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Grupo Aeroportuario del Pacifico Announces Results for the Second Quarter of 2019

GUADALAJARA, Mexico, July 29, 2019 (GLOBE NEWSWIRE) -- Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (NYSE: PAC; BMV: GAP) (“the Company” or “GAP”) reported its consolidated results for the second quarter ended June 30, 2019. Figures are unaudited and have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Summary of Results 2Q19 vs. 2Q18

  • The sum of aeronautical and non-aeronautical services revenues increased by Ps. 411.4 million, or 13.2%. Total revenues increased by Ps. 214.6 million, or 6.2%.
     
  • Cost of services increased by Ps. 98.9 million, or 16.3%.
     
  • Operating income increased by Ps. 244.0 million, or 13.9%.
     
  • EBITDA increased by Ps. 282.9 million, or 13.2%. EBITDA margin (excluding the effects of IFRIC 12) increased from 68.7% in 2Q18 to 68.8% in 2Q19.
     
  • Net income and comprehensive income decreased by Ps. 332.7 million, or 21.5%, mostly due to the currency translation effect.

Operating Results

During 2Q19, total terminal passengers at the Company’s 13 airports increased by 1,085.4 thousand passengers, or 9.8%, compared to 2Q18. Over the same period, domestic passenger traffic increased by 654.1 thousand passengers, while international passenger traffic increased by 431.3 thousand passengers.

In the traffic tables below, we have reflected the users of the Cross Border Xpress (CBX) under the international passenger numbers for the Tijuana airport.

During 2Q19, the following routes opened:

Revenues (2Q19 vs. 2Q18)

  • Aeronautical services revenues increased by Ps. 246.3 million, or 10.6%
  • Non-aeronautical services revenues increased by Ps. 165.1 million, or 20.8%
  • Revenues from improvements to concession assets decreased by Ps. 196.8 million, or 61.7%
  • Total revenues increased by Ps. 214.6 million, or 6.2%

Aeronautical services revenues include:

i.        Revenues from the Mexican airports increased by Ps. 229.2 million, or 11.6%, compared to 2Q18, generated mainly by a 10.3% increase in passenger traffic, as well as higher passenger fees after adjustments for inflation.

ii.        Revenues from the Montego Bay airport increased by Ps. 17.1 million, or 4.7%, compared to 2Q18. This was mainly due to a 5.2% increase in passenger traffic and an increase in passenger fees due to inflation, and was offset by the 1.3% appreciation of the Mexican peso against the U.S. dollar, from an average exchange rate of Ps. 19.3715 in 2Q18 to an average exchange rate of Ps. 19.1250 in 2Q19.            

Non-aeronautical services revenues include:

i.          The Mexican airports contributed an increase of Ps. 156.6 million, or 23.9%, compared to 2Q18, mainly driven by an increase of Ps. 90.8 million in revenues from businesses operated by third parties. This was mainly due to the opening of commercial spaces for car rentals, food and beverage operations and retail stores at the Guadalajara, Puerto Vallarta and Tijuana airports, as well as increase in revenues from “Duty-free” stores, as a result of contract renegotiations.
Revenues from businesses operated directly by the Company increased by Ps. 56.3 million, or 26.9%, mainly due to an increase in the number of visitors at the VIP lounges as a result of the opening of two new VIP lounges in the La Paz and Puerto Vallarta airports, the opening of seven new convenience stores in the Guanajuato, Mexicali, Puerto Vallarta and Tijuana airports during 2019, and an increase in car parking revenues.

ii.        Revenues from the Montego Bay airport in 2Q19 increased by Ps. 8.9 million, or 6.2%, mainly driven by a 7.5% increase in revenues from duty-free stores, retail stores, leasing of space, communications and financial services, and food and beverages. This increase was offset by the 1.3% appreciation of the peso against the U.S. dollar during the quarter, from an average exchange rate of Ps. 19.3715 in 2Q18 to an average exchange rate of Ps. 19.1250 in 2Q19.

