ANNUAL REPORT COPENHAGEN CPH COPENHAGEN AIRPORTS A/S

Transcription

1 2003 CPH COPENHAGEN COPENHAGEN AIRPORTS A/S ANNUAL REPORT 2003

2 Annual Report 2003 Contents 3 Contents Highlights of Financial highlights and key ratios 6 Management s report Foreword by the CEO 9 Largest in Scandinavia, cheapest in Europe and best in the World 10 Traffic business 11 Commercial business 15 International business 18 Financial review 23 Risk factors 30 Environmental impact 32 Employees 33 Corporate governance 35 Shareholder information 36 Consolidated financial statements Accounting policies 41 Income statement 47 Balance sheet 48 Cash flow statement 50 Statement of equity 51 Notes to the financial statements 53 Management s statement and auditors report 70 Other corporate information Supervisory Board 73 Executive Board 76 structure 78 Announcements to the Copenhagen Stock Exchange Financial calendar

3 Annual Report 2003 Highlights of Highlights of 2003 The annual report 2003 presents Copenhagen Airports three business areas. See more in three short flash movies in the online version of the annual report on Consolidated profit before tax was DKK million or 14.0% higher than in the same period of Consolidated operating profit increased significantly due to growth in concession revenue and a higher operating margin All international operations experienced progress. Growth was secured through substantial passenger increases and an efficient turnaround at Newcastle International Airport, which was selected by easyjet in 2003 as its new north-eastern UK base Traffic fell by 3.1% to 17.7 million passengers as a consequence of the war in Iraq, SARS and recession in CPH s catchment area. Our position as the largest airport in Scandinavia was retained A long-term Standard & Poor s credit rating A with Stable Outlook was obtained. The credit rating enhanced CPH s access to the international debt markets The number of locally departing passengers increased by 5.5%, whilst the percentage of transit and transfer passengers fell by 12.1% due to a change in the traffic pattern Treasury shares were acquired equivalent to 4.41% of the Company s total share capital of DKK 910 million (nominal value). At year-end, CPH s portfolio of treasury shares amounted to 6.86% of the total share capital Low-cost passengers rose to 6.3% of total passengers, equivalent to more than one million low-cost passengers in 2003 Some shops were relocated and the shopping centre refurbished in an effort to optimise commercial activities A recommendation will be made to the shareholders at the annual general meeting that the payout ratio for 2003 be increased to 40%, equivalent to DKK per share, and that the Company s treasury shares be cancelled Copenhagen Airports A/S Lufthavnsboulevarden 6 DK-2770 Kastrup Denmark Tel Fax webmaster@cph.dk Web In case of any discrepancy between the English and Danish versions, the Danish version shall prevail. Investor Relations Tel Fax ibr@cph.dk Web

4 6 Annual Report 2003 Financial highlights and key ratios Annual Report 2003 Financial highlights and key ratios 7 Financial highlights and key ratios Financial highlights and key ratios DKK million Income statement Net revenue 2,213 2,145 2,041 1,908 1,801 EBITDA 1,276 1,210 1,130 1,138 1,025 EBIT Profit/(loss) from investments 29 (21) Net financing costs Profit before tax Net profit Assets Property, plant and equipment Investments Receivables Cash and cash equivalents Intangible assets Other assets Equity and liabilities Provisions Equity Loans Other liabilities Balance sheet Property, plant and equipment 6,135 6,381 6,655 6,627 6,111 Investments 1,500 1,740 1, Total assets 8,514 8,516 8,834 7,448 6,890 Equity 3,136 3,234 3,261 2,966 2,594 Interest-bearing debt 3,907 4,155 4,473 3,360 3,274 Capital investments Financial investments , Net revenue and EBIT margin DKK million % 2, , , Profit before tax and return on assets DKK million % Cash flow statement Cash flow from operating activities 1, Cash flow from investing activities (202) (524) (1,752) (943) (1,255) Cash flow from financing activities (377) (482) 1, Cash at end of year Key ratios EBITDA margin 57.6% 56.4% 55.3% 59.7% 56.9% EBIT margin 36.5% 34.4% 32.2% 37.2% 36.0% Asset turnover rate Return on assets 12.2% 10.8% 9.4% 10.4% 10.4% Return on equity 13.0% 10.7% 11.0% 15.7% 15.2% Equity ratio 36.8% 38.0% 36.9% 39.8% 37.6% Earnings per share of DKK Cash earnings per share of DKK Net asset value in DKK per share of DKK Payout ratio 40.0% 35.0% 26.5% 19.8% 22.0% Dividend per share of DKK NOPAT margin 25.8% 22.0% 24.0% 27.7% 25.2% Turnover rate of capital employed ROCE 7.9% 6.2% 7.0% 8.7% 8.5% Net revenue EBIT margin Equity and equity ratio DKK million % 4, , , , Profit before tax Return on assets Earnings per share of DKK 100 and payout ratio DKK million % The definitions of ratios are in line with the recommendations made by the Danish Association of Financial Analysts, except for those not defined by the Association. Definitions of key ratios are published at Equity Equity ratio Earnings per share of DKK 100 Payout ratio

5 Annual Report 2003 Management s report Foreword by the CEO 9 A passion for quality The employees of our businesses have a passion for quality and make ever-greater demands on themselves each year. This was reflected in our 2003 performance, with a 14% increase in profit in spite of the war in Iraq, SARS and other factors adversely affecting passenger numbers in our largest operation: Copenhagen Airport. Our focus on quality, innovation and efficiency improvements has made us less vulnerable to traffic fluctuations. We were able to increase revenues through our commercial activities, and all our international airports had growth. In addition, we optimised internal operations even further, which enabled us to live up to our track record of profit margin growth. Our expectation of traffic growth makes us optimistic about performance in the year ahead. We expect fair revenue growth in 2004 along with continuing efficiency improvements, growing profits from our international operations and, consequently, growth in both profits and return in Copenhagen Airports. Will the upward trend we have seen for many years now continue? Will the structural crisis airlines are suffering change our market opportunities and conditions? There are many different possible future scenarios, but, for our activities, they are encouraging scenarios rather than intimidating ones. Our ambition for Copenhagen Airport is to be the largest in Scandinavia, the cheapest in Europe and the best in the World. Other airports will constantly challenge this position in all areas; we will never be able to rest on our laurels. Quality, innovation and efficiency improvements are good tools in our efforts to retain our position as the largest airport in Scandinavia and our efforts to attain our goal of becoming the cheapest airport in Europe in terms of charges, while remaining among the best airports in the world. Quality, innovation and efficiency improvements are also the key drivers in our work to generate continuing performance growth in our foreign operations. Niels Boserup President and CEO

