AIRPORTS COMPANY SOUTH AFRICA SOC LIMITED - Airports Company South Africa SOC Limited: Financial Performance Highlights and Availability of Annual Report BIACSA

Airports Company South Africa SOC Limited: Financial Performance Highlights and Availability of Annual Report BIACSA

Airports Company South Africa SOC Limited
(Incorporated in the Republic of South Africa)
(Registration number 1993/004149/30)
Issuer Code: BIACSA


Airports Company South Africa SOC Limited: Financial Performance
Highlights and Availability of Annual Report

Airports Company South Africa today reported revenue of R7.12-
billion, EBITDA of R2.6-billion and profit of R1.2-billion for the
financial year to 31 March 2020.

Chief Executive Officer Mpumi Z. Mpofu said the improvement in
profit is to a large extent at odds with the underlying operational
performance of the company. She said the significant improvement
in profit is attributable to the impact of accounting adjustments
and events such as the R721-million fair-value adjustment to
investment properties and R157-million in rates refunds.

“The impact of COVID-19 and travel restrictions resulted in the
company foregoing performance bonuses, salary adjustments and
reduce other operating expenses towards the end of the financial
year in order to mitigate the liquidity challenges, but it also
necessitated an increase of R270-million in provision for doubtful
debts,” she said.

Mpofu said the 1.7% decline in aeronautical revenue reflected the
impact of a tough operating environment and effect of no tariff
increase which contributed to the overall 0.03% drop in revenue.

“A 1.9% increase in non-aeronautical revenue offset the muted
aeronautical income. However, earnings were eroded by significant
cost pressures which saw operating costs rise by 2% to R2.6-
billion.

“Major components of the cost base were security services and asset
maintenance costs in response to security threats, regulatory
compliance, and previously anticipated growth in traffic volumes
in a bid to improve passenger experience,” said Mpofu.

The group generated sufficient cashflows of R2.5-billion to fund
its operations, investment in capital expenditure and servicing of
debt. The group repaid R296-million of debt and ended the
financial year with cash reserves of R1.7-billion.
As of 31 March 2020, the company’s debt amounted to R6.4-billion
(2019: R6.5-billion) with a gearing ratio of 17%. Debt has been
reduced by R11-billion since 2012 when gearing stood at 60%.

Mpofu said that in spite of the challenging environment, the
network of airports had been on track to weather the economic storm
underway before COVID-19, recording 3.3% total passenger growth up
to the end of February 2020. This comprised muted growth of 0.3%
for cross-border traffic and 4.7% for domestic travel.

Overall, Airports Company South Africa recorded a 1% decline in
departing passenger numbers to 20 924 465. Aircraft landings for
the year were down 4% to 248 519 (2019: 259 169).

Said Mpofu: “Up until the end of the third quarter, we were able
to withstand economic headwinds. Unfortunately, the pandemic and
subsequent travel bans led to a drastic contraction in departing
passengers and aircraft landings, resulting in an overall decline
for the year.”

Leading up to the last quarter, the company’s plans to grow non-
aeronautical revenue were yielding good results. Compared to the
previous year, commercial and retail revenues were up 4% and 1%
respectively. Annual escalations pushed car rental and property
revenues up by 4% and 9% respectively, while advertising recorded
an increase of 10%.

“The onset of the COVID-19 pandemic caused our earnings to take a
dramatic downturn and this trend is set to continue in the next
financial year,” said Mpofu.

While circumstances have compelled the company to adapt its
transformation agenda, in the year to end-March it met, and in
many cases exceeded, its transformation targets. The share of
commercial revenue generated by black businesses rose to 55.4%
from 54% in the previous year.

In planning for the recovery from the pandemic, an amended
corporate plan was submitted to the Department of Transport and
National Treasury in August 2020 and September 2020, respectively.

Mpofu says the amended corporate plan is based on the company’s
assessment of the impact of COVID-19 and travel restrictions on
traffic volumes, and the ramifications for the Group’s financial
performance and position.
“We anticipate that the impact on traffic volumes and airline
sustainability will be long term. Significant responses that have
been introduced to mitigate the impact of the anticipated traffic
volume decline include considerable reductions in operational and
capital expenditure,” said Mpofu.

The result of this scenario leads to a funding requirement over a
five- to six-year period of up to R11- billion. Of this amount, up
to R3.5-billion will be required in the next three years given
current assumptions.

“It is important to note that the financial position of the Group
was solid prior to COVID-19 in spite of the difficult operating
environment. We continue to take great pride in our standing as a
well-run State-owned company that has made a profit in all but one
of its 26 years.”

Looking ahead, Mpofu says the only certainty is that high levels
of uncertainty about the future will prevail for some time. Risks
abound, including the re-emergence of new waves of COVID-19.

She says the resilience of domestic and international carriers is
unclear. The future of domestic airlines is uncertain and exposure
of capacity to airlines from the Middle East, which rely on oil-
sourced funds, is concerning in the light of projected low oil
prices.

“Capacity rationalisation is inevitable, and we are prepared to
look for new ways of diversifying our revenue.”

“The COVID-19 pandemic has adversely impacted our outlook for the
future. Fortunately, Airports Company South Africa is a fortified
and resilient company, well positioned to weather this storm. The
response of all our employees has been a source of inspiration, as
I have witnessed first-hand the dedication, innovation and
flexibility of each and every one of our employees who have worked
tirelessly to ensure adaptation to a new normal,” said Mpofu.

“The road to recovery will be difficult but we are in a good
position not only to recover ourselves but to support a wider
recovery across the aviation and tourism value chains.”

The integrated annual report for Airports Company South Africa can
be viewed and downloaded at:

http://www.airports.co.za/business/investor-relations/financial-
information

Noteholders are also advised that the issuer’s audit reports were
unqualified and that there were restatements of the previous year’s
annual reports as stated in note G.16 of the annual report.


Johannesburg
27 October 2020

Debt Sponsor
The Standard Bank of South Africa Limited

Date: 27-10-2020 10:00:00
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