Financial Statements. Embracing forward thinking

Transcription

1 Financial Statements 2014 Embracing forward thinking

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3 CONTENTS Report of the Board Audit and Risk Committee 2 Directors responsibilities and approval 4 Group secretary s certification 6 Independent auditor s report 7 Directors report 10 Statement of financial position 12 Statement of profit and loss and other comprehensive income 14 Statement of changes in equity 15 Statement of cash flows 17 Accounting policies 19 Notes to the consolidated annual financial statements 34 statistical review 112 Company information 116 These consolidated annual financial statements were prepared under the supervision of the Chief Financial Officer: Maureen Manyama-Matome CA(SA). These consolidated annual financial statements have been audited in compliance with the applicable requirements of the Companies Act 71 of king shaka international Airport 1

4 Report of the Board Audit and Risk Committee For the year ended 31 March 2014 The Audit and Risk Committee report is prepared in terms of the Public Finance Management Act of 1999 as amended including its related regulations; Companies Act No. 71 of 2008 (as amended) and the principle stipulated by the King III Code of Corporate Governance. Terms of reference The Audit and Risk Committee of consists of four independent non-executive directors. The skills and competencies of the members are outlined under section 3.2 of the integrated report. The Audit and Risk Committee operated under terms of reference which is approved by the Board. The Committee has carried out its duties as per the Companies Act and the Public Finance Management Act, including the special mandates that are assigned by the Board from time to time. responsibilities The committee reports that it has discharged its responsibilities as it relates to the following, namely review of: The effectiveness of internal controls The risk management process and performance The reliability, adequacy and effectiveness, of financial and non-financial information provided by management s through the quarterly reports that are submitted to the Department of Transport The accounting and auditing concerns, as identified by the auditors (both internal and external) as well as reviewing the adequacy of management s corrective action in response to both significant internal and external audit findings Compliance with legal and regulatory provisions The Committee has also reviewed the litigation report on a continuous basis to ensure that they are disclosed appropriately Effectiveness of the internal audit function Independence and objectivity of the external auditors The performance of the internal audit functions through quarterly progress reports. The Committee approved the annual operational internal audit plan and a strategic three year rolling plan; and was satisfied that the plans are in place to address the risks identified per the strategic risk register. Monitored the relationship between management, internal auditors and external auditors Internal Controls (including Internal Financial controls) The Committee continued through its engagement during the period under review, to provide oversight on the Company s internal control system to ensure that it is designed and implemented in a manner that achieves the following: The reliability and integrity of financial information. Compliance on applicable laws and regulations Achievements of pre-determined objectives Economy and efficiency of operations Safeguarding of assets. 2

5 The Committee is of the opinion that the internal financial controls are adequate to ensure that the financial records may be relied upon in the preparation of the annual financial statements, and accountability for assets and liabilities is maintained. The conclusion has been reached based on the discussions and explanations obtained from management and external and internal auditors based on the results of their audits. No significant matters relating to the material breakdown of internal controls have come to the attention of the Committee, other than those reported in the directors report. The committee has satisfied itself on the expertise, adequacy of the resources and experience of the finance team, under the leadership of the CFO, that were responsible for the financial statements of the Group. Financial Statements; Integrated report and Draft Audit Opinion The Committee is satisfied that the accounting policies adopted in the preparation of the annual financial statements are appropriate, and that the judgements and estimates made in their preparation are reasonable and prudent. The Board Audit and Risk Committee reviewed the going concern of the Company and is satisfied that the adoption of the going concern premise in the preparation of the annual financial statements is appropriate. The Committee has, at its meeting on 8 July 2014, considered the audited annual financial statements; integrated report; report to management as well as the draft audit opinion which were all recommended to the special Board meeting held on the 22 July 2014 for approval. On behalf of the Board Audit and Risk Committee. Tryphosa Ramano Chairman 22 July

6 Directors Responsibilities and Approval For the year ended 31 March 2014 The directors are required in terms of the Companies Act No. 71 of 2008, Treasury Regulations and the Public Finance Management Act No.1 of 1999 as amended (PFMA), to maintain adequate accounting records and are responsible for the content and integrity of the consolidated annual financial statements and related financial information included in this report. It is their responsibility to ensure that the consolidated annual financial statements fairly present the state of affairs of the Group as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards (IFRS) and its interpretations issued by the International Accounting Standards Board (IASB). The external auditors are engaged to express an independent opinion on the consolidated annual financial statements. The consolidated annual financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations issued by the International Accounting Standards Board (IASB) and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the Group and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the Board sets standards for internal control aimed at reducing the risk of error or loss in a costeffective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Group and all employees are required to maintain the highest ethical standards in ensuring the Group s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the Group is on identifying, assessing, managing and monitoring all known forms of risk across the Group. While operating risk cannot be fully eliminated, the Group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the consolidated annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss. The financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. 4

7 The external auditors are responsible for independently auditing and reporting on the Group s consolidated annual financial statements. The consolidated annual financial statements have been examined by the Group s external auditors and their report is presented on pages 7 to 9. The consolidated annual financial statements set out on pages 12 to 110, which have been prepared on the going concern basis, were approved by the Board on 22 July 2014 and were signed on its behalf by: Busisiwe Mabuza Roshan Morar Chairman Deputy Chairman 22 July July

8 Group Secretary s Certification For the year ended 31 March 2014 Declaration by the Group secretary in respect of Section 88(2)(e) of the Companies Act In terms of Section 88(2)(e) of the Companies Act, No.71 of 2008, as amended, I certify that the Group has lodged with the Commissioner all such returns as are required of a public company in terms of the Companies Act and that all such returns are true, correct and up to date. In terms of Section 8(1) of the Airports Company Act, No.44 of 1993, I certify that, for the financial year ended 31 March 2014, SOC Limited has lodged, with the Minister of Transport, the financial statements in respect of the preceding financial year. Nosisa Kekana Company Secretary 22 July

9 Independent auditors report to the shareholders of Airports Company South Africa SOC Limited For the year ended 31 March 2014 REPORT ON THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS Introduction We have audited the consolidated and separate financial statements of SOC Limited and its subsidiaries set out on pages 12 to 110, which comprise the consolidated and separate statement of financial position as at 31 March 2014, the consolidated and separate statement of profit and loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, as well as the notes, comprising a summary of significant accounting policies and other explanatory information. Accounting authority s responsibility for the consolidated and separate financial statements The Board of Directors, which constitutes the accounting authority, is responsible for the preparation and fair presentation of these consolidated and separate financial statements in accordance with International Financial Reports Standards and the requirements of the Public Finance Management Act of South Africa and the Companies Act of South Africa, and for such internal control as the accounting authority determines is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error. Auditors responsibility Our responsibility is to express an opinion on these consolidated and separate financial statements based on our audit. We conducted our audit in accordance with the Public Audit Act of South Africa, the general notice issued in terms thereof and International Standards on Auditing. Those standards require that we comply with ethical requirements, and plan and perform the audit to obtain reasonable assurance about whether the consolidated and separate financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated and separate financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the consolidated and separate financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated and separate financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the financial position of SOC Limited and its subsidiaries as at 31 March 2014 and their financial performance and cash flows for the year then ended, in accordance with International Financial Reporting Standards and the requirements of the Public Finance Management Act of South Africa and the Companies Act of South Africa. 7

10 Independent auditors report to the shareholders of Airports Company South Africa SOC Limited (continued) For the year ended 31 March 2014 Other reports required by the Companies Act of South Africa As part of our audit of the consolidated and separate financial statements for the year ended 31 March 2014, we have read the Directors Report, the Audit Committee s Report and the Company Secretary s Certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited consolidated and separate financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited consolidated and separate financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports. Other matters The supplementary information as set out on pages 112 to 115 does not form part of the consolidated and separate financial statements and is presented as additional information. We have not audited this information and accordingly do not express an opinion thereon. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the Public Audit Act and the general notice issued in terms thereof, we report the following findings on the reported performance information against predetermined objectives for the selected key performance indicators presented in the annual report, non-compliance with legislation as well as internal control. We performed tests to identify reportable findings as described under each subheading but not to gather evidence to express assurance on these matters. Accordingly, we do not express an opinion or conclusion on these matters. Predetermined objectives We performed procedures to obtain evidence about the usefulness and reliability of the reported performance information for the following selected strategic objectives presented in the integrated report of the Company for the year ended 31 March 2014: Objective: Ensure succession planning on pages 26 Objective: Economic viability job creation on pages 27 Objective: On time departures on pages 28 Objective: Aviation safety incidents on pages 28 Objective: Aviation security incidents on pages 28 Objective: Inclusive infrastructure planning and development on pages 28 Objective: Leverage IT for competitive advantage on pages 28 Objective: Optimise regulatory return on pages 29 Objective: Deliver exceptional passenger services on pages 29 Objective: Entrench and deepen partner relations on pages 29 Objective: Deliver on long-term profitability (ROCE) on pages 30 Objective: Control funding and cost of borrowing (Net debt/ebitda) on pages 30. We evaluated the reported performance information against the overall criteria of usefulness and reliability. We evaluated the usefulness of the reported performance information to determine whether it was presented in accordance with the National Treasury s annual reporting principles and whether the reported performance was consistent with the 8

11 planned strategic objectives. We further performed tests to determine whether indicators and targets were well defined, verifiable, specific, measurable, time-bound and relevant, as required by the National Treasury s Framework for Managing Programme Performance Information (FMPPI). We assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete. We did not raise any material findings on the usefulness and reliability of the reported performance information for the selected strategic objectives. Although we raised no material findings on the usefulness and reliability of the reported performance information for the selected strategic objectives, we draw attention to the following matter: Achievement of planned targets Refer to the integrated report on pages 26 to 30 for information on the achievement of the planned targets for the year. Compliance with legislation We performed procedures to obtain evidence that the Company had complied with legislation regarding financial matters, financial management and other related matters. We did not identify any instances of material non-compliance with specific matters in key legislation, as set out in the general notice issued in terms of the Public Audit Act. Internal control We considered internal control relevant to our audit of the financial statements, strategic objectives and compliance with legislation. We did not identify any significant deficiencies in internal control. Ngubane & Co (Jhb) Inc. pricewaterhousecoopers Inc. Director: E Sibanda director: R Dhanlall Registered auditor registered auditor Midrand Johannesburg 31 July July

12 Directors Report For the year ended 31 March 2014 The directors have pleasure in submitting their report on the consolidated annual financial statements of Airports Company South Africa SOC Limited and the Group for the year ended 31 March The Company was established in terms of the Airports Company Act, No.44 of 1993 as amended and the Companies Act, No.71 of 2008 as amended. Nature of business The principal activities of the Company are the acquisition, establishment, development, provision, maintenance, management, control and operation of airports or part of any airport or any facilities or services that are normally performed at an airport. There have been no material changes to the nature of the Group s business from prior years. Review of operations Revenue for the Group amounted to R7.1 billion (2013: R6.6 billion), including non-aeronautical revenue of R2.6 billion (2013: R2.4 billion). Profit before income tax for the Group amounted to R2.3 billion (2013: R1.6 billion). The profit for the year for the Group was R1.7 billion (2013: R991 million) after taxation expense of R597 million (2013: R650 million). Dividends The Board of Directors has approved an ordinary dividend of R300 million for the 2014 financial year (2013: R99 million). Capital expenditure During the year R928 million (2013: R990 million) was spent on capital expenditure relating to improvements, expansions and replacements by the Group. (Refer to Notes 5, 6 and 7 and 36 on capital commitments for more details). Share capital There were no changes to the authorised and issued share capital of the Company and the Group during the financial year. Going Concern The financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. Subsidiaries, joint ventures and associates The Group has a 50% interest in Airport Logistics Property Holdings (Pty) Ltd, which is a joint venture between the Company and The Bidvest Group Ltd. The Group has a 100% interest in ACSA Global Ltd, a management company incorporated in Mauritius. The Company has been accounted for as a subsidiary. ACSA Global Ltd holds a 10% interest in the Mumbai International Airport concession (MIAL). ACSA Global Ltd is registered in Mauritius. The investment in MIAL has been accounted for as an associate. 10

13 SOC Ltd has a 40% interest in the La Mercy JV Property Investments (Pty) Ltd. The Company is a property holding, development and letting company. The investment in the Company has been accounted for as an associate. SOC Ltd holds a 10% interest in Aeroporto de Guarulhos Participações S.A. Aeroporto de Guarulhos Participações S.A., registered in Brazil. The investment has been accounted for as an associate. Details of the assets, liabilities, revenues and expenses of the joint ventures and associates that are included in the consolidated statement of comprehensive income and the statement of financial position are set out in notes 9 and 10 of the annual financial statements. The Group s accounts include the consolidation of the Airports Management Share Incentive Scheme Company (Pty) Ltd and Lexshell 342 Investment Holdings (Pty) Ltd. These companies are consolidated in terms of International Financial Reporting Standards. The Group consolidates these entities as it is exposed to significant risks that are associated with loans extended to the entities to acquire shares of the Company. Furthermore, the Group receives rewards associated with the employment of the beneficiaries. Directors and Secretary Details of the Directors and Secretary of the Company are given on pages 45 to 52 of the Integrated report. Interests of Directors and Officers No contracts were entered into in which directors and officers of the Company had an interest and which affect the business of the Group. The directors had no interest in any third party or company responsible for managing any of the business activities of the Group. The emoluments of directors are determined by the shareholders. No long-term service contracts exist between directors and the Company (Directors emoluments can be found in note 38). Information required in terms of the Public Finance Management Act In terms of the materiality framework agreed with the shareholder, any losses due to criminal conduct or irregular or fruitless and wasteful expenditure that individually (or collectively where items are closely related) exceed R60 million, must be reported. Fruitless and wasteful expenditure of R0.5 million (2013: R13.6 million) in relation to not returning and/or demanding a refund on non-functional equipment and forfeited deposits was suffered. Management has instituted preventative and corrective measures as considered appropriate, including disciplinary and possible legal action. Irregular expenditure of R82 million (2013: R32.8 million) was suffered by the Group, in relation to non-adherence to procurement procedures. Management has instituted preventative and corrective measures as considered appropriate, including disciplinary and possible legal action. Management has controls in place to monitor and report on this type of expenditure on a regular basis. This information is considered and presented to the Exco and the Audit and Risk Committee for review on a quarterly basis. 11

