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Heathrow Results for the nine months ended 30 September '12

  Heathrow - Results for the nine months ended 30 September '12

RNS Number : 7010P
Heathrow
29 October 2012




















29 October 2012

                                      

                            Heathrow (SP) Limited

                                      

             Results for the nine months ended 30 September 2012

                                      

Heathrow (SP) Limited (formerly BAA  (SP) Limited) owns Heathrow and  Stansted 
airports. Throughout this document, Heathrow (SP) Limited and its subsidiaries
are referred to as the Group.



o Heathrow passengers  up 0.6% to  53.0 million, with  combined Heathrow  and 
Stansted passengers down 0.5% to 66.4 million

o 8.2% revenue increase supports 9.6% Adjusted EBITDA growth

o Capital investment increases by over 25% from 2011 as activity on  Terminal 
2 fit out intensifies

o  Strong   operational   performance  during   Olympics   drives   passenger 
satisfaction to record levels

o Stansted disposal process underway



At or for nine months ended 30 September              2012     2011 Change (%)
(figures in £m unless otherwise stated)                                    
Revenue                                            1,843.6  1,703.3        8.2
Adjusted EBITDA^(1)                                  922.9    842.2        9.6
Cash generated from operations                       835.9    799.9        4.5
Adjusted pre-tax profit/(loss)^(2)                     6.7  (100.0)        n/a
Pre-tax profit/(loss)^(3)                            111.8  (147.3)        n/a
                                                                          
Heathrow (SP) Limited consolidated net            11,282.6 10,442.6        8.0
debt^(4)(5)
Heathrow Finance plc consolidated net             11,848.6 10,992.2        7.8
debt^(4)(5)(6)
Regulatory Asset Base^(5)                         14,518.9 13,849.7        4.8
                                                                          
Passengers (m)^(7)                                    66.4     66.7      (0.5)
Net retail income per passenger^(7)(8)               £5.68    £5.42        4.7



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

(2) Adjusted pre-tax profit/(loss) is before exceptional items, loss on
disposals, impairment of fixed assets and fair value adjustments

(3) Pre-tax profit reflects particularly the impact of reduced inflation
expectations on the fair value of index-linked derivatives

(4) Nominal net debt excluding intra-group loans and including index-linked
accretion

(5) 2011 net debt and Regulatory Asset Base figures are as at 31 December
2011

(6) Heathrow Finance plc (formerly BAA (SH) plc) is the parent company of
Heathrow (SP) Limited

(7) Changes in passengers and net retail income per passenger are calculated
using unrounded data

(8) See section 2.2.2.2 for calculation of net retail income per passenger



Colin Matthews, Chief Executive Officer of Heathrow, said:

"Heathrow continues to report a strong operating and financial performance. It
received its highest ever passenger satisfaction scores during a period  which 
included the London 2012 Olympic and Paralympic Games. Our large and sustained
capital investment programme is creating jobs throughout the UK and  improving 
passengers' experience of  Heathrow. We are  on track to  invest more than  £1 
billion by the end of 2012, with the next major milestone being the opening of
the new Terminal 2 in 2014."





For further information please contact



Heathrow                                               
Media enquiries    Simon Baugh              020 8745 7224
Investor enquiries Andrew Efiong            020 8745 2742
                                                      
MHP Communications Reg Hoare or James White 020 3128 8100





Please click here to view presentation:



http://www.rns-pdf.londonstockexchange.com/rns/7010P_1-2012-10-28.pdf







There will be a conference call today  at 3.00 pm (UK time)/10.00 am  (Eastern 
standard time) for  bondholders and  bank lenders  to the  Group and  Heathrow 
Finance plc and  credit analysts to  discuss the results  for the nine  months 
ended 30 September 2012. The call will be hosted by Jose Leo, Chief  Financial 
Officer. Dial-in details for the  call are: UK free  phone: 0800 368 1950;  US 
free phone: 1866  928 6049;  UK local/standard international:  +44 (0)20  3140 
0668. Participant PIN code is 720122#. It will also be possible to view online
the presentation (using event password: 387068) as it is used during the  call 
at:



https://arkadin-trial.webex.com/arkadin-trial/j.php?ED=224511297&UID=491373747&PW=NYzQzZmE0NmQ5&RT=MiMyMQ%3D%3D





Disclaimer



This material  contains certain  tables and  other statistical  analyses  (the 
"Statistical Information") which  have been prepared  in reliance on  publicly 
available information and  may be  subject to  rounding. Numerous  assumptions 
were used in preparing  the Statistical Information, which  may or may not  be 
reflected herein. Actual events may differ  from those assumed and changes  to 
any assumptions may have a material impact on the position or results shown by
the Statistical Information.  As such,  no assurance can  be given  as to  the 
Statistical Information's  accuracy, appropriateness  or completeness  in  any 
particular context; nor as to  whether the Statistical Information and/or  the 
assumptions upon which it is based reflect present market conditions or future
market performance. The  Statistical Information  should not  be construed  as 
either projections or predictions nor should any information herein be  relied 
upon as legal, tax,  financial or accounting advice.  The Group does not  make 
any representation  or warranty  as to  the accuracy  or completeness  of  the 
Statistical Information.



These materials contain statements that  are not purely historical in  nature, 
but are  "forward-looking  statements".  These include,  among  other  things, 
projections, forecasts,  estimates of  income, yield  and return,  and  future 
performance targets. These forward-looking  statements are based upon  certain 
assumptions, not  all of  which are  stated. Future  events are  difficult  to 
predict and are beyond  the Group's control. Actual  future events may  differ 
from those assumed.  All forward-looking statements  are based on  information 
available on the date hereof and neither  the Group nor any of its  affiliates 
or advisers  assumes  any  duty  to  update  any  forward-looking  statements. 
Accordingly, there can be no  assurance that estimated returns or  projections 
will be realised,  that forward-looking  statements will  materialise or  that 
actual returns or results will not be materially lower than those presented.



Any reference  to "Heathrow  (SP)" or  "the  Group" will  include any  of  its 
affiliated   associated    companies   and    their   respective    directors, 
representatives or employees and/or any persons connected with them.





Heathrow (SP) Limited



Consolidated results for the nine months ended 30 September 2012





Index



1      Key business developments           2     Financial review        
1.1    Change of name                      2.1   Basis of preparation    
1.2    Passenger traffic                   2.2   Profit and loss         
                                                 account
1.3    Investment in modern airport        2.3   Cash flow               
       facilities
1.4    Service standards                   2.4   Pension scheme          
1.5    Competition Commission process      2.5   Future financing        
                                                 themes
1.6    Tariff setting process for next     2.6   Financing position      
       regulatory period
                                         2.7   Outlook                 
                                                                         
Appendix 1                Unaudited consolidated financial information   
                          for Heathrow (SP) Limited
Appendix 2                Analysis of turnover and operating costs by    
                          airport and activity



1 Key business developments





1.1 Change of name



On 15 October 2012, it was announced that the BAA name would cease to be used.
This change was implemented  for a number of  reasons including the fact  that 
Heathrow will account for more than 95% of the former BAA group once  Stansted 
is sold. As a result, whilst the  brands and related legal entity names  (such 
as Heathrow Airport  Limited, Stansted  Airport Limited  and Heathrow  Express 
Operating Company  Limited)  of  individual  operating  businesses  are  being 
retained, the names of many of  the holding companies in the business  assumed 
the Heathrow brand.



The change  saw  BAA Limited  become  Heathrow Airport  Holdings  Limited.  In 
relation to companies  more relevant  to the  operation and  financing of  the 
London airports, BAA Funding Limited became Heathrow Funding Limited, BAA (SH)
plc became Heathrow Finance plc, BAA (SP) Limited became Heathrow (SP) Limited
and BAA (AH) Limited became Heathrow  (AH) Limited. In addition, BAA  Airports 
Limited, the shared services provider and sponsor of the group defined benefit
pension scheme, became LHR Airports Limited.





1.2 Passenger traffic



Passenger traffic for the nine months  ended 30 September 2012 at the  Group's 
airports is analysed below:



(figures in millions unless otherwise stated) 2012 2011 Change (%)^(1)
Passengers by airport                                              
Heathrow                                      53.0 52.6            0.6
Stansted                                      13.5 14.1          (4.6)
Total passengers^(1)                          66.4 66.7          (0.5)
                                                                  
Passengers by market served                                        
UK                                             4.5  4.7          (3.9)
Europe^(2)                                    33.8 34.2          (1.0)
Long haul                                     28.1 27.9            0.7
Total passengers^(1)                          66.4 66.7          (0.5)

(1) These figures have been calculated using un-rounded passenger numbers

(2) Includes North African charter traffic



In the nine  months ended  30 September  2012, combined  passenger traffic  at 
Heathrow and Stansted declined 0.5% to 66.4 million (2011: 66.7 million)  with 
moderate 0.6%  growth  at Heathrow  more  than offset  by  a 4.6%  decline  at 
Stansted.



