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Abridged Group Financial Results For The Year Ended 28 February 2014
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
GROUP FINANCIAL RESULTS
FOR THE YEAR ENDED 28 FEBRUARY 2014
SEGMENT INFORMATION for the year ended 28 February 2014
TOTAL RETAIL MOTOR
Restated Restated
2014 2013 2014 2013
R'000 % R'000 % R'000 % R'000 %
External revenue 10 831 384 100 9 808 733 100 10 261 436 95 9 311 946 95
Operating profit 320 224 100 289 827 100 234 173 74 242 723 84
Net finance costs (75 547) 100 (67 333) 100 (62 778) 83 (50 754) 76
Profit before taxation 244 677 100 222 494 100 171 395 70 191 969 87
Total assets 2 574 110 100 2 494 624 100 1 538 713 60 1 496 905 60
Total liabilities 2 008 384 100 1 813 953 100 1 272 973 63 1 149 474 63
Goodwill at year-end 74 972 100 74 972 100 74 972 100 74 972 100
Employee costs 636 386 100 598 277 100 526 107 83 489 941 82
Number of staff 2 935 100 2 840 100 2 427 82 2 344 83
CAR HIRE MARINE AND LEISURE
Restated Restated
2014 2013 2014 2013
R'000 % R'000 % R'000 % R'000 %
External revenue 337 439 3 316 807 3 127 768 1 150 756 2
Operating profit 65 431 20 67 766 23 (449) – (5 533) (2)
Net finance costs (35 594) 47 (41 706) 62 (256) – (278) –
Profit before taxation 29 837 12 26 060 12 (705) – (5 811) (3)
Total assets 645 072 25 559 576 22 51 432 2 69 599 3
Total liabilities 681 724 34 616 807 34 12 247 1 13 814 1
Goodwill at year-end – – – – – – – –
Employee costs 63 678 10 56 647 9 9 841 1 14 762 3
Number of staff 368 13 349 12 28 1 48 2
FINANCIAL SERVICES CORPORATE SERVICES/OTHER
Restated Restated
2014 2013 2014 2013
R'000 % R'000 % R'000 % R'000 %
External revenue 77 910 1 23 150 – 26 831 – 6 074 –
Operating profit 30 289 9 11 246 4 (9 220) (3) (26 375) (9)
Net finance costs 2 384 (3) 456 (1) 20 697 (27) 24 949 (37)
Profit before taxation 32 673 13 11 702 5 11 477 5 (1 426) (1)
Total assets 18 039 1 5 834 – 320 854 12 362 710 15
Total liabilities 2 156 – 7 369 – 39 284 2 26 489 2
Goodwill at year-end – – – – – – – –
Employee costs – – – – 36 760 6 36 927 6
Number of staff – – – – 112 4 99 3
GROUP STATEMENT OF FINANCIAL POSITION at 28 February 2014
Restated Restated
2014 2013 2012
R'000 R'000 R'000
ASSETS
Non-current assets
Plant and equipment 74 803 68 803 58 537
Goodwill 74 972 74 972 89 972
Insurance receivable 18 039 1 074 2 445
Deferred taxation 46 643 45 707 49 964
214 457 190 556 200 918
Current assets
Car hire fleet vehicles 572 765 520 162 467 376
Inventories 1 214 577 1 184 968 1 001 472
Trade and other receivables 263 831 264 007 212 668
Tax paid in advance – – 42
Cash and cash equivalents 308 480 334 931 385 994
2 359 653 2 304 068 2 067 552
Total assets 2 574 110 2 494 624 2 268 470
EQUITY AND LIABILITIES
Capital and reserves
Share capital 27 794 29 500 25 438
Share-based payment reserve 14 441 13 024 10 006
Non-distributable reserve – – 5 896
Retained earnings 523 379 638 027 541 523
Ordinary shareholders' equity 565 614 680 551 582 863
Non-controlling interest 112 120 266
Total equity 565 726 680 671 583 129
Non-current liabilities
Advance from non-controlling shareholders of subsidiaries – 3 938 15 952
Insurance payable 2 156 2 608 2 746
Lease liabilities 90 244 97 481 104 528
92 400 104 027 123 226
Current liabilities
Advance from non-controlling shareholders of subsidiaries 4 193 7 255 –
Derivative financial liabilities – – 1 778
Trade and other payables 1 258 014 1 128 197 1 020 421
Borrowings 622 962 563 116 525 768
Lease liabilities 8 759 9 092 6 639
Current tax liabilities 22 056 2 266 7 509
1 915 984 1 709 926 1 562 115
Total liabilities 2 008 384 1 813 953 1 685 341
Total equity and liabilities 2 574 110 2 494 624 2 268 470
GROUP STATEMENT OF COMPREHENSIVE INCOME for the year ended 28 February 2014
