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Combined Motor Holdings Limited - Interim Results
Combined Motor Holdings Limited
(Registration number 1965/000270/06)
Share code: CMH
ISIN: ZAE000001541
("the Company" or "the Group")
Interim report for the six months ended 31 August 2005
* 154% increase in net profit
* 151% increase in headline earnings per share
* 65% increase in recommended dividend
Group financial highlights
Restated
6 Months 6 Months
31 Aug 31 Aug
2005 2004
Revenue (R"000) 2 775 015 1 726 515
Operating profit before
finance costs
- as previously reported (R"000) 85 200 39 636
- as restated (R"000) 85 200 36 869
Weighted average number
of shares in issue ("000) 20 840 20 580
Number of shares for
dilution calculation ("000) 21 534 21 018
Earnings per share
- as previously reported (cents) 272,4 103,5
- as restated (cents) 272,4 108,5
Diluted earnings per share
- as previously reported (cents) 263,6 101,4
- as restated (cents) 263,6 106,3
Headline earnings per share
- as previously reported (cents) 272,4 117,9
- as restated (cents) 272,4 108,5
Diluted headline
earnings per share
- as previously reported (cents) 263,6 115,5
- as restated (cents) 263,6 106,3
Recommended dividend per share (cents) 38,0 23,0
Total assets
- as previously reported (R"000) 1 145 433 775 063
- as restated (R"000) 1 145 433 788 737
Restated
12 Months
Change 28 Feb
% 2005
Revenue 61 4 454 213
Operating profit before
finance costs
- as previously reported 115 172 450
- as restated 131 166 234
Weighted average number
of shares in issue 1 20 649
Number of shares for
dilution calculation 2 21 421
Earnings per share
- as previously reported 163 546,1
- as restated 151 550,4
Diluted earnings per share
- as previously reported 160 526,4
- as restated 148 530,6
Headline earnings per share
- as previously reported 131 561,1
- as restated 151 539,1
Diluted headline
earnings per share
- as previously reported 128 540,9
- as restated 148 519,7
Recommended dividend per share 65 105,0
Total assets
- as previously reported 48 1 140 834
- as restated 45 1 157 829
Abridged group income statement
Restated Restated
Unaudited Unaudited Unaudited
6 Months 6 Months 12 Months
31 Aug 31 Aug 28 Feb
2005 2004 Change 2005
R"000 R"000 % R"000
Revenue 2 775 015 1 726 515 61 4 454 213
Cost of sales (2 440 252) (1 508 673) (3 829 189)
Gross profit 334 763 217 842 54 625 024
Selling and
operating expenses (249 563) (180 973) 38 (458 790)
Profit from
operations 85 200 36 869 131 166 234
Finance costs 500 (2 925) (117) (2 902)
Operating profit
before
taxation and
non-trading items 85 700 33 944 152 163 332
Non-trading items - - 2 500
Profit before
taxation 85 700 33 944 152 165 832
Taxation (28 711) (11 505) 150 (51 887)
Profit for the period 56 989 22 439 154 113 945
Attributable to:
Equity shareholders
of parent company 56 774 22 333 113 658
Minority interests 215 106 287
56 989 22 439 113 945
Reconciliation of
headline earnings
Net profit
attributable
to ordinary
shareholders 56 774 22 333 113 658
Non-trading items
- capital profit - - (2 339)
Headline earnings 56 774 22 333 154 111 319
Abridged group cash flow statement
Unaudited Unaudited Unaudited
6 Months 6 Months 12 Months
31 Aug 31 Aug 28 Feb
2005 2004 2005
R"000 R"000 R"000
Cash flow from operating activities (52 473) (21 544) 137 365
Cash flow from investing activities (9 885) (2 104) (47 396)
Cash flow from financing activities - - 1 296
Net cash flow for period (62 358) (23 648) 91 265
Cash and cash equivalents
at beginning of period 282 891 191 626 191 626
Cash and cash equivalents
at end of period 220 533 167 978 282 891
Abridged group balance sheet
Restated Restated
Unaudited Unaudited Unaudited
31 Aug 31 Aug 28 Feb
2005 2004 2005
R"000 R"000 R"000
Non-current assets
Plant and equipment 29 911 18 924 26 344
Amount owing by share trust - 568 -
Goodwill 35 950 7 450 29 950
Deferred taxation 20 677 15 768 18 869
86 538 42 710 75 163
Current assets 1 058 895 746 027 1 082 666
Total assets 1 145 433 788 737 1 157 829
Equity and liabilities
Total share capital and reserves 369 379 254 696 343 172
