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Unaudited interim results for the six months ended 31 December 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”)
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED
31 DECEMBER 2015 AND CASH DIVIDEND DECLARATION
PERFORMANCE REVIEW
The first half of the 2016 financial year presented very different and
challenging market conditions to those experienced during the comparative
period. The stagnation in passenger volumes since 2008 reversed, with a 12.8%
growth in the market, arising from aggressive pricing as a result of surplus
capacity. While this level of discounting is ultimately not sustainable in the
industry, Comair managed the situation well to deliver cash earnings (profit
before taxation, depreciation and foreign liability translation losses) of
R382 million (comparative period: R481 million). The cash balance at
31 December 2015 was R972 million (prior period: R688 million). Revenue
declined by 5% due to a 10% decline in average yield, while the number of
passengers carried increased by 4%.
The weakening of the exchange rate to R15.54 to the US dollar at 31 December
2015, required that Comair revalue the dollar denominated loan of $27 million
on one of its aircraft, thereby negatively affecting profits by a non-cash
flow, pre-tax amount of R91 million.
Operating costs declined by 2%, mainly as a result of the suppressed dollar
price of oil. The significant reduction in the dollar price of oil was not,
however, fully realised in South Africa due to a 23% devaluation in the Rand
relative to the comparative period. Furthermore, dollar oil hedges, contracted
in mid-2014, cost the Company R71 million (pre-tax) during this reporting
period. The last of these hedges expired in December 2015.
Consequently, profit for the period was R84 million (prior period R164
million), earnings per share were 18.0 cents and headline earning per share
were 13.1 cents (prior period earnings per share and headline earnings per
share were 37.6 cents).
The Company continues to progress with its fleet upgrade programme. It retired
the last two Boeing 737-300 aircraft by December 2015, and took delivery of its
6th new Boeing 737-800NG in October 2015.
PROSPECTS
The current weak economy is expected to maintain pressure on consumer spending,
and we therefore expect to see continued pressure on margins in the industry
despite the recent growth in passenger volumes. Comair is, however, well placed
to operate in these conditions, with strong brands, committed staff, effective
equipment, an efficient cost base and strong cash reserves.
We anticipate that both the oil price and the exchange rate will remain
volatile. The forward price of oil reflects an expected increase, but this also
makes it imprudent to take out any further hedges at these forward rates,
despite the low spot price. With the expiry of the historic fuel hedges we will
not see further losses of this nature in the second half of the financial year.
Further revaluation of the dollar denominated loan will depend on the exchange
rate at financial year end.
The ongoing upgrades to our fleet provide mitigation to the expected recovery
in the fuel price, while also providing an improved customer proposition. The
7th new Boeing 737-800NG aircraft arrives in February 2016, and the last new
aircraft from this consignment arrives in November 2016, both for operation by
the British Airways brand. The new fleet, along with improved, technology-
driven operating processes, will ensure that we maintain a healthy lead for the
benefit of our customers. Our travel business, flight training facility,
catering business and airport lounges also show opportunities for further
growth.
The above outlook has not been reviewed and reported on by Comair’s external
auditors and does not constitute an earnings forecast.
CASH DIVIDEND DECLARATION
Following on the strong cash earnings of the first six months, namely the
period 1 July 2015 to 31 December 2015, notice is hereby given that a
gross interim cash dividend of 5 cents per share (prior year gross interim
cash dividend of 5 cents) was declared payable to ordinary shareholders.
The dividend was declared out of income reserves.
Dividends will be subject to a local dividend tax rate of 15% or 0.75 cents
per share, resulting in a net dividend of 4.25 cents per share, unless the
shareholder is exempt from paying dividend tax or is entitled to a reduced rate
in terms of the applicable double tax agreement. The Company’s tax reference
number is 9281/874/7/1/0 and the number of shares in issue at the date of this
declaration is 469,330,865 ordinary shares.