Underlying demand at  Heathrow has  been firm  through 2012  with an  all-time 
record in reported  traffic for the  first nine months  of the year.  However, 
there have been  fluctuations in  reported performance through  the year  with 
robust year on  year growth in  the first quarter  reflecting partly the  leap 
year and the change in the timing of Easter. Conversely the second quarter saw
a modest decline due  particularly to boosts to  prior year traffic from  both 
the timing of Easter and the  Royal Wedding. In the third quarter,  Heathrow's 
traffic was impacted in July and August by over 400,000 passengers compared to
the same period  of 2011 by  the London  2012 Olympics, which  resulted in  UK 
based travellers  staying  in  the  country to  enjoy  the  Games  and  non-UK 
travellers avoiding  travelling to  the  UK due  to concerns  over  disruption 
caused by the Games. However, in  September traffic trends normalised with  an 
all-time record for that month recorded.



On a regional  basis, Heathrow's  performance has  continued to  be driven  by 
North Atlantic traffic which increased 3.9% to 12.5 million passengers  (2011: 
12.0 million). Traffic to other long haul destinations declined modestly, down
0.3% to 15.3 million  (2011: 15.4 million). Strength  in services with  Brazil 
(due to increased services), the Middle East (due partially to recovery in key
markets from the unrest  in the region  that impacted 2011)  and the Far  East 
(due partly to recovery from 2011's Japanese tsunami) was offset  particularly 
by weakness in African and Indian traffic due to airlines reducing or  ceasing 
services.



Heathrow's European  traffic  also  declined marginally,  down  0.4%  to  21.6 
million passengers (2011: 21.7 million),  principally due to Olympics  related 
weakness,  with  significant   variances  in   performance  between   markets, 
reflecting the  macro-economic environment  across  Europe. There  was  strong 
performance in markets such  as Norway, Czech Republic  and Romania offset  by 
weakness in markets such as Italy, Poland and Finland. Domestic traffic was up
marginally, by  0.1%  to 3.6  million  passengers (2011:  3.6  million),  with 
performance improving since the  first quarter, due  primarily to passing  the 
first anniversary (in March 2012) of  the cessation of bmi's Glasgow  service, 
and traffic less impacted than other markets during the Olympics.



Stansted's traffic  declined  4.6%  to 13.5  million  passengers  (2011:  14.1 
million) with the Olympics having only a modest adverse effect on performance.
Stansted's core European  scheduled market  saw traffic decline  1.8% to  10.8 
million passengers (2011: 11.0 million) which partly reflected easyJet  moving 
3 Stansted based aircraft  to Southend. Declines in  traffic in other  markets 
were driven  mostly by  cessation of  a limited  number of  services, such  as 
Prestwick and Newcastle in the domestic  market and Kuala Lumpur (Air Asia  X) 
in the long  haul market.  As in 2011,  Stansted has  continued to  experience 
robust load factors that were  81.1% in the first  nine months of 2012  (2011: 
81.3%), suggesting limited deterioration in demand dynamics.





1.3 Investment in modern airport facilities



Heathrow continues to be the focus of the capital investment programme, a  key 
enabler of the  Group's strategic  objective of  enhancing Heathrow's  leading 
position in the  global aviation industry  and particularly its  long-standing 
role as the  UK's gateway  to the  world. The  investment programme's  current 
focus is on the construction  of the new Terminal  2, which remains on  budget 
with construction  due to  be completed  in late  2013 and  operations due  to 
commence in 2014. In addition, significant investment continues on  Heathrow's 
baggage infrastructure.



Over £800 million was invested at Heathrow  in the first nine months of  2012. 
Fit-out within  the main  Terminal 2  building is  proceeding at  pace and  is 
approximately 30% complete, with the installation of the internal walls, glass
wall linings and  floor tiles well  underway. The first  of 39  communications 
rooms which will house the data  switches and systems to support the  terminal 
IT network has  been completed and  handed over  for IT fit  out.Work on  the 
Vertical Passenger Movement (VPM) building, which will take passengers down to
the  underground  walkway  to  Terminal   2's  satellite  building,  is   also 
progressing well. Specialist  baggage contractors are  working to ensure  that 
the baggage  system  is integrated  successfully  into the  new  building  and 
available for end to end testing with the Terminal 1 baggage system.



The second  phase of  the  satellite Terminal  2B  was made  weather-tight  on 
schedule during the third quarter of 2012. Fit-out has continued to make  good 
progress with recent highlights including the successful installation of  some 
of the longest escalators at Heathrow  that will carry passengers between  the 
satellite building and the underground walkway connection to the main Terminal
2 building.



Good progress is being  made at both  the main terminal  and the satellite  in 
erecting the structural steelwork for  the 'nodes' which connect the  terminal 
buildings to the air bridges through which passengers board or leave aircraft.
On the apron  next to these  nodes, concrete  is being laid  and services  are 
being installed.



Construction of Terminal  2's multi-storey  car park is  progressing at  speed 
with the main access ramp leading up to the car park's upper level being  well 
on the way to completion, forming the connection between the new car park  and 
the existing road network.



In  Heathrow's  baggage  investment  programme,  the  superstructure  for  the 
building to  house  Terminal  3's  new integrated  baggage  system  is  nearly 
completed. Good progress  is now being  made on the  external cladding of  the 
building and roof panels have been installed. The main elements of the baggage
system are being delivered to Heathrow and installation has been started.



The refurbishment works in  Terminal 4's departure lounge  are expected to  be 
completed by the end of 2012.





1.4 Service standards



The  Group's  focus  on  delivering  transformational  change  in  passengers' 
experience of its airports continues  to receive significant endorsement  from 
the  travelling  public,  demonstrating  that  passengers  are  noticing   the 
improvements made by the airports.



In April 2012 Heathrow Terminal 5 was named the world's best airport  terminal 
in the 2012 SKYTRAX  World Airport Awards. Stansted  was named as the  world's 
best airport for low cost airlines in the same awards. Most recently, Heathrow
achieved an all-time record  overall passenger satisfaction  score of 3.96  in 
the  Airport   Service   Quality   survey  (produced   by   Airports   Council 
International) for the third quarter of 2012. This reflected in particular the
success of the airport  and other organisations that  planned and delivered  a 
warm and efficient journey through Heathrow for passengers during the  Olympic 
and Paralympic  games. This  success built  on Heathrow  having achieved  what 
were, prior  to the  third quarter,  its two  highest ever  overall  passenger 
satisfaction scores in  the same survey  in the first  and second quarters  of 
2012.



Individual service  standards continue  to perform  robustly at  Heathrow  and 
Stansted. On  punctuality,  the proportion  of  aircraft departing  within  15 
minutes of schedule  during the nine  months ended 30  September 2012 was  79% 
(2011: 80%) at Heathrow and 89%  (2011: 88%) at Stansted. Further,  Heathrow's 
baggage misconnect rate was 14 per 1,000 passengers (2011: 15).



On security queuing, passengers passed through central security within periods
prescribed under service  quality rebate  schemes 96.0% (2011:  97.0%) of  the 
time at Heathrow and 98.0%  (2011: 97.6%) of the  time at Stansted during  the 
nine months  ended  30  September  2012.  This  compares  with  95.0%  service 
standards.





1.5 Competition Commission process



Having carefully  considered  the Court  of  Appeal's recent  ruling,  it  was 
decided not to  appeal to  the Supreme Court  in relation  to the  Competition 
Commission's requirement that  the Group  disposes of Stansted  airport. As  a 
result, the Stansted airport disposal process has commenced.





1.6 Tariff setting process for next regulatory period



On 30 July 2012  Heathrow distributed to the  airline community and the  Civil 
Aviation Authority ('CAA') its  initial business plan for  the next five  year 
regulatory period due to commence on 1 April 2014. Formal consultation by  the 
CAA on the  review of  price regulation  is expected  in early  2013 once  the 
current constructive engagement process  is completed, Heathrow publishes  its 
final business plan in January 2013 and the CAA has completed its own research
and analysis.  It  is  currently  expected that  the  CAA's  final  price  cap 
proposals will  be published  in  September 2013  and  the CAA's  decision  on 
licence conditions will be published in January 2014.





2 Financial review





2.1 Basis of preparation



Heathrow (SP) Limited is the holding company of a group of companies that owns
Heathrow and Stansted airports and operates the Heathrow Express rail  service 
(the 'Group').  The Group's  statutory accounts  are prepared  under UK  GAAP. 
Consolidated financial  information  is set  out  in Appendix  1.  A  detailed 
analysis of turnover and operating costs  both by airport and activity is  set 
out in Appendix 2.





2.2 Profit and loss account



2.2.1 Introduction



The profit and loss account below  provides more detailed disclosure than  the 
statutory format in Appendix  1 in order to  enable a better understanding  of 
the results of the Group's operations.