Restated
2014 2013
R'000 R'000
Revenue 10 831 384 9 808 733
Cost of sales (9 162 323) (8 246 446)
Gross profit 1 669 061 1 562 287
Other income – –
Impairment of goodwill – (15 000)
Selling and administration expenses (1 348 837) (1 257 460)
Operating profit 320 224 289 827
Finance income 13 709 12 535
Finance costs (89 256) (79 868)
Profit before taxation 244 677 222 494
Tax expense (75 245) (65 680)
Total profit and comprehensive income 169 432 156 814
Attributable to:
Equity holders of the company 169 440 156 810
Non-controlling interest (8) 4
169 432 156 814
EARNINGS PER SHARE (cents)
Basic 156,8 144,5
Diluted basic 154,9 142,4
GROUP STATEMENT OF CHANGES IN EQUITY for the year ended 28 February 2014
Attri-
butable
Non- Share- to equity Non-
distri- based holders con-
Share butable payment Retained of the trolling Total
capital reserve reserve earnings company interest equity
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Previously reported balance at
29 February 2012 25 438 5 896 10 006 630 203 671 543 (5 301) 666 242
Adjustment for policy change (88 680) (88 680) 5 567 (83 113)
Restated balance at
29 February 2012 25 438 5 896 10 006 541 523 582 863 266 583 129
Issue of shares 3 144 3 144 3 144
Total profit and
comprehensive income
– restated 156 810 156 810 4 156 814
– previously reported 186 399 186 399 17 528 203 927
– adjustment for policy change (29 589) (29 589) (17 524) (47 113)
Transfer to share capital 918 (918)
Share-based payment reserve 3 936 3 936 3 936
Dividends paid
– restated (66 202) (66 202) (150) (66 352)
– previously reported (66 202) (66 202) (20 209) (86 411)
– adjustment for policy change 20 059 20 059
Transfer to retained earnings (5 896) 5 896
Balance at 28 February 2013 29 500 – 13 024 638 027 680 551 120 680 671
Issue of shares 1 274 1 274 1 274
Total profit and
comprehensive income 169 440 169 440 (8) 169 432
Transfer to share capital 377 (377)
Release following exercise of
share appreciation rights (2 182) (2 182) (2 182)
Loss on share appreciation
rights exercised (864) (864) (864)
Share-based payment reserve 3 976 3 976 3 976
Dividends paid (85 026) (85 026) (85 026)
Shares repurchased (3 357) (198 198) (201 555) (201 555)
Balance at 28 February 2014 27 794 – 14 441 523 379 565 614 112 565 726
GROUP STATEMENT OF CASH FLOWS for the year ended 28 February 2014
Restated
2014 2013
R'000 R'000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 10 814 135 9 784 160
Cash paid to suppliers and employees (10 362 756) (9 598 534)
Cash generated from operations 451 379 185 626
Taxation paid (56 055) (66 624)
Net cash movement from operating activities 395 324 119 002
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of non-current plant and equipment (38 227) (37 077)
Proceeds on disposal of non-current plant and equipment 5 105 1 079
Insurance receivable (16 965) 1 371
Insurance payable (452) (138)
Net cash movement from investing activities (50 539) (34 765)
CASH FLOWS FROM FINANCING ACTIVITIES
Non-controlling shareholders of subsidiaries (7 000) (4 909)
Proceeds of issue of shares 1 274 3 144
Repurchase of shares (201 555) –
Settlement of share appreciation rights (3 382) –
Finance income received 13 709 12 535
Finance costs paid (89 256) (79 868)
Dividends paid (85 026) (66 202)
Net cash movement from financing activities (371 236) (135 300)
Net movement in cash and cash equivalents (26 451) (51 063)
Cash and cash equivalents at beginning of year 334 931 385 994
Cash and cash equivalents at end of year 308 480 334 931
CHANGES IN ACCOUNTING POLICIES AND COMPARATIVE FIGURES
Previously
Restated reported
28 February Adjustment Adjustment 28 February
2013 Note 1 Note 4 2013
GROUP STATEMENT OF FINANCIAL POSITION R'000 R'000 R'000 R'000
