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HOSKEN PASSENGER LOGISTICS AND RAIL LIMITED - Reviewed provisional condensed consolidated results for the year ended 31 March 2019

Release Date: 23/05/2019 11:30
Code(s): HPR     PDF:  
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Reviewed provisional condensed consolidated results for the year ended 31 March 2019


HOSKEN PASSENGER LOGISTICS AND RAIL LIMITED 
Incorporated in the Republic of South Africa 
Registration number: 2015/250356/06 
JSE share code: HPR
ISIN: ZAE000255907 
("HPLR" or "the Company") 

REVIEWED PROVISIONAL CONDENSED CONSOLIDATED RESULTS for the year ended 31 March 2019
 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 March 2019
                                                                         Reviewed      Audited
                                                                             2019         2018
                                                                            R'000        R'000

ASSETS

Non-current assets                                                      1 610 505    1 709 120
Property, plant and equipment                                           1 579 256    1 462 937
Goodwill                                                                    8 451        8 451
Intangible assets                                                              57           78
Investments in associates                                                  22 342       18 343
Other financial asset                                                           -      218 897
Deferred taxation                                                             399          414

Current assets                                                            609 825      630 598
Other financial asset                                                           -      237 503
Inventories                                                                17 559       15 714
Trade and other receivables                                                68 933       67 816
Taxation                                                                    2 376        1 435
Cash and cash equivalents                                                 520 957      308 130

Total assets                                                            2 220 330    2 339 718

EQUITY AND LIABILITIES

Equity                                                                  1 158 702    1 406 308
Equity attributable to equity holders of the parent                     1 115 079    1 373 693
Non-controlling interest                                                   43 623       32 615

Non-current liabilities                                                   633 272      557 397
Borrowings                                                                341 182      300 887
Post-employment medical benefit liability                                  64 675       58 928
Deferred taxation                                                         227 415      197 582

Current liabilities                                                       428 356      376 013
Trade and other payables                                                  159 866      124 720
Current portion of borrowings                                             166 901      149 323
Taxation                                                                    5 653        4 340
Provisions                                                                 95 936       97 630

Total equity and liabilities                                            2 220 330    2 339 718


CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
for the year ended 31 March 2019

                                                                         Reviewed      Audited
                                                                             2019         2018
                                                                            R'000        R'000

Revenue                                                                 1 779 849    1 808 406
Other income                                                               14 541        4 501
Operating expenses                                                     (1 382 392)  (1 358 793)
Operating profit                                                          411 998      454 114
Depreciation and amortisation                                             (81 471)    (112 076)
Investment income                                                          48 810       22 310
Income from equity accounted investments                                   10 999        7 283
Finance costs                                                             (45 014)     (39 618)
Profit before taxation                                                    345 322      332 013
Taxation                                                                 (100 406)     (86 619)
Profit for the year                                                       244 916      245 394

Profit attributable to:
Equity holders of the parent                                              233 908      235 947
Non-controlling interest                                                   11 008        9 447
                                                                          244 916      245 394


CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
for the year ended 31 March 2019
                                                                         Reviewed      Audited
                                                                             2019         2018
                                                                            R'000        R'000

Profit for the year                                                       244 916      245 394
Other comprehensive income:
Items that will be reclassified subsequently to profit or loss
Cash flow hedging - current year losses                                         -         (343)
Cash flow hedging - amount capitalised to property, plant and equipment         -        6 633
Taxation relating to cash flow hedging                                          -       (1 761)
Items that will not be reclassified subsequently to profit or loss
Actuarial (losses)/gains on defined benefit plans                          (2 730)      16 863
Taxation relating to actuarial (losses)/gains on defined benefit plans        764       (4 722)
Total comprehensive income for the year                                   242 950      262 064

Total comprehensive income attributable to:
Equity holders of the parent                                              231 942      252 617
Non-controlling interest                                                   11 008        9 447
                                                                          242 950      262 064

RECONCILIATION OF HEADLINE EARNINGS
for the year ended 31 March 2019
                                                                    Reviewed           Audited
                                                                        2019              2018
                                                                       R'000             R'000

                                                                Gross       Net    Gross       Net

Earnings attributable to equity holders of the parent                   233 908            235 947

