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CMH
CMH
CMH - Combined Motor - Interim Report for the six months ended 31 August 2009
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 2009
GROUP FINANCIAL HIGHLIGHTS
* Operating profit up 20%
* Profit for the period up 129%
* Earnings per share up 106%
* Dividends resumed - 6 cents per share
ABRIDGED GROUP INCOME STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
31 August 31 August 28 February
% 2009 2008 2009
Change R`000 R`000 R`000
Revenue (17) 2 929 957 3 536 810 6 581 641
Cost of sales (19) (2 456 226) (3 041 748) (5 483 271)
Gross profit (4) 473 731 495 062 1 098 370
Other operating
income 1 500 - 3 100
Impairment of
goodwill - - (21 572)
Selling and
administration
expenses (5) (440 377) (465 961) (1 033 520)
Operating profit 20 34 854 29 101 46 378
Investment income (26) 6 539 8 831 17 142
Finance costs (30) (17 351) (24 925) (50 437)
Profit before
taxation 85 24 042 13 007 13 083
Taxation 25 (6 840) (5 490) (11 023)
Profit for the period 129 17 202 7 517 2 060
Total comprehensive
income
for the period 17 202 7 517 2 060
Attributable to:
Equity holders of
the Company 106 17 620 8 533 8 127
Minority shareholders 59 (418) (1 016) (6 067)
129 17 202 7 517 2 060
Reconciliation of
headline earnings
Profit for the period 17 202 7 517 2 060
Non-trading items
- capital profit on
sale of business - - (100)
- less: capital
gains tax - - 14
- - (86)
- impairment of
goodwill - - 21 572
- - 21 572
Headline earnings 129 17 202 7 517 23 546
Headline earnings
attributable to:
Equity holders of
the Company 106 17 620 8 533 26 390
Minority shareholders 59 (418) (1 016) (2 844)
129 17 202 7 517 23 546
Earnings per share
(cents) 106 16.3 7.9 7.6
Diluted earnings per
share (cents) 106 16.3 7.9 7.6
Headline earnings
per share (cents) 106 16.3 7.9 24.6
Diluted headline
earnings
per share (cents) 106 16.3 7.9 7.6
ABRIDGED GROUP CASH FLOW STATEMENT
Unaudited Unaudited Audited
31 August 31 August 28 February
2009 2008 2009
R`000 R`000 R`000
Operating profit adjusted for
non-cash items 48 908 42 144 100 841
Working capital changes:
Movement in inventory 165 473 171 673 216 713
Movement in trade and other
receivables (17 985) 8 793 64 684
Movement in trade and other
payables (161 762) (201 128) (211 175)
Cash generated from operations 34 634 21 482 171 063
Investment income received 6 539 8 831 17 142
Finance costs paid (17 351) (24 925) (50 437)
Dividends paid - (36 349) (30 094)
Taxation paid (8 610) (20 266) (38 827)
Cash flow from operating activities 15 212 (51 227) 68 847
Cash flow from investing activities (14 362) (15 943) (47 777)
Cash flow from financing activities (21 020) (12 727) (32 548)
Net cash flow for period (20 170) (79 897) (11 478)
Cash and cash equivalents at
beginning of period 211 990 223 468 223 468
Cash and cash equivalents at end of
period 191 820 143 571 211 990
ABRIDGED GROUP BALANCE SHEET
Unaudited Unaudited Audited
31 August 31 August 28 February
2009 2008 2009
R`000 R`000 R`000
Assets
Non-current assets
Plant and equipment 68 940 68 171 75 069
Goodwill 123 001 144 346 123 001
Investments 156 839 133 868 146 848
Deferred taxation 45 831 40 601 43 535
394 611 386 986 388 453
Current assets 1 415 244 1 610 645 1 579 834
Total assets 1 809 855 1 997 631 1 968 287
Equity and liabilities
Capital and reserves
Share capital and reserves 469 657 451 893 451 905
Minority interest (851) 4 850 (433)
Total equity 468 806 456 743 451 472
Non-current liabilities
Advance from minority shareholders 203 964 241 145 224 792
Interest-bearing borrowings 3 446 4 554 3 670
Assurance funds 14 680 26 407 19 458
Lease liabilities 96 813 80 405 88 613
318 903 352 511 336 533
Current liabilities 1 022 146 1 188 377 1 180 282
Total equity and liabilities 1 809 855 1 997 631 1 968 287
Net asset value per share (cents) 436 426 420
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 29 February 2008 20 062 5 896 5 477 441 281
Issue of shares 384
Profit for the period 8 533
Dividends paid (30 094)
Share-based payment
reserve 354
At 31 August 2008 20 446 5 896 5 831 419 720
Issue of shares 63
Profit for the period (406)
Dividends paid
Share-based payment
reserve 355
Purchase of minority
interest
At 28 February 2009 20 509 5 896 6 186 419 314
Profit for the period 17 620
Share-based payment
reserve 132
At 31 August 2009 20 509 5 896 6 318 436 934
Attributable
to equity
holders of Minority Total
the Company interest equity
R`000 R`000 R`000
At 29 February 2008 472 716 12 121 484 837
Issue of shares 384 384
Profit for the period 8 533 (1 016) 7 517
Dividends paid (30 094) (30 094)
Share-based payment reserve 354 354
At 31 August 2008 451 893 11 105 462 998
Issue of shares 63 63
Profit for the period (406) (5 051) (5 457)
Dividends paid - (6 398) (6 398)
Share-based payment reserve 355 355
Purchase of minority interest (89) (89)
At 28 February 2009 451 905 (433) 451 472
Profit for the period 17 620 (418) 17 202
Share-based payment reserve 132 132
At 31 August 2009 469 657 (851) 468 806
SEGMENTAL ANALYSIS
TOTAL
2009 2008
R`000 R`000
Revenue 2 929 957 3 536 810
Operating profit 34 854 29 101
Net finance costs (10 812) (16 094)
Profit before taxation 24 042 13 007
Total assets 1 809 855 1 997 631
Total liabilities 1 341 049 1 540 888
Number of employees 2 321 2 639
RETAIL MOTOR
2009 2008
R`000 R`000
Revenue 2 736 181 3 304 255
Operating profit 38 055 46 754
Net finance costs (21 124) (31 402)
Profit before taxation 16 931 15 352
Total assets 1 025 948 1 181 996
