| Wed 8 Oct 2008, 12:00 | | CMH - Combined Motor Holdings Limited - Interim Report: Six Months Ended 31 |
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CMH
CMH
CMH - Combined Motor Holdings Limited - Interim Report: Six Months Ended 31
August 2008
COMBINED MOTOR HOLDINGS LIMITED
(Registration number: 1965/000270/06)
(Share code: CMH ISIN: ZAE000088050)
("the Company" or "the Group")
www.cmh.co.za
INTERIM REPORT FOR THE SIX MONTHS ENDED 31 AUGUST 2008
GROUP FINANCIAL HIGHLIGHTS
6 Months 6 Months
31 August 31 August
2008 2007
Revenue (R`000) 3 536 810 4 575 744
Operating profit (R`000) 29 101 103 552
Earnings per share (cents) 7.9 50.7
Headline earnings per share (cents) 7.9 50.2
Dividend payable -
December 2008 (cents) Nil 10.6
Total assets (R`000) 1 997 631 2 053 983
12 Months
Change 29 February
% 2008
Revenue (R`000) (23) 8 811 995
Operating profit (R`000) (72) 212 237
Earnings per share (cents) (84) 91.6
Headline earnings per share (cents) (84) 97.7
Dividend payable -
December 2008 (cents) n/a 28.0
Total assets (R`000) (3) 2 247 845
ABRIDGED GROUP INCOME STATEMENT
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
31 August 31 August 29 February
2008 2007 Change 2008
R`000 R`000 % R`000
Revenue 3 536 810 4 575 744 (23) 8 811 995
Cost of sales (3 041 748) (3 988 308) (24) (7 486 603)
Gross profit 495 062 587 436 (16) 1 325 392
Other operating
income - 750 (100) 12 698
Impairment of
goodwill - - - (10 400)
Selling and
administration
expenses (465 961) (484 634) (4) (1 115 453)
Operating profit 29 101 103 552 (72) 212 237
Investment income 8 831 3 886 127 7 218
Finance costs (24 925) (13 631) 83 (52 690)
Profit before
taxation 13 007 93 807 (86) 166 765
Taxation (5 490) (29 910) (82) (54 857)
Net profit 7 517 63 897 (88) 111 908
Attributable to:
Equity holders of
the Company 8 533 54 256 (84) 98 173
Minority shareholders (1 016) 9 641 (111) 13 735
RECONCILIATION OF
HEADLINE 7 517 63 897 (88) 111 908
EARNINGS
Net profit 7 517 63 897 111 908
Non-trading items
- capital profit on
sale of
business - (750) (2 750)
less: capital gains
tax - 109 109
- (641) (2 641)
- impairment of
goodwill - - 10 400
- - 10 400
Headline earnings 7 517 63 256 (88) 119 667
Headline earnings
attributable to:
Equity holders of
the Company 8 533 53 711 (84) 104 768
Minority shareholders (1 016) 9 545 14 899
7 517 63 256 119 667
ABRIDGED GROUP CASH FLOW STATEMENT
Unaudited Unaudited Audited
31 August 31 August 29 February
2008 2007 2008
R`000 R`000 R`000
Operating profit adjusted for
non-cash items 42 144 114 858 240 294
Working capital changes:
Movement in inventory 171 673 53 805 29 115
Movement in trade and other
receivables 8 793 (35 883) 8 058
Movement in trade and other payables(201 128) (136 064) 54 230
Cash generated from operations 21 482 (3 284) 331 697
Investment income received 8 831 3 886 7 218
Finance costs paid (24 925) (13 631) (52 690)
Dividends paid (36 349) (210 432) (215 841)
Taxation paid (20 266) (69 414) (106 709)
Cash flow from operating activities (51 227) (292 875) (36 325)
Cash flow from investing activities (15 943) (15 532) (41 735)
Cash flow from financing activities (12 727) (8 811) (28 985)
Net cash flow for period (79 897) (317 218) (107 045)
Cash and cash equivalents at
beginning
of period 223 468 330 513 330 513
Cash and cash equivalents at end of
period 143 571 13 295 223 468
ABRIDGED GROUP BALANCE SHEET
Unaudited Unaudited Audited
31 August 31 August 29 February
2008 2007 2008
R`000 R`000 R`000
Assets
Non-current assets
Plant and equipment 68 171 78 034 71 717
Goodwill 144 346 154 574 144 346
