Roy Cokayne
LABOUR extremists seemed to consider the motor industry, South Africa’s biggest manufacturing scetor, to be a legitimate target in pursuit of their political aspirations but the loss of income to both workers and the fiscus was severe, said listed vehicle retailer Combined Motor Holdings (CMH) yesterday.
Jebb McIntosh, the chief executive of CMH, was commenting on the impact of the strikes during CMH’s interim financial reporting period for the six months to August.
McIntosh said the period under review had been extremely disrupted, adding that after the many national holidays during March/April, which had reduced productivity, the motor manufacturing industry was hit by protracted strike action that brought production to a virtual standstill.
“The first strike, at the assembly plants, was followed by a second at the component manufacturers, and a third at the steel and engineering suppliers,” he said.
However, he said, after a slow start to the financial year the group had experienced an improvement during July and August and the early signs were that this would continue.
“Improved national new vehicle sales in September showed there has been a pick-up in business activity, albeit off a relatively low base. While the motor industry expects further price hikes this year, attractive incentive packages, pre-emptive demand and expected stable interest rates should sustain demand,” he said.
McIntosh said the group would shortly open six Datsun and four Mazda outlets, all of which would be accommodated within the existing group’s overhead structure.
CMH yesterday reported 10 percent growth in headline earnings a share to 86.7c in the six months to August, from 79.1c in the previous corresponding period.
Revenue rose to R5.49 billion from R5.37bn. Operating profit decreased by 1.5 percent to R735.6 million and the operating profit margin deteriorated to 2.9 percent from 3 percent.
The group used R200m of its cash resources for a share buyback during the reporting period, resulting in net finance charges rising by 7 percent. Expenses were contained and rose by 5 percent to R578.7m from R550m.
A dividend of 32.5c was declared, 16 percent higher than the 28c declared in the previous period.
McIntosh said the directors were satisfied with the results considering the economic environment during the period under review, which led to a 9 percent decline in national dealer new vehicle sales.
He said a strategy had been implemented to eliminate the group’s loss-making retail motor operations, which had eliminated the net losses in excess of R10m in the prior period.
Despite the closures, group new vehicle unit sales had declined only 8.3 percent compared with the dealer industry decline of 9 percent during the period under review, he said.
McIntosh said the group’s car hire segment recorded excellent growth, with pre-tax profit increasing by 18 percent and the profit margin from 9.3 percent to 10.3 percent after absorbing the effects of the interest rate hikes on the cost of financing the fleet. He attributed this improvement largely to stable used car prices.
However, McIntosh said the results of the marine and leisure division were disappointing.
McIntosh said despite various restructuring and cost-cutting measures, this segment continued to suffer the effects of consumers’ reduced disposal income and management was reviewing its options.
McIntosh said the directors believed the group would deliver satisfactory results during the next six months. The shares closed unchanged yesterday at 1 200c.