The accounting policies applied in preparing the 2017 consolidated figures are in line with those utilised for the 2016 consolidated financial statements. The consolidation scope at December 31, 2017 altered on December 31, 2016 with the acquisition by SEA SpA of an additional stake in SEA Prime SpA of 1.57% (of which SEA SpA already held control). The SEA Prime holding is currently 99.91%. With this acquisition, the holding in the associate Signature Flight Support Italy Srl therefore increased from 39.34% to 39.96% (in 2016 however fully consolidated until March 31). The liquidation of SEA Handling SpA in liquidazione and of Consorzio Malpensa Construction in liquidazione, SEA subsidiaries held respectively 100% and 51%, in addition concluded in 2017.
| (Euro thousands) | 2017 | % | 2016 | % | Cge. % 2017/2016 |
|---|---|---|---|---|---|
| Operating revenues | 697,698 | 96.1% | 653,512 | 93.3% | 6.8% |
| Revenue for works on assets under concession | 28,281 | 3.9% | 46,622 | 6.7% | -39.3% |
| Total revenues | 725,979 | 100.0% | 700,134 | 100.0% | 3.7% |
| Operating costs: | |||||
| Personnel costs | (210,743) | -29.0% | (182,971) | -26.1% | 15.2% |
| Other operating costs | (246,224) | -33.9% | (239,646) | -34.2% | 2.7% |
| Total operating costs | (456,967) | -62.9% | (422,617) | -60.4% | 8.1% |
| Costs for works on assets under concession | (26,006) | -3.6% | (43,114) | -6.2% | -39.7% |
| Total costs | (482,973) | -66.5% | (465,731) | -66.5% | 3.7% |
| EBITDA (1) | 243,006 | 33.5% | 234,403 | 33.5% | 3.7% |
| Provisions & write-downs | (32,218) | -4.4% | (5,497) | -0.8% | 486.1% |
| Restoration and replacement provision | (13,602) | -1.9% | (17,193) | -2.5% | -20.9% |
| Amortisation & Depreciation | (69,296) | -9.5% | (61,714) | -8.8% | 12.3% |
| Operating profit | 127,890 | 17.6% | 149,999 | 21.4% | -14.7% |
| Investment income/(charges) | 8,135 | 1.1% | 9,842 | 1.4% | -17.3% |
| Financial charges | (18,167) | -2.5% | (18,940) | -2.7% | -4.1% |
| Financial income | 258 | 0.0% | 136 | 0.0% | 89.7% |
| Profit before taxes | 118,116 | 16.3% | 141,037 | 20.1% | -16.3% |
| Income taxes | (35,667) | -4.9% | (47,263) | -6.8% | -24.5% |
| Continuing Operations profit | 82,449 | 11.4% | 93,774 | 13.4% | -12.1% |
| Discontinued Operations profit/(loss) | 1,556 | 0.2% | (130) | 0.0% | -1296.9% |
| Minority interest profit/(loss) | (65) | 0.0% | 25 | 0.0% | -360.0% |
| Group Net Profit | 84,070 | 11.6% | 93,619 | 13.4% | -10.2% |
(1) EBITDA is calculated as the difference between total revenues and total costs, excluding provisions and write-downs.
Operating revenues in 2017 grew 6.8%, mainly due to the strong passenger and cargo performance, in addition to the non-aviation activities, the contribution of commercial aviation - which on completion of the terminal restyling can provide exclusive and top quality services to customers - and the energy business which successfully tapped into the market recovery, boosting energy sales to the market, while also contracting methane gas at the lows of 2016.
EBITDA was Euro 243,006 thousand, up 3.7% on 2016, although including Euro 23,923 thousand of non-recurring costs for post-employment benefits under the Framework Agreement signed on July 22, 2016 with the Trade Unions. Excluding these costs, and net of extraordinary revenue items of Euro 2,929 thousand, EBITDA was Euro 264,044 thousand, up 10.1% on 2016 (which also included non-recurring revenue and cost items and reported net EBITDA of Euro 5,392 thousand).
