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CULLINAN HOLDINGS LIMITED - Condensed Reviewed Results for the year ended 30 September 2015

Release Date: 29/12/2015 16:00
Code(s): CULP CUL     PDF:  
Wrap Text
Condensed Reviewed Results for the year ended 30 September 2015

CULLINAN HOLDINGS LTD
TOURISM, LEISURE & FINANCIAL SERVICES
Registration number : 1902/001808/06
(Share code: CUL ISIN: ZAE000013710)
(Share code: CULP ISIN: ZAE000001947)
("the Company" or "the Group")

CONDENSED REVIEWED GROUP RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2015

GROUP FINANCIAL HIGHLIGHTS

Trading profit R74.9m (Down 19%)
Earnings per share down 17%

Cash generated before working capital changes R107m
Headline earnings per share down 19%

Group condensed statement of financial position
                                                    Reviewed as at    Audited as at
                                                      30 September     30 September
                                                              2015             2014
                                                             R'000            R'000
ASSETS    
Non-current assets                                         408 202          329 788
    Property, plant and equipment                          258 813          200 939
    Investment properties                                   10 900           10 900
    Goodwill                                                99 948           69 981
    Intangible assets                                       24 321           27 513
    Investment in associate companies                        3 732            3 697
    Investment in joint ventures                             7 054            7 946
    Deferred tax asset                                       3 434            8 812
Current assets                                             636 802          524 091
   Other current assets                                    528 171          338 034
   Cash and cash equivalents                               108 631          186 057
    
Total assets                                             1 045 004          853 879
    
    
EQUITY AND LIABILITIES    
Ordinary shareholders' equity                              416 590          380 284
Preference shareholders' equity                                546              546
Non-controlling interest                                     3 218            4 180
Total shareholders' equity                                 420 354          385 010
Non-current liabilities                                     84 701           14 647
    Preference shares                                          500              500
    Shareholders loans                                      70 000              -
    Deferred tax liability                                   8 881            6 288
    Operating lease accrual                                  5 320            7 859
Current liabilities                                        539 949          454 222
    Other current liabilities                              539 949          454 222
    
Total equity and liabilities                             1 045 004          853 879

Group condensed statement of comprehensive income
                                                           Reviewed         Audited
                                                         Year ended      Year ended
                                                       30 September    30 September
                                                               2015            2014
                                                              R'000           R'000
Revenue                                                     926 075         941 396

Turnover                                                    920 324         933 415
Net operating expenses                                    (845 346)       (840 425)
Trading profit                                               74 978          92 990
Net finance income                                            1 883           7 682
Preference dividends paid                                      (55)            (55)
Share of (loss) / profit of associates and
    joint ventures                                            (857)             275
Profit before taxation                                       75 949         100 892
Tax expense                                                (19 953)        (29 569)
Profit for the year                                          55 996          71 323

Other comprehensive (loss) / income:
Movement in cash flow hedge                                 (7 856)               -
Exchange differences on translating 
    foreign operations                                        (215)             306
Total comprehensive income for the year                      47 925          71 629
Profit / (loss ) attributable to: 
    equity holders                                           56 321          67 990
    non-controlling interest                                  (325)           3 333
Total comprehensive income / (loss) attributable to: 
    equity holders                                           48 250          68 296
    non-controlling interest                                  (325)           3 333
Earnings per share (cents)                                     7.04            8.50
Diluted earnings per share (cents)                             6.91            8.33
 