Profit on disposal of plant and equipment                        (913)     (657)    (860)     (619)
Impairment of property, plant and equipment                    10 903     7 850        -         -
Insurance claim for capital assets                             (9 492)   (6 834)       -         -
Headline earnings                                                       234 267            235 328

Earnings per share (cents)
Basic                                                                     80.66              81.36
Diluted                                                                   80.66              81.36

Headline earnings per share (cents)
Basic                                                                     80.78              81.15
Diluted                                                                   80.78              81.15

Weighted average number of shares in issue ('000)
Basic                                                                   290 000            290 000
Diluted                                                                 290 000            290 000

Actual number of shares in issue ('000)                                 290 000            290 000


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2019
                                                                        Reviewed      Audited
                                                                            2019         2018
                                                                           R'000        R'000

Balance at the beginning of the year                                   1 406 308      829 570
Prior period restatements - adoption of IFRS 15                           (4 272)           -
Shares issued                                                                  -    2 900 000
Share issue costs                                                              -       (3 538)
Total comprehensive income                                               242 950      262 064
Equity settled share-based payments                                        3 816            -
Effects of changes in shareholding                                             -   (1 800 000)
Dividends                                                               (490 100)    (131 986)
Distribution to shareholders                                                   -     (649 802)
Balance at the end of the year                                         1 158 702    1 406 308

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2019
                                                                        Reviewed      Audited
                                                                            2019         2018
                                                                           R'000        R'000

Cash flows from operating activities                                     356 795      249 763
Cash generated by operations                                             456 819      467 333
Investment income                                                         55 012       15 132
Finance cost                                                             (45 013)     (36 940)
Taxation paid                                                            (69 423)     (63 776)
Dividends paid                                                           (40 600)    (131 986)
  
Cash flows from investing activities                                     404 038      (97 117)
Dividends received                                                         7 000        5 000
Acquisition of property, plant and equipment1                            (56 348)    (104 079)
Proceeds from settlement of financial asset                              448 417            -
Proceeds from sale of property, plant and equipment                        4 969        1 962

Cash flows from financing activities                                    (548 006)    (132 913)
Ordinary shares issued                                                        -       649 802
Other liabilities raised                                                      -        (3 538)
Funding raised1                                                          60 000        30 000
Funding repaid                                                         (158 506)     (159 375)
Special dividends paid                                                 (449 500)            -
Distribution to shareholders                                                  -      (649 802)
 
Increase in cash and cash equivalents                                   212 827        19 733
Cash and cash equivalents
At the beginning of the year                                            308 130       288 397
At the end of the year                                                  520 957       308 130

1 R156.4 million (2018: R155.9 million) of debt raised in the period relates to instalment sale agreements used to finance bus acquisitions, and has 
therefore not been included in the cash flow statement as a cash flow amount.

NOTES TO THE REVIEWED PROVISIONAL CONDENSED  CONSOLIDATED FINANCIAL STATEMENTS

BASIS OF PREPARATION AND ACCOUNTING POLICIES

The reviewed provisional condensed consolidated results for the year ended 31 March 2019 have been prepared in accordance with International Financial 
Reporting Standards ("IFRS"), the disclosure requirements of IAS 34 - Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the 
Accounting Practices Committee, the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the requirements of the 
South African Companies Act, No. 71 of 2008 (as amended) and the Listings Requirements of the JSE Limited.

The accounting policies applied by the Group in preparation of these reviewed condensed consolidated financial statements, other than the adoption of 
IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers, are consistent with those applied by the Group in its consolidated 
financial statements for the year ended 31 March 2018. The adoption of IFRS 9 had no material impact on prior year figures presented and consequently 
no adjustments were made to opening retained earnings. IFRS 15 was adopted using the modified retrospective approach whereby no comparative figures were 
restated, but instead a cumulative catch-up adjustment was recognised in opening retained earnings. The adjustment was to recognise Deferred revenue on 
the sale of multi-journey tickets that expire subsequent to year-end. In prior years, revenue was recognised on the date of sale of these tickets. Details 
of the standards adopted will be provided in the annual financial statements. As required by the Listings Requirements of the JSE Limited, the Group reports 
headline earnings in accordance with Circular 4/2018 - Headline Earnings, as issued by the South African Institute of Chartered Accountants.

