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CMH
CMH
CMH - Combined Motor Holdings Limited - Audited Group Financial results for the
year ended 29 February 2012
COMBINED MOTOR HOLDINGS LIMITED
("the Company" or "the Group")
Registration number: 1965/000270/06
Share code: CMH
ISIN: ZAE000088050
COMBINED MOTOR HOLDINGS LIMITED
AUDITED GROUP FINANCIAL RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2012
Condensed segment information
FOR THE YEAR ENDED 29 FEBRUARY 2012
Audited Audited
2012 2011
R`000 % R`000 %
TOTAL
External revenue 8 293 728 100 7 362 224 100
Operating profit 217 124 100 199 992 100
Net finance costs (19 110) 100 (19 517) 100
Profit before taxation 198 014 100 180 475 100
Total assets 2 483 139 100 2 176 761 100
Total liabilities 1 816 897 100 1 590 752 100
Goodwill at year-end 89 972 100 89 972 100
Employee costs 531 476 100 484 097 100
Number of staff 2 728 100 2 572 100
RETAIL MOTOR
External revenue 7 799 845 94 6 881 230 94
Operating profit 167 491 77 161 735 81
Net finance costs (59 125) 309 (48 295) 247
Profit before taxation 108 366 55 113 440 63
Total assets 1 270 677 51 1 114 609 51
Total liabilities 1 073 663 59 857 903 54
Goodwill at year-end 84 972 94 84 972 94
Employee costs 436 270 82 392 220 81
Number of staff 2 263 83 2 143 83
CAR HIRE
External revenue 291 914 4 299 442 4
Operating profit 23 445 11 23 517 12
Net finance costs - - (298) 2
Profit before taxation 23 445 12 23 219 13
Total assets 511 575 21 454 825 21
Total liabilities 555 236 30 514 348 32
Goodwill at year-end - - - -
Employee costs 49 171 9 52 576 11
Number of staff 307 11 305 12
MARINE AND LEISURE
External revenue 173 155 2 142 321 2
Operating profit 2 642 1 (230) -
Net finance costs (320) 2 (229) 1
Profit before taxation 2 322 1 (459) -
Total assets 63 749 3 63 186 3
Total liabilities 21 967 1 14 684 1
Goodwill at year-end 5 000 6 5 000 6
Employee costs 15 021 3 12 263 2
Number of staff 64 2 49 2
FINANCIAL SERVICES
External revenue 15 559 - 12 009 -
Operating profit 14 529 7 5 873 3
Net finance costs 503 (3) 494 (3)
Profit before taxation 15 032 8 6 367 4
Total assets 9 620 - 12 662 1
Total liabilities 9 916 1 13 314 1
Goodwill at year-end - - - -
Employee costs - - - -
Number of staff - - - -
CORPORATE SERVICES/OTHER
External revenue 13 255 - 27 222 -
Operating profit 9 017 4 9 097 4
Net finance costs 39 832 (208) 28 811 (147)
Profit before taxation 48 849 24 37 908 21
Total assets 627 518 25 531 479 24
Total liabilities 156 115 9 190 503 12
Goodwill at year-end - - - -
Employee costs 31 014 6 27 038 6
Number of staff 94 4 75 3
Condensed group statement of financial position
AT 29 FEBRUARY 2012
Audited Audited
2012 2011
R`000 R`000
ASSETS
Non-current assets
Plant and equipment 58 537 58 565
Goodwill 89 972 89 972
Investments 204 500 187 271
Deferred taxation 49 964 55 287
402 973 391 095
Current assets
Investments 3 000 -
Car hire fleet vehicles 467 376 415 636
Inventory 1 001 472 825 201
Trade and other receivables 212 868 229 931
Tax paid in advance 42 2 310
Cash and cash equivalents 395 408 312 588
2 080 166 1 785 666
Total assets 2 483 139 2 176 761
EQUITY AND LIABILITIES
Capital and reserves
Share capital 25 438 25 013
Share-based payment reserve 10 006 7 039
Non-distributable reserve 5 896 5 896
Retained earnings 630 203 550 624
Ordinary shareholders` equity 671 543 588 572
Non-controlling interest (5 301) (2 563)
Total equity 666 242 586 009
Non-current liabilities
Non-controlling shareholders of subsidiaries 135 489 144 073
Assurance funds 7 731 13 137
Lease liabilities 104 528 110 176
247 748 267 386
Current liabilities
Non-controlling shareholders of subsidiaries 4 850 32 089
Interest-bearing borrowings - 986
Derivative financial liabilities 1 778 -
Trade and other payables 1 546 201 1 286 022
Lease liabilities 6 639 -
Current tax liabilities 9 681 4 269
1 569 149 1 323 366
