With a 60% decline in passenger numbers expected this year due to the Covid-19 pandemic, perennial profit-maker Airports Company South Africa (Acsa) is set to report operational losses for its financial year ending March 31, 2021 and breach its financial covenants.
While new Acsa CEO Mpumi Mpofu did not go into the extent of the expected losses during the group’s financial results presentation on Tuesday, she said that overall air passenger traffic is only expected to reach pre-Covid-19 levels by 2024.
Acsa, which is a monopoly in South Africa, controlling nine of the country airports, may need to sell its international investments in airports in Brazil and India, to help mitigate the impact of the coronavirus. If it does not sell these stakes, the group will have to secure state guarantees from its major shareholder, the South African government.
Discussions are underway with National Treasury and no decisions have been made yet. However, the group noted in the latest financial results presentation that with the projected breach of debt covenants, it has obtained a waiver until June 2022 from AFD (the French Development Agency – one of its biggest funders).
Acsa, which has slashed its overall debt by more than half since 2015 (from around R13 billion to around R6.4 billion), also plans to bolster its liquidity profile in the face of Covid-19. The group said that it had already secured R3 billion in credit facilities and is pursuing further credit facilities as part of its future financial plans.
From a capital allocation perspective, Acsa has also been forced to cut its capex plans – a move announced earlier this year after Covid-19 hit.
Besides a low loan-to-value or gearing ratio of 17% (as at the end of its financial year to March 2020), the group noted that it had a “solid pre-Covid-19 financial position” with a “cash position of R1.7 billion”.
Acsa’s after tax profit for the year (to the end of March 2020) came in at just under R1.2 billion. However, Mpofu noted that the spike in profit is largely attributable to the impact of accounting adjustments and events such as a R721 million fair-value adjustment to investment properties and some R157 million in rates refunds.
The CEO said that the Covid-19 pandemic adversely affected Acsa’s latest full-year results as well as outlook in the tail-end of its financial year (in March).
Mpofu pointed out that Acsa’s airport network was on track to weather the economic headwinds in South Africa even before Covid-19, having recorded a 3.3% increase in total passenger growth until the end of February 2020.
However, the travel bans first introduced in March that included “almost a week of hard lockdown”, lead to an overall 0.9% contraction in passenger numbers for the financial year to the end of March.
Worth noting, is that this part of the year forms a crucial time for international tourist travel to South Africa, particularly the Western Cape. This is part of the reason why the Tourism Business Council of SA is pushing for the government’s red list of Covid-19 countries to be scrapped, in order to save the upcoming peak February/March 2021 international travel season to SA.