Wrap Text
Interim results for the six months ended 31 August 2018
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
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2018
GROUP FINANCIAL HIGHLIGHTS
Unaudited Unaudited Audited
6 months 6 months 12 months
Change 31 August 31 August 28 February
% 2018 2017 2018
Total assets (R'000) 2,2 2 703 709 2 645 210 2 772 650
Cash resources (R'000) 0,1 385 345 384 787 372 882
Net asset value per share (cents) 17,5 933 794 935
Revenue (R'000) 8,8 5 572 638 5 123 421 10 572 596
Operating profit (R'000) (4,7) 180 655 189 627 438 378
Total profit and comprehensive income (R'000) 0,1 96 231 96 113 247 460
Earnings per share (cents) - 128,5 128,5 330,7
Headline earnings per share (cents) 0,2 128,7 128,5 332,9
Dividend paid per share (cents) 161,0
Dividend declared per share, payable December 2018 (cents) - 61,0 61,0
Dividend cover (times) - 2,1 2,1 2,1
GROUP STATEMENT OF FINANCIAL POSITION as at 31 August 2018
Unaudited Unaudited Audited
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
ASSETS
Non-current assets
Plant and equipment 61 857 68 710 64 967
Car hire fleet vehicles 587 871 632 299 760 282
Goodwill 8 078 10 078 8 078
Insurance receivable 57 544 46 470 45 144
Deferred taxation 44 536 40 000 43 865
759 886 797 557 922 336
Current assets
Inventories 1 197 160 1 136 993 1 164 428
Trade and other receivables 361 318 325 873 311 635
Tax paid in advance - - 1 369
Cash and cash equivalents 385 345 384 787 372 882
1 943 823 1 847 653 1 850 314
Total assets 2 703 709 2 645 210 2 772 650
EQUITY AND LIABILITIES
Capital and reserves
Share capital 38 091 38 091 38 091
Share-based payment reserve 8 176 6 699 8 873
Retained earnings 650 068 548 175 651 439
Ordinary shareholders' equity 696 335 592 965 698 403
Non-controlling interest 1 339 1 124 1 229
Total equity 697 674 594 089 699 632
Non-current liabilities
Borrowings 41 186 - 60 081
Lease liabilities 52 802 47 066 49 780
93 988 47 066 109 861
Current liabilities
Trade and other payables 1 460 344 1 339 471 1 452 888
Borrowings 446 924 654 300 503 600
Lease liabilities 1 365 1 866 1 292
Current tax liabilities 3 414 8 418 5 377
1 912 047 2 004 055 1 963 157
Total liabilities 2 006 035 2 051 121 2 073 018
Total equity and liabilities 2 703 709 2 645 210 2 772 650
GROUP STATEMENT OF COMPREHENSIVE INCOME for the six months ended 31 August 2018
Unaudited Unaudited Audited
6 months 6 months 12 months
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
Revenue 5 572 638 5 123 421 10 572 596
Cost of sales (4 663 698) (4 274 179) (8 806 119)
Gross profit 908 940 849 242 1 766 477
Other income 10 710 10 199 29 659
Impairment of goodwill - - (2 000)
Selling and administration expenses (738 995) (669 814) (1 355 758)
Operating profit 180 655 189 627 438 378
Finance income 10 099 12 270 24 452
Finance costs (60 574) (65 575) (124 871)
Profit before taxation 130 180 136 322 337 959
Tax expense (33 949) (40 209) (90 499)
Total profit and comprehensive income 96 231 96 113 247 460
Attributable to:
Equity holders of the Company 96 121 96 116 247 358
Non-controlling interest 110 (3) 102
96 231 96 113 247 460
Reconciliation of headline earnings
Total profit and comprehensive income attributable to equity holders 96 121 96 116 247 358
of the Company
Re-measurement items
- impairment of goodwill - - 2 000
- loss/(profit) on sale of plant and equipment
- gross 255 (40) (445)
- impact of income tax (71) 11 125
Headline earnings attributable to equity holders of the Company 96 305 96 087 249 038
Weighted average number of shares in issue ('000) 74 802 74 802 74 802
Earnings per share
Basic (cents) 128,5 128,5 330,7
Diluted basic (cents) 127,8 127,8 325,8
Headline (cents) 128,7 128,5 332,9
Diluted headline (cents) 128,0 127,7 328,1
Dividend declared per share, payable - December 2018 (cents) 61,0 61,0 -
Dividend paid per share (cents) - - 161,0
Dividend cover (times) 2,1 2,1 2,1
GROUP STATEMENT OF CHANGES IN EQUITY for the six months ended 31 August 2018
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 2017 38 091 6 981 527 358 572 430 1 127 573 557
Total profit and comprehensive income 96 116 96 116 (3) 96 113
Release following exercise of share
appreciation rights (2 349) 2 349
Cost of shares delivered in terms of share
appreciation rights scheme (2 846) (2 846) (2 846)
Share-based payment charge 2 067 2 067 2 067
Dividends paid (74 802) (74 802) (74 802)
Balance at 31 August 2017 38 091 6 699 548 175 592 965 1 124 594 089
