Wrap Text
Consolidated Financial Results
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
GROUP FINANCIAL HIGHLIGHTS
2019 2018 % change
Total assets R'000 3 110 681 2 772 650 12,2
Cash resources R'000 675 966 372 882 81,3
Net asset value per share cents 1 052 935 12,5
Revenue R'000 11 154 757 10 572 596 5,5
Operating profit R'000 411 181 438 378 (6,2)
Net profit attributable to ordinary shareholders R'000 228 166 247 358 (7,8)
Return on shareholders' funds % 30,8 38,9 (20,8)
Basic earnings per share cents 305,0 330,7 (7,8)
Headline earnings per share cents 305,2 332,9 (8,3)
Dividends paid per share cents 176,0 161,0 9,3
Dividend declared - payable June 2019 cents 115,0 115,0 0,0
GROUP STATEMENT OF FINANCIAL POSITION
AS AT 28 FEBRUARY 2019
2019 2018
R'000 R'000
ASSETS
Non-current assets
Plant and equipment 71 431 64 967
Car hire fleet vehicles 813 102 760 282
Goodwill 8 078 8 078
Insurance receivable 37 530 45 144
Deferred taxation 38 676 43 865
968 817 922 336
Current assets
Inventories 1 160 680 1 164 428
Trade and other receivables 304 770 311 635
Taxation paid in advance 448 1 369
Cash and cash equivalents 675 966 372 882
2 141 864 1 850 314
Total assets 3 110 681 2 772 650
EQUITY AND LIABILITIES
Capital and reserves
Share capital 38 091 38 091
Share-based payment reserve 10 927 8 873
Retained earnings 736 483 651 439
Ordinary shareholders' equity 785 501 698 403
Non-controlling interest 1 502 1 229
Total equity 787 003 699 632
Non-current liabilities
Borrowings 287 419 60 081
Lease liabilities 55 001 49 780
342 420 109 861
Current liabilities
Trade and other payables 1 460 215 1 452 888
Borrowings 514 194 503 600
Lease liabilities 1 001 1 292
Current tax liabilities 5 848 5 377
1 981 258 1 963 157
Total liabilities 2 323 678 2 073 018
Total equity and liabilities 3 110 681 2 772 650
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 28 FEBRUARY 2019
2019 2018
R'000 R'000
Revenue 11 154 757 10 572 596
Cost of sales (9 329 488) (8 806 119)
Gross profit 1 825 269 1 766 477
Other income 22 634 29 659
Impairment of goodwill - (2 000)
Selling and administration expenses (1 436 722) (1 355 758)
Operating profit 411 181 438 378
Finance income 23 769 24 452
Finance costs (122 971) (124 871)
Profit before taxation 311 979 337 959
Tax expense (83 540) (90 499)
Total profit and comprehensive income 228 439 247 460
Attributable to:
Equity holders of the company 228 166 247 358
Non-controlling interest 273 102
228 439 247 460
Reconciliation of headline earnings
Total profit and comprehensive income attributable to equity holders of the company 228 166 247 358
Re-measurement items:
- impairment of goodwill - 2 000
- loss/(profit) on sale of plant and equipment
- gross 219 (445)
- impact of income tax (61) 125
Headline earnings attributable to equity holders of the Company 228 324 249 038
Earnings per share
Basic (cents) 305,0 330,7
Diluted basic (cents) 302,4 325,8
Headline (cents) 305,2 332,9
Diluted headline (cents) 302,6 328,1
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 28 FEBRUARY 2019
Attributable
Share-based to equity Non-
Share payment Retained holders of controlling Total
capital reserve earnings the company interest equity
R'000 R'000 R'000 R'000 R'000 R'000
Balance at 28 February 2017 38 091 6 981 527 358 572 430 1 127 573 557
Total profit and comprehensive income 247 358 247 358 102 247 460
Release following exercise
of share appreciation rights (2 349) 2 349
Cost of shares delivered in terms
of share appreciation rights scheme (5 196) (5 196) (5 196)
Share-based payment charge 4 241 4 241 4 241
Dividends paid (120 430) (120 430) (120 430)
Balance at 28 February 2018 38 091 8 873 651 439 698 403 1 229 699 632
Total profit and comprehensive income 228 166 228 166 273 228 439
Release following exercise
of share appreciation rights (3 160) 3 160
Cost of shares delivered in terms
of share appreciation rights scheme (14 631) (14 631) (14 631)
Share-based payment charge 5 214 5 214 5 214
