Wrap Text
Interim Results for the six months ended 31 August 2013
COMBINED MOTOR HOLDINGS LIMITED
("the Company or "the Group)
Registration number: 1965/000270/06
Share code: CMH
ISIN: ZAE000088050
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2013
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Previously Restated Previously
Restated reported Unaudited reported
Unaudited Unaudited Adjustment Unaudited 12 months Adjustment Audited
31 August 31 August 31 August 31 August 28 February 28 February 28 February
2013 2012 2012 2012 2013 2013 2013
R'000 R'000 R'000 R'000 R'000 R'000 R'000
ASSETS
Non-current assets
Plant and equipment 67 464 52 871 52 871 68 803 68 803
Goodwill 74 972 74 972 74 972 74 972 74 972
Investments (231 167) 231 167 (233 613) 233 613
Deferred taxation 44 878 49 974 49 974 45 707 45 707
187 314 177 817 408 984 189 482 423 095
Current assets
Investments (2 715) 2 715 (1 000) 1 000
Car hire fleet vehicles 440 734 391 617 391 617 520 162 520 162
Inventory 1 219 565 1 011 153 1 011 153 1 184 968 1 184 968
Trade and other receivables 235 324 301 243 301 243 264 113 264 113
Cash and cash equivalents 318 108 274 215 274 215 340 659 340 659
2 213 731 1 978 228 1 980 943 2 309 902 2 310 902
Total assets 2 401 045 2 156 045 2 389 927 2 499 384 2 733 997
EQUITY AND LIABILITIES
Capital and reserves
Share capital 30 774 26 810 26 810 29 500 29 500
Share-based payment reserve 14 884 11 843 11 843 13 024 13 024
Non-distributable reserve 5 896 5 896
Retained earnings 669 740 548 071 (118 830) 666 901 638 027 (118 269) 756 296
Ordinary shareholders' equity 715 398 592 620 711 450 680 551 798 820
Non-controlling interest 82 18 9 394 (9 376) 120 8 102 (7 982)
Total equity 715 480 592 638 702 074 680 671 790 838
Non-current liabilities
Non-controlling shareholders of subsidiaries 4 000 14 002 (117 446) 131 448 10 938 (117 446) 128 384
Assurance funds 7 778 7 963 7 963 7 548 7 548
Lease liabilities 90 645 102 106 102 106 97 481 97 481
102 423 124 071 241 517 115 967 233 413
Current liabilities
Non-controlling shareholders of subsidiaries 4 255 (7 000) 7 000 255 (7 000) 7 255
Trade and other payables 1 548 770 1 420 292 1 420 292 1 690 765 1 690 765
Lease liabilities 11 109 7 261 7 261 9 092 9 092
Current tax liabilities 19 008 11 783 11 783 2 634 2 634
1 583 142 1 439 336 1 446 336 1 702 746 1 709 746
Total liabilities 1 685 565 1 563 407 1 687 853 1 818 713 1 943 159
Total equity and liabilities 2 401 045 2 156 045 2 389 927 2 499 384 2 733 997
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Previously Previously
Restated reported Restated reported
Unaudited Unaudited Unaudited Unaudited Audited
6 months 6 months Adjustment 6 months 12 months Adjustment 12 months
31 August 31 August 31 August 31 August 28 February 28 February 28 February
2013 2012 2012 2012 2013 2013 2013
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Revenue 5 033 453 4 307 194 (32 882) 4 340 076 8 927 698 (44 113) 8 971 811
Cost of sales (4 344 049) (3 682 112) (3 682 112) (7 408 617) (7 408 617)
Gross profit 689 404 625 082 (32 882) 657 964 1 519 081 (44 113) 1 563 194
Other income (1 500) 1 500 (3 000) 3 000
Impairment of goodwill (15 000) (15 000) (15 000) (15 000)
Selling and administration expenses (550 006) (529 704) (529 704) (1 257 460) (1 257 460)
Operating profit 139 398 80 378 (34 382) 114 760 246 621 (47 113) 293 734
Finance income 2 175 4 524 4 524 12 535 12 535
Finance costs (21 068) (15 540) (15 540) (36 662) (36 662)
Profit before taxation 120 505 69 362 (34 382) 103 744 222 494 (47 113) 269 607
Tax expense (34 344) (24 136) (24 136) (65 680) (65 680)
Total profit and comprehensive income 86 161 45 226 (34 382) 79 608 156 814 (47 113) 203 927
Attributable to:
Equity holders of the company 86 199 45 474 (30 150) 75 624 156 810 (29 589) 186 399
Non-controlling interest (38) (248) (4 232) 3 984 4 (17 524) 17 528
86 161 45 226 (34 382) 79 608 156 814 (47 113) 203 927
