Good morning, and welcome to Groupe ADP 2024 nine months revenue conference call. Today's call will be recorded, and if you want to ask a question at the end of the presentation, please press star one on your telephone keypad. Please limit yourself to two questions per analyst. I will now hand over the call to Cécile Combeau to -- please go ahead. Thank you.
Thank you, and good morning, everyone. Thank you for being with us this morning for our nine-month revenue publication. I am here with Philippe Pascal, Groupe ADP CFO, and Antoine Crombez, Deputy CFO. Philippe Pascal will first go through some prepared remarks before taking your questions with Antoine. Before we start, I remind you that certain information to be discussed on today's call is forward-looking and is subject to risks and uncertainties that could cause actual results to differ materially. For these, I refer you to the disclaimer statement included in our press release and on Slide 28 of our presentation. With that, I will hand it over to Philippe.
So thank you, Cécile, and good morning, everyone. Let's jump directly to Slide 3 . You can see here the key figures for the first one month, with total revenue standing at EUR 4.6 billion, up 11.7% compared to last year. Two key message for this publication. First one is that the performance recorded so far fully supports our financial targets, which are confirmed, even if traffic in Paris this year is now expected in the lower part of the assumption range, taken in February, and which was 3.5%-5% growth versus 2023. The second message for this publication is that we continue to develop the group, as materialized by two bolt-on acquisition concluded recently and which expand Extime hospitality offering.
Remember that we have also finalized the completion of the GIL and GAL merger end of July. Moving on to Slide 4 , with overall traffic evolution. Group traffic is 8% higher than last year, driven by continuing strong trends in our international assets. In Paris, traffic has been developing within our assumption range, up 3.88% in the first nine months. But as you know, summer traffic was slightly less dynamic compared to growth rates recorded in the first part of the year. That was particularly true in July, and Olympic-related traffic did not offset the impact of travelers arriving in Paris. As commented in previous quarters, the comparison basis in the second half of the year is tougher, notably because traffic with China increased from Q4 last year.
Accordingly, we expect traffic growth in Paris this year to be the lower part of the 3.5%-5% assumption range. Let's move on to Slide 6, with a bit more granularity on Paris traffic. Traffic with mainland France show a decline of 5%, reflecting a structural decline, but with a better Q3. Domestic traffic in August was just above that of last year due to the Olympics. International traffic is growing by 7.2%. Traffic with the Middle East is down 5.4% due to the deterioration of geopolitical context. But on the opposite, traffic with North America continue to see a strong momentum, up 6.6%, driven by both U.S. and Canada. Nevertheless, Q3 sees weaker growth compared to previous quarters.
Traffic with Asia Pacific is 27.7% higher than last year. This is mostly driven by the recovery of traffic with China, which was still below 25% of pre-COVID level in the first nine months of 2023, and has been now around 60% recoveries. Moving on to Slide 6 , with traffic in international assets, which are also a solid traffic growth of 9.5%, driven by our two main international assets. As you can see on the left side of the slide, traffic growth of TAV Airports was strong, up 11.7% overall. That international network of airports is the strongest growth, with traffic up 19.3%, and notably a solid contribution from Almaty, where traffic is up 21.2%.
Third, airport in Turkey saw solid growth, up 8.1%, with international traffic growing 9.1% compared to the first nine months of 2023. On the right side, we can see GMR Airports traffic. GMR Airports traffic growth was solid as well, up to 9.8% compared to the first nine months of 2023. Here as well, international traffic is seeing the strongest growth. Let's now move on to Slide 7 , with a focus on Extime Paris spend per pax. It stands at 31.4%, + 5.6% higher than in the first nine months of 2023. As expected, Q3 grew at a slower pace in the quarter, reflecting notably the rebasing effect driven by the reopening of Terminal 2A and 2C since May.
Our premium terminals continue to deliver strong growth in SPP, sustained by growth in international traffic. Media and advertising have been performing particularly well. Revenue is up by close to 50%. This was driven by increased advertising campaign ahead and during the Olympics. So clearly, this outstanding performance will not repeat next year, and going forward, we expect lower revenue from advertising for next year. Travel essentials also benefit from positive momentum, thanks to Olympics merchandising, hence our expectation of slower growth in Q4 here as well. In terms of outlook, we keep an unchanged cautious stance, linked to the internal headwinds, which you are well aware of, including the works in Terminal [2 or 3] , but are already ongoing and will intensify at the beginning of 2025. But also taking into consideration some sign of conjuncture softening.
