Wrap Text
Financial Results for the six months ended 31 August 2016
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
FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2016
GROUP STATEMENT OF FINANCIAL POSITION
as at 31 August 2016
Unaudited Unaudited Audited
31 August 31 August 29 February
2016 2015 2016
R'000 R'000 R'000
ASSETS
Non-current assets
Plant and equipment 66 920 69 517 71 715
Goodwill 10 078 25 878 27 078
Insurance receivable 40 703 28 138 30 032
Deferred taxation 39 128 49 282 39 934
156 829 172 815 168 759
Current assets
Car hire fleet vehicles 603 331 494 431 643 882
Inventories 1 106 462 1 113 262 1 118 004
Trade and other receivables 319 740 395 276 266 680
Tax paid in advance – – 2 590
Cash and cash equivalents 292 147 155 906 498 254
2 321 680 2 158 875 2 529 410
Assets of disposal group held for sale – – 85 300
Total assets 2 478 509 2 331 690 2 783 469
EQUITY AND LIABILITIES
Capital and reserves
Share capital 38 091 38 091 38 091
Share-based payment reserve 5 030 4 350 5 987
Retained earnings 443 315 353 575 436 013
Ordinary shareholders' equity 486 436 396 016 480 091
Non-controlling interest 887 275 722
Total equity 487 323 396 291 480 813
Non-current liabilities
Lease liabilities 42 972 76 305 44 745
Provisions – 3 712 –
42 972 80 017 44 745
Current liabilities
Advance from non-controlling shareholders of subsidiaries 255 255 255
Trade and other payables 1 286 243 1 277 871 1 521 268
Borrowings 653 277 552 396 726 137
Lease liabilities 6 266 10 126 6 413
Current tax liabilities 2 173 14 734 3 838
1 948 214 1 855 382 2 257 911
Total liabilities 1 991 186 1 935 399 2 302 656
Total equity and liabilities 2 478 509 2 331 690 2 783 469
GROUP STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 August 2016
Restated
Unaudited unaudited Audited
6 months 6 months 12 months
31 August 31 August 29 February
2016 2015 2016
R'000 R'000 R'000
Continuing operations
Revenue 5 262 311 5 511 069 11 016 150
Cost of sales (4 415 618) (4 698 035) (9 275 592)
Gross profit 846 693 813 034 1 740 558
Other income 13 753 8 925 28 064
Impairment of goodwill (17 000) (22 000) (22 000)
Selling and administration expenses (679 296) (653 009) (1 373 717)
Operating profit 164 150 146 950 372 905
Finance income 9 643 5 293 14 906
Finance costs (64 817) (49 726) (117 644)
Profit before taxation 108 976 102 517 270 167
Tax expense (37 011) (36 312) (87 218)
Total profit for the year from continuing operations 71 965 66 205 182 949
Discontinued operation
Loss for the year from discontinued operation (attributable to equity holders
of the Company) – (924) –
Total profit and comprehensive income 71 965 65 281 182 949
Attributable to:
Equity holders of the Company 71 800 65 281 182 502
Non-controlling interest 165 – 447
71 965 65 281 182 949
Reconciliation of headline earnings
Profits/(losses) for the year attributable to equity holders of the Company
– from continuing operations 71 800 66 205 182 502
– from discontinued operation – (924) –
Total profit and comprehensive income attributable to equity holders of the Company 71 800 65 281 182 502
Non-trading items:
– impairment of goodwill 17 000 22 000 22 000
– profit on sale of plant and equipment
– gross (2 230) (490) (3 395)
– impact of income tax 624 137 951
Headline earnings attributable to equity holders of the Company 87 194 86 928 202 058
From continuing operations 87 194 87 852 202 058
From discontinued operation – (924) –
87 194 86 928 202 058
Weighted average number of shares in issue (‘000) 74 802 88 516 81 653
Total earnings per share
Basic 96,0 73,8 223,5
Diluted basic 96,0 73,8 223,5
Headline 116,6 98,2 247,5
Diluted headline 116,6 98,2 247,5
Earnings per share from continuing operations
Basic 96,0 74,8 223,5
Diluted basic 96,0 74,8 223,5
Headline 116,6 99,2 247,5
Diluted headline 116,6 99,2 247,5
Earnings per share from discontinued operation
Basic – (1,0) –
Diluted basic – (1,0) –
Headline – (1,0) –
Diluted headline – (1,0) –
Dividend payable – December 2016 55,0 46,5
Dividend paid 111,5
Dividend cover (times) 2,1 2,1 2,2
GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 August 2016
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 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
Total profit and comprehensive income 117 221 117 221 447 117 668
Share-based payment reserve 1 637 1 637 1 637
Dividends paid (34 783) (34 783) (34 783)
Balance at 29 February 2016 38 091 5 987 436 013 480 091 722 480 813
Total profit and comprehensive income 71 800 71 800 165 71 965
Release following exercise of
share appreciation rights (2 566) 2 566 – –
Share-based payment reserve 1 609 1 609 1 609
Cost of shares delivered in terms of share
