Fraport Group Interim Report – First half 2015

In the first half of 2015, the Fraport Group recorded noticeable growth in Group revenue, rising by 10.6 percent to €1.242 billion. This increase was primarily driven by traffic growth, higher proceeds from the retail business, and currency effects. Fraport’s external business also contributed to revenue growth due to the first-time consolidation of two new Group subsidiaries – AMU Holdings Inc. (Airmall) and Aerodrom Ljubljana.

The Group’s operating result or EBITDA (earnings before interest, tax, depreciation and amortization) improved by 8.7 percent to €385 million. The Group result advanced by €11.3 million year-on-year to €103 million. Fraport’s free cash flow grew from €107.6 million to €189.7 million, reflecting improved operating cash flow as well as lower cash outflow for investments, when compared to the same period of the previous year.

Commenting on the company’s growth in the first half of 2015, Fraport AG’s executive board chairman Dr. Stefan Schulte said: “Fraport achieved positive operating and financial performance in the first half of the year. Passenger figures saw a noticeable increase, while our retail business is favorably on the rise again, and our external business also showed strong performance. We aim to continue this development in the second half of 2015 and thus confirm our outlook for the full year.”

At its Frankfurt Airport (FRA) home base, Fraport AG recorded passenger growth of 4.1 percent in the first six months of 2015 to some 28.9 million passengers. Cargo (airfreight + airmail) tonnage dropped by 1.8 percent year-on-year to around 1.0 million metric tons. Passenger and cargo traffic at the Group’s airports outside Frankfurt posted varying results. The airports in St. Petersburg (LED) in Russia, Antalya (AYT) in Turkey, and Varna (VAR) and Burgas (BOJ) in Bulgaria saw traffic volumes decline by 4.3 percent, 4.2 percent and 12.8 percent (VAR and BOJ combined) respectively. As expected, these airports were affected by the tense economic situation in Russia, with the resulting depreciation of the ruble and a decline in the country’s overall consumer spending. In contrast, other Fraport Group airports registered dynamic passenger growth: Slovenia’s Ljubljana Airport (LJU) achieved 9.7 percent growth, Peru’s Lima Airport (LIM) registered a gain of 8.7 percent, Hanover Airport (HAJ) in Germany increased by 5.3 percent, and Xi’an Airport (XIY) in China even soared by 15.3 percent.

Overview of Fraport’s Four Business Segments:

Aviation: Revenue in the Aviation business segment rose from €418.4 million to €444.0 million in the first six months of 2015, up 6.1 percent year-on-year. This was primarily due to the significant growth in passenger traffic at Frankfurt Airport and the development of airport charges. Despite the €25.6 million revenue increase, the segment’s EBITDA declined by €2.0 million or 1.9 percent to €102.4 million. Reasons included a rise in personnel expenses (due primarily to higher collective wage agreements in the public sector and for aviation security services), markedly lower release of provisions and, simultaneously, higher creation of provisions compared to the previous year, as well as an increase in investments that could not be capitalized. With amortization and depreciation increasing slightly by €1.2 million or 2.0 percent to €59.5 million, the segment’s EBIT declined by 6.9 percent, from €46.1 million to €42.9 million.

Retail & Real Estate: Revenue in Fraport’s Retail & Real Estate business segment reached €233.1 million in the first half of 2015 – an increase of 6.6 percent. This growth in revenue can largely be attributed to the higher passenger traffic at Frankfurt Airport and, in particular, to the growing number of intercontinental passengers who typically make above-average purchases of retail goods while at the airport. In addition, the devaluation of the euro compared to many international currencies helped boost passenger spending at FRA. Thus, the key performance indicator “net retail revenue per passenger” climbed by 6.1 percent in the reporting period, from €3.42 to €3.63. Despite higher operating expenses, segment EBITDA expanded by 6.7 percent to €183.9 million. Since amortization and depreciation remained almost level, the segment’s EBIT rose by 8.8 percent year-on-year to €142.6 million.