6 10 Annual Report 2003 Management s report Annual Report 2003 Management s report Traffic 11 Largest in Scandinavia, cheapest in Europe and best in the World When an airline is choosing which airport to start up a new route from, three factors are considered: the passenger base, the charges levied for using the airport, and the quality of the airport. Our ambition is for Copenhagen Airport to be largest in Scandinavia, the cheapest in Europe and to be among the best in the World. Scandinavia s largest airport Copenhagen Airport s market area comprises the local catchment area, defined as the number of people who can reach the airport by surface transport within three hours, and the transfer market, defined as the Nordic countries and the regions bordering on the Baltic Sea. Copenhagen Airport s catchment area comprises 6.5 million people. This is not a large figure if we compare ourselves with the large European capitals, but in a Scandinavian context, there is no getting around our position as the Scandinavian hub for air traffic in northern Europe. The geographic location of Copenhagen Airport, its size and its catchment area have made the airport a hub for traffic to and from the Nordic countries, the Baltic states and northern Germany. The airport s position as Scandinavia s hub helps attract new airlines to Copenhagen, and the greater the choice of routes and the more frequencies available, the more attractive will it be for passengers to use the airport. For these reasons, it is Copenhagen Airport s goal to maintain its position as Scandinavia s largest airport. Europe s cheapest airport The intensified competition among airlines means that airports will face growing competition and pressure on the charges airlines will be willing to pay. Copenhagen Airports A/S (CPH) has transparency in our level of charges levied on all airlines using Copenhagen Airport. What CPH charges for airport use is regulated on the basis of principles laid down by the Danish Ministry of Transport. Under the model applied, a ceiling is fixed in advance for changes to the charge for periods of three years at a time. The ceiling is basically fixed through voluntary negotiations between CPH and the airlines. If CPH and the airlines are unable to reach an agreement, the Ministry of Transport fixes a ceiling after consulting CPH and the airlines. The year 2003 was the first year under the second voluntary price agreement, which runs from 2003 until the end of 2005 and which implies annual price increases of 2.75% annually in 2003, 2004 and Not least in a situation when the airlines must exercise tight cost control, the airports have the chance to contribute to this by improving efficiency wherever possible. Copenhagen remains at the low end compared with the price of using other international airports in Europe. This is not least the result of a freeze of prices during the period from 1992 to CPH must be able to retain a relatively low price level for Copenhagen Airport through continuing focus on efficiency improvements and the development of commercial activities. The goal is for Copenhagen to be the cheapest in Europe among its European peers. The World s best airport Although price and passenger base are at the top of airline wish lists, it is very important in the long run, not just to passengers but also to airlines, that the airport continually meets the highest quality standards. The airport must be a secure and comfortable base for a passenger s journey. CPH holds many years of experience in building, operating and maintaining a quality airport, and experience shows that quality is not more expensive. Copenhagen Airport receives top ratings in international surveys again and again: ratings for efficient handling of traffic, comfortable and attractive physical facilities and retail facilities that are unique in a Scandinavian context. The goal is for Copenhagen Airport to continue to be among the world s best airports. Traffic Copenhagen Airport is the traffic hub of Scandinavia and is often called the locomotive of the Øresund region. With 119 destinations, 62 airlines and the lowest number of delays among European airports in 2003, trips to and from Scandinavia are often most efficient if they go via Copenhagen Airport. You can see more at

7 12 Annual Report 2003 Management s report Traffic Annual Report 2003 Management s report Traffic 13 Traffic Business scope The Traffic business comprises the operations, functions and facilities which the airports at Copenhagen and Roskilde make available so that airlines can operate their flights. Revenue from this business comprises passenger, take-off and parking charges paid by the airlines for using the facilities made available by the airports. The prices charged by the airports are regulated by the Danish State. The year in review Traffic at Copenhagen Airport in 2003 was affected by the war in Iraq, SARS and the weak economy in the airport s near markets: Sweden, Norway and Germany. Therefore, Copenhagen Airport experienced a slight decline in traffic, but in spite of the 3.1% fall in the number of passengers, the airport remained the largest in Scandinavia, with 17.7 million passengers. In addition to the fall in total traffic, 2003 implied a traffic-pattern change involving a fall in the number of transfer passengers and an increase in the number of locally departing passengers at Copenhagen Airport. The prime reason for the change was the culmination in 2003 of infrastructure improvement in the region: the bridge across the Øresund. Today, an ever-increasing number of passengers from southern Sweden arrive by car or train rather than by air, which means that they are Passenger growth at selected Scandinavian airports in 2003 Million passengers (3.1%) Copenhagen (8.0%) Stockholm Arlanda +1.8% Oslo Gardermoen +1.0% registered as locally departing passengers rather than transfer passengers in CPH s statistics. Another important reason for the change in traffic pattern is the significant increase in the number of low-cost passengers. The low-cost airlines are characterised by their focus on point to point services without taking into account connecting services. Therefore, low-cost passengers figure in our statistics as locally departing passengers from Copenhagen. In 2003, the number of low-cost Helsinki Vantaa Passengers by market 2003 Million passengers Inter-Scandinavian (4.3%) (8.0%) Gothenburg Landvetter European (1.6%) Intercontinental (2.9%) (9.0%) (2.4%) Malmoe Sturup Domestic (7.9%) Source: Copenhagen Airports annual statistics 2003 Billund Comparison of total airport charges at selected European airports 2003 Ranking 42 Vienna VIE 37 Amsterdam SPL 35 Berlin TXL Frankfurt FRA Munich MUC passengers out of Copenhagen rounded the one-million mark, which was double the number in The continuing growth among the low-cost airlines means that Copenhagen Airport is now heading towards a position as the largest low-cost airport in Scandinavia. As a direct consequence of this change in traffic pattern, inter-scandinavian traffic was adversely affected in 2003 by the change in the travel pattern of passengers from southern Sweden. The decline was intensified by low economic growth in Sweden and Norway, which affected travel activity from these two countries. Also traffic to the UK, France and Germany, which are important business travel destinations from Denmark, was adversely affected, whilst traffic to the popular southern European holiday destinations showed growth as a result of the increasing competition by the low-cost airlines for leisure passengers. Intercontinental traffic as a whole experienced a small decline, primarily as a result of the SARS outbreak, which strongly curbed traffic to Asia for a while. Nevertheless, because intercontinental traffic in Copenhagen accounts for less than 10% of total traffic, Copenhagen was less affected by SARS than other airports. Unlike Asian traffic, Stockholm ARN 26 Zurich ZRH 19 Brussels BRU Copenhagen CPH Oslo OSL London LHR Source: Analysis of the charges levied by 50 selected airports worldwide, 2003, by the Transport Research Laboratory 18 North American traffic increased as a whole, also because SAS increased the number of seats available, and Air Canada reintroduced its service to Toronto. An increased price awareness among passengers and the entry of new operators at the airport intensified competition among the airlines, resulting in lower fares. The pressure on fares has had the effect that airport charges today account for a larger share of total fares than they used to. As a result of this trend, airlines are putting pressure on airports to reduce their charges for using airport facilities. Since 2000, the charges level at Copenhagen Airport has been fixed by voluntary agreements between CPH and the airlines, agreements which run for three years at a time. The year 2003 was the first year of the second voluntary price agreement, which runs from 2003 until the end of 2005 and which implies annual price increases of 2.75% each year (2003, 2004 and 2005). An analysis of the charges levied by 50 selected airports worldwide shows that, compared with its European peers, Copenhagen Airport was quite inexpensive, not least because its charges were frozen from 1992 to Source: The respective airport websites