Total liabilities 1 816 897 1 590 752
Total equity and liabilities 2 483 139 2 176 761
Condensed group statement of cash flows
FOR THE YEAR ENDED 29 FEBRUARY 2012
Audited Audited
2012 2011
R`000 R`000
Cash flows from operating activities
Operating profit 217 124 199 992
Adjustments for non-cash items 87 564 92 169
Sale of car hire fleet vehicles 277 705 306 238
Purchase of car hire fleet vehicles (396 527) (336 536)
Working capital changes:
Inventory (176 271) (105 087)
Trade and other receivables 17 063 (21 593)
Trade and other payables 261 679 113 607
Cash generated from operations 288 337 248 790
Finance income received 14 927 12 831
Finance costs paid (34 037) (32 348)
Dividends paid (46 513) (36 703)
Taxation paid (40 865) (49 784)
Net cash movement from operating activities 181 849 142 786
Cash flows from investing activities
Purchase of non-current plant and equipment (26 410) (25 754)
Proceeds on disposal of non-current
plant and equipment 1 904 5 714
Investments (17 229) (18 234)
Purchase of non-controlling shareholders`
interest in subsidiaries (5 669) (1 494)
Payment of goodwill - (167)
Net cash movement from investing activities (47 404) (39 935)
Cash flows from financing activities
Non-controlling shareholders of subsidiaries (50 946) (43 338)
Proceeds of issue of shares 307 2 179
Interest-bearing loans (986) (2 183)
Net cash movement from financing activities (51 625) (43 342)
Net movement in cash and cash equivalents 82 820 59 509
Cash and cash equivalents at
beginning of year 312 588 253 079
Cash and cash equivalents at end of year 395 408 312 588
Condensed group statement of comprehensive income
FOR THE YEAR ENDED 29 FEBRUARY 2012
Audited Audited
2012 2011
R`000 R`000
Revenue 8 293 728 7 362 224
Cost of sales (6 922 488) (6 075 026)
Gross profit 1 371 240 1 287 198
Other income 3 000 3 000
Impairment of goodwill - (167)
Selling and administration expenses (1 157 116) (1 090 039)
Operating profit 217 124 199 992
Finance income 14 927 12 831
Finance costs (34 037) (32 348)
Profit before taxation 198 014 180 475
Tax expense (53 868) (50 139)
Total profit and comprehensive income 144 146 130 336
Attributable to:
Equity holders of the Company 131 297 120 031
Non-controlling interest 12 849 10 305
144 146 130 336
Reconciliation of headline earnings
Total profit and comprehensive income 144 146 130 336
Non-trading items:
- impairment of goodwill - 167
Headline earnings 144 146 130 503
Attibutable to:
Equity holders of the Company 131 297 120 173
Non-controlling shareholders of subsidiaries 12 849 10 330
144 146 130 503
EARNINGS PER SHARE (cents)
Basic 121,4 111,2
Diluted basic 121,0 109,2
Headline 121,4 111,3
Diluted headline 121,0 109,3
Group statement of changes in equity
FOR THE YEAR ENDED 29 FEBRUARY 2012
Non-
Share distributable Share-based
capital reserve payment Retained
reserve earnings
R`000 R`000 R`000 R`000
Balance at 28 February
2010 21 123 5 896 6 449 467 296
Issue of shares 2 179
Total profit and
comprehensive income 120 031
Transfer to share capital 1 711 (1 711)
Share-based payment reserve 2 301
Dividends paid (36 703)
Purchase of non-controlling
shareholders` interest
in subsidiaries
Balance at 28 February
2011 25 013 5 896 7 039 550 624
Issue of shares 307
Total profit and
comprehensive income 131 297
Transfer to share capital 118 (118)
Share-based payment reserve 3 085
Dividends paid (46 513)
Purchase of non-controlling
shareholders` interest
in subsidiaries (5 205)
Balance at 29 February
2012 25 438 5 896 10 006 630 203
Attributable
to equity holders Non-controlling Total
of the Company interest equity
R`000 R`000 R`000
Balance at 28 February 2010 500 764 (818) 499 946
Issue of shares 2 179 2 179
Total profit and
comprehensive income 120 031 10 305 130 336
Transfer to share capital
Share-based payment reserve 2 301 2 301
Dividends paid (36 703) (10 556) (47 259)
Purchase of
non-controlling
