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Condensed audited consolidated results for the year ended 30 June 2016 and cash dividend declaration
Comair Limited
(Incorporated in the Republic of South Africa)
Reg. No. 1967/006783/06
ISIN Code: ZAE000029823 Share Code: COM
(“Comair” or the “Group”)
CONDENSED AUDITED CONSOLIDATED RESULTS FOR THE YEAR ENDED 30 JUNE 2016 AND CASH DIVIDEND DECLARATION
Earnings review
The 2016 financial year was characterised by overcapacity in the low cost
carrier segment, which led to 10% volume growth in the domestic passenger
market. We estimate however, that total revenue in the market for domestic
airline tickets declined, the impact of which was exacerbated by the relatively
weak economy. The international inbound market showed a partial recovery of 4%
following the relaxation of the 2014 visa regulations, thereby improving the
international feed traffic particularly on the British Airways flights operated by
Comair. The weakening of the Rand further improved revenue from overseas sales.
Despite declining revenue in the domestic market, Comair grew its revenue by 1%
and passenger volumes by 6% due to the strength of the kulula and
British Airways brands as well as our ongoing commitment 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 achieving our threshold target of 85% across both the
British Airways and kulula.com brands.
The Rand weakened against the US dollar by an average of 27% compared to the
previous year, thereby negatively impacting dollar denominated costs. This cost
increase was offset by a lower Rand fuel price based on a consistently low
dollar oil price throughout the year, resulting in no significant increase in
total operating expenses. This included realised losses of R71 million (pre-
taxation) on hedges that were in effect until 31 December 2015.
The volatility of the Rand resulted in significant unrealised exchange losses of
R73,9m as at 30 June 2016 on the revaluation of a US$ 24.8 million loan on one
aircraft.
Profit after taxation for the year consequently declined by 12% to R193 million
(prior year R219 million),resulting in earnings per share of 41.5 cents (prior
year : 47.8 cents) and headline earnings per share of 36.5 cents (prior year :
47.9 cents). Cash generated from operations grew by R212 million (by 31%),
resulting in a healthy cash balance of R1,1 billion at year end (prior year : R849
million).
Our affiliated businesses of flight training, travel product distribution,
catering and airport lounges performed well. Non-airline revenue grew by 6%,
contributing 18% to profit from operations.
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
The current weak economy is expected to maintain pressure on consumer spending,
and we will therefore 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 increase, making it
imprudent to take out any further hedges at these forward rates, despite the low
spot price.
The ongoing upgrades to our fleet provide mitigation to the expected recovery in
the fuel price, while also providing an improved customer proposition. During
the year we took delivery of three new 737-800’s from Boeing, with the last
aircraft from this order of 8 aircraft scheduled for delivery in November 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 our
operating performance, customer service experience and revenue generating
opportunities. The pace of development in distribution technology is
relentless, and Comair is intent on extracting the maximum benefit from its
customer information data in order to improve on its service offering, and on
the marketing of relevant products to its various customer segments. We are
also developing new software applications for use on board the aircraft and on
the ground to facilitate more efficient operating procedures.
Comair’s claim against SAA for damages, arising from anti-competitive conduct,
was heard in the Gauteng South High Court between 18 April and 24 August 2016,
the outcome of which remains pending.
The financial information on which the above forecast is based has not been
reviewed and reported on by Comair’s external auditors.
Dividends
Notice is hereby given that a final gross cash dividend of 11.00000 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 1.65000
cents per ordinary share, resulting in a net dividend of 9.35000 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) Tuesday, 25 October 2016
Shares commence trading (ex dividend) Wednesday, 26 October 2016
Record date (date shareholders recorded in books) Friday, 28 October 2016
Payment Date Monday, 31 October 2016
Share certificates may not be dematerialised or rematerialised between
Wednesday, 26 October 2016 and Friday, 28 October 2016, both days inclusive.