8 14 Annual Report 2003 Management s report Traffic Annual Report 2003 Management s report Commercial 15 Commercial The year in figures Below is a review of selected items in the note to the financial statements on segment performance (page 53). DKK million Ch. % External revenue 1, , % Operating profit (6.6) (2.3%) Profit before interest (6.6) (2.3%) Segment assets 4, ,180.1 (171.1) (4.1%) Employees % Outlook The growth in the number of passengers during the last few months of 2003 created an expectation of traffic growth in The significant growth in low-cost traffic from 2003 is expected to continue, among other things due to Maersk Air s new strategy, which at this point involves 12 new services out of Copenhagen starting in the spring of To this should be added easyjet s launch of daily services between Copenhagen and Berlin, as well as planned new destinations and additional frequencies out of Copenhagen to be introduced by Sterling and Snowflake. Copenhagen Airport has 10,000 square metres of shops, restaurants and bars. Its combination of highly reputed international brands, Scandinavian quality products and competitive prices means that the airport offers an exclusive, international shopping street which is unique in a Scandinavian context. You can see more at The marginal increase in revenue was attributable to an average 2.75% increase in charges on 1 January 2003 and the change in the passenger mix, with a larger proportion of locally departing passengers. The charge per locally departing international passenger was DKK 94 in 2003, versus DKK 47 per transfer passenger. The increase was more or less offset by a 3.1% drop in the number of passengers. The lower operating profit was mainly attributable to costs incurred in implementing new airport security measures imposed on European airports by a new set of EU airport security regulations. One of the effects of this implementation was the hiring in H2 of new security staff. The increased costs were partially offset by continuing efficiency improvements. Due to the new security measures imposed on European airports by the EU, CPH has filed an application with the Danish Ministry of Traffic for a DKK 9.70 increase in the charge per departing passenger with effect from 1 April 2004 to partially cover the new costs. This is being done under the charges agreement between CPH and its user airlines. The new security measures are comprehensive, and involve the hiring of some 200 new security staff, new equipment and building conversions, which together will run into annual costs of about DKK 100 million. We aim to achieve our goal of making Copenhagen Airport the cheapest in Europe among its international peers based on our ten-year capital investment plan, which is based on flexible, phased solutions, continuing efficiency improvements and development of the commercial activities. In view of the expected traffic growth, the shift in passenger mix towards more locally departing passengers, and an average of 2.75% increase in charges, management expects traffic revenue to grow significantly in To read more about traffic trends at Copenhagen Airport in 2003, go to

9 16 Annual Report 2003 Management s report Commercial Annual Report 2003 Management s report Commercial 17 Commercial Business scope The Company s Commercial business comprises the retail facilities and services provided by its airports to passengers and other users of the airports, including parking facilities, shops, restaurants, rest areas, lounges and the hotel. The vast majority of these operations have been concessioned to private concessionaries. Furthermore, this business area includes the leasing of CPH s buildings, premises and land to third-party lessees. Unlike traffic revenue, commercial revenue is not separately regulated by the Danish State. The year in review After an expansion of the shopping centre by 1,300 square metres in 2002, the main focus in the Company s commercial business in 2003 was on optimising existing activities rather than growth. The year implied a number of shop relocations in the shopping centre. In particular, home decoration shops were given additional space in the most frequented parts of the terminal area due to the general increase in interest in Scandinavian design. This refurbishment of shops resulted in increased revenue already in 2003 in the areas involved, which serves to underline the value of a regular review and renovation of the shopping opportunities available at the airport. Passenger use of bars and restaurants in the terminal area changed in line with the changed traffic pattern. More passengers are now travelling economy class on low-cost flights without access to lounges or in-flight meal services. As a consequence, concession revenue from the food & beverage category rose by 15% in In response to this increase in demand, CPH made minor renovation work to bar and restaurant facilities during the year, also to add more seating areas and boost capacity. with particularly low rates targeting holiday travellers also helped fill up the car parks during the traditionally quiet summer months, when the number of business travellers is low. In the spring of 2003, The Nuance (Denmark) A/S brought an arbitration action against CPH, claiming a reduction in the agreed concession charge. In December 2003, the arbitration court dismissed the claims against CPH. The Hilton Copenhagen Airport succeeded in increasing its occupancy rate and generated revenue growth in 2003, in spite of the growing competition in the hotel market. In the real estate business, the initial work to develop a new inter-modal transport centre was started up in The planned new centre is to be located next to the existing airport land on the 420,000 sqm of reclaimed area created when the Øresund Link was constructed. The philosophy behind the transport centre is to develop the airport s crucial position in the Øresund region and to have a central location to function as a Scandinavian hub for cargo traffic. To increase awareness of the project, a conference was held in September The keynote speaker at the conference was Danish Economic and Business Affairs Minister Bendt Bendtsen, who expressed his support of the concept. In 2003, CPH was in contact with a number of different Danish and international companies who expressed an interest in renting property and/or premises in the area. Concession revenue from the shopping centre and food & beverage (DKK million) F&B 35 Shopping 450 The year in figures Below is a review of selected items in the note to the financial statements on segment performance (page 53). DKK million Ch. % External revenue % Operating profit % Profit before interest % Segment assets (53.8) (2.1%) Employees (2) (0.5%) The increase in revenue was mainly the result of the new concession contract with The Nuance, the operator of the airport s duty-free shops, and the sale of a plot of land. Furthermore, the operating profit was favourably affected by a decline in energy costs primarily attributable to a reimbursement of energy taxes from previous years. Outlook Year 2004 earnings from the commercial business area are expected to be at the same level as in This forecast is based on the accession of ten new countries to the EU on 1 May At first, this enlargement will result in a decline in the number of non-eu passengers at CPH, i.e. passengers who can shop duty-free, which means that duty-free sales are likely to fall. On the other hand, this decline is expected to be somewhat offset by the traffic growth anticipated for Going forward, the Company s commercial operations will focus on developing new sources of revenue within the retail trade and food & beverage areas for the many passengers who spend time at Copenhagen Airport. The initiatives already planned will run in 2004 and well into One of the plans is to open a new duty-free shop in Terminal 3 together with The Nuance. The location of the new shop will make it easier to serve the group of passengers who primarily use this terminal. Moreover, setting up a new service centre in the transit area, where all the airline service desks are, will release space in the middle area of the terminal for new commercial activities. Lastly, against the backdrop of the anticipated increase in food & beverage business, there will be a thorough refurbishment of the overall restaurant concept in both terminals. In addition, new development of the concepts in the real estate operation are expected to create new sources of revenue. The change in traffic pattern was also reflected in an increased use of CPH s parking facilities. The larger number of parkings was mainly a result of the increase in locally departing passengers, including a larger number of passengers from southern Sweden choosing to travel by car to the airport. The new holiday parking scheme F&B 99 Shopping

