Aeroports de Paris SA (AEOXF) Q4 2022 Earnings Call Transcript

Aeroports de Paris SA (OTCPK:AEOXF) Q4 2022 Results Conference Call February 16, 2023 4:00 AM ET

Company Participants

Cecile Combeau – Head, IR

Augustin de Romanet – Chairman and CEO

Edward Arkwright – Deputy CEO

Philippe Pascal – CFO

Conference Call Participants

Cristian Nedelcu – UBS

Stephanie D’Ath – RBC

Elodie Rall – JPMorgan

Nicolas Mora – Stanley

Ruxandra Haradau-Doser – Kepler Cheuvreux

José Manuel Arroyas – Santander

Graham Hunt – Jefferies

Dario Maglione – BNP Paribas

Cecile Combeau

Thank you, and good morning, everyone. I’m Cecile Combeau, Head of Investor Relations of Groupe ADP and it is my pleasure to welcome you to our full year results conference call. I’m here with our Chairman and CEO, Augustin de Romanet; Deputy CEO, Edward Arkwright; and CFO, Philippe Pascal.

After the presentation of our full year results by the management, we will open the line to Q&A. But before we start, I would like to draw your attention to the definition of the financial indicators that we will refer to during the presentation. They are on Page 42 of the presentation, and please take a look at our usual disclaimer related to forward-looking statements, which is on Page 44. And with that, let me hand it over to the Chairman and CEO, Augustin de Romanet.

Augustin de Romanet

Thank you, Cecile. Good morning, everybody. We are happy to be with you, and thanks to be with us. It’s a pleasure to be with you, and as you probably saw in the headlines, we are posting solid results for 2022, meeting or exceeding most of the time, all the targets we have set for the year.

Revenue, which is €4.7 billion, up 69% year-on-year 2021. The two main drivers for this performance are: first, the vigorous recovery in traffic, both in Paris and internationally; and secondly, the strong momentum of the retail and services businesses in Paris. EBITDA stands at €1.7 billion. This is a margin of 36.4% of revenues, in line with the objective to be in the upper part of the targeted range. Net income is back to positive territory, standing at €116 million. And the ratio between our net financial debt and EBITDA significantly improved in 2022. It is standing at 4.5x EBITDA. We have exceeded our target here. Excluding the proceeds from the sale of our stake in Royal Schipol Group, this ratio stands at 4.6x EBITDA compared to a target of 5 to 5.5x EBITDA. This strong performance leads us to propose a dividend of €3.13 per share for the approval of the next AGM. That is comfortably above the target flow we had set in February 2022, which was €1.

Next slide shows that today marks the first anniversary of the launch of our strategic road map, 2025 Pioneers. And I must say that I’m very pleased with its successful launch. As you will see in the highlights, I’m about to present, we have initiated a series of actions contributing to build the foundation of a new airport model by 2025. Moving to Slide 5, focusing on our operations in Paris. We welcomed nearly 87 million passengers in Paris, which is more than the double compared to 2021, up 106% versus last year. The second half of the year was particularly strong, reaching 88% of 2019 traffic. This strong recovery has been an operational human challenge, and I take this opportunity to thank our employees and partners for their mobilization and engagement.

As you know, compared to other hubs in Europe, our performance has been excellent. We’ve been able to manage this surge in traffic without any capacity restriction. You know that quality of service is very, very important for me and that leads me to this topic of hospitality, which, as you know, our core focus to us at the center of our, that we call resolvement. [Ph] You can see on the graph on the left that passenger satisfaction remained just above 2019 levels. For sure, we had some difficulties, notably with police and controls for passports. But every day, we strive to build a hospitality model aimed at excellence. The progressive switch to this strategy shows promising signs of success.

You can see that the spending per departing passenger in our airside areas in Paris, this is what we call Extime Paris sales per pax has reached an all-time level of €27.4 and it is impressive even as we have 7x less Chinese travelers than before. Nevertheless, we had a very good performance. Especially in the fourth quarter, which has been outstanding. The seasonality of the business partly explains this record level. Nevertheless, the overall trends make us confident for the future of our retail and service businesses.

2023 marks the formal launch of our airport hospitality and retail new brand called Extime. I’m now on Slide 7. Last April, you remember, we opened Terminal 2G in CDG after it got the brand makeover. This was the inaugural introduction of the Extime brand under the Lifestyle pharma and retail offering. Beginning of December, we reopened a wonderfully upgraded terminal 1 in CDG, our first boutique terminal and really, I think, a flagship. It is the first of our premium format executive and believe me, it is stunning. It will be soon be followed by CDG Terminal 2BD connection, building to be branded Extime under the lifestyle format to be completed later this month and orders to follow through 2023.

About our international portfolio. To highlight some of the successful achievements in our international portfolio, I would like to mention, first, Antalya Airport, the renewal of Ankara Airport concession until 2050, and regarding GMR Airports; Indonesia Capital City Airport, Medan has been taken over since July. The new Goa airport in India has just commissioned last autumn by Prime Minister Modi. And third, the disposal of Cebu Airport in Philippines was completed last December as part of the asset rotation and deleveraging target of GMR. Our international assets help having a well-balanced portfolio in terms of exposure to promising geographies where demographic and economic patterns show significant growth potential, and I’m pleased with the team’s achievements in 2022.

