COMAIR LIMITED - Naudited Unreviewed Condensed Consolidated Interim Results For The Six Months Ended 31 December 2017 And Cash Divide

2018-02-13 12:00:00

COM 201802130032A
Naudited Unreviewed Condensed Consolidated Interim Results For The Six Months Ended 31 December 2017 And Cash Divide

Comair Limited
Incorporated in the Republic of South Africa
Registration number: 1967/006783/06
Share code: COM
ISIN: ZAE000029823
(“Comair” or “the Company” or “the Group”)

UNAUDITED UNREVIEWED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE
SIX MONTHS ENDED 31 DECEMBER 2017 AND CASH DIVIDEND DECLARATION

Performance review

Comair delivered a record first half performance for the 2018 financial year,
slightly above that achieved in the first half of the prior year. EBITDA for
the first half of the 2018 financial year again exceeded half a billion Rand,
at R604 million (prior period R575 million). 

Consequently, profit after taxation for the period was R203 million (prior
period R199 million), and earnings per share and headline earning per share
were 43.6 cents (prior period earnings and headline earnings per share of 42.8
cents).  

Revenue growth for the domestic aviation industry is reliant on strong economic
and GDP growth. Despite the continued surplus capacity in the market
restricting occupancy levels to below that of international standards, combined
with volatile economic conditions, Comair saw revenue growth of 6% as a result
of a similar increase in passenger volumes, while average yields remained flat.

Operating expenses increased by 5% in the face of local inflationary pressure
and higher fuel prices arising from a stronger oil price, which was only
partially offset by the strengthening of the Rand. Comair’s fleet replacement
programme continues to contribute operating efficiencies which contain the cost
pressures, whilst providing an enhanced customer experience.

Further gains arose from the translation of the dollar denominated aircraft
loan as the Rand made some headway to close at R12.36/dollar as at 31 December
2017, down from R13.73 a year earlier. 

Comair’s non-airline business continued to grow steadily with non-airline
revenue increasing by 11.6% and non-airline EBITDA increasing by 20%, resulting
in an overall contribution of 13% to Profit from Operations for the Group.

Net cash flows from operating activities was strong, generating R514 million
after significant cash investments having been made in aircraft heavy
maintenance of R135 million, the purchase of an income producing property on
which the catering division is currently housed for R75 million and 
pre-delivery aircraft payments of R160 million towards the 737-8 Max order,
resulting in cash on hand of R777 million at 31 December 2017.

Highlights

In November 2017, Comair was awarded 5th place amongst the Sunday Times JSE Top
100 listed companies, in terms of growth in cumulative shareholder value over
the past 5 years, with total growth of 467%, equal to compounded annual growth
of 41.5% per annum.

We are also proud to announce that the Group has been certified by the Top
Employer Institute, as a top employer in South Africa. The management of talent
amongst the entire workforce is considered to be a key differentiator of the
Group and continues to be a core focus. The Group values its talent and
continues to make a significant investment to support the management of its
skills base. Talent Management practices support decision making in terms of
building capacity now and into the future, with the dual benefit to employees
of having information that supports their careers within the Group.

The Company also invested in the acquisition of a Training Academy, namely EPT
Aviation Training (Pty) Ltd and Global Training College South Africa (Pty) Ltd
as part of its ongoing diversification of its non-airline operations. While the
financial impact of the acquisition will not be significant initially, the
acquisition will enhance an already formidable pilot training facility,
increasing the Group’s capacity for cabin crew, passenger handling and travel
and tourism training. 

Comair continued its focus on implementing technology solutions to enhance
operating performance, customer service and revenue generation. The pace of
development in distribution technology is relentless, and Comair is intent on
extracting the maximum benefit from its customer data in order to improve on
its service offering, and on the marketing of relevant products to its various
customer segments. New software applications are being developed for use on
board the aircraft and on the ground to facilitate more efficient operating
procedures.

In November 2017, Comair successfully implemented a variable voting structure
applicable to Foreign Shareholders in order to ensure that it cannot exceed the
foreign control restrictions applicable to licensed air service operators in
South Africa.

