Airports Company reports sharp fall in profits, but remains in black

4th October 2019 By: Rebecca Campbell - Creamer Media Senior Deputy Editor

State-owned Airports Company South Africa (ACSA) has again reported a profit in its latest annual results, for the 2018/19 financial year (FY). However, that profit, of R227-million, was 58.9% down on the R552-million achieved during FY2017/18. Acting CEO Bongiwe Mbomvu affirmed, at the company’s recent results presentation, that “[w]e enter FY2020 with a healthy balance sheet”.

ACSA’s revenues, R7.1-billion, were up 5.6% on the previous financial year (R6.7-billion). The company divides its revenues into aeronautical and nonaeronautical. Under aeronautical, landing fees were up 5%, passenger service charges rose by 7% and aircraft parking fees jumped 14%. Non-aeronautical revenues also increased.

Earnings before interest, taxation, depreciation and amortisation (Ebitda) fell by 4.6% to R2.8-billion in FY2018/19 from R3-billion in FY2017/18. The value of the company’s total assets declined by 5% to R32-billiion from R33-billion.

“We experienced some cost pressures on operational costs,” said acting CFO Lindani Mukhudwani in part explanation of the fall in profit and Ebitda. From FY2017/18 to FY 2018/19, employee costs jumped 17%, utilities costs rose 7%, security costs rocketed 54% (owing to regulatory changes that required new security measures), repairs and maintenance went up 13% and information systems expenses increased by 15%. Another contributory factor, she noted, was “fair-value issues” – the fair value of ACSA’s investment properties dropping by 125% year-on-year.

However, the company’s debt continued to fall. ACSA’s gearing ratio fell to 18%, from 25% in the previous financial year. In numbers, it stood at R7-billion in the reported period, compared with R9-billion in FY2017/18.

“As a business, we only borrow for specific purposes,” she stated. The company would start borrowing again in the near future to fund specific projects. One such project was the planned realignment of Cape Town International Airport’s runway. ACSA’s capital expenditure had already risen from R916-million in FY2017/18 to R1.1-billion in FY2018/19.

Key issues for the company in the coming years, Mbomvu highlighted, were technology and digitalisation, safety and security, government policy and regulations (airports are highly regulated), new growth opportunities and transformation. “Innovation is quite important for an airport,” she observed. “Technology is moving like you never imagined . . . We want to minimise our environmental impact . . . We want to contribute more to black economic empowerment.”

The core business pillars of the company were to run airports, develop airports and grow ACSA’s footprint. Running airports meant being efficient, while developing airports meant improving them. Doing both successfully would boost the regional economy. Growing the footprint means getting involved in more airports and/or more related businesses. “A larger footprint provides more impactful outcomes for the country and the world,” she noted.

“We make money because of the passenger,” she highlighted. “Passengers are very important to us.” Staff are not forgotten, however. “At ACSA, our employees are [also] very important.”

The company owns and operates nine airports in South Africa, has equity investments in international airports in Brazil (São Paulo) and India (Mumbai) and provides technical, advisory and consultancy services for airports in Ghana, Liberia, Rwanda, Zambia and, in South Africa, for non-ACSA Oribi Airport, in Pietermaritzburg. The company has received what it describes as a fair and reasonable offer for its investment in Mumbai and so is pursuing this opportunity.

“I do want want to emphasise the fact that the business is stable [and] that the business is in good hands,” assured Mbomvu. “We are OK!” ACSA is the only State-owned company that pays dividends. Coincidently or not, it is also the only one run by women.