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Condensed Provisional Audited Consolidated Results For The Year Ended 30 June 2017 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 PROVISIONAL AUDITED CONSOLIDATED RESULTS FOR THE YEAR ENDED
30 JUNE 2017 AND CASH DIVIDEND DECLARATION
Earnings review
The 2017 financial year represented a return to Comair’s historic profit growth
trend in the absence of the extraordinary costs of the comparative period that
arose from losses on oil hedges and the revaluation of the dollar based
aircraft loan.
The total domestic passenger market increased by 2.3% while Comair grew
passenger numbers by 2% resulting in an increase in airline revenue of 2%,
which is testament to the brands’ strength as well as our ongoing commitment to
service. In the absence of meaningful GDP growth, the market has yet to expand
into its surplus seat capacity, which is constraining industry occupancy levels
at below the global average of approximately 80.6%. Despite inflationary
pressure and a 5% increase in the rand price of fuel, operating costs including
depreciation and interest expense remained well contained with a 1% increase
overall. The new aircraft continue to contribute towards this efficiency
through their lower fuel burn and maintenance requirements. In line with our
promise to constantly improve service delivery, we met our threshold target
on-time performance of 85%, achieving 89% in the last six months.
The translation loss of the comparative period that arose from the effect of
the exchange rate on a dollar based aircraft loan, was partly reversed as the
currency made some headway to R13.044 against the dollar as at 30 June 2017,
from the low of R14.765 against the dollar a year earlier. This resulted in a
profit of R41 million in the current period on the loan value of US$21.2
million, compared to a loss of R74 million on the revaluation of the loan at
30 June 2016. The dollar oil price remained relatively stable over the past
12 months and the oil hedges that gave rise to a loss of R71 million in the
comparative period all matured by 31 December 2015, with no subsequent hedges
being entered into.
The non-airline businesses grew their contribution to 20% of earnings. The
travel business, pilot training, SLOW lounges and catering all performed well
and have justified further investment into these ventures.
Profit after taxation for the year consequently increased by 54% to R297
million (prior year R193 million), resulting in earnings per share of 63.7
cents (prior year: 41.5 cents) and headline earnings per share of 67.0 cents
(prior year: 36.5 cents). Cash generated from operations grew by R257 million
(by 28%), resulting in a healthy cash balance of R935 million at year end
(prior year: R1.12 billion), after a significant investment of R132 million in
pre-delivery payments towards new aircraft for delivery in 2019. Dividends
declared for the past 12 months increased by 5 cents per share from 16 cents in
the prior year to 21 cents per share in the current year.
Highlights
The ongoing upgrades to our fleet provide mitigation to the expected rise in
the fuel price, while also providing an improved customer proposition. During
the year we took delivery of one new 737-800 from Boeing, being the last of the
original order of eight 737-800 New Generation aircraft. The delivery of the
next eight Boeing 737-8 Max aircraft remains scheduled for commencement in
2019. Two 737-8 Max aircraft have been deferred to the end of the original
delivery schedule in order to smooth the timing of deliveries more evenly. The
ongoing upgrades to the fleet will continue to improve operating efficiency
while at the same time enhancing the revenue potential per flight.
We acquired a fixed-base flight simulator for R21.6 million to expand our
Boeing 737-800 training capacity and commenced with the construction of a
third simulator training facility at a cost of approximately R67 million with
the potential capacity for a further two fixed-base simulators and two
full-motion simulators.
During the year, substantial investments were made in commencing the expansion
and upgrading of our SLOW Lounge in the Domestic terminal at OR Tambo
International Airport and have recently opened a new concept lounge at Lanseria
International Airport. We look forward to expanding the new concept lounge to
some of the smaller airports where we do not yet have a lounge presence.
The Group’s catering operations and its stores facility are housed in an office
park, known as Anchor Park. An agreement has been entered into to purchase the
industrial park for R75 million to provide capacity for future expansion, with
transfer of the property expected to take place early in the 2018 financial
year. In addition, we have developed offices, catering facilities and store
facilities at Cape Town International Airport to the value of R27 million.
Continued focus on implementing technology solutions has enhanced operating
performance, customer service and revenue generation. 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. New software applications are being developed for use on
board the aircraft and on the ground to facilitate more efficient operating
procedures.
The management of talent is also considered to be a key differentiator of the
Group and continues to be a core focus. The Group values its talent and
continues to make a significant investment to support the management of its
skills base. Talent Management practices support decision making in terms of
building capacity now and into the future, with the dual benefit to employees
of having information that supports their careers within the Group.
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.
Judgement in this matter was handed down on 15 February 2017. In terms of the
judgement, Comair was awarded damages in the sum of approximately R1.16 billion,
inclusive of interest and costs. SAA lodged an appeal against this judgement.
Comair lodged a cross appeal to recover the full amount of the damages
sustained plus interest on the total amount, which if successful, will increase
the damages awarded to approximately R1.9 billion. It is anticipated the appeal
will be heard in early 2018.
