AIRPORTS COMPANY SOUTH AFRICA BUDGET 2008 M.W. Hlahla B.T. Mparutsa B. Maseko
Agenda Highlights, Key Value Drivers Economic Assumptions Regulatory Environment Capital Expenditure Capital Structure Traffic Assumptions and Key Objectives for 2008 Consolidated Income Statement Details per category and airport Commercial Services Human Resources Expenditure Balance Sheet and Cash Flow Statement
Highlights 2008 Budget Revenue 2 784 828 EBITDA 1 737 993 Headline Earnings EBITDA Margin (%) 663 652 62.41 Nominal Return on CE (%) 8.01% Return on Equity (%) Capex 14.23% 4 668 961
Strategic deliverables Improvement in the end to end user experience in operations; Focus on the customer/passenger; Safety and Security Permission 2008-2012; Capital Structure and borrowings; La Mercy; Cargo; Commercial (Property / Advertising / Parking).
Strategic deliverables Achieve strategic deliverables through internal business processes including: Human Resources; Brand Management; Information Technology; Stakeholder Management; Appropriate Operating Structures
Strategic Deliverables Timeous infrastructure provision; Provision of public transport e.g. Gautrain; Provision of parking facilities; Integrated technology based solutions, Airport Management Centre; Service Level Agreements with partners and service providers; Ramp Handling Licences.
Key Value Drivers Regulated Tariffs - budgeted tariff increase of 8.5%; Traffic Growth is still maintained for PAX to 9.47% ( 07: 9.03%) and ATM s to 5.93% ( 07: 10%); Commercial Revenue increases by 16.01% ( 07: 17.5%) lead by property income; Operating Expenditure maintain cost control whilst improving operating environment and customer satisfaction; Appropriate Capital Structure increase level of gearing to 50% with increased capex plans; Capex meet all capex required for World Cup 2010 as well as the new permission.
Economic assumptions
Economic Assumptions 2005 2006 2007 2008 Actual Actual Estimate Forecast GDP Growth (%) 5.1 5.0 4.5 4.5 Inflation (%) CPIX 3.9 4.6 5.4 5.1 Average ZAR / USD 6.4 6.77 7.64 8.18 Average ZAR/ Euro 7.91 8.52 10.16 10.63 R153 Bond Yield (%) 7.74 7.92 8.3 7.74 R157 Bond Yield (%) 8.05 7.97 8.14 7.99 Prime Overdraft Rate (%) 10.63 11.17 12.50 12.38 Personnel Cost Increases (%) 6.32 5.50 6.0 7.0
Current Economic Environment Domestic economy continues to be robust with retail sectors performing particularly well; Business confidence remains high; Inflation (CPIX) remains within the 3 6% target range; Construction Inflation remains very high - in excess of 15% Prime rate increased by 200 bps from 10.5% to 12.5% - no increase in Feb 07 and April 07; Growth continues to exceed forecasts; Further growth initiatives will be implemented targeted at achieving a 6% growth rate; Public sector infrastructure investment programmes.
Regulatory Environment
Economic Regulation Permission Application submitted on 30 September 2006; Regulating Committee (RC) unable to meet the timeline with regard to finalising the tariffs; New Regulatory Asset Base (RAB) principles introduced the RC; Regulatory financial model being updated with the new RAB principles; Revised model to me submitted to the RC in mid-march 07; Finalisation expected by the end of May 07.
