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Audited abridged group results for the year ended 30 June 2012
Comair Limited
(Incorporated in the Republic of South Africa)
Reg. No. 1967/006783/06
ISIN Code: ZAE000029823 Share Code: COM
("Comair" or the "Group")
AUDITED ABRIDGED GROUP RESULTS FOR THE YEAR ENDED 30 JUNE 2012
Earnings review
The past year has been the toughest financial period in Comair's history,
and no different from that experienced by the global aviation industry. The
sustained high fuel price and weak global economy created pressure from
which few airlines could escape unscathed, as evidenced by the failure of
such notable carriers as Malev, Spanair and Air Australia, and the filing
for Chapter 11 protection by American Airlines. In the local market we saw
the closure of one airline, being the 9th private airline to fail out of the
11 that have entered the market since deregulation in 1991, and the recent
application for business rescue by another competitor. In the midst of the
abovementioned challenges, we are very proud to announce that Comair has
retained its unbroken profit history, now of 67 years, with a small but
noteworthy headline profit of R18 million (prior year R77 million).
Revenue grew by 16% as result of sustained product excellence and value
proposition, and despite continued pricing competition. This year saw the
highest ever average jet fuel price, being 29% higher than the average for
the prior year, and 50% higher than that of 2010. Competitor response to the
cost increase, and consumer acceptance of higher ticket prices, was slow in
the first half, but improved towards year end. Seat occupancy remained
strong, supported by the exit of Velvet Sky and reduced competition on
routes from Lanseria airport.
Costs were negatively impacted by the October increase in ACSA tariffs of
70%, and by the effect on maintenance and lease costs of the 11% average
weakening of the rand. Numerous individual cost saving initiatives were
therefore launched during the year, the most significant being the opening
of our in-house flight catering units in Johannesburg and Cape Town, and the
opening of a new crew base in Cape Town. Employment costs were kept stable
by applying a salary and headcount freeze for the 2012 calendar year,
thereby avoiding any retrenchments.
After suffering the impact of the rampant fuel price on the Nelspruit and
Maputo routes, Comair and Solenta Aviation, by mutual agreement, terminated
the turboprop operation joint venture launched in the previous year. While
this resulted in undesirable termination costs, it was apparent that we
would not recover the higher fuel bill any time soon over the relatively
small number of seats on these aircraft.
Of the four Boeing 737-200's retired in December of the prior year, Comair
sold three and impaired the fourth to nil value, resulting in a combined
capital loss of R14.7million.
Comair's affiliated businesses in flight training, travel distribution and
airport lounges continued to perform well, in line with the previous year,
and made a meaningful contribution to profits. During the year, a fourth
flight simulator, for the training of ATR turboprop pilots, was placed in a
leased bay in the Comair flight training building by ATR Industries, thereby
further broadening the offering of this world class facility.
Operations
Service levels, as measured by on-board and call centre surveys, remained
strong, with the new, in-house catering units raising the passenger
satisfaction index for in-flight food to a new high. On-time departures
achieved our 85% target on both brands, and should be further improved with
the new fleet in the year ahead. Comair also successfully completed its bi-
annual IOSA (IATA Operations Safety Audit) in February, once again
highlighting its commitment to leading airline safety in Africa.
Investment
During the year we made substantial investments towards the acquisition of a
new fleet of Boeing 737-800 aircraft and a new IT platform, totalling R216
million. The first new Boeing arrived just after year end, in July, and a
further two will be delivered in October and November 2012 to join the five
737-800's currently on lease. Thereafter four more are on order for delivery
in 2015 and 2016. By December 2012 the entire kulula fleet will have been
upgraded to 737-800's, where the high seating capacity, lower operating cost
and extended potential daily utilisation will be most productive. A
programme is also under way to refurbish the interiors of the British
Airways fleet.