Prospects
While profits for the year were good, we are still not achieving the margins
that will allow for the optimum pace of upgrading the fleet. The current weak
economy is expected to maintain pressure on consumer spending, and we will
therefore see continued pressure on margins, particularly in the airline
industry, combined with a possible decline 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 foresee that the non-airline businesses will continue to grow
their contribution towards profits and will receive ongoing focus.
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.
Dividends
Notice is hereby given that a final gross cash dividend of 14.00000 cents per
ordinary share has been approved and declared by the board which is payable
to shareholders for the financial year ended 30 June 2017. The dividend has
been declared out of income reserves.
The dividend will be subject to a local dividend tax rate of 20% or 2.80000
cents per ordinary share, resulting in a net dividend of 11.20000 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, 24 October 2017
Shares commence trading (ex dividend) Wednesday, 25 October 2017
Record date (date shareholders recorded in books) Friday, 27 October 2017
Payment Date Monday, 30 October 2017
Share certificates may not be dematerialised or rematerialised between
Wednesday, 25 October 2017 and Friday, 27 October 2017, both days inclusive.
Directors’ Appointments and Resignations
Resignations
The following directors resigned during the period under review
- Ms WD Stander resigned as an Independent Non-executive Director (and her
associated positions on the Audit Committee, Risk Committee, Remunerations
Committee and Social and Ethics Committee) on 28 November 2016
- Mr KI Mampeule resigned as an Independent Non-executive Director (and his
associated positions on the Audit Committee, Risk Committee, Nominations
Committee and Social and Ethics Committee) on 31 March 2017
- Mr GJ Halliday resigned as an Independent Non-executive Director (and his
associated positions on the Audit Committee and Risk Committee) on
5 April 2017
Appointments
- Mr N Maharajh, an Independent Non-executive Director, was appointed as a
member of the Risk Committee and Social and Ethics Committee on
13 February 2017
- Mr MN Louw, an Executive Director, was appointed as a member of the Risk
Committee on 13 February 2017
- Mr RS Ntuli, an Independent Non-executive Director, was appointed as a
member of the Audit Committee on 5 June 2017
Condensed Audited Consolidated Results
Comair Limited
Group
Audited Audited
Year Year
30 June 30 June
2017 2016
R'000 R'000
---------------------------------
Condensed Consolidated Statement
of Profit or Loss
Revenue 6,063,737 5,959,573
Operating expenses (4,999,789) (5,129,781)
---------------------------------
Operating profit before depreciation,
amortisation, impairment, unrealised
translation gain (loss) on dollar
denominated loan, compensation for
damaged aircraft and (loss) profit
on sale of assets 1,063,948 829,792
Depreciation and amortisation (456,281) (372,103)
Write off of aircraft damaged beyond
economical repair - (64,462)
Compensation for write off of aircraft
damaged beyond economical repair - 84,155
Unrealised translation gain (loss) on dollar
denominated loan 40,697 (73,946)
(Loss) profit on sale of assets (10,574) 12,419
---------------------------------
Profit from operations 637,790 415,855
Interest income 49,670 41,440
Interest expense (250,377) (170,496)
Impairment loss on re-measurement of
non-current assets held for sale (11,270) -
Share of profit of associates 8,874 8,011
---------------------------------
Profit before taxation 434,687 294,810
Taxation (137,717) (102,108)
---------------------------------
Profit for the year 296,970 192,702
Profit attributable to:
Owners of the parent 296,023 192,555
Non-controlling interest 947 147
---------------------------------
296,970 192,702
Condensed Consolidated Statement
of Other Comprehensive Income
Profit for the year 296,970 192,702
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
---------------------------------
Total comprehensive income for the year 296,970 223,089
---------------------------------
Total comprehensive income for the year
attributable to:-
Owners of the parent 296,023 232,942
Non-controlling interest 947 147
---------------------------------
296,970 233,089
Earnings per share (cents) 63.7 41.5
Headline earnings per share (cents) 67.0 36.5
Diluted Earnings per share (cents) 63.7 41.4
Diluted Headline earnings per share (cents) 67.0 36.5
Actual number of shares in issue ('000) 469,331 469,331
Weighted ordinary shares in issue ('000) 465,089 464,347
Diluted weighted ordinary shares in
issue ('000) 465,089 464,716
Reconciliation between earnings and
headline earnings
Earnings attributable to the equity holders
of the parent 296,023 192,555
Add: IAS 16 loss (profit) on disposal of
property, plant and equipment 10,574 (12,419)
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: IFRS 5 Impairment on re-measurement
of non-current assets held for sale 11,270 -
Less: tax effect of re-measurement
adjustments (6,116) 8,991
---------------------------------
Headline earnings attributable to
ordinary shareholders 311,751 169,434
---------------------------------
Audited Audited
Year Year
30 June 30 June
2017 2016
R'000 R'000
Condensed Consolidated Statement
of Financial Position
ASSETS
Property, plant and equipment 4,631,326 3,988,323
Intangible assets 15,892 21,953
Investments in and loans to associates 45,296 36,422
Goodwill 6,615 6,615