14 Statement of Financial Position For the year ended 31 March 2014 GROUP COMPANY Figures in Rand thousand Note ASSETS Non-current assets Property, plant and equipment Investment property Intangible assets Investments in subsidiaries Investment in joint ventures * * Investments in associates Other non-current assets Current assets Inventories Derivative financial instruments Current tax receivable Trade and other receivables Investments Cash and cash equivalents Non-current assets held for sale Total assets Equity and liabilities Equity Share capital Ordinary Share premium Treasury share reserve 21 (44 024) (44 024) (44 024) Other reserves 22 (77 467) ( ) (26 309) (83 928) Retained income

15 GROUP COMPANY Figures in Rand thousand Note Liabilities Non-current liabilities Derivative financial instruments Retirement benefit obligation Deferred income Deferred tax liability Interest-bearing borrowings Current liabilities Derivative financial instruments Current tax payable Trade and other payables Deferred income Provisions Interest-bearing borrowings Total liabilities Total equity and liabilities *Amounts less than R

16 Statement of Profit and Loss and Other Comprehensive Income For the year ended 31 March 2014 GROUP COMPANY R restated restated Figures in Rand thousand note Revenue Other income Employee costs 29 ( ) ( ) ( ) ( ) Depreciation, amortisation and impairments 6, 7 ( ) ( ) ( ) ( ) Operating expenses 43 ( ) ( ) ( ) ( ) Operating profit Income from equity accounted investments 9, Finance income Finance costs 30 ( ) ( ) ( ) ( ) Gains on remeasurement and disposal of financial instruments Profit before taxation Taxation 31 ( ) ( ) ( ) ( ) Profit for the year Other comprehensive income: Items that will not be reclassified to profit or loss: Actuarial gain/(loss) (18 278) (18 278) Gains and losses on property revaluation (note 5) Income tax relating to items that will not be reclassified (18 111) (14 008) (18 111) (14 008) Total items that will not be reclassified to profit or loss Items that may be reclassified to profit or loss: Exchange differences on translating foreign operations Effects of cash flow hedges (71 680) (71 680) Income tax relating to items that may be reclassified (21 401) (4 290) Total items that may be reclassified to profit or loss (30 654) (51 610) Other comprehensive income for the year net of taxation (16 593) Total comprehensive income for the year Earnings per share Per share information Basic earnings per share (cents) Diluted earnings per share (cents)

17 Statement of Changes in Equity For the year ended 31 March 2014 Treasury Share Share share Other Retained Total Figures in Rand thousand capital premium reserve reserves income equity Group Balance at 1 April (44 024) Profit for the year Total comprehensive income for the year Gain on revaluation of investment property, net of tax Transfer between reserves ( ) Actuarial losses on defined benefit post-retirement medical aid liability, net of tax (13 441) (13 441) Foreign currency translation differences, net of tax Cash flow hedge reserve on derivative financial instruments, net of tax (51 610) (51 610) Deferred tax on transfer Total other comprehensive income ( ) Balance at 1 April (44 024) ( ) Profit for the year Other comprehensive income Total comprehensive income for the year Actuarial losses on defined benefit post-retirement medical aid liability, net of tax Gain on revaluation of investment property, net of tax Foreign currency translation differences, net of tax Cash flow hedge reserve on derivative financial instruments, net of tax Dividends declared (97 925) (97 925) Total other comprehensive income (97 925) Balance at 31 March (44 024) (77 467) Note(s)

18 Statement of Changes in Equity (continued) For the year ended 31 March 2014 Treasury Share Share share Other Retained Total Figures in Rand thousand capital premium reserve reserves income equity Company Balance at 1 April Profit for the year Total comprehensive income for the year Gain on revaluation of investment property, net of tax Transfer between reserves ( ) Actuarial losses on defined benefit post-retirement medical aid liability, net of tax (13 441) (13 441) Cash flow hedge reserve on derivative financial instruments, net of tax (51 610) (51 610) Deferred tax realised on sale of non-current assets held for sale Total other comprehensive income ( ) Balance at 1 April (83 928) Profit for the year Other comprehensive income Total comprehensive income for the year Actuarial losses on defined benefit post-retirement medical aid liability, net of tax Cash flow hedge reserve on derivative financial instruments, net of tax Gain on revaluation of investment property, net of tax Dividends declared (99 107) (99 107) Total other comprehensive income (99 107) (41 488) Balance at 31 March (26 309) Note(s)

19 Statement of Cash Flows For the year ended 31 March 2014 GROUP COMPANY Figures in Rand thousand note Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees ( ) ( ) ( ) ( ) Cash generated from operations Interest income Tax paid 35 ( ) ( ) ( ) ( ) Net cash from operating activities Cash flows from investing activities Purchase of property, plant and equipment 6 ( ) ( ) ( ) ( ) Sale of property, plant and equipment Purchase of investment property 5 (16 106) (7 763) (16 106) (7 763) Purchase of other intangible assets 7 (48 573) (37 930) (48 573) (37 914) Loans to group companies repaid/(advanced) (7 256) ( ) Decrease/(Increase) in short-term investments ( ) ( ) Proceeds on disposal of Assets held for sale Investments in associates ( ) (76 892) ( ) (76 892) Net cash from investing activities ( ) ( ) ( ) ( ) Cash flows from financing activities Interest-bearing borrowings repaid ( ) ( ) ( ) ( ) Financial instruments held for trading (76 761) (72 743) (76 761) (72 743) Dividends paid (97 528) (97 528) Interest paid ( ) ( ) ( ) ( ) Net cash from financing activities ( ) ( ) ( ) ( ) Total cash movement for the year ( ) ( ) ( ) ( ) Cash at the beginning of the year Effect of exchange rate movement on cash balances 295 Total cash at end of the year

20 We continued to deliver to a high standard. The profit reported for the year ended 31 M arch 2014 is R1.7 billion, which has increased by 73% and represents the highest profit that we have generated since inception. 18

21 Accounting Policies For the year ended 31 March Basis of Preparation The consolidated annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations issued by the International Accounting Standards Board (IASB), and the Companies Act, No.71 of 2008, as amended, and the requirements of the Public Finance Management Act No. 1 of 1999, as amended. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note The consolidated annual financial statements incorporate the principal accounting policies set out below. These accounting policies are consistent with the previous period, except for the changes set out in note 2, Changes in accounting policy. 1.1 Segmental reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments of an entity, has been identified as the Exco. The basis of segmental reporting has been set out in note Basis of measurement The consolidated annual financial statements have been prepared on the historical cost basis, except for investment property and certain financial instruments that are carried at fair value. Functional and presentation currency These financial statements are presented in South African Rand, which is the Company s functional currency, and were rounded to the nearest thousand. 1.3 Consolidation Subsidiaries Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest s proportionate share of the acquiree s net assets. 19

22 Accounting Policies (continued) For the year ended 31 March Basis of Preparation (continued) 1.3 Consolidation (continued) Subsidiaries (continued) The Company s investments in subsidiaries are carried at cost, net of accumulated impairment losses. Cost is adjusted to reflect the changes in consideration arising from contingent consideration amendments. Cost also includes directly attributable costs of investment. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date and fair value of any previous equity interest in the acquiree over the fair value of the Group s share of the identifiable net assets acquired is recognised as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the statement of comprehensive income. Accounting policies of the subsidiaries are consistent with those of the Group. Investments in associates and joint arrangements Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. A joint venture is a joint arrangement whereby the parties that have joint control over the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. Investments in associates and joint ventures are accounted for using the equity method of accounting and are initially recognised at cost. If the ownership interest in an associate or joint venture is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate. The Group s share of its associates and joint ventures post-acquisition profits or losses is recognised in the statement of comprehensive income, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group s interest in the associates or joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Dilution gains and losses arising in investments in associates are recognised in the statement of comprehensive income 20

23 1. Basis of Preparation (continued) 1.3 Consolidation (continued) Subsidiaries (continued) Accounting policies of the joint ventures and associates have been changed where necessary to ensure consistency with the policies adopted by the Group. The Group s policy for accounting for investments in joint ventures changed from the proportional accounting to the equity accounting method, due to the first time adoption of IFRS 11, Joint Arrangements in The change in accounting policy has been applied as from 1 April The effects of the change in accounting policies on the financial position, comprehensive income and the cash flows of the Group at 1 April 2012 and 31 March 2013 are shown in note 2. The change in accounting policy has had no impact on earnings per share. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Transactions with non-controlling interests The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. 1.4 Revenue Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group s activities. Revenue is shown net of value-added tax and returns, and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group s activities as described below. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Rental income is recognised in profit and loss on a straight-line basis over the term of the lease. Lease incentives are recognised as an integral part of rental income, over the term of the lease. 21

24 Accounting Policies (continued) For the year ended 31 March Basis of Preparation (continued) 1.4 Revenue (continued) Revenue of the Group comprises the following: Aeronautical revenue Aeronautical revenue consists of the following: Landing fees Landing fees are determined by using regulated tariffs for aircraft landings based on the maximum take-off weight of landing aircrafts for each landing. Passenger service charges Passenger service charges are determined by using regulated tariffs for each departing passenger at an airport of departure. Aircraft parking Aircraft parking fees are determined on regulated tariffs for each aircraft parked for over four hours, based on the maximum take-off weight of aircraft parking per 24-hour period. Commercial revenue Commercial revenue consists of the following: Advertising Revenue is generated through the rental of advertising space to concessionaires. Rental income is normally based on the higher of a minimum guaranteed rental or a percentage of turnover. Retail Revenue is generated through the rental of retail space to concessionaires. Rental income is normally based on the greater of a percentage of turnover or a minimum monthly rental. Parking Revenue generated by providing short and long-term parking facilities is determined on time-based tariffs. Car hire Revenue is generated from concession fees and the rental of space and kiosks to car hire companies. Property rental Revenue is generated through the rentals of offices, air lounges, aviation fuel depots, warehousing, logistics facilities, hotels and filling stations, based on medium to long-term rental agreements with tenants. Hotel operations Revenue comprises the invoice value of accommodation and the sale of food and beverages. Accommodation income is recognised in the financial statements at the date guests are invoiced. 22

25 1. Basis of Preparation (continued) 1.4 Revenue (continued) Premiums received Premiums received comprise the net gains on investments made in an insurance cell captive. Other Other revenue mainly consists of the recovery of electricity and water charges and fees charged for the issuing of permits, and dividend income. Dividend income is recognised in profit and loss on the date that the Group s right to receive payment is established. 1.5 Other income Other income is any income that accrued to the Group from activities that are not part of the normal operations and is recognised as earned. 1.6 Finance income and expense Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit and loss, using the effective interest method. Finance expenses comprise interest expense on borrowings. All borrowing costs are recognised in profit and loss, using the effective interest method. 1.7 Leases leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased assets are measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to those assets. payments made under operating leases are recognised in profit and loss on a straight-line basis over the term of the lease. Lease incentives are recognised as an integral part of the total lease expense, over the term of the lease. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the contingency no longer exists and the lease adjustment is known. 1.8 Foreign currency Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to South African Rand at closing rate. The income and expenses of foreign operations are translated to South African Rand at exchange rates at the dates of the transactions. Foreign currency differences are recognised directly in other comprehensive income. When a foreign operation is disposed of, in part or in full, the relevant amount in the Foreign Currency Translation Reserve (FCTR) is transferred to profit and loss. 23

26 Accounting Policies (continued) For the year ended 31 March Basis of Preparation (continued) 1.8 Foreign currency (continued) Foreign operations (continued) Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of net investment in a foreign operation and are recognised directly in other comprehensive income in the FCTR. Foreign currency transactions and balances Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between the amortised cost of the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on translation are recognised in profit and loss. 1.9 Borrowing costs Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings, pending their expenditure on qualifying assets, is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised as an expense in the period in which they are incurred Employee benefits Short-term employee benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or incentive scheme plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. Defined contribution plans A defined contribution plan is a plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans and medical aid schemes are recognised as an employee benefit expense in profit and loss when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. 24

27 1. Basis of Preparation (continued) 1.10 Employee benefits (continued) Other long-term employee benefits The Group s net obligation in respect of post-employment medical benefits is the amount of future benefit that employees have earned in return for their services in the current and prior periods. The benefit is discounted to determine its present value, and the fair value of any related assets are deducted. The discount rate is determined by the actuarial assumptions that have maturity terms approximating the terms of the Group s obligations. The calculation is performed using the projected unit credit method. The Group recognises all actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions directly to equity in the statement of other comprehensive income in the period in which they arise Income tax Income tax expense comprises current and deferred tax. Income tax is recognised in the profit and loss, except to the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised directly equity or in other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of the previous years. Deferred tax is recognised using the balance sheet method by providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that is probable that they will not reverse in the foreseeable future and the timing of the reversal of the temporary difference is controlled by the Group. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rate that is expected to be applied to the temporary differences when they reverse, based on laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset the liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis, or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will realise. 25

28 Accounting Policies (continued) For the year ended 31 March Basis of Preparation (continued) 1.12 Property, plant and equipment Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. Borrowing costs related to the acquisition and construction of qualifying assets are capitalised during the period of time required to complete and prepare the property for its intended use, as part of the cost of the asset. When parts of an item of property, plant and equipment (i.e. equipment, motor vehicles, roads, runways and aprons, and buildings) have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within other operating income in profit and loss. Reclassification to investment property Property that is being constructed for future use as investment property is accounted for as property, plant and equipment at cost if fair value is not easily determinable until the development is complete. Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit and loss, as incurred. Depreciation Depreciation is recognised in profit and loss on a straight-line basis to reduce the assets to their residual values over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated. The estimated useful lives for the current and comparative periods are as follows: Equipment : 3 12 years Motor vehicles : 5 years Roads, runways and aprons : years Buildings : years Depreciation methods, useful lives and residual values are re-assessed at each reporting date. 26