Non-current assets
Investments – (233 613) – 233 613
Insurance receivable 1 074 1 074 – –
Current assets
Investments – (1 000) – 1 000
Trade and other receivables 264 007 (106) – 264 113
Cash and cash equivalents 334 931 (5 728) – 340 659
Total assets 2 494 624 (239 373) – 2 733 997
Capital and reserves
Retained earnings 638 027 (118 269) – 756 296
Non-controlling interest 120 8 102 – (7 982)
Non-current liabilities
Advance from non-controlling shareholders
of subsidiaries 3 938 (124 446) – 128 384
Assurance funds – (7 548) – 7 548
Insurance payable 2 608 2 608 – –
Current liabilities
Trade and other payables 1 128 197 548 (563 116) 1 690 765
Borrowings 563 116 – 563 116 –
Current tax liabilities 2 266 (368) – 2 634
Total equity and liabilities 2 494 624 (239 373) – 2 733 997
CHANGES IN ACCOUNTING POLICIES AND COMPARATIVE FIGURES
Previously
Restated reported
29 February Adjustment Adjustment 29 February
2012 Note 1 Note 4 2012
GROUP STATEMENT OF FINANCIAL POSITION R'000 R'000 R'000 R'000
Non-current assets
Investments – (204 500) – 204 500
Insurance receivable 2 445 2 445 – –
Current assets
Investments – (3 000) – 3 000
Trade and other receivables 212 668 (200) – 212 868
Cash and cash equivalents 385 994 (9 414) – 395 408
Total assets 2 268 470 (214 669) – 2 483 139
Capital and reserves
Retained earnings 541 523 (88 680) – 630 203
Non-controlling interest 266 5 567 – (5 301)
Non-current liabilities
Non-controlling shareholders of subsidiaries 15 952 (119 537) – 135 489
Assurance funds – (7 731) – 7 731
Insurance payable 2 746 2 746 – –
Current liabilities
Non-controlling shareholders of subsidiaries – (4 850) – 4 850
Trade and other payables 1 020 421 (12) (525 768) 1 546 201
Borrowings 525 768 – 525 768 –
Current tax liabilities 7 509 (2 172) – 9 681
Total equity and liabilities 2 268 470 (214 669) – 2 483 139
Previously
Restated reported
28 February Adjustment Adjustment Adjustment 28 February
GROUP STATEMENT OF 2013 Note 1 Note 3 Note 4 2013
COMPREHENSIVE INCOME R'000 R'000 R'000 R'000 R'000
Revenue 9 808 733 (44 113) 881 035 – 8 971 811
Cost of sales (8 246 446) – (881 035) 43 206 (7 408 617)
Gross profit 1 562 287 (44 113) – 43 206 1 563 194
Other income – (3 000) – – 3 000
Operating profit 289 827 (47 113) – 43 206 293 734
Finance costs (79 868) – – (43 206) (36 662)
Profit before taxation 222 494 (47 113) – – 269 607
Total profit and comprehensive
income 156 814 (47 113) – – 203 927
Attributable to:
Equity holders of the company 156 810 (29 589) – – 186 399
Non-controlling interest 4 (17 524) – – 17 528
Earnings per share (cents)
Basic 144,5 (27,2) – – 171,7
Diluted basic 142,4 (26,9) – – 169,3
CHANGES IN ACCOUNTING POLICIES AND COMPARATIVE FIGURES
Previously
Restated reported
28 February Adjustment Adjustment Adjustment Adjustment 28 February
GROUP STATEMENT 2013 Note 1 Note 2 Note 3 Note 4 2013
OF CASH FLOWS R'000 R'000 R'000 R'000 R'000 R'000
Cash flows from
operating activities
Cash receipts from
customers 9 784 160 (44 007) – 881 035 – 8 947 132
Cash paid to suppliers and
employees (9 598 534) 44 656 – (881 035) 43 206 (8 805 361)
Cash generated from
operations 185 626 649 – – 43 206 141 771
Finance income – – (12 535) – – 12 535
Finance costs – – 36 662 – – (36 662)
Dividends paid – – 66 202 – – (66 202)
Taxation paid (66 667) 1 761 – – – (68 428)
Net cash movement from
operating activities 118 959 2 410 90 329 – 43 206 (16 986)
Cash flows from
investing activities
Investments – (20 000) – – – 20 000
Redemption of insurance
receivables 1 414 1 414 – – – –
Repayment of insurance
payables (138) (138) – – – –
Net cash movement from
investing activities (34 722) (18 724) – – – (15 998)
Cash flows from
financing activities
Advance from non-
controlling shareholders