10 18 Annual Report 2003 Management s report International Annual Report 2003 Management s report International 19 International The investments in China, the UK, Mexico and Norway have been made with reference to value creation by exploiting Copenhagen Airports core competencies within the areas of operating efficiency, capacity utilisation and optimisation of commercial activities. You can see more at International Business scope The Company s International business comprises CPH s investments in foreign airports and its subsequent active ownership and sales of consultancy services to these airports concerning operations, optimisation and efficiency improvements. A wholly-owned subsidiary, Copenhagen Airports International A/S, handles these international activities. CPH is currently active in China, the UK, Mexico and Norway. The year in review In spite of the significant events that took place abroad and the global economic downturn, all foreign airports in which CPH has an interest experienced significant growth in passenger numbers and thus helped generate growth in a year of declining traffic at Copenhagen Airport. Traffic at Hainan Meilan Airport in China rose by almost 8% for the year in spite of SARS, which more or less closed the airport completely in May and June. The main reason for this traffic growth was the attractive geographic location of Hainan, which has given the island the nickname China s Hawaii. Hainan is today the preferred Chinese holiday destination, so the driver of this growth was domestic traffic. In 2003, Hainan Meilan Airport s status changed to that of an international airport, and this has paved the way for further growth. Monthly traffic growth at Hainan Meilan Airport 2003 (+7.7% full year) Percentage development from 2002 and trend 40 0 (40) (80) (100) Jan 03 Feb 03 Mar 03 Apr 03 May 03 Jun 03 Jul 03 Aug 03 Sep 03 Oct 03 Nov 03 Dec 03 Source: Hainan Meilan Airport s traffic statistics 2003 Monthly traffic growth at Newcastle International Airport 2003 (+15.3% full year) Percentage development from 2002 and trend Jan 03 Feb 03 Mar 03 Apr 03 May 03 Jun 03 Jul 03 Aug 03 Sep 03 Oct 03 Nov 03 Dec 03 Source: Newcastle International Airport s traffic statistics 2003

11 20 Annual Report 2003 Management s report International Annual Report 2003 Management s report International 21 Traffic at Newcastle International Airport in the UK rose by more than 15% in 2003, primarily because low-cost airline easyjet opened a new north-eastern UK base at Newcastle in 2003, initially with three new routes. Expansion of the partnership with easyjet continued during the year, and an additional three services were added. At the end of the year, easyjet accounted for about 18% of total traffic at Newcastle International Airport. Traffic at the nine Mexican airports (ASUR) was severely hit by the slowdown in travel activity in March as a result of the war in Iraq. Later in the year, traffic picked up again, and the full-year growth rate reached 11%. The growth was primarily generated by an increase in the number of holiday travellers to Cancun, an attractive destination for US tourists, who preferred a holiday destination closer to home in 2003 in light of the tense situation in the Middle East. As a follow-up to the traffic growth at the foreign airports, there were efforts to optimise and enhance efficiency in these companies in Monthly traffic growth in 2003 at the nine Mexican airports (ASUR) (+10.8% full year) Percentage development from 2002 and trend The year 2003 was Hainan Meilan Airport Company s first full year of operation with CPH as a shareholder. CPH s main activity in the company was an attempt to strengthen its corporate governance. In addition, a comprehensive project to redesign the airport s shopping facilities was started up. This includes a new contract with Select Service Partner, a global player in the airport restaurant business, regarding the future management of the restaurant business at the airport. As a result of the strong rise in passenger numbers, the Hainan Meilan Airport will start building new terminal capacity in In Mexico, negotiations were held during the year with the airlines and the Mexican Ministry of Transport regarding new long-term expansion plans for ASUR s nine airports. The plans were approved at the turn of the year, and the development plans and airport charges have now been fixed at a satisfactory level for the period Lastly, negotiations continued with the Norwegian Ministry of Transport regarding potential civil aviation at the military airport at Rygge in Norway. During the year, the Norwegian airport company received an increased number of applications from airlines interested in operating out of Rygge. Whether or not civil aviation will be permitted at the airport will most likely be determined in The year in figures Below is a review of selected items in the note to the financial statements on segment performance (page 53). Newcastle International Airport continued its implementation of the company s turnaround strategy and new three-year business plan in The main focus was on restructuring and cost adjustment in the organisation in order to create the right foundation for future growth. As part of this project, the airport was forced to reduce staff by about 40%, which was primarily carried out through voluntary redundancy agreements. In order to optimise the airport s commercial offerings, a refurbishment of the terminal was initiated in 2003 and is scheduled for completion in the spring of DKK million Ch. % External revenue % Operating profit (14.6) (21.0) % Profit from associates 29.2 (21.1) % Profit before interest 14.6 (42.1) % Investments in associates 1, ,715.4 (217.2) (12.7%) Employees % The fall in the value of investments in associates was mainly the effect of currency translation, whilst the number of employees grew as a result of the increase in activity following the Company s investment in Hainan Meilan Airport in late Outlook Against the backdrop of the growth in traffic in 2003 and favourable developments in the companies in China, the UK and Mexico, there is reason to expect a continuing rise in earnings from international activities. The significant growth of traffic in China in H creates an expectation of continuing strong traffic growth in In view of the reorganisation of the shopping facilities in 2003 and the plans of additional steps to be taken in the commercial area, CPH expects revenue in the Hainan Meilan Airport to increase significantly in Also in the UK, significant traffic growth is expected in 2004 due to easyjet s base at the airport in Newcastle and their plans to open new services and increase frequencies. In the commercial area, revenue growth is expected, partly as a result of the rise in traffic and partly as a result of an expansion and refurbishment of the shopping facilities. In Mexico, the new price agreement between ASUR and the airlines bodes well for our future partnership, and the potential for further development of their commercial activities is also good. 5 0 Jan 03 Feb 03 Mar 03 Apr 03 May 03 Jun 03 Jul 03 Aug 03 Sep 03 Oct 03 Nov 03 Dec 03 Source: ASUR S traffic statistics 2003 The increase in revenue was achieved through increased sales of consultancy services to associates, mainly Hainan Meilan Airport. In addition, a lower cost level had a favourable effect on operating profit, as no new international investments were made in For comments on income from investments in associates, see the financial review on page 26.

