Financial commentary

A total of 29.4 million passengers passed through Zurich Airport during the last financial year, an increase of 6.3%. During the same period, Flughafen Zürich AG generated revenues of CHF 1,037.1 million, a rise of 2.4% over the previous year. The year-on-year increase in consolidated profit of CHF 37.5 million was driven primarily by the CHF 31.4 million from the successful sale of the equity investment in Bangalore. Adjusted for one-off effects, profit improved by CHF 10.8 million (+4.5%).

Income statement

In the financial year just ended, aviation revenue grew from CHF 620.4 million to CHF 624.2 million (+0.6%), accounting for around 60% of total revenue despite the airport operator lowering flight operations charges in September 2016, Due to strong passenger growth, however, revenue climbed by CHF 3.8 million year on year. The slight decrease in passenger-related flight operations charges attributable to lower passenger charges (–0.6%) was more than offset by higher revenue from other flight operations charges (+3.5%). Aviation fees also rose by CHF 1.8 million (+2.6%).

Overall, non-aviation revenue increased by CHF 20.5 million to CHF 412.9 million (+5.2%). Total commercial and parking revenue grew by CHF 13.5 million to CHF 234.2 million, an increase of 6.1%. In particular, this was due to the higher revenues achieved from retail, tax & duty free plus food & beverage of CHF 6.5 million (+5.7%), despite the building alteration work carried out in the central duty free stores during the second half of 2017. In addition, parking revenue also rose by CHF 4.0 million (+5.4%), thanks in particular to the positive trend in revenue from public parking which was successfully boosted by marketing campaigns targeting long-stay parking.

The decline of CHF 3.6 million in revenue from facility management was attributable to rate adjustments for energy and utility costs (which are always cost-based) and lower revenue from services, as fewer construction projects were carried out for third parties.

Revenue from international business is stated as a separate item for the first time in 2017; in addition to revenue from international consulting activities, it now also includes revenue from the companyʼs consolidated subsidiaries in Chile and Brazil. This amounts to a total of CHF 17.3 million for the 2017 financial year.

Operating expenses in the year under review increased by CHF 19.5 million to CHF 453.5 million (+4.5%). As in the previous year, operating expenses were influenced by one-off effects that reduced expenditure. While both a payment of CHF 3.5 million in connection with the liquidation of Swissair in debt restructuring proceedings and the additional purchase price payment of CHF 7.3 million for land for THE CIRCLE influenced operating expenses in the prior year, a second payment of CHF 4.8 million from the bankruptcy assets of the former Swissair reduced operating expenses during the year under review. After adjusting for these one-off effects, operating expenses rose by CHF 13.5 million (+3.0%). This increase includes CHF 7.0 million from the newly consolidated subsidiaries in Chile and Brazil.

Personnel expenses rose by CHF 4.8 million to CHF 201.5 million (+2.5%). As well as a higher headcount and a general pay rise, this is due to consolidating the personnel costs of the international holdings. Despite much higher passenger volumes (+6.3%), the costs for police and security rose by only 1.2%. The CHF 2.8 million rise in the cost of maintenance and materials is primarily attributable to the effect of consolidation and the revaluation of spare parts held in storage. In addition to the newly consolidated holdings, various non-capitalised project costs contributed to the rise in administrative expenses of CHF 3.6 million.

Earnings before interest, tax, depreciation and amortisation (EBITDA) amounted to CHF 583.6 million (+0.8%). After adjusting for the aforementioned one-off effects, EBITDA was CHF 578.8 million, up 1.9% on the adjusted figure for the previous year.

Depreciation and amortisation were up slightly on the prior-year figure of CHF 241.5 million to CHF 243.7 million. The finance result was down by CHF 0.9 million year on year to CHF –18.3 million. The share of profit or loss of associates of CHF –3.1 million (2016: CHF –5.3 million) stems mainly from the share of profit or loss of the airport operator in Belo Horizonte. In addition, the sale of the remaining 5% stake in Bangalore International Airport Ltd. resulted in a pre-tax gain of CHF 36.3 million.

Consolidated profit for the financial year just ended amounted to CHF 285.5 million, up CHF 37.5 million (15.1%) from the prior-year period. When adjusted to take account of one-off effects (including disposal of the stake in Bangalore Airport), profit totalled CHF 250.3 million, CHF 10.8 million higher (+4.5%) than the adjusted profit for the previous year.

Assets and financial position

Invested capital stood at CHF 3.5 billion at the end of 2017 and the corresponding return on invested capital (ROIC) at 8.1%. Equity increased by CHF 0.1 billion to CHF 2.4 billion, resulting in a healthy equity ratio of 55.9% (2016: 55.6%).

Starting with an operative cash flow of CHF 529.7 million and year-on-year higher investments of CHF 275.0 million in property, plant and equipment, projects in progress and airport operator projects, free cash flow fell during the reporting period by CHF 30.0 million to CHF 254.7 million year on year.

Outlook

Flughafen Zürich AG expects passenger volumes to grow by 3.5% to 4.0% in the current financial year. Aviation revenue will be correspondingly higher, due to the expected growth in passenger volumes. Revenue is also expected to rise in the non-aviation segment, driven in particular by the new duty free formats and international business activities. Operating expenses will likely increase year on year in 2018 – again, mainly as a result of international business activities.

Factoring out the one-off effects in financial year 2017 and any one-off effects in the current year, EBITDA as well as profit are expected to be up on the prior-year figure.

INTERVIEW WITH LUKAS BROSI, CFO

Chief Financial Officer Lukas Brosi on the 2017 results, strategic growth areas and a look ahead to the 2018 financial year.