of subsidiaries (4 909) 20 000 – – – (24 909)
Finance income 12 535 – 12 535 – – –
Finance costs (79 868) – (36 662) – (43 206) –
Dividends paid (66 202) – (66 202) – – –
Net cash movement from
financing activities (135 300) 20 000 (90 329) – (43 206) (21 765)
Net movement in cash and
cash equivalents (51 063) 3 686 – – – (54 749)
Cash and cash equivalents
at beginning of year 385 994 (9 414) – – – 395 408
Cash and cash equivalents
at end of year 334 931 (5 728) – – – 340 659
EXTRACTS FROM THE REPORT OF THE CHIEF EXECUTIVE OFFICER
The year began in a positive mood, with consumer confidence at the
relatively high levels recorded in the latter months of 2012. However,
testing times began with the prolonged strike in both the motor
manufacturing and the motor component sectors. These impacted
negatively on production for a three-month period. The continual
fuel price increases, the currency collapse in November/December,
and the interest rate hike in January 2014 have precipitated a fall
in consumer confidence to levels last seen in October 2010. Higher
levels of household debt, and consequent falling vehicle affordability,
have increased the pressure in an already competitive and testing
economy.
Given this background, I am pleased with the results achieved by the
Group. Off revenue which exceeded the R10 billion level for the first
time, the Group reported a 10,5% increase in operating profit, and a
3% margin on revenue.
FINANCIAL OVERVIEW
Group revenue increased by 10% to R10,8 billion, with the retail
motor, car hire and financial services segments reporting real growth.
Despite the revenue growth and the knock-on effect on variable
expenses, total selling and administration expenses rose a modest
7,3%. Expansion of the car hire fleet, coupled with the January 2014
prime rate hike, caused net finance costs to increase by 12,2%.
Within the segments, the 10,7% decline in retail motor profit before
taxation was more than offset by the improvements in car hire,
marine and leisure, and financial services.
After eliminating the cost of goodwill impaired last year, headline
earnings reflected a decline of 1,3%, to R169,3 million. Although
disappointing, this still represents a creditable 27,2% return on
shareholders' funds.
In October 2013 the Board announced that it intended to utilise some
of its surplus cash to effect an offer to shareholders to voluntarily
submit for repurchase all or a portion of their shares. The exercise
was completed in February 2014, and resulted in the Company
repurchasing 15,4 million shares at R13 each, a total outlay of
R200,2 million excluding costs. Despite this negative cash flow, and
the payment of dividends totalling R85,0 million, the Group ended
the year with cash resources of R308,4 million. The 14,0% reduction
in shares in issue will have the effect of enhancing earnings and
dividends per share in future periods.
The assets and liabilities levels, as recorded in the statement of
financial position remain substantially unchanged from last year.
The Group is soundly positioned, with the only interest-bearing
borrowings being of a short-term nature, aligned with the value of
the car hire fleet.
During the year a number of changes in accounting policies were
effected. These were triggered principally by accounting statement
changes and, to a lesser extent, by decision of the Board. Full details
of the changes, and the impact on the financial statements, are
contained in the notes to the financial statements.
Total dividends declared during the year were 78 cents per share, up
27,9% on the previous year. The relatively unchanged level of headline
earnings and continued liquidity have enabled the Board to declare a
dividend of 50 cents per share, payable in June 2014.