Comair’s claim against SAA for damages, arising from anti-competitive conduct
was heard in the Gauteng South High Court between 18 April and 24 August 2016.
Judgement in this matter was handed down on 15 February 2017. In terms of the
judgement, Comair was awarded damages in the sum of approximately R1.16 billion
with regard to a total claim of R1.9 billion, inclusive of interest and costs.
SAA lodged an appeal against this judgement.  It is anticipated that the appeal
will be heard in early 2018.

Prospects

Given current volatile economic conditions, it is expected that pressure will
be maintained on consumer spending and we therefore foresee continued pressure
on margins in the airline industry. Comair is however well placed to operate 
in these conditions, with strong brands, committed staff, effective equipment, 
an efficient cost base and strong cash reserves. Despite mention in the media 
of a reduction in the flight schedules of some state-owned airlines, it is not
anticipated that there will be any reduction in the total capacity operating in
the domestic market.  


We anticipate that the Rand/dollar exchange rate and the oil price will remain
volatile going forward. The ongoing upgrades to our fleet provide mitigation to
the increase in the fuel price while providing incremental revenue per flight 
and an improved customer experience. The delivery of the next eight Boeing 
737-8 Max aircraft remains scheduled for commencement in 2019. 

We foresee that the non-airline businesses, namely the travel business, flight
training, catering and airport lounges, will continue to increase their
contribution towards profits and will receive ongoing focus.

The above outlook has not been reviewed and reported on by Comair’s external
auditors and does not constitute an earnings forecast.

Cash Dividend Declaration

Notice is hereby given that a gross interim cash dividend of 5.00000 cents per
share (prior period gross interim cash dividend of 7 cents) payable to ordinary
shareholders was approved and declared by the board of directors for the 
six-month period ended 31 December 2017. The dividend was declared out of
income reserves. 

Dividends will be subject to a local dividend tax rate of 20% or 1.00000 cent
per share, resulting in a net dividend of 4.00000 cents per share, unless the
shareholder is exempt from paying dividend tax or is entitled to a reduced rate
in terms of the applicable double tax agreement. The Company’s tax reference
number is 9281/874/7/1/0 and the number of shares in issue at the date of this
declaration is 469,330,865 ordinary shares. The company’s registration number
is 1967/006783/06.

In accordance with the provisions of Strate, the electronic settlement and
custody system used by the JSE Limited, the relevant dates for the dividend are
as follows:

Event:                                                Date:
Last day to trade (cum dividend)                      Tuesday, 13 March 2018
Shares commence trading (ex dividend)                 Wednesday, 14 March 2018
Record date (date shareholders recorded in books)     Friday, 16 March 2018
Payment date                                          Monday, 19 March 2018

Share certificates may not be dematerialised or re-materialised between
Wednesday, 14 March 2018 and Friday, 16 March 2018, both days inclusive.

Director appointments and resignations

Appointments 
-  Ms NB Sithole, was appointed as an Independent Non-executive Director of the
   company, on 1 October 2017
-  Ms P Mahanyele, an Independent Non-executive Director, was appointed as a
   member of the Audit Committee on 1 October 2017
-  Mr SL Doyle, was appointed as an Independent Non-executive Director of the
   company, on 1 December 2017

Unaudited Unreviewed Condensed Consolidated Interim Results
Comair Limited

                                                        Group

                                      Unaudited       Unaudited        Audited
                                       6 months        6 months           Year
                                          ended           ended          ended
                                         31 Dec          31 Dec        30 June
                                           2017            2016           2017
                                          R'000           R'000          R'000
                                   --------------------------------------------
Condensed Consolidated Statements
of Profit or Loss

Revenue                               3,301,043       3,128,842      6,063,737
Operating expenses                   (2,715,226)     (2,583,879)    (4,999,789)
                                   --------------------------------------------
Operating profit*                       585,817         544,963      1,063,948
Depreciation and amortisation          (210,375)       (206,986)      (456,281)
Unrealised translation gain on
Dollar denominated aircraft loan         11,614          25,492         40,697
Loss on sale of assets                        -               -        (10,574)
                                   --------------------------------------------
Profit from operations                  387,056         363,469        637,790
Interest income                          20,297          25,920         49,670
Interest expense                       (124,921)       (116,021)      (250,377)
Impairment loss on 
remeasurement of non-current
assets held for sale                       (266)              -        (11,270)
Income from equity accounted
associates                                6,606           4,919          8,874
                                   --------------------------------------------
Profit before taxation                  288,772         278,287        434,687
Taxation                                (85,394)        (79,281)      (137,717)
                                   --------------------------------------------
Profit for the period                   203,378         199,006        296,970
                                   --------------------------------------------
Profit for the period
attributable to:

Owners of the parent                    202,714         198,539        296,023
Non-controlling interest                    664             467            947
                                   --------------------------------------------
                                        203,378         199,006        296,970
                                   --------------------------------------------

* Operating profit before depreciation, amortisation, unrealised translation
gain on translation of Dollar denominated aircraft loan and loss on sale of
assets.