Minority interest 1 129 733 914
Total equity 370 508 255 429 344 086
Life assurance funds 23 339 18 592 21 987
Current liabilities 751 586 514 716 791 756
Total equity and liabilities 1 145 433 788 737 1 157 829
Net asset value per share (cents) 1 758 1 253 1 655
Reconciliation of net income for the year ended 28 February 2005
Adjustments
Previously in respect Previous
stated of IAS 17 GAAP
R"000 R"000 R"000
Revenue 4 454 213 4 454 213
Operating profit
before taxation 169 548 (5 534) 164 014
Non-trading items (2 950) (2 950)
Profit before taxation 166 598 (5 534) 161 064
Taxation (53 547) 1 660 (51 887)
Profit after taxation 113 051 (3 874) 109 177
Attributable to:
Equity shareholders
of parent company 112 757 (3 867) 108 890
Minority interests 294 (7) 287
113 051 (3 874) 109 177
Effect of
transition
to IFRS IFRS
R"000 R"000
Revenue 4 454 213
Operating profit
before taxation (682) 163 332
Non-trading items 5 450 2 500
Profit before taxation 4 768 165 832
Taxation (51 887)
Profit after taxation 4 768 113 945
Attributable to:
Equity shareholders
of parent company 4 768 113 658
Minority interests 287
4 768 113 945
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 1 March 2004 as
previously reported 11 143 5 896 255 263
Operating lease
adjustment (23 064)
At 1 March 2004 as
restated 11 143 5 896 232 199
Net profit for period 21 310
Dividend paid (16 875)
Operating lease
adjustment (1 937)
Effect of transition to
IFRS
- goodwill
amortisation reversed 2 960
At 31 August 2004
as restated 11 143 5 896 237 657
Issue of shares 1 251
Net profit for period 91 447
Dividend paid (4 782)
Operating lease
adjustment (1 930)
Effect of transition to
IFRS
- goodwill
amortisation reversed 2 490
- share-based
payment reserve 682 (682)
At 28 February 2005
as restated 12 394 5 896 682 324 200
Net profit for period 56 774
Dividend paid (30 567)
Share-based
payment reserve 819 (819)
At 31 August 2005 12 394 5 896 1 501 349 588
Minority Total
Total interest equity
R"000 R"000 R"000
At 1 March 2004 as
previously reported 272 302 627 272 929
Operating lease adjustment (23 064) (23 064)
At 1 March 2004 as restated 249 238 627 249 865
Net profit for period 21 310 106 21 416
Dividend paid (16 875) (16 875)
Operating lease adjustment (1 937) (1 937)
Effect of transition to IFRS
- goodwill
amortisation reversed 2 960 2 960
At 31 August 2004
as restated 254 696 733 255 429
Issue of shares 1 251 1 251
Net profit for period 91 447 188 91 635
Dividend paid (4 782) (4 782)
Operating lease adjustment (1 930) (7) (1 937)
Effect of transition to IFRS
- goodwill
amortisation reversed 2 490 2 490
- share-based
payment reserve
At 28 February 2005
as restated 343 172 914 344 086
Net profit for period 56 774 215 56 989
Dividend paid (30 567) (30 567)
Share-based
payment reserve
At 31 August 2005 369 379 1 129 370 508
Reconciliation of net income for the six months ended 28 February 2005
Adjustments
Previously in respect Previous
stated of IAS 17 GAAP
R"000 R"000 R"000
Revenue 2 775 015 2 775 015
Profit before
taxation 89 216 (2 697) 86 519
Taxation (29 493) 782 (28 711)
Profit after
taxation 59 723 (1 915) 57 808
Attributable to:
Equity
shareholders of
parent company 59 508 (1 915) 57 593
Minority interests 215 215
59 723 (1 915) 57 808
Effect of
transition
to IFRS IFRS
R"000 R"000
Revenue 2 775 015
Profit before
taxation (819) 85 700
Taxation (28 711)
Profit after
taxation (819) 56 989
Attributable to:
Equity
shareholders of
parent company (819) 56 774
Minority interests 215
(819) 56 989
SEGMENT ANALYSIS TOTAL RETAIL MOTOR
Restated Restated
2005 2004 2005 2004
R"000 R"000 R"000 R"000
Revenue 2 775 015 1 726 515 2 677 801 1 660 570
Operating
profit before
finance costs 85 200 36 869 76 904 33 126
Finance costs 500 (2 925) (8 808) (8 127)
Operating profit
before taxation
and non-trading
items 85 700 33 944 68 096 24 999
Total assets 1 145 433 788 737 716 211 518 294
Total liabilities 774 925 533 308 522 633 382 846
Total employees 1 948 1 634 1 699 1 402
SEGMENT ANALYSIS CAR HIRE FINANCIAL SERVICES
Restated Restated