Group condensed statements of changes in equity
                                                           Reviewed         Audited
                                                         Year ended      Year ended
                                                       30 September    30 September
                                                               2015            2014
                                                              R'000           R'000
Ordinary share capital     
Balance at beginning of year                                  8 002           7 927
Issued during year                                                -              75
Balance at end of year                                        8 002           8 002
Share premium     
Balance at beginning of year                                149 086         140 942
Premium on issue of shares                                        -           8 144
Balance at end of year                                      149 086         149 086
Share capital reduction reserve fund     
Balance at beginning and end of year                         20 876          20 876
Capital redemption reserve fund     
Balance at beginning and end of year                              4               4
Foreign currency translation reserve     
Balance at beginning of year                                (1 359)         (1 665)
Reserve on translation of foreign subsidiary                  (215)             306
Balance at end of year                                      (1 574)         (1 359)
Revaluation reserve     
Balance at beginning and end of year                            870             870
Hedging reserve     
Balance at beginning of year                                      -               -
Movement in cash flow hedge                                 (7 856)               -
Balance at end of year                                      (7 856)               -
Share-based payment reserve               
Balance at beginning of year                                  6 626           2 225
Expense for the year                                          4 059           4 401
Balance at end of year                                       10 685           6 626
Accumulated profit / (loss)               
Balance at beginning of year                                196 179         152 194
Attributable income for year                                 56 321          67 990
Ordinary dividend declared                                 (16 003)        (24 005)
Balance at end of year                                      236 497         196 179
Ordinary shareholders' equity                               416 590         380 284
Non-controlling interest              
Balance at beginning of year                                  4 180           1 804
Arising from business combination                                                 -
(Loss) / profit attributable to non-controlling               
     interest for year                                        (325)           3 333
Dividend paid to non-controlling interest                     (637)           (957)
Balance at end of year                                        3 218           4 180
Preference shareholders' equity              
Balance at beginning of year                                    500             500
Balance at end of year                                          500             500
Total comprehensive income is made up of              
Profit / (loss ) for the year                                55 996          71 323
 - Attributable to equity shareholders                       56 321          67 990
 - Attributable to non-controlling interest                   (325)           3 333
Movement in cash flow hedge                                 (7 856)               -
Translation of foreign subsidiary                             (215)             306
                                                             47 925          71 629

Group condensed statement of cash flows
                                                           Reviewed         Audited
                                                         Year ended      Year ended
                                                       30 September    30 September
                                                               2015            2014
                                                              R'000           R'000
- Cash generated by operations                               11 149         119 433
Net cash (outflow) / inflow from             
    operating activities                                   (27 081)          73 245
Net cash outflow from             
    investing activities                                  (121 141)        (92 591)
Net cash inflow / (outflow) from             
    financing activities                                     69 363           (957)
Net decrease in cash             
    and cash equivalents                                   (78 859)        (20 303)
Effect of exchange rate changes on cash             
    and cash equivalents                                      1 505           (360)
Cash acquired on acquisition                                      -             649
Cash and cash equivalents             
    at beginning of the year                                185 723         205 737
Cash and cash equivalents             
    at end of the year                                      108 369         185 723

Notes
1. Basis of preparation
   The condensed reviewed group results have been prepared in accordance with
   the framework concepts and the measurement and recognition requirements of International
   Financial Reporting Standards ("IFRS"), and the
   SAICA Financial Reporting Guides as issued by the Accounting Practices Committee.
   The results contain the information required by IAS34 Interim Financial Reporting and
   are in compliance with the South African Companies Act (2008)
   The accounting policies and methods of computation used in the preparation
   of the results are consistent with those used in the annual financial statements for
   the year ended 30 September 2014 except as indicated in note 6.

2. Notes to the statement of comprehensive income
                                                         Year ended       Year ended
                                                       30 September     30 September
                                                               2015             2014
   Ordinary shares ('000)                                   800 173          800 173
   Weighted average number of net shares     
       in issue                                             800 173          800 173
   Adjusted for effect of future share-based      
       compensation payments                                 15 048           16 119
   Diluted weighted average number of shares                815 221          816 293
      
   Determination of headline earnings:                        R'000            R'000
   Earnings attributable to ordinary shareholders            56 321           67 990
   Losses on disposal      
       of property, plant and equipment                       (116)            1 557
   Total tax effect                                              32            (436)
   Headline earnings                                         56 237           69 111
   Headline earnings per share (cents)                         7.03             8.64
   Diluted headline earnings per share (cents)                 6.90             8.47
   Dividends per share (cents)                                 2.00             3.00    
 
3. Goodwill                                                Reviewed          Audited
                                                         Year ended       Year ended
                                                       30 September     30 September
                                                               2015             2014
                                                              R'000            R'000
   Carrying value at the beginning of the year               69 981           66 758
   Arising from business combinations during the year        29 720            3 000
   Foreign exchange adjustment                                  247              223
   Carrying value at the end of the year                     99 948            69 98

4. BUSINESS COMBINATION
   Chester Finance
   On 1 October 2014, Cullinan Holdings Limited acquired the trade finance business of Chester Finance (Pty)
   Ltd. Goodwill on acquisition arose from intangible assets that do not qualify for recognition seperately from goodwill,
   including intellectual capital and the client base, as well as other immaterial intangible assets such as the business trade name.
   The business will trade under the name Chester Finance - A Division of
   Cullinan Holdings Limited. The acquisition was funded out of cash reserves. Chester was acquired in line with the group strategy to
   expand into the financial services sector and will provide the group with additional skills and expertise in this area.