Reconciliation of headline earnings
Total profit and comprehensive income 86 161 45 226 (34 382) 79 608 156 814 (47 113) 203 927
Impairment of goodwill 15 000 15 000 15 000 15 000
Loss on sale of plant and equipment 542 542
Headline earnings 86 161 60 226 (34 382) 94 608 172 356 (47 113) 219 469
Attributable to:
Equity holders of the company 86 199 60 473 (27 901) 88 374 172 352 (27 258) 199 610
Non-controlling interest (38) (247) (6 481) 6 234 4 (19 855) 19 859
86 161 60 226 (34 382) 94 608 172 356 (47 113) 219 469
Weighted average number
of shares in issue ('000) 108 982 108 374 108 374 108 531 108 531
Earnings per share (cents) 79,1 42,0 69,8 144,5 171,7
Headline earnings per share (cents) 79,1 55,8 81,5 158,8 183,9
Dividend payable December 3013 (cents) 28,0
Dividend paid (cents) 25,0 25,0 61,0 61,0
Dividend cover (times) 2,8 2,2 3,3 2,6 3,0
GROUP STATEMENT OF CHANGES IN EQUITY
Attributable
Share- to equity
Non- based holders Non-
Share distributable payment Retained of the controlling Total
capital reserve reserve earnings company interest equity
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Opening balance at 1 March 2012 25 438 5 896 10 006 630 203 671 543 (5 301) 666 242
Adjustment for policy change (88 680) (88 680) 5 567 (83 113)
Restated balance at 1 March 2012 25 438 5 896 10 006 541 523 582 863 266 583 129
Issue of shares 1 372 1 372 1 372
Total profit and comprehensive income
restated 45 474 45 474 (248) 45 226
previously reported 75 624 75 624 3 984 79 608
adjustment for policy change (30 150) (30 150) (4 232) (34 382)
Dividends paid
restated (38 926) (38 926) (38 926)
previously reported (38 926) (38 926) (8 059) (46 985)
adjustment for policy change 8 059 8 059
Share-based payment reserve 1 837 1 837 1 837
Balance at 31 August 2012 26 810 5 896 11 843 548 071 592 620 18 592 638
Issue of shares 1 772 1 772 1 772
Total profit and comprehensive income
restated 111 336 111 336 252 111 588
previously reported 110 775 110 775 13 544 124 319
adjustment for policy change 561 561 (13 292) (12 731)
Dividends paid
restated (27 276) (27 276) (150) (27 426)
previously reported (27 276) (27 276) (12 150) (39 426)
adjustment for policy change 12 000 12 000
Transfer to share capital 918 (918)
Transfer to retained earnings (5 896) 5 896
Share-based payment reserve 2 099 2 099 2 099
Balance at 28 February 2013 29 500 13 024 638 027 680 551 120 680 671
Issue of shares 1 274 1 274 1 274
Total profit and comprehensive income 86 199 86 199 (38) 86 161
Dividends paid (54 486) (54 486) (54 486)
Share-based payment reserve 1 860 1 860 1 860
Balance at 31 August 2013 30 774 14 884 669 740 715 398 82 715 480
CONDENSED GROUP STATEMENT OF CASH FLOWS
Previously Previously
Restated reported Restated reported
Unaudited Unaudited Unaudited Unaudited Audited
6 months 6 months Adjustment 6 months 12 months Adjustment 12 months
31 August 31 August 31 August 31 August 28 February 28 February 28 February
2013 2012 2012 2012 2013 2013 2013
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Cash flows from operating activities
Operating profit 139 398 80 378 (34 382) 114 760 246 621 (47 113) 293 734
Adjustments for non-cash items:
Dividend accrued 32 882 (32 882) 44 113 (44 113)
Fair value discount reversed 1 500 (1 500) 3 000 (3 000)
Other 62 647 106 847 106 847 111 547 111 547
Sale of car hire vehicles 178 983 108 667 108 667 267 426 267 426
Purchase of car hire vehicles (151 304) (80 754) (80 754) (393 646) (393 646)
229 724 215 138 215 138 231 948 231 948
Working capital changes
Inventory (34 597) (9 681) (9 681) (183 496) (183 496)
Trade and other receivables 28 789 (88 375) (88 375) (51 245) (51 245)
Trade and other payables (141 995) (125 909) (125 909) 144 564 144 564
Cash generated from operations 81 921 (8 827) (8 827) 141 771 141 771
Finance income received (4 524) 4 524 (12 535) 12 535
Finance costs paid 15 540 (15 540) 36 662 (36 662)
