Manchester Airports Group Investor Presentation February 2014 - - PowerPoint PPT Presentation

Manchester Airports Group

Investor Presentation February 2014

Contents

• CREDIT HI

CREDIT HIGHLIGHTS GHLIGHTS

• ASSET O

ASSET OVERVIEW ERVIEW

• FINANCIAL HIGH

FINANCIAL HIGHLIGH LIGHTS TS

• TRA

TRANSA SACTION S ION STRUC RUCTURE TURE

• RA

RATING TING A AGENCY CY FEEDBA FEEDBACK CK

• INDICA

INDICATIVE TIVE TERMS TERMS

2

Introduction

Ken O’Toole FCA Ken O’Toole FCA – Chief hief Commerci Commercial Offi Officer cer

Ken was appointed as Chief Commercial Officer in January 2012. Prior to that he spent six years with Ryanair Holdings plc, joining initially as Head of Revenue Management and latterly as Director

• f New Route Development. A qualified Chartered Accountant, his previous experience includes

Musgrave Group, a leading Irish and UK based retailer, and Credit Suisse First Boston

Nei Neil Thompson Thompson ACA, CTA ACA, CTA – Chief hief Financial Financial Offi Officer cer

Joined MAG in 2005, being Commercial FD and then Corporate FD, prior to taking on the role of Chief Financial Officer in March 2011. Neil previously held senior finance roles at The MAN Group and ALSTOM, with responsibility across businesses in the UK, Europe, North America, Canada, India, Singapore and Australia. Prior to the power generation sector, Neil spent seven years in financial practice, specialising in Corporate Finance and M&A transactions, latterly with PricewaterhouseCoopers

Charl Charlie Corni Cornish – – Group roup Chie Chief Executi Executive

Appointed Group Chief Executive in October 2010. Prior to joining MAG, Charlie was Managing Director of Utility Solutions, the commercial business of United Utilities (UU) with operations in the UK, Middle East, Australia, Bulgaria, Poland, Estonia and Philippines and was a Director of UU plc. Previously he worked for a number of manufacturing and service companies including Plessey Telecommunications, British Aerospace and ABF 3

CREDIT HIGHLIGHTS

4

Credit Highlights

Wel Well-i

• invest

nvested With With Predi Predicta tabl ble Costs Costs

• MAN and STN well invested with spare capacity
• Modest investment programme with potential to defer pending operational performance and economic outlook
• Capex at STN focused on retail re-development and new airside layout

Lo Long-term, S

• term, Suppo

portive rtive Shareholde eholders rs

• MCC and District Councils are permanent, long-term shareholders; IFM has 25+ years investment horizon
• Conservative opening leverage and ongoing commitment to prudent financial policy to support strong investment

grade ratings

Experi Experienced enced Management Team Management Team

• New management team has grown Legacy MAG revenue by 7.0% and EBITDA by 9.3% CAGR since 2011
• Intent to replicate MAN success at STN through terminal redevelopment, growing retail and car parking yields

Diversi Diversified Mix Mix Of Of Airl Airlines es

• Over 80 airline customers across low-cost, full service and charter
• Long term contracts signed with 90% of customers de-risks growth

Diversi Diversified Mix Mix Of Of Route Routes

• 275 routes served – more than any other UK airport group
• 20 new routes added April to September 2013 – including Moscow, Cairo, Gdansk, Krakow, Antigua, St Lucia

Diversi Diversified Mix Mix Of Of Reven Revenues

• Equal proportion of aeronautical and non-aeronautical revenues
• Strong growth in retail yields in recent years at MAN following terminal investment, whilst commercialisation of

car parking has also generated strong car park yield growth

A A Truly N y National Airport tional Airport Group Group

• c.50m people live within 2 hours’ drive of a MAG airport – almost 70% of the UK population
• Closest counties have high average income per capita. Catchment areas served well by road and rail
• National footprint provides more commercial opportunities for airline and retail customers. Group’s scale affords

significant operational efficiencies 5

Truly National: uly National: The UK’s Second Largest Airports Group

Bourne Bournemo mouth Airpor Airport - t - BOH OH

• Significant investment in new t

terminal al increasing passenger capacity to 3.0m p.a.

• Weal

Wealthy catc y catchment t area area

• Large land holding – on-s
• site

ite b business siness par park

Manchest Manchester Airpo Airport - t - MAN AN

• UK’s 3rd larg

UK’s 3rd largest airp airport rt

• 70+ airlines & 200+ destinations
• 2 runways with potential 64% spa

64% spare e capa capacity ty

• 21m people within a 2 hour drive

East Midl East Midland ands Airport Airport - EMA EMA.

• UK’s

UK’s larg largest fre freigh ght t airpo airport after after Heathr Heathrow – – 296,000 tonnes p.a.