About social responsibility and governance, we have been very active. I’m now on Slide 9. As a responsible employer, Groupe ADP is promoting individual civic engagement of its employees in 2022, this materialized into more than 800 cumulative days benefiting to local nonprofit organizations. Regarding governance, you will remember that ADP set up a stakeholder committee contributing to the alignment of its ESG targets and our financial objectives. In a spirit of transparency, the stakeholder committee recently published a first white paper on the sale of ground access and strategies for reducing CO2 emissions on the ground. And even if I was not 100% in accordance with this paper, we have decided to publish it on my LinkedIn account showing that I aim to share all the opinions, even some decent which could provokes.

Now Slide 10. Speaking about tradition of emissions, which is one of our priorities, you see on Slide 10, some example of the development introduced in our construction works projects. Groupe ADP wants to be the leader and is committed to reduce its carbon footprint by building less and better. The project highlighted in this slide illustrates our progresses with new construction modes and the use of materials on machinery with lower carbon emissions. Groupe ADP positions itself as an active player in the airport transition. Sixteen airports of the group engaged in the airport carbon accreditation program, 10 of them gained a level last year. I’m very proud we obtained the level 4 airport carbon accreditation certification for our three French platforms as well as in Amman in Jordan last July. Atlas platform even received Level 4, which is the last step before reaching Net Zero internal emissions. Now let’s get into our performance more in detail with Philippe Pascal.

Philippe Pascal

Thank you, Augustin, and good morning, everyone. Let’s move on to Slide 13 with traffic. All our airports experienced a strong recovery of traffic, traffic recovery against 2019 stood at 80.2% in Paris. As mentioned by Augustin, traffic more than doubled compared to the last year in Paris, a huge return of passengers. At the group level, the recovery remains just slightly higher than we ended up in 80.9% of 2019 profit. This recovery levels fall in line with our assumptions, which, as you remember, were paid in July and announced last October.

Moving to Slide 14 to focus on Paris Aeroport. We see that traffic with Europe, which amount to 45% of traffic has recovered well to 82.8% of 2019 traffic levels in 2022 and 91.7% in Q4. This recovery continues to be particularly strong for low-cost traffic, representing 27.6% of traffic in Paris compared to around 22% before COVID. International traffic, which, as you know, is the most contributive both for regulated and nonregulated revenues stood at 76.3% of 2019. Traffic with Asia remains the weakest with only 34% of 2019 level, but we saw an acceleration in the second half with 45% recovery compared to only 22% recovery in the first part of 2022. China reopened only very recently and was still at only 6% of 2019 in Q4.

Now if we look at how this traffic translate into our retail business in Paris, we see that performance has been contemptibly strong this year. Sales per pax outperformed our initial expectations, reaching the record level of €27.4 in 2022, plus €2.1 above 2021, and plus €4 above 2019 sales-per pax. Within that performance, we are seeing some pass-through of inflation on sales price, but with an overall modest impact. Above all, these numbers demonstrate the relevance of Group ADP’s retail offer and airport hospitality model, which meets the demand of passenger. One of the most obvious sign on this is a strong growth in luxury product spending. The reopening of Terminal 1 has been an important milestone for our new retail concept, Extime, and we trust that the 2023 numbers will confirm this very good and strong performance.

Moving on to Slide 15 for our 2 main international assets. As remember, term numbers are fully consolidated in our accounts and GMR Airport result on equity accounting. On the left side, nonrecovery stands at 81.2% of 2019 level. Touristic airports in use are recovering well, notably Antalya, with 87.5%, thanks to the traffic with the U.K. and Germany, which was well above 2019 level. Some international assets in Georgia, Macedonia and most importantly, Almaty show strong performance. Almaty is surpassing 2019 practical. On the right side, we can see GMR Airports standing at 81.2% recovery. It is stronger in Indian airport driven by domestic profit, which stood at 19.9% of 2019 level. Note that Cebu Airport and Indonesia was disposed as part of the asset rotation and delivering strategy of GMR.

Now getting back to our financial performance in 2022. All key financial indicators strongly improved in volume, but also margin and demands. I propose to move directly to Slide 17 for more details on our revenue first. Revenue reached €4.7 billion, up 68.8% versus last year. Within this growth, €229 million and linked to the full year effect of the integration of Almaty Airport acquired in May 2021 and its revenue increased. In Paris, the Aviation segment is up 63%, driven by traffic recovery. The Retail & Services segment is not 75% versus 2021, helped by the strong sales per pax addition to traffic. Revenue for real estate was up plus 6.8%, thanks to more gains due to the new development and the return to full ownership of some buildings in 2021. Outside Almaty, airport performance has been strong. International revenue almost double compared to 2021, totaling €1.4 billion.

Moving on to Slide 18, with EBITDA standing at €1.7 billion, up to €953 million compared to last year. The strong improvement is driven by the recovery of traffic impacted positively, in particular our revenue. At the same time, our cost base benefited from a relative protection against inflation. The share of energy expenses in our OpEx remained stable in 2022. As you remember, we secured our energy purchases with hedged prices until December 2023. Energy costs are expected to increase from 2024. Consumable and external services costs increased slower than traffic, plus 49% versus 2021.

