To view the PDF file, sign up for a MySharenet subscription.

COMBINED MOTOR HOLDINGS LIMITED - Interim Result For the Period Ended 31 August 2014

Release Date: 22/10/2014 12:00
Code(s): CMH     PDF:  
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.

Share This Story