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Reviewed consolidated provisional financial results for the year ended 30 June 2015 and cash dividend declaration
Comair Limited
Incorporated in the Republic of South Africa
Registration number: 1967/006783/06
Share code: COM
ISIN: ZAE000029823
(“Comair” or “the Company” or “the Group”)
REVIEWED CONDENSED CONSOLIDATED PROVISIONAL FINANCIAL RESULTS FOR THE
YEAR ENDED 30 JUNE 2015 AND CASH DIVIDEND DECLARATION
Earnings review
The 2015 financial year provided a basket of challenging variables, with a very
strong profit in the first half followed by a more mundane second half. The
first half started with an unprecedented collapse in the oil price, resulting in
a drop in the price of jet fuel from a high of R9.50 per litre to R7.30 by
December and R6.50 by year end. This decline granted relief to the dramatic
cost escalation of previous years. We benefitted from revenue growth of 5%
in the first half of the year.
The second half of the year saw two new competitors enter the market with very
aggressive, but more than likely unsustainable pricing. Comair was, out of
necessity, drawn into the fray in order to retain its slice of a market that had
still not recovered to 2008 volumes. As a result of this, any savings achieved
on the price of fuel were returned to our customers by way of significantly
reduced ticket prices, with a consequent reversal of the revenue growth
experienced in the first six months. Despite the new capacity in the market,
Comair maintained its passenger volumes, largely due to the strength of the
kulula.com and British Airways brands and our ongoing attention to service.
We continued to focus on our customers through the application of service
metrics, feedback surveys, customer journey mapping, and extensive investment
in training programmes for front-line staff. Operating performance therefore
remained good, with on-time performance exceeding our threshold target of 85%
across both the British Airways and kulula.com brands.
The year closed with no growth in revenue compared to the previous year, and a
1% saving in operating costs. Despite an increase in operating profit, profit
for the year reflects a 17% reduction, resulting in earnings per share of 47.8
cents per share (prior year 58.4 cents).
Cash of R147 million was invested in the acquisition of three previously
leased Boeing 737-400 aircraft and two pre-owned Boeing 737-400s, all for
operation in the British Airways fleet. These aircraft have replaced the
737-300 fleet which will be fully retired by December. The newer aircraft
afford improved fuel efficiency and reduced maintenance demands, while at
the same time improving passenger comfort. Early settlement was also
concluded on aircraft and simulator funding amounting to R115 million.
Cash on hand at year end was R849 million, much in line with the prior year
balance of R868 million.
Due to hedging 26% of demand during the early decline in the fuel price,
the Company was not able to achieve the full benefit of the lower cost of fuel.
At year end there remain 160,000 barrels hedged at an average of $82,
representing 10% of our fuel demand for the 2016 financial year. The last of
these hedges will expire in December 2015.
The Black Economic Empowerment transaction concluded by Comair and the Thelo
Consortium in 2007, matured in September 2014, and created realised value of
R152 million for the participants. The “A” shares arising from the transaction
were converted to 29,067,766 ordinary shares on 21 April 2015. The weighted effect
of the additional shares is a reduction in the 2015 earnings per share of 3 cents.
The Group continued to invest in its transformation initiatives, including its
pilot cadet programme, airport learnerships, enterprise development and social
responsibility and thereby maintained its level 4 B-BBEE score.
Our affiliated businesses of flight training, travel product distribution,
catering and airport lounges performed well and continue to grow their
contribution to the consolidated profits.
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 weak economic growth and the consequent impact of
overcapacity in the domestic aviation market. Fundamentals dictate that a
correction in market capacity is very likely. On the other hand the new visa
regulations applicable to South Africans traveling with children, as well as
to foreign tourists, have impacted negatively on our cross-border tourist
destinations, and we are actively participating in achieving a more favourable
dispensation in this regard. The weakness of the Rand continues to impact
negatively on all Dollar based operating costs.