shareholders` interest in
subsidiaries (1 494) (1 494)
Balance at 28 February 2011 588 572 (2 563) 586 009
Issue of shares 307 307
Total profit and
comprehensive income 131 297 12 849 144 146
Transfer to share capital
Share-based payment reserve 3 085 3 085
Dividends paid (46 513) (15 123) (61 636)
Purchase of
non-controlling
shareholders` interest in
subsidiaries (5 205) (464) (5 669)
Balance at 29 February 2012 671 543 (5 301) 666 242
EXTRACTS FROM CHIEF EXECUTIVE OFFICER`S REPORT
The year was one during which the Group consolidated the gains achieved in 2010
and 2011, and laid the seeds for organic growth during the years ahead.
FINANCIAL OVERVIEW
Despite the continued difficult economic conditions, which hampered the ability
of potential customers to obtain credit facilities, the Group delivered a
satisfactory set of results for the year. A drive to increase sales resulted in
market share gains in both new and used cars, and revenue increased 13%.
Despite the opening of eight new retail branches, and the launch of an import
and distribution infrastructure for the MG range of vehicles, operating costs
were well contained at a 6% increase. As a result, the Group achieved a 2,6%
operating margin, which is well ahead of the industry average of 2,2%.
Continued tight control over working capital meant that net finance costs were
marginally reduced. Utilisation of prior year assessed losses helped the decline
in the overall tax rate, with the result that total profit increased by 10,6%.
After adjusting for minority interests, the Group recorded a 9,4% increase in
earnings.
Strong cash generation from operations ensured that, after paying dividends of
R46,5 million to its listed shareholders, and dividends and loan repayments to
its BEE minority partners of R50,9 million, the Group increased its level of
cash and cash resources by R83 million, to R395 million.
The balance sheet remains sound. Focus is concentrated on working capital levels
and ratios. It is pleasing to see that the current ratio and acid-test ratio
remain steady at 1,3 and 0,7 respectively.
The increase in earnings justifies a 10% increase in the dividend payable in
June 2012. However, the directors have decided to use the Group`s strong past
and expected future cash flow to increase the dividend level, thereby enabling
shareholders to offset, in part, the impending 15% withholding tax on dividends.
As a result, the board has recommended an increase of 20%, to 36 cents per
share. It is estimated that the dividend will be covered 2,6 times by headline
earnings.
OPERATIONAL OVERVIEW
Retail motor
National new vehicle sales increased 13% during the year under review. The trend
towards more affordable models continued. The highest growth came from
the entry-level segment, with consequent lower revenue and margins for
retail dealers. Price increases were contained at an average of less than
4%. The buy-down trend adversely affected used car sales. Major vehicle
finance houses reported a fall of approximately 8% in sales of one to
five-year-old vehicles.
Group sales of such vehicles declined only 1,8%. In respect of the makes and
models which the Group represents in the new vehicle market, national sales
increased 13%, whilst Group sales increased 19%.
The used car market is expected to endure continued pressure in the year ahead.
Management will increase its focus in this area in an attempt to restore
previously-enjoyed profit margins.
The Group`s web-based brand "Carshop - powered by the CMH Group" has gained
market recognition, and provides an ever-increasing source of sales leads.
The parts and service departments enjoyed steady growth, with revenue increases
of 13,2% and 15,8% respectively.
Car hire
This division enjoyed an excellent year, almost matching the record performance
recorded during the previous year - and without the boost of the World Cup.