Ground Handling: Driven by higher passenger figures, a rise in maximum takeoff weights (MTOW), and an increase in infrastructure charges, revenue in the Ground Handling business segment grew by 4.9 percent to €333 million in the first six months of 2015. Personnel expenses in the segment markedly increased in the reporting period, reflecting the traffic-related higher need for manpower as well as pay increases under collective wage agreements. Despite a rise in personnel expenses and a decline in other operating income, segment EBITDA improved by 12.5 percent to €12.6 million, thanks to positive revenue growth. Higher depreciation and amortization led to a decline in the segment EBIT, which dropped by €1.3 million to minus €8.6 million year-on-year.

External Activities & Services: Revenue in Fraport AG’s External Activities & Services business segment jumped from €162.8 million to €224.6 million year-on-year (up 38.0 percent), if adjusted for the recognition of earnings-neutral capacitive capital expenditure in connection with the application of the IFRIC 12 accounting standards. In addition to traffic growth at Lima Airport, first-time consolidation of the Group’s new companies – AMU Holdings Inc. and Aerodrom Ljubljana (both acquired in the second half of 2014) – resulted in additional segment revenue of €44.7 million. The conversion of revenues gained at the Lima Airport subsidiary, from U.S. dollars into the Group’s standard currency (euros), also had a positive effect on the segment’s revenue. Operating expenses increased during the reporting period, mainly due to the first-time consolidation of the new AMU and Aerodrom Ljubljana subsidiaries, as well as reflecting currency and traffic-related effects at Lima Airport. Due to positive revenue growth, the segment’s EBITDA improved by 29.9 percent to €86.1 million. Higher depreciation and amortization, resulting primarily from the new AMU Holdings Inc. and Aerodrom Ljubljana subsidiaries, led to segment EBIT of €45 million, up 25.7 percent.

The Fraport Group Interim Report (January 1 to June 30, 2015) is available for viewing and downloading on the Fraport Website under “Investor Relations > Publications > Group Interim Reports”.

Fraport AG – which ranks among the world’s leading companies in the global airport business – offers a full range of integrated airport management services and boasts subsidiaries and investments on five continents. In 2014, the Fraport Group generated sales of €2.4 billion and profit of about €252 million. Last year more than 108.5 million passengers used airports around the world in which Fraport has more than a 50 percent stake.

At its Frankfurt Airport (FRA) home base, Fraport welcomed about 60 million passengers and handled some 2.2 million metric tons of cargo (airfreight and airmail) in 2014. For the current winter timetable, FRA is served by 98 passenger airlines flying to some 250 destinations in 105 countries worldwide. More than half of FRA’s destinations are intercontinental (beyond Europe) – underscoring Frankfurt’s role as a leading hub in the global air transportation system. In Europe, Frankfurt Airport ranks first in terms of cargo tonnage and is the third-busiest for passenger traffic. With about 55 percent of all passengers using Frankfurt as a connecting hub, FRA also has the highest transfer rate among the major European hubs.

Frankfurt Airport City has become Germany’s largest job complex at a single location, employing more than 80,000 people at some 500 companies and organizations on site. Major new real estate developments – such as The Squaire, the Gateway Gardens business park, and the Mönchhof Logistics Park – are creating an exciting new dimension and range of services at the evolving Frankfurt Airport City of the 21st century.

Almost half of Germany’s population lives within a 200-kilometer radius of the FRA intermodal travel hub – the largest airport catchment area in Europe. FRA Airport City also serves as a magnet for other companies located throughout the economically vital Frankfurt/Rhine-Main-Neckar region. Thanks to synergies associated with the region’s dynamic industries, networked expertise, and outstanding intermodal transportation infrastructure, FRA’s world route network enables Hesse’s and Germany’s export-oriented businesses to flourish in global growth markets.

Frankfurt Airport meets the increasing needs of the export-oriented economies of the State of Hesse as well as Germany as a whole, for optimal connections to growth markets around the globe. Likewise, FRA is a strategic gateway for companies wanting to access the huge European marketplace. Thus, Frankfurt Airport – which is strategically located in the heart of Europe – is one of the most important hubs in the global logistics chain.