appreciation rights scheme (3 483) (3 483) (3 483)
Dividends paid (63 581) (63 581) (63 581)
Balance at 31 August 2016 38 091 5 030 443 315 486 436 887 487 323
GROUP STATEMENT OF CASH FLOWS
for the six months ended 31 August 2016
Unaudited Unaudited Audited
6 months 6 months 12 months
31 August 31 August 29 February
2016 2015 2016
R'000 R'000 R'000
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit
From continuning operations 164 150 146 950 372 905
From discontinued operation – (868) –
164 150 146 082 372 905
Adjustment for non-cash items
– depreciation/other 69 386 94 753 94 192
Sale of car hire fleet vehicles 149 655 159 996 341 606
Purchase of car hire fleet vehicles (150 647) (106 256) (461 388)
232 544 294 575 347 315
Working capital changes:
Inventories 48 465 61 945 (48 024)
Trade and other receivables (53 060) (128 983) (387)
Trade and other payables (234 266) (1 496) 238 642
Borrowings (72 860) (115 165) 58 576
Cash movement from operations (79 177) 110 876 596 122
Taxation paid (35 280) (29 704) (84 748)
Net cash movement from operating activities (114 457) 81 172 511 374
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of non-current plant and equipment (9 085) (8 623) (37 007)
Proceeds on disposal of non-current plant and equipment 390 540 7 422
Proceeds on disposal of business 49 954 – 31 205
Purchase of business – (2 906) (5 537)
Insurance receivable (10 671) (7 720) (9 614)
Insurance payable – (1 680) (1 680)
Net cash movement from investing activities 30 588 (20 389) (15 211)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of issue of shares – 11 579 11 579
Repurchase of shares – (251 643) (251 643)
Cost of shares delivered in terms of share appreciation rights scheme (3 483) (8 511) (8 511)
Finance income received 9 643 5 293 14 906
Finance costs paid (64 817) (49 782) (117 644)
Dividends paid (63 581) (62 357) (97 140)
Net cash movement from financing activities (122 238) (355 421) (448 453)
Net movement in cash and cash equivalents (206 107) (294 638) 47 710
Cash and cash equivalents at beginning of period 498 254 450 544 450 544
Cash and cash equivalents at end of period 292 147 155 906 498 254
GROUP SEGMENT INFORMATION
for the six months ended 31 August 2016
FINANCIAL CORPORATE MARINE & LEISURE
TOTAL RETAIL MOTOR CAR HIRE SERVICES SERVICES/OTHER (discontinued)
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Segment revenue 5 278 046 5 550 250 4 968 181 5 233 325 225 998 191 278 38 072 43 137 45 795 51 574 – 30 936
Inter-segment revenue (15 735) (8 245) – – – – – – (15 735) (8 245) – –
External revenue 5 262 311 5 542 005 4 968 181 5 233 325 225 998 191 278 38 072 43 137 30 060 43 329 – 30 936
Operating profit/(loss) 164 150 146 082 94 736 85 868 60 490 45 149 13 139 15 351 (4 215) 582 – (868)
Net finance costs (55 174) (44 489) (30 977) (30 766) (31 225) (25 936) 2 427 1 354 4 601 10 915 – (56)
Profit before taxation 108 976 101 593 63 759 55 102 29 265 19 213 15 566 16 705 386 11 497 – (924)
After charging
– employee costs 381 586 374 222 318 569 319 200 33 966 30 475 – – 29 051 24 547 – –
– depreciation charge 54 927 54 704 11 479 12 893 42 743 40 919 – – 705 892 – –
– impairment of goodwill 17 000 22 000 17 000 22 000 – – – – – – – –
Total assets 2 478 509 2 331 690 1 387 108 1 542 447 721 579 527 208 40 703 28 138 329 119 219 597 – 14 300
Total liabilities 1 991 186 1 935 399 1 231 670 1 339 838 710 671 575 649 2 739 433 46 106 15 956 – 3 523
Goodwill at period-end 10 078 25 878 10 078 25 878 – – – – – – – –
COMMENTARY ON THE RESULTS
The directors are satisfied with the results which have been
achieved during a particularly tough trading period. The declining
level of new vehicle sales is a reflection of the subdued economic
activity brought about by depressed business and consumer
confidence levels. Interest hikes and substantial new vehicle price
increases, coupled with social and political unrest, have combined
to produce a climate of uncertainty and a deferral of purchasing
decisions
Despite this, the Group produced a 12% increase in operating profit,
with the operating margin, before goodwill impairments, rising
from 3.1% to 3.4%. Taking into account the fewer shares in issue,
following the share repurchase in July last year, this translates into
a 19% increase in headline earnings per share. Good cash generation
has enabled the repayment of in excess of R200 million of interest-
bearing trade payables and car hire fleet borrowings. In addition, the
directors have proposed a dividend of 55 cents per share, up 18% on
last year. The statement of financial position remains sound, with a
healthy cash balance, and no long-term debt.