Condensed Audited Consolidated Results
Comair Limited
Group
Audited Audited
Year Year
30 June 30 June
2016 2015
R'000 R'000
-------------------------------
Condensed Consolidated Statements of
Profit or Loss
Revenue 5,959,573 5,890,746
Operating Expenses (5,129,781) (5,106,894)
-------------------------------
Operating profit before depreciation,
amortisation, impairment, unrealised
translation loss on dollar denominated loan,
compensation and profit on sale of assets 829,792 783,852
Depreciation and amortisation (372,103) (405,812)
Impairment of loan - (1,530)
Write off of aircraft damaged beyond
economical repair (64,462) -
Compensation for write off of aircraft
damaged beyond economical repair 84,155 -
Unrealised translation loss on dollar
denominated loan (73,946) (50,684)
Profit on sale of assets 12,419 1,231
-------------------------------
Profit from operations 415,855 327,057
Interest income 41,440 40,428
Interest expense (170,496) (72,930)
Share of profit of associates 8,011 6,799
-------------------------------
Profit before taxation 294,810 301,354
Taxation (102,108) (82,578)
-------------------------------
Profit for the year 192,702 218,776
Profit attributable to:
Owners of the parent 192,555 217 887
Non-controlling interest 147 889
-------------------------------
192,702 218,776
Condensed Consolidated Statements
of Other Comprehensive Income
Profit for the year 192,702 218,776
Other comprehensive income: Items that may
be reclassified subsequently to profit or loss
Effects of oil cash flow hedge recognised
in other comprehensive income 40,387 (40,387)
-------------------------------
Total comprehensive income for the year 233,089 178,389
-------------------------------
Total comprehensive income for the year
attributable to:-
Owners of the parent 232,942 177,500
Non-controlling interest 147 889
-------------------------------
233,089 178,389
Earnings per share (cents) 41.5 47.8
Headline earnings per share (cents) 36.5 47.9
Diluted Earnings per share (cents) 41.4 47.8
Diluted Headline earnings per share (cents) 36.5 47.9
Dividends per share paid (cents) 15.0 18.0
Actual number of shares in issue ('000) 469,331 469,331
Weighted ordinary shares in issue ('000) 464,347 457,655
Diluted weighted ordinary shares in
issue ('000) 464,716 457,655
Reconciliation between earnings and
headline earnings
Earnings attributable to the equity holders
of the parent 192,555 218,776
Less: IAS 16 profit on disposal of
property, plant and equipment (12,419) (1,231)
Add: IAS 16 write off of aircraft damaged
beyond economical repair 64,462 -
Less: IAS 16 compensation for write off of
aircraft damaged beyond economical repair (84,155) -
Add: IAS 36 impairment of loan - 1,530
Less: tax effect of remeasurement adjustments 8,991 345
-------------------------------
Headline earnings attributable to ordinary
shareholders 169,434 219,420
-------------------------------
Audited Audited
Year Year
30 June 30 June
2016 2015
R'000 R'000
-------------------------------
Condensed Consolidated Statements of
Financial Position
ASSETS
Property, plant and equipment 3,988,323 2,760,584
Intangible assets 21,953 27,490
Investments in and loans to associates 36,422 28,411
Goodwill 6,615 6,615
Deferred taxation 3,942 4,965
Current assets 1,553,163 1,207,318
-------------------------------
5,610,418 4,035,383
-------------------------------
EQUITY AND LIABILITIES
Share capital and reserves 1,329,515 1,166,190
Non-current portion of interest
bearing liabilities 2,182,459 982,052
Deferred taxation 303,848 217,316
Share-based payments 1,001 -
Current liabilities 1,793,595 1,669,825
-------------------------------
5,610,418 4,035,383
-------------------------------
Net asset value per share (cents) 286.6 251.5
Condensed Consolidated Statements
of Cash Flows
Cash and cash equivalents at the
beginning of the year 849,278 867,703
Cash from operations, investment
income and finance charges 762,281 647,573
Taxation paid (6,020) (46,785)
Cash (utilised) in investing activities (94,496) (280,465)
Cash (utilised) in financing activities (390,915) (338,748)
-------------------------------
Cash and cash equivalents at the
end of the year 1,120,128 849,278
-------------------------------
Audited Audited
Year Year
30 June 30 June
2016 2015
R'000 R'000