Total profit and comprehensive income 151 242 151 242 105 151 347
Cost of shares delivered in terms of share
appreciation rights scheme (2 350) (2 350) (2 350)
Share-based payment charge 2 174 2 174 2 174
Dividends paid (45 628) (45 628) (45 628)
Balance at 28 February 2018 38 091 8 873 651 439 698 403 1 229 699 632
Total profit and comprehensive income 96 121 96 121 110 96 231
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 2 463 2 463 2 463
Dividends paid (86 021) (86 021) (86 021)
Balance at 31 August 2018 38 091 8 176 650 068 696 335 1 339 697 674
GROUP STATEMENT OF CASH FLOWS for the six months ended 31 August 2018
Unaudited Unaudited Audited
6 months 6 months 12 months
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
Cash flows from operating activities
Cash generated from operations 221 708 73 153 223 241
Taxation paid (35 214) (30 775) (89 340)
Net cash movement from operating activities 186 494 42 378 133 901
Cash flows from investing activities
Purchase of plant and equipment (10 756) (8 285) (20 616)
Proceeds on disposal of plant and equipment 252 737 3 406
Insurance receivable (12 400) (8 308) (6 982)
Net cash movement from investing activities (22 904) (15 856) (24 192)
Cash flows from financing activities
Cost of shares delivered in terms of share appreciation rights scheme (14 631) (2 846) (5 196)
Finance income received 10 099 12 270 24 452
Finance costs paid (60 574) (65 575) (124 871)
Dividends paid (86 021) (74 802) (120 430)
Net cash movement from financing activities (151 127) (130 953) (226 045)
Net movement in cash and cash equivalents 12 463 (104 431) (116 336)
Cash and cash equivalents at beginning of period 372 882 489 218 489 218
Cash and cash equivalents at end of period 385 345 384 787 372 882
GROUP SEGMENT INFORMATION for the six months ended 31 August 2018
Corporate
Retail Financial services/
Total motor Car hire services Other
2018 2018 2018 2018 2018
R'000 R'000 R'000 R'000 R'000
Segment revenue 5 590 126 5 251 353 263 023 44 023 31 727
Inter-segment revenue (17 488) - - - (17 488)
External revenue 5 572 638 5 251 353 263 023 44 023 14 239
Operating profit 180 655 123 063 51 309 12 122 (5 839)
Finance income 10 099 - - 3 247 6 852
Finance costs (60 574) (36 754) (22 907) - (913)
Profit before taxation 130 180 86 309 28 402 15 369 100
After charging
- employee costs 377 722 307 781 40 655 - 29 286
- depreciation charge
- included in cost of sales 53 090 - 53 090 - -
- included in selling and administration expenses 13 359 10 077 1 317 - 1 965
Total assets
- per statement of financial position 2 703 709 1 582 513 652 788 57 544 410 864
- set off of inter-segment balances 101 200 - - - 101 200
2 804 909 1 582 513 652 788 57 544 512 064
Total liabilities
- per statement of financial position 2 006 035 1 437 560 541 840 - 26 635
- set off of inter-segment balances 101 200 - 101 200 - -
2 107 235 1 437 560 643 040 - 26 635
Goodwill at period-end 8 078 8 078 - - -
Corporate
Retail Financial services/
Total motor Car hire services Other
2017 2017 2017 2017 2017
R'000 R'000 R'000 R'000 R'000
Segment revenue 5 139 281 4 814 256 251 219 42 070 31 736
Inter-segment revenue (15 860) - - - (15 860)
External revenue 5 123 421 4 814 256 251 219 42 070 15 876
Operating profit 189 627 115 829 65 039 14 349 (5 590)
Finance income 12 270 - - 2 920 9 350
Finance costs (65 575) (27 073) (34 932) - (3 570)
Profit before taxation 136 322 88 756 30 107 17 269 190
After charging
- employee costs 352 708 279 903 41 084 - 31 721
- depreciation
- included in cost of sales 32 447 - 32 447 - -
- included in selling and administration expenses 13 354 11 213 1 317 - 824
Total assets 2 645 210 1 485 256 707 027 46 470 406 457
Total liabilities 2 051 121 1 324 930 691 866 - 34 325
Goodwill at period-end 10 078 10 078 - - -
COMMENTARY ON RESULTS
Given the particularly difficult economic circumstances which prevailed during the period under review, the directors are satisfied with
the marginal increase in headline earnings per share achieved. 2018 has been challenging for corporate South Africa. The economy has
suffered the after-effects of years of corruption and mismanagement and the ANC's recent pronouncement that it intends to amend the
constitution to allow land redistribution without compensation. Investor confidence, both local and international, has been dented, causing
the economy to enter a technical recession, and currency exchange rates to fall. The domestic economic growth outlook for the remainder
of 2018 is weaker than earlier expected.