• Located next to key road interchanges

– four hours from virtually all UK commerce

Lo London S

• n Stansted Airport -

sted Airport - STN

• UK’s 4th

UK’s 4th larg largest airpo airport

• 150+ destinations
• 1 runway with 50% spa

50% spare e capa capacity ty

• 25m people within two hours’’ drive
• Acquired February 2013

MAG Property MAG Property

• MAG has a property portfolio of >

£550m

• c.500 properties and 1,000 tenants

Ca Catch tchment a ent area ea within 2 hours’ drive of:

42m 42m £638m £638m

Source: MAG Annual report, MAG Pro Forma Consolidated Financial Statements, Prospectus

Key Profo Key Proforma ma Metrics Metrics

MAN STN

MAG is G is the U UK’s seco ’s second la largest a est airport g group se servin ing 4 42 million llion p passen ssenger ers p s per a annum

6

307 20 244 18 87 5 0% 50% 100%

Revenues (£m) Passengers (m)

MAN STN Other

Long-Term, Supportive Shareholders

• Full

Fully aligned intere aligned interests sts reflected in equal equal voting rig voting rights ts for IFM and MCC

• Long term

Long term com commitme ment nt matches IFM pension fund ownership

• 25+ years investment horizon
• Open-ended fund structure with no exit requirement
• Sharehold

Shareholders suppor rs support m management str nagement strategy tegy

• Dividend policy contemplates and monitors leverage, credit

rating and growth investments

IFM sel IFM selected by MA by MAG sharehol shareholders rs as as equity partner for equity partner for alignme alignment of t of interests interests and experie and experience ce in sector in sector

Owner Ownershi hip structu p structure Stable, Stable, long-term long-term shareholders shareholders

Manchester Airports Manchester Airports Holdings Limited Holdings Limited Greater Manchester Greater Manchester Boroug rough Counc h Councils ils The The Co Council uncil of the City the City of Ma Manc nchester hester (“MCC (“MCC”) ”) IFM IFM Manchester Airport Group Manchester Airport Group Investments Limited Investments Limited Manchester Airport Group Manchester Airport Group Finance Limited Finance Limited Manchester Airport Plc Manchester Airport Plc Stanst ansted Airport Airport Limit Limited Bour urnemo nemouth Inter uth Internatio ional nal Airport Airport Limit Limited Eas East Midlands Midlands Internation International l Airport Airport Limit Limited Eas East Midlands Midlands Airport Airport Nottingham Nottingham Derby Derby Le Leice icester Limit r Limited Manchester Airport Group Manchester Airport Group Fu Funding plc nding plc

35.5% 35.5% 35.5% 35.5% 29.0% 29.0%

IFM IFM1

• Leading

Leading invest investment manager wi ment manager with £28 th £28bn equi bn equity ty funds funds under under manageme management nt

• Interest in MAG is held in an open ended fund
• 33% of IFM’s investment portfolio in infrastructure sector
• Extensive experience in the airport sector through shareholdings

in:

• Mel

Melbou

• urn

rne Airp Airport

• rt, acquired in 1997, 28.2m passengers
• Brisba

isbane Airport ne Airport, acquired in 1997, 21.0m passengers

• Perth Airport

Perth Airport, acquired in 1997, 12.6m passengers

• Ade

Adelaide Airport aide Airport, acquired in 2002, 7.7m passengers

Notes/Sources: (1) Company Website. Passenger numbers for FY 2012

Shared control – 50% voting rights each

7

111.8 126.9 134.6 100.0 110.0 120.0 130.0 140.0 2010/11 2011/12 2012/13 17.7 19.1 19.8 16.0 17.0 18.0 19.0 20.0 2010/11 2011/12 2012/13

Overview of Manchester Airport

MA MAN serv serves the North of England – the North of England – a regi region with a

• n with a divers

diverse pass passenger base enger base

201 2011 Strat Strategy gy del deliver ering strong g strong EBITDA EBITDA growt growth Introduct Introduction to

• n to MAN

MAN

• Third largest airport in the UK with 19.8m passengers p.a.
• Diversified customer offer with 70 airlines serving over 200

destinations

• Three terminals with combined capacity of 28 million passengers,

which can be increased to 42 million passengers with relatively modest investment

• Potential to grow its annual terminal capacity to 55 million

passengers without any further runway-related capex Divers versified ified a airline o e offer 1 1 of

• f onl
• nly 2

2 Airports ts i in UK wi UK with 2 2 run runway ays Passeng Passengers rs (m) (m)

CAGR: 5.8% CAGR: 5.8% CAGR: 9.7% CAGR: 9.7%

EBITD EBITDA (£m) (£m) 8

The Acquisition of STN has Diversified the MAG Group

Source: CAA; Notes: (1) LHR + LTN + LCY + LGW + STN + SEN

Strategic a tegic acquisitio isition t to c complemen mplement M MAG’s e s existin isting p portfolio lio

• UK’s fourth largest airport with 17.8m passengers in 2013
• Strengthens MAG’s business profile – creates 2nd largest airport

group in UK

• Extensive network with over 150 destinations
• STN complements MAG’s existing catchment area
• Only London airport with significant capacity
• Opportunity for MAG to leverage existing relationships with

airlines and retail customers … whi … while the the London mark London market1 has re has remained re resi silient