   The carrying value of the assets as noted below approximate their fair value at the date of acquisition.
   The assets acquired as at 1 October 2014 arising from the acquisition are as follows:

                                                                                                                     Estimated Fair
                                                                                                                              Value
                                                                                                                              R'000
Property, Plant & Equipment                                                                                                     273
Trade receivables                                                                                                            45 768
Net asset value acquired                                                                                                     46 041
Purchase consideration paid out of cash reserves                                                                             75 761
Goodwill                                                                                                                     29 720
The gross amount due under trade and other receivables is R45.768million of which all is expected to be collectible.
The property, plant and equipment consists of vehicles, fixtures and fittings and computer software and equipment.

Since the acquisition date, the following amounts have been included in the statement of comprehensive income for
Cullinan for the year:

                                                                                                                              R'000
Revenue                                                                                                                      25 211
Profit                                                                                                                       14 454

Acquisition costs allocated to the statement of comprehensive income                                                          2 792

5. Segmental reporting                                                 
                                                                         Travel and   Marine and  Financial    Corporate
                                                                            Tourism      Boating   Services     Services      Total
                                                                             R'000         R'000      R'000        R'000      R'000
   30 September 2015                                                 
   Revenue                                                                 740 131        63 256    122 902         (214)   926 075
   Trading profit                                                           95 596         3 237     16 325      (40 180)    74 978
   Profit before tax                                                        94 739         3 237     18 208      (40 235)    75 949
   30 September 2014                                                 
   Revenue                                                                 826 876        48 833     65 959         (272)   941 396
   Trading profit                                                          132 045         2 070      5 207      (46 332)    92 990
   Profit before tax                                                       132 320         2 070     12 889      (46 387)   100 892
                                                 
6  Correction of error: Restatement of Revenue, Turnover and cost of sales of
   Silverton Travel (Pty) Ltd t/a Edusport Travel
   In the 2014 Annual Financial Statements, the commission on tour sales earned by Silverton Travel (Pty) Ltd was reflected as turnover.
   This is consistent with the manner in which all of the Cullinan Travel and Tourism businesses treat turnover.
   However, it has been determined that in the case of Silverton Travel (Pty) Ltd, the business acts as principal in most transactions
   and in order to more correctly reflect this, the decision was made to reflect gross invoiced sales as
   turnover in 2015. The adjustment to turnover is offset by an equivalent increase in the cost of sales which is reflected in net
   operating expenses.

                                                                                                                               2014
                                                                                                                              R'000
   Turnover as reported in the 2014 Annual Financial Statements                                                             828 381
   Less : Net operating expenses                                                                                          (735 391)
   Operating profit                                                                                                          92 990
                                                               
   Restated turnover as disclosed above                                                                                     933 415
   Less : net operating expenses                                                                                          (840 425)
   Operating profit                                                                                                          92 990
   
   The restatement has no effect on earnings

7  Cash flow hedge
   Forward exchange contracts are classified as Level 2 instruments in the fair value heirarchy. The fair value of the Forward
   exchange contract liability at year end amounted to R7.856m
   The fair values of forward exchange contracts are calculated using standard market calculation conventions with reference to the
   relevant market spot rates, forward foreign exchange and interest rates. The notional principal amounts of the outstanding forward
   foreign exchange contracts at year end was R136.31m.

Condensed Reviewed Group Results
These condensed reviewed group results were prepared by D Standage CA (SA), the Financial Director of the Group.

Approval of the condensed reviewed group results
The condensed reviewed group results were approved by the Board of Directors on 23rd December 2015.

Review opinion
The condensed reviewed group results have been reviewed by the group's independent auditor, Mazars. Their unmodified
review opinion is available for inspection at the group's registered office. Their review was conducted in accordance with ISRE 2410
 "Review of interim financial information performed by the independent auditor of the entity". The auditor's report does not necessarily
report on all of the information contained in these results. Shareholders are therefore advised that in order to obtain a full
 understanding of the nature of the auditor's engagement they should obtain a copy of the auditor's report together
with the accompanying financial information from the company's registered office.

Cullinan Holdings is pleased to report on its reviewed group results for 2015.

The 2015 year saw the group's tourism and travel segment (specifically the inbound and tourism coach transport divisions)
materially impacted by a number of factors. These factors include the impact of Ebola, the new South African visa regulations
announced in September 2014 and the impact of xenophobia.

As a result of the factors mentioned above, the group experienced significant decreases in tourism numbers from China, Japan,
Malaysia, Singapore, India and South America. Tourism volumes from the USA and Europe were also negatively impacted for the year.

