| Thu 23 Apr 2009, 12:00 | | CMH - Combined Motor Holdings Limited - Audited Results For The Year Ended 28 |
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CMH
CMH
CMH - Combined Motor Holdings Limited - Audited Results For The Year Ended 28
February 2009
Combined Motor Holdings Limited
(Registration number: 1965/000270/06)
(Share code: CMH)
(ISIN: ZAE000088050)
("the Company" or "the Group")
Audited results for the year ended 28 February 2009
Abridged Group income statement
Audited Audited
28 February 29 February
2009 Change 2008
R`000 % R`000
Revenue 6 581 641 8 811 995
Cost of sales (5 483 271) (7 486 603)
Gross profit 1 098 370 1 325 392
Other income 3 100 12 698
Impairment of goodwill (21 572) (10 400)
Selling and administration expenses (1 033 520) (1 115 453)
Operating profit 46 378 (78) 212 237
Investment income 17 142 7 218
Finance costs (50 437) (52 690)
Profit before taxation 13 083 (92) 166 765
Taxation (11 023) (80) (54 857)
Net profit 2 060 (98) 111 908
Attributable to:
Equity holders of the Company 8 127 (92) 98 173
Minority shareholders (6 067) (144) 13 735
2 060 (98) 111 908
Reconciliation of
headline earnings
Net profit 2 060 111 908
Non-trading items
- capital profit (100) (2 750)
less: capital gains tax 14 109
(86) (2 641)
- impairment of goodwill 21 572 10 400
Headline earnings 23 546 (80) 119 667
Headline earnings attributable to:
Equity holders of the Company 26 390 (75) 104 768
Minority shareholders (2 844) 14 899
23 546 119 667
Abridged Group cash flow statement
Audited Audited
28 February 29 February
2009 2008
R`000 R`000
Operating profit adjusted for non-cash items 100 846 244 488
Working capital changes:
Movement in inventory 216 713 29 115
Movement in trade and other receivables 64 684 8 058
Movement in trade and other payables (211 180) 50 036
Cash generated from operations 171 063 331 697
Investment income received 17 142 7 218
Finance costs paid (50 437) (52 690)
Dividends paid (30 094) (215 841)
Taxation paid (38 834) (106 709)
Cash flow from operating activities 68 840 (36 325)
Cash flow from investing activities (47 770) (41 735)
Cash flow from financing activities (32 548) (28 985)
Net cash flow for year (11 478) (107 045)
Cash and cash equivalents at beginning of year 223 468 330 513
Cash and cash equivalents at end of year 211 990 223 468
Abridged Group balance sheet
Audited Audited
28 February 29 February
2009 2008
R`000 R`000
Assets
Non-current assets
Plant and equipment 75 069 71 717
Goodwill 123 001 144 346
Investments 146 848 124 379
Deferred taxation 43 535 36 396
388 453 376 838
Current assets 1 579 834 1 871 007
Total assets 1 968 287 2 247 845
Equity and liabilities
Capital and reserves
Share capital and reserves 451 905 472 716
Minority interest (433) 12 121
Total equity 451 472 484 837
Non-current liabilities
Advance from minority shareholders 224 792 252 317
Interest-bearing borrowings 3 670 5 314
Assurance funds 19 458 26 217
Lease liabilities 88 613 77 905
336 533 361 753
Current liabilities 1 180 282 1 401 255
Total equity and liabilities 1 968 287 2 247 845
Net asset value per share (cents) 420 451
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 1 305
Net profit 98 173
Dividends paid (65 988)
Share-based payment
reserve 1 137
Purchase of
minority interest
At 29 February 2008 20 062 5 896 5 477 441 281
Issue of shares 447
Net profit 8 127
Dividends paid (30 094)
Share-based
payment reserve 709
Purchase of
minority interest
At 28 February 2009 20 509 5 896 6 186 419 314
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 1 305 1 305
Net profit 98 173 13 735 111 908
Dividends paid (65 988) (13 594) (79 582)