1

Aviat Aviation charge

• n charges doubled

doubled reduc reducing passeng ng passenger numbe numbers… s… Overv Overview of

• f STN

STN Wel Well inv invest sted site – site – min inima imal m maintena tenance c e capex

24 24 22 20 19 18 17 3.3 5.4 6.5 6.6 6.7 7.0 7.6

2 4 6 8 10 5 10 15 20 25 2006 2007 2008 2009 2010 2011 2012 £ per passenger Passengers (m) STN Passengers (m) Aeronautical Yield (£/pax)

136.9 139.5 136.9 130.1 127.2 133.4 134.8 17.3% 17.0% 16.3% 15.3% 14.6% 13.5% 12.9%

0% 5% 10% 15% 20% 20 40 60 80 100 120 140 160 2006 2007 2008 2009 2010 2011 2012 Market Share Passengers (m) London Passengers STN share of London Passengers

9

Deepen relati Deepen relation

• nsh

ships with carriers ips with carriers

Strategy for Growth

Best UK Airport - October 2012

Manc nches hester er A Airp rport Voted for by airlines

World’s Best Airport for Low Cost Airlines for three years in succession - 2011, 2012 & 2013

Lon London Stansted Stansted

Award of Excellence - 2011 & 2013

Lon London Stansted Stansted

Voted for by travel industry professionals

Best UK Airport - January 2012

Manc nches hester er A Airp rport

Voted for by a panel of travel industry leaders

Buildi Building on g on award winning succ award winning success

Pricing str icing strate tegy to gy to encoura

• urage

ge gr growth th Ta Target m major a alliances Build Build on unde

• n understanding of airl

g of airline mar e market et Alter mark Alter market percep et percepti tion

• n

Passenger focu ssenger focussed ssed market marketing Incr Increasi easing cargo busi cargo business ness

UK Airport of the Year Best Regional UK Airport -2011

East M Midlands dlands

10

ASSET OVERVIEW

11

STN catchme STN catchment area t area MAN catchme MAN catchment area t area

• Situated in the wealthy Greater London catchment area and

closest major airport to:

• The City, Canary Wharf, North London and revived East

London

• Cambridge – a top ten UK tourist destination – and the

East of England

• This resilient underlying origin market is supported by a large

inbound presence – 43% of all passengers

• At 45% STN has a strong Visiting Friends and Relatives (“VFR”)

customer base – the fastest growing purpose of travel segment

• Largest continental gateway for Northern and Central Britain
• At the heart of UK’s North West – the largest economic region
• utside London and the South East1
• Opportunity to use spare capacity to capture new passengers:
• 3.9m leakage to London’s Heathrow and Gatwick2
• MAN’s on-site bus and train stations serve over 100 destinations
• £1.4bn extension of the Metrolink tram network (due

2016) will improve connectivity further

Notes: BHX – Birmingham, BLK – Blackpool, DSA – Doncaster Sheffield, HUY – Humberside, LBA – Leeds Bradford, LCY – London City, LHR – London Heathrow, LGW – London Gatwick, LPL – Liverpool, LTN – London Luton, NWI – Norwich, SEN – Southend; Source: (1) Office for National Statistics; (2) CAA

LHR LHR LGW LGW BHX BHX STN STN EMA EMA LTN LTN NWI NWI LCY LCY SEN SEN Pass Passengers p.a. p.a. > 50m 5m – 10m 25m – 50m 1m – 5m 10m – 25m < 1m

Our Two Main Airports Serve 89% of MAG’s passengers

An exte An extens nsive catc catchment t area cov area covering 70% of UK populati g 70% of UK population

• n

MAN MAN BHX BHX EMA EMA LPL LPL BLK BLK LBA LBA DSA DSA HUY HUY MAN MAN

12

50% 19% 14% 8% 8% Aviation income Retail income Car parking Property related income¹ Other

1.8 1.9 1.9 2.1 2.2 2.3 1.7 1.8 1.8 1.9 2.0 1.9

1.4 1.6 1.8 2.0 2.2 2.4 £ per passenger Par Parking Yi Yield Legacy MAG STN

Well b ll bala lanced r ced reven venue b base se w with d diver versif sified ied a and resilien silient c commercial a mmercial activities vities

Revenu Revenues by es by type – type – MAG and AG and STN combi STN combined ed

Source: Pro forma consolidated financial statements for year ending 31st March 2013 Notes: (1) Property related income includes MAG Property and property related income; Notes/Sources: (1) Legacy MAG / STN annual accounts. Legacy MAG shown as year to March, STN as year to December so e.g. 2012 shows Legacy MAG year to March 2013 and STN year to Dec 2012

Sign Significan ant opportun t opportunity to to imp improv

• ve non-ae

non-aero yi ro yields ds¹ Succ Successf sful MAN non-ae MAN non-aero strate strategy gy bein being impl g implemented at d at STN STN

• Equal proportion of aeronautical and non-aeronautical revenues
• c.80%

c.80% of

• f passeng

passengers cove s covere red by d by long- long-term commi committed contra d contracts