Average daily rental revenue and fleet utilisation rate, together the crucial
measurements of success, showed pleasing improvement.
The home-grown "First Car Rental" brand is growing in recognition both locally
and in the important overseas market.
The division`s conservative policy regarding fleet depreciation has ensured that
retired vehicles can be readily disposed of, and the fleet size tailored to meet
anticipated seasonal fluctuations in demand.
Marine and leisure
After a number of years of difficult trading conditions, the marine and leisure
division recorded a positive, albeit small, contribution to Group results. This
market segment is particularly susceptible to economic downturn, and it is
gratifying to see that the restructuring and cost-cutting measures taken over
the past three years are beginning to bear fruit. The improved profit trend is
expected to continue in the years ahead.
Financial services
Annuity income from insurance policies sold during the current and previous
years boosted revenue in this division, enabling it to record its best results
since the sale of term-based products was abolished in 2007.
Policy premiums have been outsourced to a collections agency and the result has
been an improved collections rate and a reduction in early lapsing of policies.
Income from the Group`s ventures with two vehicle finance houses showed steady
improvement.
PROSPECTS
The consensus view is that national new and used vehicle sales will show a
moderate increase during calendar 2012.
If this is accurate, and coupled with stable interest and currency exchange
rates, I am confident that the Group will continue its trend of earnings growth.
Seeds planted during the current year, particularly the establishment of the
MG/Maxus distribution centre and the opening of the retail branch network, were
a drain on current year profits and resources. However this investment should
provide modest returns in the year ahead, and improvement thereafter. Of concern
is the ongoing Middle East conflict and its impact on the domestic petrol price.
Locally, the inefficiencies of Government and local authorities has resulted in
unacceptable and unsustainable increases in electricity tariffs, property rates
and toll road fees. All of these have the effect of reducing the buying power of
the consumer and retarding economic growth.
The Group is well-structured in terms of personnel, products and resources, and
is ideally positioned to take advantage of the prospects that lie ahead.
DIVIDENDS
A dividend (dividend number 48) of 36 cents per share will be paid on Monday, 18
June 2012 to members reflected in the share register of the Company at the close
of business on the record date, Friday, 15 June 2012. Last day to trade `cum`
dividend is Friday, 8 June 2012. First day to trade `ex` dividend is Monday, 11
June 2012. Share certificates may not be dematerialised or rematerialised from
Monday, 11 June 2012 to Friday, 15 June 2012, both days inclusive.
The number of ordinary shares in issue at the date of the declaration is 108 198
573. Consequently the gross dividend payable is R38 951 000 and will be
distributed from income reserves. The total value of STC credits available for
utilisation is R1 372 000, or 1,3 cents per share. The dividend will be subject
to dividend withholding tax at a rate of 15%, which will result in a net
dividend of 30,8 cents to those shareholders who are not exempt in terms of
section 64F of the Income Tax Act.
BASIS OF PREPARATION
The results of the Group for the year ended 29 February 2012 have been prepared
in accordance with IAS 34 Interim Financial Reporting, International Financial
Reporting Standards, the AC 500 Standards as issued by the Accounting Practices
Board, the Listings Requirements of the JSE Limited and the Companies Act, 2008.
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 2011.
ANNUAL GENERAL MEETING
The annual general meeting will be held at 1 Wilton Crescent, Umhlanga Ridge at
15:00 on Thursday, 31 May 2012.
These financial results were prepared by SK Jackson, CA (SA).
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.
K Fonseca CA (SA)
Company Secretary
19 April 2012
REGISTERED OFFICE
1 Wilton Crescent, Umhlanga Ridge, 4319
TRANSFER SECRETARIES
Computershare Investor Services (Pty) Limited
PO Box 61051, Marshalltown, 2107
SPONSOR
PricewaterhouseCoopers Corporate Finance (Pty) Limited
Private Bag X36, Sunninghill, 2157
DIRECTORS
M Zimmerman (Chairman), JD McIntosh (CEO), LCZ Cele, MPD Conway,
JS Dixon, JTM Edwards, SK Jackson, VP Khanyile, D Molefe,
JW Alderslade (alternate)
25 April 2012
Date: 25/04/2012 09:49:00 Produced by the JSE SENS Department.
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