OPERATING REVIEW
Against a decline of 12.4% in national new passenger and light
commercial unit sales, the Group's sales declined 8.8%. This was
offset by a 6.7% rise in used vehicle sales. Overall, the retail motor
division recorded a 16% improvement in pre-tax profit. This was
due to an increase in gross profit margins, a below-inflation rise in
selling and administration expenses, and the positive impact of the
closure of loss-making dealerships. The operating margin, before
goodwill impairment, improved from 2.1% to 2.2%.
Underpinned by strong demand for its retired fleet vehicles, and
an 18% growth in revenue, the car hire division enjoyed continued
success, returning a 52% increase in profit before taxation. The
division is benefitting from the economies of scale which arise from
increased revenue and a static infrastructure.
The financial services operations produced mixed results. The
insurance cells recorded a pleasing 17% improvement on the
back of an improved claims ratio. Offsetting this, the finance joint
ventures applied more conservative doubtful debt provisioning in
anticipation of increased pressure on consumer disposable income,
and profit declined 22%.
The increased net finance cost is largely attributable to the interest
income foregone on the R250 million invested last year on the
share repurchase, and the increased investment in the car hire fleet.
PROSPECTS
The directors do not forsee an improvement in trading conditions
during the second half of the financial year. The optimists are
speculating that the new vehicle sales levels are bottoming out,
and that further year-on-year declines will be limited. It is clear
that new vehicle price hikes have made purchases very expensive,
despite the marketing incentives offered by manufacturers. On the
plus side, the banks are reporting an increase in applications for
used vehicle financing. This indicates that consumers are switching
from new to used, rather than not investing at all. The Group has a
strong used car presence, able to take advantage of the increased
demand.
Whilst the directors do not believe that the 19% increase in headline
earnings per share is sustainable for the full year, they are confident
that the Group will emerge favourably from a difficult trading period.
CHANGES IN DIRECTORATE
BWJ Barritt was appointed as an executive director on
25 April 2016 and as a member of the Social, Ethics and
Transformation Committee on 26 May 2016.
DIVIDEND DECLARATION
A gross dividend (dividend number 57) of 55 cents per share will
be paid on Monday, 19 December 2016 to members reflected
in the share register of the Company at the close of business on
the record date, Thursday, 15 December 2016. Last day to trade
cum dividend is Monday, 12 December 2016. First day to trade ex
dividend is Tuesday, 13 December 2016. Share certificates may not
be dematerialised or rematerialised from Tuesday, 13 December
2016 to Thursday, 15 December 2016, 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
R41 141 100 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 46,75 cents per share to
those shareholders who are not exempt in terms of section 64F of
the Income Tax Act.
BASIS OF PREPARATION
The summary consolidated financial statements for the six
months ended 31 August 2016 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 "Act"), applicable to summary
financial statements. 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 applied in the financial statements as
at 29 February 2016. The figures previously presented in respect
of the Group Statement of Comprehensive Income for the six
months ended 31 August 2015 have been restated to separately
disclose "Other income" which was previously included in "Selling
and administration expenses". The restatement has no impact on
operating profit. The results have not been reviewed nor audited by
PricewaterhouseCoopers Inc., 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
13 October 2016
DIRECTORS
JTM Edwards (chairman)
JD McIntosh (CEO)
BWJ Barritt
LCZ Cele
JS Dixon
SK Jackson
ME Jones
JA Mabena
MR Nkadimeng
TRANSFER SECRETARIES
Computershare Investor Services Proprietary Limited
PO Box 61051
Marshalltown 2107
BUSINESS ADDRESS AND REGISTERED OFFICE
1 Wilton Crescent
Umhlanga Ridge 4319
POSTAL ADDRESS
PO Box 1033
Umhlanga Rocks 4320
SPONSORS
PricewaterhouseCoopers Corporate Finance Proprietary Limited
Private Bag X36
Sunninghill 2157
WEBSITE
www.cmh.co.za
Date: 13/10/2016 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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