Wrap Text
Interim Result For the Period Ended 31 August 2014
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
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2014
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Previously
Restated reported
Unaudited Unaudited Adjustment Unaudited Audited
31 August 31 August 31 August 31 August 28 February
2014 2013 2013 2013 2014
R'000 R'000 R'000 R'000 R'000
ASSETS
Non-current assets
Plant and equipment 68 604 67 464 67 464 74 803
Goodwill 74 972 74 972 74 972 74 972
Insurance receivable 19 480 25 405 25 405 – 18 039
Deferred taxation 44 487 44 878 44 878 46 643
207 543 212 719 25 405 187 314 214 457
Current assets
Car hire fleet vehicles 454 339 440 734 440 734 572 765
Inventory 1 087 751 1 219 565 1 219 565 1 214 577
Trade and other receivables 364 060 235 324 235 324 263 831
Cash and cash equivalents 239 106 283 681 (34 427) 318 108 308 480
2 145 256 2 179 304 (34 427) 2 213 731 2 359 653
Total assets 2 352 799 2 392 023 (9 022) 2 401 045 2 574 110
EQUITY AND LIABILITIES
Capital and reserves
Share capital 27 794 30 774 30 774 27 794
Share-based payment reserve 10 491 14 884 14 884 14 441
Retained earnings 559 958 669 740 669 740 523 379
Ordinary shareholders' equity 598 243 715 398 715 398 565 614
Non-controlling interest 112 82 82 112
Total equity 598 355 715 480 715 480 565 726
Non-current liabilities
Advance from non-controlling shareholders
of subsidiaries – 4 000 4 000 –
Assurance funds – – (7 778) 7 778 –
Insurance payable 712 – – 2 156
Lease liabilities 84 713 90 645 90 645 90 244
85 425 94 645 (7 778) 102 423 92 400
Current liabilities
Advance from non-controlling shareholders
of subsidiaries 255 4 255 4 255 4 193
Trade and other payables 1 112 679 1 050 096 (498 674) 1 548 770 1 258 014
Borrowings 531 068 497 430 497 430 – 622 962
Lease liabilities 10 540 11 109 11 109 8 759
Current tax liabilities 14 477 19 008 19 008 22 056
1 669 019 1 581 898 (1 244) 1 583 142 1 915 984
Total liabilities 1 754 444 1 676 543 (9 022) 1 685 565 2 008 384
Total equity and liabilities 2 352 799 2 392 023 (9 022) 2 401 045 2 574 110
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Previously
Restated reported
Unaudited Unaudited Unaudited Audited
6 months 6 months Adjustment 6 months 12 months
31 August 31 August 31 August 31 August 28 February
2014 2013 2013 2013 2014
R'000 R'000 R'000 R'000 R'000
Revenue 5 489 524 5 368 468 335 015 5 033 453 10 831 384
Cost of sales (4 753 865) (4 659 133) (315 084) (4 344 049) (9 162 323)
Gross profit 735 659 709 335 19 931 689 404 1 669 061
Selling and administration expenses (578 753) (550 006) (550 006) (1 348 837)
Operating profit 156 906 159 329 19 931 139 398 320 224
Finance income 4 382 2 175 2 175 13 709
Finance costs (45 890) (40 999) (19 931) (21 068) (89 256)
Profit before taxation 115 398 120 505 120 505 244 677
Tax expense (34 042) (34 344) (34 344) (75 245)
Total profit and comprehensive income 81 356 86 161 86 161 169 432
Attributable to:
Equity holders of the Company 81 356 86 199 86 199 169 440
Non-controlling interest – (38) (38) (8)
81 356 86 161 86 161 169 432
Reconciliation of headline earnings
Total profit and comprehensive income 81 356 86 161 86 161 169 432
Non-trading item
– profit on sale of plant and equipment
– gross (256) – – (115)
– impact of income tax 72 – – 32
Headline earnings 81 172 86 161 86 161 169 349
Attributable to:
Equity holders of the Company 81 172 86 199 86 199 169 357
Non-controlling shareholders of subsidiaries – (38) (38) (8)
81 172 86 161 86 161 169 349
Weighted average number of shares in issue ('000) 93 673 108 982 108 982 108 057
Earnings per share
Basic (cents) 86,9 79,1 79,1 156,8
Diluted basic (cents) 85,7 78,9 78,9 154,9
Headline (cents) 86,7 79,1 79,1 156,7
Diluted headline (cents) 85,5 78,9 78,9 154,8
Dividend payable – December 2014 (cents) 32,5 28,0 28,0
Dividend paid (cents) 78,0
Dividend cover (times) 2,7 2,8 2,8 2,0
GROUP STATEMENT OF CHANGES IN EQUITY
Attributable
Share- to equity
based holders Non-
Share payment Retained of the controlling Total
capital reserve earnings company interest equity
R'000 R'000 R'000 R'000 R'000 R'000