Dividends paid 38 926 (38 926) 66 202 (66 202)
Taxation paid (17 141) (22 002) (22 002) (68 428) (68 428)
Net cash movement from operating activities 64 780 (30 829) 49 942 (80 771) 73 343 90 329 (16 986)
Cash flows from investing activities
Purchase of plant and equipment (13 269) (39 844) (39 844) (37 077) (37 077)
Proceeds on disposal of plant and equipment 981 - 1 079 1 079
Investments (8 000) 8 000 (20 000) 20 000
Net cash movement from investing activities (12 288) (39 844) (8 000) (31 844) (35 998) (20 000) (15 998)
Cash flows from financing activities
Non-controlling shareholders of subsidiaries (2 938) (1 950) 8 000 (9 950) (4 909) 20 000 (24 909)
Proceeds of issue of shares 1 274 1 372 1 372 3 144 3 144
Finance income received 2 175 4 524 4 524 12 535 12 535
Finance costs paid (21 068) (15 540) (15 540) (36 662) (36 662)
Dividends paid (54 486) (38 926) (38 926) (66 202) (66 202)
Net cash movement from financing activities (75 043) (50 520) (41 942) (8 578) (92 094) (70 329) (21 765)
Net movement in cash and cash equivalents (22 551) (121 193) (121 193) (54 749) (54 749)
Cash and cash equivalents
at beginning of period 340 659 395 408 395 408 395 408 395 408
Cash and cash equivalents
at end of period 318 108 274 215 274 215 340 659 340 659
SEGMENTAL ANALYSIS
Total Retail motor Car hire
2013 2012 2013 2012 2013 2012
R'000 R'000 R'000 R'000 R'000 R'000
Revenue
restated 5 033 453 4 307 194 4 761 101 4 077 841 161 232 150 895
previously reported 5 033 453 4 340 076 4 761 101 4 077 841 161 232 150 895
adjustment (32 882)
Operating profit
restated 139 398 80 378 109 913 89 141 14 925 11 003
previously reported 139 398 114 760 109 913 89 141 14 925 11 003
adjustment (34 382)
Net finance costs (18 893) (11 016) (37 039) (29 635)
Profit before taxation
restated 120 505 69 362 72 874 59 506 14 925 11 003
previously reported 120 505 103 744 72 874 59 506 14 925 11 003
adjustment (34 382)
Total assets
restated 2 401 045 2 156 045 1 592 381 1 404 380 437 657 422 283
previously reported 2 401 045 2 389 927 1 592 381 1 404 380 437 657 422 283
adjustment (233 882)
Total liabilities
restated 1 685 565 1 563 407 1 173 302 1 058 097 469 544 442 389
previously reported 1 685 565 1 687 853 1 173 302 1 058 097 469 544 442 389
adjustment (124 446)
Goodwill 74 972 74 972 74 972 74 972
Number of staff 2 973 2 768 2 472 2 290 376 315
Marine and leisure Financial services Corporate services
2013 2012 2013 2012 2013 2012
R'000 R'000 R'000 R'000 R'000 R'000
Revenue
restated 53 174 55 548 29 670 9 581 28 276 13 329
previously reported 53 174 55 548 29 670 9 581 28 276 46 211
adjustment (32 882)
Operating profit
restated (1 730) (9 156) 15 505 4 792 785 (15 402)
previously reported (1 730) (9 156) 15 505 4 792 785 18 980
adjustment (34 382)
Net finance costs (102) (530) 465 210 17 783 18 939
Profit before taxation
restated (1 832) (9 686) 15 970 5 002 18 568 3 537
previously reported (1 832) (9 686) 15 970 5 002 18 568 37 919
adjustment (34 382)
Total assets
restated 54 165 56 876 34 427 12 665 282 415 259 841
previously reported 54 165 56 876 34 427 12 665 282 415 493 723
adjustment (233 882)
Total liabilities
restated 3 435 6 770 9 022 7 963 30 262 48 188
previously reported 3 435 6 770 9 022 7 963 30 262 172 634
adjustment (124 446)
Goodwill
Number of staff 27 63 3 3 95 97
COMMENTARY ON THE RESULTS
The directors are pleased with the results which have been achieved during a
relatively tough trading period. A number of the comparative figures have been
restated following the change in accounting policies detailed below. However, on a
comparable basis, the Group achieved a 17% increase in revenue, which translated
into a 10% improvement in gross profit. Selling and administration expenses were
contained at a 4% increase and the operating margin, excluding the prior year
impairment of goodwill, increased from 2,2% to 2,8%. The overall result was a