Share-based payment reserve 1 137 1 137
Purchase of minority interest (237) (237)
At 29 February 2008 472 716 12 121 484 837
Issue of shares 447 447
Net profit 8 127 (6 067) 2 060
Dividends paid (30 094) (6 398) (36 492)
Share-based payment reserve 709 709
Purchase of minority interest (89) (89)
At 28 February 2009 451 905 (433) 451 472
Segmental analysis
TOTAL RETAIL MOTOR
2009 2008 2009 2008
R`000 R`000 R`000 R`000
Revenue 6 581 641 8 811 995 6 065 942 8 132 421
Operating profit 46 378 212 237 42 347 163 797
Net finance costs (33 295) (45 472) (63 624) (86 274)
Profit before taxation 13 083 166 765 (21 277) 77 523
Total assets 1 968 287 2 247 845 1 003 202 1 208 618
Total liabilities 1 516 815 1 763 008 739 542 848 495
Number of employees 2 418 2 829 2 005 2 386
CAR HIRE MARINE AND LEISURE
2009 2008 2009 2008
R`000 R`000 R`000 R`000
Revenue 258 509 219 789 225 753 388 503
Operating profit (1 020) 9 790 (9 268) 10 281
Net finance costs 2 832 (1 737) (582) (7 913)
Profit before taxation 1 812 8 053 (9 850) 2 368
Total assets 452 230 485 786 121 698 157 356
Total liabilities 466 579 513 978 34 706 80 409
Number of employees 293 278 59 86
FINANCIAL SERVICES CORPORATE SERVICES
2009 2008 2009 2008
R`000 R`000 R`000 R`000
Revenue 8 160 23 865 23 277 47 417
Operating profit 7 866 24 584 6 453 3 785
Net finance costs 2 968 3 828 25 111 46 624
Profit before taxation 10 834 28 412 31 564 50 409
Total assets 25 544 44 847 365 613 351 238
Total liabilities 19 475 33 977 256 513 286 149
Number of employees 3 3 58 76
Group financial highlights
Audited Audited
28 February Change 29 February
2009 % 2008
Revenue (R`000) 6 581 641 (25) 8 811 995
Operating profit (R`000) 46 378 (78) 212 237
Earnings per share (cents) 7,6 (92) 91,6
Headline earnings per
share (cents) 24,6 (75) 97,7
Final dividend per share (cents) - (100) 28,0
Total assets (R`000) 1 968 287 (12) 2 247 845
Year-end cash resources (R`000) 211 990 (5) 223 468
COMMENTARY ON RESULTS
The year was undoubtedly the most difficult the Group has experienced. The
challenges presented during the previous year have been exacerbated by the
global economic crisis, triggered by the sub-prime loans meltdown in the United
States.
Dominated by a 25% fall in revenue, primarily as the result of the slump in
vehicle sales, operating profit fell 78% to R46,4 million, and attributable
headline earnings declined 75% to R26,4 million.
The gross margin on revenue increased from 15,0% to 16,7%. Despite an inflation
rate of 8%, operating expenses were reduced by 7%, and tight control over cash
resources enabled a 27% reduction in net interest costs. However, in the face of
the 25% decline in revenue, it was inevitable that profit before taxation would
be severely impacted.
One positive feature of the year`s trading was the Group`s firm grasp on its
cash flow. Cash generated from operations enabled the Group to fund a dividend
payment of R30 million in June 2008, repay loans and dividends of R31,5 million
to its BEE partner, and still end the year with cash resources of R212 million
(2008: R223 million).
Despite the disappointing earnings, the Group`s balance sheet remains sound, and
the cash flow statement records strong cash generation. Interest-bearing debt is
a negligible R5 million and the Group`s current ratio and quick ratio have been
constant at 1,3 and 0,4 respectively for a number of years.
With an eye on funding working capital for future expansion, and in view of the
ever-tightening lending criteria being applied by finance houses, the directors
have recommended that no dividend be paid in respect of the year under review.
