Wrap Text
Interim unaudited results for the six months ended 31 August 2015
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
UNAUDITED RESULTS
FOR THE 6 MONTHS ENDED 31 AUGUST 2015
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 August 31 August 28 February
2015 2014 2015
R'000 R'000 R'000
ASSETS
Non-current assets
Plant and equipment 69 517 68 604 74 846
Goodwill 25 878 74 972 44 972
Insurance receivable 28 138 19 480 20 418
Deferred taxation 49 282 44 487 51 224
172 815 207 543 191 460
Current assets
Car hire fleet vehicles 494 431 454 339 609 811
Inventory 1 113 262 1 087 751 1 175 207
Trade and other receivables 395 276 364 060 266 293
Cash and cash equivalents 155 906 239 106 450 544
2 158 875 2 145 256 2 501 855
Total assets 2 331 690 2 352 799 2 693 315
EQUITY AND LIABILITIES
Capital and reserves
Share capital 38 091 27 794 27 794
Share-based payment reserve 4 350 10 491 12 011
Retained earnings 353 575 559 958 600 543
Ordinary shareholders' equity 396 016 598 243 640 348
Non-controlling interest 275 112 275
Total equity 396 291 598 355 640 623
Non-current liabilities
Insurance payable – 712 1 680
Lease liabilities 76 305 84 713 74 298
Provisions 3 712 – 4 231
80 017 85 425 80 209
Current liabilities
Advance from non-controlling shareholders of subsidiaries 255 255 255
Trade and other payables 1 277 871 1 112 679 1 279 367
Borrowings 552 396 531 068 667 561
Lease liabilities 10 126 10 540 15 232
Current tax liabilities 14 734 14 477 10 068
1 855 382 1 669 019 1 972 483
Total liabilities 1 935 399 1 754 444 2 052 692
Total equity and liabilities 2 331 690 2 352 799 2 693 315
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Restated
Unaudited Unaudited Audited
6 months 6 months 12 months
31 August 31 August 28 February
2015 2014 2015
R'000 R'000 R'000
Continuing operations
Revenue 5 511 069 5 452 896 10 737 862
Cost of sales (4 698 035) (4 723 640) (8 986 601)
Gross profit 813 034 729 256 1 751 261
Impairment of goodwill (22 000) – (30 000)
Selling and administration expenses (644 084) (566 708) (1 395 103)
Operating profit 146 950 162 548 326 158
Finance income 5 293 4 306 14 821
Finance costs (49 726) (45 890) (103 355)
Profit before taxation 102 517 120 964 237 624
Tax expense (36 312) (34 042) (77 074)
Total profit for the year from continuing operations 66 205 86 922 160 550
Discontinued operation
Loss for the year from discontinued operation
(attributable to equity holders of the company) (924) (5 566) (8 000)
Total profit and comprehensive income 65 281 81 356 152 550
Attributable to:
Equity holders of the Company 65 281 81 356 152 387
Non-controlling interest – – 163
65 281 81 356 152 550
Reconciliation of headline earnings
Profits/(losses) for the year attributable to equity holders of the company
– from continuing operations 66 205 86 922 160 387
– from discontinued operation (924) (5 566) (8 000)
Total profit and comprehensive income attributable to equity holders of the company 65 281 81 356 152 387
Non-trading items:
– impairment of goodwill 22 000 – 30 000
– profit on sale of plant and equipment
– gross (490) (256) (93)
– impact of income tax 137 72 26
Headline earnings attributable to equity holders of the company 86 928 81 172 182 320
From continuing operations 87 852 86 738 190 320
From discontinued operation (924) (5 566) (8 000)
86 928 81 172 182 320
Weighted average number of shares in issue (‘000) 88 516 93 673 93 673
Total earnings per share
Basic 73,8 86,9 162,7
Diluted basic 73,8 85,7 160,1
Headline 98,2 86,7 194,6
Diluted headline 98,2 85,5 191,6
Earnings per share from continuing operations
Basic 74,8 92,8 171,2
Diluted basic 74,8 91,6 168,5
Headline 99,2 92,6 203,1
Diluted headline 99,2 91,4 200,0
Earnings per share from discontinued operation