Revenues from improvements to concession assets1

Revenues from improvements to concession assets (IFRIC 12) decreased by Ps. 196.8 million, or 61.7%, compared to 2Q18, mainly due to a decrease in committed investments under the Master Development Program for the Mexican airports for 2019, which resulted in a decrease of Ps. 128.4 million, or 54.9%, as well as to a decline in revenues from improvements to concession assets at the Montego Bay airport of Ps. 68.4 million, or 80.2%.

Total operating costs decreased by Ps. 29.4 million, or 1.7%, compared to 2Q18, mainly due to cost of services comprised of the following:

  • Operating costs at the Montego Bay airport decreased by Ps. 53.3 million, or 12.5%, compared to 2Q18 mainly due to a decrease in improvements to concession assets (IFRIC 12) of Ps. 68.4 million, which was offset by an increase in cost of services of Ps. 6.0 million, or 5.6%, and an increase in depreciation and amortization of Ps. 10.6 million or 11.9%, among others.
     
  • Operating costs at the Mexican airports increased by Ps. 23.9 million, or 1.9%, compared to 2Q18, mainly due to an increase in cost of services for Ps. 92.9 million, or 18.6%, higher technical assistance fees and the cost of rights over the concession assets of Ps. 32.9 million, or 14.3%, and depreciation and amortization of Ps. 28.3 million, or 9.4%. This increase was offset by a decrease in the cost of improvements to the concession assets (IFRIC 12) for Ps. 128.4 million or 54.9%.

The increase in cost of services was mainly due to:

  • An increase in maintenance expenses of Ps. 40.3 million, or 46.2%, mainly aimed at the operational areas, terminal buildings, documented baggage and cleaning services, which jointly increased by Ps. 38.4 million, or 44.3%, due to the addition of square meters at the airports that recently completed their expansions, as well as for improvements in passenger service.
  • An increase in other operating expenses of Ps. 30.1 million, or 33.4%, compared to 2Q18, mainly due to the increase in the reserve for doubtful accounts, cost of sales in the VIP lounges, convenience store fees and professional service fees, which jointly increased by Ps. 27.4 million, or 32.9%.
  • An increase in utility costs of Ps. 15.2 million, or 28.5%, compared to 2Q18, due to higher energy prices and expansions of terminal buildings.

Operating margin for 2Q19 increased by 360 basis points, from 51.1% in 2Q18 to 54.7% in 2Q19. Excluding the effects of IFRIC 12, operating margin increased by 30 basis points, from 56.3% in 2Q18 to 56.6% in 2Q19. Operating income increased by Ps. 244.0 million, or 13.9%, compared to 2Q18.

EBITDA margin increased by 410 basis points from 62.3% in 2Q18 to 66.4% in 2Q19. Excluding the effects of IFRIC 12, EBITDA margin increased by 10 basis points from 68.7% in 2Q18 to 68.8% in 2Q19. The nominal value of EBITDA increased by Ps. 282.9 million, or 13.2%, compared to 2Q18.

Financial result increased by Ps. 204.6 million, from a net expense of Ps. 31.2 million in 2Q18 to a net expense of Ps. 235.8 million in 2Q19. This increase was mainly the result of:

  • Foreign exchange rate loss of Ps. 11.1 million in 2Q19, compared to a gain of Ps. 39.9 million in 2Q18, mainly due to an 8.3% appreciation of the Mexican peso against the U.S. dollar in 2Q18, compared to a depreciation of 1.1% in 2Q19 generating an increase in foreign exchange loss of Ps. 51.0 million. The currency translation effect represented a higher loss of Ps. 407.0 million, compared to 2Q18.
     
  • An increase in interest expenses of Ps. 178.1 million, or 94.1%, compared to 2Q18, mainly due to a higher debt derived from the issuance of long-term bond certificates (Certificados Bursatiles) for Ps. 3.0 billion, an increase in interest rates and a decline in the fair value of hedging instruments.
     
  • An increase in interest income of Ps. 24.6 million, or 28.1%, mainly due to the increase in the Company’s cash position, as well as to an increase in the interest rates.

Comprehensive income declined by Ps. 332.7 million, or 21.5%, compared to 2Q18.

This decrease was mainly the result of a higher exchange rate loss resulting from the foreign exchange conversion effects of Ps. 407.0 million, or 112.7%.