Total liabilities 736 029 784 193
Number of employees 1 921 2 221
CAR HIRE
2009 2008
R`000 R`000
Revenue 116 170 125 789
Operating profit 4 082 (2 316)
Net finance costs - (35)
Profit before taxation 4 082 (2 351)
Total assets 315 369 384 332
Total liabilities 333 985 403 296
Number of employees 286 282
MARINE AND LEISURE
2009 2008
R`000 R`000
Revenue 55 673 85 868
Operating profit (6 061) (10 008)
Net finance costs (2 243) (2 744)
Profit before taxation (8 304) (12 752)
Total assets 108 484 142 561
Total liabilities 22 573 41 684
Number of employees 44 66
FINANCIAL SERVICES
2009 2008
R`000 R`000
Revenue 2 398 2 676
Operating profit 203 2 255
Net finance costs 854 1 116
Profit before taxation 1 057 3 371
Total assets 27 907 33 278
Total liabilities 15 242 28 865
Number of employees 3 3
CORPORATE SERVICES
2009 2008
R`000 R`000
Revenue 19 535 18 222
Operating profit (1 425) (7 584)
Net finance costs 11 701 16 971
Profit before taxation 10 276 9 387
Total assets 332 147 255 464
Total liabilities 233 220 282 850
Number of employees 67 67
COMMENTARY ON RESULTS
The significant increase in earnings during the period under review belies the
continued difficult economic conditions which prevailed. Revenue fell 17% and,
although offset by an improved margin, this resulted in a 4% decrease in gross
profit. The Group`s efforts over the past two years to reduce its overhead
structure bore fruit, with a 5% decline in selling and administration expenses.
This enabled a 20% increase in operating profit. The reduction in interest
rates, and the Group`s focus on optimising its working capital level, produced a
33% decline in net finance costs. The tax rate reduced from 42% to 28% as a
result of the high secondary taxation on companies related to the dividend paid
in the prior period which was not applicable in the current period.
The net result is that the Group achieved a 106% increase in earnings and
headline earnings per share.
RETAIL MOTOR
The continued difficulty faced by potential customers seeking to finance their
purchases again dominated the retail motor sector. Finance houses are still
suffering the consequences of prior lending patterns and, despite talk of less
restrictive minimum requirements for new business, the reality is that only one
in four applicants is being approved.
Following a 17% decline in revenue and a stable profit margin, it was only
because of a 33% saving in net finance costs that the segment recorded a
marginal improvement in profit before taxation. The Group`s investment in
inventory has been reduced in line with the lower trading level.
CAR HIRE
The division`s concentration on profitable business, rather than chasing market
share, has paid dividends.
With a lower cost base, and aided by the interest rate decline which reduced the
fleet holding costs, the division has turned a R2,4 million loss into a R4,1
million profit before taxation. A small reduction in the fleet size has produced
a meaningful increase in utilisation and hence revenue per day. The division has
a good order book for the balance of the year and with the expected boost during
next year`s World Cup, seems well positioned to continue its improvement trend.
MARINE AND LEISURE
Intensive management efforts to reduce the cost structure, head count and
working capital level have paid dividends; however these were not enough to
fully counter the 35% revenue decline. It is expected that this segment will
continue to struggle until such time as there is an improvement in economic
conditions. A gradual return to profitability, especially during the next six
"summer" months, is anticipated.
FINANCIAL SERVICES
The annuity-type income generated by this segment will continue to decline until
substantial "fresh" business is added following an increase in new and used
vehicle sales. The continued high cancellation and default rate on insurance
policies is a concern, and a reflection of desperate measures resorted to by
pressured customers.
PROSPECTS
Although the year-on-year decline in new vehicle sales continues, there are
indications that the bottom has been reached, and month-on-month levels will
trend upwards.
Vehicle sales declined 30% during the first nine months of calendar year 2009;
however, modest increases were experienced in September. It is anticipated that
the lower interest rates and easier bank lending criteria will fuel improved
sales levels in the months ahead. Given its low cost structure, such an
improvement will have a significant positive impact on Group earnings.
The Group is financially sound, has a good cash generation record and low debt
levels.
DIVIDEND
A dividend (dividend number 43) of 6 cents per share will be paid on Monday 14
December 2009 to members reflected in the share register of the Company at the
close of business on the record date, Friday 11 December 2009. Last day to trade
"cum" dividend is Friday 4 December 2009. First day to trade "ex" dividend is
Monday 7 December 2009. Share certificates may not be dematerialised or
rematerialised from Monday 7 December 2009 to Friday 11 December 2009, both days
inclusive.
BASIS OF PREPARATION
The results of the Group for the six months ended 31 August 2009 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 28 February 2009.
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
20 October 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)
Date: 20/10/2009 12:00:01 Produced by the JSE SENS Department.
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