12 22 Annual Report 2003 Management s report International Annual Report 2003 Management s report Financial review 23 Financial review CPH s international activities Company Country Equity stake(%) Acquisition costs The 2003 annual report has been prepared according to the same accounting policies as the 2002 annual report. The increase in net revenue was mainly related to increased concession revenue and the sale of a plot of land. Hainan Meilan China 20.0% DKK 353 Airport million Company Ltd. (HMA) Newcastle United 49.0% DKK 1,192 International Kingdom million Airport Ltd. (NIAL) Grupo Mexico 6.3% DKK 313 Aeroportuario (direct and million del Sureste, S.A. indirect) de C.V. (ASUR) Rygge Sivile Norway 36.7% DKK 5 Lufthavn AS million Hainan Meilan Airport Company Ltd. operates the Hainan Meilan Airport on the holiday island of Hainan. The Chinese airport company is listed on the Hong Kong stock exchange. In 2003, Hainan Meilan Airport had 6.0 million passengers, which was a 7.7% increase on You can read more about Hainan Meilan Airport at Newcastle International Airport Ltd. operates Newcastle Airport in north-eastern England. In 2003, Newcastle International Airport had 3.9 million passengers, which was a 15.3% increase on You can read more about Newcastle Airport at and Grupo Aeroportuario del Sureste, S.A. de C.V. (ASUR) operates nine airports on the Yucatan peninsula in south-east Mexico. ASUR is listed on the New York and Mexico City stock exchanges. In 2003, the nine airports had a combined 12.2 million passengers, which was a 10.8% increase on Cancún International Airport alone accounted for 71% of total passenger traffic at the nine airports. You can read more about the nine Mexican airports at and Rygge is currently a military airport. The company Rygge Sivile Lufthavn AS was founded in 1999 to investigate the possibility of operating civil air transport from Rygge, which is located 60 kilometres south of Oslo. Performance compared with forecasts Consolidated profit before tax for the year ended 31 December 2003 was DKK million. This was more than 2% higher than the forecast of approximately DKK million made in the Q report. The main reason for the improvement was traffic growth in Copenhagen in Q4, indicating that traffic was no longer affected by the war in Iraq and the lung disease SARS. Performance by CPH s international operations was at the forecast level, whereas the Q4 performance of the hotel operation was marginally lower than forecast. Performance relative to last year Pre-tax profit for 2003 was DKK million, a DKK 75.3 million improvement on The higher profit was attributable to the parent company s operating profit and profit from investments in foreign associates. The improvement was partially offset by an increase in net financing costs. Parent company DKK million Ch. % Net revenue 2, , % EBITDA 1, , % EBIT % Profit/(loss) from investments (9.1) (55.8) % Net financing costs % Profit before tax % Furthermore, the company s operating profit was lifted by continued tight cost management. The higher profit from investments was primarily attributable to the restructuring programme initiated at Newcastle International Airport and the full-year consolidation of Hainan Meilan Airport, in which CPH acquired a 20% equity stake on 15 November The increase in net financing costs was mainly the result of exchange losses related to the settlement of hedges of investments in foreign associates. Copenhagen Airports Hotel and Real Estate Company (Hotel operation) DKK million Ch. % Net revenue % EBITDA (5.6) (35.9%) EBIT (15.2) (9.2) (6.0) (65.2%) Net financing costs (2.0) (7.8%) Profit before tax (38.9) (35.0) (3.9) (11.1%) The increase in revenue was driven by higher occupancy at the hotel. The lower operating profit was attributable to a DKK 4.2 million adjustment of a management fee for Net of this effect, the operating profit for 2003 increased by almost 18%.

13 24 Annual Report 2003 Management s report Financial review Annual Report 2003 Management s report Financial review 25 Income statement Equity CPH s equity stood at DKK 3,234.0 million at the beginning of the year and DKK 3,136.4 million at 31 December The fall in equity was attributable to currency translations of investments in associates and the purchase of treasury shares. A statement of movements in equity is included on page 52 of this report. Dividend The Supervisory Board intends to propose to the annual general meeting that the payout ratio be increased from 35.0% (DKK per share) for 2002 to 40.0% (DKK per share) for 2003, equivalent to DKK million. Revenue Passengers Ch. % Q1 3, ,928.6 (153.6) (3.9%) Q2 4, ,947.1 (269.4) (5.4%) Q3 5, ,176.4 (112.7) (2.2%) Q4 4, ,220.1 (22.5) (0.5%) Traffic Totalrevenue 17, ,272.2 (558.2) (3.1%) The total number of passengers at Copenhagen Airport was adversely affected by the war in Iraq and the lung disease SARS. The fall was attributable to a 12.1% decline in the number of transfer passengers, which was partially offset by a 5.5% increase in the number of locally departing passengers. For additional comments on traffic developments, please see our previously released announcement on traffic statistics for December 2003 and the full year. Traffic revenue DKK million Ch. % Take-off charges (11.8) (2.4%) Passenger charges % Other charges % Total 1, , % Traffic revenue was boosted by an average 2.75% increase in traffic charges for using Copenhagen Airport that took effect on 1 January Take-off charges were adversely affected by a 3.4% fall in the take-off mass, which was due to the airlines continually adjusting their capacity to demand. Passenger charges were favourably affected by a change in the passenger mix, with a larger proportion of locally departing passengers, who are subject to higher charges than transfer passengers. Consession revenue DKK million Ch. % Shopping centre % Handling (1.2) (1.4%) Other % Total % The increase in revenue from the airport shopping centre was mainly achieved as CPH concluded a new concession agreement with The Nuance in 2001, which did not have full effect until in The increase in other concession revenue, which includes parking, banking and restaurants, was primarily attributable to the parking concession, among other things as a result of the increase in the number of locally departing passengers. Rent DKK million Ch. % Rent from premises % Rent from land (3.1) (7.1%) Other rent (0.8) (7.8%) Total (1.4) (0.8%) The increase in rent from premises was attributable to contractual rent adjustments and new leases in Terminal 2. The fall in rent from land was primarily attributable to an agreement on rent exemption in connection with an option entered into regarding the purchase of property. Sales of services, etc. DKK million Ch. % Hotel operation % Other sales of services % Total % The increase in revenue from the hotel operation was achieved through an improvement in occupancy. The increase in other revenue was attributable to the sale of a plot of land at Kastrup. Costs External costs DKK million Ch. % Operating and maintenance costs % Energy (11.9) -23.8% Administrative expenses (0.2) (0.2%) Other costs % Total (5.1) (1.2%) Hotel operation % External costs were reduced in 2003 through the tight cost management applied. The fall in energy costs was attributable to a reimbursement of energy taxes in respect of prior years. Developments in other costs were related to insurance costs, which increased by DKK 6.6 million. Hotel operation costs were adversely affected by a DKK 4.2 million adjustment of the management fee for 2002.

