Heathrow6.45% S Regulatory News (88BX)

27 June 2019

Heathrow Funding Limited

Heathrow Finance plc

Publication of June 2019 Investor Report

On behalf of Heathrow Airport Limited, Heathrow Express Operating Company Limited, Heathrow (AH) Limited and Heathrow (SP) Limited, LHR Airports Limited (as 'Security Group Agent') is today distributing its semi-annual Investor Report to various parties pursuant to the terms of the Common Terms Agreement entered into on 18 August 2008.

The Investor Report is also being distributed by the Security Group Agent and Heathrow Finance plc to various parties pursuant to Heathrow Finance plc's £250 million 5.75% Senior Secured Notes dated 13 October 2014 and due 2025, £275 million 3.875% Senior Secured Notes dated 5 June 2017 and due 2027 and the £300 million 4.75% Senior Secured Notes dated 31 October 2018 and due 2024 (the 'Heathrow Finance Bonds') and pursuant to Heathrow Finance plc's Facilities Agreements dated 15 December 2014, 10 February 2016, 5 October 2016, 14 September 2018, 22 November 2018, 23 November 2018, 1 February 2019 and 8 May 2019. In addition, the final facility raised by ADI Finance 2 Limited dated 6 July 2017 was migrated to Heathrow Finance plc on 15 March 2019 (the 'Heathrow Finance Facilities Agreements').

The Investor Report contains information relevant to creditors of both Heathrow (SP) Limited (and its subsidiaries) and Heathrow Finance plc.

The attention of potential readers of the Investor Report is drawn to page 2 of the document which contains an Important Notice, including in relation to certain forward-looking statements included in the Investor Report, and contains a description of the basis on which the operational and financial information included in the document has been prepared.

The Investor Report includes an updated forecast for 2019 for the financial performance of Heathrow (SP) Limited prepared on a consolidated basis, forecast nominal debt and financial ratios for Heathrow (SP) Limited and Heathrow Finance plc. Heathrow (SP) Limited, through its indirect subsidiary, Heathrow Airport Limited, owns Heathrow airport.

We have revised our Adjusted EBITDA(1) forecast for 2019 to £1,912 million, up 4.1% on 2018 including our expectation of slightly more muted growth than in 2018 as a result of the uncertainties surrounding BREXIT and the wider global economy. This excludes a reduced BREXIT contingency allowance. Despite this, we have upgraded our traffic forecast to 80.9 million compared to 80.6 million in the previous Investor Report, primarily as a result of higher seat capacity as airlines move to operating larger aircraft. Revenue is forecast to grow by 3.3% to £3,067 million compared to £2,970 million in 2018 with aeronautical revenue increasing by 4.6% and retail revenue by 3.6%. Revenue is marginally down compared to the previous Investor Report as we introduce the commercial airline deal. We forecast operating costs to increase 2.0% to £1,155 million in 2019 as we continue to invest in improving service levels, increased regulatory costs and investment in future growth, whilst reducing underlying operating costs per passenger in real terms. RAB is forecast to be £16.8 billion at the end of 2019 compared to £17.2 billion published in the previous investor report, due to the deferral of some capital spend into 2020 and a lower inflation forecast.

We have continued to overlay a BREXIT contingency to ensure that the business remains robust in all foreseeable circumstances. Confirmation of the aviation contingency plans and Heathrow's unique position in the European aviation market has seen us reduce the contingency allowance to £35 million from £114 million in the previous Investor Report. While we hope that this contingency will remain too prudent, we believe it is right to retain it given the ongoing uncertainty over Brexit. Including the reduced contingency, we forecast Adjusted EBITDA to be £1,877 million in 2019, up 2.2% compared to 2018, an improvement against the 3% decline in Adjusted EBITDA in the December Investor Report. We remain confident that BREXIT will not have a material impact on Heathrow airport even if the UK were to exit the EU without a deal.

The Investor Report document is available in pdf format at the following link:

http://www.rns-pdf.londonstockexchange.com/rns/5684D_1-2019-6-26.pdf

The Investor Report is available from today via the Heathrow Investor Centre at https://www.heathrow.com/company/investor-centre/reporting/investor-reports

Pursuant to the terms of the Common Terms Agreement, the Security Group Agent is today also distributing the consolidated financial information of Heathrow (SP) Limited for the year ended 31 December 2018 and the regulatory accounts for Heathrow Airport Limited for the year ended 31 December 2018.

Pursuant to the terms of the Heathrow Finance Bonds and the Heathrow Finance Facilities Agreements, Heathrow Finance plc is today also distributing its consolidated financial statements for the year ended 31 December 2018.

(1) Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation, BREXIT contingency and exceptional items

For investor enquiries please contact James Hoskins on +44 (0)7525 597567.