Capital Expenditure
ACSA MAJOR DEVELOPMENTS ORTIA Developments International Pier & Echo Apron International Departures Upgrade Central Terminal Building New MSP Gautrain ABSA ITB
ACSA MAJOR DEVELOPMENTS ORTIA International pier
ACSA MAJOR DEVELOPMENTS CIA developments New Domestic Terminal Wing New Central Terminal Building International Terminal Wing upgrade A380 aircraft stands MSP (under construction) New Upper Road 2 nd MSP
ACSA MAJOR DEVELOPMENTS CIA New terminal airside view
ACSA MAJOR DEVELOPMENTS CIA New terminal landside access
ACSA MAJOR DEVELOPMENTS CIA - MSP
Capital Expenditure 4,800 4,400 4,000 3,600 3,200 2,800 2,400 2,000 1,600 1,200 800 400 0 2005 2006 2007 2008 2009 2010 Capex (R'm) Permission (R'm)
Capital Expenditure Airport Services Commercial Total ORTIA 1,478,222,147 437,116,157 1,915,338,304 CTIA 549,564,248 164,183,100 713,747,348 DIA 33,507,641 31,000,000 64,507,641 La Mercy 1,586,958,186-1,586,958,186 Corporate 144,495,900-144,495,900 PE 46,895,149 4,950,000 51,845,149 EL 85,733,808 5,300,000 91,033,808 BL 40,873,580 1,900,000 42,773,580 GG, KM, UP, PIA 50,261,409 8,000,000 58,261,409 TOTAL 4,016,512,067 652,449,257 4,668,961,324
Capital Structure
Capital Structure Key Initiatives R12 bn DMTN programme registered on the Bond Exchange of South Africa in Feb. 07; Achieved an independent AA rating by Fitch; Initial R 2 bn bond issued on 15 March 07; Gearing will increase during this high capex period; Continue to seek longer term funding; Match underlying tariff with debt pricing profile; Manage dividend policy / payout ratio; Maintain bank lines; Establish a Treasury function.
Traffic Assumptions
Traffic Assumptions Based on TRL, Airlines Associations and ACSA forecasts; Full recognition of new entrants into market e.g. Mango, Flyglobespan, Thai, Delta, Bellevue and Ghana Airways; Domestic demand under pressure with increase in interest rates; Low cost carriers Mango operated from December 2006; Intense continuing pressure to cut costs for the aviation sector as a whole; Forecasts adjusted for known entrants, schedule changes and cancellations.
Passenger Increase Summary PAX 2006 2007 2008 % growth Actual Forecast Budget Domestic 10 560 289 11 611 749 12 837 844 11 International 3 842 256 4 071 779 4 356 147 7 Regional 385 777 412 436 441 231 7 Unscheduled 68 943 103 436 99 040 (4) TOTAL 14 857 265 16 199 401 17 734 261 9
ATM Increase Summary ATM 2006 2007 2008 % growth Actual Forecast Budget Domestic 134 103 138 838 150 859 9 International 28 144 29 435 31 096 6 Regional 11 702 10 982 10 997 0 Unscheduled 61 920 80 315 82 019 2 TOTAL 235 869 259 571 274 970 6
Consolidated Income Statement
Consolidated Income Statement 2008 BUDGET Aeronautical Revenue 1 548 658 Commercial Revenue 1 181 535 Other Revenue 54 635 Total Revenue 2 784 828 Personnel costs 452 758 Repairs and Maintenance 119 995 Utilities 132 601 Security 76 270 Marketing 61 471 Other Costs 203 740 Operating Expenditure 1 046 835 EBITDA 1 737 993
Consolidated Income Statement (Cont.) 2008 BUDGET EBITDA 1 737 993 Depreciation 588 240 Net Operating Income 1 149 753 Finance charges (165 490) Net Income before Taxation 984 263 Taxation (320 612) Net Income after Taxation 663 652
Details per category and airport
Aeronautical Revenue MAJOR CATEGORIES 2008 Budget % Landing Fees 507 610 32.8% Passenger Service Charge 1 020 545 65.9% Aircraft Parking 20 503 1.3% TOTAL 1 548 658 100%
Aeronautical Revenue SEGMENTAL ANALYSIS BY AIRPORT 2008 Budget % ORTIA 1 027 920 66.4% CIA 286 683 18.5% Domestic Airports 234 055 15.1%
Passenger service charge MAJOR CATEGORIES 2008 Budget % International 491 771 48.2% Domestic 489 009 48.0% Regional 35 502 3.4% Unscheduled 4 264 0.4% TOTAL 1 020 545 100%
