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Interim Report for the six months ended 31 August 2012
COMBINED MOTOR HOLDINGS LIMITED
("the Company" or "the Group")
Registration number: 1965/000270/06
Income tax reference number: 9471/712/71/2
Share code: CMH
ISIN: ZAE000088050
INTERIM REPORT FOR THE SIX MONTHS ENDED 31 AUGUST 2012
GROUP FINANCIAL HIGHLIGHTS
6 months 6 months 12 months
Change 31 August 31 August 29 February
% 2012 2011 2012
Revenue (R'000) 10 4 340 076 3 928 536 8 293 728
Operating profit (R'000) 56 114 760 73 335 217 124
Total profit and comprehensive income (R'000) 86 79 608 42 730 144 146
Earnings per share (cents) 89 69,8 37,0 121,4
Headline earnings per share (cents) 120 81,5 37,0 121,4
Dividend payable December 2012 (cents) 92 25,0 13,0 43,0
Total assets (R'000) 13 2 389 927 2 114 520 2 483 139
Cash resources (R'000) 4 274 215 262 667 395 408
Weighted average shares in issue ('000) 108 374 108 159 108 179
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months 12 months
31 August 31 August 29 February
Change 2012 2011 2012
% R'000 R'000 R'000
Revenue 10 4 340 076 3 928 536 8 293 728
Cost of sales 9 (3 682 112) (3 374 346) (6 922 488)
Gross profit 19 657 964 554 190 1 371 240
Other operating income 1 500 1 500 3 000
Impairment of goodwill (15 000)
Selling and administration expenses 10 (529 704) (482 355) (1 157 116)
Operating profit 56 114 760 73 335 217 124
Finance income (14) 4 524 5 253 14 927
Finance costs 4 (15 540) (14 928) (34 037)
Profit before taxation 63 103 744 63 660 198 014
Tax expense 15 (24 136) (20 930) (53 868)
Total profit and comprehensive income 86 79 608 42 730 144 146
Attributable to:
Equity holders of the Company 89 75 624 39 968 131 297
Non-controlling interest 44 3 984 2 762 12 849
86 79 608 42 730 144 146
Reconciliation of headline earnings
Total profit and comprehensive income 79 608 42 730 144 146
Non-trading item impairment of goodwill 15 000
Headline earnings 94 608 42 730 144 146
Attributable to:
Equity holders of the Company 121 88 374 39 968 131 297
Non-controlling shareholders of subsidiaries 126 6 234 2 762 12 849
121 94 608 42 730 144 146
Earnings per share (cents)
Basic 89 69,8 37,0 121,4
Diluted basic 89 69,6 36,8 121,0
Headline 120 81,5 37,0 121,4
Diluted headline 121 81,3 36,8 121,0
CONDENSED GROUP STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
6 months 6 months 12 months
31 August 31 August 29 February
2012 2011 2012
R'000 R'000 R'000
Operating profit adjusted for non-cash items 187 225 132 119 304 688
Sale of car hire fleet vehicles 108 667 127 007 277 705
Purchase of car hire fleet vehicles (80 754) (89 034) (396 527)
Working capital changes:
Inventory (9 681) (11 906) (176 271)
Trade and other receivables (88 375) (52 272) 17 063
Trade and other payables (125 909) (47 507) 261 679
Cash generated from operations (8 827) 58 407 288 337
Finance income received 4 524 5 253 14 927
Finance costs paid (15 540) (14 928) (34 037)
Dividends paid (38 926) (45 547) (46 513)
Taxation paid (22 002) (20 154) (40 865)
Net cash movement from operating activities (80 771) (16 969) 181 849
Net cash movement from investing activities (31 844) (18 971) (47 404)
Net cash movement from financing activities (8 578) (13 981) (51 625)
Net movement in cash and cash equivalents (121 193) (49 921) 82 820
Cash and cash equivalents at beginning of period 395 408 312 588 312 588
Cash and cash equivalents at end of period 274 215 262 667 395 408
CONDENSED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 August 31 August 29 February
2012 2011 2012
R'000 R'000 R'000
ASSETS
Non-current assets
Plant and equipment 52 871 55 918 58 537
Goodwill 74 972 89 972 89 972
Investments 231 167 197 171 204 500
Deferred taxation 49 974 56 419 49 964
408 984 399 480 402 973
Current assets
Investments 2 715 3 000
Car hire fleet vehicles 391 617 333 063 467 376
Inventory 1 011 153 837 107 1 001 472
Trade and other receivables 301 243 282 203 212 868
Tax paid in advance 42
Cash and cash equivalents 274 215 262 667 395 408
1 980 943 1 715 040 2 080 166
Total assets 2 389 927 2 114 520 2 483 139
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders' equity 711 450 597 941 671 543
Non-controlling interest (9 376) (12 900) (5 301)