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, 11 March 2016
Shares commence trading (ex dividend) Monday, 14 March 2016
Record date (date shareholders recorded in books) Friday, 18 March 2016
Payment date Tuesday, 22 March 2016
Share certificates may not be dematerialised or rematerialised between Monday,
14 March 2016 and Friday, 18 March 2016, both days inclusive.
Directors' appointments and resignations
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 Maharajh was appointed as an independent non-executive director on
1 August 2015. As an independent non-executive director and chartered
accountant, he was appointed as chairperson and member of the Audit
Committee, on 2 November 2015
4) Ms Phuti Mahanyele was appointed as an independent non-executive director on
1 August 2015
5) Mr Hubert Brody resigned as an independent non-executive director, (and his
associated positions on the Audit Committee and Risk Management Committee),
on the 20 October 2015
6) Dr Piet Welgemoed, an independent non-executive director, resigned as
chairperson of the Audit Committee on 2 November 2015. He continues to
serve as a member of the Audit Committee
Comair Limited
Consolidated Interim Results
Group
Unaudited Unaudited Audited
6 months 6 months Year
31 Dec 31 Dec 30 June
2015 2014 2015
R'000 R'000 R'000
-------------------------------------------
Condensed Consolidated Statements
of Profit or Loss
Revenue 2,960,721 3,126,877 5,890,746
Operating expenses (2,571,386) (2,630,380) (5,106,894)
-------------------------------------------
Operating profit before
depreciation and amortisation,
impairment, unrealised translation
loss on dollar denominated loan,
compensation and profit on sale
of assets 389,335 496,497 783,852
Depreciation and amortisation (173,060) (225,312) (405,812)
Impairment of goodwill - - (1,530)
Impairment of aircraft (64,462) - -
Compensation for impairment
of aircraft 84,124 - -
Unrealised translation loss on
dollar denominated loan (91,244) (28,453) (50,684)
Profit on sale of assets 12,450 - 1,231
-------------------------------------------
Profit from operations 157,143 242,732 327,057
Interest income 19,884 22,209 40,428
Interest expense (64,847) (38,668) (72,930)
Share of profit of associates 5,749 948 6,799
-------------------------------------------
Profit before taxation 117,929 227,221 301,354
Taxation (34,196) (63,649) (82,578)
-------------------------------------------
Profit for the period 83,733 163,572 218,776
-------------------------------------------
Total comprehensive profit for the
period attributable to:-
Owners of the parent 83,733 163,572 217,887
Non-controlling interest - - 889
-------------------------------------------
83,733 163,572 218,776
-------------------------------------------
Condensed Consolidated Statements
of Profit or Loss and Other
Comprehensive Income
Profit for the period 83,733 163,572 218,776
Other comprehensive income: Items
that may be reclassified
subsequent to profit or loss
Effects of oil cash flow hedge
recognised in other comprehensive
income 40,387 (79,621) (40,387)
-------------------------------------------
Total comprehensive profit for
the period 124,120 83,951 178,389
-------------------------------------------
Earnings per share (cents) 18.0 37.6 47.8
Headline earnings per
share (cents) 13.1 37.6 47.9
Diluted earnings per share (cents) 18.0 35.2 47.8
Diluted headline earnings per
share (cents) 13.1 35.2 47.9
Dividends per share paid (cents) 10.0 13.0 18.0
Actual number of shares in
issue ('000) 469,331 440,263 469,331
Weighted ordinary shares in
issue ('000) 464,337 435,270 457,655
Diluted weighted ordinary shares
in issue ('000) 464,337 464,338 457,655
Reconciliation between earnings
and headline earnings
Earnings attributable to the
equity holders of the parent 83,733 163,572 218,776
Less: IAS 16 profit on disposal
of property, plant and equipment (12,450) - (1,231)
Add: IAS36 impairment of aircraft 64,462 - -
Less: IAS16 compensation for
impairment of aircraft (84,124) - -
Add: IAS36 impairment of goodwill - - 1,530
Add: tax effect of re-measurement
adjustments 8,991 - 345
-------------------------------------------
Headline earnings attributable to
ordinary shareholders 60,612 163,572 219,420
-------------------------------------------
Condensed Consolidated Statements
of Financial Position
ASSETS
Property, plant and equipment 3,557,404 2,700,119 2,760,584
Intangible assets 23,962 25,922 27,490
Investments in associates 34,160 7,560 28,411
Goodwill 3,668 3,668 6,615
Deferred tax 4,940 - 4,965
Current assets 1,483,070 1,442,668 1,207,318
-------------------------------------------
5,107,204 4,179,937 4,035,383
-------------------------------------------
EQUITY AND LIABILITIES