                                                       2012    2011
Nine months ended 30 September                            £m      £m
                                                                 
Group turnover                                       1,843.6 1,703.3
Adjusted operating costs^(1)                         (920.7) (861.1)
                                                                 
Adjusted EBITDA^(2)                                    922.9   842.2
Operating (costs)/gain - exceptional - pensions^(3)  (145.6)    36.6
                                                                 
EBITDA                                                 777.3   878.8
Depreciation - ordinary                              (378.7) (356.8)
Depreciation and impairment - exceptional^(3)              -  (11.0)
                                                                 
Operating profit                                       398.6   511.0
                                                                 
Loss on airport disposals                              (0.2)       -
                                                                 
Net interest payable and similar charges             (537.5) (585.4)
Fair value gain/(loss) on financial instruments        250.9  (72.9)
Total net interest payable and similar charges       (286.6) (658.3)
                                                                 
Profit/(loss) on ordinary activities before taxation   111.8 (147.3)
Tax credit on profit/(loss) on ordinary activities      16.8    51.7
Profit/(loss) on ordinary activities after taxation    128.6  (95.6)

(1) Adjusted operating costs are stated before depreciation, amortisation
and exceptional items

(2) Adjusted EBITDA is earnings before interest, tax, depreciation and
amortisation and exceptional items

(3) See section 2.2.6 for further discussion of exceptional items





2.2.2 Turnover



In the  nine  months ended  30  September  2012, turnover  increased  8.2%  to 
£1,843.6 million (2011: £1,703.3 million).  This reflects increases of  10.5%, 
4.3% and 6.4% in aeronautical, retail and other income respectively.





                                  2012    2011
Nine months ended 30 September      £m      £m Change (%)
Aeronautical income            1,057.3   956.7       10.5
Retail income                    401.5   385.0        4.3
Other income                     384.8   361.6        6.4
Total                          1,843.6 1,703.3        8.2



2.2.2.1 Aeronautical income



Aeronautical income by airport



                                 2012  2011          
Nine months ended 30 September      £m    £m Change (%)
                                                   
Heathrow                         955.2 858.8       11.2
Stansted                         102.1  97.9        4.3
Total                          1,057.3 956.7       10.5



In the  nine months  ended 30  September 2012,  aeronautical income  increased 
10.5% to  £1,057.3 million  (2011: £956.7  million). At  Heathrow, the  growth 
primarily reflects the headline 12.2% and 12.7% increases in its tariffs  from 
1 April 2011 and 1 April 2012 respectively supported by the modest increase in
passenger traffic.  This has  been  partially offset  by lower  than  expected 
yields particularly due  to factors such  as more quieter  aircraft, a  higher 
proportion of  transfer  passengers and  a  lower contribution  from  aircraft 
parking charges than assumed  when tariffs for  the relevant regulatory  years 
were determined. These factors led to aeronautical income being  approximately 
£25 million lower  than expected  during the  nine months  ended 30  September 
2012. This shortfall  (or yield  dilution) will  be recovered  through the  'K 
factor' true-up mechanism  in the years  commencing 1 April  2013 and 1  April 
2014.



At Stansted, growth  in aeronautical  income reflects the  headline 6.33%  and 
6.83% increase in its tariffs from 1 April 2011 and 1 April 2012  respectively 
together with  reduced tariff  discounts,  partially offset  by a  decline  in 
traffic.



With the level of  the UK retail  price index for August  2012 now known,  the 
headline maximum allowable yields  at Heathrow and  Stansted will increase  by 
10.4% and 4.53% respectively from 1 April 2013.



2.2.2.2 Retail income



The Group's retail business has continued to perform well with reported growth
in retail income of 4.3% to  £401.5 million (2011: £385.0 million) boosted  to 
approximately 5% after taking into account  the effect of one-off benefits  at 
Heathrow of approximately  £5 million  in the second  quarter of  2011 and  £2 
million (Olympics related) in the third quarter of 2012.



Reported net  retail income  ('NRI')  per passenger  increased 4.7%  to  £5.68 
(2011: £5.42) in  the nine  months ended 30  September 2012,  led by  Heathrow 
where NRI per  passenger was up  4.8%. The year  on year increase  in NRI  per 
passenger was 8.9% in the third  quarter (or slightly over 7% after  adjusting 
for the one-off Olympics benefit discussed above).



Net retail income per passenger by airport^(1)



                              2012 2011          
Nine months ended 30 September    £    £ Change (%)
                                               
Heathrow                       6.04 5.76        4.8
Stansted                       4.27 4.17        2.5
Total                          5.68 5.42        4.7

(1) These figures have been calculated using un-rounded numbers



At Heathrow,  retail income  increased 5.8%  to £338.4  million (2011:  £319.9 
million) and NRI  per passenger  increased 4.8%  to £6.04  (2011: £5.76).  The 
underlying  growth  in  Heathrow's  net   retail  income  per  passenger   was 
approximately 6% after adjusting for the two one-off factors described above.



Heathrow's duty  and tax-free  and airside  specialist shops  continue to  see 
increases  in  the  average  spend  of  passengers  purchasing  items  in  the 
in-terminal retail facilities. This  is being driven  by factors including  an 
increased  proportion  of  higher   spending  non-EU  passengers,  the   major 
refurbishment of  Terminal  3's airside  specialist  shops and  the  new  walk 
through area in the World Duty Free store in Terminal 3. In airside specialist
shops, trading was particularly buoyant in the luxury and fashion segments.



A strong performance  in bureaux de  change at Heathrow  was due primarily  to 
improvements in contract  terms with business  partners. Catering income  grew 
well ahead of  passenger growth due  to rebalancing of  the portfolio  towards 
premium outlets, enhanced contractual terms and  a general focus on speed  and 
quality of service. Finally in advertising, income growth primarily  reflected 
Olympics related sales.



Stansted's  retail  income  decreased  3.1%  to  £63.1  million  (2011:  £65.1 
million), outperforming  the 4.6%  decline  in Stansted's  passenger  traffic. 
Combined  with  retail  expenditure  reducing  to  £5.6  million  (2011:  £6.3 
million), this resulted in NRI per  passenger increasing 2.5% to £4.27  (2011: 
£4.17). Airside  specialist  shops,  advertising, catering  and  other  retail 
income increased year on year although  this was more than offset by  declines 
elsewhere, particularly in car parking, due to reduced usage, fewer passengers
and a decrease in the length of stay, and duty and tax-free.



2.2.2.3 Other income



Income from activities other  than aeronautical and  retail increased 6.4%  to 
£384.8 million  (2011:  £361.6  million). This  partly  reflects  rail  income 
increasing 5.3% to £85.8 million (2011:  £81.5 million) due to fare  increases 
from 1  January  2012, additional  Crossrail  income and  increased  passenger 
volumes on the Piccadilly line extension to Terminal 5, offsetting the loss in
revenue from  the 2.7%  fall  in Heathrow  Express  passenger numbers  to  4.5 
million (2011:  4.6  million).  Operational facilities  and  utilities  income 
increased 11.0% to £129.1 million (2011: £116.3 million) due mainly to  higher 
demand, back billing and increases in tariffs for electricity.



2.2.3 Adjusted operating costs



Adjusted operating costs  exclude depreciation,  amortisation and  exceptional 
items.



In the nine months ended 30 September 2012, adjusted operating costs increased
6.9% to £920.7 million (2011: £861.1 million), with cost increases  moderating 
to 4.7% in the third quarter.



                               2012  2011          
Nine months ended 30 September    £m    £m Change (%)
                                                 
Employment costs               279.0 248.8       12.1
Maintenance expenditure        115.5  99.9       15.6
Utility costs                   82.6  84.9      (2.7)
Rents and rates                107.6  99.2        8.5
General expenses               192.2 176.2        9.1
Retail expenditure              24.3  23.1        5.2
Intra-group charges/other      119.5 129.0      (7.4)
Total                          920.7 861.1        6.9



The main  drivers  of  the  increased adjusted  operating  costs  were  higher 
employment  costs,  maintenance  expenditure,  rents  and  rates  and  general 
expenses.



Employment costs were up 12.1%  reflecting principally budgeted pay rises  and 
an increase in the defined benefit pension scheme service charge. The increase
in maintenance  expenditure was  mainly  due to  the  costs of  the  temporary 
Olympic terminal at Heathrow  together with the impact  of the adverse  winter 
weather in  early February  2012. Increases  in rents  and rates  were  driven 
primarily  by  inflation-linked  increases  in  property  rates  as  well   as 
additional rateable property (such as Terminal  5C that opened in June  2011). 
The growth in  general expenses  reflected increases  across a  range of  cost 
categories including air traffic control, insurance, cleaning and Olympics. In
the nine  months ended  30 September  2012,  the Group  incurred a  net  £14.3 
million in costs in relation to the 2012 Olympic and Paralympic Games.



