THE TURNAROUND in profitability at Comair, South Africa, that commenced in the second half of the 2012 financial year has continued into the six months to December, 2012, and has resulted in a profit after tax of R79 million for the period, a significant improvement on the results of the comparative period. While it took time to adequately address the effect of higher operating costs, brought on predominantly by the rapid escalation of the fuel price in 2011, we are now accommodating an oil price of over US$110 per barrel and do not anticipate a reduction in this price in the near future, it says.
Revenue grew by 20%, mainly attributable to the fuel surcharge on British Airways tickets and kulula’s improved pricing capability and revenue integrity processes emanating from its new inventory management system. The four new Boeing 737-800s, introduced during the period, further contributed to increased revenue per flight, while at the same time improving fuel efficiency. Our in-house catering facility and other cost saving initiatives continued to deliver meaningful results
Earnings per share and headline earnings per share grew to 16.4 cents (prior period loss of 7.1 cents and headline loss of 4.9 cents) and cash generation was particularly strong due to the tax allowances on the new aircraft, as well as abnormally good advance ticket sales in December, resulting in a cash balance of R529 million at 31 December, 2012. The four new aircraft were brought onto the statement of financial position during the period, funded with US Export-Import Bank-backed loans, which ensured excellent financing rates. We are particularly proud of the fact that the turnaround in profitability was achieved without the retrenchment of any staff, largely as a result of their own commitment towards implementing the changes required to turn the business around.
Prospects: The total domestic passenger market has shown year-on-year shrinkage since February, 2012, with the half year volumes for the market 6% lower than for the comparative period. The continued devaluation of the Rand has driven the Rand price of fuel and Dollar-based technical services to record levels, and therefore we do not foresee early growth in market volumes as ticket prices will remain at the levels necessary to recover such escalating costs. We also do not anticipate any near term recovery in global or local consumer spending.
However, our new enterprise-wide IT platform and the new fleet, which were only in operation for a portion of the reporting period, offer further opportunities for improved revenue and operating efficiency that will be fully optimised over the next few years.
Flights from Johannesburg (ORTIA) to East London on the kulula brand will commence on 1 March, 2013, and flights from Johannesburg to Maputo on the British Airways brand from May, 2013. There are also good growth opportunities for our travel business, flight training facility, catering business and airport lounges. We are therefore cautiously optimistic for further improvements to profitability and cash generation in the second half of the 2013 financial year. The above outlook has not been reviewed and reported on by Comair’s external auditors and does not constitute an earnings forecast.
Dividend: Contrary to past practice and in light of the company’s improved trading results, notice is hereby given that a gross interim cash dividend of 5.0 cents per ordinary share has been declared payable to shareholders. The dividend has been declared out of income reserves. STC Credits of R5 640 412 (equating to 1.15304 cents per share) are available to be utilised as part of this declaration. The gross dividend will be subject to a local dividend tax rate of 15% but the effective rate is brought down to 11.54% once STC Credits have been applied resulting in a net dividend of 4.42296 cents per ordinary 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 9281/874/1/0 and the number of ordinary shares in issue at the date of this declaration is 489,176,471.
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: Share certificates may not be dematerialised or rematerialised between Monday, 11 March, 2013 and Friday, 15 March, 2013, both days inclusive.
Directors’ resignations and appointments: Derek Henry Borer was appointed as an Alternate Director to Rodney Cyril Sacks, an Independent Non-executive Director, on 17 October, 2012. Alan Buchanan, a Non-executive Director, having left the employ of British Airways, resigned as a Board Member on 27 November, 2012.
Basis of preparation: In terms of the Listings Requirements of the JSE Limited, the Group has prepared its consolidated interim results in accordance with International Financial Reporting Standards, including IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee 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 aspects with those used for the previous Annual Financial Statements. These Unaudited Interim Group Results were prepared by R Yasas Sri-Chandana, Financial Director, Comair Limited.