Corporate Plan - FYs 2016 to 2018

1. Corporate Plan - FYs 2016 to 2018 PORTFOLIO COMMITTEE ON TRANSPORT 17 April 2015

2. Contents Corporate overview Our business, people and society and environment Our integrated value creation model Our governance and operating structures SWOT Operating environment Stakeholder relations Strategy Key initiatives Annual performance plan Key FY 2015 – 2016 projects Financial plan & Borrowing plan Conclusion Annexures

3. Corporate overview

4. Our business, people and society & environment • Business Sustainability • Businesses that are profitable and contribute to healthy ecosystems and communities. • “…Meets the needs of the present without compromising the ability of future generations to meet their own needs." • (Brundtland report, WBCSD) • We clustered the capitals into the following categories: • Our Business – comprising of manufactured, intellectual and financial capital • Our People and Society – comprising of social and human capital • Our Environment – comprising of natural capital. Source: Incite (2013), adapted for Airports Company South Africa

5. Our integrated value creation model Source: International Integration Reporting Committee, adapted for Airports Company South Africa

6. Our governance structure

7. Our operating structure * * *Recruitment process underway

8. SWOT

9. Sluggish Economic Climate Operating environment Government Objectives (NDP & DoT) Economic Regulation Stakeholder relations (management) Security of Energy Supply Maintain Credit Rating Declining costs of Brent Crude Oil Airport transport policy Effect of Ebola on Air Travel

10. Key risks

11. Stakeholder relations • Leverage our corporate reputation • Minimise our reputational risk • Improve mutually beneficial relationships and related outcomes • Integrate a reputation management and measurement system with a communication strategy

12. Shareholder value • The current Corporate Plan does not provide for the returns expected by shareholders and investors to enhance shareholder value.  • Shareholder value remains a key strategic objective.  • Management will continue to develop strategies over the Corporate Plan period to enhance return on capital employed (ROCE) to achieve in excess of the weighted average cost of capital (WACC) [i.e.  above 10.9%, and return on equity (ROE) in excess of 13.4% in the foreseeable future]. • Curbing costs (R100m) over the next two years

13. Strategic thrusts Strategy - To build an efficient and customer focussed business based on firm transformation and sustainability imperatives

14. Key initiatives

15. DOT Measurable Performance & Accountable Delivery • The performance agreement between the President and the Minister of Transport outlines the following 4 outcomes/objectives: • Decent employment through inclusive economic growth • An efficient, competitive and responsive economic infrastructure network • Comprehensive rural development and land reform • Protect and enhance our environmental assets and natural resources • Accordingly, we re-aligned the previous pre-determined objectives with the following new pre-determined objectives:

16. Annual performance plan Integrating pre-determined objectives and company objectives with KPI’s

17. Annual performance plan, cont…

18. Annual performance plan, cont…

19. Annual performance plan, cont…

20. Annual performance plan, cont… Note 1: The Employment Equity target for 2018 will be provided once the new five year (2016 – 2021) Employment Equity plan has been developed and approved.

21. Key projects – 2015/2016

22. Financial & Borrowing Plan FYs 2016 to 2018

23. Assumptions • Forecast 2014/15 was based on August 2014 results • Worst case claw back assumed -> aeronautical revenue • Opex is based on current reality / contractual / tariff increases • Personnel costs -> CPI plus 2.5% • Promulgated tariffs were used for regulated charges (FY2016)

24. Financial performance overview

27. Financial position overview

29. Key value drivers for an airport Operating efficiency Return on Sales (ROS) • Total Revenue / Pax, Atm’s • EBITDA Margin • Cash Flow / Total Revenue Return on Assets ROA X Asset utilisation Return on Equity Asset Turnover ROE X • Pax, ATM’s / Total Assets • Capex / Total Revenue • Capex / Depreciation Capital structure Financial Leverage • Net Assets / Total Assets • Gearing (Debt / Equity ratio) • Debt Ratio Source: Dr Hans-Arthur Vogel, 2006

34. Weaker economic performance projected Macro-economic projections Source: World Bank, Global Economic Prospects – January 2015, Consensus Forecasts – January 2015 • Domestic GDP growth projected to average 2.5 per cent in the next three years • Moderate global GDP growth in the next three years • Inflation projected to be anchored below target of 6 per cent • The Rand to remain above R11.0level in the next year

35. Funding Strategy • Meet funding requirements over the forecasted period • Match liabilities with assets • Minimise funding costs • Diversify sources of funding • Optimisation of the Capital Structure • Projected key credit metrics are within current credit rating and loan covenants requirements • Manage the following factors affecting funding activities • The credit rating of the company • Liquidity (marketability) of listed securities • Investor perceptions and demand • Manage all financial risks related to Treasury activities

36. Credit ratings • On 24 Nov 14 – Fitch affirmed the company’s Long term local currency rating at BBB and National Scale rating at AA-(zaf) with stable outlook • On 25 Nov 14 – Moody’s assigned issuer credit rating of Baa2 and National Scale credit rating of A2.za with stable outlook

37. 3 Year Funding Plan Debt Funding Required & Sources Funding Requirements (2016E -2018E) • Funding for the financial years 2015/16 and 2016/17 • No debt funding required • Funding for the financial year 2017/18 • Debt funding of R1.8 billion required • Sources • Domestic Debt Capital Markets (DMTN) • Tap 10-year AIR04 and 16-year AIR05 • Issue new benchmark bond • Commercial Paper • Bank credit facilities and financing • Development Finance Institutions (DFIs) Funding Composition (Per Year)

38. Debt Redemption Proposal • Meet Board Approved Investment Objectives • Capital Preservation • Ensure adequate liquidity to meet debt maturing obligations • InvestR1.3 billion in Income Fund to fully cover 3 year debt redemptions • Enhance risk-adjusted returns and grow assets under management • Ensure partial funds to meet bond principals • 50% cover for AIRL01 inflation bond (due to its accretion nature) • Estimated 28 equal payments = R32.9 million (total:R921 million) • Enhance the yield on the assets above the market related bond yields • Approved asset allocation via Mandate • Expected yield of 3 months Jibar plus 1.50% • Redemption Fund Operations • Continue with Stanlib Asset Managers • Ensure skills transfer within 2 years

39. Key Covenants – 3 Year Forecast

40. Conclusion

41. Conclusion • Over the next three years (2016 to 2018), we are planning to have: • Improved shareholder value • Finalised the empowerment shareholders matters • Have a model to secure new business in Africa and other emerging markets • Continue to unlock value potential in-land at our airports • Accelerated our sustainability and transformation programmes as pertains to: • Job creation • Retail transformation • Employment equity • Gender • Youth and people with disabilities • Skills development • Environmental • Socio economic development • Enterprise development • Engaged on, with industry players and Economic Regulator, economic regulatory legislation and funding framework • Continue managing and developing a high performing and engaged team • Continue to deliver on and / or have delivered some of our key strategic initiatives

42. Annexures A.Risk management framework and company risks B. Shareholder compact and pre-determined objectives C. Governance D. Borrowing plan E. Significance and materiality framework F. Dividend policy G. Employment equity plan H. Fraud prevention plan I. Business unit initiatives

43. Thank you