Investments 133 868 112 942 124 379
Deferred taxation 40 601 34 720 36 396
386 986 380 270 376 838
Current assets 1 610 645 1 673 713 1 871 007
Total assets 1 997 631 2 053 983 2 247 845
Equity and liabilities
Capital and reserves
Share capital and reserves 451 893 438 558 472 716
Minority interest 4 850 15 882 12 121
Total equity 456 743 454 440 484 837
Non-current liabilities
Advance from minority shareholders 241 145 260 596 252 317
Interest-bearing borrowings 4 554 7 133 5 314
Assurance funds 26 407 40 048 26 217
Lease liabilities 80 405 71 849 77 905
352 511 379 626 361 753
Current liabilities 1 188 377 1 219 917 1 401 255
Total equity and liabilities 1 997 631 2 053 983 2 247 845
Net asset value per share (cents) 426 424 451
GROUP STATEMENT OF CHANGES IN EQUITY
Non- Share-based
Share distributable payment Retained
capital reserve reserve earnings
R`000 R`000 R`000 R`000
At 28 February 2007 18 757 5 896 4 340 409 096
Issue of shares 247
Net profit 54 256
Dividends paid (54 603)
Share-based payment
reserve 569
At 31 August 2007 19 004 5 896 4 909 408 749
Issue of shares 1 058
Net profit 43 917
Dividends paid (11 385)
Share-based payment
reserve 568
Purchase of minority
interest
At 29 February 2008 20 062 5 896 5 477 441 281
Issue of shares 384
Net profit 8 533
Dividends paid (30 094)
Share-based payment
reserve 354
At 31 August 2008 20 446 5 896 5 831 419 720
Attributable
to equity
holders of Minority Total
the Company interest equity
R`000 R`000 R`000
At 28 February 2007 438 089 12 217 450 306
Issue of shares 247 247
Net profit 54 256 9 641 63 897
Dividends paid (54 603) (5 976) (60 579)
Share-based payment reserve 569 569
At 31 August 2007 438 558 15 882 454 440
Issue of shares 1 058 1 058
Net profit 43 917 4 094 48 011
Dividends paid (11 385) (7 618) (19 003)
Share-based payment reserve 568 568
Purchase of minority interest - (237) (237)
At 29 February 2008 472 716 12 121 484 837
Issue of shares 384 384
Net profit 8 533 (1 016) 7 517
Dividends paid (30 094) (6 255) (36 349)
Share-based payment reserve 354 354
At 31 August 2008 451 893 4 850 456 743
SEGMENT ANALYSIS
TOTAL RETAIL MOTOR
2008 2007 2008 2007
R`000 R`000 R`000 R`000
Revenue 3 536 810 4 575 744 3 304 255 4 281 811
Operating profit 29 101 103 552 46 754 101 298
Net finance costs (16 094) (9 745) (31 402) (37 980)
Profit before
taxation 13 007 93 807 15 352 63 318
Total assets 1 997 631 2 053 983 1 181 996 1 425 842
Total liabilities 1 540 888 1 599 543 784 193 874 182
Number of employees 2 639 3 123 2 231 2 642
CAR HIRE MARINE AND LEISURE
2008 2007 2008 2007
R`000 R`000 R`000 R`000
Revenue 125 789 112 758 85 868 154 242
Operating profit (2 316) 2 969 (10 008) (3 668)
Net finance costs (35) (34) (2 744) (3 786)
Profit before
taxation (2 351) 2 935 (12 752) (7 455)
Total assets 384 332 397 486 142 561 150 167
Total liabilities 403 296 361 187 41 684 32 410
Number of employees 282 285 66 134
FINANCIAL SERVICES CORPORATE SERVICES
2008 2007 2008 2007
R`000 R`000 R`000 R`000
Revenue 2 676 10 271 18 222 16 662
Operating profit 2 255 10 110 (7 584) (7 157)
Net finance costs 1 116 1 883 16 971 30 172
Profit before
taxation 3 371 11 993 9 387 23 015
Total assets 33 278 52 565 255 464 27 923
Total liabilities 28 865 47 486 282 850 284 278
Number of employees 3 3 57 59
COMMENTARY ON RESULTS
Notwithstanding the extremely depressed and challenging trading conditions which
prevailed throughout the period under review, the directors are disappointed at
the results achieved. In line with national vehicle sales, revenue declined 23%.
