Comair (COM) reported its H1:12 results for the interim period ended December 2011. The airlines Group had previously issued a profit warning indicating a coming loss (see - SUR, COM & FGL and a little more background here 1Time & Comair Will Hurt).

Comair's revenues actually grew 17% to just a little more than R2bn on higher fleet utilisation and the larger Boeing 737-800 aircraft introduced last year. Unfortunately this was simply not enough to offset higher average fuel prices (+41% in the period) and higher airports tariffs (+70% during the period). The latter constrained Comair's ability to pass on costs to passengers, thus went a far way in pushing the Group into a HEPS of -4,9cps (H1:11 - HEPS of +10.3cps).

Comair remains very cash generative, though, and both generated Cash from Operations (and investment income) of R161m (H1:11 - R34m) to end the year with a cash balance up some R20m to R254m (FY 11: R234m).

The Group's balance sheet also retains quite robust with a NAV per share of 159.6cps against a share price of 151cps. There is very little goodwill or nasty intangibles on the balance sheet either.

Finally, it is worth noting that the Group's "Non-airline" revenues actually grew c.270% during the period to R122m (H1:11 - R33m) and significantly hiked its profits to R15m (H1:11 - R10).

I strongly suspect that this "non-airline" segment is not just the future of Comair, but the future of the entire airlines industry, as eventually the airlines industry will become a break-even industry that generates profits from its captive client-base (once you are in the airport, on the plane or looking at their website) and from support and related services (aircraft maintenance, pilot training, etc.).

Comair is quite negative about its prospects and goes on to say how the directors "...remain of the opinion that the high oil price and a weak global economy will prevail for the foreseeable future."

Moving on, Italtile (ITE) is a fantastic business. It really is. It has a great balance of variable costs that allows it to maintain (and even grow!) profits during construction and building sector slow downs while standing to benefit from the upswings too. My view is that this is mostly based on Italtile's non-investment in manufacturing capacity (which would have been a fixed costs and made them volume dependent) and their sourcing/importing of tiles and product from where ever suits them best (which is a variable cost).

Compare this to Dawn (DAW), which operates in most of the same markets as Italtile, but made the "strategic" decision to backward integrate its operations in order to capture manufacturing margins upstream. This basically saw Dawn's results become highly volatile from their dependence on manufacturing volumes that eventually resulted in Dawn reporting a nasty little loss in FY 11. Italtile reported a c.5% increase in HEPS over this period.

Well, more recently, Dawn has just reported a trading statement indicating that it expects its HEPS for H1:12 to up between 30% and 35% due to "...improved results from the Infrastructure segment of the Group."

Italtile just released their H1:12 results and shows a 22% rise in HEPS to 21,7cps (H1:11 - 17,6cps).

Personally, I would rather have slightly lower profit growth that is more consistent in performance and result, than wild swings in profitability and the underlying uncertainty and risk that naturally follows that.

Hence, I prefer Italtile to Dawn.

Finally, Topfix (TFX), has just announced the resignation of its CEO, Benjamin Marais, and the simultaneous sale of Top Fix Scaffolding (Pty) Ltd (TFS) and MBM Administration & Labour Brokers (Pty) Ltd (MBM) to him for the equivalent of 48million TFX shares and R5m cash (or, c.R29m in amount).

The rationale for the disposal is as follows: "The board has decided to dispose of TFS and MBM as part of its strategy to decrease its exposure to cyclical industries such as the construction industry and to increase its focus on the personnel outsourcing, personnel placements and safety services industries."

That is all nice and well, but the deal disposes of a major asset of Topfix's, it disposes of the said asset to the former CEO (a related party), the former CEO remains the major shareholder in Topfix (even more of an influential insider!), and the former CEO is leaving with the said assets.

I am not comfortable with this at all and, if I was a Topfix shareholder, I would be kicking up a fuss.

Here are the two pertinent questions I see:

If the assets are worth getting rid of, why is the Former CEO going with them and not staying the CEO of the "improved" listed Group?

If the listed Group is improved after disposing of the TFS and MBM businesses, why is the former CEO effectively dis-investing a large portion of his shareholding (c.88% of his shareholding of c.54million TFX shares are being effectively "exited") in the listed Group? Surely, he would like to retain the shares in TFX, if TFX is going places, that is...

Like I said, if I was a Topfix shareholder, I would be kicking up a fuss.

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