14 26 Annual Report 2003 Management s report Financial review Annual Report 2003 Management s report Financial review 27 Balance sheet Staff costs DKK million Ch. % Salaries and wages % Other % Amount capitalised as fixed assets (29.1) (18.2) (10.9) 59.9% Total % Average number of employees 1,352 1, % The increase in salaries and wages was mainly the result of the annual average pay adjustment and costs relating to additional staff hired due to stricter EU airport security regulations. The increase was partially offset by efficiency improvements during the year. The increase in capitalised payroll costs was mainly attributable to the implementation of a new ERP system. Amortisation, depreciation and impairment of intangible assets and property, plant and equipment DKK million Ch. % Total (4.2) (0,9%) Hotel operation % The fall was primarily a consequence of the lower investment activity in Copenhagen. Profit/(loss) from investments in associates before tax The improvement of Newcastle International Airport s performance was attributable to a 15.3% increase in the number of passengers and cost savings achieved through a restructuring programme initiated in Q In order to recognise the income from Hainan Meilan Airport without violating Hong Kong stock exchange regulations, the profit from this investment is now disclosed together with the profit from the investments in ITA and ASUR. The profit from CPH s Mexican investments increased, mainly as a result of a 10.8% increase in the number of passengers. The improvement was partially offset by the adverse impact of exchange rate movements. The investment in Hainan Meilan Airport was made on 15 November 2002, and this airport made an increased contribution to profit, mainly because the investment was consolidated for the full year in The approximately 12% decline in the number of passengers during H1 as a result of SARS was reversed, and the number of passengers at Hainan Meilan Airport increased by 7.7% for the full year. Net financing costs DKK million Ch. % Interest % Exchange losses 16.5 (24.2) % Other (3.2) (19.8%) Total % Hotel operation (2.0) (7.8%) Tax on profit for the year DKK million Ch. % Associates (2.1) (8.1%) % Total % The effective tax rate in 2003 was 32.5%, down from 35.4% in The lower tax rate was mainly attributable to a special tax paid in 2002 in connection with the distribution of dividends from CPH s Mexican operations. Assets DKK million Ch. % Fixed assets Intangible assets 51,7 32,7 19,0 58,1% Property, plant and equipment 6,134,9 6,380,5 (245,6) (3,8%) Investments 1,500,0 1,740,2 (240,2) (13,8%) Current assets Receivables 322,0 315,1 6,9 2,2% Cash 505,3 47,5 457,8 963,8% Total 8,513,9 8,516,0 (2,1) 0,0% The increase in intangible assets was mainly attributable to an investment in a new ERP system. The reduction in property, plant and equipment was attributable to the limited investment activity in Copenhagen. The fall in investments was mainly attributable to currency translation of investments in foreign associates. CPH aims to retain a certain debt-equity ratio, which resulted in an increase in cash. If no application is found for this cash in the form of investments, it will be used as dividends or for share buybacks. DKK million Ch. % NIAL (16.9) (45.7) % Rygge (1.1) (0.8) (0.3) 37.5% ITA ASUR HMA Total other % Total 29.2 (21.1) % The increase in interest expenses was mainly attributable to interest allowances received in 2002 relating to tax payments. The difference in exchange losses was mainly attributable to the settlement of hedges of investments in foreign associates, as CPH in 2003 decided not to continue hedging its strategic investments.

15 28 Annual Report 2003 Management s report Financial review Annual Report 2003 Management s report Financial review 29 Cash flow statement Outlook for 2004 Equity and liabilities DKK million Ch. % Long-term liabilities 4, , % Current liabilities ,370.4 (764.0) (55.8%) Total 5, , % The increase in long-term liabilities reflects a loan of USD 300 million swapped into DKK 1,968 million. The loan was partially used to repay other long-term loans. The loan represents attractive, long-term finance. DKK million Ch. Cash flow from Operating activities 1, Investing activities (202.5) (523.7) Financing activities (377.0) (482.4) Total cash flow (133.1) Cash at beginning of year (133.1) Cash at end of year In its Q report, CPH forecast a slight increase in the total number of passengers and the total take-off mass in Furthermore, 2004 concession revenue was forecast to be at the 2003 level, while an increase was forecast for CPH s existing international operations. Since the release of the Q report, the number of passengers commencing their journey in Copenhagen has increased more than forecast, whereas the number of transfer passengers continues to show a falling trend. Against this backdrop, an increase in the total number of passengers of almost 2% relative to the 2003 level is now forecast. On the basis of the above, CPH s pre-tax profit for the existing operations is expected to increase by around 10% relative to the 2003 level. The forecast of pre-tax profit for 2004 should be seen in light of CPH s wish to maintain the existing capital structure. Quarter-by-quarter performance in terms of pre-tax profit for 2004 is expected to be in line with The figure below illustrates the expected developments in pre-tax profit in 2004 compared with actual results in Seasonal fluctuations in profit before tax DKK million Out of the long-term debt at floating rates, CPH swapped DKK 1,000 million to fixed rate debt in order to extend the duration of the liabilities. The fall in short-term liabilities reflects repayment of debt to financial institutions. Cash flow from operating activities The increase in the cash flow from operating activities was attributable to the increase in revenue and operating margin as well as an improvement of working capital. Cash flow from investing activities The lower cash outflow for investing activities was attributable to the investment in Hainan Meilan Airport, which was made on 15 November 2002, whereas no international investments were made in Cash flow from financing activities The lower cash flow from financing activities was attributable to a fall in net repayments on debt in 2003, which was partially offset by an increase in share buybacks. Traffic revenue is expected to increase significantly in In addition to the expected traffic growth and the change in the passenger mix with an increase in locally departing passengers, traffic revenue will be favourably affected by the increase in charges by an average 2.75% effective 1 January Furthermore, under the charges agreement with the airlines, CPH has filed an application with the Danish Ministry of Transport to increase the passenger charges by DKK 9.70 per departing passenger from 1 April 2004 to partially cover the increased security measures implemented in compliance with stricter EU requirements. The increase in the number of passengers will also have a favourable impact on concession revenue, but this impact will partially be offset by lower revenue from duty free sales as a result of the expansion of the EU to include an additional ten member states from 1 May The increase in security costs has a significant adverse impact on CPH s operating costs and operating margin. If this effect is disregarded, 2004 operating costs are expected to remain at the 2003 level. The international operations are expected to show significant growth in The main reason for this is that Newcastle International Airport is expected to contribute a profit in CPH s net financing costs are expected to be reduced significantly in 2004 as a result of the decision made in 2003 not to continue hedging investments in foreign associated companies Q1 Forecast 2004 Actuals 2003 Q2 Q3 Q4 As a result of the good performance in H and the prospects of economic growth, CPH expects an increase in the number of offers in the international market for airport privatisation and strategic consultancy. Management believes, that CPH continues to be well positioned to exploit the opportunities that may arise for becoming involved in new international projects on favourable financial terms. Forward-looking statements The forward-looking statements in this annual report reflect management s expectations of future events and financial performance. Forward-looking statements are subject to risks and uncertainties, which could cause actual results and performance to differ materially from the forecasts made herein.