29 1. Basis of Preparation (continued) 1.13 Investment property Investment property is property which is held either to earn rental income, or for capital appreciation, or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is carried at fair value, representing open market value determined annually by independent expert valuers. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, or location or condition of the specific asset. If the information is not available, the Group uses alternative valuation methods, such as recent prices on less active markets or discounted cash flow projections. Changes in fair values are recorded in comprehensive income as part of other income Intangible assets Intangible assets comprise: computer software, development costs of the Enterprise Resource Planning system and other information management systems. These intangible assets are measured initially at cost and are carried at cost less accumulated amortisation and accumulated impairment losses. The amortisation methods, useful lives and residual values for intangible assets are re-assessed at each reporting date. Amortisation is provided to write down the intangible assets, on a straight-line basis, to their residual values as follows: Item : Useful life Computer software : 3 5 years 1.15 Impairment Non-financial assets The carrying amounts of the Group s non-financial assets, other than investment property, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is an indication of impairment. If any such indication exists, then the asset s recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest groups of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit ). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit and loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. 27

30 Accounting Policies (continued) For the year ended 31 March Basis of Preparation (continued) 1.15 Impairment (continued) Financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events had a negative effect on the estimated future cash flows of that asset. The criteria that the Group uses to determine that there is objective evidence of an impairment loss include: A breach of contract, such as a default or delinquency in payments The probability that the debtor will enter bankruptcy or other financial reorganisation Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between the carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in profit and loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in profit and loss Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the firstin-first-out principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their location and condition. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts Financial instruments Non-derivative financial instruments Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit and loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described overleaf. 28

31 1. Basis of Preparation (continued) 1.18 Financial instruments (continued) Non-derivative financial instruments (continued) Accounting for finance income and expense is discussed in note 30. Financial assets are derecognised when the contractual rights to receive cash flows from the financial assets have expired or where the Group has transferred substantially all the risks and rewards of ownership, without retaining control. Any interest in the transferred financial asset that is created or retained by the Group is recognised as a separate asset or liability. A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss. Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Financial assets at fair value through profit and loss An instrument is classified at fair value through profit and loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit and loss if the Group manages such investments and makes purchases and sale decisions based on their fair value in accordance with the Group s documented risk management or investment strategy. Upon initial recognition attributable transactions costs are recognised in profit and loss when incurred. Financial instruments at fair value through profit and loss are measured at fair value, and changes therein are recognised in profit and loss. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group s loans and receivables comprise trade and other receivables and cash and cash equivalents in the balance sheet. Loans and receivables are measured at amortised cost. Other Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses. The effective interest rate method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. 29

32 Accounting Policies (continued) For the year ended 31 March Basis of Preparation (continued) 1.18 Financial instruments (continued) Derivative financial instruments The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit and loss when incurred. Subsequent to initial recognition, the method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged The Group designates certain derivatives as either: a) hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge). b) Hedges of a net investment in a foreign operation (net investment hedge). The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an on-going basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. The fair values of various derivative instruments used for hedging purposes are disclosed in note 11. Movements on the hedging reserve in other comprehensive income are shown in note 22. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining hedged item is more than 12 months, and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability. a) Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the statement of comprehensive income within Gains/losses on remeasurement and disposal of financial instruments. Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss. The gain or loss relating to the ineffective portion of interest rate swaps hedging variable rate borrowings is recognised in the statement of comprehensive income within Gains/losses on re-measurement and disposal of financial instruments. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory or fixed assets), the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset. The deferred amounts are ultimately recognised in cost of goods sold in the case of inventory or in depreciation in the case of fixed assets. 30

33 1. Basis of Preparation (continued) 1.18 Financial instruments (continued) Derivative financial instruments (continued) a) Cash flow hedge (continued) When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the statement of comprehensive income. b) Net investment hedges The derivative instruments are used to hedge the risk of fluctuations in monetary assets and liabilities denominated in foreign currencies. The entity does not have such a designated hedging strategy and does not apply hedge accounting therefore the changes in the fair value of such derivatives are recognised in profit and loss as part of foreign currency gains and losses Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation Non-current assets held for sale Non-current assets (or disposal Groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use Earnings per share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit and loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit and loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprises convertible bonds and share options granted to employees 1.23 Government grants Government grants are recognised initially as deferred income at fair value when there is reasonable assurance that they will be received and the Group will comply with the conditions associated with the grant. Grants that 31

34 Accounting Policies (continued) For the year ended 31 March Basis of Preparation (continued) 1.23 Government grants (continued) compensate the Group for expenses incurred are recognised in profit or loss as other income on a systematic basis in the same periods in which the expenses are recognised. Grants that compensate the Group for the cost of an asset are presented in the statement of financial position as deferred income, and are recognised in profit or loss on a systematic basis over the useful life of the asset Related parties s related parties include entities directly or indirectly owned by the South African Government. Key management is defined as being individuals with the authority and responsibility for planning, directing and controlling the activities of the entity. The Group regards all individuals from the level of Group Executive up to the Board of Directors as key management per the definition of the standard. Close family members of key management personnel are considered to be those family members who may be expected to influence, or be influenced by key management individuals in their dealings with the entity. Other related party transactions are also disclosed in terms of the requirements of the standard. The objective of the standard and the financial statements is to provide relevant and reliable information and therefore materiality is considered in the disclosure of these transactions Significant judgments, estimates and sources of estimation uncertainty In preparing the consolidated annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the consolidated annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the consolidated annual financial statements. Significant judgments include: Accounting for investment in associate The Group s 10% shareholding in the Mumbai International Airport Limited through ACSA Global Limited and 10% shareholding in Aeroporto de Guarulhos Participações S.A. have been accounted for using the equity method as the Group believes that it has the ability (and power) to participate in the financial and operating policy decisions of the entities, which gives the Group significant influence over them. Fair value of financial instruments The fair values of financial instruments that are not traded in an active market are determined by using valuation techniques. The Group uses its judgment to select a variety of methods and makes assumptions that are mainly based on market conditions existing at each reporting date. The Group has used discounted cash flow analysis for financial assets that are not traded in active markets, specifically interest rate swaps. 32

35 1. Basis of Preparation (continued) 1.25 Significant judgments, estimates and sources of estimation uncertainty (continued) Post-retirement medical aid obligation The present value of the post-retirement medical aid obligation depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for post-retirement medical aid include the discount rate. Any changes in these assumptions will impact the carrying amount of post-retirement medical aid obligations. The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the post-retirement medical aid obligations. In determining the appropriate discount rate, the Group considers the interest rates of high-quality government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related post-retirement medical aid liability. Other key assumptions for post-retirement medical aid obligations are based in part on current market conditions. Additional information is disclosed in note 14. Fair value of investment property The fair values of investment properties are determined using the discounted cash flow analysis valuation technique, using transactions observable in the market at the reporting date. The Group uses its judgement to select a variety of methods and makes assumptions that are mainly based on market conditions existing at each reporting date. Useful lives and residual values of assets The Group reassesses the useful lives and residual values of property, plant and equipment annually by reference to the age or known condition of the assets and the Group s expected use of the related assets. 33

36 Notes to the consolidated annual financial statements For the year ended 31 March Changes in accounting policy The consolidated annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations issued by the International Accounting Standards Board (IASB) on a basis consistent with the prior year except for the adoption of the following new or revised standards. IFRS 10 Consolidated financial statements The Group adopted IFRS 10 Consolidated Financial Statements in the current year. IFRS 10 was issued in May 2011 and replaces the guidance on control and consolidation of IAS 27 Consolidated and Separate Financial Statements, SIC-12 Consolidation Special Purpose Entities and SIC 33 Consolidation. IFRS 10 establishes a new definition of control, whereby an entity has control of an investee when it has power over the investee; it is exposed to or has rights to variable returns from involvement with the investee; and it has the ability to use its power over the investee to affect the amount of the investor s returns. The adoption of IFRS 10 has been applied in accordance with the applicable transitional provisions as set out below: Application previously consolidated investees Management have applied the principles of IFRS 10, and concluded that Guardrisk Life Cell Captive, an investee which was previously consolidated under IAS 27 or SIC-12, shall no longer be consolidated into the Group. Adjustments have been made in accordance with the transitional provisions by measuring the interest in Guardrisk Life Cell Captive as of 1 April IFRS 12 Disclosure of interests in other entities The Group adopted IFRS 12 Disclosure of Interests in Other Entities in the current year. IFRS 12 was issued in May 2011 and sets out new disclosure requirements for entities that have an interest in a subsidiary, associate, joint arrangements or an unconsolidated structured entity. IFRS 12 provides that the required disclosures need not be presented for any prior year presented which begins before the annual year immediately preceding the first annual year for which IFRS 12 is applied. Accordingly, the impact of the adoption of IFRS 12 on the Group is that additional disclosures have been provided for the current and immediately preceding year. IFRS 13 Fair value measurement The Group adopted IFRS 13 Fair Value Measurement in the current year. IFRS 13 defines fair value, sets out a single IFRS framework for measuring fair value and requires additional disclosures about fair value measurements. The IFRS provides guidance and explains how to measure fair value for financial reporting purposes. IFRS 13 is effective for years beginning on or after 1 January 2013, and the application is prospective. Accordingly, the Group have applied IFRS 13 prospectively from the current year. The main impact on the Group has been the additional disclosure requirements; particularly note 39 of the financial statements. 34

37 2. Changes in accounting policy (CONTINUED) IFRS 11 Joint arrangements The group adopted IFRS 11 Joint Arrangements in the current year. IFRS 11 was issued in May 2011 and replaces IAS 31 Interests in Joint Ventures. IFRS 11 classifies joint arrangements as joint operations or joint ventures depending on the contractual rights and obligations of each investor rather than the legal structure of the joint arrangement. A joint operation exists when the parties that have joint control have rights to the assets and obligations for the liabilities relating to the joint arrangement. A joint venture exists when the parties that have joint control, have rights only to the net assets of the joint arrangement. Joint ventures are required to be accounted for using the equity method of accounting in the Group s financial statements and either at cost or fair value in the joint venturer s separate financial statements. Joint operations are accounted for, in both the Group and separate financial statements (as defined by IAS 27 Separate Financial Statements ), by recognising and measuring the assets, liabilities, income and expenses of the joint operation in relation to the involvement with the joint operation. The previous accounting policy for joint ventures was proportionate consolidation. Therefore, any joint ventures identified in the Group are now required to be equity accounted in accordance with the provisions of IFRS 11. Joint operations will continue to be accounted for by recognising the assets, liabilities, income and expenses of the joint operation in relation to the Group s involvement with the joint operation. The aggregate effects of the changes in accounting policy in relation to the adoption of IFRS 11 on the consolidated annual financial statements for the years ended 31 March 2013 and 31 March 2012 are as follows: 35

38 Notes to the consolidated annual financial statements For the year ended 31 March Changes in accounting policy (Continued) GROUP COMPANY Figures in Rand thousand Statement of Financial Position Group Investment property Previously stated Adjustment ( ) ( ) Investment in joint ventures Previously stated Adjustment Trade and other receivables Previously stated Adjustment Cash and cash equivalents Previously stated Adjustment (6 899) (6 006) Interest bearing borrowings (non current) Previously stated Adjustment (38 701) (46 464) Deferred tax liabilities Previously stated Adjustment (17 196) (16 255) Trade and other payables Previously stated Adjustment (23 209) (20 369) Interest-bearing borrowings (current) Previously stated Adjustment (13 992) (11 911)

39 2. Changes in accounting policy (Continued) GROUP COMPANY Figures in Rand thousand Statement of Financial Position Group (continued) Other non-current assets Previously stated Adjustment Retirement benefit obligation Previously stated Adjustment Opening other reserves Previously stated ( ) (83 287) Adjustment (641) 362 (641) 361 Opening retained earnings ( ) (83 928) Previously stated Adjustment Profit or Loss Group Revenue Previously stated Adjustment (13 659) (16 066) Other operating income Previously stated Adjustment (40 784) Other operating expenses Previously stated ( ) ( ) Adjustment ( ) ( ) 37

40 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Changes in accounting policy (Continued) GROUP COMPANY Figures in Rand thousand Profit or Loss Group (continued) Income from equity accounted investments Previously stated Adjustment Finance income Previously stated Adjustment Finance expenses Previously stated ( ) ( ) Adjustment Income tax expense ( ) ( ) Previously stated ( ) Adjustment Total impact on profit for the period ( ) Previously stated Adjustment 245 Gains on remeasurement and disposal of financial instruments Previously stated ( ) ( ) Adjustment Remeasurements of net defined benefit liability ( ) ( ) Previously stated (17 276) (8 008) (17 276) (8 008) Adjustment (1 002) 361 (1 002) 361 (18 278) (7 647) (18 278) (7 647) 38

41 3. Segmental information The Group s reported operating segments are based on reports reviewed by the Exco to make strategic decisions. The reportable segments offer the same services except for Corporate and other and are managed separately because they require different marketing strategies. Information regarding the operations of each reportable segment is included below. The Exco assesses the performance of the operating segments as a measure of earnings before interest, taxation, depreciation and amortisation expense (EBITDA). Interest income and expenditure are not allocated to operating segments as they are driven largely by the Corporate division, which manages the cash requirements of the Company. Corporate overhead expenses are not allocated to the reportable segments. Sales between operating segments are carried out at arm s-length. The revenue from external parties reported to the Exco is measured in a manner consistent with that in the statement of comprehensive income. GROUP Figures in Rand thousand EBITDA for reportable segments and other segments Depreciation, amortisation and impairments ( ) ( ) ( ) Income from equity accounted investments Net finance expense ( ) ( ) ( ) Profit/(loss) before tax Reportable segment assets are reconciled to total assets as follows: Segment assets for reportable segments Other segment assets ( ) ( ) Reportable segment liabilities are reconciled to total liabilities as follows: Segment liabilities for reportable segments Other segment liabilities and eliminations Unallocated Deferred tax Derivative financial instruments: non-current Derivative financial instruments: current Income tax liabilities Interest-bearing liabilities: non-current Interest-bearing liabilities: current