We still had a few notes closed at the beginning of the year, which helped a bit. But this good control also reflects the fact that a large proportion of our contracts include fixed price or are not directly indexed with inflation. Nevertheless, I remind you that around 10% of our contracts are indexed with inflation and 15% of them will be renewing during 2023. As a result, we expect external services cost to move slightly up in 2023.

Regarding staff costs, 2022 benefited from the effect of the departure plan, and those departures occurred mainly at the early beginning of the year. At the same time, we have started to recruit again to accompany the return of traffic plus 550 people accreted in 2022, minus almost 100 people with natural attrition. The effect of the recruitment in 2022 remain modest because recruitment were made progressively. It will be felt more in 2023. We implemented salaries increased from EDP model company in the second half of 2022 for €10 million as well as some onetime profit sharing bonus paid in November and to pay in 2023 for an additional €9 million. These 2 effects were offset by provisional reversal. All in all, excluding Amatil, staff expenses were up 16.6%, mainly due to salary increase and recruitment of TAV Airports and in our returners.

So EBITDA margin is up 9.4 points to 36.4% in the upper part of the 32% to 37% target as announced in October. Below EBITDA, Slide 19, you can see amortization and impairment are mostly stable while profit from associates and JVs is up €75 million, mainly due to higher performance in TAV Airport Services Company. This leads to an improvement in our operating income to €936 million. Financial result is down €6 million, benefiting from a lesser cost of debt and €46 million gain from disposal stake. I remind that last year benefited from the positive impact of Tunisia debt resurfacing for more than €100 million. Income tax increased sharply to €172 million, reflecting our return to profitability. Groupe ADP recorded its first profitable year since 2019 with a net income of €518 million, leading to propose a dividend of €3.1.

Last word on net debt, Slide 20. Net debt is down €571 million compared to December 2021. Cash flow from operations has been strong, above €1.5 billion, driven by the EBITDA growth, including the proceeds from RSG process stake disposal for €420 million. Net debt ratio is improving radically down to 4.4x EBITDA. Excluding this impact, it is 4.6x EBITDA outperforming our target of 5 to 5.5x the EBITDA. And with that, I will hand back to Augustin. Thank you.

Augustin de Romanet

Thank you very much, Philippe. To close this presentation, I would like to give you a few comments on our outlook, starting with our priorities in 2023 on Slide 22. This year, we will continue to be fully focused on our 2025 Pioneers strategic road map, contributing to the ecological transition of our sector. We, as an airport as at the overgrind of this ecological transition. This is a paramount objective and it is at the heart of our work and capacity management planning in Paris this year.

2023 will also be the final year to prepare for the Olympics. We’ll be getting ready to welcome delegations of athletes who have every specific needs. It will be a great opportunity to introduce some innovations in our passenger journey, benefiting for the future of our infrastructures. Olympics or not, we will welcome passengers in our airports. We went into effort to improve our services on hospitality, notably with the deployment of time, our new retail specialty brand. And last, we will continue to strengthen the integration of our international airport network. As you can see, we continue to have a lot of on our plate. This business program is done in a context where the recovery in traffic continues.

About traffic, some traffic outlook. We are getting a more precise view on our traffic expectations for 2023. Our central assumptions are unchanged, but we have narrowed our expected ranges. In Paris, traffic should stand this year between 87% to 93% of the 2019 traffic. Going forward, we continue to see a return to 2019 level sometime between ’24 and ’26. At group level, traffic this year should get closer to return to 2019 levels, and we expect 95% to 105%. So no change to our view of a return to 2019 level sometime between 2023 and 2024. Now, based on these assumptions and considering the performance delivered in 2022 as well as the effect that Philippe Pascal described regarding our cost base and the strong growth expected in our international activities.

Let’s look at our updated financial trajectory into 2025. First, EBITDA. EBITDA is expected to continue to grow, and it should be equal or above that of 2019, already in 2023. This is 1 year earlier than what we initially hoped for. So we confirm our guidance of an EBITDA margin between 32% and 37% of revenue in 2023. For the next couple of years, 2024, 2025, we now expect ADP OpEx per passenger between €17 and €20. This is certainly €1 or €2 higher than our previous guidance, mainly driven by the expected increase in staff costs and energy costs, as Philippe explained. This effect combined with the stronger development of lower-margin businesses, in particular at TAV lead us to adjust our EBITDA margin expectations for 2024, 2025, which we now see between 35% and 38%.

Extime in Paris, sales per pax is now expected at 29.5% in 2025 versus previously 27.5% in our last guidance, therefore, supportive to revenue and EBITDA growth. Now next slide. Building on the increase of cash generated by the growth in EBITDA, we will continue to deploy capital according to a balanced allocation. In terms of CapEx, our previous guidance excluded inflation. Now it is in current euros, meaning it includes inflation. The overall envelope over the 2023, 2025 period is slightly higher to reflect that and also to include some additional projects. At group level, we are now guiding for investments totaling around €1.3 billion per year on average. This includes CapEx linked to Ankara concession renewal, as announced in December.