Appendix 2 provides an analysis of  adjusted operating costs for Heathrow  and 
Stansted.



2.2.4 Adjusted EBITDA



In the nine months ended 30 September 2012, Adjusted EBITDA increased 9.6%  to 
£922.9 million (2011: £842.2 million), resulting in an Adjusted EBITDA  margin 
of 50.1% (2011: 49.4%).



The increase in Adjusted EBITDA from 2011 reflects the fact that increases  in 
aeronautical and retail income per  passenger meant that turnover grew  faster 
than adjusted operating costs.



Adjusted EBITDA  at Heathrow  (including  Heathrow Express  Operating  Company 
Limited) increased  10.2%  to  £847.9  million  (2011:  £769.5  million).  The 
significant increase  in  Heathrow's  Adjusted  EBITDA  reflects  the  factors 
referred to above in  relation to the growth  in the Group's Adjusted  EBITDA. 
Stansted's Adjusted  EBITDA  increased  3.2% to  £75.0  million  (2011:  £72.7 
million) due principally to higher  tariffs and increases in other  non-retail 
income streams  partially  offset principally  by  reduced retail  income  and 
increased employment costs and maintenance expenditure.



2.2.5 Operating profit



The Group recorded an operating profit for the nine months ended 30  September 
2012 of £398.6 million (2011: £511.0 million). The difference between Adjusted
EBITDA and operating profit results from £378.7 million in depreciation (2011:
£356.8 million) and a £145.6  million exceptional charge (2011: £25.6  million 
credit). A  reconciliation between  Adjusted  EBITDA and  statutory  operating 
profit is provided below.



                                  2012    2011
Nine months ended 30 September      £m      £m Change (%)
Adjusted EBITDA                  922.9   842.2        9.6
Depreciation - ordinary        (378.7) (356.8)        6.1
Exceptional items - pensions   (145.6)    36.6        n/a
Impairment - exceptional             -  (11.0)        n/a
Operating profit                 398.6   511.0     (22.0)



2.2.6 Exceptional items



In the nine months  ended 30 September 2012,  there was an exceptional  £145.6 
million pre-tax charge  (2011: £25.6 million  credit) to the  profit and  loss 
account. This reflected a non-cash pension related charge arising  principally 
from the Group's  share of the  movement in the  LHR Airports Limited  defined 
benefit pension  scheme from  a surplus  to  a deficit.  See section  2.4  for 
further discussion  of the  movement  in the  defined benefit  pension  scheme 
deficit.



2.2.7 Taxation



The tax credit  for the  nine months  ended 30  September 2012  results in  an 
effective tax  credit  rate for  the  period  of -15.0%  (2011:  35.1%).  This 
reflects a tax charge  arising on ordinary activities  of £3.6 million  (2011: 
£27.7 million credit) and a tax credit of £20.4 million (2011: £24.0  million) 
due to the further reduction in the rate of corporation tax from 1 April  2012 
and 1 April 2013.



The tax  charge  for the  nine  months ended  30  September 2012  on  ordinary 
activities results in an effective tax rate of 3.2% (2011: 18.8%). This charge
is calculated by applying the forecast estimated annual effective tax rate for
each entity to the results  for the nine months  ended 30 September 2012.  For 
each entity,  the  effective tax  rate  for the  period  differs from  the  UK 
statutory rate of  corporation tax  of 24.5% primarily  due to  the impact  of 
phasing results  through  the  year and  permanent  differences  arising  from 
non-qualifying depreciation. The effective tax rate for the Group reflects the
proportionate contribution of each entity's results in each interim accounting
period and will vary as those proportions change.



On 21  March  2012,  the  Government  announced  its  intention  to  introduce 
legislation for further reductions in the rate of corporation tax to 24%  from 
1 April 2012 and 23% from 1 April 2013. Both the reductions in the corporation
tax rate have been substantively enacted at the reporting date and as a result
the Group's deferred tax balances, which were previously provided at 25%, were
re-measured at the rate of  23%. This has resulted in  a reduction in the  net 
deferred tax liability  of £9.8 million,  with £20.4 million  credited to  the 
profit and loss account and £10.6 million charged to reserves.





2.3 Cash flow



2.3.1 Summary cash flow

                                                                 2012    2011
Nine months ended 30 September                                     £m      £m
Net cash inflow from operating activities                       835.9   799.9
Net interest paid                                             (332.3) (309.4)
Taxation - group relief paid                                   (13.7)  (22.7)
Cash flow after interest and tax                                489.9   467.8
Net capital expenditure                                       (832.8) (659.9)
Disposal of subsidiaries                                        (1.2)   (5.6)
Dividends paid                                                (436.0)  (24.8)
Net cash outflow before use of liquid resources and financing (780.1) (222.5)
Management of liquid resources                                 (23.0)  (23.8)
Cancellation and restructuring of derivatives                  (57.4)  (53.1)
Increase in amount owned to Heathrow Finance plc                168.5    31.8
Movement in borrowings and other financing flows                700.9   264.0
Increase/(decrease) in cash                                       8.9   (3.6)



2.3.2 Cash flow from operating activities



Net cash inflow  from operations in  the nine months  ended 30 September  2012 
increased 4.5% to £835.9  million (2011: £799.9  million) which compares  with 
Adjusted EBITDA of £922.9  million (2011: £842.2  million). The conversion  of 
Adjusted  EBITDA  to   operating  cash  flow   primarily  reflects  the   cash 
contributions to the defined benefit pension scheme being in excess of the net
service charge and adverse movements in working capital.



2.3.3 Capital expenditure



In the  nine months  ended 30  September 2012,  the cash  flow impact  of  the 
Group's capital investment programme was £832.8 million (2011: £659.9 million)
with £818.8  million (2011:  £645.1  million) at  Heathrow and  £14.0  million 
(2011: £14.8 million) at Stansted.



The most significant areas of capital expenditure at Heathrow were on the  new 
main Terminal 2 building, the second  phase of the satellite building for  the 
new Terminal 2 and the new integrated baggage system for Terminal 3.



2.3.4 Restricted payments/dividends



In the nine months ended 30 September 2012, there was a net £343.7 million  of 
restricted payments made out of the  Group. Of this amount, £37.0 million  was 
utilised to  make  interest  payments on  Heathrow  Finance  plc's  ('Heathrow 
Finance') external debt  financing and £295.0  million to make  distributions 
beyond Heathrow Finance which,  together with other  cash within the  Heathrow 
Airport Holdings Limited (formerly BAA Limited) group, was utilised in  paying 
both accrued  and current  interest on  the  facility held  at ADI  Finance  1 
Limited and  making the  first three  quarterly dividend  payments  (totalling 
£180.0 million) to the Group's ultimate shareholders since it was acquired  by 
the Ferrovial-led consortium in 2006. The  remainder of the £343.7 million  of 
restricted payments has been  either retained at Heathrow  Finance or used  to 
meet its financing related costs.



A significant part of the distributions  out of the Group were implemented  by 
£436.0 million  in  dividend  payments  made in  March  2012,  June  2012  and 
September 2012. Of this amount, at  30 September 2012 £141.0 million had  been 
lent back to the Group.





2.4 Pension scheme



At 30 September 2012, the LHR Airports Limited defined benefit pension  scheme 
had a  deficit of  £92.1 million  as measured  under IAS  19, of  which  £82.1 
million was  attributable  to the  Group  under the  Group's  shared  services 
agreement with LHR  Airports Limited.  The scheme deficit  had barely  changed 
from 30 June 2012 (when it was £89.9 million) but contrasted with the position
at 31 December 2011 when there was a scheme surplus of £38.7 million.





2.5 Future financing themes



In the  first half  of 2012,  the Group  raised over  £3 billion  in the  debt 
capital markets and put in place new £2.75 billion 5 year revolving credit and
liquidity facilities. This  marked the  culmination of  a financing  programme 
that has seen well  over £7 billion  raised since late 2009  by the Group  and 
Heathrow Finance.



This programme has transformed the  financing position of the Group,  enabling 
the repayment of £6  billion of short dated  term loans, materially  extending 
the average life of its debt, diversifying its sources of funding in the  bond 
markets from two currencies  to five and providing  the stability to  commence 
dividend payments.



The Group expects  the scale and  focus of its  capital markets activities  to 
evolve going  forward.  In  particular, it  expects  funding  requirements  to 
moderate materially, to an average of  less than £1.5 billion per annum,  over 
the coming years reflecting the repayment of loan facilities referred to above
as well  as an  expectation of  both  a more  moderate capital  programme  and 
continued increases in  operating cash  flow through to  the end  of the  next 
regulatory period. The expected proceeds from the sale of Stansted will reduce
financing needs even further over the next 12 months.



Nevertheless, the Group will continue to focus on maintaining its presence  in 
its different  currency markets,  including  through primary  market  activity 
whilst having a stronger focus on relative value. It will also seek to combine
public syndicated transactions with the use of private placements and taps  of 
existing bonds and consider pursuing other initiatives that enable it to  more 
actively manage its debt maturity profile.