Given the background, it is not surprising that the national new vehicle market has perpetuated the sideways cycle that has been in place
for the past 2-3 years. Sales levels have been sustained by a negative movement in real new car prices and robust sales incentives.
A consequence of negative new vehicle pricing over the past 2-3 years has been a sharp downward adjustment in the value of used
vehicles, particularly in the luxury segment. This has created pressure for customers who wish to trade-in and recycle their vehicles every
3-4 years.
Group operating results were characterised by increased revenue at a lower trading margin. The 8,8% revenue improvement was recorded
at a gross margin of 16,3%, compared with the 16,6% achieved last year. The net interest cost decreased 5,3%, leaving profit before
taxation 4,5% down. This decline was offset by a lower effective tax rate, leading to a 0,2% improvement in headline earnings. The values
on the statement of financial position are substantially unchanged from 2017. The reduction in borrowings reflects the further settlement
of car hire fleet liabilities using Group cash resources. Cash flow generation from operating activities remained strong, and has enabled the
directors to recommend a dividend of 61 cents per share, equal to last year.
OPERATING REVIEW
Against the backdrop of flat national new vehicle sales, the Group achieved a 5,6% increase. Particularly pleasing was the Group's increase
in luxury model sales, a segment which has suffered declining trends over the past three years.
Offsetting to an extent the improved new car profitability, used car unit sales declined 1,7%. Longer periods over which vehicles are
financed, coupled with the fall in their residual values, has led to a greater gap between the resale values and the finance settlement
values. Adjustments have been made to ensure that Group inventory is realistically valued, and the past two months have produced
positive outcomes. The parts and service departments have recorded steady collective improvement.
The car hire market, in general, has been forced to retain its vehicles for longer periods, and rent them out at a lower daily rate, because
the fall in used vehicle values has rendered the retired fleet less saleable. The result of the pricing competition and lower recoveries on
the disposal of the retired fleet on the Group's First Car Rental division is that, although revenue increased 4,7%, profit before taxation has
declined 5,7%. The directors are confident that the fleet is conservatively valued, and anticipate improved performance during the summer
months ahead.
A once-off increase of R3,2 million to the doubtful debts provision in the records of the Group's joint venture partner, following the
introduction of IFRS 9, has meant a 10,1% decline in operating profit of the Group's financial services division. This charge pre-empts the
provision that would otherwise have been incurred over the life of the debtors' credit agreements. It is pleasing that the premium income
level continues to rise, despite the flat vehicle market, and this augurs well for future annuity-type income.
PROSPECTS
The financial outlook for the short-term future remains fragile. The economy contracted by 0,7% during the second quarter of 2018,
and is expected to grow by less than 1,0% for the full year. Consumers have been hit by the VAT rate increase, and face further fuel price
rises. Unemployment levels remain at record highs. On the positive side, interest rates have remained stable, and the stimulus package,
announced as part of the Government's economic recovery plan, will provide some boost to business confidence. It is important that this
injection is aligned with consistent policy and implementation aimed at attracting local and foreign investment, with the ultimate objective
of promoting faster economic growth and job creation.
The directors believe that the Group will have performed well if it is able to maintain headline earnings growth for the full year to
February 2019.
CHANGES IN DIRECTORATE
There has been no change in directors since the release, in April 2018, of the results for the year ended 28 February 2018.
DIVIDEND DECLARATION
A dividend (dividend number 61) of 61 cents per share will be paid on Tuesday, 18 December 2018 to members reflected in the share
register of the Company at the close of business on the record date, Friday, 14 December 2018. Last day to trade cum dividend is Tuesday,
11 December 2018. First day to trade ex dividend is Wednesday, 12 December 2018. Share certificates may not be dematerialised or
rematerialised from Wednesday, 12 December 2018 to Friday, 14 December 2018, 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.
BASIS OF PREPARATION
The summary consolidated financial statements for the six months ended 31 August 2018 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, 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 28 February 2018. 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 IV Report on Corporate Governance
("the Report") and applies the principles and the appropriate best business practices as recorded in the Report. The Group also complies
with the corporate governance requirements set out in the JSE Limited Listings Requirements.
By order of the board of directors
K Fonseca CA (SA)
Company Secretary
17 October 2018
DIRECTORS
JS Dixon (chairman)
JD McIntosh (CEO)
BWJ Barritt
LCZ Cele
SK Jackson
ME Jones
JA Mabena
MR Nkadimeng
SPONSORS
PricewaterhouseCoopers Corporate Finance Proprietary Limited
4 Lisbon Lane
Waterfall City
Jukskei View 2090
TRANSFER SECRETARIES
Computershare Investor Services Proprietary Limited
PO Box 61051
Marshalltown 2107
BUSINESS ADDRESS AND REGISTERED OFFICE
1 Wilton Crescent
Umhlanga Ridge 4319
WEBSITE
www.cmh.co.za
Date: 17/10/2018 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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