Nevertheless, we nevertheless are in a position to confirm our guidance for 2025 of a spend per pax 3%-5% higher than in 2023, and continue the deployment and strengthening of the Extime model to fuel future growth. Indeed, you can see on Slide 8 that we are pursuing the development of Extime with two important acquisitions closed just a few days ago of Paris Experience Group, as was announced last July, and Private Suite for now. First, on Paris Experience Group. With this acquisition, Extime's value proposition in hospitality is being extended to the entirety of the stay of tourists in Paris, with a strong belief that greater quality of service and greater experience create more value. We see significant potential, driven by notably premiumization and enhancement of the offering, consistent with Extime operational excellence standards.
Also driven by the enhancement of clientele from other countries like China or the Emirates, by mutualizing with the Extime networks, but also driven by marketing of VIP hospitality service. Then, regarding our acquisition of Private Suite, the company operates exclusive terminal for VVIP commercial passenger, with a niche market but with a strong potential. Private Suite employs close to 300 people and is present in four airports in the U.S., including Los Angeles and Atlanta, which are in operation, and Dallas and Miami under development. After the opening of the Extime Exclusive reception lounge in Paris last June, ADP becomes now a key player in luxury airport hospitality. We now operate an international network of exclusive terminals, well-positioned to conquer future opportunity in new geography.
Private Suite give us access to a large database of qualified clients for VVIP offering, and has proven successfully in high-quality operating process. Our short-term priority is to successfully welcome and integrate the Paris Experience Group and Private Suite team with Groupe ADP and start together this new growth journey. Moving on to Slide 9 . Revenue reached EUR 4.6 billion in the first nine months of 2024, up 11.7% versus last year. Aviation revenue is up EUR 87 million. The segment is growing 6%, reflecting the combination of traffic growth in Paris and the regulated tariff increase of 4.5% on average, applied since April this year. The retail and services revenue is growing EUR 137 million, driven by both the traffic growth and the solid sales per pax dynamic.
Real estate revenue segment is up 3.7% due to new assets and rent indexation clause. Abroad, Paris Aéroport is growing EUR 252 million, making the biggest contribution to revenue growth in the first nine months, while Jordan Airport is still impacted by geopolitical context. Let's move to Slide 10 . Here, let's have a focus on the latest budget development in France with the Finance Bill for 2025. First, on the infrastructure tax. As you know, the tax has been in force since the beginning of 2024. We are now, no change introduced in the bill of 2025, so no change. The tax impacts our OpEx for around EUR 130 million per year. It was EUR 64 million in the first half of this year. And this tax going in the same proportion of ADP SA revenue.
The regulated part of this OpEx, around two-thirds, can be offset with the regulated tariff. We consider that the 2024 tariff increase implemented in April, plus the proposed tariff increase for 2025, will have fully offset regulated portion of the tax. The second item of this slide was the temporary income tax increase. According to the project, this additional contribution of the income tax will apply to 2024 and 2025 fiscal years only. We estimate the additional tax expense to range between EUR 120 million and EUR 130 million in 2024, and between EUR 45 million and EUR 55 million in 2025. I encourage you not to draw any conclusion of or extrapolate this number on the group financial, because the fiscal result is calculated in French GAAP, and is subject to some accounting adjustments that can be very different from the operational results.
So no extrapolation, please. Offsetting this full regulated tariff is only partially possible, because it is only a temporary measure, and because the increase in the tax rate has a negative impact on the WACC, therefore, limited the room for a tariff increase, in spite of the decrease of the ROCE. So we have, at the same time, a decrease in the ROCE and the decrease in the WACC, so the room of maneuver to offset this increase is very light. The third item, the funding of security activities. As you know, the French state currently only cover 94% of the security, security costs borne by ADP. The Finance Bill provide that this coverage drops to 90%. It's just a project, it's a bill.