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
Share-based payment reserve 1 860 1 860 1 860
Dividends paid (54 486) (54 486) (54 486)
Balance at 31 August 2013 30 774 14 884 669 740 715 398 82 715 480
Total profit and comprehensive income 83 241 83 241 30 83 271
Transfer to share capital 377 (377) – –
Release following exercise of share
appreciation rights (2 182) (2 182) (2 182)
Loss on share appreciation rights exercised (864) (864) (864)
Share-based payment reserve 2 116 2 116 2 116
Dividends paid (30 540) (30 540) (30 540)
Shares repurchased (3 357) (198 198) (201 555) (201 555)
Balance at 28 February 2014 27 794 14 441 523 379 565 614 112 565 726
Total profit and comprehensive income 81 356 81 356 81 356
Release following exercise of share
appreciation rights (5 470) (5 470) (5 470)
Profit on share appreciation rights exercised 2 059 2 059 2 059
Share-based payment reserve 1 520 1 520 1 520
Dividends paid (46 836) (46 836) (46 836)
Balance at 31 August 2014 27 794 10 491 559 958 598 243 112 598 355
CONDENSED GROUP STATEMENT OF CASH FLOWS
Previously
Restated reported
Unaudited Unaudited Unaudited Audited
6 months 6 months Adjustment 6 months 12 months
31 August 31 August 31 August 31 August 28 February
2014 2013 2013 2013 2014
R'000 R'000 R'000 R'000 R'000
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit 156 906 159 329 19 931 139 398 320 224
Adjustments for non-cash items
Depreciation/other 70 034 62 417 (230) 62 647 103 836
Sale of car hire fleet vehicles 157 549 178 983 178 983 294 102
Purchase of car hire fleet vehicles (97 642) (151 304) (151 304) (427 013)
286 847 249 425 19 701 229 724 291 149
Working capital changes:
Inventory 126 826 (34 597) (34 597) (29 609)
Trade and other receivables (100 229) 28 683 (106) 28 789 176
Trade and other payables (145 335) (78 101) 63 894 (141 995) 129 817
Borrowings (91 894) (65 686) (65 686) – 59 846
Cash generated from operations 76 215 99 724 17 803 81 921 451 379
Taxation paid (39 466) (16 773) 368 (17 141) (56 055)
Net cash movement from operating activities 36 749 82 951 18 171 64 780 395 324
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of non-current plant and equipment (7 827) (13 269) (13 269) (38 227)
Proceeds on disposal of non-current plant and equipment 282 981 981 5 105
Insurance receivables (1 441) (24 331) (24 331) – (16 965)
Insurance payables (1 444) (2 608) (2 608) – (452)
Net cash movement from investing activities (10 430) (39 227) (26 939) (12 288) (50 539)
CASH FLOWS FROM FINANCING ACTIVITIES
Non-controling shareholders of subsidiaries (3 938) (2 938) (2 938) (7 000)
Proceeds of issue of shares – 1 274 1 274 1 274
Repurchase of shares – – – (201 555)
Settlement of share appreciation rights (3 411) – – (3 382)
Finance income received 4 382 2 175 2 175 13 709
Finance costs paid (45 890) (40 999) (19 931) (21 068) (89 256)
Dividends paid (46 836) (54 486) (54 486) (85 026)
Net cash movement from financing activities (95 693) (94 974) (19 931) (75 043) (371 236)
Net movement in cash and cash equivalents (69 374) (51 250) (28 699) (22 551) (26 451)
Cash and cash equivalents at beginning of period 308 480 334 931 (5 728) 340 659 334 931
Cash and cash equivalents at end of period 239 106 283 681 (34 427) 318 108 308 480
SEGMENTAL ANALYSIS
Total Retail motor Car hire
2014 2013 2014 2013 2014 2013
R'000 R'000 R'000 R'000 R'000 R'000
Revenue
– restated 5 489 524 5 368 468 5 197 580 5 096 116 171 874 161 232
– as previously reported 5 489 524 5 033 453 5 197 580 4 761 101 171 874 161 232
– adjustment 335 015 335 015
Operating profit
– restated 156 906 159 329 105 957 109 913 41 459 34 856
– as previously reported 156 906 139 398 105 957 109 913 41 459 14 925
– adjustment 19 931 19 931
Net finance costs
– restated (41 508) (38 824) (32 487) (37 039) (23 797) (19 931)
– as previously reported (41 508) (18 893) (32 487) (37 039) (23 797)
– adjustment (19 931) (19 931)
Profit before taxation 115 398 120 505 73 472 72 874 17 662 14 925
Total assets
– restated 2 352 799 2 392 023 1 523 987 1 592 381 488 391 437 657
– as previously reported 2 352 799 2 401 045 1 523 987 1 592 381 488 391 437 657
– adjustment (9 022)