Landing fees MAJOR CATEGORIES 2008 Budget % International 278 264 54.8% Domestic 202 340 39.9% Regional 11 362 2.2% Unscheduled 15 644 3.1% TOTAL 507 610 100%
Commercial Services
Commercial Revenue 2008 Budget % Advertising 128 805 10.9% Retail 422 462 35.8% Car Parking 254 835 21.6% Car Rental 115 179 9.7% Property 281 794 23.8% Lease Smoothing (21 541) (1.8%) TOTAL 1 181 535 100%
Commercial Revenue SEGMENTAL ANALYSIS BY AIRPORT 2008 Budget % ORTIA 769 486 65.1% CIA 235 765 20.0% Domestic Airports 164 253 13.9%
Human Resources
Human Resources Main Assumptions: FTE increase related to ACSA s strategic approach in addressing service levels Focus on the passenger and ensure efficiency in operations for the end-to-end experience; Increased investment in safety and security; Salary increases in line with inflation at 7 %;
Analysis: Headcount vs. Volume Growth % increase ATMS PAX Headcount 2003 3.12 8.65 0.78 2004 (2.25) 7.42 (0.61) 2005 2.7 12.1 (0.11) 2006 7.9 11.4 3.74 2007 10 9.03 2.69 2008 5.93 9.47 15.85 Cumulative 27.4 58.07 22.34
Human Resources 2007 Forecast 2008 Budget % Variance Full Time Employees 1 894 2 194 15.9 PAX / Employee 8 553 8 083 5.5 Personnel cost / Employee Staff cost / Operating cost 196K 206K 5.0 40.94 % 43.25 % 6.0
Human Resources Security 134 8,876,920 Safety 9 1,639,533 Project Managers 2 682,864 Engineers & Technicians 26 6,785,123 Legal 2 665,489 Information Technology 3 1,144,041 Internal Auditor 1 315,489 Human Resources 5 1,040,276 Fire & Rescue 27 2,751,959 Client/Duty/Passenger Managers 70 10,855,908 Commercial 12 2,512,958 Aviation Services 2 664,064 Secretarial, Finance and Admin, MD s Office 7 1,473,732 Total New Staff Members 300 39,408,357
Expenditure
Expenditure Repairs & Maintenance increase by 7.8% as a result of an increase in preventative and scheduled maintenance and increased infrastructure; Security Costs increase by 15.5% due to additional staff and the new security contracts; Marketing increase with 69% due to required CSI spent of 1% on turnover, as well as communication drive to stakeholders; Rates and Taxes do not increase if the R&T refund in CTIA is excluded; Administration increases by 4.5%, but decreases by 7% if the additional R4.7m for service standards monitoring are excluded.
Balance Sheet and Cash Flow Statement
Consolidated Balance Sheet 2007 FORECAST 2008 BUDGET Share Capital 750 001 750 001 Long Term Borrowings 2 000 000 5 500 000 Retained Income 4 740 987 5 234 639 Deferred tax 822 525 828 321 Creditors & provisions 380 850 742 491 Loans and funding 848 354 549 370 Total Liabilities 9 542 717 13 604 822 Assets Net Book Value 9 133 073 13 213 795 Investments 50 968 50 968 Receivables 360 304 344 833 Cash and Stock (1 628) (4 774) Total Assets 9 542 717 13 604 822
Cash Flow Statement 2008 BUDGET Net Profit before tax & interest 1 149 753 Depreciation 588 240 Investment Income 15 000 Profit on sale of assets (390) Net Provisions realised (3 822) Decrease in receivables & stock 15 357 Increase in accounts payable 365 464 Cash generated by operations 2 129 603 Interest paid (180 490) Taxation paid (320 612) Dividends paid (170 000) Net cash inflow from operating activities 1 458 501
Cash Flow Statement (Cont.) 2008 BUDGET Net cash (out)/inflow from operating activities 1 458 501 Proceeds on disposal of assets 390 Additions to Fixed Assets (4 668 961) Increase / Decrease in RFB liabilities & Deferred Tax 5 796 Increase in short term loans /borrowings 3 201 016 Movement in cash for year (3 259) Cash at beginning of year (3 088) Cash at end of year (6 347)
End