The further 4% of cost borne by ADP would have an impact of around EUR 25 million, and it's EUR 25 million in the non-regulated scope, in the form of lesser revenue from security. So no direct offsetting is possible here. The fourth and last item in the proposal is the proposed increase of tax on plane tickets. This has no direct financial impact on ADP, but we will be sensitive to the potential negative impact on flight demand at the end of the day, and the negative impact on the competitiveness of Paris as a hub, and that our partner or the airlines. So it is not possible for us to quantify this at this stage, because it depends on price elasticity, and only of price elasticity.
The Finance Bill is currently being discussed in the Parliament, and therefore, still subject to modification until the adoption of the Finance Law at the end of December, and we are fully committed to try to decrease this impact. To conclude this presentation, a word on our outlook. Our outlook on Slide 12. Our traffic assumption and financial guidance for 2024 and 2025 are confirmed. In particular, we expect traffic in Paris to grow this year in the lower part of the range, so very close to 3.5% hypothesis, and conclude to expect the group traffic to grow by more than 8%. Our target to deliver at least 4% growth in EBITDA in 2024 is also confirmed. Our CapEx guidance is unchanged and confirmed. Investment are expected to ramp up slightly this year in Paris.
We should spend around EUR 900 million on average between 2024 and 2025, driven by infrastructure improvement, as already outlined. All our other 2023 and 2025 targets are confirmed, and with that, let's open the line for the Q&A. Thank you.
Thank you. As a reminder, if you would like to ask a question, please signal by pressing star one on your telephone keypad. We'll pause for a moment to allow everyone an opportunity to signal for questions. We will take the first question from line, Elodie Rall from JPMorgan. The line is open now, please go ahead.
Oh, hi, good morning. Thanks for taking my questions. The first question is with regard to winter capacity schedule. I was wondering if you have an update on that front from your different airlines? My second question is on the CEO succession, if also you have an update there now that we have a government in place. Well, I know it's a decision from the President, but I was wondering if there's any update. Third question is also on China, where we are today, what you expect recovery to look like in 2025, and the impact on retail, and then on the tax front, so thanks for all the details, that's really helpful.
If the tax was so the new corporate tax, if it was actually permanent? And what do you think about the likelihood of that, by the way? Would it be actually possible to offset that through tariffs? I understand now, it's you have a limited maneuver, but if it was to be permanent, would you be able to actually offset that? Thank you.
Thank you. Thank you, Elodie. Your first question is about the winter capacity and the level of traffic. At this stage, the new flight schedule for the winter season is consistent with our traffic forecast and our assumption for 2024, but also for 2025. We can confirm this assumption with this traffic growth, 2025 traffic growth between 2.5% and 3% compared to this year. Remember that we have a slight impact at the end of this year and the beginning of next year about the new flight system. We expect some impact in Q4, indeed, due to the deployment, consistent with our expectation of traffic growth in Paris, the bottom part of our assumption.
So that is for winter capacity, when we check with all the airlines, we can see that all the airlines are traditionally optimistic. We are a little bit more cautious, but we can confirm our trajectory, our assumption. For the CEO succession. As you know, as announced at the last AGM on May, Augustin de Romanet will step down as the Chairman and CEO of the company on December, the end of December, last day, thirty-one of December. The Board of Directors will propose to the French President, President of the French Republic, a candidate chosen among its members for nomination by decree as new Chairman and CEO.
The candidate will undergo audition by the two relevant Parliament commission, which is may oppose such designation. So, for the moment, no, we don't have no news, particular news in this topic. For the Chinese traffic. For Chinese traffic, currently, we have around 48 weekly frequencies scheduled. This compare with 93 weekly frequencies during the summer schedule in 2019. So 48 now compared to 93 before COVID. So we are globally at 50-60% pre-COVID capacity. We wait for recovery. We don't have a strong visibility of that. Probably it's mainly in 2025 and probably more in 2026 to have a full recovery.
But for the moment, in terms of retail, Chinese traffic is just an upside, but it's a good upside. At the end of the day, and when you see our performance in terms of retail, it's possible to have a good upside for the next period of development. In terms of tax, clearly, the tax now is just temporary. It's a traditional way in France to try to decrease the level of debt. All the governments, the last 30 years, use this methodology to increase, for one or two years, strongly the corporate tax. So it's a traditional way, and it's traditionally temporary. So we don't model the capacity for the moment to be a permanent increase. That is the first.
point of the answer. And clearly, it's difficult due to the fact that you have a decrease, but in terms of WACC, but also a decrease in terms of EBITDA to manage the capacity to offset. Obviously, if we have a permanent tax that is not so projected, and we don't have any element about that, we have to check in the dynamic in terms of the level of the EBITDA and the WACC. Perhaps create a slight room for maneuver, but it's not consistent for the moment. So thank you. Thank you very much, Elodie, for your question.