In August 2015 we took delivery of the first of the next four new 737-800s
from Boeing, the remaining three of which will be delivered in late 2015 and
2016. The delivery of the eight Boeing 737-8 MAX aircraft remains scheduled
for 2019 to 2021. 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 also focused on implementing technology solutions to enhance customer
satisfaction, operating performance and drive revenue generating opportunities.
The pace of development in distribution technology is relentless. Comair is
intent on realising the maximum benefit from its customer insight in order to
improve on its overall proposition, and the marketing of relevant products to
its customer segments. We are also developing new applications to enhance both
the ground and air experience that will facilitate more efficient operating
procedures.
The financial information on which the above forecast is based has not been
reviewed and reported on by Comair’s external auditors.
DIVIDEND
Notice is hereby given that a final gross cash dividend of 10.00000 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 1.50000
cents per ordinary share, resulting in a net dividend of 8.50000 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. 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 469,330,865.
In accordance with the provisions of Strate, 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, 16 October 2015
Shares commence trading (ex dividend) Monday, 19 October 2015
Record date (date shareholders recorded in books) Friday, 23 October 2015
Payment date Monday, 26 October 2015
Share certificates may not be dematerialised or rematerialised between Monday,
19 October 2015 and Friday, 23 October 2015, both days inclusive.
Directors’ Resignation and Appointment
1) Mr Luo Cheng was appointed as a non-executive director on 1 August 2015
2) Mr Li Neng was appointed as a non-executive director on 1 August 2015
3) Mr Naran Maharaj was appointed as an independent non-executive director on
1 August 2015
4) Ms Phuti Mahanyele was appointed as an independent non-executive director on
1 August 2015
Reviewed Condensed Consolidated Provisional Financial Results for the year
ended 30 June 2015
Comair Limited
Audited
Reviewed restated
year ended year ended
30 June 30 June
2015 2014
R'000 R'000
-------------------------------
Condensed Consolidated Statement of
Profit or loss
Revenue 5,890,746 5,903,219
Operating expenses (5,157,578) (5,198,457)
-------------------------------
Operating profit before depreciation,
impairment and profit on sale of assets 733,168 704,762
Depreciation (405,812) (290,747)
(Impairment) reversal of impairment (1,530) 2,235
Profit on sale of assets 1,231 524
-------------------------------
Profit from operations 327,057 416,774
Interest income 40,428 32,149
Interest expense (72,930) (77,340)
Share of profit of associates 6,799 2,327
-------------------------------
Profit before taxation 301,354 373,910
Taxation (82,578) (109,059)
-------------------------------
Profit for the year 218,776 264,851
Earnings per share (cents) 47.8 58.4
Headline earnings per share (cents) 47.9 57.8
Diluted earnings per share (cents) 47.8 56.1
Diluted headline earnings per share (cents) 47.9 55.6
Dividends per share paid (cents) 18.0 15.0
Audited
Reviewed restated
year ended year ended
30 June 30 June
2015 2014
R'000 R'000
-------------------------------
Condensed Consolidated Statement of
Profit or loss and other
Comprehensive Income
Profit for the year 218,776 264,851
Other comprehensive income: Items that
may be reclassified subsequently to
profit or loss
Effects of oil cash flow hedge recognised
in comprehensive income (40,387) -
--------------------------------
Total comprehensive income for the year
attributable to ordinary shareholders of
the parent 178,389 264,851
Audited
Reviewed restated
year ended year ended
30 June 30 June
2015 2014
R'000 R'000
-------------------------------
Actual number of shares in issue ('000) 469,331 440,263
Weighted ordinary shares in issue ('000) 457,655 453,856
Diluted weighted ordinary shares in
issue ('000) 457,655 471,851
Reconciliation between earnings and
headline earnings
Earnings attributable to the equity holders
of the parent 218,776 264,851
Less: IAS 16 (profit) on disposal of
property, plant and equipment (1,231) (524)