• Non-aeronautical revenues comprise retail, car-parking and other
• MAG aims to increase STN yields to MAN levels
• STN retail offering to be rejuvenated by terminal redevelopment
• Successful MAN car park products being introduced at STN

Diversified Mix of Revenues

• Reconfiguration of physical space to create walk-through duty free

area and improve passenger flow under way

• Increased airside yield capacity and offering
• Removal of the one bag rule
• Consolidated supplier terms across MAG and improve these based
• n new scale
• MAN car parking strategy being implemented through introduction of

new products and expansion of distribution channels 13

2.5 2.6 3.0 3.1 3.1 3.1 2.1 2.3 2.6 2.6 2.7 2.8

2.0 2.2 2.4 2.6 2.8 3.0 3.2 £ per passenger Retail Retail Yield Yield Legacy MAG STN

STN Terminal Redevelopment Plan

STN STN ter terminal al red redevelopment wil t will transfor transform the passe m the passeng nger exp experi rience

Existi Existing termi ng terminal nal confi configuration Propos Proposed termi termina nal confi configurat ation

• The principal benefits of the development are that it will:
• double retail airside space from 63,500sq. ft. to

approximately 114,000 sq. ft. by 2016

• improve passenger flows to ensure that 100% of

passengers pass all stores

• introduce a walk-through duty free store of 25,000 sq. ft.

and increase catering space by 26%

• seven new International Departure Lounge stores
• £40m investment with up to further £40m to be committed by

retailers

• Challenges of current configuration:
• cold retail spots
• less than 100% footfall
• sub-optimal dwell times post security
• poor passenger flows and average customer experience
• Terminal reconfiguration ahead of schedule, completion date for

late 2015 (c.6 months ahead of acquisition business plan) 14

Diversified Mix of Routes

MA MAG serve G serves 275 275 routes routes worl worldw dwide – e – mor

• re than

e than any any other UK

• ther UK airport group

airport group

MAG w G worldwide f rldwide footprin int 2 t 2013 13 Routes serve Routes served Top 1 Top 10 desti destinati ations¹ ns¹

• MAG’s revenues are resilient to airline network and route changes
• Limited exposure to any single route or destination
• Almost 20 new routes added in April – September 2013
• Include: Moscow, Cairo, Stavanger, Gdansk, Krakow,

Antigua, St Lucia, Charlotte, Athens and Agadir

• Close to 30 additional services on existing routes

Rank Destination Passengers (millions) % of total passengers 1 Dublin 1.51 3.5% 2 Palma de Mallorca 1.38 3.2% 3 Alicante 1.27 2.9% 4 Malaga 1.17 2.7% 5 Tenerife 1.13 2.6% 6 Amsterdam 1.00 2.3% 7 Faro 0.86 2.0% 8 Heathrow 0.78 1.8% 9 Dubai 0.76 1.8% 10 Dalaman 0.65 1.5%

Notes: (1) 31st December 2012; Source: CAA, MAG

202 216 230 275 50 100 150 200 250 300 2011 2012 2013 Legacy MAG 2013 Combined MAG Group

15

Diversified Mix of Airlines

80+ airli 80+ airlines with relati es with relative importance importance of

• f largest carrier in

largest carrier in line with peers line with peers

• Strategy focused on securing growth from the robust and fast-

growing low cost carrier market

• Pursuing further opportunities in unserved markets by:
• Developing new relationships with airline customers
• Exploring growth proposals with existing carriers
• Long-term commercial agreements have been signed with Ryanair

and easyJet to grow STN passenger numbers over next 10 years

• Ryanair (73% STN passengers): 13m in 2013 to 21m by 2023
• easyJet (18% STN passengers): 2.8m in 2013 to 6m by 2018
• Existing long term contracts with customers such as Thomas

Cook, Thomson, Monarch and Jet2

MAG passenger split by airline1 Share of passengers by largest carrier2

Sources: (1) Pro forma Legacy MAG/STN, based on 42m passengers (2) CAA

Ryanair, 40% easyJet, 12% Thomson, 8% Thomas Cook, 6% Monarch, 5% Jet2, 4% FlyBe, 4% British Airways, 2% Lufthansa, 2% Emirates, 2% Other, 16%

A A dive diversified mix of airl mix of airlines Importanc Importance of

• f larg

largest carr carrier is is in in line w line with peers th peers

46% 40% 40% 0% 10% 20% 30% 40% 50% Heathrow Gatwick MAG

Impro Improved purpos purpose of

• f trav

travel mix² mix²

51% 51% 59% 59% 33% 33% 24% 24% 16% 16% 17% 17% 0% 0% 50 50% 100% Comb Combined MA ined MAG Group G Group Leg Legacy M MAG Lei Leisure ure VFR VFR Bu Business siness

16

FINANCIAL HIGHLIGHTS

17

Financial Highlights – Legacy MAG

Note: Legacy MAG figures shown as year to March (1) excludes depreciation and exceptional items Source: Annual Report, CAA