This good performance stems from strong revenue growth and prudent operating cost management.
EBIT of Euro 127,890 thousand was impacted by the Euro 25,252 thousand write-down of the Alitalia SAI receivable for unsettled invoices in the year before the company entered extraordinary administration (May 2, 2017).
Group Net Profit - benefitting Euro 1,556 thousand from the liquidation of SEA Handling and impacted by the extraordinary items indicated above - amounts to Euro 84,070 thousand, contracting Euro 9,549 million on the previous year.
The main income statement accounts are broken down as follows.
Revenues
Operating revenues in 2017 (revenues net of works on assets under concession) of Euro 697,698 thousand include Aviation revenues of Euro 443,593 thousand (Euro 408,970 thousand in 2016), Non Aviation revenues of Euro 227,263 thousand (Euro 216,900 thousand in 2016), General Aviation business revenues of Euro 12,124 thousand (Euro 11,750 thousand in 2016) and Energy business revenues of Euro 14,718 thousand (Euro 15,892 thousand in 2016).
The improvement of Euro 44,186 thousand on the previous year (+6.8%) was supported in 2017 by non-recurring revenues of Euro 2,929 thousand (Euro 2,429 thousand from the Anti-trust Authority review of the penalty imposed on SEA in 2015 following the acquisition of SEA Prime - previously ATA Ali Trasporti Aerei and Euro 500 thousand from the collection of a supplier penalty), while in 2016 including revenues from the company Signature Flight Support Italy S.r.l. (previously Prime Aviation Services) and refuelling operations - no longer included in the Group consolidation scope - of Euro 1,274 thousand. Net of these items, revenues grew Euro 42,531 thousand (+6.5%). This performance is principally based on:
- Aviation operations for Euro 32,910 thousand, mainly due to the boost in traffic volumes both in the passengers’ segment - benefitting from additional airline capacity and load factor growth - and the cargo segment;
- Non Aviation operations for Euro 9,238 thousand, growing across all the main business segments, including Shops, Food & Beverage, Car Rental, Parking and Cargo;
- the Energy business, whose revenues contracted Euro 1,243 thousand. Despite good electric and thermal energy sales on the basis of favourable sales prices and increased volumes, revenues decreased with the conclusion of the Green certificates benefit at Linate;
- the General Aviation business - at like-for-like scope - for Euro 1,626 thousand, principally due to non-regulated operations (entry into use of the new Hanger and better parking management), while regulated operation results were in line with the previous year.
Revenues for works on assets under concession decreased from Euro 46,622 thousand in 2016 to Euro 28,281 thousand in 2017 (-39.3%). These revenues refer to construction work on assets under concession increased by a mark-up representing the best estimate of the remuneration of the internal cost for the management of the works and design activities undertaken, which corresponds to a mark-up which a third-party general constructor would request to undertake such activities. This account is strictly related to investment activities on assets under concession.
Operating costs
Operating costs for the year amount to Euro 456,967 thousand, up Euro 34,350 thousand on the previous year (+8.1%). These include non-recurring costs of Euro 23,966 thousand (Euro 23,923 thousand of which leaving incentive payments). Therefore, net of these items, compared to the year 2016 which, in turn, incorporated non-recurring costs for a total of Euro 6,665 thousand, the increase amounts to Euro 17,048 thousand (4.1%).
Non-recurring items in 2017 mainly refer to leaving payments related to the Project Framework Agreement concluded with the Trade Unions on July 22, 2016. Euro 5,768 thousand were disbursed in 2017, while Euro 17,971 thousand relates to the early retirement incentive programme for a pre-defined maximum number of workers who will reach pensionable age by August 2023.
In 2016, Euro 4,019 thousand were earmarked for early retirement incentive payments, Euro 1,508 thousand for the closure of the litigation on State Aid, while the costs of Prime Aviation Services’ refuelling activities amounting to Euro 1,138 were still present within the Group’s consolidation scope.
