INTEGRATED REPORT 2019
Performance at a glance
-
R7.1 billion
R6.7 billion
(FY2017/18)
-
R2.8 billion
R3.0 billion
(FY2017/18)
-
R227 million
R552 million
(FY2017/18)
-
1%
2.6%
(FY2017/18)
-
MIAL
returned to profitability
-
R1.1 billion
R916 million
(FY2017/18)
-
R32 billion
R33 billion
(FY2017/18)
-
18%
25%
(FY2017/18)
Material matter: Economic regulation
Description
Our ability to plan for the future and achieve our strategic objectives while creating sustainable value requires us to be financially self-sufficient. However, our financial and infrastructure development planning depends on predictability, transparency and a balance of risk and reward in the regulatory framework and approach and regulatory decision-making. Our ability to manage our core revenue is constrained by regulated charges for the use of our airport facilities. Pre-funding is currently absent from the regulatory approach that would enable a predictable price path for airport charges and cost-effective funding of major infrastructure investments.
Strategic response
The current tariff promulgation, which allows for a 5.8% increase in airport charges in FY2018/19 with no further increases until 2021, applies until 31 March 2021. Airports Company South Africa continuously engages in the review of the economic regulatory framework with stakeholders to provide clarity and certainty on tariff decisions going forward, including through an appeals mechanism included in the Airports Company Amendment Bill.
We will continue to apply a conservative financial management approach to mitigate against the unpredictability of regulatory decisions. We also manage our supply chain in order to contain costs in a prudent fashion, as well as driving the growth of non-aeronautical revenue as much as possible in order to mitigate for constraints on growth of our aeronautical revenue.
Impact of the transformation material matter on our business
.
Strategic pillar
Run airports
.
Our response to risks and opportunities in FY2018/19
- Continued engagement with Regulating Committee.
- Increasing contribution of non-aeronautical revenue to overall revenue.
Impact of our response on stakeholders in FY2018/19 and beyond
- Financial planning based on regulatory certainty allows us to achieve our financial goals and maintain service levels.
Strategic pillar
.
Our desired outcome
- Achieve return on equity target.
- Improve reputation index.
- Diversify income streams.
Trade-offs to achieve our desired outcome
- Investment in business development to mitigate constraints on core revenue through regulated charges.
.
Strategic pillar
Develop airports.
.
Our response to risks and opportunities in FY2018/19
- Prudent control of supply chain.
Impact of our response on stakeholders in FY2018/19 and beyond
- Tariff certainty until 2020 presents window of opportunity to roll out infrastructure investment to expand airport facilities.
.
Our desired outcome
- Achieve return on equity target.
- Improve reputation index.
Trade-offs to achieve our desired outcome
- Airports are currently at or beyond capacity, potentially impacting on service levels.
Material matter: Access to and cost of funding
Description
A lack of affordable funding for infrastructure development impacts on our ability to accommodate growing demand for use of our airports and avoid congestion. Negative sovereign and Group credit ratings have an adverse impact on our access to affordable funding.
Strategic response
Poor perceptions of South Africa’s economic prospects and financial management continue to plague the public sector. Combined with constraints on our core revenue, our ability to obtain affordable funding has been largely unaffected in the short term but may become a significant material threat to the medium- and long-term outlook of our business.
Impact of the access to and cost of funding material matter on our business
.
Strategic pillar
Develop airports.
.
Our response to risks and opportunities in FY2018/19
- Strengthened treasury stakeholder engagement.
- Strengthened operating and governance models.
- Prudent financial management to support funding requirements.
Impact of our response on stakeholders in FY2018/19 and beyond
- Infrastructure development creates additional capacity to cater for growing demand for airport services in South Africa.
.
Our desired outcome
- Improving the passenger experience.
- Creating long-term value for stakeholders.
Trade-offs to achieve our desired outcome
- Prudent approach to expenditure on infrastructure upgrade allowing for modest growth in both aeronautical and non-aeronautical revenue.