2005 2004 2005 2004
R"000 R"000 R"000 R"000
Revenue 74 938 52 043 11 298 9 052
Operating
profit before
finance costs 8 520 3 567 5 697 4 261
Finance costs (625) (508) 709 604
Operating profit
before taxation
and non-trading
items 7 895 3 059 6 406 4 865
Total assets 241 460 143 769 33 916 34 161
Total liabilities 207 021 113 456 24 534 23 292
Total employees 193 181 3 3
SEGMENT ANALYSIS CORPORATE SERVICES/OTHER
Restated
2005 2004
R"000 R"000
Revenue 10 978 4 850
Operating
profit before
finance costs (5 921) (4 085)
Finance costs 9 224 5 106
Operating profit
before taxation
and non-trading
items 3 303 1 021
Total assets 153 846 92 513
Total liabilities 20 737 13 714
Total employees 53 48
Comments on results
1.Favourable trading conditions prevailed during the period under review.
Prime overdraft rate held steady at 10,5% and the currency exchange rates
remained firm, trading within narrow bands. The continued brake on new vehicle
pricing has caused ongoing pressure on used vehicle values and the Group has
taken a conservative view of inventory stand-in values at the period end.
2. National/Alamo, the Group"s car hire division, returned an increase in
revenue of 44% and improved its trading margin. The first six months of each
financial year contain fewer "peak" months and seasonal growth during the
latter half is expected to ensure outstanding returns from this division for
the full year. The division"s fleet has been adequately depreciated to
recognise the decline in used vehicle values.
3. The financial and corporate services segments returned satisfactory results
off a sound base. The Group"s two joint venture finance arrangements reflected
growth in line with the additional business which has been generated over the
past eighteen months, and are projected to continue this trend in the medium
term, Cash flow controls remained a high priority. The closing balance of cash
resources fell below that held at February 2005 because of the payment of a
dividend of approximately R30 million in June 2005, the early settlement of R35
million of interest-bearing car hire creditors, and the additional working
capital needed to fund the Group"s 61% increase in revenue. Approximately R200
million of cash resources will be used to finance the acquisition of certain
franchise outlets and businesses from Forza (Proprietary) Limited, and the
acquisition, effective 1 September 2005, of Cape City Volkswagen in Cape Town,
the Group"s first Volkswagen dealership.
4. The first six months of each financial year traditionally yield lower
returns than those of the second half. The directors apply a conservative
approach to inventory and debtor provisions, and actuarily- determined
insurance reserves. The directors are confident that, boosted by the expected
income from the new acquisitions, and given a continued stable economic
environment, the Group will again produce pleasing results for the year to
February 2006.
Basis of preparation
1. The results of the Group for the six months ended 31 August 2005 have been
prepared in accordance with the Group"s accounting policies which comply with
International Financial Reporting Standards (IFRS) and IAS 34 - Interim
Financial Reporting. The standards are subject to ongoing review and may
change. The Group will be reporting under IFRS for the first time in respect of
the annual financial statements for the year ending 28 February 2006. The
Group"s transition date is 1 March 2004 and IFRS 1 - First Time Adoption of
International Financial Reporting Standards has been applied in preparing this
financial information. At transition date IFRS 1 allows a number of exemptions
to the retrospective application principle on adoption of IFRS. The Group made
the following elections relating to the transitional arrangements:
1.1 Business combinations - the Group has elected not to apply the
retrospective application requirements of IFRS 3 in respect of business
combinations that occurred prior to 1 March 2004. Adjustments to goodwill were
made in terms of IFRS 3. Refer to discussion below.