Deferred taxation 3,902 3,942
Current assets 1,208,365 1,553,163
Non-current assets held for sale 7,044 -
---------------------------------
5,918,440 5,610,418
---------------------------------
EQUITY AND LIABILITIES
Share capital and reserves 1,542,717 1,329,515
Non-current portion of interest
bearing liabilities 2,344,926 2,182,459
Deferred taxation 435,043 303,848
Share-based payments 5,032 1,001
Current liabilities 1,590,722 1,793,595
---------------------------------
5,918,440 5,610,418
---------------------------------
Net asset value per share (cents) 331.7 286.6
Audited Audited
Year Year
30 June 30 June
2017 2016
R'000 R'000
Condensed Consolidated Statement
of Cash Flows
Cash generated from operating activities
Cash generated from operations 1,149,088 892,231
Interest paid (250,377) (170,496)
Interest received 49,670 40,546
Taxation received (paid) 25,034 (6,020)
---------------------------------
Net cash from operating activities 973,415 756,261
---------------------------------
Cash utilised in investing activities
Additions to property, plant and equipment (323,248) (182,257)
Proceeds on disposal of property,
plant and equipment 3,594 100,935
Aircraft deposits paid (132,217) -
Additions to intangible assets (9,652) (13,174)
Repayment of loan by associate 7,852 -
---------------------------------
Net cash from investing activities (453,671) (94,496)
---------------------------------
Cash utilised in financing activities
Raising of interest-bearing liabilities - 34,790
Repayment of interest-bearing liabilities (717,921) (638,258)
Refund on aircraft purchase price for
pre-delivery payment finance 96,738 282,317
Dividends paid (83,776) (69,764)
---------------------------------
Net cash from financing activities (704,959) (390,915)
---------------------------------
Total cash movement for the year (185,215) 270,850
Cash and cash equivalents at the
beginning of the year 1,120,128 849,278
---------------------------------
Cash and cash equivalents at the
end of the year 934,913 1,120,128
---------------------------------
Audited Audited
Year Year
30 June 30 June
2017 2016
R'000 R'000
Condensed Consolidated Segmental Report
Segmental Revenue
Airline 5,796,443 5,725,892
Non-airline 267,294 233,681
---------------------------------
6,063,737 5,959,573
---------------------------------
Segmental results
Airline 964,559 743,896
Non-airline 99,389 85,896
---------------------------------
Operating profit before depreciation,
amortisation, impairment, unrealised
translation gain (loss) on dollar denominated
loan, compensation for damaged aircraft and
(loss) profit on sale of assets 1,063,948 829,792
Depreciation and amortisation - Airline (438,115) (361,072)
Depreciation and amortisation - Non-airline (18,166) (11,031)
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 gain (loss) on
dollar denominated loan 40,697 (73,946)
(Loss) profit on sale of assets – Airline (10,574) 12,419
---------------------------------
Profit from operations 637,790 415,855
---------------------------------
Segmental assets – Airline 5,398,905 5,288,207
Segmental assets - Non-airline 519,535 322,211
Segmental liabilities – Airline (4,261,165) (4,158,433)
Segmental liabilities - Non-airline (114,558) (122,470)
Segmental capital additions - Airline
(excluding borrowing costs capitalised) 888,615 1,480,618
Segmental capital additions- Non-airline 79,206 12,569
Audited Audited
Year Year
30 June 30 June
2017 2016
R'000 R'000
Condensed Consolidated Statement of
Changes in Equity
Opening Balance 1,329,515 1,166,190
Profit for the year 296,970 192,702
Cash flow hedge reserve - 40,387
Dividend paid (83,776) (69,764)
Shares sold by Share Trust 8 -
---------------------------------
1,542,717 1,329,515
---------------------------------
Significant Commitments
Comair made pre-delivery payments of R132 million during the current year, in
addition to R102 million in preceding years, towards the delivery of eight
Boeing 737-8 Max aircraft due for delivery between 2019 and 2022. The Group has
a remaining commitment to Boeing for R5.7 billion at year end (prior year
R6.6 billion) in respect of the Boeing 737-8 Max order, the funding options of
which will be finalised closer to the time of delivery. Pre-delivery payment
finance has been mandated to Investec Bank.
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 2016. 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. These condensed
consolidated financial results have been prepared by Ryan de Miranda CA (SA),
under the supervision of Kirsten King CA (SA), the Financial Director. 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
R70 million was paid on 31 August 2017, for purchase of the office park, known
as Anchor Park. Transfer is expected to take place in the near future at which
time, the remaining R5 million will be paid in full and final settlement of
the transaction
No other 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 (Michelle da Costa (Audit Partner, Registered
Auditor, Chartered Accountant (SA)) have issued their unmodified opinion on
the Group’s financial statements for the year ended 30 June 2017. The audit was
conducted in accordance with International Standards on Auditing. A copy of the
auditors’ report together with a copy of the audited financial statements are
available for inspection at the Company’s registered office. These condensed
provisional audited 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)
11 September 2017
Sponsor:
PSG Capital Proprietary Limited
Release Date: 12 September 2017
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