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CMH
CMH
CMH - Combined Motor Holdings - Audited Results For The Year Ended
28 February 2010
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 2010
GROUP FINANCIAL HIGHLIGHTS
Restated
Audited Audited
Change 28 February 28 February
% 2010 2009
Operating profit (R`000) 133 108 103 46 378
Earnings per share (cents) 566 50,6 7,6
Headline earnings per
share (cents) 212 76,7 24,6
Diluted headline
earnings per share (cents) 207 75,5 24,6
Final dividend per share (cents) 100 21,0 0,0
Total assets (R`000) 2 2 005 167 1 968 287
Year-end cash resources (R`000) 19 253 079 211 990
ABRIDGED GROUP STATEMENT OF COMPREHENSIVE INCOME
Restated
Audited Audited
28 February 28 February
2010 2009
R`000 R`000
Revenue 6 507 518 6 822 786
Cost of sales (5 390 828) (5 724 416)
Gross profit 1 116 690 1 098 370
Other income 3 000 3 100
Impairment of goodwill (33 029) (21 572)
Selling and administration expenses (978 558) (1 033 520)
Operating profit 108 103 46 378
Finance income 16 458 17 142
Finance costs (34 192) (50 437)
Profit before taxation 90 369 13 083
Tax expense (35 586) (11 023)
Total profit and comprehensive income 54 783 2 060
Attributable to:
Equity holders of the Company 54 439 8 127
Minority interest 344 (6 067)
54 783 2 060
Reconciliation of headline earnings
Total profit 54 783 2 060
Non-trading items
capital profit on sale of business - (100)
less: capital gains tax - 14
- (86)
- impairment of goodwill 33 029 21 572
Headline earnings 87 812 23 546
Headline earnings attributable to:
Equity holders of the Company 82 514 26 390
Minority shareholders 5 298 (2 844)
87 812 23 546
ABRIDGED GROUP CASH FLOW STATEMENT
Restated
Audited Audited
28 February 28 February
2010 2009
R`000 R`000
Operating profit adjusted for non-cash items 226 790 154 724
Sale of car hire fleet vehicles 294 717 282 181
Purchase of car hire fleet vehicles (389 613) (282 748)
Working capital changes:
Inventory 37 835 163 402
Trade and other receivables (12 003) 64 684
Trade and other payables 17 381 (211 180)
Cash generated from operations 175 107 171 063
Finance income 16 458 17 142
Finance costs (34 192) (50 437)
Dividends paid (6 457) (30 094)
Taxation paid (37 309) (38 834)
Cash flow from operating activities 113 607 68 840
Cash flow from investing activities (34 234) (47 770)
Cash flow from financing activities (38 284) (32 548)
Net cash flow for year 41 089 (11 478)
Cash and cash equivalents at beginning of year 211 990 223 468
Cash and cash equivalents at end of year 253 079 211 990
ABRIDGED GROUP BALANCE SHEET
Restated Restated
Audited Audited Audited
28 February 28 February 29 February
2010 2009 2008
R`000 R`000 R`000
Assets
Non-current assets
Plant and equipment 64 493 75 069 71 717
Goodwill 89 972 123 001 144 346
Investments 166 037 146 848 124 379
Deferred taxation 49 896 43 535 36 396
370 398 388 453 376 838
Current assets 1 634 769 1 579 834 1 871 007
Total assets 2 005 167 1 968 287 2 247 845
Equity and liabilities
Capital and reserves
Ordinary shareholders` equity 500 764 451 905 472 716
Minority interest (818) (433) 12 121
Total equity 499 946 451 472 484 837
Non-current liabilities
Advance from minority
shareholders 189 743 224 792 252 317
Interest-bearing borrowings 976 3 670 5 314
Assurance funds 14 766 19 458 26 217
Lease liabilities 98 079 88 613 77 905
303 564 336 533 361 753
Current liabilities 1 201 657 1 180 282 1 401 255
Total equity and liabilities 2 005 167 1 968 287 2 247 845
Net asset value per share
(cents) 465 420 451
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 29 February 2008 20 062 5 896 5 477 441 281
Issue of shares 447
Total profit and
comprehensive income 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
Issue of shares 614
Total profit and
comprehensive income 54 439
Dividends paid (6 457)
Share-based payment
reserve 263
Purchase of minority
interest
At 28 February 2010 21 123 5 896 6 449 467 296
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 447 447
Total profit and comprehensive income 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
Issue of shares 614 614
Total profit and comprehensive income 54 439 344 54 783
Dividends paid (6 457) (6 457)
Share-based payment reserve 263 263
Purchase of minority interest (729) (729)
At 28 February 2010 500 764 (818) 499 946
SEGMENTAL ANALYSIS Total