Net of one-off items, the increase in costs of Euro 17,048 thousand mainly relates to:
- Group personnel costs, which increased Euro 8,229 thousand (+4.6%) compared to 2016, increasing from Euro 178,591 thousand in 2016 to Euro 186,820 thousand in 2017. The increase was mainly due to the introduction of a reward contribution linked to the achievement of company performance objectives. It also included the portion allocated for the National Collective Labour Agreement’s renewal, which was signed in 2014 and expired at the end of 2016.
On a like-for-like consolidation basis, thus excluding Prime Aviation Services’ workforce from 2016, the workforce numbered 2,766 Full-Time Equivalents and compares with 2,792 units for 2016.
- Other operating costs increased by Euro 8,818 thousand (+3.7%) compared to 2016, increasing from Euro 237,362 thousand in 2016 to Euro 246,181 thousand in 2017. This was due to the increase in costs directly linked to revenues and traffic of Euro 14,501 thousand (public fees, commercial costs and parking management fees), partly offset by a reduction in other core costs of Euro 5,683 thousand, mainly as a result of lower energy costs following a careful procurement policy and the containment of other operating costs.
Costs for works on assets under concession
Costs for works on assets under concession decreased from Euro 43,114 thousand in 2016 to Euro 26,006 thousand in 2017. These costs refer to the costs for the works undertaken on assets under concession. This movement is strictly related to investment activities.
As a result of the above dynamics, EBITDA stood at Euro 243,006 thousand compared to Euro 234,403 thousand for 2016, up 3.7% (+Euro 8,603 thousand). Net of the non-recurring items highlighted above, EBITDA amounted to Euro 264,044 thousand, up 10.1% compared to 2016 (Euro 239,794 thousand).
Provisions and write-downs
In 2017, provisions and write-downs show an increase of Euro 26,721 thousand, from Euro 5,497 thousand in 2016 to Euro 32,218 thousand in the year under review. These relate to Euro 1,494 thousand in net provisions for future charges (Euro 1,035 thousand at December 31, 2016) and Euro 30,724 thousand in net provisions for doubtful debt (Euro 4,379 thousand at December 31, 2016).
"Provisions for future charges" include Euro 3,441 thousand in provisions relating to the current year for litigations with the GSE on the assignment of Green Certificates and White Certificates, provisions for employment, revocatory risks and insurance deductibles, partially offset by the release of previous years’ provisions for risks and charges of Euro 1,947 thousand, as a result of the elimination of some ongoing disputes.
"Credit risk provisions" show a net effect of Euro 30,724 thousand (Euro 4,379 thousand at December 31, 2016), due to net provisions for trade receivables amounting to Euro 27,498 thousand (Euro 2,743 thousand in 2016), net releases of other receivables amounting to Euro 250 thousand (Euro 1,636 thousand in 2016) and net provisions for other financial assets amounting to Euro 3,476 thousand (item not present in 2016).
The total provision for trade receivables is almost all related to a past loan (prior to May 2, 2017) to Alitalia SAI in Extraordinary Administration, for an amount of Euro 25,252 thousand. There is currently no guarantee on its collection.
In relation to other receivables in 2016, a provision was made for Euro 307 thousand for receivables from SEA Energia’s 2015 green certificates. Following the settlement of the dispute with GSE, Euro 57 thousand of the provision made in 2016 was used in 2017 and the remaining Euro 250 thousand released.
The year 2017 also includes the write-down of the financial receivable relating to equity financial instruments and Airport Handling’s equity value transferred to the Trust and the subject of the contract with dnata for Euro 3,476 thousand, in anticipation of the probable review of the sale price on the expiry of the call option exercisable by dnata.
Further information is available in Note 9.6 of the Consolidated Financial Statements.