For EPS, we now expect around €900 million per year on average. As far as it is on average, therefore, it could be slightly less in 2023 and slightly higher in 2025. In addition to inpatient, this increased envelope corresponds to new projects linked to the first growth of cargo business and also an acceleration of the electrification of Vegas. In terms of returns to shareholders, our dividend policy remains in changing with a 60% payout and a minimum dividend per share of €3. We will then have flexibility to invest in our international development if opportunities arise. We will always, as usual, and however, exercise great financial discipline in such investment decision as our objective remains to deleverage our balance sheet as signaled by the improved net debt-to-EBITDA target between 3.5% and 4.5% in 2025.

Now with Philippe, Eduard, we’ll be happy to answer your questions, and I propose we open the line for the Q&A session.

Question-and-Answer Session

Operator

First question comes from the line of Cristian Nedelcu from UBS.

Cristian Nedelcu

First one, we’ve seen the tough guidance on EBITDA for the next few years, the other day. Could you tell us maybe just looking at the Core Paris business, what level of traffic versus ’19 levels do you need to get to the same EBITDA in Paris as in 2019?

The second one, it’s just very helpful to hear the moving parts on OpEx, the increases in OpEx in ’23. Could you help us a bit quantify that? If you think that the overall Paris OpEx, what is the incremental in 2023 coming from staff third-party contracts and terminal reopening. And also if you can give us a hint on the energy cost increase that you expect for 2024 versus the current levels.

The last one maybe on the incremental CapEx that you announced today. Could you help us understand a bit better the split between regulated and nonregulated business? And if you are more confident in the outcome on the regulated WACC from the regulator, do you believe there’s higher chances there that they will increase the WACC range versus the current one? Thank you very much.

Augustin de Romanet

I propose that Philippe Pascal answer.

Philippe Pascal

Yes. Thank you. So I’ll start by the last question about the regulated scope. In fact, we expect a strong performance in 2022 in terms of regulated Roche at a good level. And that is a proof that globally, we can recover our accountability in a good position in line with the traffic, in line with our performance. All in all, it’s also the proof that we can step by step, have more color about the cap in terms of value creation in the regulated cap, what is the level of regulated drag and I can confirm that the regulated mechanically, with this performance, it’s higher than expected. But it’s a little bit early to give you more color about that.

In terms of incremental CapEx. What is very important for you to understand is the fact that our new guidance is in current euros. So with the impact of inflation, the large part around 2/3 of the incremental CapEx is linked by the impact of inflation. The new guidance, it’s a way for us to give you more color about the impact of inflation. As you know, for the moment, in our CapEx program, we executed some work with specific agreements conclude before the inflation. So we don’t observe in ’22 and a little bit in ’23, we don’t have impact of inflation in our CapEx program. But in ’24-’25, we expect a huge impact due to the fact that we launched new projects with new contract with the inflation. The inflation is globally around €250 million. So it’s a main explanation of that.

In terms of OpEx, to have more color about the expectation in our OpEx by 2025. We have, first of all, an impact in terms of wages and sell. We have a natural increase with natural inflation for our model for around 2.5%. It’s the natural increase before the COVID Crisis, and we come back to this natural increase. But we have also the impact of negotiation in terms of salary measures. And in this inflation, due to the new agreement with the unions, we have a new basis with an increase of €40 million on an annual basis. So in TAV OpEx, in terms of wages and say, mechanically with a huge inflation in Turkey, and with the recruitment, we expect higher OpEx for around €90 million. So it’s a huge impact. And the full impact of the recruitment in 2022 for more than 500 people have an impact in our trajectory for the next year.

In terms of consumable and external traffic, we have the impact of the recovery of the traffic, but it’s not so huge. We don’t have impact in terms of energy in ’23, but we expect a negative impact in ’24. It’s a little bit early to speak alone because we have to negotiate a new agreement to try to moderate this bad impact. In terms of the other OpEx, we expect an inflation that is in line with the other company in Europe. So all in all, that is very important to note.

So first, we have a good recovery of EBITDA. And as you know, we can reach EBITDA level of 2019 in 2023. It’s a very good news and it’s organic growth. Second point, we’re not — but for the performance in terms of margin in 2022, it’s an exceptional performance due to the fast recovery of the traffic, but also the moderation of the OpEx due to the fact that we are to recruit to launch new subcontractors. So we have an exceptional performance. And for the next year, we return, we come back to the traditional performance of the group. In fact, we can see our new guidance. But all in all, it’s compared to the previous guidance, we just changed the higher part of the range. Due to the fact that we note that we can increase in staff costs, and we have increase in energy. That’s all. It’s not a huge impact. So thank you.

Cristian Nedelcu

Thank you so much Philippe Just a small clarification. So on Paris EBITDA, this traffic recovery to ’19 levels is ’24 to ’26. Does it mean the EBITDA recovery of Paris is also in ’24 to ’26 — or can you come earlier than that?

Philippe Pascal

No, no. The EBITDA — the group of EBITDA has come back in ’23. I’m very comfortable, and we have a good dynamic in ’24 and ’25 and a strong dynamic due to the both elements. First, we have a full recovery of the traffic between 24% and 26%. And second point, we have new activities. And in a retail area and in the development. And when you see the guidance of badness and EBITDA, you can see that we generate a new cash flow strongly. When you study our guidance, we can see that in — we have a good performance in debt net and EBITDA, and we clarify our trajectory EBITDA for the total of the group included in price. That is a strong performance.