2.6 Financing position



2.6.1 Consolidated net debt and liquidity at Heathrow (SP) Limited



The analysis  below focuses  on the  Group's external  debt and  excludes  the 
debenture between  Heathrow  (SP) Limited  ('Heathrow  (SP)') and  its  parent 
company Heathrow Finance. It includes  all the components used in  calculating 
gearing ratios under the  Group's financing agreements including  index-linked 
accretion.



During the nine months ended 30  September 2012, the Group's nominal net  debt 
increased 8.0% from £10,442.6  million to £11,282.6  million. The increase  in 
net debt primarily reflects  three factors: funding  of capital investment  at 
Heathrow; making  the restricted  payments/dividend  payments referred  to  in 
section 2.3.4; and inflation accretion  on the Group's index-linked swaps  and 
bonds.



The Group's nominal net debt at 30 September 2012 comprised £10,233.1  million 
outstanding under bond  issues, £140.0 million  outstanding under the  Group's 
revolving  credit  facility,  £490.4  million  outstanding  under  other  loan 
facilities, £483.9 million  in index-linked derivative  accretion and cash  at 
bank and term deposits of £64.8 million (compared with cash and current  asset 
investments of £65.1  million shown on  the balance sheet).  Nominal net  debt 
comprised £9,657.6 million in senior (Class  A) net debt and £1,625.0  million 
in junior (Class B) debt.



The accounting  value  of  the Group's  net  debt  at 30  September  2012  was 
£10,699.9 million (31 December 2011: £10,254.4 million).



The average cost of the Group's external  gross debt at 30 September 2012  was 
4.31% (31 December  2011: 4.17%) taking  into account the  impact of  interest 
rate,  cross-currency  and  index-linked  hedges  but  excluding  index-linked 
accretion. Including index-linked accretion, the Group's average cost of  debt 
at 30 September 2012 was 6.05% (31 December 2011: 6.45%). The increase in  the 
average cost of debt excluding accretion is the result of a number of  factors 
including increases in the proportion of fixed rate debt and Class B debt.



As at 30 September  2012, there was £1,860  million undrawn under the  Group's 
revolving  credit  and  working  capital  facilities,  sufficient  to  provide 
liquidity until around  the end of  2014. Proceeds from  the sale of  Stansted 
airport will extend the Group's liquidity horizon further.



2.6.2 Consolidated net debt at Heathrow Finance plc



Taking into account the Group's nominal  net debt discussed in section  2.6.1, 
together with £577.5 million of gross debt  and £11.5 million of cash held  at 
Heathrow Finance, Heathrow  Finance's consolidated  net debt  at 30  September 
2012 was £11,848.6 million, an increase  of 7.8% from £10,992.2 million at  31 
December 2011.



2.6.3 Regulatory Asset Base ('RAB')



Set out below are RAB  figures for Heathrow and  Stansted at 31 December  2011 
and 30 September 2012. RAB figures are utilised in calculating gearing  ratios 
under the Group's and Heathrow Finance's financing agreements.



                 Heathrow Stansted    Total
                       £m       £m       £m
                                        
31 December 2011  12,490.2  1,359.5 13,849.7
30 September 2012 13,173.8  1,345.1 14,518.9



The increase in the total RAB during  the nine months ended 30 September  2012 
reflected the addition of approximately  £865 million in capital  expenditure; 
indexation  adjustment   of  around   £280  million;   offset  by   regulatory 
depreciation of around £450 million;  RAB profiling adjustments of around  £25 
million and a modest amount of disposals.



2.6.4 Net interest payable and net interest paid



In the nine months ended 30  September 2012, the Group's net interest  payable 
was £537.5  million (2011:  £585.4  million) excluding  fair value  gains  and 
losses on financial  instruments. Underlying net  interest payable was  £572.5 
million (2011: £566.6 million), after adjusting for £69.5 million (2011: £21.5
million) in capitalised interest  and £34.5 million  (2011: £40.3 million)  in 
non-cash amortisation of financing fees and bond fair value adjustments.



Within interest payable  is also recorded  a non-cash net  fair value gain  on 
financial instruments of £250.9 million (2011: £72.9 million loss).



Net interest  paid in  the nine  months  ended 30  September 2012  was  £332.3 
million (2011: £309.4 million). This consisted of £283.6 million (2011: £268.3
million) paid in  relation to  external debt  and £48.7  million (2011:  £41.1 
million) paid under the debenture between Heathrow (SP) and Heathrow  Finance. 
The increase in net interest paid is due primarily to the overall increase  in 
net debt, timing differences and the increase in the average cost of debt.



The difference between net interest paid  and net interest payable is  largely 
accounted for  by:  an  amortisation  charge of  £38.4  million  (2011:  £48.0 
million) in  net  interest  payable  relating  to  prepayments  of  derivative 
interest made  in  earlier  periods; £145.7  million  (2011:  £179.3  million) 
non-cash accretion on index-linked  instruments; the non-cash amortisation  of 
financing fees  and  bond fair  value  adjustments and  movement  in  interest 
accruals; partially offset by capitalised interest.



2.6.5 Financial ratios



The Group and Heathrow Finance continue to operate comfortably within required
financial ratios.



At 30  September 2012,  the Group's  senior  (Class A)  and junior  (Class  B) 
gearing ratios (nominal net debt to RAB) were 66.5% and 77.7% respectively (31
December 2011: 68.0% and 75.4%  respectively) compared with trigger levels  of 
70.0% and 85.0%  under its  financing agreements.  Heathrow Finance's  gearing 
ratio was 81.6%  (31 December  2011: 79.4%) compared  to a  covenant level  of 
90.0% under  its financing  agreements.  The increase  in the  Group's  junior 
gearing ratio and Heathrow Finance's gearing  ratio since 31 December 2011  is 
due to the increase in net debt described in section 2.6.1.





2.7 Outlook



In its June 2012 investor report, the Group indicated that its Adjusted EBITDA
for 2012 was expected to be approximately £1.27 billion.



Developments since  then, particularly  the  previously reported  weaker  than 
expected Heathrow passenger traffic through the peak summer months of July and
August, suggest that Adjusted EBITDA for 2012 may be marginally lower than the
guidance provided in June.



Prospects for further good growth in Adjusted EBITDA in 2013 are supported  by 
the tariff increases taking effect from  1 April 2013. The Group will  provide 
more detailed guidance on expected performance  for next year in its  investor 
report due to be published in December 2012.









Appendix 1 - Financial information



                            Heathrow (SP) Limited

                                      

                     Consolidated profit and loss account

                 for the nine months ended 30 September 2012

                                      

                                      

                                           Unaudited    Unaudited

                                                Nine         Nine     Audited

                                        months ended months ended  Year ended

                                         30 September 30 September 31 December
                                                2012         2011        2011
                                   Note           £m           £m          £m
Turnover                            1        1,843.6      1,703.3     2,280.0
                                                                           
Operating costs - ordinary                 (1,299.4)    (1,217.9)   (1,656.8)
Operating (costs)/gain -            2         (145.6)        36.6      (40.3)
exceptional: pensions
Operating costs - exceptional:      2              -       (11.0)      (10.8)
other
Total operating costs                      (1,445.0)    (1,192.3)   (1,707.9)
                                                                           
Total operating profit              1          398.6       511.0       572.1
                                                                           
(Loss)/gain on disposal of          2           (0.2)           -
airports                                                                   7.9
                                                                           
Interest receivable and similar     3          184.1       161.0       220.4
income
Interest payable and similar        3         (721.6)      (746.4)   (1,010.3)
charges
Fair value gain/(loss) on           3          250.9       (72.9)      (45.9)
financial instruments
Net interest payable and similar             (286.6)      (658.3)     (835.8)
charges
                                                                           
Profit/(loss) on ordinary                     111.8      (147.3)     (255.8)
activities before taxation
Tax credit on profit/(loss) on      4           16.8        51.7        64.3
ordinary activities
Profit/(loss) on ordinary                     128.6       (95.6)     (191.5)
activities after taxation







                                      

                                      

                            Heathrow (SP) Limited

                                      

                          Consolidated balance sheet

                           as at 30 September 2012

                                      

                                      

                                           Unaudited    Unaudited     Audited

                                         30 September 30 September 31 December
                                                2012         2011        2011
                                    Note          £m           £m          £m
Fixed assets                                                               
Tangible fixed assets                      12,734.6     12,034.9    12,160.5
Financial assets - derivative                 342.6        394.2       369.1
financial instruments
Total fixed assets                         13,077.2     12,429.1    12,529.6
                                                                           
Current assets                                                             
Stocks                                          8.8          6.9         8.0
Debtors                                       311.5        394.4       305.9
Financial assets - derivative                     -        195.0       170.9
financial instruments
Current asset investments                      44.0         64.8        21.0
Cash at bank and in hand                       21.1          2.5        12.2
Total current assets                          385.4        663.6       518.0
                                                                           