Thank you.
Thank you. We will take the next question from line, Eric Lemarié from CIC Market Solutions. The line is open now, please go ahead.
Yeah, thanks for taking my question. Regarding a possible next regulation contract, you mentioned it in the recent past, and I was wondering if you continue to or you looked at least more optimistic regarding your potential new regulating contract. Could you confirm you can, I don't know, start negotiations sometimes in 2025 or 2026 , maybe 2025 ? That's my first question. I got a second question regarding this exceptional corporate tax in France. So you mentioned these figures, 120 , 134 for 2024 .
I was a bit surprised because I thought the level expected in 2024 was basically the double of what would be expected in 2025, and I was wondering if you can explain the difference, but maybe just my own calculation. The last question in terms of sales per pax, I understand the Chinese are not fully back, and I was wondering which type of travelers are responsible for the current level of sales per pax, which is not bad at all, actually. Thank you.
So thank you for your question. So for your first question about the Economic Regulation Agreement. An Economic Regulation Agreement, it's a long way. We have two years to prepare and to negotiate to implement this contract for five years. Two years, the first step, it's an internal step, and we have start this works. It's a long way to stabilize a good initial project in term of CapEx plan. It's a long way to try to manage the dynamic in term of regulated OpEx, but also to stabilize the cost allocation system. The structure of tariff, it's not just a level, it's also a balance between landing fees, parking fees, and passenger fees. So we have a lot of element to prepare.
After that, so we start the works, and we have to wait the next CEO to define the strategy. After that, we have to propose formally an economic regulation agreement balance, and for that, we have to publish a specific document, probably at the end of 2025. To negotiate in 2026, the negotiation, it's not just commercial negotiation. It's a very formal process with a specific condition, with all the stakeholders and the airlines, with the French government, and at the end of the day, with the French regulator. It's a long process. Now, we prepare that, but we... For the moment, we don't have a decision internally.
We await the new CEO to start the formal process. Your second question about the exceptional corporate tax. Clearly, it's hard for you to model due to the fact that it's calculated in French GAAP with a fiscal result, not the IFRS system. In this specific fiscal result in France, it's subject to some accounting adjustment due to the exceptional operation, that we don't have any impact in IFRS methodology, but a strong and positive impact in the fiscal result. So we give you some color about that, but because we know exactly that it's difficult for you to model.
But at the end of the day, in fact, we can confirm the figures for 2024 between 120 and 130, and for 2025, between EUR 45 million and EUR 55 million . Your first question about the geography for SPP, clearly, well, the main performance is led by the international segment, with a strong growing geography. First, the main contribution, it's the three main geography. It's Asia, North America, and Middle East. For the moment, we have a strong momentum with North America, but also a good performance with Middle East. And Asia, it's an upside.
We have a good performance with the current clients, but if you have more passenger and more weekly frequency, mechanically, we can improve our performance in term of SPP. So thank you for your question.
Thank you.
Thank you. We will take the next question from line Dario Maglione from BNP Paribas. The line is open now. Please go ahead.
Good morning. I have four questions. The first one on the tariff proposal. If I understand correctly, 4.5% year-on-year increase. What ROCE are you targeting for 2025? Second question on the spend per passenger in Q3, could you maybe quantify the impact of the Olympics? Then third question, around the acquisitions, which makes sense to me. I read that in term it costs around EUR 360 million. Could you maybe tell us more about the contribution to EBIT that you would expect, or net income? And the final question on the security activities, this proposal basically to reduce the cost coverage from the state. Is that a permanent change proposed or a temporary one? Thank you.
Thank you for your questions. About the first question, the tariff proposal of 4.5% . We don't disclose exactly the regulated ROCE, but we want to target clearly. It's part of the game, not for the investors and our shareholders, but it's a part of the game with the French government. That is a clear element. Obviously, in this way, it's very important for us to obtain the maximum possible, but to secure the capacity to have fewer problems. The second question about the SPP Q3. It's difficult for us to identify clearly the impact of Olympics.