OPERATIONAL OVERVIEW
The Group's management style remains one of decentralised
operating and marketing complemented by centralised cash flow
monitoring, accounting controls and internal audit. Remuneration
of management and staff is linked to performance benchmarks,
all of which are closely monitored using internally-generated
measurements, and peer group review. The Group operates in sectors
which produce very low margins, so tight control over expenses and
cash flow is vital to success.
The Group as a whole has retained its B-BBEE status as a level 4
contributor, and the car hire division, measured separately, as a
level 3 contributor.
Motor retail
In line with the national market in respect of the franchises which
the Group represents, only marginal growth in new passenger and
light commercial unit sales was achieved during the year. In the
used vehicle market, the Group recorded growth of 4% against an
estimated national market decline of 5%.
Whilst the majority of branches returned excellent results, the overall
picture was spoilt by disappointing, albeit predictable, losses in
others.
One of the strengths of the Group is that it represents a wide range of
motor manufacturers. This provides a measure of protection against
the fluctuating fortunes of these manufacturers. Nevertheless,
the decline of a particular manufacturer does negatively impact
on Group results. During the year the Group suffered losses in its
once-profitable Peugeot dealerships, and was forced to close four
outlets. The staff, lease and other unavoidable costs have been fully
accounted for, and will eliminate losses in the year ahead.
There are two principal growth paths in the retail motor industry
– by acquisition, or by developing "green-field" dealerships. The
former is difficult to achieve because the majority of desirable
targets are held by big motor groups like ourselves and are rarely
offered for sale. If and when they are available, they command high
premiums over their net asset value. Consequently, the Group has,
over the past two years, invested in establishing new dealerships,
usually in competition with developed dealers in the vicinity and
often representing less popular vehicle brands. These investments
are not without attendant risks. A dealership infrastructure is high,
particularly in terms of staff and lease commitments, and the
break-even volumes can take a considerable time to achieve. In the
interim, trading losses must be absorbed. Management's task is to
continuously assess performance against budget and to terminate
those operations that show no realistic chance of future profitability.
During the year under review a number of new investments were
made and they, predictably, incurred start-up losses.
The environment remained extremely competitive, especially in the
lower value segments, as manufacturers struggled to maintain their
share of a declining market. The intense competition forced them to
once again contain increases to rates which were below inflation.
At dealer level the competition manifested in pressure to maintain
higher than optimum inventory levels and to conclude sales at
reduced margins.
The MG/Maxus range produced disappointing results, both at
importer/distributor and retail level. Significant delays in the
production of the new range of smaller and higher-volume MG
models has meant that the businesses have not been able to cover
overheads with the low volume of sales of the current product.
Management is assessing its options regarding the future of this
venture, particularly in light of the recent currency deterioration.
The Group's workshops and parts departments produced outstanding
results, increasing profitability by 41% and 8% respectively. These
departments produce the stable and dependable base on which all
successful dealerships are founded, and their continued growth is
comforting.
Customer service levels at each dealership are measured monthly,
both internally and by independent manufacturer representatives.
It is a constant challenge to maintain best-in-class standards in the
face of ever-increasing demands of customers.
The Group's web-based Carshop brand has been identified as a
stand-alone business, and will market both Group and externally-
sourced vehicles.
The ill-conceived billing system designed for the Gauteng toll roads
is proving to be unworkable in a dealership environment. Accounts
are received for vehicles long since sold and for usage prior to the
dealerships trading in used vehicles. This occurs, in part, because the
toll system is linked to an already-flawed eNaTis system containing
inaccurate vehicle ownership information. Attempts to have invoices
redirected to correct owners are met with no response from an
obviously overloaded Sanral billings department. I hope that the
inefficiencies highlighted since the opening of these toll roads will
prompt a rethink by the appropriate authorities.
Car hire
Over the last six years, since its rebranding in 2008, this division
has recorded a remarkable 25% compound growth in profit. This is
testament to the sound management team under the leadership of
Bruce Barritt, and adherence to the core principle that consistently
good customer service will build a loyal customer base. The First
Car Rental brand is the country's largest car rental brand that is
not linked to an international brand. Operating from 40 locations
including all major airports, the division has a state-of-the-art web-
based marketing and reservations system providing a user-friendly
customer interface. To reduce vehicle damage repair costs and
turnaround times, the division has opened its own panel shop in Cape
Town, and a second is planned for the Kempton Park depot. I expect
continued growth in the years ahead.
