Wrap Text
Audited Group Financial Results for the year ended 28 February 2013
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
COMBINED MOTOR HOLDINGS LIMITED
AUDITED GROUP FINANCIAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2013
Condensed segment information
for the year ended 28 february 2013
Audited Audited
2013 2012
R'000 % R'000 %
TOTAL
External revenue 8 971 811 100 8 293 728 100
Operating profit 293 734 100 217 124 100
Net finance costs (24 127) 100 (19 110) 100
Profit before taxation 269 607 100 198 014 100
Total assets 2 733 997 100 2 483 139 100
Total liabilities 1 943 159 100 1 816 897 100
Goodwill at year-end 74 972 100 89 972 100
Employee costs 598 277 100 531 476 100
Number of staff 2 840 100 2 728 100
RETAIL MOTOR
External revenue 8 430 911 95 7 799 845 94
Operating profit 242 723 83 167 491 77
Net finance costs (50 754) 210 (59 125) 309
Profit before taxation 191 969 71 108 366 55
Total assets 1 496 905 55 1 270 677 51
Total liabilities 1 149 474 59 1 073 663 59
Goodwill at year-end 74 972 100 84 972 94
Employee costs 489 941 82 436 270 82
Number of staff 2 344 83 2 263 83
CAR HIRE
External revenue 316 807 3 291 914 4
Operating profit 24 560 8 23 445 11
Net finance costs 1 500 (6)
Profit before taxation 26 060 10 23 445 12
Total assets 559 576 20 511 575 21
Total liabilities 616 807 32 555 236 30
Goodwill at year-end
Employee costs 56 647 9 49 171 9
Number of staff 349 12 307 11
MARINE AND LEISURE
External revenue 150 756 2 173 155 2
Operating profit (5 533) (2) 2 642 1
Net finance costs (278) 1 (320) 2
Profit before taxation (5 811) (2) 2 322 1
Total assets 69 599 3 63 749 3
Total liabilities 13 814 1 21 967 1
Goodwill at year-end 5 000 6
Employee costs 14 762 3 15 021 3
Number of staff 48 2 64 2
FINANCIAL SERVICES
External revenue 23 150 15 559
Operating profit 11 246 4 14 529 7
Net finance costs 456 (2) 503 (3)
Profit before taxation 11 702 4 15 032 8
Total assets 5 834 9 620
Total liabilities 7 369 9 916 1
Goodwill at year-end
Employee costs
Number of staff
CORPORATE
SERVICES/OTHER
External revenue 50 187 13 255
Operating profit 20 738 7 9 017 4
Net finance costs 24 949 (103) 39 832 (208)
Profit before taxation 45 687 17 48 849 24
Total assets 602 083 22 627 518 25
Total liabilities 155 695 8 156 115 9
Goodwill at year-end
Employee costs 36 927 6 31 014 6
Number of staff 99 3 94 4
Condensed group statement of financial position
at 28 February 2013
Audited Audited
2013 2012
R'000 R'000
ASSETS
Non-current assets
Plant and equipment 68 803 58 537
Goodwill 74 972 89 972
Investments 233 613 204 500
Deferred taxation 45 707 49 964
423 095 402 973
Current assets
Investments 1 000 3 000
Car hire fleet vehicles 520 162 467 376
Inventory 1 184 968 1 001 472
Trade and other receivables 264 113 212 868
Tax paid in advance 42
Cash and cash equivalents 340 659 395 408
2 310 902 2 080 166
Total assets 2 733 997 2 483 139
EQUITY AND LIABILITIES
Capital and reserves
Share capital 29 500 25 438
Share-based payment reserve 13 024 10 006
Non-distributable reserve 5 896
Retained earnings 756 296 630 203
Ordinary shareholders' equity 798 820 671 543
Non-controlling interest (7 982) (5 301)
Total equity 790 838 666 242
Non-current liabilities
Non-controlling shareholders of subsidiaries 128 384 135 489
Assurance funds 7 548 7 731
Lease liabilities 97 481 104 528
233 413 247 748
Current liabilities
Non-controlling shareholders of subsidiaries 7 255 4 850
Derivative financial liabilities 1 778
Trade and other payables 1 690 765 1 546 201
Lease liabilities 9 092 6 639
Current tax liabilities 2 634 9 681
