EXCLUSIVE: SAA board approved management buyout of subsidiary

Cape Town – The boards of South African Airways (SAA) and its subsidiary South African Travel Centre (SATC) recommended a management buyout of the state-owned travel agent, SATC said in its 2016 annual financial statement for the year ended March 2016.

Fin24 has seen a copy of loss-making SATC’s 2015/16 results, after SAA chairperson Dudu Myeni delivered outstanding annual financial statements of SAA's subsidiaries to the Standing Committee on Finance on Tuesday.

The parliamentary committee had requested them in terms of the Public Finance Management Act and the SAA board is expected in Parliament on Wednesday to give an update on progress made since being appointed a few months ago.

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“The SATC board resolved that it recommends a management buyout by SATC management via a sale of shares by the SAA board,” the director’s report states.

As part of conditions set down, the management presented a business plan and financial analysis for the new company to the board, the report states.

It also has provided a detailed account of the commercial benefit to SAA, and an undertaking that there will be no increase of cost leading up to the finalisation of the buyout.

By adhering to the above conditions, SATC said both its board and that of SAA approved the buyout.

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SATC made an after-tax loss of R977 000 for the year ended March 2016, it said in its report. “This is an increase from the net loss after tax of the prior year of R3.6m,” it said. Revenue decreased from about R17.3m in 2014/15 to about R8m in 2015/16.

Comparatively speaking, Flight Centre’s South Africa unit posted earnings before interest and tax (Ebit) of R172m in 2016.

SATC, which has been in existence since 1997, said on its website that it “boasts an extensive footprint with 50 agencies located in the major centres around South Africa, as well as Botswana, Lesotho, Ghana and Zambia”.

“Each SATC agency is independently-owned and run by seasoned travel agents who are focused on consistently offering the best value to their clients,” it said.

It has a R17m loan from SAA and has about R3.3m worth of assets. It said the loan has been subordinated in favour of other creditors. The company’s official name is South African Airways City Centre SOC Limited.

The report did not name the management team, but said Bulelwa Koyana had resigned as CEO on 30 June, 2015. Interestingly, the report states that her salary increased from R885 000 in 2015 to about R2.2m in 2016.

SAA said in its 2015/16 annual financial report that SATC "has been subject to ongoing strategic efforts on the part of the group to divest itself from the company".

"As a result of the widespread knowledge of the decision of the group to divest, there has also been a reduction in the number of franchisees associated with the company.

"There are 30 franchisees that still form part of SATC consortium," it said. "As at 1 April 2016, SATC management finalised the negotiations for SATC to affiliate all its preferred deals under XL Travel. This is part of the retention strategy to allow SATC franchisees access to a wider pool of suppliers and potential overrides earnings."

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