Financial services
This division comprises five insurance cells providing life, disability,
retrenchment, and vehicle warranty cover, and two joint venture
vehicle financing operations. Insurance premium income increased
almost 200% during the year which bodes well for the continued
success of these cells. I recorded last year that prior year losses in
the finance joint ventures had been eliminated, and the result was a
profit of R19,5 million, up from R5,0 million. This annuity-type income
has the potential to record continued growth in the years ahead.
Marine and leisure
Management's decision to close the retail outlet in Randburg has
proved correct. The business has been restructured to concentrate
on import and distribution, and the product range has been trimmed
to those lines which have historically delivered profitable volumes.
During the six months to 31 August 2013, the division recorded a
trading loss of R1,8 million, whilst the second half produced a profit
of R1,1 million. I am confident that the restructured business will
continue the second half trend.
PROSPECTS
Recent economic data releases indicate the economy is heading for a
period of consolidation and slower economic growth. Real disposable
income of the majority of households has not kept pace with
inflation, and the anticipated interest rate hikes will only worsen the
position. Continued strike action is worrying. Only when the country
can develop a stable work force, operating at peak efficiency and with
reasonable salary expectations, will companies be able to generate
the profits required to foster expansion and further job creation.
Resolution of the recent electricity supply disruptions is a priority.
In the retail motor segment, I expect negative dealer vehicle sales
growth in the year ahead. After a number of years of pleasing growth,
I expect a period of consolidation. Following the devaluation of the
rand it is inevitable that price increases will be effected. A number
of relatively significant increases have already been announced and
these are expected to continue.
The strategy within the Group is to maintain the profit levels of
the historically successful operations, and to secure growth by
elimination of the loss-makers. The rigorous evaluation of sub-
performing branches started during the second half of 2013 and
progress has been encouraging. The expected new vehicle price
increases will widen the gap between new and used vehicles and
create opportunities for growth in that market.
As mentioned earlier, the marine and leisure division is well on the
way to recovery, and continued growth is expected from car hire,
financial services and parts/workshop departments.
The Group has a strong and experienced management team which
embraces the challenge of growing earnings in what threatens to be
a difficult trading environment.
CHANGES IN DIRECTORATE
During October 2013, Maldwyn Zimmerman announced his
retirement as chairman of the Group. He has headed the Group
since its inception in 1976 and during its listing in 1987. I take this
opportunity to thank Maldwyn for his invaluable contribution and
wise council over an extended period.
John Edwards was elected as Maldwyn's successor. He has a long
association with the Group, having been appointed to the Board in
2002. John has, over the years, served as chairman of the audit and
risk assessment committee and remuneration committee, and in
recent years acted as lead independent director. He brings with him a
wealth of professional and business leadership experience, and I look
forward to working with him during his tenure.
Vusi Khanyile, chairman of Thebe Investment Corporation resigned in
January 2014, and his position was filled by Zukie Siyotula.
DIVIDEND
A dividend (dividend number 52) of 50 cents per share will be paid on
Tuesday, 17 June 2014 to members reflected in the share register of
the Company at the close of business on the record date, Friday,
13 June 2014. Last day to trade 'cum' dividend is Friday, 6 June 2014.
First day to trade 'ex' dividend is Monday, 9 June 2014. Share
certificates may not be dematerialised or rematerialised from
Monday, 9 June 2014 to Friday, 13 June 2014, both days inclusive.
The number of ordinary shares in issue at the date of the declaration
is 93 673 498. Consequently, the gross dividend payable is
R46 837 000 and will be distributed from income reserves. There are
no STC credits available for utilisation. The dividend will be subject to
dividend withholding tax at a rate of 15%, which will result in a net
dividend of 42,5 cents 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 year ended
28 February 2014 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 abridged
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 abridged reports to be prepared in
accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting
Standards ("IFRS"), and 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, except as recorded below, are consistent
with those accounting policies applied in the preparation of the
previous consolidated financial statements.
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.
CHANGES IN ACCOUNTING POLICIES AND COMPARATIVE FIGURES
During the year a number of changes in accounting policies were
effected. These were triggered principally by accounting statement
changes, and also by decision of the Board. Details of the changes,
and the impact on prior year financial statements, are recorded
below.