Total equity 702 074 585 041 666 242
Non-current liabilities
Non-controlling shareholders of subsidiaries 131 448 126 309 135 489
Assurance funds 7 963 11 558 7 731
Lease liabilities 102 106 112 576 104 528
241 517 250 443 247 748
Current liabilities
Non-controlling shareholders of subsidiaries 7 000 36 066 4 850
Interest-bearing borrowings 588
Derivative financial liabilities 1 778
Trade and other payables 1 420 292 1 238 515 1 546 201
Lease liabilities 7 261 6 639
Current tax liabilities 11 783 3 867 9 681
1 446 336 1 279 036 1 569 149
Total liabilities 1 687 853 1 529 479 1 816 897
Total equity and liabilities 2 389 927 2 114 520 2 483 139
Net asset value per share (cents) 647 541 616
GROUP STATEMENT OF CHANGES IN EQUITY Attributable
Share Non-distributable Share-based Retained to equity holders Non-controlling Total
capital reserve payment reserve earnings of the Company interest equity
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 28 February 2011 25 013 5 896 7 039 550 624 588 572 (2 563) 586 009
Issue of shares 205 205 205
Total profit and comprehensive income 39 968 39 968 2 762 42 730
Share-based payment reserve 1 644 1 644 1 644
Dividends paid (32 448) (32 448) (13 099) (45 547)
Balance at 31 August 2011 25 218 5 896 8 683 558 144 597 941 (12 900) 585 041
Issue of shares 102 102 102
Total profit and comprehensive income 91 329 91 329 10 087 101 416
Transfer to share capital 118 (118)
Dividends paid (14 065) (14 065) (2 024) (16 089)
Share-based payment reserve 1 441 1 441 1 441
Purchase of non-controlling shareholders' interest in subsidiaries (5 205) (5 205) (464) (5 669)
Balance at 29 February 2012 25 438 5 896 10 006 630 203 671 543 (5 301) 666 242
Issue of shares 1 372 1 372 1 372
Total profit and comprehensive income 75 624 75 624 3 984 79 608
Share-based payment reserve 1 837 1 837 1 837
Dividends paid (38 926) (38 926) (8 059) (46 985)
Balance at 31 August 2012 26 810 5 896 11 843 666 901 711 450 (9 376) 702 074
SEGMENTAL ANALYSIS Total Retail motor Car hire Marine and leisure Financial services Corporate services
2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Revenue 4 340 076 3 928 536 4 077 841 3 695 225 150 895 138 759 55 548 67 086 9 581 5 761 46 211 21 705
Operating profit 114 760 73 335 89 141 63 998 11 003 9 239 (9 156) (1 864) 4 792 2 860 18 980 (898)
Net finance costs (11 016) (9 675) (29 635) (26 212) (530) (498) 210 412 18 939 16 623
Profit before taxation 103 744 63 660 59 506 37 786 11 003 9 239 (9 686) (2 362) 5 002 3 272 37 919 15 725
Total assets 2 389 927 2 114 520 1 404 380 1 230 157 422 283 357 931 56 876 52 879 12 665 16 523 493 723 457 030
Total liabilities 1 687 853 1 529 479 1 058 097 891 552 442 389 438 997 6 770 8 370 7 963 14 879 172 634 175 681
Goodwill 74 972 89 972 74 972 84 972 5 000
Number of staff 2 768 2 654 2 290 2 208 315 306 63 59 3 3 97 78
COMMENTARY ON RESULTS
The directors are proud of the results achieved during the period under review. Analysis of the Group's statement of
comprehensive income reveals the multiplier effect of volume sales increases. The 10% increase in revenue yielded a 19%
increase in gross profit and a 56% improvement in operating profit. Net finance costs were marginally up. These were offset
by the lower tax rate, reduced from 33% to 23% as the result of a higher content of exempt income, and the abolishment
of secondary taxation on companies. The result, after eliminating non-controlling shareholders' interests, is a 89% and 120%
increase in basic and headline earnings per share respectively. The dividend proposed has been increased by 92% to 25 cents
per share.
Operational review
In the retail motor sector, new vehicle sales volumes increased by 9%, compared with the industry increase of 11%, and used
vehicle volumes increased by 2%. Revenue increases in the parts and service departments exceeded the rate of inflation. The
net effect was that profit before taxation in this sector increased by 57% to R60 million.
The car hire segment continued its growth trend. Concentration on daily rental and fleet utilisation rates, together with
favourable values secured for the retired fleet vehicles, has enabled the segment to report a 19% improvement in profit before
taxation.