1.2 Property, plant and equipment - no adjustment to the value of property,
plant and equipment has been made as the residual values and useful lives of
the assets are considered reasonable in terms of IAS 16 - Property, Plant and
Equipment.
1.3 Share-based payments - the Group has elected not to apply the provisions of
IFRS 2 - Share-based Payments, to employee share option scheme awards granted
on or before 7 November 2002.
Comparative figures have been restated where applicable and are reflected as
"unaudited" as the adjustments have not been audited by the Company"s external
auditors.
2. The annual financial statements for the year ended 28 February 2005 were
prepared in accordance with South African Statements of Generally Accepted
Accounting Practice (SA GAAP). SA GAAP differs in some areas from IFRS. A
reconciliation and description of the effects of the transition from SA GAAP to
IFRS on the Group"s equity and net profit is reflected below.
3. The following new accounting policies were applied for IFRS reporting:
3.1 Business Combinations - Goodwill arising on business combinations is no
longer amortised on an annual basis, but is subjected to regular impairment
testing, at least at each reporting date. Goodwill is carried at cost less
accumulated impairment losses. In respect of the period under review no
impairment charge is considered necessary. Goodwill amortised in the prior
period has been reversed.
3.2 Share-based Payments - The fair value of share options granted to employees
after 7 November 2002 and which had not vested on 1 January 2005, is recognised
as a charge in the income statement over the vesting period, with a
corresponding increase in share-based payments reserve in equity. The expenses
will be adjusted at the end of each reporting period to reflect actual and
expected levels of vesting. The proceeds received, net of any directly
attributable transaction costs, will be credited to share capital when the
options are exercised. This expense was not previously recognised and
comparative figures have been restated.
4. Restatement in respect of IAS 17
The manner of recognising lease payments has been changed following the issue
by SAICA of circular 7/2005 as the result of a change in interpretation of
IAS17 (AC105) by South African companies to align with the practice applied
internationally. The effect of the revised interpretation is that operating
lease payments will be recognised as an expense on a straight-line basis over
the lease term, and not as cash is paid. Comparative figures have been restated
and the impact, after taxation, is reflected in the statement of changes in
equity.
Dividend declaration
1. An interim dividend (dividend number 37) of 38,0 cents per share will be
paid on Monday, 12 December 2005 to members reflected in the share register of
the Company at the close of business on the record date Friday, 9 December
2005. Last day to trade "cum" dividend is Friday, 2 December 2005. First day to
trade "ex" dividend is Monday, 5 December 2005. Share certificates may not be
dematerialised or rematerialised from Monday 5 December 2005 to Friday, 9
December 2005, both days inclusive.
Corporate Governance
1. 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 Listing
Requirements.
2. The report has not been audited or reviewed by the Company"s auditors.
Subsequent event
1. Shareholders were advised on 15 August 2005 that the Group had entered into
an agreement to purchase certain franchise outlets and associated assets from
Forza (Proprietary) Limited. The conditions precedent have been fulfilled and
the agreement became effective from 1 October 2005. The pro forma financial
effects of the acquisition were disclosed in the 15 August 2005 announcement.
By order of the Board of Directors
SK Jackson B Com (Hons) (Tax Law), CA(SA)
Secretary
6 October 2005
Registered office
1st Floor
CMH Building
206 West Street
Durban, 4001
Transfer secretaries
Computershare Investor Services 2004
(Proprietary) Limited
PO Box 61051
Marshalltown, 2107
Sponsor
PricewaterhouseCoopers
Corporate Finance (Pty) Limited
Private Bag X36
Sunninghill, 2157
Directors: M Zimmerman (Chairman), JD McIntosh (Managing), MPD Conway,
JTM Edwards, SK Jackson, RTAC Nethercott, CL Odendaal, A Rogoff
Date: 06/10/2005 11:09:32 AM Produced by the JSE SENS Department
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