In terms of SPP, clearly, we have a very important and favorable impact in media and advertising with a strong figure, as I mentioned. But we have also a very good momentum in travel essentials, due to the goodies and some specific goods in these shops. In terms of pure retail and F&B, globally, it's neutral for this year. Globally, quite neutral. With neutral it mean that no good news and no bad news. It's no specific impact. So in the security activities, your fourth question. Clearly, it's a bill, it's just a bill, a project. And this project try to be permanent.
What is very important to know, the fact that the funding of security activities seems questionable to us, and we are petitioning for change in the framework. The partial refunding of security costs is triggered when the security costs per pax are above EUR 9 per pax. If security costs were below that level, then we have be funded with a fee covering 100% of our security costs. This EUR 9 threshold was set back in 29 as an incentive to cost control. But due to the inflation, due to the other element linked by the practitioner of the French state, it is now unrealistic. We are petitioning for a reevaluation of this level to be adjusted upwards and be indexed with this future inflation.
If we obtain just this element, we have the capacity to, with a good and a strong cost control, to be below the new threshold, and mechanically, not to have this ticket tax paid, but to be fully offset by the tax. So, globally, we work hard to have the capacity at the end of the day to offset this impact. For the consequence of in terms of EBIT with Paris Experience Group and Private Suite. Combined revenue for the two companies was in the range of EUR 150 million in 2023, with only one terminal, Los Angeles, operated by Private Suite at the time, versus two now, including Atlanta, Atlanta opened at the end of 2023.
This acquisition bring additional revenues and additional EBITDA, and will be relative at EPS level in the midterm. Not now, but in the midterm, and we are very comfortable with that. The strong growth profile of Private Suite implies possible future capital injection in the future. So good, good for all. So sorry, not to be disclosed, clearly, all the figures, but we have to work on that.
Thank you.
Thank you. We kindly remind you to limit the number of questions to two per person. We will take the next question from line Augustin Cendre from Stifel. The line is open now. Please go ahead.
Yes, good morning, and thank you for taking my question. I've got two. The first one is on GMR, which published its results last night with a quite strong increase on the debt year-on-year. It seems that further investments are on the way with the signing of the Nagpur concession. There's also the acquisition of an additional stake at Delhi. So I know we discussed this previously, but could you please remind us how you intend to address the leverage and cash generation of the company, and what horizon do you see this being addressed? Should we expect improvements in the next year, or is it more a medium to longer term improvements? And my second question is a follow-up on the CEO change.
I was wondering if an internal candidate is an option at this stage, or if you expect an external candidate similar to the previous change? Thank you.
So thank you for your question. For the first question, perhaps Antoine, the former Deputy CEO of GMR, can answer?
Thank you, Philippe. Thank you for the question. So regarding GMR's leverage, as we already highlighted and discussed in the past, for sure, it's a top priority for both the partners, ADP and GMR, to reduce the leverage of the company at asset level as well as the holding level. What are the levers to do this de-leveraging? First one is, of course, to increase the cash generation from the assets. On that front, I think we have a very positive trend in the traffic in both airports.
We can foresee, notably in Hyderabad, a possible dividend upstreaming in the very short term. Regarding Delhi, we are waiting, as you know, for the CP4 tariffs. When they come, hopefully, in the first semester of next year, the profile and the cash situation of Delhi will materially improve, and that will, for sure, be a good support in terms of de-leveraging. I think we can also add, in terms of de-leveraging strategy of GMR, the increase in non-aero revenues, and particularly, the retail and Duty Free revenue.
GMR Airports has won the concession of Duty Free of Delhi Airport, and that will also create a significant room of cash generation, and de-leveraging opportunity, for GMR. So that's the main focus of both partners at the moment.
Thank you, Antoine. And for your second question, so the process of selection of the future chairman and CEO is underway, led by the Board Nomination and Governance Committee. So as I say, the final decision, it's the decision of the French President. So it's now difficult to know exactly, and we have to wait. Thank you for your questions.
Thank you.
Thank you. We will take the next question from line Graham Hunt from Jefferies. The line is open now, please go ahead.
