EDITORIAL: Astute Acsa an SOE anomaly
Company’s self-help measures are good news after it seemed in August it might need a cash injection
For some companies, approaching shareholders with a begging bowl for a cash injection to dig themselves out of a financial mess is the last resort.
That is sadly in stark contrast to state-owned enterprises (SOEs) such as the Post Office, which is facing a painful reckoning as its long-standing mail and parcel delivery model is in irreversible decline and has asked the Treasury to stump up R7bn to shore up its balance sheet.
The list of SOEs in the queue for bailouts is too long.
Thankfully, Airports Company SA (Acsa), which has been felled by the global slump in air travel during the pandemic, is not one of them.
The operator of airports, such as OR Tambo International, is taking a leaf out of the books of private sector companies such as Aspen Pharmacare and Sasol.
Aspen hit turbulent times three years ago when investors dumped its stock amid growing concerns that it might be unable to shoulder its multibillion-rand debt pile.
With delays in sealing a deal to sell its Australian business, speculation swirled that the company would be left with little choice but to tap investors for cash.
Instead, the company embarked on an asset-disposal programme, slashing debt by almost a third since 2018 and putting its net debt to core earnings — a key measure used by lenders that shows how well a company’s earnings can cover its debt — securely below the levels agreed with creditors.
Sasol is another high-profile example of a private sector company that is putting in much work to avoid giving investors the unwelcome choice of coughing up cash or watch their holding being diluted.
Having also embarked on cutting costs and selling assets, including a stake in its Lake Charles Chemicals Project, there’s growing consensus among equity analysts that Sasol, which needs the money to rescue it from a potential messy collapse, could yet avoid a R30bn rights offer.
It is the sort of creative self-help measures that Acsa, which until the pandemic ravaged the aviation industry was held up as an example of a profitable state-owned company, is taking to make up for sales crushed by the Covid-induced downturn.
Acsa is expected to swing into heavy losses after delivering R1.5bn profit in the year to end-March 2020, mirroring the carnage in the global aviation industry. London’s Heathrow Airport, one of the world’s busiest, suffered a £1.5bn (R30bn) loss in the nine months to September.
Acsa said it is in the market for financial advisers to help it find ways to make money out of its nearly R8bn property portfolio, which earns money from renting shopping space at airports that were left unused for months in 2020 due to travel restrictions.
Alongside exploring ways to release value trapped in its real estate — which also includes hotels, office parks, fuel stations and cargo terminals — to shore up its finances, Acsa has cut its operational spending by R1.2bn while spending on new projects worth R14.5bn has been deferred.
It has also sold its 10% stake in Mumbai International Airport for about R1.2bn.
For the Treasury, Acsa’s self-help measures is good news after the company told parliament in August it might need a cash injection in the form of government-guaranteed borrowings. The company told parliament in 2020 that it could require new government-backed debt of up to R11bn over the next six years.
But for finance minister Tito Mboweni to hold up Acsa as not only a company that has consistently delivered profits but one that can come up with creative solutions to dig itself out of a hole, the government’s support for this coherently laid-out fundraising plan should not be only on paper.
As Acsa CFO Siphamandla Mthethwa puts it, the process will have to go through “a very stringent process” because Acsa is an SOE, but stringent shouldn't mean a tardy approval process that might leave it with cash shortages and force it to consider an unpopular cash injection from the shareholder.
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