Business Maverick

ACSA profit declines, but this (monopoly) SOE still made money and paid down debt

By Ed Stoddard 18 September 2019

Pity more of our SOEs couldn't be like the Airports Company South Africa. The company just released its 2019 annual results and while profits declined, it still ended in the black. And paid down debt without burdening the taxpayer. Of course, being a monopoly helps. 

Monopolies have a number of drawbacks. They deprive consumers of choice, and the lack of competition can make a company flabby, with few incentives to innovate or improve services. Of course, the flip side is that, depending on your market, it would be hard for a monopoly not to make money. Unless of course it is mismanaged and looted into the ground Eskom-style.

The Airports Company South Africa (ACSA) is both a monopoly and a state-owned enterprise (SOE), but it has avoided the fate of many of its peers. The company on Tuesday, 17 September, unveiled its annual results for 2019. Its profit declined 59% to R227 million, but at least it made money, which it has done it all but one of the 26 years since it was formed. 

The fall in profits stemmed from the weakness of the South African economy and a surge in security costs – a huge factor for airports in the post 9/11 era. 

“South African economy affected passenger numbers and viability of some local airlines, thereby impacting revenue from commercial activities,” the company said in a statement. “ACSA also experienced some significant cost pressures, specifically in relation to security services which rose by more than 50% as a result of regulatory amendments and heightened security measures implemented during the year.” 

It also managed to cut debt, reducing it by R2.3 billion to R6.6 billion. That still sounds like a large debt burden but over the past six years, R10.5 billion has been repaid, so the company has been able to service its debt. And its total equity is R22 billion, so its debt to equity ratio is far from problematic. 

JSE-listed Comair also released its annual results on Tuesday, 17 September. Its headline earnings per share rose 184% to 197.2 cents. This is good news for Comair, not so much for another SOE. 

“The sharp increase in earnings was a direct consequence of the company entering into a settlement agreement with South African Airways SOC Limited (“SAA”) amounting to R1.1 billion plus R168 million interest (the “Settlement Amount”) in respect of Comair’s case initiated against SAA in 2005 in respect of SAA’s anti-competitive travel agent incentive schemes,” the company said. 

This was expected after the settlement as announced earlier this year. That was yet another blow to SAA, an ailing SOE that has only been kept aloft by government bail-outs. BM



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