1 709 746 1 569 149
Total liabilities 1 943 159 1 816 897
Total equity and liabilities 2 733 997 2 483 139
Condensed group statement of comprehensive income
for the year ended 28 february 2013
Audited Audited
2013 2012
R'000 R'000
Revenue 8 971 811 8 293 728
Cost of sales (7 408 617) (6 922 488)
Gross profit 1 563 194 1 371 240
Other income 3 000 3 000
Impairment of goodwill (15 000)
Selling and administration expenses (1 257 460) (1 157 116)
Operating profit 293 734 217 124
Finance income 12 535 14 927
Finance costs (36 662) (34 037)
Profit before taxation 269 607 198 014
Tax expense (65 680) (53 868)
Total profit and comprehensive income 203 927 144 146
Attributable to:
Equity holders of the Company 186 399 131 297
Non-controlling interest 17 528 12 849
203 927 144 146
Reconciliation of headline earnings
Total profit and comprehensive income 203 927 144 146
Non-trading items:
impairment of goodwill 15 000
loss on sale of plant and equipment 542
Headline earnings 219 469 144 146
Attributable to:
Equity holders of the Company 199 610 131 297
Non-controlling interest 19 859 12 849
219 469 144 146
Earnings per share (cents)
Basic 171,7 121,4
Diluted basic 169,3 121,0
Headline 183,9 121,4
Diluted headline 181,3 121,0
Condensed group statement of cash flows
for the year ended 28 february 2013
Restated
Audited Audited
2013 2012
R'000 R'000
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit 293 734 217 124
Adjustments for non-cash items: 64 434 70 335
Sale of car hire fleet vehicles 267 426 277 705
Purchase of car hire fleet vehicles (393 646) (396 527)
Working capital changes:
Inventory (183 496) (176 271)
Trade and other receivables (51 245) 17 063
Trade and other payables 144 564 261 679
Cash generated from operations 141 771 271 108
Finance income 12 535 14 927
Finance costs (36 662) (34 037)
Dividends paid (66 202) (46 513)
Taxation paid (68 428) (40 865)
Net cash movement from operating activities (16 986) 164 620
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of non-current plant and equipment (37 077) (26 410)
Proceeds on disposal of non-current
plant and equipment 1 079 1 904
Investments 20 000
Purchase of non-controlling shareholders'
interest in subsidiaries (5 669)
Net cash movement from investing activities (15 998) (30 175)
CASH FLOWS FROM FINANCING ACTIVITIES
Non-controlling shareholders of subsidiaries (24 909) (50 946)
Proceeds of issue of shares 3 144 307
Interest-bearing loans (986)
Net cash movement from financing activities (21 765) (51 625)
Net movement in cash and cash equivalents (54 749) 82 820
Cash and cash equivalents at
beginning of year 395 408 312 588
Cash and cash equivalents at end of year 340 659 395 408
Restatement of statements of cash flows
Dividend income receivable but not yet received by the Group was reflected
in the statement of cash flows for the year ended 29 February 2012 both as cash
inflows, and as an increase in investments. Further, the line item Cash
paid to suppliers and employees' also included an entry recording dividends
accrued.
The 2012 condensed statement of cash flows has been adjusted to remove the
effect of these items, as follows:
As Adjustment
previously for dividend As
reported income restated
R'000 R'000 R'000
2012
Cash generated from
operations 288 337 (17 229) 271 108
Net cash movement
from operating activities 181 849 (17 229) 164 620
Investments (17 229) 17 229
Net cash movement
from investing activities (47 404) 17 229 (30 175)
The restatement had no impact on the net movement in cash and cash
equivalents, nor the balance thereof at year-end.
