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COMAIR LIMITED - Audited Group results and cash dividend for the year ended 30 June 2014

Release Date: 09/09/2014 13:00
Code(s): COM     PDF:  
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Audited Group results and cash dividend for the year ended 30 June 2014

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 GROUP RESULTS AND CASH DIVIDEND FOR THE YEAR ENDED 30 JUNE 2014

Earnings review
Comair has again delivered strong performance against a backdrop of a 
contracting domestic market and devaluation of the rand.  Total comprehensive 
income increased by 16% to R265 million, while earnings per share were further 
improved by the repurchase of 10% of issued shares, transacted in November and 
December 2013, resulting in a 24% increase in earnings per share to 58 cents.

Turnover grew by 17%, with one quarter attributable to an increase in passengers
and three quarters from improved yields. Due to the strength of the kulula and 
British Airways brands and the ongoing attention to customer service, a growth 
in passengers of 3% was achieved despite the domestic market contracting by 4%.
We continued to focus on our customers through the application of service 
metrics, feedback surveys, customer journey mapping and and extensive investment
in training programmes for front-line staff. Operating performance remained 
good, with on-time performance meeting our threshold target of 85% across both 
the British Airways and kulula.com brands. The capacity growth by Comair and its
competitors has, however, resulted in a decline of 6% in average seat occupancy
rates compared to the prior year.

Operating costs remained under control. A significant challenge for the 
2014 financial year was to accommodate an 18% weakening of the average exchange
rate, contributing to an increase of 19% in the price of fuel and similar 
increases in other foreign based costs.  Excluding the effect of the fuel price
increase, the cost per available seat decreased by 1.5%.  This was achieved 
mainly through the efficiencies derived from the ongoing fleet upgrade strategy.
The new Boeing 737-800’s, acquired 18 months ago, continued to perform 
exceptionally well, and Comair purchased a further, pre-owned ‘800 early in the
year, followed by another ‘800 on lease.  Both of these aircraft replaced Boeing
737-300’s that were retired.

Cash at year end remained strong at R868 million, after accommodating outflows 
of R120 million for the 50% cash component of the purchase of the 737-800 
mentioned above, R151 million for the share buy-back, R152 million on 
pre-delivery payments for the 4 new aircraft to be delivered in late 2015 and 
2016, and a R102 million deposit on 8 new aircraft to be delivered from 2019 to
2021.

Comair achieved a clean safety audit by IATA, thereby renewing its IATA
Operations Safety Audit certification for a further 2 years. 
 
Our affiliated businesses of flight training, travel product distribution and 
airport lounges continued to perform well.

The Group continued to invest in its transformation initiatives, including its 
pilot cadet programme, airport learnerships, and social responsibility, and
anticipates an improvement in its BBBEE score.

Our sincere appreciation goes to every person within the Comair Group who 
contributed to our success during the year under review, including our 
directors, management and employees, and a special thanks to our customers and 
stakeholders who have chosen to use our services or provide services to us. We 
also thank all the public sector departments and agencies that we have worked 
with for their shared commitment to our objectives.
 
Prospects
We remain concerned with the sluggish economy, declining domestic passenger 
market and the high operating costs faced by the aviation industry. The total 
market size remains below the peak volume of 2008 and does not currently show 
signs of returning to historic levels. 

Nevertheless, looking further ahead, we remain confident that there is scope
for further growth in the profits of the Group. The ongoing upgrades to the
fleet will continue to improve operating efficiency while at the same time
enhancing the revenue potential per flight.  We are scheduled to take delivery
of the next four new 737-800’s from Boeing in late 2015 and 2016. During the 
year Comair placed the first African order for the next generation of Boeing 
737, the 737-8 Max. Eight of these aircraft will be delivered to Comair from 
2019 to 2021. We are also focused on implementing technology solutions to 
enhance our operating performance, customer service experience and revenue 
generating opportunities. The pace of development in distribution technology is
relentless,and Comair is intent on extracting the maximum benefit from its 
customer information data in order to improve on its service offering, and on 
the marketing of relevant products to its various customer segments.

We are also developing new software applications for use on board the aircraft
and on the ground to facilitate more efficient operating procedures.

The financial information on which the above is based has not been reviewed 
and reported on by Comair’s external auditors.

Dividends
Notice is hereby given that a final gross cash dividend of 13.00000 cents per
ordinary share has been declared payable to shareholders.  The dividend has been
declared out of income reserves.