Income before income taxes increased by Ps. 40.5 million, or 2.3% in 2Q19. During 2Q19, income taxes decreased by Ps. 34.1 million, or 6.3% compared to 2Q18. This was a result of the lower incurred tax of Ps. 52.7 million that was offset by the decline in the benefit from deferred income tax of Ps. 18.6 million, due to accumulated inflation that went from 0.12% in 2Q18 to 0.06% deflation in 2Q19.

Revenues (1H19 vs 1H18)

  • Aeronautical services revenues increased by Ps. 517.2 million, or 11.0%.
  • Non-aeronautical services revenues increased by Ps. 317.2 million, or 20.6%.
  • Revenues from improvements to concession assets declined by Ps. 348.4 million, or 56.4%.
  • Total revenues increased by Ps. 486.0 million, or 7.1%.

Aeronautical services revenues include:

i.        Revenues from the Mexican airports increased by Ps. 440.4 million, or 11.1%, compared to 1H18, generated primarily by the 7.3% passenger traffic increase, as well as higher passenger fees due to inflation.

ii.        Revenues from the Montego Bay airport increased by Ps. 76.8 million, or 10.4%, compared to 1H18. This was primarily due to an 8.7% increase in passenger traffic and the adjustment in passenger fees as a result of inflation and to a 0.6% depreciation of the Mexican peso against the U.S. dollar, from an average exchange rate of Ps. 19.0653 in 1H18 to an average exchange rate of Ps. 19.1724 in 1H19.

Non-aeronautical services revenues include:

i.          The Mexican airports contributed an increase of Ps. 288.1 million, or 22.6%, compared to 1H18, driven mainly by a Ps. 171.8 million increase in revenues from third-party operated businesses. This was mainly due to the opening of commercial spaces, the increase in revenues from car rentals, food and beverage operations, retail stores and timeshares at the Guanajuato, Guadalajara, Puerto Vallarta and Tijuana airports, as well as an increase in revenues from “Duty-free” stores, as a result of contract renegotiations.

Revenues from businesses operated directly by the Company increased by Ps. 94.0 million or 24.3%, mainly due to an increase in the number of visitors at the VIP lounges as a result of the opening of two new VIP lounges in the La Paz and Puerto Vallarta airports, the opening of seven new convenience stores in the Guanajuato, Mexicali, Puerto Vallarta and Tijuana airports, and an increase in car parking revenues.

ii.        Montego Bay airport revenues increased by Ps. 29.2 million, or 10.9%, compared to 1H18, mainly due to a 10.2% increase in revenues from duty-free stores, retail stores, leasing of space and food and beverages, as well as to the 0.6% depreciation of the peso versus the U.S. dollar during 1H19.

Revenues from improvements to concession assets2

Revenues from improvements to concession assets (IFRIC 12) decreased by Ps. 348.4 million, or 56.4%, compared to 1H18, mainly due to a decrease in committed investments under the Master Development Program for the Mexican airports for 2019 that resulted in a decrease in improvements to concession assets of Ps. 256.7 million, or 54.9%, and to a decline in revenues improvements to concession assets at the Montego Bay airport of Ps. 91.7 million, or 61.3%, compared to 1H18.

Total operating costs during 1H19 increased by Ps. 8.9 million, or 0.3%, compared to 1H18, and comprised the following:

  • Operating Costs at the Mexican airports increased by Ps. 22.6 million, or 0.9%, mainly due to an increase in the cost of services of Ps. 164.4 million, or 17.9%, an increase in technical assistance fees and the cost of rights to concession assets of Ps. 62.8 million, or 13.6%, and depreciation and amortization of Ps. 56.3 million, or 9.5%, all of which were offset by a decrease in improvements to concession assets (IFRIC 12) of Ps. 256.7 million, or 54.9%.