Dividends paid (131 651) (131 651) (131 651)
Balance at 28 February 2019 38 091 10 927 736 483 785 501 1 502 787 003
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 28 FEBRUARY 2019
2019 2018
R'000 R'000
Cash flows from operating activities
Operating profit 411 181 438 378
Adjustments for non-cash items: 139 485 105 760
Sale of car hire fleet vehicles 371 686 399 496
Purchase of car hire fleet vehicles (525 558) (471 433)
Working capital changes:
Inventories 3 748 (45 865)
Trade and other receivables 6 865 (56 792)
Trade and other payables 8 031 131 212
Borrowings 237 932 (277 515)
Cash generated from operations 653 370 223 241
Taxation paid (76 959) (89 340)
Net cash movement from operating activities 576 411 133 901
Cash flows from investing activities
Purchase of plant and equipment (38 927) (20 616)
Proceeds on disposal of plant and equipment 3 470 3 406
Insurance receivable 7 614 (6 982)
Net cash movement from investing activities (27 843) (24 192)
Cash flows from financing activities
Cost of shares delivered in terms of share appreciation rights scheme (14 631) (5 196)
Finance income received 23 769 24 452
Finance costs paid (122 971) (124 871)
Dividends paid (131 651) (120 430)
Net cash movement from financing activities (245 484) (226 045)
Net movement in cash and cash equivalents 303 084 (116 336)
Cash and cash equivalents at beginning of year 372 882 489 218
Cash and cash equivalents at end of year 675 966 372 882
GROUP SEGMENT INFORMATION
FOR THE YEAR ENDED 28 FEBRUARY 2019
FINANCIAL CORPORATE
TOTAL RETAIL MOTOR CAR HIRE SERVICES SERVICES/OTHER
R'000 % R'000 % R'000 % R'000 % R'000 %
2019
Segment revenue 11 196 974 100 10 523 718 93 512 561 5 82 591 1 78 104 1
Inter-segment revenue (42 217) 100 - - - - - - (42 217) 100
External revenue 11 154 757 100 10 523 718 94 512 561 5 82 591 1 35 887 -
Operating profit 411 181 100 279 932 68 94 570 23 34 824 9 1 855 -
Finance income 23 769 100 - - 203 1 6 601 28 16 965 71
Finance costs (122 971) 100 (75 946) 62 (45 695) 37 - - (1 330) 1
Profit before taxation 311 979 100 203 986 65 49 078 16 41 425 13 17 490 6
After charging
- employee costs 789 491 100 643 266 82 89 111 11 - - 57 114 7
- depreciation 147 490 100 21 314 14 122 111 83 - - 4 065 3
Total assets 3 110 681 100 1 468 009 47 893 967 29 37 531 1 711 174 23
Total liabilities 2 323 678 100 1 408 794 60 851 735 37 - - 63 149 3
Goodwill at year-end 8 078 100 8 078 100 - - - - - -
FINANCIAL CORPORATE
TOTAL RETAIL MOTOR CAR HIRE SERVICES SERVICES/OTHER
R'000 % R'000 % R'000 % R'000 % R'000 %
2018
Segment revenue 10 603 356 100 9 958 756 93 497 415 5 74 585 1 72 600 1
Inter-segment revenue (30 760) 100 - - - - - - (30 760) 100
External revenue 10 572 596 100 9 958 756 94 497 415 5 74 585 1 41 840 -
Operating profit/(loss) 438 378 100 307 472 70 115 479 26 28 775 7 (13 348) (3)
Finance income 24 452 100 - - - - 5 379 22 19 073 78
Finance costs (124 871) 100 (70 838) 57 (51 279) 41 - - (2 754) 2
Profit before taxation 337 959 100 236 634 70 64 200 19 34 154 10 2 971 1
After charging
- employee costs 745 005 100 597 303 80 88 864 12 - - 58 838 8
- depreciation 139 133 100 20 352 15 115 002 82 - - 3 779 3
- impairment of goodwill 2 000 100 2 000 100 - - - - - -
Total assets
- per statement of
financial position 2 772 650 100 1 449 200 52 875 734 32 45 144 2 402 572 14
- set off of inter-segment
balances 205 000 100 - - - - - - 205 000 100
2 977 650 100 1 449 200 49 875 734 29 45 144 2 607 572 20
Total liabilities
- per statement of
financial position 2 073 018 100 1 371 537 66 646 327 31 - - 55 154 3
- set off of inter-segment
balances 205 000 100 - - 205 000 100 - - - -
2 278 018 100 1 371 537 60 851 327 37 - - 55 154 3
Goodwill at year-end 8 078 100 8 078 100 - - - - - -
EXTRACTS FROM THE REPORT
OF THE CHIEF EXECUTIVE OFFICER
Whilst it is disappointing to interrupt a record of rising
headline earnings per share, given the political and economic
background I am satisfied with the results achieved.