-------------------------------
Condensed Consolidated Segmental Reports
Segmental Revenue
Airline 5,725,892 5,671,092
Non-airline 233,681 219,654
-------------------------------
5,959,573 5,890,746
-------------------------------
Segmental results
Airline 743,896 704,619
Non-airline 85,896 79,233
-------------------------------
Operating profit before depreciation,
amortisation, impairment, unrealised
translation loss on dollar denominated loan,
compensation and profit on sale of assets 829,792 783,852
Depreciation and amortisation - Airline (361,072) (397,352)
Depreciation and amortisation - Non-airline (11,031) (8,460)
Impairment of loan - Airline - (1,530)
Write off of aircraft damaged beyond
economical repair - Airline (64,462) -
Compensation for write off of aircraft
damaged beyond economical repair - Airline 84,155 -
Unrealised translation loss on dollar
denominated loan (73,946) (50,684)
Profit on sale of assets - Airline 12,419 1,231
-------------------------------
Profit from operations 415,855 327,057
-------------------------------
Segmental assets - Airline 5,288,208 3,876,837
Segmental assets - Non-airline 322,211 158,546
Segmental liabilities - Airline (4,158,433) (2,761,037)
Segmental liabilities - Non-airline (122,470) (108,156)
Segmental capital additions - Airline
(excluding borrowing costs capitalised) 1,480,618 558,145
Segmental capital additions- Non-airline 12,569 11,082
Condensed Consolidated Statements
of Changes in Equity
Opening Balance 1,166,190 1,067,970
Profit for the year 192,702 218,776
Equity settled share-based payment adjustment - 857
Repurchase of 'A' class shares - (451)
Cash flow hedge reserve 40,387 (40,387)
Dividend paid (69,764) (81,464)
Business combinations - 889
-------------------------------
1,329,515 1,166,190
-------------------------------
Significant Commitments
Comair made pre-delivery payments of R68 million during the year towards the
delivery of the final Boeing 737-800NG of the original order of eight due for
delivery in November 2016. The Group has a remaining commitment to Boeing for
R477 million at year end (prior year R1.9 billion), the funding options of which
will be finalised closer to the time of delivery. Pre-delivery payment finance is
mandated to Investec Bank.
Comair also made deposits of R102 million in the 2014 year, towards the purchase
of eight Boeing 737-8 Max’s for delivery from 2019 to 2021. Pre-delivery
payments on these aircraft will commence in 2017. At year end the Group has a
remaining commitment to Boeing for R6.6 billion (prior year 4.6 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 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 2015. The condensed consolidated financial statements are prepared
in accordance with the requirements of the JSE Listings Requirements and the
requirements of the Companies Act of South Africa. The condensed consolidated
financial results are presented in terms of the minimum disclosure requirements
set out in International Accounting Standards (“IAS”) 34 – Interim Financial
Reporting, as well as 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
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.
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.
Audit Opinion
The auditors, Grant Thornton, have issued their unmodified opinion on the
Group’s annual financial statements for the year ended 30 June 2016. The audit
was conducted in accordance with International Standards on Auditing. A copy of
the auditor’s report together with a copy of the audited financial statements
are available for inspection at the Company’s registered office. These
summarised consolidated financial statements have been derived from the Group’s
annual financial statements. The contents of this announcement are extracted
from audited information, although the announcement itself is not audited. The
directors of Comair take full responsibility for the preparation of this
announcement and confirm that the financial information has been correctly
extracted from the underlying audited annual financial statements.
By order of the Board
P van Hoven (Chairman) ER Venter (CEO)
12 September 2016
Sponsor:
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Release Date: 13 September 2016
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