The increase in cost of services was explained by:

  • Other operating expenses increased by Ps. 55.0 million or 33.1% versus 1H18, mainly due to an increase of Ps. 51.5 million, or 54.5%, in the reserve for doubtful accounts, cost of sales in VIP lounges and convenience stores and professional service fees.
  • Maintenance costs increased by Ps. 44.5 million, or 20.6% versus 1H18, mainly due to maintenance of operating areas, terminal buildings, cleaning services and documented baggage inspection equipment, and the latest expansions to the terminal buildings.
  • Utility costs increased by Ps. 28.2 million, or 31.6%, compared to 1H18, due to the additional square meters in terminal buildings (as a result of the expansions) and higher energy prices during 1H19.
  • Employee costs increased by Ps. 24.4 million or 7.3%, compared to 1H18, mainly due to an increase in personnel, and salary adjustments.     

Operating costs at the Montego Bay airport decreased by Ps. 13.7 million, or 1.7% compared to 1H18, mainly due to a decrease in improvements to concession assets (IFRIC12) of Ps. 91.7 million, which was offset by an increase in cost of services of Ps. 12.5 million, or 6.0%, an increase in the cost of concession assets rights of Ps. 45.6 million, or 16.5%, and depreciation and amortization of Ps. 19.1 million or 23.7%

Operating margin increased by 300 basis points from 52.6% in 1H18 to 55.6% in 1H19. Operating margin, excluding the effects of IFRIC 12, decreased by 10 basis points from 57.8% to 57.7% in 1H19. Operating income increased by Ps. 477.1 million, or 13.2%, compared to 1H18.

EBITDA margin increased by 330 basis points from 63.9% in 1H18 to 67.2% in 1H19. EBITDA margin, excluding the effects of IFRIC 12, decreased by 50 basis points from 70.2% in 1H18 to 69.7% in 1H19. The nominal value of EBITDA increased by Ps. 553.2 million, or 12.6%, compared to 1H18.

Financial result increased by Ps. 336.7 million, from a net gain of Ps. 18.4 million in 1H18 to a net loss of Ps. 318.3 million in 1H19. This increase mainly includes:

  • The foreign exchange gain decreased from a gain of Ps. 194.7 million in 1H18 to a gain of Ps. 58.3 million in 1H19 due to a 0.6% depreciation of the Mexican peso against the U.S. dollar in 1H18 compared to an appreciation of 2.6% in 1H19, which generated a decrease in foreign exchange gain of Ps. 136.4 million. In addition, the effect in foreign currency translation effect resulted in a net loss of Ps. 168.5 million compared with 1H18.
     
  • Interest expenses increased by Ps. 250.5 million or 61.4% compared to 1H18, mainly due to an increase in debt derived from the issuance of long-term bond certificates (Certificados Bursatiles) of Ps. 3.0 billion, as well as an increase in interest rates and a decline in the fair value of hedging instruments.
     
  • Interest income increased by Ps. 50.2 million or 21.7%, due to the increase in the Company’s cash position and higher interest rates.

Comprehensive income declined by Ps. 126.9 million, or 4.8%, compared to 1H18.

This decrease was mainly the result of higher exchange loss of Ps. 168.5 million.

Income before income taxes increased by Ps. 141.1 million, or 3.9% in 2Q19. Income taxes increased by Ps. 98.5 million, or 9.8%, due to a decline in the benefit from deferred income tax of Ps. 113.8 million and a lower inflation rate, which went from an inflation rate of 1.0% in 1H18 to an inflation of 0.4% in 1H19. This result was offset by a Ps. 15.3 million decrease in taxes incurred.

Statement of Financial Position

Total assets as of June 30, 2019 increased by Ps. 2,508.6 million compared to June 30, 2018, primarily due to the following items: (i) cash and cash equivalents of Ps. 1,944.3 million, (ii) improvements to concession assets of Ps. 809.2 million, (iii) machinery, equipment and improvements to leased buildings of Ps. 179.0 million and (iv) accounts receivable of Ps. 24.8 million. This result was offset by a decline in airport concessions of Ps. 454.3 million, due to amortization. 

Total liabilities as of June 30, 2019 increased by Ps. 3,702.2 million compared to the same period of 2018. This increase was primarily due to the following items: (i) an increase in long-term bond certificates (Certificados Bursátiles) of Ps. 3.0 billion, (ii) dividends payable of Ps. 420.5 million, and (iii) increase in long-term bank loans of Ps. 350.5 million. These increases were offset by a decrease in short-term bank loans of Ps. 91.4 million, among others.