Group statement of changes in equity
for the year ended 28 february 2013
Non- Share-based Attributable Non-
Share distributable payment Retained to equity holders controlling Total
capital reserve 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 307 307 307
Total profit and comprehensive income 131 297 131 297 12 849 144 146
Transfer to share capital 118 (118)
Share-based payment reserve 3 085 3 085 3 085
Dividends paid (46 513) (46 513) (15 123) (61 636)
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 3 144 3 144 3 144
Total profit and comprehensive income 186 399 186 399 17 528 203 927
Transfer to share capital 918 (918)
Share-based payment reserve 3 936 3 936 3 936
Dividends paid (66 202) (66 202) (20 209) (86 411)
Capital redemption reserve transferred
to retained earnings (5 896) 5 896
Balance at 28 February 2013 29 500 13 024 756 296 798 820 (7 982) 790 838
EXTRACTS FROM THE REPORT OF THE CHIEF EXECUTIVE OFFICER
The year was characterised by uncertain global and local
economic conditions, and only moderate growth in the industry
segment in which the Group competes. During the year a
number of the strategies and structures implemented in 2010
and 2011 bore fruit, and the outcome was a remarkable result
during an unremarkable economic period.
FINANCIAL OVERVIEW
Improved gross margins and a tight control over selling and
administration expenses resulted in the 8,2% increase in
revenue converting into a 35,3% improvement in operating
profit. The operating profit margin, before impairment of
goodwill, has improved from 2,6% to a pleasing 3,4%, well
ahead of the industry average. Net finances charges increased
by 26% off a low base, and the tax rate reduced from 27% to
24%, principally because of the abolishment of secondary tax
on companies and a higher content of tax-exempt dividend
income. The net result, after accounting for minority interests,
was a 51,5% increase in headline earnings per share. This
represents a 25,4% return on shareholders' funds, compared
with a 20,8% return last year. Included in these figures is a
once-off receipt of dividend income in the sum of R21,2 million.
This amount accrued as a result of the change in the taxation
of dividends and will not be repeated in future years.
The Group has been questioned in the past for having what is
described as a "lazy" balance sheet, with a too high level of
cash resources. During the year under review the Group has
used a portion of its cash resources to reduce the level of
interest-bearing trade liabilities in the retail motor (R60 million)
and car hire (R20 million) segments. It must be borne in mind
that the Group has a substantial level of interest-bearing trade
debt and, with increasing pressure from motor manufacturers
to raise inventory levels, a conservative approach to cash
management provides a shield against potential interest-rate
hikes.
The Group's statement of financial position remains sound and liquid.
Working capital levels have increased, as expected, in line with
increased activity levels. The current ratio and asset-test ratio
remain comfortable.
OPERATIONAL OVERVIEW
Retail motor
The 9% increase in national new vehicle sales belies the true
state of the industry from a retailer's perspective. A high
proportion of the unit sales increase stems from the highly
competitive entry level segment where trading margins are low.
The increase has come at the expense of the used car market.
The Group's new vehicle unit sales level matched the national
increase of 9%, and used vehicle volumes rose 4%. The latter
was disappointing, but compares with an estimated decline of
2% in national volumes of one-to five-year-old vehicles, the
segment in which the Group competes. Overall, selling margins
improved and, with a pleasing increase in the marketing of
after-sale products, both departments made significantly higher
profit contributions.
The Group's parts and service departments continued to provide a
solid and dependable base, and recorded a pleasing increase in
revenue and profit.
Internet-based and social network marketing has become
increasingly popular. Public awareness of the Group's brand,
"Carshop, powered by the CMH Group" has grown and now
generates more than 50% of sales leads.
I expect that national new vehicle sales will grow 3 - 5%
next year. Much will depend on the economic climate, the
degree to which anticipated further hikes in rates and utility
costs reduce disposable spending, and the appetite of the
banks to continue growing their lending books. One ongoing
positive is that, because the country has no effective public
transport system, the purchase of a vehicle is, for many, a
necessity rather than a luxury. Although the average finance
and replacement cycle has increased from 28 to 44 months in
recent years, the longer period does provide workshop and
replacement parts opportunities.
Car hire
First Car Rental achieved excellent results in a very competitive
market. Rental days increased by 11%, against an industry
average of 6%. Vehicle write-off and damage costs were
reduced following a focus on quality business rather than
chasing volume, and the fleet utilisation rate improved. A key
component of the profit model is the price at which retired fleet
vehicles can be sold. The policy of deploying vehicles which are
different to those used by competitors means that the division
is able to sell the vehicles into niche markets rather than
competing in a market oversupplied by retired fleets. First Car
Rental's focus on customer service was recognised when, in the
face of stiff competition from well-established industry players,
it was awarded Gold 1st Place in the South African Service
Awards. The division's web-based booking system is world class
and its popular "Show and Go" loyalty card has proved to be a
valuable time-saver for customers.