16 30 Annual Report 2003 Management s report Risk factors Annual Report 2003 Management s report Risk factors 31 Risk factors CPH regularly identifies and evaluates potential risks that may affect company operations. In this way, CPH seeks to minimise the likelihood and effect of events that may prevent the company from achieving its goals. The risks identified are controlled, diversified or hedged taking into account the exposure to cyclical fluctuations, the impact on the core business and CPH s opportunities to reduce such risks. Customer and cyclical risks Owing to its large, irreversible capital expenditure, CPH s earnings are sensitive to factors which could have an adverse impact on traffic growth. SAS is Copenhagen Airport s largest customer, contributing about 53% of traffic revenue (2002: about 55%). In the short term, Copenhagen Airport s status as a Scandinavian hub is therefore dependent on SAS finely meshed route network out of Copenhagen, primarily to European destinations. Developments in air traffic are related to trends in the economy in general, primarily economic and political developments. In addition to flight-related revenue, economic trends are also reflected in concession revenue. CPH seeks to reduce its exposure to individual customers and markets through international activities. Financial risks CPH s financial risks are managed from head office. The principles and framework governing the financial management are laid down once a year. CPH solely hedges commercial risks. Interest rate risks Fluctuations in the interest rate level affect CPH s income statement and balance sheet. In order to reduce the overall interest rate sensitivity, CPH intends to refinance its debt in an ongoing process so that it is better aligned with the economic lives of the underlying assets. In 2003, the duration of the debt was increased to between 7 and 8 years, whereas it was between 3 and 4 years at the beginning of the year. A change in the interest rate level by one percentage point would result in a change in annual interest expenses of less than DKK 1 million. Exchange rate risks Fluctuations in the interest rate level affect CPH s income statement and balance sheet. Traffic revenue is received in DKK only, and the exchange rate exposure therefore mainly concerns investments in, dividends from and intercompany accounts with non-danish associates. In 2003, CPH decided not to continue hedging its investments in foreign associates, but intends to continue, to the widest possible extent, to hedge dividends and other intercompany accounts denominated in foreign currencies 12 months ahead. Credit risks The use of money market deposits and derivative financial instruments involves exposure to credit risks. CPH seeks to reduce this exposure by solely collaborating with financial partners with a high, published credit rating. The credit exposure by partner is calculated on the basis of the net market value of the contracts concluded. The total credit risk on financial partners was approximately DKK 500 million at 31 December 2003, and solely related to money market deposits with Danish banks. Environmental risks The environmental authorities have issued a number of environmental approvals, which regulate activities at Copenhagen Airport. The most important approvals are the framework approval from the Danish Environmental Agency with respect to noise and air pollution in connection with air traffic and the Copenhagen County environmental approval of other activities. The most significant environmental impact from air traffic is noise. Conditions are monitored continuously, and measures to reduce noise are introduced whenever needed. The fall in the total number of take-offs and landings in 2003 and the phasing out of the noisiest types of aircraft contributed to a significant fall in the total noise impact. This had the effect that noise was lower in 2003 than the official limits due to take effect from Risks covered by insurance In continuation of the terrorist activities on 11 September 2001, separate airport liability insurance has been taken out for the airport in Copenhagen as well as insurance for damage to buildings and contents. The insurance taken out covers damage as a result of war and terror with limits of USD 1,000 million and USD 100 million per event, respectively, which is the maximum cover available.

17 32 Annual Report 2003 Management s report Environmental impact Annual Report 2003 Management s report Employees 33 Environmental impact Employees CPH monitors developments in its environmental impact closely in order to be able to adjust its efforts should the need arise. The individual business and support areas at the airports at Copenhagen and Roskilde are responsible for compliance with environmental approvals and current legislation. The Environmental Department provides advice, handles contact with the environmental authorities and coordinates the airports internal controls. Noise The most significant environmental impact from air traffic is noise, and our noise impact fell in The main reasons for the decline in noise impact are that the airlines are constantly replacing old aircraft types, which are mainly used at night, with less noisy aircraft types; also, the total number of operations dropped in In order to limit noise in the residential area to the north-west of Copenhagen Airport, the use of the crossrunway (12-30) is banned during night time. This ban attracted media attention in early January 2003 due to extraordinary winter weather that made it impossible for aircraft to take off from the two main runways. As a result, some 1,000 passengers were forced to spend the night at the airport. After CPH approached the Ministry of Transport about the problem, the Ministry authorised CPH in July 2003 to grant exemptions from the ban, so that the runway can now be used at nighttime if the need is acute and due to bad weather conditions. Odour Working together with the Danish National Environmental Research Institute, CPH carried out a survey of odour problems in the areas around Copenhagen Airport in The survey showed that there were sometimes deviations from threshold limit guidelines for odour up to three kilometres from the airport. However, aircraft engines have been improved in recent years. Management expects that this trend will continue in the years to come, which will reduce odour problems. Energy CPH adopted an energy policy in 2002 with a target of reducing energy consumption at Copenhagen Airport by 10% relative to the 2001 level over a three-year period. The target was met after only two years. Energy consumption was reduced by monitoring consumption and increasing the focus on regulating and controlling consumption where possible. Environmental impact assessment of Roskilde Airport In response to the growing interest in operating traffic out of Roskilde, especially from low-cost airlines, CPH began an environmental impact assessment (EIA) of Roskilde Airport in The purpose of the EIA was to investigate the feasibility of expanding Roskilde Airport in an environmentally appropriate manner. In its capacity of planning authority, the Greater Copenhagen Council (HUR) is responsible for performing the assessment. An EIA entails a specific procedure that includes a large number of studies and descriptions of various environmental factors, as well as a number of hearings in the local area. The initial hearing phase, the idea phase that involves collecting proposals from the local population and other interested parties, took place from August to September The results of the EIA will be presented at a public hearing in late 2004, and in early 2005, HUR will present the final results, after which HUR and the county of Roskilde will approve or reject the project. Whatever the outcome of the EIA, it remains a precondition to any expansion that the increase in costs that would be incurred in the expansion, operation and maintenance of Roskilde Airport can be covered commercially by the users of Roskilde Airport. Environmental report CPH has prepared a separate audited environmental report for The environmental report is available online at You can get a print version of the environmental report on request from CPH or at It is CPH s ambition to attract, retain and develop ambitious and responsible employees who are ready and willing to accept and implement change and thus well positioned to participate actively in the Company s development and innovation processes. Employee satisfaction CPH continued to measure employee satisfaction in the CPH Barometer, a questionnaire survey in which all employees at the Copenhagen and Roskilde airports are invited to participate. The overall results from the 2003 survey showed the greatest improvement over 2002 in the category satisfaction with immediate superior. The results of the survey are being processed at all levels with the advice and support of our Human Resources Department, and this work is continually evaluated and structured to meet the needs of the Company s various departments. Employee satisfaction at CPH 2003 Highly dissatisfied = 1 Highly satisfied = Working conditions Immediate superior Collaboration Source: The CPH Barometer 2003 Management development A major area of focus for the Human Resources Department is management development and the improvement of the quality of management at Copenhagen Airport, primarily through management development programmes, management courses and close contact with managers. Moreover, the Human Resources Department holds quarterly meetings and management network meetings to inform and inspire management employees at all levels across the entire organisation. Health and wellness CPH has a broad health and wellness programme which includes numerous activities aimed at strengthening employee health. With a view to treating and preventing work-related illness, CPH offers its staff physiotherapy, massage, zone therapy and chiropractic treatment in a partnership with Falck Healthcare, as well as the assistance of a psychologist, a substance abuse consultant and a weight-loss consultant. Also, modern workout facilities are available to staff. All these health-related options are offered to employees with a view to meeting the Company s goal to improve the staff general health and job satisfaction and thus reduce sick days and sick leave; results are already beginning to appear in the form of an 0.2% drop in total staff absence due to illness in Training In the large operating areas in Copenhagen, a number of supplemental training programmes were implemented in 2003 to train employees in areas sensitive to seasonal and peak-hour fluctuations to handle each other s job functions. This means that, in practice, staff can be lent out to other departments during peak hours, which means greater flexibility and a better utilisation of resources. Moreover, the programmes strengthened the team spirit of staff from different job areas and improved motivation by enhancing the skills of the individual employees.

