Business context and reporting period
Grupo Aeroportuario del Sureste, S.A.B. de C.V. (ASUR; “Southeast Airport Group”) filed this Form 20-F for the fiscal year ended December 31, 2019, not for a stand-alone fourth quarter. The company operates nine airports in southeastern Mexico, six in Colombia and Luis Muñoz Marín International Airport in Puerto Rico. Financial statements are prepared under IFRS and reported in Mexican pesos; financial amounts below are in Ps. millions unless stated otherwise.
Comparability with earlier years is affected by ASUR’s consolidation of Aerostar from June 2017 and Airplan from October 2017. The 2019 and 2018 periods both include full-year results for these operations.
Financial and operating results
| Metric | 2019 | 2018 | Change |
|---|---|---|---|
| Total revenue | Ps.16,821.6 | Ps.15,410.2 | +9.2% |
| Operating profit | Ps.8,481.3 | Ps.7,779.0 | +9.0% |
| Net income | Ps.5,683.6 | Ps.5,119.8 | +11.0% |
| Net income attributable to controlling interest | Ps.5,465.8 | Ps.4,987.6 | +9.6% |
| Basic and diluted EPS | Ps.18.22 | Ps.16.63 | +9.6% |
| Cash flow from operating activities | Ps.8,501.7 | Ps.7,696.3 | +10.5% |
Revenue comprised Ps.9,597.0 million of aeronautical services (+7.3%), Ps.5,988.5 million of non-aeronautical services (+8.3%) and Ps.1,236.2 million of construction services (+32.1%). Construction revenue is matched by construction expense under the company’s accounting treatment and is not a direct measure of passenger-driven growth. Passenger charges accounted for 41.6% of consolidated revenue.
Operating expenses rose 10.0% to Ps.8,545.1 million; operating margin was 50.4%, versus 50.5% in 2018. Net margin increased to 33.8% from 33.2%. Costs reflected higher construction activity, employee expenses, maintenance, and concession fees. Management also noted that 2018 included a Ps.71.2 million asset-tax refund and a Ps.37.1 million reversal of an uncollectible-account provision. Net financing expense improved to Ps.819.6 million from Ps.862.3 million, primarily as interest expense declined; this was partly offset by a shift from net foreign-exchange gains to losses.
Passenger traffic across the group increased 6.5% to approximately 55.7 million. Mexico handled 34.2 million passengers, Puerto Rico 9.4 million and Colombia 12.1 million. Air traffic movements in Mexico decreased to 335,500 from 342,100. Cancún generated 52.5% of consolidated revenue, including construction services, and 77.1% of Mexican revenue.
Financial position, cash flow and capital allocation
At December 31, 2019, cash and cash equivalents were Ps.6,192.7 million, up from Ps.4,584.5 million; restricted cash was Ps.165.6 million. Current assets were Ps.7,845.9 million and current liabilities Ps.2,560.0 million. Total assets were Ps.57,515.9 million, total liabilities Ps.18,744.7 million and equity Ps.38,771.2 million.
Consolidated outstanding debt was Ps.13,712.9 million (approximately U.S.$727.1 million, using the filing’s year-end exchange rate). Debt included Ps.6,913.0 million in bank loans and Ps.6,799.9 million in long-term debt. The filing identifies U.S.$366.2 million of outstanding indebtedness as floating-rate exposure; it reports no interest-rate or foreign-currency swaps at year-end. Debt service and covenant compliance remain subject to facility terms, including leverage and interest-coverage tests on certain Mexican loans.
Investing activities used Ps.2,390.2 million in 2019, including Ps.2,614.9 million of investment in concessioned assets. Financing activities used Ps.4,427.9 million, including Ps.3,000.0 million of dividends and debt principal and interest payments. The approved 2019 dividend was Ps.10.00 per share, comprising ordinary and extraordinary distributions. ASUR reported no material off-balance-sheet arrangements.
Material changes, outlook and risks
- Growth in 2019 was supported by higher passenger volumes and commercial revenue; construction revenue also rose with investment activity. Non-aeronautical revenue per terminal passenger increased 1.5% to Ps.107.5.
- Puerto Rico passenger traffic recovered 12.8% in 2019 compared with 2018. The company recognized Ps.204.7 million of Hurricane Maria insurance recovery as other income in 2019, versus Ps.134.6 million in 2018. The 2017 results included a Ps.4,719.1 million impairment related to Hurricane Maria.
- COVID-19 is a subsequent event, not reflected in 2019 results. Management reported group passenger traffic down 6.3% in the first quarter of 2020 year over year and expected the pandemic’s greatest impact in April and May. Colombian airport operations were suspended at the time of the filing; Puerto Rico remained open with substantially reduced traffic, while Mexican airports remained operational. Management said the impact on 2020 results could not yet be reasonably estimated and expected an increase in doubtful-account reserves. Airlines and tenants had requested discounts or payment extensions.
- Management expected to meet 2020 Mexican master-development investment commitments without additional financing and did not expect COVID-19 to change their timing. The 2020 committed investment amount was Ps.5,105.8 million in constant December 2019 pesos. Management stated that it expected no difficulty servicing debt or complying with covenants in 2020; Aerostar drew its U.S.$10 million revolving facility on April 1, 2020.
- Key risks include passenger-traffic sensitivity to travel restrictions and economic conditions; reliance on Cancún, U.S.-linked travel and a limited number of airlines; foreign-exchange and interest-rate exposure; regulated Mexican maximum rates and concession obligations; and potential natural-disaster, cybersecurity and operational disruption. American Airlines, United Airlines and Interjet represented 9.4%, 9.0% and 10.6% of Mexican-operation revenue, respectively, in 2019.
- Contingencies include a Ps.73 million COFECE fine, which Cancún Airport appealed; an estimated additional Ps.116 million employee-profit-sharing exposure if a pending appeal is unsuccessful; and approximately Ps.20 million of labor claims for which no provision was recorded. Management said the proceedings were not expected to have a material consolidated effect. PwC issued an unqualified IFRS audit opinion and concluded internal control over financial reporting was effective. Its critical audit matters included compliance with Mexican airport rate caps and goodwill impairment estimates.
Important facts for investors to verify
- Review the audited financial statements and notes for debt maturities, floating-rate exposure, covenants, currency mix and liquidity after the COVID-related deterioration in traffic.
- Track actual 2020 passenger volumes by country, airline and airport, particularly Cancún, Puerto Rico and Colombia, and compare them with the filing’s reported first-quarter decline and management commentary.
- Assess whether planned capital investment, especially the Ps.5.1 billion 2020 Mexican commitment, remains affordable under lower traffic and collections.
- Check resolution and potential financial effects of the COFECE appeal, employee-profit-sharing appeal, Mérida airport property dispute and other disclosed proceedings.
- Evaluate goodwill impairment sensitivity: year-end goodwill was Ps.2,567.4 million, including Ps.1,057.7 million for Aerostar and Ps.1,509.7 million for Airplan. The 2019 valuation did not incorporate COVID-19.
- Confirm dividend decisions and cash available for distribution, taking account of debt terms, concession investment obligations and the company’s geographic and customer concentration.