• Historic fall in passengers during recession increased by other one-
• ff factors: Historical exposure to Charter; lack of engagement with

Low Cost Carriers; and completion of West Coast Mainline modernisation (December 2008)

• Implementation of 2011 strategic plan has reversed previous trend
• Revenue growth at a CAGR of 7.0% in the two years to FY13 at

Legacy MAG due to:

• Growth in aero yield from £7.0 to £7.6
• Growth in car parking yield from £2.1 to £2.3 through

commercialisation

• Operating cost control at Legacy MAG has ensured revenue growth

has outpaced increases in costs. Reported statutory operating costs include carrier rebates and related marketing costs

• Legacy MAG EBITDA 9.3% CAGR two years to FY13

29 27 24 23 24 25 5 10 15 20 25 30

Pass Passengers rs

2011 Strate 2011 Strategy has driven stro has driven strong L ng Legacy gacy MA MAG perfor G performance mance

18

234 226 225 228 243 255 50 100 150 200 250 300

Ope Operating C ating Costs

153 137 117 116 131 138 40 80 120 160

EBITDA¹

387 363 342 344 373 393 100 200 300 400 500

Revenu Revenue

Financial Highlights – STN Airport

Note: STN as calendar year to December. (1) excludes depreciation and exceptional items Source: Annual Report

Historic perform Historic performance nce at at STN STN refle reflects previous strate ts previous strategie gies, transform transformation un tion under MA der MAG G now well underway now well underway

127 141 141 143 148 147 50 100 150 200 250 300

Operat Operating Cost g Costs¹ s¹

115 117 102 86 87 94 40 80 120 160

EBITDA¹ 19

242 259 243 230 234 242 100 200 300 400 500

Revenue

24 22 20 19 18 17 18 5 10 15 20 25 30

Pass Passengers rs

• Historical underperformance of STN due to doubling of aviation

charges and strategy of previous owners

• Revenues and EBITDA falling until recently. Costs slowly growing

despite significant fall in passengers

• 2013 STN passenger numbers grew 2% year-on-year, reversing

five years of decline

• Long term contracts signed with key customers
• Terminal transformation started and new security lanes already
• pened
• Car parking product delivered
• IT integration almost complete, five months ahead of plan

STN transf STN transform

• rmation under MAG
• n under MAG owne
• wnership now we

p now well underw underway ay

25 33 61 20 40 60 80 2011 2012 2013 116 131 138 100 110 120 130 140 2011 2012 2013 344 373 393 300 330 360 390 420 2011 2012 2013 23 24 25 21.0 22.0 23.0 24.0 25.0 2011 2012 2013

Experienced Management Team

Manag Management team has nt team has a a prov proven trac track record of k record of impl implementi enting earnings ng earnings-enhanci nhancing strategi g strategies across across MA MAG

Charli arlie C e Corni rnish Andr drew Harri ew Harrison And Andrew Cowa Cowan Ken O O’Toole

• le

Neil Neil Thomps Thompson Collett llette R e Roche Grou Group Chi Chief f Exec Executive MD MD, STN STN Chief ief O Operating erating Offic fficer Chief ief C Commerc ercial ial Offic fficer Chief ief F Financi ncial al Offic fficer HR Di HR Dire rector

Del Deliveri ering on g on 2011 2011 Strate Strategy



Focus on low cost carrier market in addition to full service scheduled carriers



Long-term commercial agreements with airlines



Incentivised commercial agreements with retail partners



Expansion of car parking operations



Acquisition of a major UK airport

CAGR: 4.4% CAGR: 4.4% CAGR: 7.0% CAGR: 7.0% CAGR: 9.3% CAGR: 9.3% CAGR: 56.3% CAGR: 56.3%

Passeng Passengers (m) (m) Revenu Revenues (£ es (£m) m) EBITD EBITDA (£m) (£m) Free c ee cash flow (£m) flow (£m)

Note: FY to March in each case. Figures shown relate to Legacy MAG only

20

26 m 26 million illion passengers passengers for for six six m months to nths to Septe Septembe ber 2013, including r 2013, including STN STN, represe representing 4.3% y ting 4.3% y-o-y im y improve provement

Well-Invested to Support Growth Strategy

Well in ll invested sted a asset b sset base w se with th f flex exibility t ibility to p pursue v value e lue enhancin ing p projects a ects at M MAG’s d s discretion iscretion

Disc Discre retiona

• nary spend

spend based on based on nee need Wel Well inv invest sted capex capex

• Spare

Spare capaci capacity ty: 50% at STN, 64% at MAN

• Yiel

Yield enhanc d enhanceme ement: Future capex projects will be focused on

• pportunities to generate additional value. Most significant capex

project is terminal redevelopment at STN, costing £40m and due to complete 2015

• Flex

exibility: ibility: MAG has no CAA regulatory capex requirements so has the discretion to review and re-scope projects and manage cash flows in the event of an economic downturn