91% improvement in total profit and comprehensive income. After eliminating
the interests of non-controlling shareholders, the Group achieved a 89% and
42% increase in basic and headline earnings respectively. The dividend proposed is
28 cents per share, payable in December 2013.
Operating Review
Within the Group's retail motor division, new vehicle sales volumes increased 9%,
compared with the industry increase of 5%. Used vehicle volume sales increased
8%. Efforts to increase the penetration level of after-sale products, and tight expense
control, was rewarded with an increase in the operating profit margin, from 2,2%
to 2,3%.
The car hire segment enjoyed continued success. The operating profit margin
improved from 7,3% to 9,3%, largely as the result of higher fleet utilisation rates
and a hike in the average daily rental returns. In the face of tough competition, First
Car Rental was awarded two large tender contracts, and four new branches were
opened to provide customer service in outlying areas.
Within the marine and leisure division, the last retail outlet was sold in June 2013,
and the division now concentrates only on its wholesale operation. The resultant
reduction in overheads and release of working capital has enabled the division to
reduce its operating loss from R9,7 million recorded last year, to R1,8 million.
The financial services segment recorded outstanding results. The substantial increase
in policy sales over the past two years is starting to bear fruit and, coupled with a
number of new products being marketed, provides a solid earnings base for the
years ahead. The Group's joint venture finance operations recorded significant
growth in earnings and, with prior period losses now eliminated, is expected to
enjoy continued success.
Operating profit from the corporate services segment is principally investment
income.
Prospects
The significantly weaker rand and the prolonged debilitating strikes in the motor and
allied industries have placed a dampener on consumer confidence and economic
activity levels. Low to moderate vehicle price increases over the past three years have
buoyed sales levels. However, the currency pressure has precipitated higher price
increases and an adverse impact on sales volumes and margins. For the first time
since late 2009, monthly year-on-year total industry vehicle sales have registered a
decline.
On the positive side, continued stable and low interest rates, together with extremely
competitive offerings, especially in the entry-level segment, are expected to retard
a decline in demand. Also, it is expected that an increased gap between new and
used car prices will give a much needed boost to the used car market. Management's
challenge will be to react quickly to the changing environment and adapt working
capital levels to an optimum. The restructured marine and leisure division will benefit
from the summer months which fall in the second half of the financial year, and
the Group's workshops, parts departments and financial services are expected to
continue the steady earnings they have historically achieved.
Basis of preparation
The results of the Group for the six months ended 31 August 2013 have been
prepared under the supervision of SK Jackson CA(SA), financial director, in
accordance with International Financial Reporting Standards, the information
required by International Accounting Standards (IAS) 34: Interim Financial
Reporting, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee, Financial Pronouncements as issued by the Financial
Reporting Standards Council, the Listings Requirements of the JSE Limited,
and in compliance with the requirements of the South African Companies
Act, No 71 of 2008. Except as recorded below, the accounting policies are
consistent with those used in the financial statements as at 31 August 2012 and
28 February 2013. The results have not been reviewed or audited by the Group's
external auditors.