42 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Segmental information (Continued) Revenue Non-aeronautical Total non- Figures in Rand thousand aeronautical Commercial Property aeronautical Group 2014 O.R. Tambo International Cape Town International King Shaka International Bram Fischer International East London Airport George Airport Kimberly Airport Port Elizabeth International Upington International Pilanesberg International Corporate Office Precinct 2A JIA Piazza Park Unallocated and other Elimination (41 791) (41 791) Total Group 2013 O.R. Tambo International Cape Town International King Shaka International Bram Fischer International East London Airport George Airport Kimberly Airport Port Elizabeth International Upington International Corporate Office Precinct 2A JIA Piazza Park Unallocated and other Eliminations (35 489) (35 489) Total

43 Other separately disclosable items Earnings before interest, tax depreciation Total and Depreciation Reportable Reportable external amortisation and Interest Interest total total Other revenue (EBITDA) amortisation revenue expense asset liabilities ( ) ( ) (1 881) (43 672) (809) (57 017) (57 017) ( ) ( ) (2 396) ( ) (1 588) ( ) (35 489) (28 128) (28 230) ( ) ( )

44 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Segmental information (Continued) Revenue non-aeronautical Total non- Figures in Rand thousand Aeronautical Commercial Property aeronautical Group 2012 O.R. Tambo International Cape Town International King Shaka International Bram Fischer International East London Airport George Airport Kimberly Airport Port Elizabeth International Upington International Pilanesberg International Corporate Office Precinct 2A JIA Piazza Park Unallocated and other Eliminations (32 845) (32 845) Total

45 Other separately disclosable items earnings before interest, tax depreciation Total and Depreciation reportable Reportable external amortisation and Interest Interest total total Other revenue (EBITDA) amortisation revenue expense assets liabilities (3 031) ( ) (32 845) (1 515) (1 515) ( ) ( )

46 our goal is to achieve returns acceptable to our shareholders, manage the business and engage in projects that preserve gearing and liquidity ratios. Therefore, R1.8 billion in debt was settled in the current financial year. cape town international Airport 44

47 Notes to the consolidated annual financial statements (continued) For the year ended 31 March New Standards and Interpretations 4.1 Standards and interpretations effective and adopted in the current year In the current year, the Group has adopted the following standards and interpretations that are effective for the current financial year and that are relevant to its operations: IFRS 10 Consolidated financial statements Standard replaces the consolidation sections of IAS 27 Consolidated and Separate Financial Statements and SIC 12 Consolidation Special Purpose Entities. The standard sets out a new definition of control, which exists only when an entity is exposed to, or has rights to, variable returns from its involvement with the entity, and has the ability to effect those returns through power over the investee. The effective date of the standard is for years beginning on or after 1 January The Group has adopted the standard for the first time in the 2014 consolidated annual financial statements. The impact of the standard is not material. IAS 27 Separate financial statements Consequential amendment as a result of IFRS 10. The amended Standard now only deals with separate financial statements. The effective date of the amendment is for years beginning on or after 1 January The Group has adopted the amendment for the first time in the 2014 consolidated annual financial statements. The impact of the amendment is not material. IFRS 11 Joint arrangements The standard replaces IAS 31 Interests in Joint Ventures and SIC 13 Jointly Controlled Entities Non Monetary Contributions by Ventures. The standard defines a joint arrangement as existing only when decisions about relevant activities require the unanimous consent of the parties sharing joint control in terms of a contractual arrangement. The standard identifies two types of joint arrangements as: Joint operations which exist when the entities sharing joint control have direct rights to the assets and obligations for the liabilities of the joint arrangements. In such cases the joint operators recognise their share of the assets and liabilities and profits and losses of the joint arrangements in their financial statements. Joint ventures arise where the investors have rights to the net assets of the arrangement; joint ventures are accounted for under the equity method. Proportional consolidation of joint arrangements is no longer permitted. The effective date of the standard is for years beginning on or after 1 January The Group has adopted the standard for the first time in the 2014 consolidated annual financial statements. The impact of the standard is set out in note 2 Changes in Accounting Policy. IFRS 12 Disclosure ofinterests in other entities The standard sets out disclosure requirements for investments in subsidiaries, associates, joint ventures and unconsolidated structured entities. The disclosures are aimed to provide information about the significance and exposure to risks of such interests. The most significant impact is the disclosure requirement for unconsolidated structured entities or off balance sheet vehicles. 45

48 Notes to the consolidated annual financial statements (continued) For the year ended 31 March New Standards and Interpretations (continued) 4.1 Standards and interpretations effective and adopted in the current year (continued) IFRS 12 Disclosure of interests in other entities (continued) The effective date of the standard is for years beginning on or after 1 January The Group has adopted the standard for the first time in the 2014 consolidated annual financial statements. The adoption of this standard has not had a material impact on the results of the Group, but has resulted in more disclosure than would have previously been provided in the consolidated annual financial statements. IFRS 13 Fair value measurement New standard setting out guidance on the measurement and disclosure of items measured at fair value or required to be disclosed at fair value in terms of other IFRS s. The effective date of the standard is for years beginning on or after 1 January The Group has adopted the standard for the first time in the 2014 consolidated annual financial statements. The adoption of this standard has not had a material impact on the results of the group, but has resulted in more disclosure than would have previously been provided in the consolidated annual financial statements. IAS 1 Presentation of financial statements The amendment now requires items of other comprehensive income to be presented as: Those which will be reclassified to profit or loss Those which will not be reclassified to profit or loss. The related tax disclosures are also required to follow the presentation allocation. In addition, the amendment changed the name of the statement of comprehensive income to the statement of profit or loss and other comprehensive income. The effective date of the amendment is for years beginning on or after 1 July The Group has adopted the amendment for the first time in the 2014 consolidated annual financial statements. The adoption of this amendment has not had a material impact on the results of the Group, but has resulted in more disclosure than would have previously been provided in the consolidated annual financial statements. IAS 19 Employee benefits revised requires recognition of changes in the net defined benefit liability (asset) including immediate recognition of defined benefit cost, disaggregation of defined benefit cost into components, recognition of remeasurements in other comprehensive income, plan amendments, curtailments and settlements. Introduces enhanced disclosures about defined benefit plans Modifies accounting for termination benefits, including distinguishing benefits provided in exchange for service and benefits provided in exchange for the termination of employment and affect the recognition and measurement of termination benefits 46

49 4. New Standards and Interpretations (continued) 4.1 Standards and interpretations effective and adopted in the current year (continued) IAS 19 Employee benefits revised (continued) Provides clarification of miscellaneous issues, including the classification of employee benefits, current estimates of mortality rates, tax and administration costs and risk-sharing and conditional indexation features. The effective date of the amendment is for years beginning on or after 1 January The Group has adopted the amendment for the first time in the 2014 consolidated annual financial statements. The adoption of this amendment has not had a material impact on the results of the Group, but has resulted in more disclosure than would have previously been provided in the consolidated annual financial statements. Consolidated financial statements, joint arrangements and disclosures of interests in other entities: Transition guidance. Transitional guidance for the application of IFRS 10, IFRS 11 and IFRS 12. The amendment limits the requirement to provide adjusted comparative information to only the preceding comparative period. The effective date of the amendment is for years beginning on or after 1 January The Group has adopted the amendment for the first time in the 2014 consolidated annual financial statements. The Group has adopted the amendment for the first time in the 2014 consolidated annual financial statements. The impact of the amendment is set out in note 2 Changes in Accounting Policy. Disclosures Offsetting financial assets and financial liabilities (Amendments to IFRS 7) Amendment requires additional disclosures for financial assets and liabilities which are offset and for financial instruments subject to master netting arrangements. The effective date of the amendment is for years beginning on or after 1 January The Group has adopted the amendment for the first time in the 2014 consolidated annual financial statements. The impact of the amendment is not material. IAS 28 (Revised ) Associates and joint ventures This standard includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11. The effective date of the amendment is for years beginning on or after 1 January The Group has adopted the amendment for the first time in the 2014 consolidated annual financial statements. The impact of the amendment is set out in note 2, Changes in Accounting Policy. 47

50 Notes to the consolidated annual financial statements (continued) For the year ended 31 March New Standards and Interpretations (continued) 4.2 Standards and interpretations not yet effective The Group has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the Group s accounting periods beginning on or after 01 April 2014 or later periods: IFRS 9 Financial instruments This new standard is the first phase of a three phase project to replace IAS 39 Financial instruments: Recognition and measurement. To date, the standard includes chapters for classification, measurement and derecognition of financial assets and liabilities. The following are main changes from IAS 39: Financial assets will be categorised as those subsequently measured at fair value or at amortised cost. Financial assets at amortised cost are those financial assets where the business model for managing the assets is to hold the assets to collect contractual cash flows (where the contractual cash flows represent payments of principal and interest only). All derivative financial instruments are to be subsequently measured at fair value. Under certain circumstances, financial assets may be designated as at fair value. For hybrid contracts, where the host contract is an asset within the scope of IFRS 9, then the whole instrument is classified in accordance with IFRS 9, without separation of the embedded derivative. In other circumstances, the provisions of IAS 39 still apply. Voluntary reclassification of financial assets is prohibited. Financial assets shall be reclassified if the entity changes its business model for the management of financial assets. In such circumstances, reclassification takes place prospectively from the beginning of the first reporting period after the date of change of the business model. Financial liabilities shall not be reclassified. investments in equity instruments may be measured at fair value through other comprehensive income. When such an election is made, it may not subsequently be revoked, and gains or losses accumulated in equity are not recycled to profit or loss on derecognition of the investment. The election may be made per individual investment. IFRS 9 does not allow for investments in equity instruments to be measured at cost. The classification categories for financial liabilities remain unchanged. However, where a financial liability is designated as at fair value through profit or loss, the change in fair value attributable to changes in the liabilities credit risk shall be presented in other comprehensive income. This excludes situations where such presentation will create or enlarge an accounting mismatch, in which case, the full fair value adjustment shall be recognised in profit or loss. The effective date of the standard is for years beginning on or after 1 January The Group expects to adopt the standard for the first time in the 2016 consolidated annual financial statements. It is unlikely that the standard will have a material impact on the Group s consolidated annual financial statements. Offsetting financial assets and financial liabilities (Amendments to IAS 32) Clarification of certain aspects concerning the requirements for offsetting financial assets and financial liabilities. The effective date of the amendment is for years beginning on or after 1 January The Group expects to adopt the amendment for the first time in the 2015 consolidated annual financial statements. It is unlikely that the amendment will have a material impact on the Company s consolidated annual financial statements. 48

51 4. New Standards and Interpretations (continued) 4.2 Standards and interpretations not yet effective (continued) IAS 39 Novation of derivatives and continuation of hedge accounting The amendment provides guidance on whether an entity is required to discontinue hedging when the derivatives which are designated hedging instruments are novated to a central counterparty. The effective date of the amendment is for years beginning on or after 1 January The Group expects to adopt the amendment for the first time in the 2015 consolidated annual financial statements. It is unlikely that the amendment will have a material impact on the Group s consolidated annual financial statements. IFRS 10, IFRS 12 and IAS 27 Investment entities The amendments define an investment entity and introduce an exception to consolidating particular subsidiaries for investment entities. These amendments require an investment entity to measure those subsidiaries at fair value through profit or loss in accordance with IFRS 9 Financial Instruments in its consolidated and separate consolidated annual financial statements. The amendments also introduce new disclosure requirements for investment entities in IFRS 12 and IAS 27. The effective date of the amendments is for years beginning on or after 1 January The Group expects to adopt the amendment for the first time in the 2015 consolidated annual financial statements. IFRS 14 - Regulatory deferral accounts The IASB has issued IFRS 14, Regulatory deferral accounts (IFRS 14), an interim standard on the accounting for certain balances that arise from rate-regulated activities (regulatory deferral accounts). Rate regulation is a framework where the price that an entity charges to its customers for goods and services is subject to oversight and/or approval by an authorised body. The effective date of the statement is for years beginning on or after 1 January The Group expects to adopt the amendment for the first time in the 2017 consolidated annual financial statements. IFRS 15 Revenue from contracts with customers Establishes principles for reporting useful information to users of the financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity s contracts with customers. The effective date of the statement is for years beginning on or after 1 January The Group expects to adopt the amendment for the first time in the 2018 consolidated annual financial statements. 49

52 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Investment property GROUP COMPANY Figures in Rand thousand Balance at 1 April Improvements Change in fair value recognised in statement of comprehensive income (Note 28) Recognised in other comprehensive income* Transfer to non-current asset held for sale ( ) Balance at 31 March * Fair value changes recognised in other comprehensive income relate to properties that were previously classified as owner-occupied. Investment properties are stated at fair value, which has been determined based on valuations performed by accredited independent valuers, as at 31 March 2014 and 31 March The valuers are industry specialists in valuing these types of investment properties. The fair values of the properties have been determined on transactions observable in the market. Where there was a lack of comparable data, a valuation model in accordance with that recommended by the International Valuation Standards Committee has been applied. The following main inputs have been used: GROUP AND COMPANY Market yield of comparable properties (%) Average escalation of lease rentals (%) Average duration of lease (years) Investment properties with a fair value of Rnil have been encumbered by secured borrowings (2013: Rnil; 2012: R737 million). The Group s investment property consists of land and buildings. Details of the investment properties are recorded in a register which may be inspected by the shareholders or their duly authorised agents at the Group s registered office, as required by Regulation 25(3) of the Companies Act Regulations, Investment property comprises a number of commercial properties that are leased to third parties. No contingent rents are charged. Rental income of R533 million (2013: R515 million) from investment properties has been included in revenue of the Group and Company (note 27). 50