Operator

The next question comes from the line of Stephanie at from RBC.

Stephanie D’Ath

The first one is a follow-up on the energy costs. Could you please remind us, I believe you benefited from a cap or government subsidy and when you expect this to roll off and energy prices to impact your energy costs more substantially. Regarding the Extime initiatives, how much more staff do you expect investments to be made in order to benefit from this initiative?

And then finally, on your increased objective of €29.5 years per pax. Could you please explain to us what has been driving this increase? Is it like in reverence coming back? Do you anticipate Russian tenders to be backed by 2025, that would be hugely appreciated.

Philippe Pascal

So Fran, your last question, sales per pax and the drivers. First of all, as you know, we have different elements to drive our performance. First element, it’s a number of square meters in pace in our commercial area. That is not a strong driver for the next few years. We don’t take new terminal, we just refurbish, and we change the commercial area. We don’t change the volume of the commercial area. The second driver, it’s a mixed traffic. In fact, we expect better traffic for the full recovery of the international traffic. And in this international traffic, we expect a slight recovery better recovery in terms of Asia passenger in ’23 and progressively in ’24 and ’25.

The last driver, but it’s the more important neither is the quality of goods and the offering. That is a key in our strategy because we changed our strategy to implement more fashion, and we implement new brands. And for example, we have new shops. We have just one shop of Ruida in Terminal 2. Now we have new shops of Leviton Internal 1 in Paris and legal. And this new goods, new bonds take a good place in our new hospitality model. The two points is the fact that we try to implement a global approach through time with retail, but also food and beverage with the utmost in the boarding area, we’ve launched with advertising. That is important to understand. It’s the global concept creates a huge performance in terms of sales contact.

So mainly the increase of the sales per pax in ’24 and ’25 to reach our new guidance in ’25, that is €29.5. It’s linked by the fact that we try to implement our model in our flagship, Terminal 2 and Terminal 1 in the over terminal in a lifestyle terminal also. And that is the first point. And the second point, it’s making the mechanic recovery of the international traffic and the recovery of the traffic for the next year.

For the Extime initiative. In fact, we tried to implement our exit initiative in the other terminal in Paris, especially in Terminal 2B and 2D which is a new terminal, but we have to retrofit this terminal in Extime, — and in the other airport of the group, notably we tried to implement that in Antalya, but we have another element to another project for that. For the energy cost, we will wait for the end of the winter when we have more visibility to define more in details our approach for 2024 and we currently benefit from fixed price based on the tariff contracted in 2020 and to not to use, but it’s very important to answer your question, we not use the state tariff scheme. We don’t use the cap system. That is very important in our performance. Our performance it’s just linked by our former agreements and our hedging strategy.

Operator

Next question comes from the line of Elodie Rall from JPMorgan.

Elodie Rall

Sorry, I will come back to some of the points discussed. But first, on EBITDA. So there was a reversal of provision that helped the 22% EBITDA end margin. So can you just clarify what was the underlying EBITDA without that? And therefore, given the increase in OpEx that you expect from here, is it fair to assume that EBITDA margin will likely be lower in the ’22 reported of 36.4%. So that’s my first question.

Second, on CapEx guidance. So I understand you’re now including inflation. You said it’s about 2/3 of the increase. So can you remind us what the 1/3 remaining is, in particular, in Paris, given you said there’s additional project internationally. And can you give us the phasing of CapEx between ’23, ’24 and ’25 rather than just an average, please? Is it going to be more front-end loaded or back-end loaded?

And last question on traffic, if I may. So your guidance for 23 implies basically no recovery from the current level. Why is that? And is it because you expect impact on Asia, China reopening in particular to kick in more in ’24 because your guidance basically implies fairly stable trends for the remaining of the year.

Philippe Pascal

Thank you Elodie Rall. First of all, to further the EBITDA. The EBITDA level is expected to increase strongly for the next year. In terms of margin, we have two effects. The main effect is the combination of activities with the fuel of Almaty — that is with a good margin, but not at the same level as the other activities of the group. And the effect of the full consolidation of part of our JV, especially the retail, but we have a very strong leader with a strong generation of cash flow, but with a slight margin, a good margin, below the average margin of the group. So that is the main explanation of the question of margin.

The one explanation is the OpEx level, but it’s not so huge. When you see in our performance in 2022, that is your question, we have a one-off effect, but not so huge for around €25 million and €40 million. And at our we can see that globally at EBITDA level, we have about 1 point of EBITDA margin that is linked to one-off elements. For also staff expensive, positively impacted for €20 million by a provision reversal for the demonstration of pension scheme. And we have other one-off effect that is the property tax that we have good news, and we reversed also our provision and a slight element that is not so huge.

So in terms of organic performance, we don’t have any issues. In terms of CapEx, so I said that globally, we increased our — the CapEx level on average for the 3 years or ’23, ’24, ’25. The main explanation for ’23 is the inflation for €250 million. But we have, in fact, additional project that is a very good project, especially in terms of cargo in terms of monotone, but also in terms of optimization in our capacity due to the acceleration of the traffic in — at the heart of the — we have also a slight element like electrification, refurbishment that it’s part of the scheme.