The second half of the year was dominated by the implementation of a
business wide airline enterprise system from Sabre Airline Solutions at a
cost of R52 million. The cut-over to the new system on 23 June went largely
unnoticed by our customers, but as with any system change of this magnitude,
there is still much work to do to iron out small faults and implement the
full functionality afforded by the new platform. The commercial modules of
the system will improve revenue through more dynamic pricing, better
capacity management and improved revenue integrity, while the operations
modules will improve communications with customers, manpower planning and
aircraft scheduling.
Looking ahead
The past year has been one of inward focus and addressing the fundamentals
in order to ensure sustainability in an environment of higher operating
costs. The coming year will continue to target these issues, with the
delivery of the new aircraft and ongoing implementation of Sabre systems
functionality, and related process changes. As much as these efforts address
internal efficiencies, they will also provide a better customer proposition,
reduced environmental impact and a strong platform for future growth.
We are still somewhat cautious as to the state of the global and South
African economic circumstances, and expect consumers to remain under
pressure for the foreseeable future. While there is much talk about the
growth of aviation in Africa, this is off a very small base, and we will
therefore continue to take a pragmatic approach to our expansion on
the continent.
Whilst the government's ownership of three airlines is anticipated to
continue, along with the ongoing funding of these airlines, it is imperative
that there is greater transparency in the employment of such funds to ensure
that they are not used contrary to current policy, which requires government
to achieve a level playing field in the domestic aviation industry. This is
particularly relevant in that government is a shareholder, competitor and
regulator.
We are, however, confident that our focus on safety, customer service and
efficiency has built a sustainable foundation that will allow us to take
advantage of growth opportunities as they arise. We do anticipate that our
financial performance in the coming year will be an improvement on the
results of the past difficult period.
We wish to thank our staff for their commitment in a very demanding year,
where many were impacted by the extra work load as result of the enterprise
system change, while at the same time being personally impacted by the
economic pressure affecting the company. We also appreciate the loyalty of
the travelling public and the travel industry in their ongoing support of
our two airline brands.
The financial information on which the above forecast is based has not been
reviewed and reported by Comair's external auditors.
Dividends
Due to the uncertain economic outlook, the Directors have resolved not to
declare a cash dividend.
Directors' resignation and appointment
a. Donald Novick retired as the non-executive Chairman of the Board on
31 January 2012.
b. Martin Moritz acted as the non-executive Chairman of the Board between the
retirement of Donald Novick and the appointment of Pieter van Hoven as the
independent non-executive Chairman.
c. Pieter van Hoven was appointed as the independent non-executive Chairman
of the Board on 13 February 2012.
d. Gidon Novick resigned as Executive Director and Joint Chief Executive
Officer of the Board on 1 December 2011.
e. Erik Venter was appointed as the sole Chief Executive Officer on
1 December 2011.
Annual General Meeting
The Annual General Meeting of shareholders of Comair will be held at the
Comair Operations Building on 1 November 2012 at 12:00.