53 6. Property, plant and equipment A accumulated Carrying Accumulated Carrying Figures in Rand thousand Cost depreciation value Cost depreciation value Group Land Buildings ( ) ( ) Equipment ( ) ( ) Motor vehicles ( ) ( ) Roads, runways and aprons ( ) ( ) Work in progress Total ( ) ( ) COMPANY Land Buildings ( ) ( ) Equipment ( ) ( ) Motor vehicles ( ) ( ) Roads, runways and aprons ( ) ( ) Work in progress Total ( ) ( ) Reconciliation of property, plant and equipment Opening Figures in Rand thousand balance Additions Disposals Transfers Depreciation Total GROUP 2014 Land Buildings (27) ( ) Equipment ( ) Motor vehicles (710) (23 869) Roads, runways and aprons (39) ( ) Work in progress ( ) (776) ( ) GROUP 2013 Land (12) Buildings ( ) Equipment (39) ( ) Motor vehicles (21 763) Roads, runways and aprons ( ) Work in progress ( ) (51) ( )

54 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Property, plant and equipment (continued) Reconciliation of property, plant and equipment Opening Figures in Rand thousand balance Additions Disposals Transfers Depreciation Total COMPANY 2014 Land Buildings (27) ( ) Equipment ( ) Motor vehicles (710) (23 869) Roads, runways and aprons (39) ( ) Work in progress ( ) (776) ( ) COMPANY 2013 Land (12) Buildings ( ) Equipment ( ) Motor vehicles (21 740) Roads, runways and aprons ( ) Work in progress ( ) (12) ( ) A register containing the information required by section 25(3) of the Companies Act Regulations, 2011 is available for inspection at the registered office of the Company. 52

55 7. Intangible assets Accumulated Carrying Accumulated Carrying Figures in Rand thousand Cost amortisation value Cost amortisation value GROUP Computer software ( ) ( ) COMPANY Computer software ( ) ( ) Reconciliation of intangible assets Opening amor- Figures in Rand thousand balance Additions Disposals tisation Total GROUP 2014 Computer software (15) (88 430) Opening Figures in Rand thousand balance Additions Amortisation Total GROUP 2013 Computer software ( ) Reconciliation of intangible assets Opening amor- Figures in Rand thousand balance Additions Disposals tisation Total GROUP 2014 Computer software (88 430) COMPANY 2013 Computer software ( ) Investments in subsidiaries COMPANY Figures in Rand thousand Indebtedness Total interest in subsidiaries Directors valuation Aggregate after tax profits of subsidiary companies

56 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Investments in subsidiaries (continued) Details of the Company s subsidiaries at 31 March 2014 are as follows: issued investment Indebted- P principal Country of share Interest at cost ness Subsidiaries activity incorporation held held R 000 R OSI Airport Systems (Pty) Ltd Dormant South Africa * 51% Precinct 2A (Pty) Ltd Property owning South Africa * 100% JIA Piazza Park (Pty) Ltd Hotel operations South Africa * 100% Pilanesburg International Airport management South Africa * 100% Airport (Pty) Ltd ACSA Global Ltd Management company Mauritius * 100% Special purposes entities # Lexshell 342 Investment Employee share South Africa * Holdings (Pty) Ltd option plan Airport Management Share Employee share South Africa * Incentive Scheme option plan Company (Pty) Ltd # The Group s accounts include the consolidation of the Airport Management Share Incentive Scheme Company Proprietary Limited and Lexshell 342 Investment Holdings Proprietary Limited. Although the Airport Management Share Incentive Scheme Company Proprietary Limited is wholly owned by the Airport Management Share Incentive Scheme Trust and Lexshell 342 Investment Holdings Proprietary Limited is wholly owned by the ACSA Kagano Trust, in terms of IFRS 10. ^ Consolidated Financial Statements, the Group consolidates these entities as it has power over the relevant activities of those entities and exposure to variable returns associated with the intercompany loan funding and the Company receives significant rewards associated with the employment of the beneficiaries. There were no impairments of investments in subsidiaries. * Amounts less than R

57 8. Investments in subsidiaries (continued) issued investment Indebted- P principal Country of share Interest at cost ness Subsidiaries activity incorporation held held R 000 R OSI Airport Systems (Pty) Ltd Dormant South Africa * 51% Pilanesburg International Airport Management South Africa * 100% Airport (Pty) Ltd Precinct 2A (Pty) Ltd Property owning South Africa * 100% JIA Piazza Park (Pty) Ltd Hotel operations South Africa * 100% ACSA Global Ltd Management company Mauritius * 100% Special purposes entities# Lexshell 342 Investment Employee share South Africa * Holdings (Pty) Ltd option plan Airport Management Employee share Share Incentive Scheme option plan South Africa * Company (Pty) Ltd OSI Airport Systems (Pty) Ltd Dormant South Africa 51% Pilanesberg International Airport management South Africa 100% Airport (Pty) Ltd) Precinct 2A (Pty) Ltd Property owning South Africa 100% JIA Piazza Park (Pty) Ltd Hotel operations South Africa 100% 321 ACSA Global Ltd Management company Mauritius 100% Special purposes entities* Lexshell 342 Investment Employee share South Africa Holdings (Pty) Ltd option plan Airport Management Employee share South Africa Share Incentive Scheme option plan Company (Pty) Ltd

58 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Joint arrangements Joint ventures The Group has the following significant interests in joint ventures: Airport Logistics Property Holdings (Pty) Ltd. The Group has a 50% interest in a joint venture, Airport Logistics Property Holdings (Pty) Ltd. The following represents the Group s share of assets, liabilities, revenue and expenses of the joint venture: Opening Share of Figures in Rand thousand balance profit Total Group 2014 Airport Logistics Property Holdings (Pty) Ltd Group 2013 Airport Logistics Property Holdings (Pty) Ltd Group 2012 Airport Logistics Property Holdings (Pty) Ltd Summarised financial information of material joint ventures Summarised Statement of comprehensive Income Airport Logistics Property H holdings (Pty) Ltd Figures in Rand thousand GROUP Revenue Interest income Other income and expenses 719 (883) (2 263) Interest expense (20 312) (21 012) (21 454) Profit before tax Tax expense (2 453) Profit (loss) from continuing operations Total comprehensive income

59 9. Joint arrangements (continued) Summarised statement of financial position Airport Logistics Property H holdings (Pty) Ltd Figures in Rand thousand GROUP ASSETS Non-current Current Cash and cash equivalents Other current assets Total current assets LIABILITIES Non-current Non-current financial liabilities (excluding trade payables and provisions) Other non-current liabilities Total non-current liabilities Current Other current liabilities Total current liabilities Total net assets Reconciliation of net assets to equity accounted investments in joint ventures Interest in joint venture at percentage ownership Carrying value of investment in joint venture Investment at beginning of period Share of profit Investment at end of period The summarised information presented above reflects the financial statements of the joint ventures after adjusting for differences in accounting policies between the Group and the joint venture. 57

60 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Investments in associates Investment in Mumbai International Airport Private Limited The Group has a 10% equity interest, through ACSA Global Limited, in the 30-year concession (with an option for a further 30 years) to modernise the Chhatrapati Shivaji International Airport in Mumbai. is an integral investor in the project, as well as being the designated airport operator. The investment has been accounted for as an associate. Investment in La Mercy JV property investments (Pty) Ltd The Group has a 40% interest in La Mercy JV Property Investments (Pty) Ltd. The Company is a property holding, development and letting company. The investment in the Company has been accounted for as an associate. Aeroporto de Guarulhos Participações S.A. The Group has a 10% equity interest, in the 20-year concession to modernise the Guarulhos International Airport. Airports Company South Africa is an integral investor in the project, as well as being the designated airport operator for a five-year period. The Group has the power to participate in the financial and operating policy decisions through a memorandum of understanding between the two parties. The investment has therefore been accounted for as an associate. % % % Carrying Carrying Carrying ownership ownership ownership amount amount amount interest interest interest Name of company Held by R 000 R 000 R 000 COMPANY La Mercy JV Property Airports Company 40% 40% Investments (Pty) Ltd South Africa SOC Limited Aeroporto de Guarulhos Airports Company 10% 10% Participações S.A South Africa SOC Limited Summarised financial information of material associates GROUP 2014 Summarised statement of comprehensive income Other Total P profit compre- comprefor the hensive hensive Figures in Rand thousand Revenue period income income La Mercy JV Property Investments (Pty) Ltd Mumbai International Airport Private Ltd ( ) Aeroporto de Guarulhos Participações S.A

61 10. Investments in associates (continued) Summarised financial information of material associates (continued) Summarised statement of financial position Non-current Current Non-current Current Total net Figures in Rand thousand assets assets liabilities liabilities assets La Mercy JV Property Investments (Pty) Ltd Mumbai International Airport Private Ltd Aeroporto de Guarulhos Participações S.A Reconciliation of net assets to equity accounted investments in associates Interest in Total net associate at Translation Investment Figures in Rand thousand assets % ownership differences in associate La Mercy JV Property Investments (Pty) Ltd Mumbai International Airport Private Ltd Aeroporto de Guarulhos Participações S.A (78 201) (78 201) Reconciliation of movement in investments in associates Investment investment at 1 April Share of Share at 31 March Figures in Rand thousand 2013 Acquisitions profit of OCI 2014 La Mercy JV Property Investments (Pty) Ltd Mumbai International Airport Private Ltd (84 572) Aeroporto de Guarulhos Participações S.A GROUP 2013 Summarised statement of comprehensive income Other Total P profit compre- comprefor the hensive hensive Figures in Rand thousand revenue period income income La Mercy JV Property Investments (Pty) Ltd Mumbai International Airport Private Ltd Aeroporto de Guarulhos Participações S.A (78 463) (6 250) (84 713)

62 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Investments in associates (continued) Summarised financial information of material associates (continued) GROUP 2013 Summarised statement of financial position N non-current Current Non-current Current Total net Figures in Rand thousand assets assets liabilities liabilities assets La Mercy JV Property Investments (Pty) Ltd Mumbai International Airport Private Ltd Aeroporto de Guarulhos Participações S.A Reconciliation of net assets to equity accounted investments Interest in Total net associate at Translation Investment Figures in Rand thousand assets % ownership differences in associate La Mercy JV Property Investments (Pty) Ltd Mumbai International Airport Private Ltd Aeroporto de Guarulhos Participações S.A (87 368) (87 368) Reconciliation of movement in investments in associates I investment investment at 1 April Share of Share of at 31 March Figures in Rand thousand 2013 Acquisitions profit OCI 2013 La Mercy JV Property Investments (Pty) Ltd Mumbai International Airport Private Ltd Aeroporto de Guarulhos Participações S.A (7 846) (625) Guarantees issued equity guarantee an Airport Operator guarantee has been issued by ACSA Global Ltd to Mumbai International Airport Private Ltd for an amount of INR 3 billion (R529 million; 2013: R429 million). This guarantee is limited to ACSA Global s performance fee of USD 1 million (2013: USD 1 million). 60

63 11. Derivative financial instruments and hedging information The following information relates to derivative financial instruments included in the financial statements: GROUP Figures in Rand thousand Assets Liabilities Assets Liabilities Forward foreign exchange contracts held for trading Interest rate swaps cash flow hedges Current Non-current COMPANY Figures in Rand thousand Assets Liabilities Assets Liabilities Forward foreign exchange contracts held for trading Fair value through profit or loss Current Non-current Trading derivatives are classified as a current asset or liability. The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and, as a current asset or liability, if the maturity of the hedged item is less than 12 months. Forward foreign exchange contracts cash flow hedge The Group is exposed to foreign currency fluctuations resulting from the US Dollar. The Group manages its foreign currency risk by entering into forward exchange contracts, which have the effect of fixing the exchange rate at which transactions will be done. These forward exchange contracts entitle or oblige the Group to buy foreign currency at fixed rates on the same notional principal amounts. Interest rate swaps cash flow hedge The Group is exposed to the floating rates of interest: South African prime rates and JIBAR. The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. The Group has entered into interest rate swap contracts that entitle or oblige it to receive interest at fixed rates on notional principal amounts and entitle or oblige it to pay interest at fixed rates on the same notional principal amounts. The interest rate swaps allow the Group to swap long-term debt from floating rates to fixed rates that are lower, or higher, than those available if it had borrowed directly at fixed rates. Under the interest rate swap contracts, the Group agrees 61

64 airports company south africa was given an international long-term local currency rating of BBB by fitch in november 2013, with a stable outlook. O.R. Tambo international Airport 62

65 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Derivative financial instruments and hedging information Interest rate swaps cash flow hedge (continued) with other parties to exchange, at specified quarterly and semi-annual intervals, the difference between fixed rates and floating rate interest amounts that are calculated by reference to the agreed notional principal amounts. The ineffective portion recognised in profit or loss that arises from cash flow hedges amounts to a gain of R15.3 million (2013: R2.7 million). The notional principal amounts of the outstanding derivative contracts were as follows: GROUP AND COMPANY Figures in Rand thousand Interest rate swaps Receive pay Notional amount fair value 30 September m JIBAR % % (90 477) ( ) 30 November m JIBAR % % (9 059) (23 889) (99 536) ( ) Foreign exchange contracts Rate pay Notional amount fair value 30 June 2014 (US$ rate) r $5 000 (146) 30 April 2013 (US$ rate) 8.83 r $ July 2013 (US$ rate) 8.93 r $ October 2013 (US$ rate) 9.04 r $ (146) Deferred tax liability GROUP COMPANY Figures in Rand thousand Reconciliation of deferred tax asset/(liability) At beginning of year Movements during the year recognised in the statement of comprehensive income (73 391) Prior year adjustment (53 444) (53 444) recognised directly in other comprehensive income ( ) ( ) Deferred tax liabilities expected to be recovered after more than 12 months Deferred tax liabilities expected to be (44 940) (76 043) (44 940) recovered within the next 12 months Financial Integrated statements Report

66 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Deferred tax liability (CONTINUED) GROUP COMPANY Figures in Rand thousand Deferred tax liability Property, plant and equipment Investment property Non-current assets held for sale Intangible assets Lease receivables Provisions (55 793) (93 330) (83 486) (55 793) (93 330) Derivative financial instruments (27 911) (73 001) (54 537) (27 911) (73 001) Investments in associates Prepayments Impairment of trade and other receivables (11 927) (45 297) (27 597) (11 927) (45 297) Assessed loss ( ) Other non-current assets Total deferred tax liability The deferred tax assets and the deferred tax liability relate to income tax in the same jurisdiction, and the law allows net settlement. Therefore, they have been offset in the statement of financial position as follows: Deferred tax liability Deferred tax for components of other comprehensive income Actuarial losses on defined benefit post-retirement medical aid liability (4 837) (2 242) (4 837) Fair value gains on investment property ( ) ( ) Cash flow hedge (20 070) (11 264) (20 070) Foreign currency translation differences (7 886) Other non-current assets ( ) ( ) Figures in Rand thousand Lease receivable non-current portion Investments investments relates to the fund managed by the Guardrisk Life cell captive to fund the obligation that arises from additional pension payouts to qualifying retired employees (refer to note 14). 64