Total liabilities
– restated 1 754 444 1 676 543 1 171 525 1 173 302 561 494 469 544
– as previously reported 1 754 444 1 685 565 1 171 525 1 173 302 561 494 469 544
– adjustment (9 022)
Goodwill at period end 74 972 74 972 74 972 74 972 – –
Number of staff 2 967 2 973 2 443 2 472 399 376
Marine and leisure Financial services Corporate services/Other
2014 2013 2014 2013 2014 2013
R'000 R'000 R'000 R'000 R'000 R'000
Revenue
– restated 36 628 53 174 35 706 29 670 47 736 28 276
– as previously reported 36 628 53 174 35 706 29 670 47 736 28 276
– adjustment
Operating profit
– restated (5 642) (1 730) 14 448 15 505 684 785
– as previously reported (5 642) (1 730) 14 448 15 505 684 785
– adjustment
Net finance costs
– restated 78 (102) 946 465 13 752 17 783
– as previously reported 78 (102) 946 465 13 752 17 783
– adjustment
Profit before taxation (5 566) (1 832) 15 394 15 970 14 436 18 568
Total assets
– restated 44 917 54 165 19 480 25 405 276 024 282 415
– as previously reported 44 917 54 165 19 480 34 427 276 024 282 415
– adjustment (9 022)
Total liabilities
– restated 4 998 3 435 712 – 15 715 30 262
– as previously reported 4 998 3 435 712 9 022 15 715 30 262
– adjustment (9 022)
Goodwill at period end – – – – – –
Number of staff 24 27 3 3 98 95
COMMENTARY ON THE RESULTS
Considering the economic environment during the period under review,
which led to a 9% decline in national dealer new vehicle sales, the directors
are satisfied with the results achieved. Headline earnings per share increased
10% and continued strong cash generation has enabled the directors to
recommend a dividend of 32,5 cents per share, up 16% over that declared
last year. Off marginally increased revenue, the gross profit margin improved
from 13,2% to 13,4%, expenses were contained at a 5% increase, and
the operating profit margin reduced from 3,0% to a still creditable 2,9%.
Following the utilisation of R200 million of cash resources to effect a share
buyback during January 2014, net finance charges increased 7%.
OPERATING REVIEW
The period under review was extremely disrupted. After the many national
holidays during March/April which reduced productivity, the motor
manufacturing industry was hit by protracted strike action which brought
production to a virtual standstill. The first strike, at the assembly plants,
was followed by a second at the component manufacturers, and a third
at the steel and engineering suppliers. Labour extremists seem to consider
the motor industry, South Africa's biggest manufacturing industry, to be a
legitimate target in pursuit of their political aspirations. The loss of income
to both workers and the fiscus is severe.
In April 2014 it was recorded that a strategy had been implemented to
eliminate the Group's loss-making retail motor operations. This exercise has
borne fruit, and prior period net losses in excess of R10 million have been
eliminated. Despite the closing of these operations, Group new vehicle
unit sales declined only 8,3% compared with the dealer industry decline
of 9,0% during the period under review. Operating margins remain under
pressure at 2,0% (2,2%), but expense levels have been held below inflation.
Tight control over working capital resulted in a 12% reduction in finance
charges, and profit before taxation, at R73,5 million, was marginally up on
the prior period.
The car hire segment recorded excellent growth with an 18% increase in
pre-tax profit. The profit margin has improved from 9,3% to 10,3% after
absorbing the effects of the interest rate hikes on the cost of financing the
fleet. The improvement is largely as a result of the stable used car prices
which have generated a higher return for the retired fleet, and improved
daily rental returns. The division has increased its footprint with the opening
of two new branches, and is well structured for continued improvement.
The results of the marine and leisure division were disappointing. Despite
various restructuring and cost-cutting measures, this segment continued to
suffer the effects of consumers' reduced disposal income. Management is
reviewing its options regarding the future viability of this operation.