Share capital and reserves 1,243,801 1,096,096 1,166,190
Interest bearing liabilities 1,648,837 1,169,073 982,052
Deferred taxation 249,023 175,313 217,316
Share-based payments - 25,277 32,500
Current liabilities 1,965,543 1,714,178 1,637,325
-------------------------------------------
5,107,200 4,179,937 4,035,383
-------------------------------------------
Net asset value per share (cents) 267.9 251.8 251.5
Condensed Consolidated Statements
of Cash Flows
Cash and cash equivalents at the
beginning of the period 849,278 867,703 867,703
Cash from operations and
investment income 298,173 222,616 647,573
Taxation paid (1,400) (27,521) (46,785)
Cash (utilised) in investing
activities (101,778) (375,214) (280,465)
Cash (utilised) generated in
financing activities (72,207) 780 (338,748)
-------------------------------------------
Cash and cash equivalents at the
end of the period 971,646 688,364 849,278
-------------------------------------------
Condensed Consolidated Segmental
Reports
Segmental revenue
Airline 2,858,399 3,028,630 5,645,467
Non-airline 102,322 98,247 245,279
-------------------------------------------
2,960,721 3,126,877 5,890,746
-------------------------------------------
Segmental results
Airline 349,915 462,553 696,292
Non-airline 39,421 33,944 87,560
-------------------------------------------
Operating profit before
depreciation and amortisation,
impairment, exchange loss on
translation of dollar denominated
loan, compensation and profit on
sale of assets 389,335 496,497 783,852
Depreciation - Airline (169,345) (222,994) (397,352)
Depreciation - Non-airline (3,715) (2,318) (8,460)
Impairment - Airline - - (1,530)
Impairment of aircraft - Airline (64,462) - -
Compensation for impairment of
aircraft - Airline 84,124 - -
Unrealised exchange loss on
translation of dollar denominated
loan - Airline (91,244) (28,453) (50,684)
Profit on sale of assets - Airline 12,450 - 1,231
-------------------------------------------
Profit from operations 157,143 242,732 327,057
-------------------------------------------
Segmental assets - Airline 4,798,880 3,986,959 3,860,891
Segmental assets - Non-airline 308,324 192,978 158,546
Segmental liabilities - Airline (3,710,867) (3,008,538) (2,743,564)
Segmental liabilities -
Non-airline (152,536) (75,302) (108,156)
Segmental capital additions -
Airline (excluding borrowing costs
capitalised) 925,871 192,968 558,145
Segmental capital additions -
Non-airline 20,503 246 11,082
Condensed Consolidated Statements
of Changes in Equity
Opening balances 1,166,190 1,067,970 1,067,970
Profit for the period 83,733 163,572 218,776
Equity settled share-based
payment adjustment - 857 857
Repurchase of ’A’ class shares - - (451)
Cash flow hedge reserve 40,387 (79,621) (40,387)
Dividend paid (46,509) (56,682) (81,464)
Business combinations - - 889
-------------------------------------------
1,243,801 1,096,096 1,166,190
-------------------------------------------
Basis of preparation
In terms of the Listings Requirements of the JSE Limited, the Group has
prepared its Consolidated Interim Results in accordance with International
Financial Reporting Standards, including IAS 34 Interim Financial Reporting,
the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee, and the requirements of the Companies Act, Act No. 71 of 2008. The
accounting policies used in the preparation of these results are consistent in
all material aspects with those applied in the prior reporting period. During
the current interim period the Group adopted those standards and
interpretations in issue and effective for the interim period. The impact of
adopting these new and amended standards and interpretations has not had a
significant impact on the Group’s adopted accounting policies.
Representation of unrealised exchange losses on translation of dollar
denominated aircraft loan to spot rate at reporting date
The unrealised exchange loss on translation of the dollar denominated aircraft
loan to spot rate as at reporting date has been displayed separately because
knowledge of the losses and materiality of the extent of the losses is useful
for the purposes of economic decisions. The unrealised losses were previously
reported within the ‘operating expenses’ line item.
Subsequent events
No matters have occurred between the reporting date and the date of approval of
the Interim Financial Statements which would have a material effect on these
financial statements.
These Unaudited Interim Consolidated Results were prepared by:
Kirsten King
Financial Director
Comair Limited
By order of the Board
P van Hoven (Chairman) E Venter (Chief Executive Officer)
15 February 2016
Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
16 February 2016
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