Restated
2010 2009
R`000 R`000
Revenue 6 507 518 6 822 786
Operating profit 108 103 46 378
Net finance costs (17 734) (33 295)
Profit before taxation 90 369 13 083
Total assets 2 005 167 1 968 287
Total liabilities 1 505 221 1 516 815
Goodwill at year-end 89 972 123 001
Retail motor
Restated
2010 2009
R`000 R`000
Revenue 6 094 517 6 307 087
Operating profit 99 103 42 347
Net finance costs (50 062) (63 624)
Profit before taxation 49 041 (21 277)
Total assets 990 018 1 003 202
Total liabilities 743 751 739 542
Goodwill at year-end 84 972 98 001
Car hire
2010 2009
R`000 R`000
Revenue 247 956 258 509
Operating profit 14 457 (1 020)
Net finance costs (773) 2 832
Profit before taxation 13 684 1 812
Total assets 492 321 452 230
Total liabilities 504 143 466 579
Goodwill at year-end - -
Marine and leisure
2010 2009
R`000 R`000
Revenue 130 832 225 753
Operating profit (26 170) (9 268)
Net finance costs (224) (582)
Profit before taxation (26 394) (9 850)
Total assets 74 078 121 698
Total liabilities 23 698 34 706
Goodwill at year-end 5 000 25 000
Financial services
2010 2009
R`000 R`000
Revenue 9 943 8 160
Operating profit 4 592 7 866
Net finance costs 1 782 2 968
Profit before taxation 6 374 10 834
Total assets 19 910 25 544
Total liabilities 15 931 19 475
Goodwill at year-end - -
Corporate services
2010 2009
R`000 R`000
Revenue 24 270 23 277
Operating profit 16 121 6 453
Net finance costs 31 543 25 111
Profit before taxation 47 664 31 564
Total assets 428 840 365 613
Total liabilities 217 698 256 513
Goodwill at year-end - -
COMMENTARY ON RESULTS
The global downturn which began in 2008 continued for almost the whole of the
year under review. Low levels of consumer confidence, high average household
debt to income ratios, and tight lending restrictions imposed by banks were
symptomatic of the South African economy, which fell into recession for the
first time in 17 years.
Within the retail motor industry the monthly trend of year-on-year sales levels
continued declining, reaching its maximum decline in April 2009. For the
balance of calendar 2009 the year-on-year figures remained negative although
the decline was reducing.
FINANCIAL REVIEW
The prompt and tough steps to restructure Group operations were rewarded with a
256% improvement in profit before goodwill impairment and taxation. This was
achieved primarily through a reduction in expenses and net finance charges.
Despite a 26% fall in national vehicle sales, Group revenue declined only 4,6%.
After a 7,3% decrease in selling and administration expenses during the
previous financial year, a further 5,3% was achieved during the year under
review. The operating profit margin before goodwill impairment improved from
1,0% last year to 2,2%.
The Group`s carrying value of goodwill is subjected to annual impairment
testing. Budgets prepared at the beginning of the year in respect of the
Group`s luxury product operations, principally the marine and leisure division
and luxury car outlets, underestimated the extent to which the economic
downturn would impact this sector. Revised budgets for 2010/2011 indicate the
need for goodwill impairment to the extent of R33 million which has been
charged in the current year. The Group`s tax rate, at 39%, is high because of
the non-deductibility of the goodwill impairment.
RETAIL MOTOR
In the motor industry, total sales fell 26% during calendar 2009, with light
and heavy commercials suffering the most. This is the largest annual decline in
South African history. Total unit sales numbered 395 000 compared with 533 000
in 2008. The decline in new vehicle sales was offset to a degree by a stronger
used car market, where demand for low-to-medium-priced vehicles resulted in
higher trade-in values.
Group new unit sales decreased by 12,1%, but were offset by an 11,5% increase
in used vehicle volumes, and improved gross margins.
The Group`s workshops and parts departments have benefited from the high
vehicles sales volumes during 2003-2007, and continue to provide a dependable
offset against branch overheads.
CAR HIRE
The segment, aided by improved prices achieved on the sale of replaced fleet
vehicles and the reduction in the interest cost of fleet financing, returned
significantly better results. Prior year profit before taxation of R1,8 million
was transformed into R13,7 million.