                                                        Group

                                      Unaudited       Unaudited        Audited
                                       6 months        6 months           Year
                                          ended           ended          ended
                                         31 Dec          31 Dec        30 June
                                           2017            2016           2017
                                          R'000           R'000          R'000
                                   --------------------------------------------

Condensed Consolidated Statements
of Comprehensive Income

Profit for the period                   203,378         199,006        296,970

                                   --------------------------------------------
Total comprehensive income for
the period                              203,378         199,006        296,970
                                   --------------------------------------------
Total comprehensive income for
the period attributable to:

Owners of the parent                    202,714         198,539        296,023
Non-controlling interest                    664             467            947
                                   --------------------------------------------
                                        203,378         199,006        296,970
                                   --------------------------------------------

Earnings per share (cents)                 43.6            42.8           63.7
Headline earnings per share (cents)        43.6            42.8           67.0
Diluted earnings per share (cents)         43.6            42.7           63.7
Diluted headline earnings per
share (cents)                              43.6            42.7           67.0
Dividends per share paid (cents)           14.0            11.0           18.0

Actual number of shares in
issue ('000)                            469,331         469,331        469,331
Weighted ordinary shares in
issue ('000)                            465,089         464,347        465,089
Diluted weighted ordinary shares
in issue ('000)                         465,089         464,803        465,089

Reconciliation between earnings
and headline earnings
Earnings attributable to ordinary
shareholders                            202,714         198,539        296,023
Add: IFRS 5 impairment on
remeasurement of non-current assets
held for sale                               266               -         11,270
Less: taxation effect of IFRS 5
impairment on remeasurement of
non-current assets held for sale            (74)              -         (3,156)
Add: IAS 16 loss on disposal of
property, plant and equipment                 -               -         10,574
Less: taxation effect of IAS 16
loss on disposal of property,
plant and equipment                           -               -         (2,961)
                                   --------------------------------------------
Headline earnings attributable to
ordinary shareholders                   202,906         198,539        311,750
                                   --------------------------------------------

                                                        Group

                                      Unaudited       Unaudited        Audited
                                       6 months        6 months           Year
                                          ended           ended          ended
                                         31 Dec          31 Dec        30 June
                                           2017            2016           2017
                                          R'000           R'000          R'000
                                   --------------------------------------------

Condensed Consolidated Statements
of Financial Position

ASSETS
Property, plant and equipment         4,985,985       4,504,287      4,631,326
Intangible assets                        16,731          19,517         15,892
Investments in associates                49,731          41,341         45,296
Goodwill                                 12,930           6,615          6,615
Deferred tax                              3,902           3,942          3,902
Current assets                        1,041,190       1,559,385      1,208,365
Non-current assets held for sale          3,337               -          7,044
                                   --------------------------------------------
                                      6,113,806       6,135,087      5,918,440
                                   --------------------------------------------

EQUITY AND LIABILITIES
Share capital and reserves            1,680,864       1,477,361      1,542,717
Interest bearing liabilities          2,246,191       2,501,440      2,344,926
Deferred taxation                       520,437         383,129        435,043
Share-based payments                      5,032           1,001          5,032
Current liabilities                   1,661,282       1,772,156      1,590,722
                                   --------------------------------------------
                                      6,113,806       6,135,087      5,918,440
                                   --------------------------------------------

Net asset value per share (cents)         361.4           317.9          331.7

                                                        Group

                                      Unaudited       Unaudited        Audited
                                       6 months        6 months           Year
                                          ended           ended          ended
                                         31 Dec          31 Dec        30 June
                                           2017            2016           2017
                                          R'000           R'000          R'000
                                   --------------------------------------------