In terms of phasing, we have a huge start of the CapEx and more back-end loaded. So more in ’24 and ’25. And for profit, the recovery, in fact, we are, as you know, we try to define more precisely our assumption for ’23, but we maintain our assumption from ’24 and ’25 for a full recovery between ’24 and ’25 probably ’24, but perhaps ‘25%. In fact, we expect a progressive recovery in terms of traffic globally in the second half of ’23 for the main part, but not for the total profit level. But the main effect is the policies, the strategy of the airlines, but open new routes when we have a good profitability, not adjust to open to date a strong competition between all the airlines. But to assume the fact that we don’t reopen due to the profitability. So for the moment, we are comfortable with this assumption in terms of profit in price. So thank you.

Operator

The next question comes from the line of Nicolas Mora from Stanley.

Nicolas Mora

I’ll come back again on the CapEx, maybe less on Paris, more on the rest of the group. I’m not sure I quite understand why you would be spending €1.3 billion on average between ’23 and ’25. I think TAV has already given some guidance on CapEx, for example, for ’23, around €220 million to €260 million. So I’m not sure what else is contributing to the delta between €900 million for Paris, which is fine and €1.3 billion for the group level? That’s the first question.

Second, on retail. Could you explain or give a little bit of color on why profitability was actually so amazing in ’22 in retail. We have the details of the contribution from SDA or the old SDA, where the detailed contribution from retail. It’s fine, but the leftover is really amazing. That’s really a step-up from what you used to deliver margin-wise in 2019. So I was just wondering what has changed? Why are you so much profitable in retail euro-for-euro now? And I will leave it there.

Augustin de Romanet

So for the international CapEx, the main explanation is the fact that as a new concession period in Ankara for that have to build new terminals for month and around for the next few years. So it’s globally, €200 million. But at the same time, we have to implement our plan our plan in Almaty. And in Almaty, it’s part of the explanation for around €100 million, a little bit less. And we have also a real estate in the international business in at.

So globally, it’s a good news. It’s a consequence of good news. It’s a new project with a good impact in our P&L at the end of the day. For your question of the retail activities, can you just clarify your point, what is your press your question?

Nicolas Mora

So the main question is your EBITDA contribution from the retail business in Paris is pretty massive in 2022, especially if you strip out Extime and Core ADP, so your core business in retail is now generating higher margins on retail than pre-Covid. Is it because the contract has now been improved or –

Augustin de Romanet

It’s a quality of things and the new luxury bonds for a huge part. And that is the retail margin in ’22 compared to ’19 for the second half — just for the second alpha the impact of the full recovery, it’s very high, more than 40% compared to ’19. And this is the effect of the new scheme and with more fashion with a global approach in terms of retail and with a good dynamic of traffic.

Operator

The next question comes from the line of Ruxandra Haradau-Doser from Kepler Cheuvreux.

Ruxandra Haradau-Doser

Congratulations on the strong performance in 2022 on the Skytrax rankings and the passenger satisfaction improvements at various terminals. First, sorry, if I missed that during the presentation, but can you talk about tariffs in 2024 and 2025, what tariff trend shall we expect flat increasing, decreasing?

Second, if I remember correctly, you were mentioning a few years ago at the areas of Air France in Terminal 2 are capacity constrained. Air France has almost restored precrisis capacity. So, how shall we think about terminal capacity requirements of Air France in the future and maybe some indications on major CapEx projects after 2025.

Third, last summer, operational disruptions at some airports like Schipol U.K. airports affected all major airports in Europe within a short period of time. So how do you see the airport system in Europe prepared for traffic during the Eastern holidays and summer this year? Some airlines are currently mentioning that the bottleneck this year will be the air traffic control and particularly the air traffic control in France where some IT systems will be changed. So how concerned are you with respect to operational disruptions this summer?

And finally, could you please talk about how the satisfaction levels of employees at Aeroport de Paris as compared to French companies in general? I asked this question in the ESG session last year and Edward mentioned that you will be able to answer it only after a survey than at the end of 2022. Thank you very much.

Philippe Pascal

So I start by your first question about tariffs. So as you know, the level of tariff depends on the convergence between the regulated ROCE and the related WACC — that is and we need some visibility about the regulated work. Keep in mind that the OpEx increase will put a bit more pressure on the regulated ROCE. So a low probably a slight increase in terms of tariff. And the WACC should also embark progressively the current market condition, therefore increasing progressively. To be very clear, we reached the regulated WACC, our regulated ROCE reached the related WACC in 2018 and 2019. So we have a cap in terms of value creation in the regulated scope at this moment. With the strong recovery we mechanically increase our regulated ROCE, and we have to manage progressively the fact that we reach the cap.

To manage that, we have to take income the level of OpEx. If you have more OpEx mechanically possible an impact in our tariff increase. We have to manage our CapEx program when we reach the cap. If we have more CapEx due to the needs in terms of capacity, it’s possible to manage the fact with an increase in terms of time. And we have also to manage the level of [indiscernible]. So clearly, I tried to give you the different elements, but I cannot answer to your question.

The second part of Air France capacity constrain. Clearly, when — just a recovery situation in ’19 and ’20, we want to launch a new terminal, that is a terminal 4 due to the fact that we expect saturation in terms of capacity for the Air France. And we need a new infrastructure 6, 7 years after. Now 3 years after, we have the same element due to the capacity contained of Air France, but we don’t have the same strategy. So we try to implement our Pioneer strategy, and for that, we have two steps.