Inbound foreign business has been adversely affected by the global economic
downturn and the perceived strength of the South African currency.
MARINE AND LEISURE
This segment remains depressed and it has become evident that its recovery will
lag the motor industry by 12-18 months. A reduction in demand of some 60% has
led to severe over-stocking within the industry and a number of prominent
casualties. `Fire-sale` trading has reduced margins. Although the Group`s
level of investment in working capital, and the infrastructure costs of this
segment have been reduced, it will do well to achieve the modest profit which
has been projected for the year ahead. The division holds the franchise rights
for quality brands and should lead the way during better economic times.
FINANCIAL SERVICES
As expected, returns from this segment fell below those of prior years. Sales
of insurance policies have shown modest improvement, but the default rate
remains high.
The Group`s joint ventures with finance houses produced collective losses.
Although the Group is protected against, and does not bear these losses, it
will be at least another year before the finance houses recover the deficit and
the Group can share in positive results.
PROSPECTS
The Group has budgeted for an 8% increase in vehicle sales volumes. It is
expected that the increase will start slowly and accelerate during the latter
months. Interest rates are predicted to remain constant throughout the year.
Given this scenario we are confident that the Group will continue the earnings
trend which began during the second half of 2009.
DIVIDEND
A dividend (dividend number 44) of 21 cents per share will be paid on Monday 14
June 2010 to members reflected in the share register of the Company at the
close of business on the record date, Friday 11 June 2010. Last day to trade
`cum` dividend is Friday 4 June 2010. First day to trade `ex` dividend is
Monday, 7 June 2010. Share certificates may not be dematerialised or
rematerialised from Monday 7 June 2010 to Friday 11 June 2010, both days
inclusive.
CHANGE IN ACCOUNTING POLICY
With effect from 1 March 2009, the Group adopted the amendment to IAS 16
`Property, Plant and Equipment` which has necessitated a change in accounting
policy in respect of car hire fleet vehicles. The amendment requires an entity
that, during the course of its ordinary activities, routinely sells items of
plant and equipment that it has held for rental, to transfer such assets to
inventory at their carrying value when they cease to be rented and become held
for sale. The proceeds of the sale of such assets are recognised as revenue in
accordance with IAS 18 `Revenue`.
Until 28 February 2009, car hire fleet vehicles were classified as current
assets and disclosed as `Inventory` on the face of the balance sheet. Revenue
from the sale of the vehicles and the carrying value thereof were disclosed as
`Cost of sales` on the face of the Statement of comprehensive income. The
profit on sale was applied as a reduction of the depreciation charged on the
vehicles.
The change in accounting policy has resulted in the reclassification of car
hire fleet vehicles from `Inventory` to `Car hire fleet vehicles`, both under
the heading `Current assets` and `Revenue` now includes the selling value of
vehicles sold.
The effect in the balance sheet is summarised as follows:
2010 2009 2008
R`000 R`000 R`000
Balance Sheet
Increase in car hire fleet
vehicles 442 804 405 135 458 485
Decrease in inventory (442 804) (405 135) (458 485)
The effect in the statement of comprehensive income and cash flow statement is
summarised as follows:
2010 2009
R`000 R`000
Statement of
Comprehensive Income
Increase in Revenue 351 956 241 145
Increase in Cost of sales 351 956 241 145
Cash Flow Statement
Sale of car hire fleet
vehicles 294 717 282 181
Purchase of car hire fleet
vehicles (389 613) (282 748)
Cash generated from
operations (37 669) 53 311
Working capital changes:
Movement in inventory 37 669 (53 311)
BASIS OF PREPARATION
The results of the Group for the year ended 28 February 2010 have been prepared
in accordance with IAS34: Interim Financial Reporting, International Financial
Reporting Standards, the AC 500 Standards as issued by the Accounting Practices
Board, the Listing Requirements of the JSE Limited and Schedule 4 of the
Companies Act of South Africa 1973. Except for the adoption of IAS 16 as noted
above, 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.
ANNUAL GENERAL MEETING
The annual general meeting will be held at 1 Wilton Crescent, Umhlanga Ridge at
15h30 on 27 May 2010.
The information has been audited by PricewaterhouseCoopers Inc., the Group`s
external auditor. A copy of their unqualified 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
16 April 2010
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,
SK Jackson, VP Khanyile, MH Shelembe,
JW Alderslade (alternate)
www.cmh.co.za
21 April 2010
Date: 21/04/2010 12:00:01 Produced by the JSE SENS Department.
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