As a consequence of the above and the decrease in revenue in the tourism and travel segment for the September 2015 year,
the Groups trading profit declined to R74.9m (down 19%) and earnings per share declined by 17%.

We believe that these factors, which impacted tourism numbers during 2015, especially Ebola and the new South African visa
regulations, are behind us and we expect growth to rebound in 2016. While the weaker rand had little impact on increased
tourism numbers in 2015, we anticipate that the effects of this will be positively felt in inbound tourism revenue in 2016.

On the positive side, the rest of the group performed well. The rest of the tourism segment performed strongly under
challenging circumstances. Despite a weak South African economy, reduced corporate and personal budgets and a weak rand,
these other tourism businesses increased their market share and grew their businesses during 2015.

We also saw growth in our Marine business, which delivered improved results.

In October 2014, the group acquired Chester Finance, a niche trade finance provider. We are pleased with the performance of
this business, considering the weak overall economy.

Despite a challenging 2015 year, the group remains strongly cash generative with R107m in cash generated before working
capital changes.

KEY ACHIEVEMENTS OVER THE PAST 12 MONTHS
- The company improved the quality and standard of its coach fleet through the continuing capital expenditure programme, with
  R65m invested in fleet in the year to September 2015 on top of the R70m invested in 2014.
- The Depot in Cape Town has been expanded by a further 17 000m2, which has allowed the Springbok Atlas fleet to combine its
  depot with that of Hylton Ross with attendant improvements in service, controls and economies of scale. This transport depot
  now houses over 120 coaches and vehicles.
- The roll out of the first and major phase of the tour operator travel system is complete. The next phase will be to utilise the
  system to transact online with customers and consumers where appropriate.
- Pentravel continued to expand with the addition of three shops and the roll out of two new concept stores. These concept
  stores provide customers with an interactive experience when choosing their holiday and have proved to be very well received
  and successful.
- Pentravel also continues to expand their web presence, with the expansion of the PenDirect office in Cape Town.
- Edusport successfully operated a program to Rugby World Cup 2015, sending over 1 000 Rugby Fans to the United Kingdom over
  September and October 2015.
- The staff mentorship program which was launched in 2013 continues to deliver excellent results, with 40 staff completing the
  program in 2015 (up from 23 in 2014).

PROSPECTS FOR 2016
With the effects of Ebola waning and the expectation that the South African visa regulations will soon be amended, we
believe the 2016 prospects are positive. Inbound tourism is still not back at 2014 levels but the lower oil price and weaker
exchange rate provide us with some optimism for the year ahead.

Corporate and leisure travel remains constrained and the weak exchange rate will not assist this segment. Despite these
conditions, we remain confident that our focus on providing excellence in service and quality will see the business continue to
outperform and increase its market share.

Financial Services remain an opportunity for growth and we will continue to look to expand this segment through organic
growth and acquisition.

Despite lower results in 2015, we are confident that the group will see further growth in 2016. The
Fundamentals of the core businesses remain strong and acquisitions made in 2013, 2014 and 2015 have contributed to the
group results.

Finally, we would like to take this opportunity to thank our Chairman, Executives, our Staff, our
customers and our partners for their support, dedication and professionalism during the 2015 year.

On Behalf of the Board
Michael Tollman                                        David Standage
Chief Executive Officer                                Financial Director

29th December 2015


Company secretary                                                           Auditors
B Allison                                                                   Mazars were re-elected as auditors in 2015

Sponsor                                                                     Registered office
Arbor Capital Sponsors (Pty) Limited                                        6 Hood Avenue, Rosebank, 2196
(Registration number 2006/033725/07)

Directors
M Tollman, MA Ness *‡, DD Hosking *‡, LA Pampallis, G Tollman*‡, DK Standage,
R Arendse ‡, S Nhlumayo ‡, A Azoulay ‡
* Non-Resident, ‡ Non-Executive

Transfer secretaries                                                        For further information on group activities, please write to:
Computershare Investor Services (Pty) Limited,                              The Company Secretary, Cullinan Holdings Limited,
Ground Floor, 70 Marshall Street, Johannesburg, 2001                        PO Box 41032, Craighall, 2024
(PO Box 61051, Marshalltown, 2107)                                          (Registration number 1902/001808/06)
                                                                            (Share code: CUL ISIN: ZAE000013710)
                                                                            (Share code: CULP ISIN: ZAE000001947)
                                                                            ("the Company" or "the Group")



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