Less: IAS 36 (reversal of impairment) to
loans to associates - (2,235)
Add: IAS 36 Impairment of goodwill 1,530 -
Add: Tax effect of profit on disposal of
property, plant and equipment 345 147
-------------------------------
Headline earnings attributable to
ordinary shareholders 219,420 262,239
-------------------------------
Audited
Reviewed restated
year ended year ended
30 June 30 June
2015 2014
R'000 R'000
-------------------------------
Condensed Consolidated Statement of
Financial Position
ASSETS
Property, plant and equipment 2,760,584 2,545,033
Intangible assets 27,490 31,106
Investments in associates 28,411 6,612
Deferred taxation 4,965 -
Goodwill 6,615 3,668
Current assets 1,191,372 1,436,929
-------------------------------
4,019,437 4,023,348
-------------------------------
EQUITY AND LIABILITIES
Share capital and reserves 1,166,190 1,067,970
Interest bearing liabilities 982,052 1,183,072
Deferred taxation 201,370 167,689
Share-based payments 32,500 21,666
Current liabilities 1,637,325 1,582,951
-------------------------------
4,019,437 4,023,348
-------------------------------
Net asset value per share (cents) 251.1 245.3
Audited
Reviewed restated
year ended year ended
30 June 30 June
2015 2014
R'000 R'000
-------------------------------
Condensed Consolidated Statement of
Cash Flows
Cash and cash equivalents at the beginning
of the period 867,703 778,045
Cash from operations and investment income 646,453 1,043,147
Taxation paid (46,785) (76,664)
Cash (utilised in) investing activities (279,796) (610,842)
Cash (utilised in) financing activities (338,297) (265,983)
-------------------------------
Cash and cash equivalents at the end
of the period 849,278 867,703
-------------------------------
Audited
Reviewed restated
year ended year ended
30 June 30 June
2015 2014
R'000 R'000
-------------------------------
Condensed Consolidated Segmental Report
Segmental Revenue
Airline 5,645,467 5,730,306
Non-airline 245,279 172,913
-------------------------------
5,890,746 5,903,219
-------------------------------
Segmental results
Airline 645,608 654,252
Non-airline 87,560 50,510
-------------------------------
Operating profit before depreciation,
impairment and profit on sale of assets 733,168 704,762
Depreciation – Airline (397,352) (280,475)
Depreciation – Non-airline (8,460) (10,272)
(Impairment) reversal of impairment – Airline (1,530) 2,235
Profit on sale of assets – Airline 1,231 524
-------------------------------
Profit before interest, dividend and taxation 327,057 416,774
-------------------------------
Segmental assets – Airline 3,860,891 3,858,702
Segmental assets – Non-airline 158,546 164,646
Segmental liabilities – Airline (2,745,091) (2,825,314)
Segmental liabilities – Non-airline (108,156) (130,064)
Segmental capital additions – Airline
(excluding borrowing costs capitalised) 558,145 510,381
Segmental capital additions – Non-airline 11,082 668
Audited
Reviewed restated
year ended year ended
30 June 30 June
2015 2014
R'000 R'000
--------------------------------
Condensed Consolidated Statement of
Changes in Equity
Opening balances 1,067,970 1,021,200
Profit for the year 218,776 264,851
Equity settled share-based payment
adjustment 857 3,428
Repurchase of Comair shares (451) (151,213)
Cash flow hedge reserve (40,387) -
Dividend paid (81,464) (70,295)
Non-controlling interest 889 -
Net effect of share trust activities - (1)
--------------------------------
1,166,190 1,067,970
--------------------------------
SIGNIFICANT COMMITMENTS
Comair has made pre-delivery payments of R288 million prior to year end towards
the delivery of four Boeing 737-800s in late 2015 and early 2016. Pre-delivery
payment finance has been arranged through Investec Bank.
Comair has also made deposits of R102 million in the prior year, towards the
purchase of eight Boeing 737-8 MAXs for delivery from 2019 to 2021. The Group
has a remaining commitment to Boeing for R1.9 billion at year end (prior year
R1.5 billion), the funding of which will be finalised closer to the time of
delivery. Pre-delivery payments on these aircraft will commence in 2017. At
year end the Group has a remaining commitment to Boeing of R5.4 billion
(prior year R4.6 billion), payable from 2017 to 2021, the funding of which will
be finalised closer to the time of delivery.
