A total of 31.1 million passengers passed through Zurich Airport in the 2018 financial year, an increase of 5.8%. Over this period, Flughafen Zürich AG generated revenue of CHF 1,152.9 million, representing a year-on-year increase of 11.2%. Owing to one-off effects, consolidated profit fell by CHF 47.7 million to CHF 237.8 million. While disposal of its stake in Bangalore Airport in particular had lifted the previous year’s result, additional provisions for sound insulation measures had a negative impact in the 2018 financial year. After adjusting for these one-off effects, profit rose by 13.3%.
As a result of the strong traffic growth achieved, aviation revenue grew from CHF 624.2 million to CHF 656.7 million (+5.2%) in the financial year just ended, accounting for around 57% of Flughafen Zürich AG’s total revenue. Flight operations charges increased by CHF 29.7 million to CHF 580.8 million (+5.4%). Total income from aviation fees and other aviation revenue rose by CHF 2.8 million overall to CHF 75.9 million (3.8%).
Overall, non-aviation revenue, which accounted for approximately 43% of total revenue, increased by CHF 83.3 million to CHF 496.2 million (20.2%). 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 earnings from facility management was mainly driven by slightly higher revenue from rental agreements, which is also reflected in a lower vacancy rate during the 2018 financial year. Higher earnings from VIP services and from the airport experience weekend contributed to a year-on-year increase of CHF 2.1 million in revenue from services to CHF 43.7 million (5.0%). 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 due to be completed by the end of 2030.
Operating expenses were lower in the prior year due to receiving payment of CHF 4.8 million (CHF 3.8 million after tax) in connection with the liquidation of Swissair. 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%). Despite the welcome growth in traffic, expenditure for this at the company’s Zurich base actually fell by 0.5%.
OPERATING RESULT AND CONSOLIDATED 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%.
At CHF 244.5 million, depreciation and amortisation were up slightly on the prior-year figure of CHF 243.7 million. The net finance result was CHF –23.1 million, CHF 4.8 million less than the previous year. The share in the result of associates in the amount of CHF –4.3 million (2017: CHF 33.2 million) essentially reflects the company’s share in the profit/loss of the Belo Horizonte airport operator. In the previous year, this item also included the gain from the sale of the remaining 5% interest in Bangalore International Airport Ltd. (CHF 36.3 million before tax).
Consolidated profit for the 2018 financial year amounted to CHF 237.8 million, down CHF 47.7 million on the prior-year result. When adjusted to take account of one-off effects, profit increased by CHF 33.3 million to CHF 283.6 million (+13.3%) compared with the previous year.
During the year under review, revenue from third parties for the regulated segment rose from CHF 612.6 million to CHF 645.1 million. In the same period, earnings before interest and tax (EBIT) for regulated business, which comprises the “Aviation”, “PRM”, “User fees”, “Air security” and “Access fees” segments, improved by CHF 36.6 million to CHF 177.2 million. The improvement is mainly due to higher passenger volumes, including a higher percentage of local passengers, and to lower depreciation in the “Air security” segment. Compared with the previous year, capital invested for regulated business remained virtually unchanged at CHF 1.9 billion, of which CHF 1.4 billion is associated with the “Aviation” segment. In addition to the usual airport infrastructure, invested capital also includes proportionate costs for mixed-use buildings, in particular the terminals. The resulting ROIC for regulated business is 7.3% (2017: 5.9%).
Revenue in the “Noise” segment (CHF 11.6 million) was on a par with the previous year. The negative EBIT result is entirely due to the recognition of additional provisions for sound insulation measures in the amount of CHF 57.6 million. As at the reporting date, capital invested in the “Noise” segment stood at CHF 109.8 million and ROIC at –32.2%.
Thanks to higher income from the retail sector and taking over operation of Florianópolis airport in southern Brazil, revenue from third parties for the non-regulated business segment grew by CHF 83.3 million to CHF 496.2 million in the 2018 financial year. EBIT consequently improved by 3.6% to CHF 203.4 million. Compared with the previous year, invested capital increased by CHF 0.1 billion to CHF 1.5 billion, with current ROIC standing at 11.2% (previous year 12.2%).
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 investments included the upgrade and extension of the baggage sorting system plus projects for expanding the aircraft stands on the southern side of the airport, and the high-speed taxiways for 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 remained 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 57.9 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.