The dividend will be subject to a local dividend tax rate of 15% or 1.95000
cents per ordinary share, resulting in a net dividend of  11.05000  cents per
ordinary share, unless the shareholder is exempt from paying dividend tax or
is entitled to a reduced rate in terms of the applicable double taxation 
agreement.  No STC credits were available to be utilised as part of this
declaration.  The Company’s tax reference number is 9281/874/7/1/0 and the
number of ordinary shares in issue at the date of this declaration is 
440,263,099.

In accordance with the provisions of State, the electronic settlement and 
custody system used by the JSE Limited, the relevant dates for the dividend are
as follows:

Event                                                  Date
Last day to trade (cum dividend)                       Friday, 10 October 2014
Shares commence trading (ex dividend)                  Monday, 13 October 2014
Record date (date shareholders recorded in books)      Friday, 17 October 2014 
Payment Date                                           Monday, 20 October 2014

Share certificates may not be dematerialised or rematerialised between Monday, 
13 October 2014 and Friday, 17 October 2014, both days inclusive.

Directors’ resignation and appointment
-  Atul Kumar Gupta resigned as an independent non-executive director of the 
   Board on 12 November 2013.  
-  Ranil Yasas Sri-Chandana, the Company’s Financial Director, who has emigrated
   to Australia, resigned as Financial Director on 15 January 2014.  
-  Hubert Rene Brody was appointed as an independent non-executive director on 
   1 January 2014.
-  Kirsten Emily King was appointed as Financial Director on 9 June 2014.

Annual General Meeting
The Annual General Meeting of shareholders of Comair will be held at the 
Comair operations building, on the corner of Whirlwind and Fortress Streets,
Rhodesfield, 1619 on 5 November 2014 at 13h00.

                                                         Audited        Audited
                                                            year           year
                                                         30 June        30 June
                                                            2014           2013
                                                          R '000         R '000
                                                    ----------------------------

Summrised Preliminary Group Statements
of Comprehensive Income

Revenue                                                6 282 219      5 386 581 
                                                    
Operating expenses                                    (5 577 457)    (4 765 356)
                                                    ----------------------------
Operating profit before depreciation,
impairment and profit on sale of assets                  704 762        621 225
Depreciation                                            (290 747)      (241 582)
Reversal of impairment (impairment)                        2 235         (6 817)
Profit on sale of assets                                     524            984
                                                    ----------------------------
Profit before interest, dividend and taxation            416 774        373 810
Investment income                                         32 149         20 217
Interest expense                                         (77 340)       (61 641)
Share of profit (loss) of associates                       2 327         (1 725)
                                                    ----------------------------
Profit before taxation                                   373 910        330 661
Taxation                                                (109 059)      (103 135)
                                                    ----------------------------
Total comprehensive income for the year 
attributable to the equity holders
of the parent                                            264 851        227 526
                                                    ----------------------------

Earnings per share (cents)                                  58.4           47.0
Headline earnings per share (cents)                         57.8           47.9
Diluted earnings per share (cents)                          56.1           47.0
Diluted headline earnings per share (cents)                 55.6           47.8
Actual number of shares in issue ('000)                  440 263        489 176
Weighted ordinary shares in issue ('000)                 453 856        483 650
Diluted weighted ordinary shares in issue ('000)         471 851        484 177

Reconciliation between earnings and headline
earnings
Profit after taxation attributable to equity
holders of the parent                                    264 851        227 526
                                                    
Less: IAS 39 (reversal of impairment)
impairment of loans to associate                          (2 235)         4 817
Less: IAS 16 (profit) on disposal of
property, plant and equipment                               (524)          (984)
Add: taxation effect of remeasurement
adjustments                                                  147            276
                                                    ----------------------------
Headline earnings after taxation                         262 239        231 635

Summarised Preliminary Group Statements
of Financial Position
ASSETS
Property, plant and equipment                          2 545 033      2 314 082
Intangible assets                                         31 106         41 475
Investments in and loans to associates                     6 612          2 050
Goodwill                                                   3 668          3 668
Current assets                                         1 436 929      1 244 581
                                                    ----------------------------
                                                       4 023 348      3 605 856
                                                    ----------------------------

EQUITY AND LIABILITIES
Share capital and reserves                             1 067 970      1 021 200
Interest-bearing liabilities                           1 183 072      1 133 767
Deferred taxation                                        167 689        135 696
Share based payments                                      21 666          4 250
Current liabilities                                    1 582 951      1 310 943
                                                    ----------------------------
                                                       4 023 348      3 605 856
                                                    ----------------------------
Net asset value per share (cents)                          235.3          211.1