The head winds which the domestic economy faced
during the year under review have been comprehensively
documented. Suffice to record that the widespread
corruption, mismanagement of SOEs, uncertainty regarding
land expropriation threats, and political leadership focused on
short-term tactics ahead of the election, have combined to
reduce business confidence to near all-time lows.
FINANCIAL OVERVIEW
In the face of the onslaught the Group suffered an 8,3%
decline in headline earnings per share.
Revenue grew 5,5%. This resulted from a slight increase in
vehicle sales volumes, an increased mix of higher-priced
luxury models, and a modest 2-3% average new vehicle
price hike. The more competitive industry meant that trading
margins were squeezed, and the gross profit margin fell from
16,7% to 16,4%.
The increased gross profit led to an increase in variable costs,
which accounted for a proportion of the overall 6,0% increase
in total selling and administration expenses, and the resulting
operating margin aligns with the top achievers in the retail
motor sector.
Excellent cash flow controls kept net finance costs on
a par with last year. Increased interest paid on vehicle
floorplan levels, during periods when dealers were forced by
manufacturers to hold higher than optimum inventory, was
offset by the periodic use of surplus funds to settle car hire
borrowings. The tax rate remained constant at 26,8%.
Despite the decrease in headline earnings, continued
strong cash flow generation has enabled the directors to
recommend that the dividend scheduled for payment in June
2019 be held at last year's level of 115 cents per share.
Looking at the statement of financial position, the only
noteworthy movements are in respect of the car hire fleet
and its attendant borrowings (both long- and short-term).
The net book value of the fleet has increased R52,8 million,
whilst the related borrowings level has increased
R237,9 million. In previous years the Group has used a
portion of its surplus cash to early settle interest-bearing
borrowings. Whilst this policy continued during the year
under review, at year end a parcel of new fleet vehicles
acquired was financed using external finance facilities,
and the intra-Group funds were returned and held on call
account. At year end, the Group held cash resources of
R676 million compared with the previous year's R373 million.
MOTOR RETAIL
This segment represents the majority of the Group's
business and is at the leading edge of economic cycles.
During the year under review, national new passenger and
light commercial vehicle sales volumes decreased 1,8%.
This follows a 0,4% rise last year, and declines in each of the
preceding three years. The macro picture for the industry
is one of increasing costs, principally salaries and property
costs, offsetting a stagnant revenue line.
Against the national sales volume decline, the Group
achieved a modest 1,9% improvement. The opportunity for
higher volume growth was hampered by supply disruptions
at Ford, which manufacturer represents the highest volume
contributor to Group sales. Ford's market share fell 18%
during the financial year. The hiccup has been resolved, and
the launch of exciting new products will provide a boost for
next year.
The national luxury model segment continued its downward
trend in volume sales. Fortunately the Group is only exposed
in respect of its Volvo/Land Rover/Jaguar dealerships, and
these, collectively, bucked the trend and recorded volume
growth.
The segment's overall decline in profitability is attributable
mainly to the difficult conditions in the used car departments.
Whilst national sales levels are estimated to have fallen
±10%, Group sales volumes were flat. I warned in my half-
year report of the challenges facing this area of business.
Longer periods over which new vehicles are financed, coupled
with a fall in their residual values, has led to a greater gap
between trade-in values and finance settlement values.
This forces owners to drive their vehicles for longer periods,
until the gap closes. When these vehicles are eventually
traded-in, they have high mileage, and are often not in the
desired condition to be resold with a warranty by a reputable
retailer. The lack of trade-ins has forced dealers to source
inventory in the open market where retained margins are
lower. Parts and service departments once again provided
the essential stability and dependability that underpins
successful dealerships.
CAR HIRE
This segment suffered a reversal of its 10-year record of
rising earnings. The 24% fall was attributable to the reduced
prices at which the retired fleet was able to be sold. I have
addressed the difficulties faced by the Group's used car
departments, and similar difficulties were experienced
on disposal of the car hire fleet. This aside, the fleet size,
utilisation rate, and average daily income rate remained
stable. The increase in the price of replacement fleet vehicles
has been offset, in part, by a reduction in the number of
luxury vehicles and the replacement thereof by models in
the medium-price range. The sector remains extremely
competitive and the drive to reduce operating costs
continues.
