Annual Report and Accounts 2013 NATS Holdings Limited
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Annual Report and Accounts 2013 NATS Holdings Limited Company Number: 04138218 Business and financial review Contents 1 2 3 4 Business and Governance Financial statements Appendix financial review 64 Corporate 98 Consolidated income 166 Abbreviations 4 Our business governance statement and definitions 6 Highlights 74 Remuneration 99 Consolidated Committee report statement of 9 Chairman’s statement comprehensive 84 Directors of NATS 13 Chief Executive’s income Holdings Limited review 100 Consolidated balance Airspace 90 Report of the sheet Airports directors Engineering 101 Consolidated 94 Independent auditor’s Other Service Lines statement of changes report in equity 36 Providing services worldwide 102 Consolidated cash flow statement 38 Financial review 103 Notes forming part 48 Principal risks and of the consolidated uncertainties accounts 54 Corporate 160 Company balance responsibility sheet 60 Our key performance 161 Company statement indicators of changes in equity 162 Notes forming part of the company accounts 1 Business and financial review Our business 4 Highlights 6 Chairman’s statement 9 Chief Executive’s review 13 Airspace Airports Engineering Other Service Lines Providing services 36 worldwide Financial review 38 Principal risks and 48 uncertainties Corporate responsibility 54 Our key performance 60 indicators Annual Report and Accounts 2013 | NATS Holdings Limited Business and financial review Our vision is to become the 1 acknowledged global leader in Our business innovative air traffic solutions and airport performance. NATS Holdings Limited NATS (Services) Limited NATS Holdings Limited (NHL) owns NATS Services is not subject to two principal operating subsidiaries economic regulation, and provides and a number of other companies air traffic services at most of the UK’s which, together with NHL, form the major airports. These range from the NATS Group. NATS provides air traffic world’s busiest dual-runway airport, control services for aircraft flying ‘en Heathrow, and Gatwick, the world’s route’ in UK airspace and the eastern busiest single-runway airport, to the part of the North Atlantic through its city airports of Glasgow and Edinburgh. subsidiary NATS (En Route) plc and at NATS Services also manages air traffic 15 airports in the UK and at Gibraltar at airports in Aberdeen, London City, through NATS (Services) Limited. Luton, Manchester and Stansted. Our vision is to become the NATS Services has a joint venture acknowledged global leader in with Spanish infrastructure company innovative air traffic solutions Ferrovial, which is contracted to and airport performance. provide air traffic control tower services at 10 airports in Spain. NATS (En Route) plc NATS Services also provides NERL is the sole provider of air traffic engineering, consultancy (including control services for aircraft flying ‘en training), defence and aviation route’ in UK airspace and the eastern information management services part of the North Atlantic. It provides to customers in 31 countries, including approach services to aircraft arriving the UK. at or departing from the major airports around London and air traffic control services to helicopters operating in the North Sea. NERL also has a long-term agreement to provide the military with engineering, surveillance and communications services. It is economically regulated by the Civil Aviation Authority (CAA) and operates under licence from the Secretary of State for Transport. It operates from two air traffic control centres, at Swanwick in Hampshire and Prestwick in Ayrshire. 4 Annual Report and Accounts 2013 | NATS Holdings Limited Business and financial review 5 We handled just over 2.1 million flights in the 1 year (2012: 2.2 million) and maintained our Highlights safety record, with no risk-bearing airprox attributable to NATS. Financial performance (£m unless otherwise specified) 2013 2012 Change % 2.1m flights Revenue 899.6 864.9 +34.7 +4.0 Operating profit 245.0 239.5 +5.5 +2.3 Profit before tax 190.7 194.5 -3.8 -2.0 Capital expenditure 128.9 127.9 +1.0 +0.8 Net debt1 457.1 509.1 -52.0 -10.2 Gearing2 (%) 54.5% 57.8% -3.3% -5.7% 0 airproxes Dividends 40.0 50.7 -10.7 -21.1 Safety, operational and > By providing our customers with more efficient flight profiles, in 2013 environmental performance we enabled further savings of 6,926 > We successfully managed the tonnes of fuel worth approximately special aviation requirements for £4.5m. Cumulatively, since 2008, the London 2012 Olympic Games, we have enabled fuel savings of coordinating extensively with key 250,000 tonnes saving customers stakeholders to provide exceptional £160m. We are also meeting the service performance during this economic regulator’s target for period. This proved to be one of the environmental efficiency. transport infrastructure success stories of the Games. > On the business development side, we renewed contracts with > We handled