Message from the acting chief financial officer

Airports Company South Africa remained profitable and achieved a satisfactory return on equity of 4.2% for the year, following the 35.5% reduction in airport charges from 1 April 2017.


Total revenue decreased by 19.4% to R6.9 billion due to lower airport charges. This was partially offset by a 4.6% increase in non-aeronautical revenues and 4.2% growth in departing passengers. The impact of the two-year delay in the Permission Decision, which rebased airport charges, has now been absorbed. We are more certain of the future price path, at least until 2020.



The Company’s total assets increased to R32 billion (2017: R31 billion), comprising 22.3% (2017: 18.3%) investment properties and 10.0% (2017: 10.7%) cash and short-term investments.

Investment property fair value adjustments amounted to R533 million, including reclassifying some car rental facilities, which explains the restatement in prior years

Increase due to equity contributions of R374 million to Guarulhos International Airport (GRU)

Mumbai International Airport (MIAL) made profits of R10 million

Cash decreased marginally due to an increase in debtor days and debt repayments
Trade and other receivables increased due to an increase in day’s sales outstanding to 37 days (2017:31)

Borrowings decreased due to the repayment of inflation-linked bond and amortisation of loans of R453 million

Net debt to capitalisation was 22% (2017: 25%)


The Company’s profit after tax decreased to R0.8 billion (2017: R2.0 billion) due to the R1.8 billion reduction in aeronautical revenue.

Aeronautical charges reduced by 35.5%; which was partially offset by 4.2% increase in passenger volumes
The 10.4% increase in operating expenses (2017: 11%) was largely due to investment in IT systems, repairs and maintenance, and annual increases in rates and taxes
Reduced losses of R481 million in Guarulhos International Airport (GRU) and a positive contribution by Mumbai International Airport Private Limited (MIAL) reduced our losses from equity‑accounted associates
Lower debt levels resulted in the reduction in financing cost

Abridged cash flow statement

Detailed information on operational performance against the Company’s Run airports, Develop airports and Grow our footprint strategic pillars is available in the performance overview.

Operating expenses

The revised governance framework and operating model, which contributed to some historic increases in employee costs during its implementation, is now well embedded, resulting in a reduction in employee costs.

The global move to digitisation and cloud services has reduced the need for capital investments in IT infrastructure in favour of more costly subscription services. This trend, combined with repairs and maintenance required to address ageing infrastructure, resulted in higher IT costs.

The Company implements cost-efficiency programmes to reduce the impact of increasing administrative or regulatory costs.

A further analysis of the top five costs is provided in the graph alongside.

Concession investments

No new concessions were entered into this year. However, a further R374 million was invested in GRU in line with the commitments of the concession agreement entered into in 2012. This is expected to be the final equity contribution. MIAL has returned to profitability. GRU almost halved its losses and is expected to improve towards profitability in the next few years.

Concession investments require high levels of capital expenditure in their initial years, followed by depreciation and interest charges which impact profitability. Over time, these charges reduce and revenue increases as traffic volumes grow, taking up the new capacity. Our investments in two airports in India and Brazil demonstrate how the Company balances its portfolio of concession investments with different maturities to reduce the impact on profitability of new concessions.


The Company strives to diversify its funding sources to ensure that capital expenditure is funded cost-effectively, regardless of economic and market conditions. A summary of our funding sources is presented in the chart below.

Total debt outstanding at year-end was R8.8 billion (2017: R9.3 billion). The weighted cost of debt increased slightly to 9.1% from 9.0%. Our fixed-rate debt was 83% of the total debt and the non-fixed-rate debt was 17% as shown in the chart below.

The Company’s gearing ratio declined from 63% in 2010 to 22%, largely due to the early debt redemption strategy. The strategy was adopted due to the Company’s favourable cash position and conservative investment plan. Since 2013, the Company has repaid approximately R8.0 billion of debt back to its lenders.

Credit rating

Airports Company South Africa’s credit rating was affirmed by Moody’s on 26 March 2018. The global scale rating was unchanged at Baa3 and the outlook changed from negative to stable in line with the South African sovereign rating. The national sale rating was affirmed at with a stable outlook. The affirmation of the Company’s credit rating confirms that our ratings are constrained by those of the South African Government, as Moody’s would not rate the Company higher than the government.

Outlook and focus areas

The 35.5% reduction in airport charges has taken full effect and established a new base for the Company to execute its strategy and plans. Over the next few years, limited increases to airport charges are expected, and no further reductions to airport charges should be required.

Positive cash generation over the past few years and the early debt redemption programme have contributed to the overall improvement in the health of the Company’s balance sheet. This will support cost-effective fundraising activities required to implement the major infrastructure investments envisaged over the medium to long term.

The turnarounds in our MIAL and GRU concession investments had a positive effect during the year, which is expected to continue into the foreseeable future.

Our supply chain management policy and procedures were revised to address shortcomings. Improved compliance with the policy and procedures, combined with appropriate capacitation of the supply chain management teams, should contribute to a reduction in non-conformances. As a consequence, this will reduce reported irregular expenditure in future.

Engagements with the airline associations in the lead up to the permission application for the 2019 to 2023 Permission confirmed the Company’s capital expenditure programme. This forms the basis of the application for airport charges. The regulatory decision received in August 2018 provides for an increase in airport charges of 5.8% in 2019 and no increases until 2021.

The Company will continue to apply a conservative financial management approach to mitigate against the continuous unpredictability of regulatory decisions, which includes the rationalisation of the infrastructure investment programme from time to time. This is often unfortunate in light of the Industry capacity requirements based on traffic volume growth and the socio-economic benefits that such infrastructure investments would have resulted in.