ACSA records worst first-half results in history

By Khulekani Magubane for Fin24

Airports Company South Africa (ACSA) says while it saw some recovery from the Covid-19 pandemic in the second half of 2021, global air traffic is unlikely to recover fully until 2025.

ACSA released its annual financial results on Tuesday morning, announcing a net loss of R2.6-billion and negative earnings before interest tax debt and amortisation (ebitda). However, the company managed to unlock funding through preference shares, staff reductions and the disposal of non-core assets, it said.

As a sector that was volatile before the Covid-19 pandemic, aviation has been rocked by the cascade of lockdowns and restrictions on movement that gripped the world last year with the advent of the novel coronavirus.

‘Worst performance in our history’

In ACSA’s case, hard lockdown in the first half of 2020 posed a significant financial threat as travel was only limited to essential services. The company noted a recovery as lockdown levels eased, but with the second wave restrictions escalated again, having a knock-on effect on travel.

ACSA CFO Sphamandla Mthethwa said 2020 and 2021 were difficult years for airport companies globally, as these businesses are estimated to have lost up to $125 billion for the year.

“For us as ACSA it is our worst performance in our history and a second loss. However, the profits that we have made in previous years enabled us to go into the pandemic with a strong balance sheet. As we sit here today, we are in a much stronger position,” said Mthethwa.

Mthethwa said the first half captured in the 2021 financial results were the worst first-half results in ACSA’s history. He said the second half saw the opening of international travel before a second wave triggered a heightening of lockdown restrictions.

“We started the year on hard lockdown and ended in March on adjusted level 3. We had ups and downs that affected aeronautical and non-aeronautical revenues. In the hard lockdown we had no international travel and some limited domestic travel, restricted to business and essential services,” Mthethwa said.

He said lockdown pressure meant that the 21-million departures in the first half of 2019 were down to 4-million in the first half of 2020. However, Mthethwa said, ACSA managed to raise R810-million in long-term debt raised.

“The second half started positive, but we started having difficulties at the end of the year. There is an appreciation for the operating environment. We had supply chain interruptions, capital project delays, regulatory changes, workforce changes and reduced staff numbers,” said Mthethwa.

He said R2.3 billion in preference shares were unlocked as a debt instrument. ACSA also disposed of its Indian investment to raise R260 million and another R3 billion in facilities was used to get ACSA through the first half of the year.

Job cuts

“From a long-term sustainability perspective, we changed KPIs to reflect the forecast and implemented a staff reduction which gave us savings of R300 million, and [we] negotiated to contain capex,” he said.

Mthethwa said ACSA would work on limiting operating expenditure to R3.9 billion. He attributed a 3.3% increase in employee costs to R1.88 billion to a once-off R243 million that was spent on voluntary severance package payments.

“Our total assets came into R31.6 billion and [we] hope to push our gearing up to 65%. Even in our forecast, we don’t anticipate coming close to 65%. We still have a grip on our balance sheet in an environment that is progressively improving,” Mthethwa said.

He said despite the uncertain environment, ACSA finished the year with R2.3 billion in cash, an unqualified audit option from the office of the Auditor General, and would remain a going concern.

ACSA CEO Mpumi Mpofu said the company’s financial position was aided through headcount rationalisation through voluntary severance packages, the disposal of assets in Brazil and India, and the use of preference shares for funding. However, she said, a full recovery will take a long time.

“The overall recovery is being seen in the local market and in the international markets it is still very sluggish. Two scenarios are given. A baseline with 2023 recovery and a long road at 2024. Recovery is being led by domestic traffic and international traffic remains a little behind with recovery expected only in 2024,” said Mpofu.

Mpofu said the picture for domestic air travel looked much more positive with domestic air traffic bouncing back as Covid-19 national lockdown levels eased after the third wave. However, the southern African regions’ recovery has been slower than west Africa and developed economies.

“We saw our network lose 78.2% of passengers, but our traffic indicators show a return to pre-pandemic levels only in 2025. East London and George in terms of domestic numbers are performing better than other airports, with Kimberly and Gqeberha performing well,” Mpofu said.

Mpofu said ACSA would continue implementing its strategy, which includes developing airports, growing its footprint in line with its global and growth strategies, as well as consolidating in advisory services, diversifying revenue and continental growth.

Mthethwa said the Brazilian asset disposal was still in progress and should be finalised by April next year, with the selling price still subject to negotiations.

Mpofu said while ACSA approached government for a guarantee before the pandemic, it was government that indicated that assistance in the form of preference shares would be more a more appropriate to bolster liquidity for the entity.

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