BASIS OF PREPARATION
The accounting policies and method of measurement and recognition applied in the
preparation of these condensed consolidated provisional financial results are in
terms of International Financial Reporting Standards (“IFRS”) and are consistent
with those applied in the audited annual financial statements for the previous
year ended 30 June 2014. The condensed consolidated financial statements are
prepared in accordance with the requirements of the JSE Listings Requirements
for provisional reports and the requirements of the Companies Act of South
Africa. The condensed consolidated provisional financial results are presented
in terms of the minimum disclosure requirements set out in International
Accounting Standards (“IAS”) 34 – Interim Financial Reporting, as well the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and
Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council. The Financial Director, Kirsten King CA (SA), was responsible
for the preparation of the condensed consolidated provisional financial results.
Any reference to future financial performance included in this announcement has
not been reviewed or reported on by the Group’s external auditors.
The Group has adopted the new standards in issue and there has been no material
impact on the financial statements identified based on management’s assessment
of these standards.
PRIOR PERIOD RESTATEMENT
Comair offers travel and holiday package services using advanced technology,
both locally and internationally, to consumers directly and via the retail
travel trade. This business forms part of the non-airline segment of the Group
and is disclosed as such in the Segmental Report. In terms of IAS 18 – Revenue,
Comair acts as an agent for the collection of revenue on certain travel packages
and these amounts, net of inventory costs, should be accounted for as commission
received. In the financial year ended 30 June 2014 gross amounts were included
in revenue, and the associated inventory costs were included in operating
expenses which gives rise to the restatement.
The restatement has no impact on the profit of the Group. The effect is a
reduction in both revenue and operating expenses amounting to R379 million in
the Statement of Comprehensive Income for the year ended 30 June 2014.
CHANGE IN ACCOUNTING ESTIMATES
Arising from the fleet upgrade programme, the Board reassessed the estimated
residual values and useful lives of the Boeing 737-300 and 737-400 fleets,
resulting in additional depreciation of R95 million in the current reporting
period. Aircraft are depreciated over their useful lives on a component basis,
taking into account residual value, technological innovation, planned
maintenance programmes and forecast retirement dates.
CHANGE IN SEGMENTAL CLASSIFICATION
The Group is organised into two main business segments: Airline and Non-airline.
Previously “Non-airline” comprised the travel business, property investments,
simulator business and Slow in the City. Lounges were initially established at
main ACSA airports to improve customer experience and were therefore included
within the Airline segment. However, the lounge business has since evolved into a
self-sustainable business, generating third party lounge revenue and can now be
considered independent of the Airline segment and will be reported as
“Non-airline” for segmental reporting purposes.
2014
Restated Previously Difference
reported
Segmental revenue
Airline 5,730,306 5,819,632 89,326
Non-airline 172,913 83,587 (89,326)
Segmental result
Airline 654,252 681,552 27,300
Non-airline 50,510 23,210 (27,300)
Segmental depreciation
Airline (280,475) (285,734) 5,259
Non-airline (10,272) (5,013) (5,259)
Segmental Assets
Airline 3,858,702 3,875,108 16,406
Non-airline 164,646 148,240 (16,406)
SUBSEQUENT EVENTS
No matters have occurred between the reporting date and the date of approval of
the Financial Statements which would have a material effect on these financial
statements.
REVIEW OF THE INDEPENDENT AUDITORS
These provisional condensed consolidated financial statements for the year ended
30 June 2015 have been reviewed by Grant Thornton, who expressed an unmodified
review conclusion. A copy of the auditor’s review report is available for
inspection at the Company’s registered office.
By order of the Board
P van Hoven (Chairman) ER Venter (CEO)
11 September 2015
SPONSOR
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
14 September 2015
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