Condensed Consolidated Statements
of Cash Flows

Cash generated from operating
activities
Cash generated from operations          622,631         447,832      1,149,088
Interest paid                          (124,921)       (116,021)      (250,377)
Interest received                        20,297          25,920         49,670
Taxation paid                            (3,569)         (2,193)        25,034

                                   --------------------------------------------
Net cash from operating activities      514,438         355,538        973,415
                                   --------------------------------------------

Cash utilised in investing
activities
Additions to property, plant and
equipment                              (258,655)       (238,217)      (323,248)
Proceeds on disposal of property,
plant and equipment                       3,441               -          3,594
Additions to intangible assets           (5,157)         (5,758)        (9,652)
Pre-delivery payments                  (160,312)              -       (132,217)
Acquisition of subsidiaries,
net of cash acquired                     (5,411)              -              -
Repayment of loan by associate                -           7,852          7,852
                                   --------------------------------------------
Net cash utilised in investing
activities                             (426,094)       (236,123)      (453,671)
                                   --------------------------------------------

Cash utilised in financing
activities
Raising of pre-delivery payment
finance                                 131,138               -              -
Repayment of interest-bearing
liabilities                            (312,655)       (335,646)      (717,921)
Refund on aircraft purchase price
for pre-delivery payment finance              -          96,738         96,738
Dividends paid                          (65,231)        (51,160)       (83,776)
                                   --------------------------------------------
Net cash utilised in financing
activities                             (246,748)       (290,068)      (704,959)
                                   --------------------------------------------

Total cash movement for the period     (158,404)       (170,653)      (185,215)
Cash and cash equivalents at the
beginning of the period                 934,913       1,120,128      1,120,128
                                   --------------------------------------------
Cash and cash equivalents at the
end of the period                       776,509         949,475        934,913
                                   --------------------------------------------

                                                        Group

                                      Unaudited       Unaudited        Audited
                                       6 months        6 months           Year
                                          ended           ended          ended
                                         31 Dec          31 Dec        30 June
                                           2017            2016           2017
                                          R'000           R'000          R'000
                                   --------------------------------------------

Condensed Consolidated Segmental
Reports

Segmental revenue
Airline                               3,148,957       2,992,562      5,796,443
Non-airline                             152,086         136,280        267,294
                                   --------------------------------------------
                                      3,301,043       3,128,842      6,063,737
                                   --------------------------------------------

Segmental results
Airline                                 534,352         495,434        964,559
Non-airline                              51,465          49,529         99,389
                                   --------------------------------------------

Operating profit before
depreciation, amortisation,
unrealised gain on translation of
Dollar denominated aircraft loan
and loss on sale of assets              585,817         544,963      1,063,948
                                   --------------------------------------------

Depreciation and amortisation 
- Airline                              (197,984)       (203,095)      (438,115)
Depreciation and amortisation 
- Non-airline                           (12,391)         (3,891)       (18,166)
Unrealised translation gain on
dollar denominated aircraft loan
- Airline                                11,614          25,492         40,697
Loss on sale of assets - Airline              -               -        (10,574)
                                   --------------------------------------------
Profit from operations                  387,056         363,469        637,790
                                   --------------------------------------------
Segmental assets - Airline            5,394,364       5,704,338      5,398,905
Segmental assets - Non-airline          719,442         430,749        519,535
Segmental liabilities - Airline      (4,313,235)     (4,500,187)    (4,261,165)
Segmental liabilities 
- Non-airline                          (119,707)       (157,539)      (114,558)
Segmental capital additions 
- Airline (excluding borrowing
costs capitalised)                      163,759         642,279        886,615
Segmental capital additions
- Non-airline                            97,266          91,641         79,206

                                                        Group

                                      Unaudited       Unaudited        Audited
                                       6 months        6 months           Year
                                          ended           ended          ended
                                         31 Dec          31 Dec        30 June
                                           2017            2016           2017
                                          R'000           R'000          R'000
                                   --------------------------------------------

Condensed Consolidated Statements
of Changes in Equity

Opening balance                       1,542,717       1,329,515      1,329,515
Total comprehensive income for
the period                              203,378         199,006        296,970
Repurchase of Comair shares sold
by Share Trust                                -               -              8
Dividend paid                           (65,231)        (51,160)       (83,776)
                                   --------------------------------------------
                                      1,680,864       1,477,361      1,542,717
                                   --------------------------------------------

Business Combinations

On 11 December 2017, the Group acquired 100% of the share capital in EPT
Aviation Training (Pty) Ltd and 100% of the share capital in Global Training
College South Africa (Pty) Ltd (previously EPT Global Training (Pty) Ltd).
These acquisitions were acquired for an aggregate consideration of
R8.5 million, which was settled in cash.