A substantial saving in overhead expenses has been achieved and further
reductions are expected during the second half. In addition, the full cost of
branch closures and staff reductions have been absorbed. The directors are
confident that the measures taken will benefit the Group when sales volumes
improve. Despite this reduction in expenses, the lower sales volumes resulted in
a 72% fall in operating profit. Net finance costs increased by 65% as the result
of a higher average prime overdraft rate, and the tax charge at 42% reflects the
disproportionately high content of secondary taxation on companies attracted by
the dividend declared in April 2008. Attributable earnings and earnings per
share declined 84%.
RETAIL MOTOR
High interest rates and the adverse impact of the National Credit Act continued
to dominate the trading environment. Consumer over-indebtedness remained evident
and the major finance houses have significantly reduced the approval rate of
credit applications. The Group`s workshops and parts departments both recorded
revenue and profit growth. Substantial overhead savings and a 17% reduction in
net finance costs as a result of lower net assets, were not sufficient to offset
the revenue reduction, and operating profit was 76% lower.
CAR HIRE
A pleasing 12% increase in revenue was negated by higher fleet holding costs and
a continued escalation of fleet accident and theft costs. Coupled with higher
interest rates, the depressed used vehicle market has meant lower realisation
prices and less flexibility to reduce the fleet size during off-peak periods.
The continuing price war amongst the dominant competitors in this segment has
placed gross margins under pressure. With effect from 1 October 2008 the Group
was appointed as the Sixt representative for South Africa. Sixt is the third
biggest car hire operator in Europe and the association is expected to boost
revenue.
MARINE AND LEISURE
Dealing as it does in luxury and semi-luxury goods, this segment is at the
forefront of changing economic cycles. The depressed conditions, coupled with a
predominance of "winter" months which fall in the period under review, resulted
in a R12,8 million loss. The operation has been substantially restructured and
six outlets have been reduced to two. Head count has been reduced by 51% and net
assets are down 14%. A significant improvement is expected during the second
half.
FINANCIAL SERVICES
This segment comprises primarily income from the Group`s joint ventures with
major finance banks, and the sale of insurance products. The joint ventures
suffered major losses following unacceptably high bad debt write-offs which
prevailed at all financial institutions, uninsured customer vehicle damage and
theft, and lower resale values of repossessed vehicles. On the insurance
products side, lower vehicle sales volumes and a reduced customer take-up rate
meant that the division was unable to match the prior year performance.
PROSPECTS
The difficult trading conditions are expected to continue at least until the
last quarter of 2009. National new passenger and light commercial vehicle sales,
measured on a year-on- year basis, have declined over the past 17 successive
months and there appears to be no respite. International markets are depressed
and the effects continue to spill over into the domestic economy. The resultant
weakening local currency has been exacerbated by the uncertainty following the
recent political upheavals and, together, have undermined consumer confidence.
The Group remains financially sound, with cash resources of R144 million. Net
asset and cost reduction programmes have yielded substantial savings and the
Group is poised to take advantage of the opportunities which arise. The car hire
and marine and leisure segments are expected to capitalise on the traditionally
improved conditions which the summer months produce.
DIVIDEND
Despite expectations of improved results during the second half, the directors
consider it prudent not to declare a dividend at this time.
BASIS OF PREPARATION
The results of the Group for the six months ended 31 August 2008 have been
prepared in accordance with IAS 34: Interim Financial Reporting, International
Financial Reporting Standards, the International Financial Reporting
Interpretation Committee interpretations adopted by the International Accounting
Standards Board, the Listings Requirements of the JSE Limited and Schedule 4 of
the Companies Act of South Africa. The accounting policies of the Group have
been consistently applied to these results and are the same as those applied to
the results at 29 February 2008.
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
significant principles of both the Report and the JSE Limited Listings
Requirements.
The results have not been audited or reviewed by the Group`s external auditors.
By order of the board of directors
SK JACKSON BCom (Hons) (Tax Law), CA (SA)
Company Secretary
8 October 2008
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
M Zimmerman (Chairman), JD McIntosh (CEO), LCZ Cele, MPD Conway, JTM Edwards, L
Gadd, SK Jackson, VP Khanyile, RTAC Nethercott, CL Odendaal, JW Alderslade
(alternate)
Date: 08/10/2008 12:00:02 Produced by the JSE SENS Department.
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