                                                         Audited        Audited
                                                            year           year
                                                         30 June        30 June
                                                            2014           2013
                                                          R '000         R '000

Summarised Preliminary Group Statements
of Cash Flows

Cash and cash equivalents at the 
beginning of the year                                    778 045        246 095
Cash from operations and investment income               940 960        913 224
Taxation (paid)                                          (76 664)       (82 530)
Cash utilised in investing activities                   (508 655)      (104 441)
Cash utilised in financing activities                   (265 983)      (194 303)
                                                    ----------------------------
Cash and cash equivalents at the end of 
the year                                                 867 703        778 045
                                                    ----------------------------

Summarised Preliminary Group Segmental Report

Segmental Revenue
Airline                                                6 109 143      5 232 260
Non-airline                                              173 076        154 321
                                                    ----------------------------
                                                       6 282 219      5 386 581
                                                    ----------------------------

Segmental Results
Airline                                                  681 552        596 907
Non-airline                                               23 210         24 318
                                                    ----------------------------
Operating profit before depreciation, 
impairment and profit on sale of assets                  704 762        621 225
Profit on sale of assets - Airline                           524            984
Reversal of impairment (impairment) - Airline              2 235         (6 817)
Depreciation - Airline                                  (285 734)      (236 342)
Depreciation - Non-airline                                (5 013)        (5 240)
                                                    ----------------------------
Profit before interest, dividend 
and taxation                                             416 774        373 810
                                                    ----------------------------

Total assets per segment
Airline                                                3 875 108      3 421 093
Non-airline                                              148 240        184 763
                                                    ----------------------------
                                                       4 023 348      3 605 856
                                                    ----------------------------

Summarised Preliminary Group Statements
of Changes in Equity
Opening Balances                                        1 021 200        814 461
Equity settled BEE share-based 
payment adjustment                                         3 428          3 428
Total comprehensive income for the year                  264 851        227 526
Dividends paid                                           (70 295)       (24 215)
Repurchase of Comair shares                             (151 213)             -
Net effect of Share Trust activities                          (1)             -
                                                    ----------------------------
Movement for the year                                     46 770        206 739
                                                    ----------------------------
Closing Balances                                       1 067 970      1 021 200
                                                    ----------------------------

Significant Commitments
Comair has made pre-delivery payments of R 152 million prior to year end towards
the delivery of four Boeing 737-800’s in late 2015 and early 2016. The Group has
a remaining commitment to Boeing for R 1,5 billion at year end (prior year 
R1,7 billion), the funding of which will be finalised closer to the time of 
delivery. Pre-delivery payment finance has been arranged through Investec Bank.

Comair has also made deposits of R102 million towards the purchase of eight 
Boeing 737-8 Max’s for delivery from 2019 to 2021. Pre-delivery payments on 
these aircraft will commence in 2017. At year end the Group has a remaining
commitment to Boeing for R 4,6 billion (prior year Nil), payable from 2017 to 
2021, the funding of which will be finalised closer to the time of delivery.

Comair has entered into two sales agreements with Qantas to purchase two Boeing
737-400 aircraft which will be delivered during the 2015 financial year. The 
total purchase price for the two aircraft, payment for which will be made in 
cash, is R 44 million.

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, SAICA 
Financial Reporting Guides as issued by the Accounting Practices Committee 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 
K. King CA(SA), Financial Director, Comair Limited.

Audit Opinion
The auditors, Grant Thornton (Jhb) Inc., have issued their unmodified opinion on
the Group’s annual financial statements for the year ended 30 June 2014. The 
audit was conducted in accordance with International Standards on Auditing.  A 
copy of the auditor’s report together with a copy of the audited financial 
statements are available for inspection at the Company’s registered office. 
These summarised preliminary financial statements have been derived from the 
Group’s annual financial statements and are consistent in all material respects
with the Group’s annual financial statements.  The contents of this announcement
are extracted from audited information, although the announcement is not itself
audited. The Directors of Comair take full responsibility for the preparation of
this announcement and confirm that the financial information has been correctly
extracted from the underlying annual financial statements. 

The auditor’s report does not necessarily report on all the information 
contained in this announcement. Shareholders are therefore advised that, in 
order to obtain a full understanding of the nature of the auditor’s engagement,
they should obtain a copy of the auditor’s report together with the accompanying
financial information from the Company’s registered office.

By order of the Board
P van Hoven (Chairman)          ER Venter (CEO)
9 September 2014

Sponsor
RAND MERCHANT BANK (A division of First Rand Bank Limited)
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