The acquired businesses contributed revenues of R2.4 million and net profit
after tax of R1.6 million to the Group since acquisition.

These provisional amounts have been calculated using the Group’s accounting
policies.

If the businesses had been acquired on 1 July 2017, revenues and net profits
after tax from the businesses would have been R7.3 million and R2.2 million
respectively.

The final purchase price accounting has not yet been completed at period end,
and will be completed within 12 months of the acquisition, as defined in the
applicable accounting standard.

The below table summarises the provisional amount of assets acquired and
liabilities assumed at the acquisition date:

                                                                         Group
                                                                     Unaudited
                                                                      6 months
                                                                         ended
                                                                        31 Dec
                                                                          2017
                                                                         R'000
                                                   ----------------------------
Purchase consideration                                                   8,480

The summarised assets and liabilities
arising from the acquisition are as follows:

Total assets                                                             8,516
Total liabilities                                                       (6,351)
                                                  ----------------------------
Fair value of net assets                                                 2,165
Goodwill                                                                 6,315
                                                   ----------------------------
Total purchase consideration                                             8,480
                                                   ----------------------------

Purchase consideration                                                   8,480
                                                   ----------------------------
Settled in cash                                                          8,480
                                                   ----------------------------

Cash and cash equivalents in subsidiaries acquired                      (3,069)
                                                   ----------------------------
Cash outflow on acquisition                                              5,411
                                                   ----------------------------

Significant Commitments

Comair made pre-delivery payments of R160 million during the current period
until 31 December 2017. This was in addition to R132 million in the previous
year ended 30 June 2017, and R102 million in the year ended 30 June 2014,
towards the delivery of eight Boeing 737-8 Max aircraft due for delivery
between 2019 and 2022. The Group has a remaining commitment to Boeing for
R5.2 billion at period end (prior period: R6.1 billion) in respect of the
Boeing 737-8 Max order, the funding options of which will be finalised closer
to the time of delivery. Pre-delivery payment finance has been mandated to
Investec Bank.

Comair has also committed itself to the construction of a fourth simulator building
at a cost of R67 million, the purchase of an Airbus A320 Fixed Base Simulator
Trainer at a cost of approximately R19 million and a pre-owned Boeing 737-800
aircraft at a cost of approximately R299 million. The financing for this
capital expenditure has been mandated to Investec Bank.

Basis of Preparation

In terms of the Listings Requirements of the Johannesburg Stock Exchange (JSE),
the Group has prepared its Unaudited Unreviewed Condensed Consolidated Interim
Financial Statements in accordance with International Financial Reporting
Standards, including IAS 34 Interim Financial Reporting, the South African
Institute of Chartered Accountants (SAICA) Financial Reporting Guides as issued
by the Accounting Practices Committee, Financial Reporting Pronouncements as
issued by the Financial Reporting Standards Council and the requirements of the
Companies Act, Act No. 71 of 2008. The accounting policies used in the
preparation of these results are consistent in all material respects with those
applied in the previous annual financial statements. During the current interim
period the Group adopted those standards and interpretations in issue and
effective for the interim period. The impact of adopting these new and amended
standards and interpretations has not had an impact on the Group’s adopted
accounting policies.

These Unaudited Unreviewed Condensed Consolidated Interim Financial Statements
were prepared by Ryan de Miranda CA(SA), under the supervision of Kirsten King
CA(SA), the Financial Director.

These results have not been audited or reviewed by the Group’s auditors, Grant
Thornton Johannesburg Partnership.

Subsequent Events

No matters have occurred between the reporting date and the date of approval of
the Unaudited Unreviewed Condensed Consolidated Interim Financial Statements 
which would have a material effect on these financial statements.

By order of the Board
P van Hoven (Chairman)               E Venter (Chief Executive Officer)
12 February 2018

Sponsor
PSG Capital Proprietary Limited
13 February 2018
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