Current liabilities                                                        
Creditors: amounts falling due       5        (831.5)    (1,474.3)   (1,553.2)
within one year
Net current liabilities                      (446.1)      (810.7)   (1,035.2)
Total assets less current                  12,631.1     11,618.4    11,494.4
liabilities
                                                                           
Creditors: amounts falling due       5     (12,553.7)   (11,032.2)  (11,096.0)
after more than one year
Deferred tax                                  (92.7)      (173.6)     (123.1)
Provisions for liabilities and               (108.6)       (37.5)      (33.8)
charges
Net liabilities                              (123.9)        375.1       241.5
                                                                           
Capital and reserves                                                       
Called up share capital                        11.0         11.0        11.0
Share premium reserve                         499.0        499.0       499.0
Revaluation reserve                           818.0      1,499.1     1,514.4
Merger reserve                             (4,535.6)    (4,535.6)   (4,535.6)
Fair value reserve                           (475.9)      (343.4)     (396.3)
Profit and loss reserve              6       3,559.6      3,245.0     3,149.0
Total shareholder's funds                    (123.9)        375.1       241.5

                                      







                                      

                                      

                            Heathrow (SP) Limited

                                      

                   Consolidated summary cash flow statement

                 for the nine months ended 30 September 2012

                                      



                                            Unaudited    Unaudited

                                                 Nine         Nine     Audited

                                         months ended months ended  Year ended

                                         30 September 30 September 31 December
                                                 2012         2011        2011
                                    Note           £m           £m          £m
Operating profit                               398.6        511.0       572.1
                                                                           
Adjustments for:                                                           
Depreciation (including impairment)            378.7       367.8      519.9
Gain on disposal of tangible fixed   
assets                                          (0.4)        (0.3)       (0.3)
                                                                           
Working capital changes:                                                   
Increase in stock and debtors                 (25.9)       (11.3)      (34.6)
(Decrease)/increase in creditors              (23.3)         3.7       30.6
Net release of provisions                      (6.2)        (7.3)       (7.3)
Difference between pension charge    
and cash contributions                         (31.2)       (27.1)      (35.7)
Exceptional pension charge/(credit)           145.6       (36.6)       40.3
Exceptional working capital          
settlement of intercompany balance                 -           -       47.2
Net cash inflow from operating       
activities                                     835.9       799.9    1,132.2
                                                                           
Net interest paid                            (332.3)      (309.4)     (388.8)
                                                                           
Taxation - group relief paid                  (13.7)       (22.7)      (27.2)
                                                                           
Net capital expenditure                      (832.8)      (659.9)     (864.7)
                                                                           
Disposal of subsidiaries - disposal  
costs                                           (1.2)        (5.6)       (6.1)
                                                                           
Dividends paid                       6        (436.0)       (24.8)      (24.8)
Net cash outflow before use of       
liquid resources and financing                (780.1)      (222.5)     (179.4)
                                                                           
Management of liquid resources                (23.0)       (23.8)       20.0
                                                                           
Issuance of bonds                    5       3,081.9     1,507.9    1,507.9
Repayment of bonds                   5        (680.2)           -          -
Drawdown of revolving credit         5
facility                                       140.0           -          -
(Repayment)/drawdown of capital      5
expenditure facility                        (1,395.0)       100.0       95.0
Repayment of facilities and other    5
items                                         (445.8)    (1,328.9)   (1,339.8)
Increase in amount owed to Heathrow  5
Finance plc                                    168.5        31.8       31.8
Settlement of accretion on           
index-linked swaps                                 -       (15.0)      (15.0)
Cancellation and restructuring of    
derivatives                                    (57.4)       (53.1)     (114.4)
Net cash inflow from financing                812.0       242.7      165.5
                                                                           
Increase/(decrease) in cash                     8.9        (3.6)        6.1







                                      

                                      

                            Heathrow (SP) Limited

                                      

                 General information and accounting policies

                                      

                                      

General information



The financial  information set  out  herein does  not constitute  the  Group's 
statutory financial statements  for the  year ended  31 December  2011 or  any 
other period. Statutory financial  statements for the  year ended 31  December 
2011 have been filed with the Registrar of Companies on 28 February 2012.  The 
annual financial information presented herein  for the year ended 31  December 
2011 is based on, and is  consistent with, the audited consolidated  financial 
statements of Heathrow (SP) Limited (the 'Group'), formerly known as BAA  (SP) 
Limited, for the year ended 31 December 2011. The auditors' report on the 2011
financial statements was unqualified,  did not contain  an emphasis of  matter 
paragraph and did not  contain any statements under  section 498(2) or (3)  of 
the Companies Act 2006.





Accounting policies



Basis of preparation

The consolidated  financial  statements of  Heathrow  (SP) Limited  have  been 
prepared under the historical cost convention, as modified by the  revaluation 
of certain tangible fixed assets and financial instruments, in accordance with
the Companies Act 2006 and United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting  Practice). The accounting  policies adopted  in 
the preparation of this consolidated financial information are consistent with
those applied by the  Group in its  audited consolidated financial  statements 
for the year ended 31 December 2011 with the exception of tax accounting  (see 
note 4) which is  in accordance with the  United Kingdom Accounting  Standards 
Board's Statement : 'Half-Yearly Financial Reports'. Unless otherwise  stated, 
amounts all relate to continuing operations.







                            Heathrow (SP) Limited

                                      

               Notes to the consolidated financial information

                 for the nine months ended 30 September 2012



1 Segment information

The Group's primary reporting format is business segments. The operating
businesses are primarily the individual airports, which are organised and
managed separately. All turnover originated in the UK.









                 Unaudited         Unaudited                
                      Nine              Nine          Audited

              months ended      months ended       Year ended

Turnover 30September2012 30 September 2011 31 December 2011
                         £m                £m               £m
Heathrow            1,658.3           1,522.1          2,045.6
Stansted              185.3             181.2            234.4
Total               1,843.6           1,703.3          2,280.0



                                 Unaudited         Unaudited                
                                     Nine              Nine          Audited

                             months ended      months ended       Year ended

Operating profit          30 September 2012 30 September 2011 31 December 2011
                                        £m                £m               £m
Heathrow                             374.2             458.1            526.8
Stansted                              20.2              48.3             39.4
Other entities and
adjustments1                           4.2               4.6              5.9
Total                                398.6             511.0            572.1
                                 Unaudited         Unaudited          Audited
Net assets                30 September 2012 30 September 2011 31 December 2011
                                        £m                £m               £m
Heathrow                           1,489.2          1,565.9          1,452.0
Stansted                             876.8            919.1            887.6
Other entities and
adjustments1                      (2,489.9)         (2,109.9)        (2,098.1)
Total                               (123.9)            375.1            241.5



1 The 'Other  entities and  adjustments' business  segment includes  Heathrow 
Express Operating  Company Limited,  Heathrow Funding  Limited, Heathrow  (AH) 
Limited and the parent company Heathrow (SP) Limited.



Reconciliation of Adjusted EBITDA and operating profit

Adjusted EBITDA has been used to provide a clearer indication of the
performance of the individual airports and to assist better comparison with
the prior period. Adjusted EBITDA is earnings before interest, tax,
depreciation, amortisation and exceptional items.

Unaudited
                           Adjusted         Operating                Operating
Nine months ended 30
September 2012              EBITDA exceptional items Depreciation^1   profit
                                 £m                £m             £m        £m
Heathrow                      843.4           (120.6)        (348.6)     374.2
Stansted                       75.0            (24.7)         (30.1)      20.2
Other entities and
adjustments^2                   4.5             (0.3)              -       4.2
Total                         922.9           (145.6)        (378.7)     398.6
Unaudited
                           Adjusted         Operating                Operating
Nine months ended 30
September 2011              EBITDA exceptional items  Depreciation1   profit
                                 £m                £m             £m        £m
Heathrow                      765.0              19.5        (326.4)     458.1
Stansted                       72.7               6.0         (30.4)      48.3
Other entities and
adjustments^2                   4.5               0.1              -       4.6
Total                         842.2              25.6        (356.8)     511.0
Audited
                           Adjusted         Operating                Operating
Year ended 31 December
2011                        EBITDA exceptional items  Depreciation1   profit
                                 £m                £m             £m        £m
Heathrow                    1,039.2            (44.1)        (468.3)     526.8
Stansted                       87.0             (7.1)         (40.5)      39.4
Other entities and
adjustments^2                   5.9              0.1          (0.1)       5.9
Total                       1,132.1            (51.1)        (508.9)     572.1



1 Depreciation  excluding  impairment  which  is  included  within  operating 
exceptional items.

2 The 'Other  entities and  adjustments' business  segment includes  Heathrow 
Express Operating  Company Limited,  Heathrow Funding  Limited, Heathrow  (AH) 
Limited and the parent company Heathrow (SP) Limited.