Basic (1,0) (5,9) (8,5)
Diluted basic (1,0) (5,9) (8,4)
Headline (1,0) (5,9) (8,5)
Diluted headline (1,0) (5,9) (8,4)
Dividend payable – December 2015 46,5 32,5
Dividend paid 82,5
Dividend cover (times) 2,5 2,7 2,4
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 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 (5 471) (5 471) (5 471)
Share-based payment reserve 1 521 1 521 1 521
Gain on share appreciation rights exercised 2 059 2 059 2 059
Dividends paid (46 836) (46 836) (46 836)
Balance at 31 August 2014 27 794 10 491 559 958 598 243 112 598 355
Total profit and comprehensive income 71 031 71 031 163 71 194
Share-based payment reserve 1 520 1 520 1 520
Dividends paid (30 446) (30 446) (30 446)
Balance at 28 February 2015 27 794 12 011 600 543 640 348 275 640 623
Issue of shares 11 579 11 579 11 579
Total profit and comprehensive income 65 281 65 281 65 281
Release following exercise of share
appreciation rights (5 655) (5 655) (5 655)
Share-based payment reserve 1 319 1 319 1 319
Loss on share appreciation rights exercised (2 856) (2 856) (2 856)
Dividends paid (62 357) (62 357) (62 357)
Transfer to share capital following exercise
of share options 3 325 (3 325) – –
Shares repurchased (4 607) (247 036) (251 643) (251 643)
Balance at 31 August 2015 38 091 4 350 353 575 396 016 275 396 291
CONDENSED GROUP STATEMENT OF CASH FLOWS
Restated
Unaudited Unaudited Audited
6 months 6 months 12 months
31 August 31 August 28 February
2015 2014 2015
R'000 R'000 R'000
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit/(loss)
From continuing operations 146 950 162 548 326 158
From discontinued operation (868) (5 642) (7 906)
146 082 156 906 318 252
Adjustments for non-cash items
Depreciation/other 94 753 70 034 138 365
Sale of car hire fleet vehicles 159 996 157 549 324 772
Purchase of car hire fleet vehicles (106 256) (97 642) (443 107)
294 575 286 847 338 282
Working capital changes
Inventories 61 945 126 826 39 370
Trade and other receivables (128 983) (100 229) (2 462)
Trade and other payables (1 496) (145 335) 20 084
Borrowings (115 165) (91 894) 44 599
Cash generated from operations 110 876 76 215 439 873
Taxation paid (29 704) (39 466) (93 643)
Net cash movement from operating activities 81 172 36 749 346 230
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of non-current plant and equipment (8 623) (7 827) (32 858)
Proceeds on disposal of non-current plant and equipment 540 282 4 807
Insurance receivables (7 720) (1 441) (2 379)
Insurance payables (1 680) (1 444) (476)
Payment of goodwill (2 906) – –
Net cash movement from investing activities (20 389) (10 430) (30 906)
CASH FLOWS FROM FINANCING ACTIVITIES
Non-controlling shareholders of subsidiaries – (3 938) (3 938)
Proceeds of issue of shares 11 579 – –
Repurchase of shares (251 643) – –
Settlement of share appreciation rights (8 511) (3 411) (3 413)
Finance income received 5 293 4 382 14 971
Finance costs paid (49 782) (45 890) (103 599)
Dividends paid (62 357) (46 836) (77 281)
Net cash movement from financing activities (355 421) (95 693) (173 260)
Net movement in cash and cash equivalents (294 638) (69 374) 142 064
Cash and cash equivalents at beginning of period 450 544 308 480 308 480
Cash and cash equivalents at end of period 155 906 239 106 450 544
GROUP SEGMENTAL ANALYSIS
TOTAL RETAIL MOTOR CAR HIRE
2015 2014 2015 2014 2015 2014
R'000 R'000 R'000 R'000 R'000 R'000
External revenue 5 542 005 5 489 524 5 233 325 5 197 580 191 278 171 874
Operating profit before goodwill impairment 168 082 156 906 107 868 105 957 45 149 41 459
Impairment of goodwill (22 000) – (22 000) – – –
Operating profit 146 082 156 906 85 868 105 957 45 149 41 459
Net finance costs (44 489) (41 508) (30 766) (32 485) (25 936) (23 797)