Restoration and replacement provision
During the year, the provision went from Euro 17,193 thousand in 2016 to Euro 13,602 thousand in 2017, with a decrease of Euro 3,591 thousand. In view of a provision of Euro 15,093 thousand in 2017 (Euro 17,193 thousand in 2016), a release of the provision amounting to Euro 1,491 thousand was recorded (nil in 2016), in order to adjust the provision to new industry regulations on x-ray equipment.
Amortisation & Depreciation
Amortisation and depreciation increased by Euro 7,582 thousand compared to 2016 (+12.3%), from Euro 61,714 thousand to Euro 69,296 thousand. Amortisation and depreciation movements in the periods reflect, on the one hand, the depreciation and amortisation of tangible and intangible fixed assets on the basis of the useful life estimated by the Group, however not exceeding the concession’s duration and, on the other, the acceleration of depreciation on x-ray equipment which will be replaced in the coming years as required by the applicable legislation, and of the turbine located in the Malpensa cogeneration plant which will be replaced in 2019. The main investments that contributed to the increase in the above-mentioned amortisation and depreciation are those made on the Cargo City area, Terminal 1 and Terminal 2’s railway station, in addition to more investment for the purchase of new de-icing machines.
Investment income and charges
In 2017, net income from investments decreased Euro 1,707 thousand, from Euro 9,842 thousand in 2016 to Euro 8,135 thousand in 2017. Equity-accounted investments and other income and charges are included.
The share of the result of Equity-accounted associates was positive at Euro 8,204 thousand in 2017 (Euro 6,986 thousand in 2016). The increase, amounting to Euro 1,218 thousand, is primarily attributable to the improvement of the results achieved by some associates.
Other income decreased Euro 2,925 thousand. This reduction is attributable to the presence of non-recurring revenues in 2016. These include SEA Prime capital gains on the sale of the 60% stake in Signature Flight Support Italy Srl (previously Prime Aviation Services SpA) amounting to Euro 955 thousand, and dividends for Euro 1,901 thousand, approved by the Shareholders’ Meeting of Airport Handling SpA on May 6, 2016 for the allocation of net profit for the financial year 2015 in relation to equity financial instruments held by SEA.
Financial income and charges
In 2017, net financial charges reduced to Euro 895 thousand, from Euro 18,803 thousand in 2016 to Euro 17,909 thousand in 2017.
This is mainly due to: (i) lower interest paid on medium/long-term loans for Euro 380 thousand, due to the reduction in the average gross debt and the contraction of the average cost of debt; (ii) lower commissions on loans for Euro 50 thousand; (iii) a reduction in other interest charges for Euro 429 thousand which mainly affect lower charges on derivatives for the continuation of the relative notional amount’s repayment; (iv) an increase in financial income of Euro 122 thousand.
Income taxes
Taxes for the year 2017 amounted to Euro 35,667 thousand, down on 2016 (Euro 47,263 thousand), due to the effect of the reduction in pre-tax profit and the entry into force of the lower IRES rate of 24%.
A detailed analysis of the components that contributed to this net result and their comparison with 2016 is available in Note 9.12 of the Consolidated Financial Statements.
Discontinued Operations profit/(loss)
The net result from discontinued operations relating to the commercial aviation handling sector shows a net profit of Euro 1,556 thousand against a net loss of Euro 130 thousand in the previous year. The item includes the result of SEA Handling SpA, for which the liquidation procedure was concluded on June 30, 2017 leading to the settlement of payables and receivables that are still open. On July 10, 2017, the Shareholders' Meeting approved the final liquidation financial statements and the company’s relative distribution plan, whose total shares were held by SEA SpA.
A detailed analysis of the components that contributed to this net result and their comparison with 2016 in the context of the application of IFRS 5 is available in the Explanatory Notes 7.2 and 9.13 to the Consolidated Financial Statements.
Group Net Result
As a result of the above movements, the Group’s net profit decreased Euro 9,549 thousand - from Euro 93,619 thousand in 2016 to Euro 84,070 thousand in 2017.