These provisional condensed consolidated financial statements were prepared under the supervision of the Chief Financial Officer, Mr Mark Wilkin CA(SA).

OPERATING SEGMENTS

The Directors have considered the implications of IFRS 8: Operating Segments and are of the opinion that the operations of the Group constitute one operating 
segment, being the provision of passenger transport services within South Africa. Resource allocation and operational management are performed on an aggregate 
basis. Performance is measured based on profit or loss before tax as shown in internal management reports that are reviewed by the Chief Operating Decision 
Maker, who is the Group's Chief Executive Officer.

REVIEW OF THE INDEPENDENT AUDITOR

The provisional condensed consolidated financial statements for the year ended 31 March 2019 have been reviewed by BDO Cape Incorporated, who expressed an 
unmodified review conclusion. The auditor's report does not necessarily report on all the information contained in the financial results. Shareholders are 
therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement they should obtain a copy of the auditor's report 
together with the accompanying financial information from the issuer's registered office.

OTHER FINANCIAL ASSET

On 1 October 2018, R237.5 million was received as part settlement of the promissory notes ceded to HPLR on the restructure of the Group. On 21 December 2018, 
the remaining instalment of the promissory note was sold for R240.2 million, which reflected a discount of R1.8 million on the carrying value of the financial 
asset at the date of sale. Shareholders are referred to the SENS announcement released on 21 December 2018 (also available on the Company's website) for details
relating to the sale.

The instalments were secured by way of Investec Bank payment obligations and carried interest at 8.5% compounded annually. Included in Investment income in the
statement of profit and loss is interest earned on the financial asset for the year ended 31 March 2019 of R23.1 million (2018: R6.2 million).

The statement of cash flows reflects the total proceeds realised from this financial asset as cash flows from investing activities. The equivalent interest 
received on this financial asset is included as Investment income in the statement of cash flows.

COMMENTARY AND RESULTS

During the 2019 financial year, the Group had to contend with a myriad of operational challenges, including, a five-week protected strike and an additional 
illegal strike that affected the MyCiti operations; unparalleled fuel price increases of 48% compared to the prior year; and the destruction of buses with 
the run-up to the national elections.

Overall demand for reliable road-based passenger public transport services continued to increase as a result of problems on the rail system in the Cape metropole.

Regrettably, in the run-up to national and provincial elections, widespread service delivery protests negatively affected the provision of scheduled bus services, particularly in areas adjacent to mushrooming informal settlements across the city. In addition, rivalry in the taxi industry sparked sporadic violence and disruption to road based public transport.

Group revenue reflected a decrease of 1.6% from the prior year partly as a result of the strikes mentioned above. Two fares increases totalling 14.5% were 
implemented over the financial year.

Despite the increase in the fuel price and 8.5% increase in wages from the prior year, which make up the Group's two largest cost drivers, management's focus on
finding efficiencies across its operations showed positive results containing the increase in operating expenses to 1.7% from the prior year. These cost-saving initiatives covered areas affecting fuel, labour, electricity and water costs.

The net effect is a decrease in operating profit of 9.3% from the prior year. Whereas profit for the year is reflected 0.2% lower than the previous year, 
largely due to interest received on the financial asset and the effect of the reassessment of residual values of buses as explained below.

CHANGE IN ACCOUNTING ESTIMATE OF RESIDUAL VALUES

In line with the Group's accounting policies, management reassessed the residual values of buses during the year, the impact of which is considered significant. The net effect of the changes in the current financial year was a decrease in depreciation of R42.2 million.

RECONCILIATION OF HEADLINE EARNINGS

The destruction of Golden Arrow buses is reflected in the Headline earnings reconciliation as impairment of property, plant and equipment totalling R10.9 million (gross); of which R9.4 million (gross) is recoverable from insurance proceeds and reflected as insurance claims for capital assets.

BUSINESS COMBINATION SUBSEQUENT TO YEAR END

At year-end Golden Arrow Bus Service Proprietary Limited ("GABS") held 33.33% of the issued share capital of Sibanye Bus Services Proprietary Limited 
("Sibanye") and 50.06% of the issued share capital of Table Bay Area Rapid Transport Proprietary Limited ("TBRT").