67 14. Retirement benefits Defined benefit plan The Company makes contributions to a defined benefit plan that provides medical benefits to employees upon retirement. The employees eligible for the post-retirement benefit are those who were in employment on 1 August The plan entitles retired employees to receive a reimbursement of certain medical costs. At retirement of employees employed after 1 August 2007 but before 1 April 2014, the Company has to purchase an annuity for the employees to subsidise their medical aid contributions. would make contributions to a deferred compensation policy during the period of employment to meet the value of the retirement benefit (i.e. the value of the annuity to be purchased). Post-retirement medical benefits GROUP COMPANY Figures in Rand thousand Present value of unfunded obligations Movements for the year Opening balance Prior overprovision (36 517) (36 517) Actuarial (gain)/loss (44 177) (44 177) Settlement ( ) ( ) Benefits paid (1 763) (1 763) Change in valuation basis (11 635) (11 635) net expense recognised in profit or loss Net expense recognised in profit or loss Current service cost Interest cost Expense recognised in other comprehensive income Balance at beginning of the year Actuarial loss recognised during the year (44 177) (44 177)

68 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Retirement benefits (CONTINUED) Post-retirement medical benefits (continued) GROUP COMPANY Figures in Rand thousand Principal assumptions at the reporting date: Assumptions used on last valuation: Discount rates used 9.10% 8.41% 9.02% 9.10% 8.41% 9.02% Health care cost inflation 8.10% 7.88% 7.80% 8.10% 7.88% 7.80% Average retirement age The assumptions used by actuaries are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescale covered, may not necessarily be borne out in practice. Assumed healthcare cost trend rates have a significant effect on the amounts recognised. A one percentage point change in assumed healthcare cost trend would have the following effects: % Increase 1% decrease Effect on the aggregate current service and interest cost (324) 259 Effect on defined benefit obligation (2 689) (3 013) Present value of unfunded obligations Expected contributions to post employment benefit plans for the year ended 31 March 2014 are R1.8 million. Defined contribution plan Pension fund All full-time employees of the Company are members of the pension fund, a defined contribution fund, subject to the Pension Funds Act On 31 March 2008 an actuarial valuation was performed by independent consulting actuaries, who found the fund to be in a sound financial position. No events have had a significant effect on the fund s position since this valuation. 66

69 14. Retirement benefits (CONTINUED) Post-retirement medical benefits (continued) Life Fund GROUP COMPANY Figures in Rand thousand Balance at beginning of the year Initial recognition of liability Measurements Balance at end of the year Post-retirement medical benefit Life fund Total retirement benefit obligation The Company acquired a 100% shareholding in a cell captive with Guardrisk Life Ltd in September 2003 to fund its obligation arising from 2002, whereby the Company agreed to increase the minimum pension payout to employees. Guardrisk performs a half yearly review per individual covered to establish the present value of the Company s obligation on the prescribed valuation basis (as approved by Guardrisk Life Statutory Actuaries) in order to assess the Company s commitment as per the assets and expressed liabilities and ensure sufficient life funds are transferred to the nondistributable reserves. 15. Investments GROUP COMPANY Figures in Rand thousand Cash deposit Stanlib Income Fund Inventories Hotel and food beverages inventories recognised as an expense during the period amounted to R5.4 million (2013: R4.7 million). 67

70 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Trade and other receivables GROUP COMPANY Figures in Rand thousand Trade receivables Loan to joint venture/associate Impairment of trade and other receivables (56 795) ( ) ( ) (56 795) ( ) Loans and receivables Taxation receivable Prepayments Insurance rent-a-captive receivable (*) Lease receivables Other receivables * The contingency policies are underwritten by Guardrisk and Centriq. The amount receivable represents the balance of the special experience account. The special experience account is payable on demand. The average credit period is 33 days (2013: 35 days; 2012: 40 days). No interest is earned on trade receivables. Trade receivables are carried at cost which normally approximates their fair value due to short-term maturity thereof. An adjustment for impairment of receivables has been made for estimated irrecoverable amounts. The Group s exposure to credit and currency risks and impairment losses related to trade and other receivables are disclosed in notes 40 and 46. Loans to joint ventures and associates bear no interest and have no fixed repayment terms. 18. Cash and cash equivalents GROUP COMPANY Figures in Rand thousand Cash and cash equivalents consist of: Cash on hand Bank balances Money markets The Group s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note

71 19. Non-current assets held for sale GROUP COMPANY Figures in Rand thousand Assets and liabilities Non-current assets held for sale Fair value of non-current assets held for sale previously classified under investment property At 31 March 2012, the immovable assets of the Durban International Airport were presented as a non-current asset held for sale following a commitment of the Group s management on 31 March 2012 to a plan to sell these facilities, due to the move of the airport operations to King Shaka International Airport at La Mercy. A sale and transfer to Transnet SOC Ltd was completed on September At 31 March 2012, the fair value of non-current assets held for sale was R1 850 million, which was the agreed selling price. A deposit of R1 200 million was received on 31 March 2012 and the balance was received on 30 September Share capital GROUP COMPANY Figures in Rand thousand Authorised Ordinary shares of R1 par value each Issued Ordinary shares Share premium There were no changes to the share capital of the Company for the financial years ended 31 March 2014 and 31 March Treasury share reserve Figures in Rand thousand The treasury share reserve represents the Company s own shares held by the Group. Also refer to note 8 Treasury share reserve (44 024) (44 024) (44 024) (44 024) (44 024) (44 024) shares (2013: shares) are held by the Airport Management Share Incentive Scheme Company (Pty) Ltd and Lexshell 342 Investment Holdings (Pty) Ltd, amounting to R30.2 million and R13.9 million respectively (2013: R30.2 million and R13.9 million). 69

72 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Other Reserves Foreign currency F fair translation Actuarial Life Figures in Rand thousand Total value reserve losses fund GROup Balance at 1 April ( ) (38 368) Actuarial losses, net of tax (13 441) (13 441) Gain on revaluation of investment property Transfer to retained earnings ( ) ( ) (4 134) Cash flow hedge reserve on derivative (53 676) (53 676) financial instruments, net of tax Loss on re-measurement of financial instruments Translation differences, net of tax Balance at 1 April 2013 ( ) (32 118) ( ) (51 809) Actuarial losses, net of tax Gain on revaluation of investment property Loss on re-measurement of financial instruments Foreign currency translation differences, net of tax Balance at 31 March 2014 (77 467) (6 174) (51 159) (20 134) 70

73 22. Other Reserves (continued) Foreign currency F fair translation Actuarial Life Figures in Rand thousand Total value reserve losses fund COmpaNy Balance at 1 April (38 368) Cash flow hedge reserve on derivative (53 676) (53 676) financial instruments, net of tax Loss on re-measurement of financial instruments Actuarial losses, net of tax (13 441) (13 441) Gain on revaluation of investment property Transfer to retained earnings ( ) ( ) Balance at 1 April 2013 (83 928) (32 119) (51 809) Loss on re-measurement of financial instruments Actuarial losses, net of tax Gain on revaluation of investment property Balance at 31 March 2014 (26 309) (6 175) (20 134) Defined benefit plan actuarial losses Actuarial losses are recognised directly in equity/other reserves in terms of IAS 19 employee benefits. Life Fund The transfer to the Life Fund represents amounts to fund future pension payments. Foreign currency translation reserve (FCTR) The foreign currency translation reserve arises on translation of the Group s interests in foreign entities into the reporting currency. 71

74 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Deferred income GROUP COMPANY Figures in Rand thousand Dube TradePort rentals received in advance Opening balance Less: amounts recognised in (1 090) (1 090) (1 090) (1 090) (1 090) comprehensive income Balance at end of year Gautrain development Opening balance Less: amounts recognised in (690) (690) (690) (690) (690) comprehensive income Balance at end of year Government grants Opening balance Additional grant received Less: amounts recognised in comprehensive income (4 312) (726) (702) (4 312) (726) Balance at end of year Other income received in advance Opening balance Additional rentals received base rentals Other income received in advance* Less: amounts recognised in comprehensive income (276) ( ) (145) (276) ( ) Balance at end of year Total deferred income Non-current liabilities Current liabilities * Other income received in advance in 2012 represents a deposit received from Transnet in respect of the disposal of the Durban International Airport site by the Company. 72

75 23. Deferred income (continued) Government grants gautrain development relates to a grant received by the Group in the 2009 financial year from the Gautrain operator. Assets belonging to the Group, located at the O.R. Tambo International Airport s central terminal building are being used by the Gautrain operator. The assets will become the property of the Group at the end of the 34 year term of the agreement with the operator. The Group has been awarded a Government grant. The grant of R35.1 million was received in the 2010 financial year. The grant was used for the construction of the road within the Cape Town International Airport precinct. Financial guarantee A guarantee was granted to Transnet as a result of the sale of Durban International Airport immovable property. The sale took place on 31 March 2012 and Transnet SOC Ltd made a first payment of R1.2 billion. The final payment of R650 million was received on 30 September The transfer of ownership process took place on 30 September 2012, after approval was obtained from the Competition Commission. The guarantee granted comprised a 50% cash component and 50% reserve on the existing facility. 24. Provisions utilised Opening during Figures in Rand thousand balance Additions the year Total GROUP 2014 Reconciliation of provisions Staff incentive bonuses ( ) GROUP 2013 Reconciliation of provisions Staff incentive bonuses (87 026) COMPANY 2014 Reconciliation of provisions Staff incentive bonuses ( ) COMPANY 2013 Reconciliation of provisions Staff incentive bonuses (87 026) Analysed as follows Current liabilities The accumulated staff bonus represents the liability at year-end provided for a planned employee incentive bonus payment. The provision for bonuses is payable within three months of finalisation of the audited financial statements. 73

76 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Interest-bearing borrowings GROup Carrying value Fair value Carrying value Figures in Rand thousand Unsecured Long-term bonds Nedbank Bul Loan Infrastructure Finance Development Bank of South Africa (DBSA) Southern Sun Loan L Agence Francaise de Developpement (AFD) L Agence Francaise de Developpement (AFD1) Secured FirstRand Bank Ltd Maturity analysis: Current portion Non-current portion

77 GROUP COMPANY Fair value Carrying value Fair value Carrying value Fair value Carrying value Fair value

78 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Interest-bearing borrowings (continued) Security Interest rate number % Terms and debt repayment schedule AIR02U 7.62% AIR03U JIBAR linked Long-term bonds AIRL % AIR % AIR % AIR % AIRL01 Inflation linked AIR04U 11.59% First Rand Bank Ltd 10.02% Southern Sun Hotel Interests (Pty) Ltd 2.00% Nedbank Bul Loan JIBAR-linked L Agence Francaise de Developpement (AFD) 10.35% L Agence Francaise de Developpement (AFD1) 10.55% Infrastructure Finance Corporation Limited (INCA) JIBAR-Linked Development Bank of Southern Africa (DBSA) JIBAR-Linked Total interest-bearing borrowings 76

79 GROUP COMPANY Nominal Maturity Carrying value R 000 date Oct Oct Feb Mar Mar Apr Apr Oct n/a Sep Nov Jan Nov Dec

80 Commendable performance of non-aeronautical revenues, which grew by 13.5% year-on-year, primarily driven by the growth in international traffic and the related impact on retail concessionaire revenues, provided for a total revenue growth of 7.2%. O.R. Tambo international Airport 78

81 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Trade and other payables GROUP COMPANY Figures in Rand thousand Trade payables Financial liabilities at mortised cost VAT Bonuses payable Leave payable Deposits received Other payables Trade payables and accruals principally comprise amounts outstanding for trade purchases, capital expenditure accruals and other costs. Trade payables are stated at carrying value which normally approximates the fair value, due to the short-term maturity thereof. The bonuses payable represents the liability accrued for at year end relating to contractual employee bonus payments. Included in other payables are lease payables, which relate to the straight-lining of lease accruals. The Group s exposure to liquidity risk related to trade and other payables is disclosed in note Revenue GROUP COMPANY Figures in Rand thousand Hotel operations Aeronautical Retail Rental Income Recoveries Other Retail revenue includes revenue from core retail, car parking, advertising and car rental 2 Recoveries include water, electricity and other utility charges recovered from tenants

82 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Other income GROUP COMPANY Figures in Rand thousand Profit on disposal of assets Fair value gains/(losses) on investment property Other Employee cost Basic Medical aid company contributions Pension benefits Total employee costs Net finance income and expense Interest received Finance income Finance costs ( ) ( ) ( ) ( ) Gains/(losses) on remeasurement and disposal of trading financial instruments Total finance expense ( ) ( ) ( ) ( ) Net finance expense ( ) ( ) ( ) ( ) 80

83 31. Taxation GROUP COMPANY Figures in Rand thousand Major components of the tax expense (income) Current Current year Prior periods (20 474) (20 474) Deferred Current year Prior periods (53 444) (53 444) Reconciliation of the tax expense Reconciliation between applicable tax rate and average effective tax rate Applicable tax rate 28.00% 28.00% 28.00% 28.00% Non-deductible expenses 0.07% 1.59% 0.26% 13.63% Resolution of certain tax positions 0.28% CGT rate differential (3.89)% (10.55)% (2.97)% (5.96)% Prior year adjustments (0.98)% (0.98)% 0.86% Other 2.61% 20.29% 1.98% 25.81% 39.61% 26.29% 36.53% The CGT rate differential is attributable to the sale of the Durban International Airport site, and taxes on the equity accounted profits. 81