• Modest capex r

Modest capex requ quirem ements: ents: Key operational assets well invested

• Extensive facilities welcome all types of aircraft incl

includi uding A380 g A380

• Rigorous internal appraisal ensure only investment projects which

meet hurdle are pursued

• Balanced investment programme based on need. Growth capex

can be cut in a downturn Compl Completed capital ted capital pr proj

• jects

ects

Notes: (1) Runway capacity, terminal capacity is currently 28m;

Runway resurfacing Runway resurfacing Completed 2011 Completed 2011 £21m £21m New air New air traf traffic c cont control tower tower Completed 2013 Completed 2013 £20m £20m Ho Hold ba ld bagga ggage screening ge screening Completed 2012 Completed 2012 £12m £12m

21

Regulation

MA MAG airports do airports do not not have economi have economic lic licences and and regula regulati tion is not a constrai

• n is not a constraint

nt on

• n com

commerc rcial acti activiti ties

• MAN was deregulated by the Civil Aviation Authority (CAA) in April 2009, neither EMA nor BOH are regulated
• The 2012 Civil Aviation Act requires the CAA to license airport operators who are deemed to have Substantial Market Power (SMP)
• On 10th January 2014, the CAA published its final decision on economic regulation for STN
• CAA determined STN does not have SMP in its passenger market
• Decision grounded in wide range of evidence including long term contracts signed with Ryanair and easyJet, representing 90% of

passenger traffic at STN

• CAA determined no economic regulation, in relation to passengers, will be imposed on STN from 1st April 2014
• STN will not therefore have an economic licence
• Affected parties have until 11th March 2014 to challenge the CAA decision
• The CAA is still reviewing STN’s market power in Cargo with a decision to be published before the end of March
• Cargo represents 1.3% of MAG’s FY13 pro-forma revenue
• The Airports Commission chaired by Sir Howard Davies did not shortlist STN as a potential option for a new runway in London and the South

East in the interim report published on 17th December 2013 as STN has significant spare capacity

• MAG does not envisage this causing any impact as a second runway at Stansted was not factored into the business plan
• Davies commission focus on best use of existing capacity

22

TRANSACTION STRUCTURE

23

0.0 1.0 2.0 3.0 4.0 2010 2011 2012 2013 (Pro Forma) Net Debt / EBITDA

Financial Strategy

Ratio Ratio buil build-u d-up (£ (£m, March YE) m, March YE)

2011 2011 2012 2012 2013 2013 Legacy MAG Legacy MAG Pro-forma

Net Debt Net Debt¹

£373m £399m £843m

EBITD EBITDA

£116m £131m £234m

Net Debt / Net Debt / EBITD EBITDA

3.2x 3.0x 3.6x

• Transaction represents the first step in establishing a long term financing programme focused on the capital markets
• Key features of financial policy:
• Commitment to maintain strong investment grade rating
• The Group maintains a conservative level of leverage commensurate with rating
• Sufficient resources are available to fund planned growth and capital requirements over the short, medium and long term
• MAG’s public sector owners and IFM are long-term shareholders focussed on the stability of the business and therefore strongly support the

management’s conservative financial policy

Source: MAG Annual reports (Legacy MAG figures), Prospectus (2013 Pro forma figures); Notes: (1) In 2011 and 2012 Net Debt included shareholder loans given the unsecured financing structure

Legacy MAG MAG + STN

MA MAG G has a conser has a conservati vative capi capital tal struct structure and ure and prudent financi prudent financial poli policy cy

Acquisition

Historically l

• rically low l

levera verage ge 24

Transaction Structure

Manch Manchest ster Airpo Airport Group Group Financ Finance Limi e Limited ( d (Borrower) Manch Manchest ster Airpo Airport Gro Group p Funding PLC Funding PLC (Issue (Issuer) Bondhol Bondholder ers Issuer Hedg Issuer Hedge Prov Providers Liquidit ity F y Facilit ility y Prov Providers s Lenders Lenders Issuer Sec Issuer Security Trust Trustee

Issuer Security

Manch Manchest ster Airpo Airport Group Group Invest Investme ments Limi s Limited d (Parent (Parent)

Bond proceeds Interest and principal payments

MAN MAN STN STN EMA EMA BOH BOH Obligor Obligor Grou Group Obligor H Obligor Hedg dge e Prov Providers

Common financing packag Common financing package for e for all cred all creditors

• rs
• All senior creditors treated equally and benefit

from common terms platform

• No single asset risk with all 4 airports included

in security group

• Automatic bank refinancing (bank documents

signed up and held in escrow) and no condition precedent bond issuance size to draw down

• All proceeds from bond will be used to repay

£900m term loan

• No special dividend from bond issuance
• Airport City JV outside Security Group

25 Obligor Secu Obligor Security Trust Trustee

Obligor Security

MAG MAG PLC PLC MAG MAGFL MAG MAGIL

• Multi-asset corporate secured platform with all creditors sharing

common terms

• MAN and STN must remain in security group¹
• Permitted business allows future development of group
• £30m corporate guarantee of Airport City project
• Security and covenant package
• Full fixed and floating security commensurate with peers
• Ability to appoint an Administrative Receiver
• Financial and operating covenants
• All dividends subject to satisfaction of the Distribution