Profit before taxation 101 593 115 398 55 102 73 472 19 213 17 662
Total assets 2 331 690 2 352 799 1 542 447 1 523 987 527 208 488 391
Total liabilities 1 935 399 1 754 444 1 339 838 1 171 525 575 649 561 494
Goodwill at period end 25 878 74 972 25 878 74 972 – –
Number of staff 3 012 2 967 2 502 2 443 407 399
CORPORATE SERVICES/
MARINE AND LEISURE* FINANCIAL SERVICES OTHER
2015 2014 2015 2014 2015 2014
R'000 R'000 R'000 R'000 R'000 R'000
External revenue 30 936 36 628 43 137 35 706 43 329 47 736
Operating profit before goodwill impairment (868) (5 642) 15 351 14 448 582 684
Impairment of goodwill – – – – – –
Operating profit (868) (5 642) 15 351 14 448 582 684
Net finance costs (56) 76 1 354 946 10 915 13 752
Profit before taxation (924) (5 566) 16 705 15 394 11 497 14 436
Total assets 14 300 44 917 28 138 19 480 219 597 276 024
Total liabilities 3 523 4 998 433 712 15 956 15 715
Goodwill at period end – – – – – –
Number of staff 2 24 3 3 98 98
* Discontinued
COMMENTARY ON THE RESULTS
Bearing in mind the numerous factors which impacted negatively
on the level of economic activity during the period under review, the
directors are satisfied with the results achieved. Electricity supply
constraints, petrol price inflation, new vehicle price increases and
a hike in the interest rate, all contributed to a subdued trading
environment.
Headline earnings per share, boosted by increased headline
earnings and fewer shares in issue following the share repurchase
effected in July 2015, increased 13% to 98,2 cents. The gross profit
margin improved from 13,3% to 14,7%.
Cash resources of R451 million at the beginning of the period
were reduced by the R250 million share repurchase and the June
dividend of R62 million. Nevertheless, positive cash flow from
trading operations has enabled the directors to propose a dividend
of 46,5 cents per share, up 43%.
OPERATING REVIEW
Year-on-year national new vehicle sales for the first eight months
of 2015 were down 3,3%, and economists and industry experts
are suggesting that the full year results will decline 5% to 7%. Price
rises have been eased, to an extent, by manufacturers offering
price cuts and other incentive packages to promote sales. Against
this backdrop Group new vehicle unit sales increased by 5,5%, and
used vehicle unit sales 8,7%. Despite these increases in unit sales
volumes, the sales mix reflects a continuing trend towards lower-
priced vehicles. The unit sales increases ensured that profit before goodwill
impairment and taxation increased 5%. A goodwill impairment
charge of R22 million was necessitated following BMW SA's
decision to reorganise its dealer network and consequently to
terminate "without cause” the Group's BMW franchise dealership in
Umhlanga Rocks. The Group's 5 newly-opened Mazda dealerships
have performed well, and the Nissan/Datsun branch in Ballito has
had an encouraging first three months.
The car hire division showed continued excellent growth, with a
9% increase in profit before taxation. The division has continued
its focus on increasing the level of corporate and tourism sales
which yield a higher margin than the insurance replacement sector.
The recent launch of the van and truck rental division has been
encouraging. Branches in Gauteng, Durban and Cape Town have
leveraged off existing infrastructure.
Financial services yielded a pleasing increase in both premium
income and profit. The annuity type income generated by policies
sold in previous years will help offset the vagaries of a cyclical
vehicle sales market. In respect of the Group's joint ventures with
vehicle financiers, whilst adequate provision has been made for
known doubtful debtors, management needs to be ever-vigilant
in the face of rising interest rates and reduced affordability levels.
