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Acsa pleased with debt reduction, passenger growth, transformation pace

Sep 18 2017 14:35
Carin Smith

Cape Town - Airports Company South Africa (ACSA) reported revenue growth of 3.4% to R8.6bn in the year ended 31 March 2017.

Its profit increased by 10.8% to R2bn.
 
Return on equity was 11.3% compared to 11.5% in the previous period. Capital expenditure decreased by 31.3% to R893m.
 
Acting chief financial officer Dirk Kunz told Fin24 on Monday that Acsa has managed to significantly reduce its debt levels. He said reducing debt levels has been a deliberate strategy of the company over the last few years. It has also applied to the regulator for a reduction in tariffs.

"We have adapted this debt reduction strategy early and used every potential opportunity to achieve this goal. The real impact was to have strengthened our balance sheet so that, if further infrastructure investments are needed, we will have the capacity to fund those," Kunz told Fin24.

Despite delays in tariff decisions, Acsa is still going through the process of further tariff applications in the hope of obtaining tariff certainty through to 2023.

According to Kunz, Acsa's overall financial position remains healthy despite regulatory uncertainty and difficult economic conditions.

"In spite of the economic climate, we have seen growth in revenues, especially from international passengers. On the back of that we could get increased turnover. We are proud of our performance," he told Fin24.

Ask how SA's airport taxes compare to others in the world, Kunz said there have not been any recent cost comparisons.

"Airports that contribute to these kinds of studies are mostly European airports where there have not been significant infrastructure investments for a while. We, however, are still in a developmental phase, so a lot of our tariffs are still because of infrastructure investments," he explained.

Kunz said Acsa will also continue to aim at improving its ability to spend as closely to what it anticipates as possible, from a planning and execution point of view.

Debt

Acsa has managed to significantly reduce its debt levels over the past five years. Debt, primarily in the form of bond issues, stood at R9bn at the end of the period, down from R17bn in 2012. As a result, Acsa's gearing ratio has reduced from 59% in 2012 to 25% in the 2017 financial year.

Aeronautical revenue contributed 63% to total revenue but the company remains committed to continue to grow the non-aeronautical revenue contribution. Non-aeronautical revenue is derived from sources such as retail space, advertising, office rental, parking and car hire.
 
“The overall financial position of the Company therefore remains healthy despite regulatory uncertainty and difficult economic conditions,” said Maseko.
 
“Operationally, we are adapting well to a new tariff regime from the regulator which required a 35.5% reduction for the 2018 financial year with increases in the following two years of 5.8% and 7.4%.”

Passenger growth

During the financial year, Acsa had a total of 20.0 million (compared to 19.4 million in 2016) departing passengers from the nine airports it owns and operates.
 
Domestic passenger growth was subdued at 2.2%, while international departing passengers grew by 6.1%.

For the first time, Cape Town International Airport reported a total of more than 10 million arriving and departing passengers, with King Shaka International Airport reporting a total of more than five million passengers for the first time.
 
Aircraft landing volumes were flat for domestic flights and up by 2.5% for international flights, indicating higher passenger utilisation of scheduled flights.

Acsa CEO Bongani Maseko told Fin24 he is pleased, for instance, with Cape Town International Airport for the first time reporting a total of more than 10 million arriving and departing passengers. King Shaka International Airport near Durban reported a total of more than five million passengers for the first time.

"Acsa continues to be resilient, despite sluggish SA economic growth. Domestic passenger growth was subdued, largely due to SA's economic situation. Acsa was, therefore, fortunate to have growth in the first place," said Maseko.

"Our international traffic is growing tremendously. Cape Town, under the guidance of Wesgro, has attracted more airlines. I still think SA is a value for money destination despite the current economic conditions. We are also working with SA Tourism to sell SA as a destination. The rand is in our favour in this regard. SA is still a value for money destination and our traffic numbers testify to that. Of course the yield we get from international traffic is, of course, higher than that of domestic."

Transformation
 
According to Maseko, Acsa has refined and enhanced its transformation strategy to focus on seven sectors which account for the bulk of its procurement. These sectors are information technology, construction, property, retail, advertising, car rental and baggage handling.
 
“We appreciate that business and transformation dynamics are different across these sectors and we need different levers to advance change in each. Some have made more progress with transformation, while in others we have identified the need to support more actively the development of black-owned and managed enterprises,” said Maseko.
 
“However, there remain several critical issues to resolve with the regulator, and we plan to continue advocating for a tariff regime without large changes from year to year. In addition, we need to resolve matters relating to capital expenditure which is essential to maintaining efficient airports and developing infrastructure for the long term.”

He told Fin24 that the broad policy statement Acsa made was to do business with more transformed institutions.

"We then recognised we need to break down that policy into sector specific strategies. It largely stems from the board saying that we must not just trade with the same people. We had to construct something new so that 'not just the usual suspects' tender for our work," he said.

"So, we have a developing strategy and we are happy with the progress in meeting our targets so far. We will increase our targets each year. We currently have tenders on retail and car rental, for instance."

Court case

In answer to a question by Fin24 about the latest development regarding a court case brought against Acsa by two empowerment partners, Maseko said it is currently before the court and "still in the process of unfolding with both parties hoping for finalisation soon".

Fin24 has reported in the past that African Harvest Strategic Investments (AHSI) and Up-Front Investments 65 took Acsa to court because they claim the parastatal is holding them “economically hostage”.

They allege Acsa had them purchase shares under false pretences in 1998 because the company planned to list on the stock exchange and would therefore be largely privatised.

Since then, Acsa embarked upon major upgrades at its nine airports throughout SA. They claim that, in the case of the King Shaka International Airport in Durban, Acsa accumulated so much debt that it cannot afford to pay market-related dividends.

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