RETAIL MOTOR
National passenger vehicle sales declined 23% and light commercial vehicles 17%
during the financial year, and it is estimated that the used market reduced
similarly. The principal reasons for the fall were the high debt levels under
which consumers were labouring, and the consequent reluctance of the motor
finance houses to extend further credit during a period when they too were
facing high write-offs and an increased cost of funds. Whilst customer interest
on showroom floors was high, the credit approval levels fell from approximately
55% to below 25%. Customers that gained approval were charged higher interest
rates than they previously enjoyed, with the result that the first 1,5
percentage points drop in the prime rate was offset by the higher bank margin.
The three highest value overhead expenses in a typical dealership are staff
costs, property rentals and demonstration vehicles/petrol. Since its peak during
mid-2007, the Group`s headcount in this segment has been reduced by 640 to its
present level of 2005 employees. This reduction has been mainly effected by the
closure of unprofitable operations and the trimming of backroom unproductive
staff. Only a small portion represents sales and/or workshop productive
functions. Over the same period the number of properties occupied by the Group
has been cut by 17 through termination of businesses or rationalisation and
sharing of facilities. In some instances the lease rentals have had to be
carried although the premises were vacant, but all such costs, and the expected
future commitments, have been expensed in the current year.
The fleet of demonstration vehicles, for both customer and staff use, has been
reduced by 44%.
Fortunately the Group`s workshops and parts departments performed well,
providing consistent returns and a buffer against the more volatile sales
departments.
MARINE AND LEISURE
The depressed economic conditions were keenly felt by this division, which
operates largely at the luxury end of the market. Revenue fell 42%, forcing a
major overhaul of the business and its operating locations. The headcount of 134
in mid-2007 has been reduced to 59, operating locations have been cut from five
to two, and assets from R157 million to R122 million. A further net asset
reduction of R15 million is expected in the next six months. This division
markets quality brands and, with its low cost base, has the capacity to return
substantial margins when the economy turns.
CAR HIRE
The new trading and brand name "First Car Rental" was successfully launched in
April 2008, and mid-year the division concluded an alliance with Sixt Car
Rental, a major European brand based in Germany.
Although revenue increased 18%, higher interest costs of holding the vehicle
fleet, coupled with lower resale values in the depressed used vehicle market,
eroded margins to the extent that the division ended the year with an operating
loss of R1 million. Daily hire rates remain competitive and have shown little
growth over the past 18 months, and the international credit crisis has affected
foreign tourism.
On the positive side, the recent interest rate reductions have had, and will
continue to have, a favourable effect. Each one percentage point reduction saves
the division R4,1 million annually. In addition, the major sporting events
scheduled in the country during this and next year will boost revenue.
FINANCIAL SERVICES
As predicted, revenue from the sale of insurance policies has reduced following
the National Credit Act`s prohibition of the sale of term policies. The sale of
monthly policies has increased, but with the high early termination rate being
experienced, it is unlikely that future income levels will improve materially.
PROSPECTS
Whilst it appears that the retail motor market has bottomed, uncertainty
surrounds the timing of the upturn. National sales are expected to be down on
last year, with the first half being in line with the second half of calendar
2008, and modest growth during the third and fourth quarters. The Group`s budget
predicts little or no volume growth in the retail motor and marine and leisure
divisions. Substantial restructuring charges, principally retrenchment and early
lease termination costs, have been fully accounted for and will reduce operating
costs going forward. Lower interest rates are expected to reduce finance costs.
The net result is that a relatively modest increase in sales volumes could yield
a substantial bottom line improvement. When this volume growth will materialise
is difficult to predict.
DIVIDEND
The directors have recommended that no dividend be paid in respect of the year
under review.
BASIS OF PREPARATION
The results of the Group for the year ended 28 February 2009 have been prepared
in accordance with IAS 34: Interim Financial Reporting, International Financial
Reporting Standards, 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 information has been audited by PricewaterhouseCoopers Inc., the Group`s
external auditor. A copy of their audit report is available for inspection at
the Company`s registered office.
By order of the board of directors
SK JACKSON BCom (Hons) (Tax Law), CA(SA)
Company Secretary
23 April 2009
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, JW Alderslade (alternate)
www.cmh.co.za
Date: 23/04/2009 12:00:04 Produced by the JSE SENS Department.
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