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FERROVIAL: POOR 3Q’20 RESULTS FROM HEATHROW AND GUIDANCE CUT (ANÁLISIS BANCO SABADELL)

Heathrow Airport Holding (HAH, 25% of FER and ~6% of our T.P.) has just released its 3Q’20 results, showing a -72% drop in revenues on the quarter to £ 239 M and £ 37 M of adjusted EBITDA (vs. £-93 M in 2Q’20). Non-aeronautical revenues (~45% of total) dropped by -68%, while Aeronautical revenues (~55%) slid by -74% due to a -84% drop in passenger traffic (already known), which would be partially offset with a tariff increase of +23.5% to £ 27.93/passenger (in cumulative terms). The company’s liquidity levels increased to £~4.5 Bn in October’20 (vs. £ 2.7 Bn in the 1H’20), which would allow it to operate normally over the next twelve months in a scenario of zero revenues and well into 2023 if its traffic estimates are met. The company cut its guidance for EBITDA’20 to £ 290 M (vs. £ 357 M previously and vs. £ 884 M BS(e)), with a drop in traffic levels of -72% vs. -63.9% previous. Looking to 2021, it has lowered its traffic forecast to 37.1 M passengers (vs. 62.8 M passengers previously and vs. ~52 M BS(e)), which means a -54% drop vs. 2019 and +64% vs. 2020. As expected, no dividends will be paid this quarter.
MARKET IMPACT
Based on these poor 3Q’20 results, which came with a guidance cut, we expect a negative, yet limited, share price reaction, given the weight of Heathrow on the valuation (~6% of our T.P. for FER). Following these 3Q’20 results, we will revise our estimates to include the company’s new guidance, with an estimated impact of around -1% on the T.P. Separately, apart from the final result of Heathrow’s request that the regulator review 2020 and 2021 tariffs (we see a low likelihood of success), we think that over the coming quarters all eyes will continue to be on the pace of air traffic recovery (new rapid tests in the airport and the evolution of Covid-19 outbreaks), which we expect to reach pre-Covid levels in 2023, and especially on the performance of the liquidity position/cash (we estimate £~450 M/quarter will be burned). This will be key to avoiding a potential equity injection from the company’s shareholders (£ 1 Bn of cash provided would mean £ 250 M for FER; ~1.9% market cap).