18 34 Annual Report 2003 Management s report Employees Annual Report 2003 Management s report Corporate governance 35 Corporate governance Communication Based on a goal of maintaining a high level of information that cuts across CPH s many and different staff groups, work is constantly being done at a strategic level to improve staff communication in general. An internal communication survey in 2003 led to a reassessment of the internal communication concept. The primary sources of general information for staff are CPH s dynamic and daily updated intranet and a bimonthly newsletter. The newsletter serves as a supplement to the intranet, but also as a primary source of general information to employees who do not use a PC in their day-today work. In addition, consultancy about communication both in-house and externally forms a natural part of day-to-day collaboration across the various departments and functions at CPH. International knowledge-sharing Through CPH s exercise of active ownership in China, the UK and Mexico, CPH and the international airports it works together with share knowledge. This knowledgesharing is based on stationing staff from Copenhagen in these areas and an ongoing collaboration between the staff at CPH s international department and the staffs of the foreign airports. Management considers this sharing of knowledge an important basis for the continuing internationalisation of the company. Read more about CPH s HR policies at The Supervisory Board believes that the interests of CPH, and thus also those of its shareholders, are best safeguarded by maintaining an open, constructive and ongoing dialogue between the company and all its stakeholders. Taking its starting point in an independent assessment held up against CPH s individual situation and nature, the Supervisory Board, as in previous years, endorses the Nørby Committee s basic recommendations on good corporate governance. The Supervisory Board believes that CPH meets the Committee s recommendations in all essential respects. CPH continues to work on initiatives within corporate governance which the directors believe would lead to improvements. For an up-to-date status report on corporate governance at CPH as it relates to Nørby Committee recommendations, see

19 36 Annual Report 2003 Management s report Shareholder information Annual Report 2003 Management s report Shareholder information 37 Shareholder information In 2003, CPH joined the Copenhagen Stock Exchange MidCap+ index. An important criterion for being included in this index was direct communication with financial target groups, and as a natural consequence of this, CPH decided to collaborate with the Copenhagen Stock Exchange and a number of other MidCap+ companies in 2004 in opening the This portal contains daily updates in market comments, news, and price lists; an investor event calendar; and comprehensive basic information on CPH and the other companies in the indices. In 2003, shareholders and other stakeholders could also find updated information on CPH s financial performance on the investor pages of Again in 2003, these investor pages moved up Danish business paper Børsen s annual ranking of major companies use of the Internet in investor relations. CPH moved from fourteenth place in 2002 to eight place in IR policy It is CPH s IR goal to offer a constantly high level of information through an active and open dialogue with investors and analysts. The supply of information is intended to help ensure a better understanding of the Company s current and expected future situation and thus contribute to a correct pricing of the shares. Another of the IR Department s tasks is to help boost CPH share turnover and performance relative to the KFX index in 2003 Price Jan 03 turnover in Copenhagen Airports shares as much as possible in order to achieve a stable share price, attracting as many investors as possible in order to create a good balance between the number of shares held by loyal long-term investors and the number of shares traded more regularly in the market. Lastly, the IR function helps secure flexible access to debt financing by providing accurate and targeted information to prospective lenders. Shares At 31 December 2003, CPH s share capital was DKK 910 million: 9.1 million shares of DKK 100 nominal value each. CPH only has one share class, and no shares carry special rights. CPH s shares are listed on the Copenhagen Stock Exchange under Securities Code ISIN DK Turnover in the shares on the Copenhagen Stock Exchange during the 2003 financial year totalled 3.1 million shares, equivalent to 34.2% of the total share capital, or an average of about 12,483 shares per business day. The total value of the shares traded was DKK 1,742.6 million. The market capitalisation of the shares was DKK 6,245.1 million at year-end, compared with DKK 4,640.9 million in Turnover (DKK million) Feb 03 Mar 03 Apr 03 May 03 Jun 03 Jul 03 Aug 03 Sep 03 Oct 03 Nov 03 Dec 03 Shareholders CPH had 9,003 registered shareholders as at 31 December At the end of the year, the Danish State held 33.8% and Copenhagen Airports A/S 6.86% of the share capital. The remaining shares were held by private and institutional investors in Denmark and abroad, including many of CPH s 1,352 employees. Since its IPO in 1994, CPH has issued employee shares three times. Only the shares from the latest programme from November 2000, when 50,000 new shares with a nominal value of DKK 5 million were issued, must still be held in blocked accounts, i.e. until 1 January Pursuant to CPH s articles of association, no shareholders other than the Danish state may hold more than 10% of the Company s share capital. An announcement released by CPH on 14 January 2004 stated that the Danish Ministry of Finance intends to propose a resolution on behalf of the Danish state at CPH s annual general meeting, to be held on 22 April 2004, to cancel this restriction. Management s interests The following shareholders held more than 5% of the share capital at year-end: the Danish state, LD Pensions, the Danish Labour Market Capital Pension Fund (ATP), Taube Hodson Stonex Partners Ltd. and Copenhagen Airports A/S. Breakdown of shareholders at 31 December 2003 The Danish State 33.8% International institutional and private investors 24.7% Danish institutional investors 20.0% Danish private investors 14.6% Copenhagen Airports A/S 6.9% Shareholdings Shareholdings at 1 January 2003 at 31 December 2003 Nominal Nominal Number value Number value of shares DKK of shares DKK Supervisory Board Kurt Bligaard Pedersen , ,500 Bjarne Hansen* ,000 John Stig Andersen 48 4, ,800 Jørgen Abildgaard Friis* ,900 Keld Elager-Jensen* ,400 Anita Doris Rasmussen** , Carsten Lennie Winther** , Executive Board Niels Boserup 1, , ,000 Kjeld Binger , ,700 Torben Thyregod , ,300 Peter Rasmussen , ,000 Turnover Copenhagen Airports Price performance Copenhagen Airports Relative price performance KFX Source: Copenhagen Stock Exchange * Joined the board in April 2003 ** Left the board in April 2003 Source: Danske Bank s register of shareholders

20 38 Annual Report 2003 Management s report Shareholder information Consolidated financial statements Share buyback programme As part of CPH s continual adjustment of its capital structure, the Supervisory Board resolved to recommend that shareholders at the general meeting in 2003 vote to continue a share buyback programme and authorise CPH to buy up to 10% of the Company s own shares, such authorisation to be granted until the next annual general meeting on 22 April At year-end, CPH held treasury shares equivalent to 6.86% of the share capital of DKK 910 million nominal value. During the 2003 financial year, 401,213 treasury shares were acquired, equivalent to 4.41% of the share capital, which brought the Company s treasury shareholdings to 624,330 shares with a total market value of DKK million at 31 December The Supervisory Board has resolved to propose at the annual general meeting in 2004 that the holding of treasury shares be cancelled. In order to be able to continue the ongoing adjustment of the capital structure, the Supervisory Board will also propose that the Board be authorised to acquire up to 10% of the Company s own shares in the time until the annual general meeting to be held in Dividend policy CPH s dividend policy seeks to optimise shareholder value by optimising the Company s capital structure. In 2003, the payout ratio was 35%, equivalent to DKK per share. The Board will recommend at the annual general meeting that shareholders vote to increase the payout ratio for 2003 to 40%, equivalent to DKK per share.