Financial services
This division comprises three insurance cells, providing both
long and short-term customer cover, and two joint venture
vehicle financing operations in partnership with major finance
houses. Profit from the insurance cells declined by 22% as the
result of a higher than usual claims ratio. Being a relatively small
portfolio, it is sensitive to movements in claims. On the positive
side, the 50% increase in premium collections reflects the
growth in policies written and augurs well for the income
stream over the next three to five years. Prior year losses in the
joint venture finance operations have been eliminated and
these operations will show significant profit in the year ahead.
Marine and leisure
Disappointing results from this division reflect the extent to
which the leisure market is still suffering from the depressed
economic conditions which have prevailed for the past three
years. The Group has taken a decision to focus on the wholesale
side of the business and to offload its two retail outlets. To this
end the Cape Town branch was sold during December 2012,
and negotiations are in progress to sell the Randburg outlet.
This move will reduce the division's cost base and working
capital investment.
PROSPECTS
Forecasts of expectations for the year ahead produce mixed
signals. Consumers are experiencing a good deal more stress
exacerbated by lower-than-inflation salary increase expectations
and exorbitant increases in the cost of basic utilities, food and petrol.
Recent instances of illegal and violent strikes have reduced
business confidence for both local and offshore investors. The
motor industry wage negotiations begin in June and, if not
quickly resolved, may result in supply disruptions. In Gauteng,
the ill-conceived toll road system will be both a financial burden
for motorists and an administrative challenge for the car hire
division and local dealerships. The car hire division will need to
recoup toll fees from hirers but will not have timeous access to
information from SANRAL.
On the positive side, the consensus opinion is that national new
vehicle sales will increase 3 - 5% off a relatively high base.
Whilst the weakening of the rand will feed through to vehicle
price inflation, it is expected that an increased gap between
new and used car prices will give a much needed boost to the
used car market.
I believe that the year ahead will be one of slow economic
recovery. However, the Group is in a strong position to continue
its recent earnings trend and achieve its growth budgets.
Dividend
A dividend of 50 cents per share will be paid on Tuesday,
18 June 2013 to members reflected in the share register of the
Company at the close of business on the record date, Friday,
14 June 2013. Last day to trade cum-dividend is Friday,
7 June 2013. First day to trade ex-dividend is Monday,
10 June 2013. Share certificates may not be dematerialised or
rematerialised from Monday, 10 June 2013 to Friday,
14 June 2013, both days inclusive.
The number of ordinary shares in issue at the date of the
declaration is 108 825 000. Consequently, the gross dividend
payable is R54 413 000 and will be distributed from income
reserves. There are no STC credits available for utilisation. The
dividend will be subject to dividend withholding tax at a rate of
15%, which will result in a net dividend of 42,5 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 year ended 28 February 2013
have been prepared in accordance with IAS 34 Interim Financial
Reporting, International Financial Reporting Standards, the
SAICA Financial Reporting Guides, as issued by the Accounting
Practices Committee, Financial Pronouncements, as issued
by the Financial Reporting Standards Council, the JSE Limited
Listings Requirements 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 principles of both
the Report and the JSE Limited Listings Requirements.
Annual general meeting
The annual general meeting will be held at 1 Wilton Crescent,
Umhlanga Ridge at 15h00 on Thursday, 30 May 2013.
The record date in terms of section 59(1)(a) of the Act for
shareholders to be recorded on the securities register of the
Company in order to receive notice of the annual general meeting
is 19 April 2013. The record date in terms of section 59(1)(b)
of the Act for shareholders to participate in and vote at the
annual general meeting is 24 May 2013. Accordingly, the last
date to trade in the Company's shares on the JSE Limited in
order to be eligible to participate in and vote at
this annual general meeting is Friday, 17 May 2013.
These financial results were prepared under the supervision of
the financial director, SK Jackson, CA(SA). The information has
been audited by PricewaterhouseCoopers Inc., the Group's
external auditor. A copy of their unqualified audit report is
available for inspection at the Company's registered office.
By order of the board of directors.
K Fonseca CA(SA)
Company Secretary
19 April 2013
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
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, J Alderslade (alternate)
22 April 2013
Date: 22/04/2013 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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