Wrap Text
Interim results
COMBINED MOTOR HOLDINGS LIMITED
Registration number: 1965/000270/06
Share code: CMH
ISIN: ZAE000088050
("the Company" or "the Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2019
Unaudited Unaudited
Unaudited Restated Restated
6 months 6 months 12 months
Change 31 August 31 August 28 February
% 2019 2018 2019
Total assets (R'000) 10,9 3 578 634 3 226 896 3 591 076
Cash resources (R'000) 40,0 539 664 385 345 675 966
Net asset value per share (cents) 12,7 1 014 900 1 010
Revenue (R'000) 2,6 5 717 648 5 572 638 11 154 757
Operating profit (R'000) (0,1) 200 067 200 170 449 384
Total profit and comprehensive income (R'000) 2,1 90 495 88 602 213 646
Earnings per share (cents) 2,4 121,2 118,3 285,3
Headline earnings per share (cents) 2,0 120,9 118,5 285,5
Dividend paid per share (cents) 176,0
Dividend declared per share, payable December 2019 (cents) - 61,0 61,0
Dividend cover (times) 2,9 2,0 1,9 1,5
FINANCIAL OVERVIEW
Given the prevailing economic climate, with low growth in gross domestic product and a disappointing consumer confidence
level, the directors are satisfied with the marginal growth in headline earnings. The results compare favourably with the Group's
peers and many of the large companies within the retail sector. The adoption of the new accounting standard for leases has
resulted in substantial changes to the financial statements. Prior period values have been restated to enable
comparison. Off the new earnings base, on a like-for-like basis, headline earnings increased 2,0%. The new accounting
standard has no impact on net cash flows, and the dividend has been maintained at 61 cents per share.
Weak growth in the embattled economy resulted in national sales of new passenger and light commercial vehicles falling 3,5%, with a
continued trend towards lower-priced models. Only the proliferation of sales incentive schemes and subsidised finance
rates has kept this level from further decline. The used car market fared no better, with an estimated 4-5% drop in sales over
the period.
The Group's trading results reflect little change from the restated comparative period. Revenue increased 2,6%, of which
1,5% is attributable to the acquisition of two new dealerships. The gross margin improved, from 16,3% to 16,8%. In
an industry with such thin operating margins, the containment of costs is vital. It is pleasing to record that, if the added costs
resulting from the acquisitions are stripped out, the like-for-like increase in selling and operating costs is only 3,2%. On the same
basis, the net interest charge fell 2,9%, reflecting good cash flow management, and enabled the utilisation of surplus funds to
accelerate the repayment of interest-bearing debt. Once-off legal and other operating costs were incurred in respect of the
acquired dealerships, but these have been expensed, and the operations are expected to be cash- and profit-generating
during the second half.
Similarly, there are few noteworthy differences in the statement of financial position, between the current values and the restated
values at the prior period-end. The increase in goodwill is attributable to the acquisitions, and is expected to be supported
by positive future profit and cash flow generation.
OPERATING REVIEW
Overall, the retail motor division recorded a 1,9% rise in pre-tax profit. However, the contributions from the new vehicle sales
departments and the used vehicle sales departments reflected mixed fortunes. The decline in new vehicle sales volumes
was only 2,0%, compared with the national decline of 3,5%. Trading margins remained under pressure as dealers competed for
market share, and the pressure from manufacturers to hold more inventory was unrelenting. The Group has opened a number of
new showrooms which share overhead expenses with an existing dealership. The costs of refurbishing and signage, required
to bring the premises to manufacturer standards, have been fully absorbed. In contrast, the renewed focus on the used vehicle
departments has been well rewarded. Sales volume growth of 1,8% was complemented by improved margins, resulting in
pleasing profit growth in a depressed and competitive market. Both departments were supported by the Group's digital
marketing platform which provides a source of potential customers, and a means to measure the quality of customer follow-up.
The parts and service departments increased their profit contributions.
First Car Rental maintained its revenue level despite a decline in both the national business and tourism sectors. Trading
margins remained squeezed between rising fleet holding costs and competitive forces which constrained hire charges. The
fleet utilisation rate has been maintained, and the operating expense increase limited to 3,3%. The most damaging effect on
operating profit was the reduced margin on disposal of the retired fleet.
The financial services division recorded a substantial 30% improvement in profit. This was brought about by a combination of
increased premium income and a reduction in claims. The division is in the process of being restructured to reduce operating
costs, and the full benefit will be felt over the next 18 months.
PROSPECTS
Pressure on discretionary income and low business levels are expected to continue throughout the financial year. The 25 basis
points decrease in the prime lending rate, and the potential of more to follow, will be offset by a substantial increase in the cost
of fuel. The unemployment rate remains high, and general strike action more prevalent, although this appears to have been averted in the motor
sector Business confidence remains low and exacerbated by government's indecision and lack of remedial implementation in key economic areas.
From the Group's perspective, improvement will hinge on the bedding down of the new acquisitions, disposal of loss-making
operations, and a small up-tick in new vehicle sales volumes.
DIVIDEND DECLARATION
A dividend (dividend number 63) of 61 cents per share will be paid on Tuesday, 17 December 2019 to members reflected in the share register
of the Company at the close of business on the record date, Friday, 13 December 2019. Last day to trade cum dividend is Tuesday,
10 December 2019. First day to trade ex dividend is Wednesday, 11 December 2019. Share certificates may not be dematerialised or
rematerialised from Wednesday, 11 December 2019 to Friday, 13 December 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 R45 629 219 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 48,8 cents per
share to those shareholders who are not exempt in terms of section 64F of the Income Tax Act.
SHORT-FORM NOTICE
This short-form announcement is the responsibility of the directors. It is only a summary of the information contained in the full announcement
and does not contain complete details. Any investment decision should be based on the full announcement which can be found on the
Company's website at www.cmh.co.za and at the following link: https://senspdf.jse.co.za/documents/2019/jse/isse/CMH/CMHIR2019.pdf
The full announcement is also available for inspection at the Company's registered office, and copies thereof may be requested at no charge, during
office hours by phoning the Company Secretary on +27 31 5804200.
For and on behalf of the Board
JS Dixon JD McIntosh
Chairman Chief Executive Officer
22 October 2019
DIRECTORS
JS Dixon (chairman), JD McIntosh (chief executive officer), BWJ Barritt, LCZ Cele, SK Jackson, ME Jones, JA Mabena, MR Nkadimeng
TRANSFER SECRETARIES SPONSOR
Computershare Investor Services Proprietary Limited PricewaterhouseCoopers Corporate Finance Proprietary Limited
PO Box 61051 4 Lisbon Lane
Marshalltown 2107 Waterfall City
Jukskei View 2090
COMPANY SECRETARY AUDITOR
K Fonseca PricewaterhouseCoopers Inc.
BUSINESS ADDRESS AND REGISTERED OFFICE
1 Wilton Crescent
Umhlanga Ridge 4319
Date: 22/10/2019 10:54:00
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