Condition

• Liquidity provided to the group through
• £60m Super Senior Liquidity Facility sized to cover 12

months of interest on senior debt

• £300m facility for capex and general corporate

purposes

• Incremental financial indebtedness above £75m (indexed)

requires satisfaction of lock-up conditions and bonds affirmed as investment grade Lock- Lock-up Condit p Conditions ns Liquid Liquidity Drawing on Liquidity Facility Intere Interest Cover st Cover <2.00x Lever Leverage >6.00x Ra Ratin ting D Downgrade grade No investment grade credit rating Event Events of

• f Def

Default Intere Interest Cover st Cover <1.40x Lever Leverage >7.50x Hed Hedging Min Min / Max Hedgi / Max Hedging 60% - 105% of the total outstanding amount under the Term Facility must bear fixed or index-linked rate Supe Super Sen r Senior Inflat r Inflation n Hed Hedging g MAG has no intention to enter into any super senior inflation hedging However, document architecture contemplates this and caps any inflation- linked hedging at 10% accretion of total debt

Transaction Structure – Overview of Terms

Note: (1) subject to Extraordinary Resolution

Conservati Conservative ve financing package with financing package with c compreh mprehensive c sive credito itor p protection ections

26

27

Rating Agency Feedback

Strong inve Strong investment grade ratings from Mood nt grade ratings from Moody’s and and Fitch tch

• STN’s performance is supported by long term “take-or-pay” contracts with Ryanair and easyJet (airline

revenue agreements) that de-risk growth and support future revenues

• MAG will [as a result of deregulation] have full pricing flexibility at its two main airports, enabling it to
• ptimise profitability and encourage additional throughput
• All MAG airports have received substantial capital investment in recent years... and all the airports have

excess capacity, minimising required future capex

• The financial structure largely consists of a secured and covenanted platform (offering a comprehensive

set of covenants, policies and security) used in other infrastructure transactions

• Viewed purely on metrics, the transaction could achieve a ‘A-’ rating. However, MAG’s operating profile

is weaker than that of most rated European airport operating peers

• Catchment areas of MAG’s key airports are strong in terms of size, complementary fit and relative

affluence of the population

• Traffic profile and performance across MAG, particularly at MAN, has been resilient in recent years but

remains below previous peaks

• MAG has the ability to pursue a growth strategy to further regain lost market share but this will likely

increase airline concentration

• MAG’s physical infrastructure is well-invested and so the risk profile of its capital expenditure program is

modest

• MAG’s financial risk profile is fairly strong reflecting a fairly conservative financial policy and the long-

term objectives of its owners

• Proposed financing structure provides for minimal structural uplift but does provide for the formal

subordination of shareholder loans

Baa1 (Stabl Baa1 (Stable) e) BBB+ (Sta BBB+ (Stable)

Information Commitments

• Six-monthly comprehensive investor report, covering:
• Regulatory and business update
• Financing position
• Group structure update
• Hedging position
• ICR and Leverage ratios
• Distribution amount
• Annual investor update meeting and semi-annual call
• Annual and Semi-Annual financial statements
• Transaction material uploaded to website
• Investor Relations team headed by Corporate Finance Director

Iain Ashworth

• Iain.Ashworth@magairports.com
• +44 (0) 161 489 5820

Strong comm Strong commitment to nt to inves investor reporti tor reporting via www g via www.mag agworld.co. co.uk/ k/inves vestors tors

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Indicative Terms

Publi Public Bond Bond Issuance Issuance Issuer Issuer Manchester Airport Group Funding plc Mini Minimum m Denomi Denominat nations

• ns

£100,000 / £1,000 Borrowe Borrower Manchester Airport Group Finance Limited Sec Security Full fixed and floating security over assets in the security group Hard-wired appointment of admin receiver Se Seri ries Guaranteed Secured EMTN Programme Issuance Issuance Siz Size Minimum benchmark Currency Currency GBP Listing Listing London Stock Exchange Maturi Maturity Profi Profile Bullet Coupon Type Coupon Type Fixed rate Tenor Tenor [●] years Use of Use of Proc Proceeds ds To refinance the Existing Indebtedness on the Initial Issue Date Expect Expected Issue Rating Issue Rating Baa1 / BBB+ (Moody’s / Fitch) Increme Incremental tal Debt Debt None expected – Existing bank facility requires proceeds to pay down term debt 29