On 1 April 2019, GABS acquired an additional 33.33% of the issued share capital of Sibanye for a purchase consideration of R26.6 million and an additional 24.97% of the issued share capital of TBRT for a purchase consideration of R39.2 million, increasing it's holding in these companies to 66.66% and 75.03% respectively.

Had the acquisitions occurred on 1 April 2018, Sibanye would have increased Group revenue by an additional R87.2 million and Group profit after tax would have
increased by an additional R16.7 million. As TBRT is already consolidated into the results of the Group it would not have had an effect on Group revenue nor 
Group profit after tax reflected.

The fair value of net assets acquired in Sibanye, for which the purchase price allocation is provisional, is as follows:

                                          Rm
Property, plant and equipment           59.1
Current assets                          48.1
Non-current liabilities                (34.6)
Current liabilities                    (20.5)
Net assets                              52.1
Less Non-controling Interest           (17.4)
Net assets acquired                     34.7

Less:
Purchase consideration                 (26.6)
Fair value of interest previously held (17.4)
Goodwill                                 9.3

CHANGES IN DIRECTORATE

Ms Faith Mahloma resigned as an independent non-executive director on 17 April 2019 and Ms Rachel Watson was appointed to succeed Ms Mahloma as an 
independent non-executive director with effect from the same date.

There were no other changes in directorate during the period under review.

ORDINARY DIVIDEND TO SHAREHOLDERS

The directors have approved and declared a final ordinary dividend of 28 cents (gross) per HPLR share for the year ended 31 March 2019 from income reserves.

The salient dates for the payment of these dividends are as follows:

Announcement date                     Thursday, 23 May 2019
Last day to trade cum dividend        Tuesday, 11 June 2019
Commence trading ex-dividend        Wednesday, 12 June 2019
Record date                            Friday, 14 June 2019
Payment date                          Tuesday, 18 June 2019

No share certificates may be dematerialised or rematerialised between Wednesday, 12 June 2019 and Friday, 14 June 2019, both dates inclusive.

In terms of legislation applicable to Dividends Tax ("DT") the following additional information is disclosed:

The final ordinary dividend shall constitute a "dividend" as defined in the Income Tax Act, No. 58 of 1962.
The local DT rate is 20%.
The number of ordinary shares in issue at the date of the declaration is 290 000 000.
The DT amounts to 5.6 cents per share for the final ordinary dividend.
The net local dividend amount is 22.4 cents per share for the final ordinary dividend for all shareholders who are not exempt from DT.
HPLR's income tax reference number is 9754/276/16/1.

In terms of DT legislation, any DT amount due will be withheld and paid over to the South African Revenue Service by a nominee company, stockbroker or Central
Securities Depository Participant (collectively "regulated intermediary") on behalf of shareholders. All shareholders should declare their status to their 
regulated intermediary as they may qualify for a reduced DT rate or exemption.

For and on behalf of the Board of Directors

FE Meyer                       ML Wilkin
Chief Executive Officer        Chief Financial Officer
23 May 2019

Directors:Y Shaik* (Chairman), TG Govender* (Deputy Chairman), FE Meyer (Chief Executive Officer), ML Wilkin (Chief Financial Officer), L Govender#* (Lead 
Independent Director), NB Jappie#*, RD Watson#* (appointed 17 April 2019), KF Mahloma#* (resigned 17 April 2019).
*Non-excutive 
# Independent

 
Company Secretary: HCI Managerial Services Proprietary Limited, Suite 801, 76 Regent Road, Sea Point, Cape Town, 8005 (PO Box 5251, Cape Town, 8000). 
 
Auditors: BDO Cape Incorporated, 6th Floor, 123 Hertzog Boulevard,Foreshore,Cape Town, 8001 (PO Box 3883, Cape Town, 8000). 
 
Transfer Secretaries: Computershare Investor Services Proprietary Limited,Rosebank Towers, 15 Biermann Avenue,Rosebank, 2196. 
(PO Box 61051, Marshalltown, 2107). 
 
Sponsor: Investec Bank Limited, 100 Grayston Drive, Sandown, Sandton, 2196 (PO Box 785700, Sandton, 2146). 
 
Website Address: www.hplr.co.za 
Date: 23/05/2019 11:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

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