The marine and leisure division continues to suffer from declining revenue, a malady which is inherent in this market segment.
The division has substantially reduced its expenses and working capital base. Traditionally this segment records improved
performance during the summer months, which fall in the second half of the financial year. Management is considering the
option of downsizing its two retail outlets, and concentrating on the wholesale operation.
The Group's joint ventures with finance houses recorded pleasing returns, enabling the financial services segment to record a
53% earnings improvement. Management has identified further opportunities for growth through the use of insurance cells,
and continued improvement is expected.
Excluding the one-off dividend accrual referred to below, the corporate services segment remained stable.
Dividend income
In support of the BEE transaction concluded with Thebe Investment Corporation ("Thebe") in 2006, CMH subscribed for "C"
preference shares to the value of R124 million in Main Street 445 (Pty) Limited, a Thebe subsidiary. To date, dividends on the
investment to the value of R100 million have been accrued, but not yet received. With effect from 1 April 2012 secondary
taxation on companies was abolished, and dividend withholding tax introduced. This change constitutes a "variation event"
in terms of the preference share subscription agreement. To compensate CMH shareholders for the new tax, the dividend yield
on the preference shares has increased from 85% to 100% of the prime overdraft rate, effective on all dividends received after
1 April 2012. In respect of dividends accrued but not yet received at 1 April 2012, the effect is that the amount accrued has
been increased by R22 million. This one-off amount has been credited to revenue in the statement of comprehensive income
during the period under review.
Goodwill
Value-in-use calculations indicated that goodwill attributable to three of the Group's outlets needed to be impaired, and a
charge of R15 million is recorded in the statement of comprehensive income. The balance of goodwill, reflected in the
statement of financial position at R75 million is considered sound.
Prospects
After a relatively positive start to 2012, the economy has been disrupted in recent weeks by strike action in the mining and
transport sectors, petrol price increases, and political upheaval in the run up to the November ANC elections. Manufacturers
will feel the pressure of the weakening Rand, and the relatively modest vehicle price increases to date may not be sustainable.
Contrasting these factors, the recent fall in interest rates and continued less restrictive borrowing criteria, augur well for the
balance of the financial year. Vehicle sales volumes, driven by a surge in the replacement market, have shown resilience and
the trend looks set to continue.
Dividend
A dividend (dividend number 49) of 25 cents per share will be paid on Tuesday 18 December 2012 to members reflected in
the share register of the Company at the close of business on the record date, Friday 14 December 2012. Last day to trade
'cum' dividend is Friday 7 December 2012. First day to trade 'ex' dividend is Monday, 10 December 2012. Share certificates
may not be dematerialised or rematerialised from Monday 10 December 2012 to Friday 14 December 2012, both days
inclusive.
The number of ordinary shares in issue at the date of declaration is 108 478 573. Consequently, the gross dividend payable is
R27 119 643 and will be distributed from income reserves. There are no STC credits available for utilisation. The dividends will
be subject to dividend withholding tax at a rate of 15%, which will result in a net dividend of 21,25 cents to those shareholders
who are not exempt in terms of section 64F of the Income Tax Act.
Basis of preparation
The results of the Group for the six months ended 31 August 2012 have been prepared in accordance with IAS 34: Interim
Financial Reporting, International Financial Reporting Standards, the AC 500 Standards as issued by the Accounting Practices
Board, the Listings Requirements of the JSE Limited and the Companies Act, 2008. The accounting policies of the Group have
been consistently applied to these results and are the same as those applied to the results at 29 February 2012.
Corporate governance
The Group is committed to maintaining the high standards of governance as embodied in the King Report on Corporate
Governance and complies with the significant principles of both the Report and the JSE Limited Listings Requirements.
These results have been prepared under the supervision of the financial director, SK Jackson CA(SA). The results have not been
audited or reviewed by the Group's external auditors.
By order of the board of directors
K Fonseca CA(SA)
Company Secretary
9 October 2012
REGISTERED OFFICE: 1 Wilton Crescent, Umhlanga Ridge, 4319
TRANSFER SECRETARIES: Computershare Investor Services (Pty) Limited; PO Box 61051, Marshalltown, 2107
SPONSOR: PricewaterhouseCoopers Corporate Finance (Pty) Limited; Private Bag X36, Sunninghill, 2157
DIRECTORS: M Zimmerman (Chairman), JD McIntosh (CEO), LCZ Cele, MPD Conway, JS Dixon, JTM Edwards, SK Jackson,
VP Khanyile, D Molefe, JW Alderslade (alternate)
www.cmh.co.za
Date: 11/10/2012 12:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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