APPENDIX

30

Airport City JV Partnership

Deliv Delivery model & y model & investm investment highlights nt highlights

• Delivery with development partner(s)
• Early release of plots linked to infrastructure development and

market need

• Pre-let transaction minimising risk based on market need
• Self-funding after initial investment period with cash recycled on a

develop-and-trade basis to fund subsequent phases

• Low equity requirement c£30m depending on timing
• Outside security ring-fence with protections capping use of security

groups funds

Ne New opportunity

• pportunity to

to compl complement the offer nt the offering at ng at MA MAN

• JV Partnership announced on 13 October 2013 comprising MAG, BCEG,

Carillion & GMPF, with Argent as Development Manager

• 160 acre / 15 year development opportunity adjacent to Manchester

Airport

• 5m sq. ft. of offices, hotels, logistics, advanced manufacturing and retail
• Expected development value of £800m with development costs of £650m
• First phase total infrastructure £27m – releases 1.8m sq. ft. of development
• Phased development with opportunity to respond to market uptake
• Government’s leading Enterprise Zone with associated financial /

planning benefits 31

Disclaimer

The terms and conditions below set out important legal and regulatory information about the information contained in this presentation and all documents and materials in relation to this presentation (the “ma materials terials”) relating to the proposed refinancing (the “Tran Transa saction ion”) by Manchester Airport Group Investments Limited and its shareholders, affiliates or subsidiaries (the “MAG Gro MAG Group Co p Compan mpanies ies”). No other third party (including, for the avoidance of doubt, any arranger, dealer, manager or underwriter in respect of the Transaction) has been involved in the preparation of, or takes responsibility for, the contents of the materials. The materials are confidential and are being provided to you solely for your information and may not be copied, reproduced, forwarded or published in any electronic or physical form or distributed, communicated or disclosed in whole or in part except strictly in accordance with the terms and conditions set out below, including any modifications to them from time to time. The information contained in the materials has been obtained from sources believed to be reliable but none of the MAG Group Companies guarantees its accuracy or completeness. EACH RECIPIENT AGREES TO BE BOUND BY THE TERMS AND CONDITIONS BELOW. The materials are intended for authorised use only and may not be published, reproduced, transmitted, copied or distributed to any other person or otherwise to be made publicly available. The information contained in the materials may not be disclosed or distributed to anyone. Any forwarding, redistribution or reproduction of any material in whole or in part is unauthorised. Failure to comply with this notice may result in a violation of the applicable laws of the relevant jurisdictions. Any of the MAG Group Companies has the right to suspend or withdraw any recipient’s use of the materials without prior notice at any time. The information and opinions contained herein are provided as at the date of this presentation and are subject to change without notice. Where the materials have been made available in an electronic form, such materials may be altered or changed during the process of electronic transmission. Consequently none of the MAG Group Companies accepts any liability or responsibility whatsoever in respect of any difference between the materials distributed in electronic format and the hard copy versions. Each recipient consents to receiving the materials in electronic form. Each recipient is reminded that it has received the materials on the basis that it is a person into whose possession the materials may be lawfully delivered in accordance with the laws of the jurisdiction in which the recipient is located and the recipient may not nor is the recipient authorised to deliver the materials, electronically or otherwise, to any other person. None of the MAG Group Companies accepts any responsibility or liability whatsoever for the contents of the materials or for any statement made or purported to be made by any of them, or on any of their behalf, in connection with any of the MAG Group Companies, the Transaction or any offer in respect of the Transaction (an “Offe ffering ring”). The MAG Group Companies accordingly disclaim all and any liability whether arising in tort, contract, or otherwise which they might otherwise have in respect of the materials or any such statement. No representation or warranty express or implied, is made by any of the MAG Group Companies as to the accuracy, completeness, verification or sufficiency of the information set out in any material. The materials do not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of the MAG Group Companies in relation to an Offering in any jurisdiction or an inducement to enter into investment activity. No part of the materials, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. Any investment decision in an Offering should be made solely on the basis of the information contained in the prospectus relating to the Transaction in final form prepared by the MAG Group Companies. Neither the materials nor any copy of them may be taken or transmitted into the United States of America, its territories or possessions, or distributed, directly or indirectly, in the United States of America, its territories or possessions. Any failure to comply with this restriction may constitute a violation of U.S. securities laws. The materials are not an offer of securities for sale in the United States. The MAG Group Companies do not intend to conduct a public offering of any securities in the United States. The securities issued under an Offering may not be offered or sold in the United States except pursuant to an exemption from, or transaction not subject to, the registration requirements of the Securities Act. This presentation is made to and is directed only at, and the materials are only to be used by, persons in the United Kingdom having professional experience in matters relating to investments who fall within the definition of "investment professionals" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (the "Order"), and to those persons to whom it can otherwise lawfully be distributed (such persons being referred to as "releva relevant person persons"). In respect of any material, none of the MAG Group Companies makes any representation as to the accuracy of forecast information. These forecasts involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forecasts. No

• ther persons should act on or rely on it.

The materials may include forward-looking statements. These forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The words "believe," "expect," "anticipate," "intends," "estimate," "forecast," "project," "will," "may," "should" and similar expressions identify forward-looking statements. Forward-looking statements include statements regarding: strategies, outlook and growth prospects; future plans and potential for future growth; liquidity, capital resources and capital expenditures; growth in demand for products; economic outlook and industry trends; developments of markets; the impact of regulatory initiatives; and the strength of competitors. The materials may contain statements about future events and expectations that are forward-looking statements. Any statement in these materials that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors which may cause the MAG Group Companies’ actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. No person should rely on such statements and the MAG Group Companies do not assume any obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements.

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