Profit before taxation from the corporate services segment is principally net
investment income. This has fallen because of the utilisation of R200 million
of cash resources to effect the share buyback in January 2014.
The financial services sector continued to provide a solid earnings base
despite the vagaries of short-term economic cycles. The marginally higher
claims rate experienced during the period has reduced returns; however,
this is not expected to impact ongoing profitability.
PROSPECTS
After a slow start to the financial year, the Group experienced an
improvement during July and August, and the early signs are that this trend
will continue. Improved national new vehicle sales in September showed
there has been a pickup in business activity, albeit off a relatively low base.
Whilst the motor industry expects further price hikes this year, attractive
incentive packages, pre-emptive demand and expected stable interest
rates should sustain demand. The Group will shortly open six Datsun and
four Mazda outlets, all of which will be accommodated within the existing
overhead structure. The directors believe the Group will deliver satisfactory
results during the next six months.
CHANGES IN DIRECTORATE
In June 2014, D Molefe resigned as a director of the Company. Her
position was filled by JA Mabena. In July 2014 M Zimmerman tendered his
resignation as a director of the company. He was replaced by II Zimmerman.
DIVIDEND
A dividend (dividend number 53) of 32,5 cents per share will be paid on
Monday, 15 December 2014 to members reflected in the share register of the
Company at the close of business on the record date, Friday, 12 December
2014. Last day to trade "cum" dividend is Friday, 5 December 2014. First day to
trade "ex" dividend is Monday, 8 December 2014. Share certificates may not
be dematerialised or rematerialised from Monday, 8 December 2014 to Friday,
12 December 2014, both days inclusive.
The number of ordinary shares in issue at the date of the declaration is
93 673 498. Consequently, the gross dividend payable is R30 443 887 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 27,625 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 2014 have been
prepared under the supervision of SK Jackson CA (SA), financial director, in
accordance with the requirements of the JSE Limited Listings Requirements
for abridged reports, and the requirements of the South African Companies
Act, No 71 of 2008. The Listings Requirements require abridged reports to be
prepared in accordance with the framework concepts and the measurement
and recognition requirements of International Financial Reporting Standards
("IFRS"), the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee, and Financial Pronouncements as issued by the
Financial Reporting Standards Council, and to also, as a minimum, contain
the information required by IAS 34: Interim Financial Reporting. The
accounting policies applied are in terms of IFRS and are consistent with
those used in the financial statements as at 28 February 2014. Except as
recorded below, the accounting policies are consistent with those used in
the financial results as at 31 August 2013. The results have not been
reviewed or audited by the Group's external auditors.
CHANGES IN ACCOUNTING POLICIES AND COMPARATIVE FIGURES
During the previous financial year a number of changes in accounting
policies were effected. Certain figures previously reported in respect of the
six months ended 31 August 2013 have been restated.
1. Consolidated financial statements
Investment in insurance underwriting activities
IFRS 10: Consolidated Financial Statements replaces the guidance on
control and consolidation in IAS 27: Consolidated and Separate Financial
Statements, and in SIC 12: Consolidation – Special Purpose Entities.
The Group conducts insurance underwriting activities through various
entities controlled by external financial service providers. These entities
were consolidated in terms of IAS 27 and SIC 12. However, the Group
has determined that the entities do not constitute "deemed separate
entities" as envisaged in IFRS 10 and they will no longer be consolidated.
As required under IFRS 10, the changes in accounting policy have been
applied retroactively and, as a consequence, adjustments have been
made in the financial statements of all comparative periods presented.
2. Reclassification of wholesale transactions
Revenue arising from the sale of new and used motor vehicles to
customers who were themselves dealers in motor vehicles and who
purchased the vehicles for resale, was classified as wholesale revenue,
and was eliminated and offset against "Cost of sales" in the statement
of comprehensive income. This policy has been discontinued and revenue
from such sales is now included in "Revenue" and a corresponding
adjustment has been made to "Cost of sales". The change has no
impact on "Gross profit".
3. Reclassification of transactions associated with financing of car hire fleet
The cost of financing the Group's car hire vehicles was included in
"Cost of sales" and the year-end liability in "Trade and other payables".
This policy has been discontinued. Finance charges are now included
in "Finance costs" and the liability is recorded as "Borrowings".
The change has no impact on "Profit before taxation" nor on "Total current
liabilities".
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.
By order of the board of directors
K Fonseca CA (SA)
Company Secretary 22 October 2014
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,
JA Mabena, N Siyotula, II Zimmerman,
JW Alderslade (alternate)
WEB ADDRESS
www.cmh.co.za
Date: 22/10/2014 12:00:00 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.