Abridged Group Statement of Comprehensive Income
Audited Audited
year year
30 June 30 June
R '000 R '000
Revenue 4,162,938 3,587,754
Operating expenses (3,974,163) (3,311,147)
Operating profit before depreciation 188,775 276,607
Impairment (4,049) -
Loss on sale of assets (10,669) -
Depreciation (153,270) (158,835)
Profit before interest, dividend and taxation 20,787 117,772
Investment income 8,200 23,184
Interest expense (19,433) (35,255)
Share of profit of associates 1,329 762
Profit before taxation 10,883 106,463
Taxation (3,202) (29,466)
Profit after tax attributable to the equity
holders of the parent 7,681 76,997
Fair value adjustment on cash flow hedge net of 395 (511)
taxation
Total comprehensive income for the year
attributable to the equity holders of the parent 8,076 76,486
Earnings per share (cents) 1.6 15.9
Headline earnings per share (cents) 3.8 15.9
Diluted earnings per share (cents) 1.6 15.9
Diluted headline earnings per share (cents) 3.8 15.9
Actual number of shares in issue ('000) 489,176 489,176
Weighted ordinary shares in issue ('000) 483,028 481,484
Diluted weighted ordinary shares in issue ('000) 483,055 482,464
Reconciliation between earnings and headline
earnings
Profit after taxation attributable to equity
holders of the parent 7,681 76,997
Add: Impairment 4,049 -
Add: IAS 16 loss on disposal of property, plant
and equipment 10,669 -
Less: tax effect of re-measurement adjustments (4,121) -
Headline earnings after tax 18,278 76,997
Abridged Group Statement of Financial Position
Audited Audited
year year
30 June 30 June
R '000 R '000
ASSETS
Property, plant and equipment 1,432,509 1,315,357
Intangible assets 51,515 -
Investments in and loans to associates 8,717 8,327
Goodwill 3,668 3,668
Current assets 709,358 776,269
2,205,767 2,103,621
EQUITY AND LIABILITIES
Share capital and reserves 814,461 800,521
Interest-bearing liabilities 85,907 274,245
Deferred taxation 99,039 97,258
Current liabilities 1,206,360 931,597
2,205,767 2,103,621
Net asset value per share (cents) 168.4 166.3
Audited Audited
year year
30 June 30 June
R '000 R '000
Abridged Group Statement of Cash Flows
Cash and cash equivalents at the beginning of the
period 234,031 374,277
Cash from operations and investment income 278,197 181,090
Dividends paid - (23,598)
Taxation paid (4,971) (45,414)
Cash utilised in investing activities (134,388) (135,564)
Cash uitlised in financing activities (126,774) (116,760)
Cash and cash equivalents at the end of the
period 246,095 234,031
Abridged Group Segment Report
Segmental revenue
Airline 4,076,004 3,538,766
Non-airline 86,934 48,988
4,162,938 3,587,754
Segmental results
Airline 169,705 261,492
Non-airline 19,070 15,115
Profit before taxation,depreciation,impairment
and loss on sale of assets 188,775 276,607
Impairment - Airline (4,049) -
Loss on sale of assets - Airline (10,669) -
Depreciation - Airline (148,030) (155,859)
Depreciation - Non-airline (5,240) (2,976)
Profit before interest, dividend and taxation 20,787 117,772
Total assets per segment
Airline 2,039,582 1,991,594
Non-airline 166,185 112,027
2,205,767 2,103,621
Abridged Group Statement of Changes in Equity
Opening balance 800,521 725,275
Total comprehensive income for the period 8,076 76,486
Dividends paid - (23,598)
Equity settled share-based payment adjustment 3,428 3,428
Net effect of Share Trust activities 2,436 18,930
Closing balance 814,461 800,521
Significant Commitments
Comair has made deposits of R164 million during the year towards the
delivery of four Boeing 737-800s in the first half of the 2013 financial
year. The Company has a remaining commitment to Boeing of R2342 million
(prior year R2015 million) of which 85% will be funded by bank loans with
the backing of a guarantee from the United States Export-Import bank, and
the balance will be funded by internally generated-cash.
Basis of preparation
In terms of the Listings Requirements of the JSE Limited, the Group has
prepared its consolidated financial statements in accordance with
International Financial Reporting Standards including IAS 34 Interim
Financial Reporting, the AC 500 standards as issued by the Accounting
Standards Board and the requirement of the Companies Act, 2008. The
accounting policies used in the preparation of these results are consistent
in all material aspects with those used for the prior comparative period.
These results have been prepared by R. Y. Sri-Chandana CA (SA), Financial
Director, Comair Limited.
Audit opinion
These financial statements have been audited by PKF (Jhb) Inc. and their
unqualified audit report is available for inspection at the registered
office of the company.
By order of the Board
Mr P van Hoven (Chairman) Mr E Venter (CEO)
11 September 2012
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 11/09/2012 11:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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