2 Operating and non-operating exceptional items



                                          Unaudited    Unaudited           
                                                                 

                                                             Nine     Audited
                                               Nine
                                                     months ended  Year ended
                                       months ended
                                                      30 September 31 December
                                  30September2012         2011        2011
                                                 £m           £m          £m
Operating costs - exceptional:                                             
pension
Pension (charge)/credit                      (145.6)         36.6      (40.3)
                                                                            
Operating costs - exceptional:                                              
other
Impairment                                        -        (11.0)      (11.0)
Reorganisation credit                             -            -        0.2
Total operating exceptional items            (145.6)         25.6      (51.1)
                                                                            
(Loss)/gain on disposal of                     (0.2)            -        7.9
airports
Total non-operating exceptional                (0.2)            -        7.9
items
                                                                            
Taxation on exceptional items                  33.5         (9.2)       10.0
Total exceptional items after tax            (112.3)         16.4      (33.2)



Operating costs - exceptional: pension

Under the Shared Services  Agreement ('SSA') the  current period service  cost 
for the Heathrow  Airport Holdings  Limited group  ('Heathrow Group')  pension 
schemes are recharged to the  Group's airports and Heathrow Express  Operating 
Company Limited  ('HEX') on  the  basis of  their pensionable  salaries.  This 
charge is  included  within  Operating  costs.  Cash  contributions  are  made 
directly by the Group's airports to  the LHR Airports Limited pension  schemes 
on behalf of LHR Airports Limited.



The Group's airports and HEX have had an obligation since August 2008 to  fund 
or benefit  from their  share  of the  LHR  Airports Limited  defined  benefit 
pension scheme deficit or surplus  and Unfunded Retirement Benefit Scheme  and 
Post Retirement Medical  Benefits pension related  liabilities under the  SSA. 
These provisions or assets  are based on the  relevant share of the  actuarial 
deficit or  surplus  and  allocated  on the  basis  of  pensionable  salaries. 
Movements in these provisions are recorded  as exceptional items due to  their 
size and nature.



For the nine months ended 30  September 2012 an exceptional pension charge  of 
£145.6 million (nine  months ended  30 September 2011:  £36.6 million  credit; 
year ended 31 December 2011: £40.3 million charge) was incurred. This reflects
the Group's share of the movement in the LHR Airports Limited defined  benefit 
pension scheme from a surplus to a deficit.



Operating costs - exceptional: other

The impairment  charge of  £11.0 million  in  both the  nine months  ended  30 
September 2011 and year ended 31 December 2011 was in relation to the Airtrack
rail project which the Group has decided not to pursue.



Non-operating exceptional items - continuing and discontinued operations

As at 30  September 2012, £0.2  million of disposal  costs was incurred,  £0.1 
million of which was Gatwick related and £0.1 million Stansted related.



Non-operating exceptional items - discontinued operations

During the last quarter  of 2011, £7.9 million  excess provisions for  Gatwick 
disposal costs were released to the  profit and loss account. This related  to 
costs expected to  be associated with  the disposal including  legal fees  and 
other separation costs.









3 Net interest payable and similar charges

                          Unaudited        Unaudited         
                                                                      Audited

                               Nine                                      Year
                                                               Nine    ended
                       months ended
                                                       months ended        31
                                  30                                  December
                     September2012               30 September 2011    2011
                                 £m   £m       £m
Interest receivable
and similar income                                                         
Interest receivable           183.8    160.8
on derivatives not
in hedge
relationship                                                            220.0
Interest on bank                0.3  0.2
deposits                                                                  0.4
                              184.1    161.0    220.4
                                                                            
Interest payable and               
similar charges                                                              
Interest on                        
borrowings:                                                                  
Bonds  and   related         (420.5)    (337.2)
hedging
instruments^1                                                          (462.2)
Bank    loans    and          (91.7)    (121.5)
overdrafts       and 
related      hedging 
instruments                                                            (157.6)
Interest payable on          (223.4)    (255.0)
derivatives not in
hedge relationship^2                                                   (347.4)
Facility fees and             (15.9)   (17.7)
other charges                                                           (23.3)
Interest on                   (39.6)   (36.5)
debenture payable to
Heathrow Finance plc                                                    (46.9)
                             (791.1)    (767.9) (1,037.4)
Less capitalised               69.5  21.5
interest^3                                                               27.1
                             (721.6)   (746.4) (1,010.3)
Net interest payable         (537.5)    (585.4)
before fair value
gain/(loss)                                                            (789.9)
                                                                            
Fair value
gain/(loss) on
financial
instruments                                                                 
Interest rate swaps:            5.8 2.6
cash flow hedge^4                                                         3.1
Index-linked swaps:           244.4   (91.5)    (88.7)
not in hedge
relationship^5
Cross-currency                  0.8  10.5     12.2
swaps: cash flow
hedge^4
Cross-currency                    - 8.7     30.8
swaps: fair value
hedge^4
Fair value
re-measurements of
foreign exchange               (0.1)  (3.2)     (3.3)
contracts and
currency balances                                                          
                              250.9   (72.9)    (45.9)
                                                                            
Net interest payable         (286.6)    (658.3)   (835.8)
and similar charges



^1 Includes accretion of £11.0 million (nine months ended 30 September  2011: 
£10.6 million; year  ended 31  December 2011: £15.4  million) on  index-linked 
bonds.

^2 Includes accretion of £134.7 million (nine months ended 30 September 2011:
£168.7 million; year ended 31  December 2011: £231.8 million) on  index-linked 
swaps.

^3 Capitalised interest included  in the cost of  qualifying assets arose  on 
the  general  borrowing  pool  and  is  calculated  by  applying  an   average 
capitalisation rate of 4.38% (nine months ended 30 September 2011: 2.21%; year
ended 31  December  2011:  2.08%)  to expenditure  incurred  on  such  assets. 
Following the significant refinancing activity for the Group in the first half
of 2012, the Group reassessed the  applicable pool of general borrowing  costs 
upon which interest has been capitalised. This  has led to an increase in  the 
capitalised interest rate  as at  30 September 2012  to 4.16%  compared to  31 
December 2011 and 30 September 2011.

^4 Hedge ineffectiveness on derivatives in hedge relationship.

^5 Reflects  the impact  on  the valuation  of  movements in  implied  future 
inflation and interest rates.









4 Tax credit on profit/(loss) on ordinary activities

The tax credit  for the  nine months  ended 30  September 2012  results in  an 
effective tax credit rate for the period of -15.0%. This reflects a tax charge
arising on  ordinary activities  of £3.6  million and  a tax  credit of  £20.4 
million due to the  further reduction in  the rate of  corporation tax from  1 
April 2012 and 1 April 2013.



For the nine months ended 30 September 2011 the effective tax credit rate  was 
35.1%, reflecting  the tax  credit  arising on  ordinary activities  of  £27.7 
million and a tax credit of £24.0 million due to the reduction in the rate  of 
corporation tax to 26% from 1 April 2011 and to 25% from 1 April 2012.



For the year ended 31 December 2011  the effective tax credit rate was  25.1%, 
reflecting the tax credit arising on ordinary activities of £40.3 million  and 
a tax credit of £24.0 million due to the reduction in the rate of  corporation 
tax to 26% from 1 April 2011 and to 25% from 1 April 2012.



The tax  charge  for the  nine  months ended  30  September 2012  on  ordinary 
activities results in  an effective  tax rate of  3.2% (nine  months ended  30 
September 2011: 18.8%;  year ended 31  December 2011: 15.8%).  This charge  is 
calculated by applying the  forecast estimated annual  effective tax rate  for 
each entity to the results  for the nine months  ended 30 September 2012.  For 
each entity,  the  effective tax  rate  for the  period  differs from  the  UK 
statutory rate  of corporation  tax of  24.5%  due to  the impact  of  phasing 
results through the year and permanent differences arising from non-qualifying
depreciation. The effective tax rate for the Group reflects the  proportionate 
contribution of each entity's  results in each  interim accounting period  and 
will vary as those proportions change.



On 21  March  2012,  the  Government  announced  its  intention  to  introduce 
legislation for further reductions in the rate of corporation tax to 24%  from 
1 April 2012 and 23% from 1 April 2013. Both the reductions in the corporation
tax rate have been substantively enacted at the reporting date and as a result
the Group's deferred tax balances, which were previously provided at 25%, were
re-measured at the rate of  23%. This has resulted in  a reduction in the  net 
deferred tax liability  of £9.8 million,  with £20.4 million  credited to  the 
profit and loss account and £10.6 million charged to reserves.



For the nine months  ended 30 September  2011 and the  year ended 31  December 
2011, the reduction in the corporation tax rate from 27% to 25% resulted in  a 
reduction in  the net  deferred tax  liability of  £20.1 million,  with  £24.0 
million credited to the  profit and loss account  and £3.9 million charged  to 
reserves.