The first step is to optimize the current terminal that is possible to accompany traffic increase of Air France, but also for the whole company in CDG to wait a new infrastructure, perhaps ’32, ’34. But for this new infrastructure, if you read our Pioneer strategy, it’s not a global terminal. It’s perhaps a new boarding area, a new air fight system, a new commercial approach, but it’s not a global infrastructure for the full airport process.

For the restriction, we don’t have a restriction in Paris, and we don’t expect restriction. In fact, we have some work for the CD aviation. But all in all, globally, for this year, we don’t expect an impact. And for the satisfaction of — I could say about satisfaction of employees. First, in December, we had an agreement with unions for the increase of wages for 2023. It is the first time in the history of the company that we have unanimity. So it’s a first for 10 years, that we have unanimity of unions to accept the increase of wages we propose. First.

Second, we are very transparent with our unions, and we did inquiry about stress about risk of burn out about all the spirit — state of spirit of all our people. And this attitude leads to a very listed — we share the situation with the unions. And I think the social climate is improving very, very quick. I would give you an example. We had a strike of fireman last summer. And last week, I received a letter from the fireman, warmly thanking us to have taken into account their requests, which is unique. They recognize that we improve the recognition of their qualification.

And last but not least, I will give you an information important that the unions did accept to approve the dividend of the company and they vote in favor of the dividend, all the unions, which was not the habits in the company. So I could say that we took this problem as strongly in our hands, and I’m quite optimistic about the satisfaction of our employees. As far I will propose them 3 stocks. We did announce yesterday at the Board of Directors that we will implement the distribution program we did announce in PIONEER 2025, thanks to the stocks we bought when we had the operation with Royal Schipol Group. When Royal Schipol Group has sold is 8% in ADP. We bought 0.3% dedicated fully to distribution to our staff. I don’t know if it answers to your question, but it’s all that you can say today.

Operator

The next question comes from the line of José Manuel Arroyas Sanchez from Santander.

José Manuel Arroyas

I will ask 3 questions, if I may. First, on the tariffs at Paris for 2023 and the level of work that was used by the regulator to approve those tariffs. I said especially don’t want to disclose the exact values that were used by the regulator. But could you — I mean, just in terms of clarity, could you — I mean, I will ask in case you can disclose those. And if this leak is in your opinion, the one that we should consider sustainable in the medium term.

The second question is how much longer do we need to wait before ATP starts new negotiations and consultations for a new era — and the third question is on international investment. I wanted a couple of clarifications. First, what do you exactly mean by being open to new international investments? Would this be done through ADP or through the two international platforms, TAV and GMR. And in relation to GMR, would ADP be open to supporting the company’s balance sheet. Thank you. Okay.

Augustin de Romanet

So for your third question, so we freeze the tariff for 2023 due to the fact that we have a strong recovery in terms of profit. We have a good dynamic in terms of review, and you can maintain at a good level. We don’t have in ’22 and probably a part of 23, a huge impact in terms of inflation. So for us, it was important to not to increase the tariff when we don’t need to increase the type. Probably in the next few years, we have inflation. We have a new CapEx program, and we have to increase the tariff. But when it’s not necessary, we freeze the pace.

Globally, we’ve when you freeze the tariff, we have a mechanic infer in terms of regulated. The French regulator in the decision is not very clear about the level of cap and the level of regulated ROCE. It just approved our tariff strategy and improve the fees of time. But in our model in the business model of 23 that we deliver to the French regulator. We have underline an expectation in terms of regulated ROC. So if the French relate approved this regulatory ROCE, this business case, it’s due to the fact that it’s probably lower than the regulated. When you in the next few weeks when we disclose our regulated ROCE for 22 and mechanically, when you modelized to exit ROCE for 23, we can see that globally, what is the range of the regulated at acceptable for the French event. That is probably around 4%, perhaps a little bit more. But it’s difficult to see exactly what is the position of the French regulator.

So your second question in terms of economic relation agreements. why we talk about now an economic regulation agreement. First of all, when you have an economic regulation agreement, we have a commitment in terms of CapEx program. We have to deliver the CapEx program. If we don’t have enough CapEx program, we have some issues in terms of regulation. So it’s not the moment to have a strong commitment in terms of CapEx program. We can see our strategy. Last year, we decreased a little bit more to our CapEx to optimize our model. This year, we have a new guidance that we can see, but we have a huge impact in terms of inflation. We try to change our airport model. So it’s not a moment to fix a level of CapEx for the next 8 years.

Why 8 years? Because we have to negotiate during 2 or 3 years, the economic regulation agreement. So, this agreement is for 5 years. So we need the visibility for 8 years, but it’s not the case now. So in ’23, we don’t have to work about economic regulation agreement. And it’s a good news for our shareholders because we try to manage the situation, to preserve our room of maneuver to accompany our recoveries. In fact, at the same moment, we know that at the end of the day, our regulating ROCE reached the regulated back, and we have just to manage to stay at the cap level, not to mechanically to increase the tariff. Tariff depends on the industrial strategy, especially for the CapEx program for the next few years.