The Group's net investment in its discontinued marine and
leisure division has reduced from R34 million at February 2015 to
R9 million today. The approaching summer months will provide the
opportunity to substantially liquidate the remaining inventory by
the end of December 2015.
SHARE REPURCHASE
With effect from 6 July 2015, the Company repurchased
21 133 000 ordinary shares of no par value at a price of R11,83
each. The total cost, including related expenses, was R251,6 million,
and was effected using the Company's existing cash resources.
CHANGES IN DIRECTORATE
The following changes in directorship occurred during the period
under review:
Resignations
J Alderslade (alternate) 29 April 2015
II Zimmerman 28 May 2015
N Siyotula 6 August 2015
MPD Conway 19 October 2015
Appointments
ME Jones 16 April 2015
R Nkadimeng 6 August 2015
As a result of the above, the following changes were made to the
sub-committees of the Board:
Audit and Risk Assessment Committee
LCZ Cele resigned 28 May 2015
ME Jones appointed 28 May 2015
N Siyotula resigned 6 August 2015
R Nkadimeng appointed 6 August 2015
Social, Ethics and Transformation Committee
N Siyotula resigned 6 August 2015
JA Mabena appointed 13 October 2015
MPD Conway resigned 19 October 2015
Remuneration Committee
LCZ Cele appointed Chairman 28 May 2015
JA Mabena appointed 28 May 2015
PROSPECTS
The directors believe that the trading environment during
the second half of the financial year will be tough. Despite
manufacturers' attempts to stall the inevitable, Rand weakness
must lead to further vehicle price increases. These increases,
potential interest rate hikes, and tightening of the bank's lending
criteria, all contribute to a deteriorating outlook for new vehicle
sales.
On the positive side, an increase in new vehicle prices will create an
opportunity in the used car market, an area where the Group has
traditionally been strong. The service and parts departments have
delivered consistent results and, coupled with expected continued
improvement in the car hire and financial services segments, should
enable the Group to deliver satisfactory results for the full year.
DIVIDEND
A dividend (dividend number 55) of 46,5 cents per share will be paid
on Monday 14 December 2015 to members reflected in the share
register of the Company at the close of business on the record
date, Friday 11 December 2015. Last day to trade ‘cum' dividend is
Friday 4 December 2015. First day to trade ‘ex' dividend is Monday
7 December 2015. Share certificates may not be dematerialised
or rematerialised from Monday 7 December 2015 to Friday
11 December 2015, both days inclusive.
The number of ordinary shares in issue at the date of the declaration
is 74 801 998. Consequently, the gross dividend payable is
R34 782 929 and will be distributed from income reserves. The
dividend will be subject to dividend withholding tax at a rate of
15%, which will result in a net dividend of 39,525 cents to those
shareholders who are not exempt in terms of section 64F of the
Income Tax Act.
BASIS OF PREPARATION
The summary consolidated results of the Group for the six
months ended 31 August 2015 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 interim reports, and the requirements of the South African
Companies Act, No 71 of 2008. The Listings Requirements require
interim 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 2015. The figures previously reported in the condensed
Group Statement of Comprehensive Income and Group Statement
of Cash Flows for the 6 months ended 31 August 2014 have been
restated to exclude the results of the discontinued Marine and
Leisure operation. The results have not been reviewed or audited
by the Group's external auditors.
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
21 October 2015
TRANSFER SECRETARIES
Computershare Investor Services Proprietary Limited
PO Box 61051
Marshalltown 2107
BUSINESS ADDRESS AND REGISTERED OFFICE
1 Wilton Crescent
Umhlanga Ridge 4319
DIRECTORS
JTM Edwards (chairman)
JD McIntosh (CEO) SPONSORS
LCZ Cele PricewaterhouseCoopers Corporate Finance Proprietary Limited
JS Dixon Private Bag X36
SK Jackson Sunninghill 2157
ME Jones
JA Mabena WEBSITE
R Nkadimeng www.cmh.co.za
Date: 21/10/2015 12:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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