just over 2.1 million Heathrow and Luton airports and flights in the year (2012: 2.2 we were contracted to fit-out million) and maintained our safety Birmingham airport’s control tower. record, with no risk-bearing airprox Our US subsidiary was part of a attributable to NATS. Average delay consortium awarded a contract per flight was 1.4 seconds compared by the US’s Federal Aviation with 7.3 seconds last year, reflecting Administration, five Spanish airports the benefit of new controller tools are now being operated by our local and systems on which frontline joint venture and we continued operational staff received training to expand our activities in the last year. Middle East. > Mindful of the difficult economic environment facing airline customers the charges for UK en route services and London 1 Excludes derivative financial instruments Approach were set £6m below 2 Ratio of the net debt to the level allowed by the economic regulatory assets of the regulator. economically regulated business (NERL) 6 Annual Report and Accounts 2013 | NATS Holdings Limited Business and financial review 7 This year saw the company make 1 significant progress towards its strategic Chairman’s objectives and I am pleased to report statement another good set of results. This year saw the company make Whilst our service performance may significant progress towards its be one of the best in Europe, our strategic objectives and I am pleased customers and regulators want us to report another good set of results. to focus on reducing our en route charge. The coming year will be a We continued to progress with very important one as the European our strong programme of safety Commission (EC) publishes targets for improvement and remain focused the next regulatory Reference Period on achieving service consistency (RP2: calendar years 2015 to 2019). with minimal delay to our customers’ The EC has made it clear that it expects operations. We provided a safe service significant cost reductions from major and achieved record punctuality with providers like NATS and this has been 99.9% of flights experiencing no delay at the forefront of our RP2 business at all whilst enabling further savings in planning undertaken over the last ATM-related fuel and CO emissions 2 few months. for customers through our environmental initiatives. Our financial Customer consultation on this performance saw us achieving a profit business plan takes place this summer. before tax of £190.7m, which compares We are offering customers a choice with £194.5m last year. The company which reflects the trade-offs between also paid a dividend of £40m. service and price. The highlight of the year was, of This flexible approach to customer course, the London Olympics and requirements is exactly the kind of the service that NATS provided, innovative response that customers working alongside the military to have come to expect of NATS, ensure national security, whilst not and one which sets us apart from inconveniencing our commercial airline other providers. The company is customers. The service levels achieved more customer-focused than ever were quite extraordinary and one of before, and that is reflected in an the major infrastructure successes 82% satisfaction rating in this year’s of the Games. customer survey. Our success proved the importance In a further demonstration of the of effective planning. We spent company’s wider sensitivity to the three years meticulously preparing business climate, we decided that for this with our military colleagues charges for en route services in 2013 and despite the peaks in traffic should be set at £5m below the level we maintained a safe service with allowed by the economic regulator and very low levels of delay. I credit this the charges set for London Approach success to the remarkable efforts of for the 2013/14 financial year were set our employees in the run-up to the £1m below the regulatory cap. Olympics and throughout the Games. 8 Annual Report and Accounts 2013 | NATS Holdings Limited Business and financial review 9 1 Chairman’s statement Cont’d The challenge of RP2 will dominate the We opened an office in Abu Dhabi to NATS agenda over the coming year accelerate our work in the Middle East and the Board is strongly supporting and closer to home, our joint venture % the Executive’s efforts in taking action is now running five of the ten Spanish 82 to reduce its costs to prepare for airport towers it won last year. Customer satisfaction the cost reduction challenges ahead Importantly, we have also renewed rating in this year’s of the EC targets being published. contracts with Heathrow Airport and Important pension changes have customer survey with Luton, which was won following an been agreed with staff and a voluntary open market tender process. redundancy programme will take place this summer. These actions are a After a call for evidence on its credit to both trades unions and shareholding, the Government decided management teams. last summer to retain its 49% stake in NATS.