84 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Operating lease GROUP COMPANY Figures in Rand thousand The Group as lessee Minimum lease payments recognised under operating leases as an expense during the year At the reporting date, the Group has outstanding commitments under non-cancellable operating leases for future minimum lease payments, recognised on the cash basis: Within one year Two to five years The Group mainly leases office and other equipment. These leases typically run for a period between one and five years and usually have no option to renew. The Group as lessor The Group rents out its investment properties on airport land under operating leases. Property rental income earned during the year was R533 million (2013: R515 million). The properties are managed and maintained by internal property managers. At the balance sheet date, the Group has contracted with tenants for the following future minimum cash lease payments: The Group as lessor Within one year Two to five years After five years Unrecognised lease payments

85 33. Earnings per share GROUP COMPANY Figures in Rand thousand Basic earnings (loss) per share From continuing operations (c per share) Basic earnings per share was based on earnings of R1.7 billion (Group 2013: R 991 million) and R1.5 billion (2013: R913 million) for Group and Company respectively, and a weighted average number of ordinary shares of 494 million and 500 million ordinary shares in issue (Group 2013: 494 million and 500 million.) Diluted earnings per share is equal to earnings per share because there are no dilutive potential ordinary shares in issue. Dividends per share Final (cents) The final dividend was declared and authorised in respect of the 2013 financial year at the annual general meeting held on 29 August Cash generated from operations Profit before taxation Adjustments for: Depreciation and amortisation Impairment of trade and other receivables Profit on sale of assets (1 311) (3 469) (1 311) (3 469) Income from equity accounted investments ( ) (62 434) Interest received investment (64 702) ( ) ( ) ( ) Finance costs Movements in retirement benefit assets and liabilities (95 846) (95 846) Movements in provisions Deferred income (2 603) (1 769) (2 603) (1 769) Unrealised fair value gains and losses ( ) ( ) ( ) ( ) Changes in working capital: Inventories (2) Other non-current assets (95 879) (78 553) Trade and other receivables (22 666) ( ) (23 629) Trade and other payables (17 836) (92 935) (12 651) ( ) Movement in tax receivable ( )

86 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Tax (paid) refunded GROUP COMPANY Figures in Rand thousand Balance at beginning of the year (19 823) (20 437) Current tax for the year recognised in profit or loss ( ) ( ) ( ) ( ) Balance at end of the year Commitments Capital commitments Contracted for ( ) ( ) ( ) ( ) Within one year Two to five years After five years Not yet contracted for Not yet contracted for and authorised by directors* * Commitments authorised by directors not yet contracted for, relate to the partnership investment with Investimentos e Participações em Infra-estrutura S.A (Invepar), for acquiring 51% of Guarulhos International Airport concession, with acquiring an additional 10% interest. The Group has committed an initial investment of R450 million. There are no commitments in relation to investments in joint ventures. 37. Contingencies Contingent assets An amount of R15 million for penalties is currently being disputed by a customer with. The recoverability of the amount is pending the outcome of negotiations with the customer, and at the date of this report, it was not resolved. Legal proceedings have been instituted against the customer. Contingencies relating to interests in joint ventures There are no contingencies relating to interests in joint ventures. 84

87 38. Related parties SOC Ltd is one of the 21 Schedule 2 major public entities in terms of the Public Finance Management Act (Act 1 of 1999 as amended) and therefore falls within the national sphere of Government. As a consequence, SOC Ltd has a significant number of related parties that are public entities. In addition, the Company has a related party relationship with its subsidiaries, associates and with its directors and executive officers (key management). Unless specifically disclosed, these transactions are concluded on an arm s length basis and the Group is able to transact with any entity. Relationships Subsidiaries refer to note 8 Joint ventures refer to note 9 Associates refer to note 10 GROUP COMPANY Figures in Rand thousand Related party balances Related party transactions National departments Services rendered Services received Amounts due from Amounts due to Constitutional institutions Services received Amounts due to (32) (32) Major public entities Services rendered Services received Amounts due from Amounts due to (694) (1 224) (694) (1 224) Other national public entities Services rendered Services received Amounts due from Amounts due to (16 550) (5 018) (16 550) (5 018) Subsidiaries and joint ventures Services rendered Amount due/(from)

88 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Related parties (continued) Remuneration All executive directors and executive management are eligible for an annual performance bonus payment linked to appropriate targets. During the current year, a liability for incentive bonus of R11 million (2013: R6 million) was raised in terms of the performance management system for executive directors and executive management. The structure of the individual bonus plans and awards is decided by the Board through the Remuneration and Nomination Committee. Other Figures in Rand thousand Salary benefits* Total GROUP 2014 Executive Bongani Maseko (appointed 15 May 2013) Maureen Manyama-Matome (appointed 1 April 2013) GROUP 2013 Bongani Maseko (Acting managing director, effective 1 October 2011) (Salary includes acting allowance) William Tlou (Acting finance director, effective September 2011) (Salary includes acting allowance) * Other benefits comprise retirement medical benefits, cash bonus and long-term incentive Directors Figures in Rand thousand fees Total GROUP 2014 Non-executive Busisiwe Mabuza (Chairman appointed 1 March 2012) Deon Botha (appointed 1 August 2013) (fees payable to the PIC) Elias Masilela (resigned 31 July 2013) (fees payable to the PIC) Roshan Morar (appointed 1 January 2012) Skumbuzo Macozoma (appointed 1 March 2012) Priscillah Mabelane (appointed 1 August 2012) Tryphosa Ramano (appointed 1 March 2012) John Lamola (appointed 1 December 2012) Kenosi Moroka (appointed 1 December 2012) Bajabulile Luthuli (appointed 1 December 2012) Chwayita Mabude (appointed 1 December 2012)

89 38. Related parties (continued) Directors Figures in Rand thousand fees Total GROUP 2013 Non-executive Busisiwe Mabuza (Chairman appointed 1 March 2012) Elias Masilela (appointed 1 January 2012) (fees payable to the PIC) Martie van Rensburg (retired 12 Novemver 2013) Roshan Morar (appointed 1 January 2012) Skumbuzo Macozoma (appointed 1 March 2012) Tryphosa Ramano (appointed 1 March 2012) John Lamola (appointed 1 December 2012) Priscilliah Mabelane (appointed 1 August 2012) Chwayita Mabude (appointed 1 December 2012) Kenosi Moroka (appointed 1 December 2012) Bajabulile Luthuli (appointed 1 December 2012) Other Figures in Rand thousand Emoluments benefits* Total GROUP 2014 Prescribed officers Deon Cloete Pieter du Plessis Haroon Jeena Tebogo Mekgoe Bongiwe Mbomvu (appointed 1 September 2013) Terence Delomoney John Neville Goran Vracar Yvette Schoeman Andre Vermeulen (Acting Group Executive: Airport Operations, effective 1 October 2011) * Other benefits comprise retirement medical benefits, cash bonus and long-term incentive 87

90 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Related parties (continued) Other Figures in Rand thousand emoluments benefits* Total GROUP 2013 Prescribed officers Deon Cloete Pieter du Plessis Haroon Jeena Chris Hlekane (resigned 30 September 2012) Tebogo Mekgoe (appointed 10 October 2012) Andre Vermeulen (acting group executive: Airport Operations, effective 1 October 2011) Terence Delomoney John Neville Goran Vracar Yvette Schoeman (appointed 1 November 2012) * Other benefits comprise retirement medical benefits, cash bonus and long-term incentive 88

91 39. Categories of financial instruments financial F financial liabilities Equity assets at Financial at fair Financial and nonfair value assets value liabilities financial through at through at assets profit or amortised profit or amortised Leases/ and Figures in Rand thousand Note(s) loss cost loss cost VAT liabilities Total GROUP 2014 Assets Non-current assets Investment property Property, plant and equipment Intangible assets Investment in joint ventures Investments in associates Other non-current assets Current assets Inventories Current tax receivable Trade and other receivables Investments Cash and cash equivalents Total assets

92 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Categories of financial instruments (continued) financial F financial liabilities Equity assets at Financial at fair Financial and nonfair value assets value liabilities financial through at through at assets profit or amortised profit or amortised Leases/ and Figures in Rand thousand Note(s) loss cost loss cost VAT liabilities Total GROUP 2014 Equity and liabilities Equity equity attributable to Equity holders of parent: Share capital Reserves 21, 22 ( ) ( ) Retained income Total equity Liabilities Non-current liabilities Derivative financial instruments Retirement benefit obligation Deferred income Deferred tax Interest-bearing borrowings Current liabilities Derivative financial instruments Current tax payable Trade and other payables Deferred income Provisions Interest-bearing borrowings Total liabilities Total equity and liabilities

93 39. Categories of financial instruments (continued) Financial Financial liabilities equity assets at Financial at fair Financial and nonfair value assets value liabilities financial through at through at assets profit or amortised profit or amortised Leases/ and Figures in Rand thousand Note(s) loss cost loss cost VAT liabilities Total GROUP 2013 Assets Non-current assets Investment property Property, plant and equipment Intangible assets Investment in joint ventures Investments in associates Other non-current assets Current assets Inventories Derivative financial instruments Current tax receivable Trade and other receivables Investments Cash and cash equivalents Total assets Equity Equity and liabilities equity attributable to Equity Holders of Parent: Share capital Reserves 20 ( ) ( ) Retained income Total equity

94 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Categories of financial instruments (continued) Financial Financial liabilities equity assets at Financial at fair Financial and nonfair value assets value liabilities financial through at through at assets profit or amortised profit or amortised Leases/ and Figures in Rand thousand Note(s) loss cost loss cost VAT liabilities Total GROUP 2013 Non-current liabilities Derivative financial instruments Retirement benefit obligation Deferred income Deferred tax Interest-bearing borrowings Current liabilities Derivative financial instruments Current tax payable Trade and other payables Deferred income Provisions Interest-bearing borrowings Total liabilities Total equity and liabilities

95 39. Categories of financial instruments (continued) financial F financial liabilities Equity assets at Financial at fair Financial and nonfair value assets value liabilities financial through at through at assets profit or amortised profit or amortised Leases/ and Figures in Rand thousand Note(s) loss cost loss cost VAT liabilities Total COMPANY 2014 Assets Non-current assets Investment property Property, plant and equipment Intangible assets Investments in subsidiaries Investments in associates Other non-current assets Current assets Trade and other receivables Investments Cash and cash equivalents Total assets

96 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Categories of financial instruments (continued) financial F financial liabilities Equity assets at Financial at fair Financial and nonfair value assets value liabilities financial through at through at assets profit or amortised profit or amortised Leases/ and Figures in Rand thousand Note(s) loss cost loss cost VAT liabilities Total COMPANY 2014 Equity and liabilities Equity equity attributable to Equity holders of parent: Share capital Reserves 21, 22 (26 309) (26 309) Retained income Total equity Liabilities Non-current liabilities Derivative financial instruments Retirement benefit obligation Deferred income Deferred tax Interest-bearing borrowings Current liabilities Derivative financial instruments Current tax payable Trade and other payables Deferred income Provisions Interest-bearing borrowings Total liabilities Total equity and liabilities

97 39. Categories of financial instruments (continued) Financial Financial liabilities equity assets at Financial at fair Financial and nonfair value assets value liabilities financial through at through at assets profit or amortised profit or amortised Leases/ and Figures in Rand thousand Note(s) loss cost loss cost VAT liabilities Total COMPANY 2013 Assets Non-current assets Investment property Property, plant and equipment Intangible assets Investments in subsidiaries Investments in associates Other non-current assets Current assets Derivative financial instruments Trade and other receivables Investments Cash and cash equivalents Total assets

98 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Categories of financial instruments (continued) Financial Financial Debt liabilities equity assets at instru- at fair Financial and nonfair value ments value liabilities financial through at through at assets profit or amortised profit or amortised Leases/ and Figures in Rand thousand Note(s) loss cost loss cost VAT liabilities Total COMPANY 2013 Equity and liabilities Equity equity attributable to Equity holders of parent: Share capital Reserves 21, 22 (83 928) (83 928) Retained income Total equity Liabilities Non-current liabilities Derivative financial instruments Retirement benefit obligation Deferred income Deferred tax Interest-bearing borrowings Current liabilities Derivative financial instruments Current tax payable Trade and other payables Deferred income Provisions Interest-bearing borrowings Total liabilities Total equity and liabilities

99 40. Financial risk management The Group recognises that an effective risk management function is fundamental to its business. Taking international best practice into account, s comprehensive risk management process involves identifying, understanding and managing the risks associated with each of the Group s business units. Risk awareness, control and compliance are embedded in the Group s day-to-day activities. The Group Risk Management unit independently monitors, manages and reports risk as mandated by the Board of Directors through the Audit and Risk Committee, and the Treasury and Economic Regulation Committee. The Executive Committee and business units are ultimately responsible for managing risks that arise. Sound financial risk management framework is in place at, based on a best-practice enterprise risk management framework, built on rigorous governance structures. These frameworks are supported by an experienced team that manages the exposures across the Group structures and these are regularly monitored and reported to the respective committees and ultimately to Board. Credit risk Credit risk is the risk of loss to the Group as a result of the failure by a customer or counterparty to meet its contractual obligations. The credit risk that faces arises mainly from commercial and aeronautical business. These risks are mitigated by the guarantees held for the exposure at a given period. Credit risks can also arise from cash and cash equivalents, accounts receivable and derivative financial instruments. These risks are effectively managed in terms of the Board approved financial risk management framework that specifies the investment and counterparty policies. As at 31 March 2014 the Group had no significant concentration of credit risk from treasury trading activities. Trade and other receivables The Group s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group s customer base, including the default rate of the industry and country, in which customers operate, has less of an influence on credit risk. Approximately 23% (2013: 32%) of the Group s aeronautical revenue is attributable to transactions with a single customer. The main concentration of credit risk is in the Johannesburg region, which approximates 61% (2013: 61%) of the trade receivables of the Group. each new customer is analysed individually for creditworthiness before the Group s standard payment terms and conditions are offered. The Group s review includes external ratings, where available, and in some cases bank references. Credit limits are established for each customer, which represents the maximum open amount, and these limits are reviewed on an ongoing basis. Customers that fail to meet the Group s benchmark creditworthiness may transact with the Group only on a prepayment/cash basis. More than 60% of the Group s customers have been transacting with the Group for over 15 years, and losses have occurred infrequently. In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or legal entity, whether they are aeronautical, commercial or retail customer, geographic location, industry, aging profile, maturity and existence of previous financial difficulties. Trade and other receivables relate mainly to the Group s aeronautical and commercial customers. Customers that are graded as high risk are placed on a 97

