Debt, SA price competition hit JSE-listed Motus
Importer of Hyundai, Renault and Kia
Motus says its new acquisition are exceeding expectations, however, and it has diversified its revenue in areas such as aftermarket parts.
Karl GernetzkySouth Africa’s largest vehicle dealer Motus said yesterday while it’s pleased with its diversification efforts and a pickup in operating profits, it’s still under pressure from higher interest rates and weak consumer confidence.
Revenue rose 11% to R57 billion in the six months to end-December and core profit 13% to R4.2 billion, but group profit fell just over a quarter to about R1.1 billion.
Motus cut its interim dividend by about 22% to R2.35 per share and in morning trade yesterday the group was down about 3%, having fallen 14% in the past twelve months.
The underlying results were boosted by a hefty UK acquisition in 2023, but net debt has picked up almost 40% to R16.2 billion. Net finance costs more than doubled to R1.1 billion.
Acquisitions
In 2023, the company spent R4.7 billion on acquisitions, notably R3.7 billion for UK-based parts distributor Motor Parts Direct (MPD), while in its first half of 2024, it also completed two significant bolt-on acquisitions aligned with its international growth strategy for a total of R552 million.
The group acquired Solway Vehicles Distribution Limited (Solway) in the UK, with four DAF commercial vehicle dealerships that operate in North West England and Southern Scotland.
The acquisition of Wagga Wagga in Australia was completed in October 2023, where it acquired multifranchise dealerships representing nine brands across two sites, with a predominant focus on the Ford, Kia, VW, and Nissan brands.
The group said the acquisitions are performing in line with expectations.
South Africa
Valued at about R17 billion on the JSE, Motus employs about 20 000 people, and has 342 dealerships in South Africa.
The country accounted for more than half of its revenue and about two-thirds of core profit in its first half. The group also operates in Australia, Asia and has 178 retail outlets in the UK.
In South Africa, the group reported a 3% revenue decline while operating profit fell by almost a third, hit by weak consumer demand and other factors. Motus is the exclusive South African importer of Hyundai, Renault, Kia and Mitsubishi.
Delays at the ports resulted in increased lead times on imported products, primarily in the last two months of the reporting period, negatively impacting sales, it said, while competition was also tough amid new entrants and competitive pricing from rivals.
New vehicle sales in South Africa slumped 10%, but pre-owned sales picked up 2%.
Its rental business in South Africa fared far better, aided among other things by increased corporate travel and tourism, but Motus reported that its passenger and commercial vehicle businesses, including the UK and Australia, retailed about 3% fewer new units at 64 076, while pre-owned units picked up about 0.75% to 43 747.
The group said that new vehicle buyers are shifting to smaller and cheaper cars.
‘Resilient’
“We are pleased to report another resilient trading performance despite the current economic landscape and increased competition offering new vehicle derivatives and competitive pricing,” CEO Osman Arbee said in a statement.
“Our two key strategies of internationalisation and diversifying the business away from the reliance on vehicle sale profitability are providing support for the areas of the business that are more severely impacted by the weak economic environment.”
Arbee said yesterday the company also expects positive revenue and core profit growth for the full year, though consumer confidence is expected to remain under pressure.
Organic growth and its internationalisation efforts are expected to assist with value creation even beyond 2024, he said.
“While the prospect of interest rate cuts in the latter part of 2024 should assist, the stagnant economic backdrop does not point to a meaningful economic rebound in the near term,” the group said.– Fin24