Recent Events

In accordance with the regulatory framework applicable to Mexican airports, on June 28, 2019, the Company presented its proposals for the Master Development Program (MDP) and for the applicable passenger fees for the 2020-2024 period to the Federal Aviation Administration (Dirección General de Aeronáutica Civil, or DGAC). Under the applicable Mexican regulatory framework, the Company must obtain approval from the DGAC for its proposals by December 31, 2019.

Company Description

Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (GAP) operates 12 airports throughout Mexico’s Pacific region, including the major cities of Guadalajara and Tijuana, the four tourist destinations of Puerto Vallarta, Los Cabos, La Paz and Manzanillo, and six other mid-sized cities: Hermosillo, Guanajuato, Morelia, Aguascalientes, Mexicali and Los Mochis.  In February 2006, GAP’s shares were listed on the New York Stock Exchange under the ticker symbol “PAC” and on the Mexican Stock Exchange under the ticker symbol “GAP”.  In April 2015, GAP acquired 100% of Desarrollo de Concesiones Aeroportuarias, S.L., which owns a majority stake in MBJ Airports Limited, a company operating Sangster International Airport in Montego Bay, Jamaica. Subject to certain conditions precedent, GAP expects to take control of the operation of the Kingston airport in the last quarter of 2019.

This press release contains references to EBITDA, a financial performance measure not recognized under IFRS and which does not purport to be an alternative to IFRS measures of operating performance or liquidity. We caution investors not to place undue reliance on non-GAAP financial measures such as EBITDA, as these have limitations as analytical tools and should be considered as a supplement to, not a substitute for, the corresponding measures calculated in accordance with IFRS.

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management’s current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words “anticipates”, “believes”, “estimates”, “expects”, “plans” and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.

In accordance with Section 806 of the Sarbanes-Oxley Act of 2002 and article 42 of the “Ley del Mercado de Valores”, GAP has implemented a “whistleblower” program, which allows complainants to anonymously and confidentially report suspected activities that may involve criminal conduct or violations. The telephone number in Mexico, facilitated by a third party that is in charge of collecting these complaints, is 01 800 563 00 47. The web site is www.lineadedenuncia.com/gap. GAP’s Audit Committee will be notified of all complaints for immediate investigation.

For presentation purposes, the 25.5% stake in Desarrollo de Concesiones Aeroportuarias, S.L. (“DCA”) held by Vantage appears in the Stockholders’ Equity of the Company as a non-controlling interest.

As a part of the adoption of IFRS, the effects of inflation on common stock recognized pursuant to Mexican Financial Reporting Standards (MFRS) through December 31, 2007 were reclassified as retained earnings because accumulated inflation recognized under MFRS is not considered hyperinflationary according to IFRS. For Mexican legal and tax purposes, Grupo Aeroportuario del Pacífico, S.A.B. de C.V., as an individual entity, will continue preparing separate financial information under MFRS. Therefore, for any transaction between the Company and its shareholders related to stockholders’ equity, the Company must take into consideration the accounting balances prepared under MFRS as an individual entity and determine the tax impact under tax laws applicable in Mexico, which requires the use of MFRS. For purposes of reporting to stock exchanges, the consolidated financial statements will continue being prepared in accordance with IFRS, as issued by the IASB.

[1] Revenues from improvements to concession assets are recognized in accordance with International Financial Reporting Interpretation Committee 12 “Service Concession Arrangements” (IFRIC 12), but this recognition does not have a cash impact or an impact on the Company’s operating results. Amounts included as a result of the recognition of IFRIC 12 are related to construction of infrastructure in each quarter to which the Company has committed in accordance with the Company’s Master Development Programs in Mexico and Capital Development Program in Jamaica. All margins and ratios calculated using “Total Revenues” include revenues from improvements to concession assets (IFRIC 12), and, consequently, such margins and ratios may not be comparable to other ratios and margins, such as EBITDA margin, operating margin or other similar ratios that are calculated based on those results of the Company that do have a cash impact.