100 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Financial risk management (continued) Trade and other receivables (continued) restricted customer list, and future transactions are made on a prepayment basis with approval of the Credit Committee. Customers are considered to be high risk when they have not met the credit terms as stipulated in their trading contracts. Investments and cash and cash equivalents in complying with the Treasury Regulation, s Financial Risk Management Framework limits the Group to investments in a short-term rated instrument or AAA rated instruments and counterparts. For banks and financial institutions, only independently rated parties with a minimum rating of A- are accepted with respect to cash and cash equivalents. Guarantees The Group has no formal policy for providing financial guarantees. Market risk Market risk is the risk that s earnings or capital, or its ability to meet business objectives, will be adversely affected by changes in the level or volatility of market rates or prices such as interest rates, foreign exchange rates and commodity prices. The main market risk arises from treasury activities and both aeronautical and non-aeronautical business. The Group has developed analytical tools that are used to perform various analyses in order to assess the impact of market risk on business and to identify mitigants to manage the risk within approved tolerance levels. Interest rate risk s interest rate risk arises from its borrowings. Borrowings issued at variable rates expose the Company to cash flow risks, and borrowings issued at fixed rates expose the Company to fair value interest rate risk. s policy is to maintain a mix of fixed to floating rate debt within the Board-approved parameters. As at 31 March 2014, s fixed to floating rate profile after hedging, on net debt was 69% (2013: 77%) fixed. Tariff risk Approximately half of the Group s revenue is regulated by an independent economic regulator using a price cap methodology. The regulated tariff is linked to the CPI index. A change in CPI has a positive or a negative impact on the revenue earned by the Group. However, the Group is allowed to adjust the difference between actual and forecast CPI in future tariffs. The tariff is determined every five years, with an option to re-open after three years. The Board has approved a regulatory strategy which seeks to proactively influence the regulatory approach in line with best practice. In this regard, the Group proactively manages the economic regulatory risk while balancing the interests of both the Group and the customers. 98

101 40. Financial risk management (continued) Foreign exchange risk has two foreign investments that give rise to limited exposure to foreign currency risk, arising primarily with respect to the Brazilian Real and Indian Rupee. All foreign debt instruments are issued in Rands or, where applicable, hedged through cross-currency swaps. The Group also uses foreign exchange contracts to hedge material expenditure once the project or purchase cash flows are certain. Liquidity risk liquidity risk is the risk of not being able to generate sufficient cash to honour financial commitments. In Airports Company South Africa it refers particularly to the risk of the Group not being able to advance funds for capital expenditure, redeem and service loans, finance operational costs and service unanticipated financial commitments. The objective of The Financial Risk Management Framework is to ensure continuity of funding and flexibility, ensuring debt maturities are spread over a range of dates to manage refinancing risks. The Group had all funding required for the 2014 financial year. Further, the Group mitigates this risk by maintaining banking facilities with major South African banks that cover 12 months funding requirements. The Group is not exposed to excessive refinancing risk in any one year. As at 31 March 2014, the Group had committed and un-committed facilities of R3.3 billion (2013: R4.5 billion). Committed Uncommitted Total facility facility facility Figures in Rand thousand amount amount amount Utilised facilities ( ) ( ) Total unutilised uncommitted facilities represent undrawn lines of credit where the bank has an agreement with the Company to make available an amount (up to the maximum specified) in loans on demand from the Group. The Group is under no obligation to actually take out a loan at any particular time. Committed facilities are those lines of credit where the Group and the bank have clearly defined terms and conditions which bind the bank to lend the Group up to the amounts stated in the agreement. 99

102 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Financial risk management (continued) in addition, the table below analyses the Group s financial liabilities in terms of their maturities. The amounts disclosed are the contractual undiscounted cash outflows. Carrying Contractual 6 months Between Between Between More than Figures in Rand thousand amount cash flows or less 6-12 months 1-2 years 2-5 years 5 years 2014 GROUP Unsecured borrowings Trade and other payables Derivative financial instruments COMPANY Unsecured borrowings Trade and other payables Derivative financial instruments GROUP Unsecured borrowings Trade and other payables Derivative financial instruments COMPANY Unsecured borrowings Trade and other payables Derivative financial instruments GROUP Secured borrowings Unsecured borrowings Trade and other payables Derivative financial instruments Financial guarantees

103 40. Financial risk management (continued) Capital risk management The Group s capital management strategy is designed to ensure that the Group is adequately capitalised in a manner consistent with the Group s risk profile, economic regulatory requirements and maintaining an investment rating level. This strategy is intended to maintain investors confidence in the Group s debt issues in the debt capital markets. The Group monitors capital adequacy through the gearing ratio, as represented by net interest-bearing debt to total capital. Net debt is calculated as total interest-bearing borrowings (including current and non-current borrowings as shown in the balance sheet) less cash and cash equivalents plus short-term investments. Total capital is calculated as equity as shown in the consolidated balance sheet, plus net debt. The gearing ratio for the Group at 31 March 2014 was 46% (2013: 53%). The Group s optimal gearing ratio is up to 60% (2013: 57% to 60%) and maintains an investment credit rating. The gearing ratios as at 31 March 2014 and 2013 were as follows: Figures in Rand thousand GROUP Total borrowings Less: cash and cash equivalents plus short-term investments ( ) ( ) ( ) Net debt Total equity Total capital Gearing ratio (net debt divided by total capital) 46% 53% 59% COMPANY Total borrowings Less: cash and cash equivalents plus short-term investments ( ) ( ) ( ) Net debt Total equity Total capital Gearing ratio (net debt divided by total capital) 48% 55% 60% Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. Fair value estimation The fair values of financial instruments traded in active markets are based on quoted market prices at the balance sheet date. The Group uses the current bid prices to determine the market prices for financial assets. The fair values of financial instruments that are not traded in active markets are determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices and dealer quotes for similar instruments are used for long-term debt. 101

104 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Financial risk management (continued) The fair values of forward foreign exchange contracts are determined using forward exchange rates at the balance sheet date. The fair values of interest rate swaps are calculated as the present value of the estimated future cash flows based on observable yield curves. Other techniques such as estimated discounted cash flows, are used to determine fair values for the remaining financial instruments. The carrying values of trade receivables less impairment provision, and carrying value of trade payables, are assumed to approximate their fair values. The fair value of financial liabilities for discounting purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 41. Fair value information Fair value hierarchy The table below analyses assets and liabilities carried at fair value. The different levels are defined as follows: level 1: Quoted unadjusted prices in active markets for identical assets or liabilities that the Group can access at measurement date. level 2: Inputs other than quoted prices included in level 1 that are observable for the asset or liability either directly or indirectly. Level 3: Unobservable inputs for the asset or liability. 102

105 41. Fair value information (continued) GROUP COMPANY Figures in Rand thousand Note(s) Levels of fair value measurements Level 2 Recurring fair value measurements Assets Investment property 5 Investment properties Financial assets designated at fair 11 value through profit or loss Foreign exchange contracts Liabilities financial liabilities at fair value 11 through profit or loss Interest rate swaps (99 682) ( ) ( ) (99 682) ( ) Non recurring fair value measurements assets held for sale and disposal groups in accordance with IFRS 5 Investment property Buildings which were classified as non-current assets held for sale in 2012 have been recognised at fair value less costs to sell because the assets fair value less costs to sell is lower than its carrying amount. The fair values of Investment properties have been determined based on valuations performed by accredited independent valuers, as at 31 March 2014 and 31 March The valuers are industry specialists in valuing these types of investment properties. The fair values of the properties have been determined on transactions observable in the market. Where there was lack of comparable data, a valuation model in accordance with that recommended by the International Valuation Standards Committee has been applied No changes have been made to the valuation technique. 103

106 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Events after the reporting period Termination of performance operator agreement After 31 March 2014, the Airport Operator Agreement between ACSA Global Limited and Mumbai International Airport Private Limited expired. Dividend declaration On 22 July 2014, the Board of Directors proposed an ordinary dividend of R300 million. 43. Other operating expenses GROUP COMPANY Figures in Rand thousand Operating expenses Auditor s remuneration Operating lease expense Repairs and maintenance Security Impairment of trade and other receivables Information systems expenses Electricity and water Rates and taxes Cleaning Marketing Managerial, technical and other fees Travel local Travel overseas Insurance Administration Training Foreign currency losses Consumables Corporate social investment Telephone and fax Recruitment expenses Legal expenses Other expenses (26 588)

107 44. Irregular expenditure GROUP COMPANY Figures in Rand thousand Opening balance Add: irregular expenditure current year Less: amounts not recoverable (not condoned) (32 832) (32 832) Irregular expenditure awaiting condonation Current year Prior years Total Details of irregular expenditure Current year: r82 million in respect of goods and services whereby invoices were dated prior to the purchase order dates. The matter is currently under investigation. Prior year: R32.8 million in respect of an IT contract. Disciplinary proceedings against the concerned employees were held. 45. Fruitless and wasteful expenditure GROUP COMPANY Figures in Rand thousand Opening balance Add: fruitless and wasteful expenditure current year Less: amounts not recoverable (not condoned) (13 625) (13 625) Fruitless and wasteful expenditure awaiting condonation Current year Prior years Total Details of fruitless and wasteful expenditure. Current year: r0.5 million in respect of not returning and/or demanding a refund on non-functional equipment. A disciplinary hearing was held and a final written warning issued to the employee in question. Forfeiture of deposit of R0.05 million for conferencing facilities due to cancellation of booking. Prior year: r13.6 million in respect of an IT contract. Disciplinary proceedings against the concerned employees were held and they were subsequently dismissed. 105

108 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Financial instruments GROUP COMPANY Figures in Rand thousand Credit risk Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows: Loans and receivables The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was as follows: O.R. Tambo International Airport Cape Town International Airport King Shaka International Airport Port Elizabeth International Airport East London Airport George Airport Bram Fischer International Airport Kimberley Airport Upington International Airport Johannesburg corporate office and other Less: impairment allowance (56 795) ( ) ( ) (56 795) ( ) The maximum exposure to credit risk for trade receivables at the reporting date before the impairment provision, guarantees and deposits held by type of customer was: Aeronautical Commercial Other

109 46. Financial instruments (continued) Trade and Impairment Trade and other receivables, as a percentage other Allowance net of allowances of trade and receivables for impairment for impairment other receivables 2014 GROUP Not past due Past due 0 30 days Past due days Past due days (56 795) % Total trade and other receivables (56 795) % COMPANY Not past due Past due 0 30 days Past due days Past due days (56 795) % Total trade and other receivables (56 795) % 2013 GROUP Not past due Past due 0 30 days Past due days Past due days ( ) % Total trade and other receivables ( ) % COMPANY Not past due Past due 0 30 days Past due days Past due days ( ) % Total trade and other receivables ( ) % 107

110 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Financial instruments (continued) Impairment loss The movement in the allowance for impairment in respect of trade receivables during the year was as follows: GROUP COMPANY Figures in Rand thousand Balance at 1 April Increase/(decrease) in allowance Bad debts written off ( ) ( ) Credit quality of financial instruments The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to historical information about the customer. Before accepting any new customer, the Group uses an external credit scoring system to assess the potential customer s credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed periodically. 60% of the trade receivables that are neither past due nor impaired were recovered within one month after the reporting date. Of the trade receivables balance at the end of the year, R137 million (2013: R181 million) is due from one significant client, the Group s largest. There are no other customers who represent more than 10% of the total balance of trade receivables. As at 31 March 2014, the Group had no significant concentration of credit risk (2013: Nil). The allowance account in respect of trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amounts owing is possible; at that point the amounts considered irrecoverable and are written off against the allowance account. The Group believes that, based on historic default rates, no other impairment allowance in respect of trade receivables not past due or past due days is required. Price risk Exposure to price risk The Group is exposed to price risk on the Stanlib Income Fund, which is based on quoted prices. A 5% change in the quote price of the Stanlib Income Fund as at 31 March would have had the effect of increasing profit for the period by R53 million (2013: R60 million). 108

111 46. Financial instruments (continued) Currency risk Exposure to currency risk in order to manage risks from fluctuations in currency rates, the Group makes use of forward exchange contracts to manage exposure to fluctuations in foreign currency rates on importation of equipment. The Group s exposure to foreign currency risks was as follows, based on notional amounts: USD Euro GBP USD Euro GBP GROUP Trade receivables Cash and cash equivalents Trade payables (359) (1 032) Gross balance exposure sheet COMPANY Trade payables (632) Foreign exchange contracts (5 000) Gross balance sheet exposure (5 000) 584 The following significant exchange rates applied during the year: Average rate Reporting spot rate Figures in Rand thousand Euro USD GBP INR BRS

112 Notes to the consolidated annual financial statements (continued) For the year ended 31 March Financial instruments (continued) Sensitivity analysis A 10% weakening of the Rand against the following currencies at 31 March would have increased/(decreased) equity and profit and loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for Figures in Rand thousand Equity Profit or loss 31 March 2014 USD (46 974) (12 897) INR (38 944) (5 173) BRL ( ) (52 198) ( ) (70 268) 31 March 2013 USD (75 268) (36 670) INR (3 092) (2 907) BRS (2 402) (2 907) (80 762) (42 484) A 10% strengthening of the Rand against the above currencies at 31 March would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. Interest rate risk Profile At the reporting date, the interest profile of the Group s interest-bearing financial instruments was: Carrying amount F fixed-rate Variable-rate Figures in Rand thousand instruments instruments 2014 GROUP Interest bearing borrowings COMPANY Interest bearing borrowings GROUP Interest bearing borrowings COMPANY Interest bearing borrowings Integrated Report

113 We have continued to create value for our stakeholders, which has grown by 8% to R6.0 billion as compared to the R5.6 billion in 2013 financial year. UPINGTON international Airport 111