The changes in accounting policy have been applied retroactively
and, as a consequence, adjustments have been made in the financial
statements of all comparative periods presented.
1. Consolidated financial statements
Investment in Main Street 445 Proprietary Limited
IFRS 10, ‘Consolidated Financial Statements' was issued in
August 2012 and replaces the guidance on control and
consolidation in IAS 27, ‘Consolidated and Separate Financial
Statements', and in SIC 12, ‘Consolidation – Special Purpose
Entities'. The Group concluded a BEE transaction with Thebe
Investment Corporation Limited (‘TIC') in 2006. In terms of the
transaction, a special purpose entity, Main Street 445 Proprietary
Limited (‘Main Street') was formed as a wholly-owned subsidiary
of TIC to acquire a 15% equity stake in CMH Holdings Proprietary
Limited. The balance of 85% is owned by the Company.
The Group has determined that, while it did not have control over
Main Street under the principles of IAS 27, it does have control
over that entity in terms of the current standard. Although the
Group does not own any ordinary equity shares in Main Street, an
agreement signed by the Company, TIC, and Main Street does
enable the Company to control the activities of Main Street, and
to earn variable returns therefrom. As a result, Main Street has
been consolidated in the financial statements of the Group.
Investment in insurance underwriting activities
The Group conducts insurance underwriting activities through
various entities controlled by external financial service providers.
These entities were consolidated in terms of IAS 27 and SIC 12.
However the Group has determined that the entities do not
constitute "deemed separate entities" as envisaged in IFRS 10
and they will no longer be consolidated.
2. Reclassification within Statement of Cash Flows
"Finance income received", "Finance costs", and "Dividends paid"
were previously classified under the heading "Cash movement
from operating activities". They have now been reclassified under
the heading "Cash movement from financing activities". The
change has no impact on "Net movement in cash and cash
equivalents".
3. Reclassification of wholesale transactions
Revenue arising from the sale of new and used motor vehicles to
customers who were themselves dealers in motor vehicles and
who purchased the vehicles for resale, was classified as wholesale
revenue, and was eliminated and offset against "Cost of sales" in
the statement of comprehensive income. This policy has been
discontinued and revenue from such sales is now included in
"Revenue" and a corresponding adjustment has been made to
"Cost of sales". The change has no impact on "Gross profit".
4. Reclassification of transactions associated with financing
of car hire fleet
The cost of financing the Group's car hire vehicles was included in
"Cost of sales" and the year-end liability in "Trade and other
payables". This policy has been discontinued. Finance charges are
now included in "Finance costs" and the liability is recorded as
"Borrowings". The change has no impact on "Profit before
taxation" nor on "Total current liabilities".
CORPORATE GOVERNANCE
The Group is committed to maintaining the high standards of
governance as embodied in the King Report on Corporate Governance
and complies with the principles of both the Report and the JSE
Limited Listings Requirements.
ANNUAL GENERAL MEETING
The annual general meeting will be held at 1 Wilton Crescent,
Umhlanga Ridge, at 15h00 on Thursday, 29 May 2014. The record
date in terms of section 59(1)(a) of the Act for shareholders to be
recorded on the securities register of the Company in order to receive
notice of the annual general meeting is Thursday, 17 April 2014. The
record date in terms of section 59(1)(b) of the Act for shareholders to
participate in and vote at the annual general meeting is Friday,
23 May 2014.
By order of the board of directors
K Fonseca CA(SA)
Company Secretary
23 April 2014
REGISTERED OFFICE
1 Wilton Crescent, Umhlanga Ridge, 4319
TRANSFER SECRETARIES
Computershare Investor Services Proprietary Limited
PO Box 61051, Marshalltown, 2107
SPONSOR
PricewaterhouseCoopers Corporate Finance Proprietary Limited
Private Bag X36, Sunninghill, 2157
DIRECTORS
JTM Edwards (Chairman), JD McIntosh (CEO), LCZ Cele,
MPD Conway, JS Dixon, SK Jackson, D Molefe, N Siyotula, M Zimmerman, J Alderslade (alternate)
Date: 23/04/2014 11:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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