FINANCIAL SERVICES
This segment comprises insurance cells, relating to products
sold in tandem with the sale of vehicles, and joint ventures
in respect of the financing and collection of credit facilities
granted to purchasers. Both areas recorded increased
profitability despite the tough market and adverse consumer
credit statistics. Particularly pleasing is the 11% growth in
premium income, an indication of improved penetration in
a flat market. This annuity-type income will provide steady
growth in the years ahead.
PROSPECTS
It is not easy to be optimistic about the short-term future
of the domestic market. The brief euphoric spell, which
prevailed during the first months following the election of our
new president early last year, soon evaporated in the face of
daily revelations of large-scale corruption, further job losses,
higher indirect taxes, and a power struggle ahead of the May
elections between the ANC and the labour unions, and within
the party itself. The Eskom debacle has been, and continues
to be, highly disruptive and costly.
Predictions of national motor sales growth for calendar 2019
vary from -1% to +2%, which will mean the lowest level in
almost a decade. On the positive side, interest rates appear
to be stable, and, in real terms, new vehicle affordability
continues to improve. NAAMSA has recently reported that
the rate of new vehicle price increases has been well below
the CPI for the last 15 months. Competitive pressures facing
motor manufacturers are likely to ensure that attractive sales
incentives continue.
The Group is in a sound financial position. Its financial
statements record a solid and stable asset base, backed
by strong cash flow generation. Costs have been reduced
to a minimum, and the management team is experienced,
hardworking and enthusiastic. The missing ingredient is a
boost to the revenue line.
DIVIDEND DECLARATION
A dividend (dividend number 62) of 115 cents per share will
be paid on Tuesday, 18 June 2019 to members reflected in
the share register of the Company at the close of business
on the record date, Friday, 14 June 2019. Last day to trade
cum dividend is Tuesday, 11 June 2019. First day to trade ex
dividend is Wednesday, 12 June 2019. Share certificates may
not be dematerialised or rematerialised from Wednesday,
12 June 2019 to Friday, 14 June 2019, 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 R86 022 298 and will be distributed from income
reserves. The dividend will be subject to dividend withholding
tax at a rate of 20%, which will result in a net dividend of
92 cents to those shareholders who are not exempt in terms
of section 64F of the Income Tax Act.
CHANGES IN DIRECTORATE
There has been no change to directors since the release of
the interim results in October 2018.
BASIS OF PREPARATION
The summary consolidated financial statements for the
year ended 28 February 2019 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 preliminary 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 preliminary 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 preparation of the previous consolidated financial
statements, except for the adoption of new standards.
The Group adopted IFRS 9: Financial Instruments and
IFRS 15: Revenue from Contracts with Customers from
1 March 2018. Both standards were adopted retrospectively.
The implementation of the standards has not had a material
impact on amounts reported in prior years and accordingly
management has not restated any comparative figures.
These results are extracted from audited information, but
are not themselves audited. The consolidated financial
statements were audited by PricewaterhouseCoopers Inc.,
who expressed an unmodified opinion thereon. The audited
consolidated financial statements and the auditor's report
thereon are available for inspection at the Company's
registered office.
The directors take full responsibility for the preparation of
these results and confirm that the financial information has
been correctly extracted from the underlying consolidated
financial statements.
CORPORATE GOVERNANCE
During the year the Group applied the principles and the
appropriate best business practices as recorded in the
King IV Report on Corporate Governance. The Board recognises
that the Report seeks to instil a greater level of transparency
and integrated thinking in its deliberations, and to consider
not just financial gain, but the larger triple context, including
social and environmental considerations.
A report on the Group's corporate governance is recorded in
the Integrated Annual Report 2019.
ANNUAL GENERAL MEETING
Details of the annual general meeting are expected to be
released on 2 May 2019.
By order of the board of directors
K Fonseca CA (SA)
Company Secretary
23 April 2019
CORPORATE INFORMATION
DIRECTORS
JS Dixon (chairman)
JD McIntosh (CEO)
BWJ Barritt
LCZ Cele
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
SPONSORS
PricewaterhouseCoopers Corporate Finance Proprietary Limited
4 Lisbon Lane
Waterfall City
Jukskei View, 2090
WEBSITE
www.cmh.co.za
Date: 23/04/2019 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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