Thank you for the questions. Just two from me, thanks. Firstly, clarification, and apologies, I think you did say this, but with the price increase you've proposed next year, you see the infrastructure taxes fully compensated as much as you can from 2025. Is that correct? Then second question, just an update on the Extime strategy would be helpful. Doing a little bit of, you know, M&A in this space. International portfolio is doing very well, but I don't think we've got to the point where we're rolling out Extime globally, but I know that was an objective historically. So just wanted to understand what the next strategic steps for Extime were, in your mind at the moment, and what we could expect from that business in the next couple of years? Thank you.
Thank you. For the first question, so with a tariff increase of 4.5% again this year, in addition of the tariff increase of 4.5% last year, the regulated portion of the infrastructure tax will be fully offset. So your second question about the Extime strategies. So just to have more clear about the rationale of Private Suite, for example, and for Extime Group also. ADP puts itself in a position to create the first international networks of exclusive terminals and get a springboard for further development. So clearly, for us, Private Suite and Extime are complementary now, with potential for operational and commercial synergy.
For example, we have an addition program to open Private Suite to international clients, attract US travelers to Extime offering. We have also operation with IT system, with efficiency in operation that we can have synergy. We have experience with a specific approach, with atmosphere for the clients and relationship. And finally, we have the commercial capacity that is important for us to merge all the capacity to have a strong experience for the VVIP people. For Paris Experience Group, the rationale, it's also very clear. The acquisition allows to extend the value proposition to these tourists for their entire stay in Paris and not just their stay at the airport.
So it is not really a diversification, but just a capacity to have a new growth level to deploy the level that made the success of Extime Paris operational excellence through premiumization, but also getting a direct and ongoing relationship with customer, and expand as well towards additional customer. It is a key point for us to have this element. It provides new distribution channel for Extime service and creates synergy at this time. Rollout of Extime in airport still very much in the strategy, but number of targets are limited, and we are roll out dedicated service launched recently in Almaty, our media advertising in Jordan. So we continue the stories. Thank you.
Thank you.
Thank you. We will take the next question from line. Marcin Wojtal from Bank of America. The line is open now, please go ahead.
Yes, good morning. Thank you so much for taking my question. I will just have one. I wanted to ask you about the outlook for operating expenses for 2025 . Could you maybe just give us an update, where are you in terms of negotiations with your trade unions? What do you expect in terms of potential increase in labor costs? And also perhaps some commentary on cost of external services, subcontractors, and perhaps energy costs. I mean, what sort of cost inflation should we incorporate for 2025, or at least some high level comments, if that's okay? Thank you.
Thank you for this important question. In fact, we work a lot about the cost control. For the moment, we manage quite well with the inflation, with the capacity for us to execute the Olympics game without some increase. And we have also a challenge due to the fact that we have a new contract and contracts that renew on an ongoing basis according to the expiry date. This led to an increase in our subcontracting costs this year and probably the next year. In 2025, the increase in the subcontracting cost is expected to be solely driven by traffic growth and price effect at the ADP level.
For your question about the staff cost and for the negotiation with the unions, for the moment, we try to manage the recruitment. We have, in fact, to negotiate with the unions about the level of wages and remuneration. For the moment, it's not the time to do that. We have to finalize the job and to wait a new strategy. But we work internally to be ready, and obviously, when we speak about a new economic regulation agreement, we speak mechanically about a performance plan and a cost cutting plan to create savings and just to justify tariff increase linked by new infrastructure, by new CapEx plan, but not linked by the bad impact in term of performance and in term of cost.
It's a vital element for us to negotiate in a good condition an Economic Regulation Agreement. So in the next few months, if we launch an Economic Regulation Agreement, mechanically, we work about this cost control. Thank you.
Thank you. There's no further question at this time. I'll hand it back over to you for closing remarks.
Thank you, everybody. Thank you for having logged on to our conference this morning, so next financial communication will be for the annual results on the nineteenth of February next year. In the meantime, we will be seeking to meet you in roadshows, and also we'll be attending some conferences, and we are looking very much forward to it, and of course, if you have any questions, feel free to get in touch with me or Eliott within the IR team, and with that, have a good day, everybody. Bye-bye.
Thank you for joining today's call. You may now disconnect.