COMBINED Motor Holdings reported a “remarkable” performance in a slowly recovering vehicle sales market, with headline earnings per share increasing sharply in the six months to August compared with the same period in 2020 and in 2019, directors said yesterday.
“A 54 percent rise in revenue, improved trading margin, slashed operating expenses, and lower interest rate have driven the segment's return from a pre-tax loss last year,” they said. Headline earnings a share increased 1 529 percent to 200 cents compared with interim 2020, and were up 65 percent versus 2019.
The interim dividend of 110 cents compared with no interim dividend last year, and the payout was up 80 percent higher than the 2019 interim dividend. Cash resources improved 5 percent to R640.2m compared to interim 2020.
Directors said the tough business decisions implemented in 2020 stood the group in good stead, positioning it well to take advantage of the modest uptick in economic activity. The share price rose 3.85 percent to R27 yesterday afternoon.
“Business and consumer confidence experienced a roller-coaster ride during the period. The third wave of Covid-19 infections forced more restrictive lockdown regulations, with a continued negative impact on the travel, hospitality and car hire sectors.”
The civil unrest in July meant all the group’s KwaZulu-Natal outlets were closed for a week and there was a slump in trading for the rest of the month. Directors estimated the events to have cost the group a 12 percent loss in headline earnings.
August, however, showed an improvement in civil stability and a recovery in both confidence levels and new vehicle sales.
Overseas Covid-19- related factory closures caused disruptions in component supply chains, principally from China and India. But new vehicle stock shortages created the opportunity to improve gross margins and increase accessory sales.
The shortage of new vehicle stock had led to fewer sales and, consequently, fewer used vehicle trade-ins. It also hindered the ability of car hire operators to rotate fleet units. These factors produced a dearth of well-priced used vehicles and used car prices had risen faster than those of new cars, as the demand for high-quality stock surged.
The parts and service departments performed well. However, after a surge in demand that followed last year’s lockdown, revenue levels had flattened in line with constrained economic activity and lower distances travelled, as many employees worked from home.
The group acquired a new Ford dealership in Ballito from May 2021. The existing Nissan, Suzuki, and Renault operations, also in Ballito, were relocated to the new site, and a Mitsubishi franchise opened. The effect had been to create a motor city for residents of the rapidly-growing north coast suburbs.
“Where possible, the group will continue its policy of adding smaller ’bolt-on’ franchises to existing dealerships to maximise.”
First Car Rental saw a recovery from the depths of despair experienced in the first half of 2020, and since then there had been a steady increase in revenue and daily hire margins. The shortage of replacement vehicles was expected to create challenges in the short term, but the division recently secured a batch of new vehicles to ease the pressure.
The lifting of travel restrictions to South Africa by European and UK countries was likely to have an “enormous” positive impact on the travel and hospitality industry over the festive season and beyond.