31.1 million passengers passed through Zurich Airport in financial year 2018, a rise of 5.8%. In the same period, Flughafen Zürich AG generated revenue of CHF 1,152.9 million, a year-on-year increase of 11.2%. Due to one-off items, profit declined by CHF 47.7 million to CHF 237.8 million. Whereas the prior-year figure was positively impacted in particular by the sale of the interest in Bangalore, additional provisions for sound insulation measures had a negative effect in financial year 2018. Adjusted for these one-off items, profit rose by 13.3%.
Due to the growth in traffic, aviation revenue climbed from CHF 624.2 million to CHF 656.7 million in the past financial year (+5.2%), accounting for around 57% of Flughafen Zürich AG’s total revenue. Flight operations charges increased by CHF 29.7 million (+5.4%) to CHF 580.8 million, and total aviation revenue and other aviation revenue by CHF 2.8 million (3.8%) to CHF 75.9 million.
Non-aviation revenue, which made up around 43% of total revenue, rose by CHF 83.3 million overall (20.2%) to CHF 496.2 million. The figure was positively impacted by the rise in commercial revenue and above all by the takeover of operations at the airport in Florianópolis in southern Brazil. Total commercial and parking revenue increased by CHF 14.1 million year on year (+6.0%) to CHF 248.3 million. In commercial operations, our partners lifted revenue by CHF 18.6 million to CHF 593.8 million last year, which translated into commercial revenue of CHF 130.3 million for Flughafen Zürich AG (+8.9%). The slight increase of CHF 1.6 million in revenue from facility management is attributable in particular to slightly higher revenue from rental and leasing agreements, which was also reflected in a lower vacancy rate at the end of financial year 2018. Higher earnings from VIP services and from the airport experience weekend contributed to a year-on-year increase of CHF 2.1 million (5.0%) in revenue from services to CHF 43.7 million. Chiefly as a result of taking over the operation of Florianópolis airport in southern Brazil and the associated expansion of infrastructure there, revenue from international airport business was lifted to CHF 82.8 million in the year under review (prior-year period: CHF 17.3 million).
Flughafen Zürich AG extended its sound insulation programme based on the night-time noise curve in the revised Sectoral Aviation Infrastructure Plan (SAIP2) approved by the Federal Council and an extension of the south-side sound insulation concept. This adds further measures amounting to CHF 60.0 million to the CHF 340.0 million previously estimated for sound insulation and resident protection. The present value of these additional costs of CHF 57.6 million (before tax) was recognised as a provision at the end of the first half of 2018, resulting in a one-off amount of CHF 45.8 million (after tax) being charged to the consolidated income statement. All additional costs will be financed by the Airport of Zurich Noise Fund, which is adequately funded. The measures are scheduled for completion by the end of 2030.
In the previous year, a payment in connection with the liquidation of Swissair in debt restructuring proceedings reduced operating expenses by CHF 4.8 million (CHF 3.8 million after tax). In addition, the sale of the remaining 5% interest in Bangalore International Airport Ltd. resulted in a gain of CHF 31.4 million (after tax).
Operating expenses rose by 28.3% to CHF 581.9 million in financial year 2018 due in particular to the extension of the sound insulation programme. After adjusting for one-off items, they were up by 14.4%, a rise mainly attributable to setting up operations in Florianópolis. At the Zurich site, operating expenses rose at a much slower pace than the growth in traffic (+2.2%).
Personnel expenses increased by CHF 10.0 million to CHF 211.5 million in the reporting period (+5.0%). As well as a higher headcount and a general pay rise, the increase is due to consolidating the personnel costs of the international holdings (in particular Florianópolis). Costs for police and security, on the other hand, were up by just CHF 1.6 million to CHF 121.2 million (+1.3%). At the Zurich site, they declined by 0.5% despite the encouraging growth in traffic.
EARNINGS AND PROFIT
Earnings before interest, tax, depreciation and amortisation (EBITDA) were down on the prior-year figure of CHF 583.6 million to CHF 571.0 million. Adjusted for the aforementioned one-off items, EBITDA climbed by 8.6% to CHF 628.6 million, which equates to an adjusted EBITDA margin of 54.5%.
Depreciation and amortisation were up slightly on the prior-year figure of CHF 243.7 million to CHF 244.5 million. The net finance result was CHF 4.8 million lower year on year at CHF –23.1 million. The share of profit or loss of associates in the amount of CHF –4.3 million (2017: CHF 33.2 million) essentially comprises the company’s share of the net income of the operator of the airport in Belo Horizonte. In the previous year, this item included the gain on the sale of the remaining 5% interest in Bangalore International Airport Ltd. (CHF 36.3 million before tax).
Profit for financial year 2018 was CHF 47.7 million down on the prior-year result to CHF 237.8 million. Adjusted for one-off items, profit rose by CHF 33.3 million year on year to CHF 283.6 million (+13.3%).
In the year under review, Flughafen Zürich AG invested CHF 290.1 million in ongoing projects (2017: CHF 239.0 million). Investments in THE CIRCLE, which were higher than the previous year owing to the progress on this building project, contributed in large part to this figure. Further significant investment projects included the expansion and refurbishment of the baggage sorting system, projects to expand the aircraft stands on the southern side of the airport and the fast taxiways on runway 28.
ASSETS AND FINANCIAL POSITION
As at the end of 2018, invested capital amounted to CHF 3.5 billion and the return on invested capital (ROIC) was 7.4%. Equity was unchanged at CHF 2.4 billion, resulting in a healthy equity ratio of 55.3% (2017: 55.9%). Due to investments in ongoing projects and international holdings, net debt increased to CHF 146.4 million at the reporting date (2017: CHF 46.2 million).
Starting with an operative cash flow of CHF 538.4 million and year-on-year higher investments of CHF 383.5 million in property, plant and equipment, projects in progress and airport operator projects, the company’s free cash flow fell during the reporting period by CHF 99.8 million to CHF 154.9 million.
Flughafen Zürich AG expects passenger growth of around 3.0% in 2019. Aviation revenue will therefore be higher. A rise in revenue is also anticipated in the Non-aviation segment, with commercial and parking revenue, revenue from facility management and revenue from international business activities all expected to be higher.
Operating expenses will likely increase in 2019, with operating expenses at the Zurich site rising at a slower pace than operating expenses from international business activities.
The company has earmarked a total of CHF 350 to 400 million for investments in ongoing projects in 2019. At around CHF 140 million, the large-scale project THE CIRCLE accounts for the largest amount of capital expenditure. Two other major investment projects currently under way involve the expansion and refurbishment of the baggage sorting system and the renovation of the maintenance workshop. In addition, Flughafen Zürich AG each year invests substantial amounts in numerous other aviation and commercial projects and in maintaining the value of the existing infrastructure.
Factoring out the one-off item in financial year 2018 and any one-off items in the current year, earnings before interest, tax, depreciation and amortisation (EBITDA) and profit in 2019 are expected to be higher year on year.