Boards propose dividend increase to EUR2 – Outlook remains positive In the 2018 fiscal year (ending December 31), Fraport AG continued on its growth path, achieving new records in revenue and earnings.
Supported by strong passenger growth at its Frankfurt Airport home base and its Group airports worldwide, revenue climbed by 18.5 percent to nearly EUR3.5 billion. After adjusting for revenue related to capital expenditure for expansion measures at the international Group companies (based on IFRIC 12), revenue rose 7.8 percent to over EUR3.1 billion. About two-thirds of this increase can be attributed to Fraport’s international portfolio – with the airports in Brazil and Greece, in particular, making a significant contribution.
Fraport AG’s executive board chairman Dr. Stefan Schulte said: “We are pleased to look back on another very successful year, especially for our Group airports around the world. Here in Frankfurt, however, 2018 presented challenges due to the constraints in European airspace and the strong traffic demand. For the medium and long term, we are very well positioned both at Frankfurt Airport and in our international business. Moreover, we are laying the foundations for further long-term growth by implementing our expansion projects.”
Revenue and earnings targets achieved
The operating result (Group EBITDA) climbed markedly by 12.5 percent to over EUR1.1 billion. The Group result (net profit) rose even stronger, by 40 percent to EUR505.7 million. This includes earnings gained from the sale of Fraport’s stake in Hanover Airport, which
contributed EUR75.9 million. However, even without the positive effects from the Hanover transaction, Fraport already achieved its revenue and earnings targets. Operating cash flow slightly dipped by 2.0 percent to EUR802.3 million. This was mainly due to changes in the net current assets related to the reporting date. After adjusting for these changes, operating cash flow rose by 18.8 percent to EUR844.9 million. In line with expectations, free cash flow fell sharply by 98.3 percent, because of more extensive capital expenditure for Frankfurt Airport and Fraport’s international business, while remaining in positive territory at EUR6.8 million.
Given the positive business development, the Executive Board and Supervisory Board will propose to the Annual General Meeting that the dividend be raised to EUR2.00 per share for the 2018 fiscal year (2017 fiscal year: EUR1.50 per share).
Passenger traffic rises noticeably at FRA and internationally Serving some 69.5 millionb passengers, Frankfurt Airport (FRA) achieved a new passenger record in 2018 and growth of 7.8 percent compared to 2017.
CEO Schulte commented: “We are pleased that the airlines have significantly expanded their flight offerings at Frankfurt Airportnfor the second year in a row, thus improving connectivity and prosperity for businesses far beyond the Frankfurt Rhine-Main Region.
Until the first pier of the new Terminal 3 opens in late 2021, we will focus on maintaining a high level of service quality at Frankfurt Airport – while dealing with the constraints affecting the entire aviation industry. In particular, enhancing the situation at the security checkpoints will be a top priority for us.”
In response to strong passenger growth, Fraport hired over 3,000 new staff members at Frankfurt Airport in 2018. Despite the constraints experienced at some central process points in the terminals during peak periods – particularly at the security checkpoints – global satisfaction of passengers with Frankfurt Airport was at 86 percent in 2018 – thus even posting a slight increase compared to the previous year (2017: 85 percent). To provide additional space for security checkpoints, Fraport is investing in an extension to
Terminal 1 for installing seven extra security lanes in the summer of 2019.
Fraport’s international portfolio also posted a significant gain in passenger traffic during 2018. In Brazil, the two airports of Porto Alegre and Fortaleza reported a 7.0 percent increase to 14.9 million passengers in 2018 – Fraport Brasil’s first year of operating these airports. At the 14 Greek airports, traffic rose by almost 9 percent to 29.9 million passengers. Antalya Airport in Turkey grew by a significant 22.5 percent to 32.3 million travelers, a new historic passenger record.
Outlook: Growth expected to continue
Fraport is forecasting sustained growth at all of the Group airports in fiscal year 2019. At Frankfurt Airport, passenger volume is expected to rise between around two and roughly three percent.
Fraport expects consolidated revenue to increase slightly up to around EUR3.2 billion (adjusted for IFRIC 12). Group EBITDA is expected to reach a range of around EUR1,160 million and approximately EUR1,195 million, despite the non-recurring revenue from the sale of Fraport’s stake in Hanover Airport. The application of the IFRS 16 accounting standard – which changes the accounting rules for leases – will not only make a positive contribution to Group EBITDA, but will also lead to much higher depreciation and amortization in fiscal year 2019. As a result, Fraport expects Group EBIT to be in the range of about EUR685 million and around EUR725 million. The company also expects to post a Group result (net profit) of around EUR420 million and about EUR460 million. The dividend per share is expected to remain stable at the higher level of EUR2 for the 2019 fiscal year.
Fraport’s four business segments at a glance
Revenue in the Aviation segment increased by 5.5 percent to slightly over EUR1 billion. This was due partly to higher revenue from airport charges resulting from increased passenger traffic at Frankfurt Airport. At EUR277.8 million, segment EBITDA increased by 11.3 percent year-on-year, while segment EBIT rose 6.5 percent to EUR138.2 million.
Revenue from the Retail & Real Estate segment dropped 2.8 percent year-on-year to EUR507.2 million. A major reason for this drop was significantly fewer proceeds from the sale of land (EUR1.9 million in the 2018 fiscal year versus EUR22.9 million for the same period in 2017). In contrast, parking income (+ EUR8.3 million) and retail revenue (+ EUR0.8 million) grew. Net retail revenue per passenger fell 7.4 percent year-on-year to EUR3.12. Segment EBITDA increased by 3.4 percent to EUR390.2 million, while segment EBIT climbed 2.8 percent to EUR302.0 million.
Revenue in the Ground Handling segment rose by 5.0 percent year-on-year to EUR673.8 million. The strong growth in passenger traffic resulted, in particular, in stronger revenue from ground services and higher infrastructure charges. On the other hand, passenger growth also led to higher personnel expenses at the FraGround and FraCareS subsidiaries.
Accordingly, segment EBITDA declined by EUR7.0 million to EUR44.4 million. Segment EBIT dropped considerably by 94 percent, but at EUR0.7 million still remained in positive territory.
At nearly EUR1.3 billion, the International Activities and Services segment significantly advanced by 58 percent compared to the previous year. After adjusting for the EUR359.5 million in revenue related to IFRIC 12, the segment’s revenue rose by 20.1 percent to EUR931.4 million. This revenue growth received major contributions from the Group subsidiaries in Fortaleza and Porto Alegre (+ EUR90.9 million), as well as Fraport Greece (+ EUR53.2 million). Segment EBITDA increased a noticeable 28.3 percent to EUR416.6 million, while segment EBIT jumped 40.7 percent to EUR289.6 million.
You can find our 2018 Annual Report and the presentation from the press conference on our financial statements (as of 10:30 a.m.) on the Fraport AG website.