In terms of international development, clearly, we are very selective, but we are open to a new opportunity. That is very important for us to check if we have a good balance and if we have a good value creation compared to bias. The priority is still biased because we don’t have a huge risk, and we have a lot of needs. But if we have to prepare the future, they have to deliver international development. And in this point, in fact, we have a development for TAG, mainly. We can see that with Antalya, with Ankara, eat tomorrow with the Nigeria and the Montenegro and through GMR Airports. That is not consolidated, but it’s very important to like a platform to develop the group with privatization of India linked by the strong dynamics in terms of hierological activities. We can see a huge development of India.

But not least, the international development, it’s not just airport business. It’s also the retail business through the development of our new ones, that is time. And for that, we try to implement these bonds, say, Antalya, perhaps another airport, Almaty, but also in new geography like North America. We don’t need for this development, new injection of the mother company in JV and in GMR. We can manage this situation. It’s the heart of our strategy to have an international platform developer. But with a good dynamic. In fact, we have to deleverage strongly GMR part. It’s a common target with the GMR family. And we have also to stabilize the situation of TAM after this strong development in Antalya and Ankara.

Operator

The next question comes from the line of Graham Hunt from Jefferies.

Graham Hunt

Just two short ones from me. Firstly, you mentioned adding around 500 in terms of headcount in 2022. I just wondered what that number — you’re expecting that number to be in 2023 in terms of additional headcount. And then on spend per pax, are you able to break out the impact of your assumptions around inflation on that higher guidance versus maybe where you’re seeing performance a little bit higher than you were expecting under the Extime brand. So just the split between the impact of inflation and underlying performance there on that new guidance.

Augustin de Romanet

So the impact of the recruitment in ’22, we in fact, we increased strongly the staff with more than 500 people. And this impact will be for the full year effect for around €20 million. All in all, we have to continue the treatment, mainly to company the recovery of the traffic but we can manage at the end of the day, our infrastructure with less people compared to 2019 for around 700 people and that is important to do.

In terms of sales per pax, I don’t know that it’s possible to explain more than we have to explain before. We don’t have a huge impact in terms of inflation. We have an impact in terms of price and so on, but not so huge as the inflation was modest. It’s just an organic performance due to our quality of traffic, quality of open.

Operator

The next question comes from the line of Dario Maglione from BNP Paribas.

Dario Maglione

Congratulation on the strong H2 results. I have four questions. First one, what was the OpEx in ADP SA in 2022? And what should we expect for 2023? Second question on regulated CapEx in Paris over the next few years. What should we expect is a range of €550 million to €650 million a good range.

Third question on interest spans for 2023, what shall we expect?– and fourth question on retail revenue. I noticed that revenue from other shops by restaurants was very strong — what is driving it? Is there any one-off effect?

Augustin de Romanet

So first, in terms of OpEx for the OpEx of ADP mother company in 2022, I’ll let you see in our press release, we have all the figures. In fact, we stabilized our OpEx, and we have just an increase compared to the traffic, and we have just noticed in around 15% compared with a strong increase in terms of more than 80%. So for the next year and for ’23, we expect the full impact in terms of cash cost due to the major decide in ’22. But I see clearly the current figures. We don’t expect a huge increase in terms of energy because we have the cap and the edge system. And we have — for the other cost, we have to renegotiate the part of our contract with our subcontractors. We have disclosed in the presentation, the level of contracts that we have to renegotiate, but it’s not so huge. But during the negotiation, we expect a slight impact in terms of inflation. So at the moment, it’s not so huge for 2022 in terms of OpEx by their parks. Our performance is under control, this 7.6% per pax.

A reminder that I explained clearly just before. It’s the fact that in ’22, we outperformed our structure of cost due to the fact that we manage our infrastructure without all the people that we need, and we have a good structure to manage our costs below the impact in terms of inflation. So it’s an exceptional year, and we have just a recovery, not a recovery in normalization in our tariff future. For the second question, in terms of regulated CapEx, we can see that we generally, we have 2/3 of regulated CapEx and 1/3 nonregulated CapEx. For the next few years, we have more nonregulated CapEx due to the fact that it’s a diversification, cargo, new luggage security system that is nonregulated.

For the third question, the interest spend, I can give you some color about that. We can see just our figures in our accounts. But we don’t have to disclose these different elements. We can see presentation, the fact that on average, the average cost, it’s €2.3. And just for the modern company for ADP SA is 1.9%. Globally, we have a very good structure with a share of fixed days for around 90.4%, not variable, 94. So very the full debt, it’s a fixed rate. And for your last question in terms of retail, I don’t understand clearly what do you say? What is the overall retail shop?

Dario Maglione

Revenue, revenue in other shops or of restaurants was very strong in Q4?

Augustin de Romanet

So I think we can check with the IR team because I don’t see that we do you need.

Edward Arkwright

So, due to too many other constraints we have, it’s now time to close this presentation. Thank you, everyone, for having logged on to our conference. We’re looking forward to seeing you all in the coming days and weeks. Our next financial communication will be on the 26th of April with our Q1 Revenue Disclosure. Feel free as well to get in touch with the best investor relations teams in France and perhaps in Europe, I mean Cecile Combeau and Elliot Truck. [Ph] This team is at your disposition for any questions. So, with that, good day, everyone.