5 Borrowings

Within Creditors:  amounts falling  due  within one  year are  borrowings  and 
financial derivatives of  £39.1 million  and £nil  respectively (30  September 
2011: £890.0 million and £0.1  million respectively; 31 December 2011:  £871.7 
million and £nil respectively).



Within Creditors: amounts falling due after more than one year are  borrowings 
and  financial  derivatives   of  £11,492.0  million   and  £1,061.6   million 
respectively  (30  September  2011:  £10,061.6  million  and  £969.3   million 
respectively;  31  December  2011:  £10,013.5  million  and  £1,081.6  million 
respectively).

                                            Unaudited    Unaudited     Audited
                                         30 September 30 September 31 December
                                                 2012         2011        2011
                                                   £m           £m          £m
Current borrowings                                                         
Secured                                                                    
Loan facilities                                  39.1         39.1        39.1
Bonds:                                                                      
3.975% €1,000 million due 2012                     -        850.9       832.6
Total current borrowings                         39.1        890.0       871.7
                                                                            
Non-current borrowings                                                      
Secured                                                                     
Revolving credit facility                       121.9            -           -
Capital expenditure facility                       -      1,400.0     1,395.0
Other loan facilities                           447.8        880.0       870.0
                                                569.7      2,280.0     2,265.0
Secured                                                                     
Bonds:                                                                      
5.850% £400 million due 2013                    387.4        378.3       379.9
4.600% €750 million due 2014                    554.1        596.4       588.8
3.000% £300 million due 2015                    298.5           -          -
2.500% US$500 million due 2015                  308.2           -          -
12.450% £300 million due 2016                   347.5        359.1       356.3
4.125% €500 million due 2016                    382.3        420.2       398.5
4.375% €700 million due 2017                    555.3           -          -
2.500% CHF400 million due 2017                  262.2           -          -
4.600% €750 million due 2018                    537.7        575.6       559.8
6.250% £400 million due 2018                    398.5        397.0       397.1
4.000% CAD 400 million due 2019                 249.1           -          -
6.000% £400 million due 2020                    395.4           -          -
9.200% £250 million due 2021                    282.6        281.1       280.6
4.875% US$1,000 million due 2021                673.1        676.7       683.3
1.650%+RPI £180 million due 2022                182.4           -          -
5.225% £750 million due 2023                    630.5        623.1       624.9
7.125% £600 million due 2024                    587.6           -          -
6.750% £700 million due 2026                    690.1        689.7       689.8
7.075% £200 million due 2028                    197.5        197.5       197.5
6.450% £900 million due 2031                    862.8        840.5       840.8
Zero-coupon €50 million due January 2032         41.0           -          -
Zero-coupon €50 million due April 2032           40.7           -          -
3.334%+RPI £460  million  due  2039^1(30        542.7        411.5       416.3
September   2011:   £365   million,   31 
December 2011: £365 million)                                     
5.875% £750 million due 2041                    749.0        737.3       737.3
                                             10,156.2      7,184.0     7,150.9
Unsecured                                                                   
Heathrow (SP) Limited debenture payable         766.1        597.6       597.6
to Heathrow Finance plc
                                                                            
Total non-current borrowings                 11,492.0     10,061.6    10,013.5
                                                                            
Total borrowings                             11,531.1     10,951.6    10,885.2

^1 The  existing  index-linked bond  was  re-opened, generating  proceeds  of 
£118.6 million in March 2012 and £154.3 million in May 2011.

^

6 Dividends

During the  period  ended  30  September  2012,  Heathrow  (SP)  Limited  paid 
dividends of £436.0 million to Heathrow Finance plc, being £21.0 million on 10
August 2012, £20.0  million on 21  June 2012  and £395.0 million  on 15  March 
2012. During the second half of 2011, Heathrow (SP) Limited paid a dividend of
£24.8 million. The dividend was paid on 10 August 2011.



Appendix 2



Analysis of turnover and operating costs for the nine months ended
30 September 2012



                                   Heathrow             Total
                                Airport Ltd HEX Opco Heathrow Stansted   Total
                                         £m       £m       £m       £m      £m
Turnover
Aeronautical income                   955.2        -    955.2    102.1 1,057.3
Retail income                         338.4        -    338.4     63.1   401.5
Car parking                            60.4        -     60.4     26.3    86.7
Duty and tax-free                      88.2        -     88.2      8.3    96.5
Airside specialist shops               67.5        -     67.5      5.2    72.7
Bureaux de change                      32.0        -     32.0      6.2    38.2
Catering                               27.9        -     27.9      7.5    35.4
Landside shops and bookshops           15.5        -     15.5      3.6    19.1
Advertising                            22.5        -     22.5      1.9    24.4
Car rental                             10.1        -     10.1      1.8    11.9
Other                                  14.3        -     14.3      2.3    16.6
Operational facilities and
utilities income                      121.4        -    121.4      7.7   129.1
Property rental income                 77.7        -     77.7      6.8    84.5
Rail income                            85.8        -     85.8      0.0    85.8
Other income                           75.3        -     75.3      5.6    80.9
HEX inter-company elimination        (44.6)     49.1      4.5        -     4.5
                                                                         

Total income                        1,609.2     49.1  1,658.3    185.3 1,843.6
Operating costs
Employment costs                      220.5     16.8    237.3     41.7   279.0
Maintenance expenditure                94.6     12.4    107.0      8.5   115.5
Utility costs                          66.2      1.7     67.9     14.7    82.6
Rents and rates                        94.6      1.2     95.8     11.8   107.6
General expenses                      159.1     10.7    169.8     22.4   192.2
Retail expenditure                     18.7        -     18.7      5.6    24.3
Intra-group charges/other             161.7      1.8    163.5      5.5   169.0
(Gain)/loss on disposal of           (0.5)        -   (0.5)      0.1   (0.4)
fixed assets
HEX inter-company elimination       (49.1)        -  (49.1)      - (49.1)
                                                                         

Adjusted operating costs              765.8     44.6    810.4    110.3   920.7
Depreciation                          348.6        -    348.6     30.1   378.7
Exceptional items                     120.6      0.3    120.9     24.7   145.6
                                                                         

Total operating costs               1,235.0     44.9  1,279.9    165.1 1,445.0
                                                                         

Adjusted EBITDA                       843.4      4.5    847.9     75.0   922.9



Analysis of turnover and operating costs for the nine months ended
30 September 2011

                                      

                                   Heathrow             Total
                                Airport Ltd HEX Opco Heathrow Stansted   Total
                                         £m       £m       £m       £m      £m
Turnover
Aeronautical income                   858.8        -    858.8     97.9   956.7
Retail income                         319.9        -    319.9     65.1   385.0
Car parking                            58.9        -     58.9     27.9    86.8
Duty and tax-free                      82.2        -     82.2      8.9    91.1
Airside specialist shops               61.7        -     61.7      5.1    66.8
Bureaux de change                      29.0        -     29.0      6.5    35.5
Catering                               26.5        -     26.5      7.4    33.9
Landside shops and bookshops           15.7        -     15.7      3.6    19.3
Advertising                            20.7        -     20.7      1.8    22.5
Car rental                             10.2        -     10.2      1.8    12.0
Other                                  15.0        -     15.0      2.1    17.1
Operational facilities and
utilities income                      109.0        -    109.0      7.3   116.3
Property rental income                 76.3        -     76.3      6.1    82.4
Rail income                            81.5        -     81.5        -    81.5
Other income                           72.1        -     72.1      4.8    76.9
HEX inter-company elimination        (43.5)     48.0      4.5        -     4.5
Total income                        1,474.1     48.0  1,522.1    181.2 1,703.3
Operating costs
Employment costs                      192.7     15.9    208.6     40.2   248.8
Maintenance expenditure                80.2     12.4     92.6      7.3    99.9
Utility costs                          68.6      1.6     70.2     14.7    84.9
Rents and rates                        87.0      1.0     88.0     11.2    99.2
General expenses                      143.9     10.9    154.8     21.4   176.2
Retail expenditure                     16.8        -     16.8      6.3    23.1
Intra-group charges/other             168.1      1.7    169.8      7.5   177.3
Gain on disposal of fixed
assets                                (0.2)        -    (0.2)    (0.1)   (0.3)
HEX inter-company elimination        (48.0)        -   (48.0)        -  (48.0)
Adjusted operating costs              709.1     43.5    752.6    108.5   861.1
Depreciation                          326.4        -    326.4     30.4   356.8
Exceptional items                    (19.5)    (0.1)   (19.6)    (6.0)  (25.6)
Total operating costs               1,016.0     43.4  1,059.4    132.9 1,192.3
Adjusted EBITDA                       765.0      4.5    769.5     72.7   842.2



                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


QRTPGGAAUUPPGWR -0- Oct/29/2012 07:00 GMT