Changes in accounting policies
Consolidated financial statements
IFRS 10, 'Consolidated Financial Statements' was issued in August 2012 and replaces
the guidance on control and consolidation in IAS 17, 'Consolidated and Separate
Financial Statements', and in SIC 12, 'Consolidation Special Purpose Entities'.
The Group concluded a BEE transaction with Thebe Investment Corporation ('TIC')
in 2006. In terms of the transaction, a special purpose entity, Main Street 445
Proprietary Limited ('Main Street') was formed as a wholly-owned subsidiary of TIC
to acquire a 15% equity stake in CMH Holdings Proprietary Limited. The balance of
85% is owned by Combined Motor Holdings Limited ('CMH').
The Group has determined that, while it did not have control over Main Street under
the principles of IAS 27, it does have control over that entity in terms of the current
standard. Although the Group does not own any ordinary equity shares in Main
Street, an agreement signed by CMH, TIC, and Main Street does enable CMH to
control the activities of Main Street, and to earn variable returns therefrom. As a
result, Main Street will be consolidated in the financial statements of the Group.
As required under IFRS 10, the change in accounting policy has been applied
retrospectively and, as a consequence, adjustments have been made in the financial
statements of all comparative periods presented.
Reclassification within Statement of Cash Flows
'Finance income received', 'Finance costs', and 'Dividends paid' were previously
classified under the heading 'Cash movement from operating activities'. They
have now been reclassified under the heading 'Cash movement from financing
activities'. Comparative figures have been restated. The change has no impact on
'Net movement in cash and cash equivalents'.
Events after the reporting period
Repurchase of shares and cautionary announcement
The directors have proposed the repurchase of 15 400 000 ordinary shares of
no par value in Combined Motor Holdings Limited (the 'Company') at a price of
R13,00 each. The Company will make an offer to all shareholders to voluntarily
submit for repurchase all or a portion of their shareholding, or no shares. In the
event that in excess of 15 400 000 shares are submitted for repurchase, then each
shareholder who submits shares for repurchase will be paid pro rata to the number
of shares submitted. If submissions total less than 15 400 000, then shareholders
who have submitted shares for repurchase will be paid in full, and no further shares
will be repurchased. The repurchase will be effected using the Group's existing cash
resources.
Details of the repurchase proposal will be announced and a circular describing the
details of the proposal will be sent to shareholders in due course. Shareholders are
advised to exercise caution when dealing in the Company's securities, until a full
announcement is made.
Disposal of preference share investment
The Company owns 124 387 'C' redeemable cumulative preference shares in Main
Street, which were purchased in support of the Group's BEE transaction described
above. Following the change in accounting policy and the decision to consolidate
Main Street, this investment is eliminated in the Group annual financial statements
presented.
The Company has entered into negotiations which, if successfully concluded, will
result in the disposal of the investment to a third party finance house for the sum
of approximately R200 million, which is the current book value of the original
investment and accumulated, but unpaid, dividends.
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.
DIVIDEND
A gross dividend (dividend number 51) of 28 cents per share for the interim period
ended 31 August 2013 will be paid on Tuesday 17 December 2013 to members
reflected in the share register of the Company at the close of business on the
record date, Friday 13 December 2013. Last date to trade 'cum' dividend is Friday
6 December 2013. First date to trade 'ex' dividend is Monday 9 December 2013.
Share certificates may not be dematerialised or rematerialised from Monday
9 December 2013 to Friday 13 December 2013, both days inclusive.
The number of shares in issue at the date of declaration is 109 073 498.
Consequently, the gross dividend payable will be R30 540 579 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 23,8 cents to those shareholders who are not exempt in terms of section
64F of the Income Tax Act.
CHAIRMAN
JTM Edwards was elected as chairman of the Company on 11 October 2013. He
succeeds M Zimmerman who resigned on that date.
By order of the Board of Directors
K Fonseca CA(SA)
Company Secretary 15 October 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
JTM Edwards (Chairman), JD McIntosh (CEO)
LCZ Cele, MPD Conway, JS Dixon, SK Jackson,
VP Khanyile, D Molefe, M Zimmerman,
JW Alderslade (alternate)
WEB ADDRESS
www.cmh.co.za
Date: 15/10/2013 12:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
