CMH slips into R14.3m loss, but declares dividend
CAPE TOWN - Combined Motor Holdings (CMH) fell into a R14.3million loss in the six months to August 31, compared with R115.8m profit made at the same time last year, due to the lockdown closure of its businesses, but shareholders will nevertheless cheer the declaration of a dividend.
The group, which had to close its motor dealerships, vehicle parts and car hire operations during the hard lockdown levels, and which reduced its staff by 24percent, declared a 100 cents dividend, well up from 61 cents at the same time last year.
The share price rose 4.5 percent to R13.85 on the JSE yesterday afternoon after the announcement, before closing at R13.26.
Directors said the dividend was declared because there had been a return to some form of normality and predictability in the market with the easing of the lockdown.
CMH sat with strong cash resources of R609.6m at the end of the period, up 13 percent over the same time last year. Net asset value was up 5.9 percent to R10.74.
Revenue declined 38 percent to R3.55bn, while operating profit fell 75.7 percent to R48.64m.
Directors said they were disappointed, as the pandemic had placed a “massive financial strain on the economy and group” - the full period of Covid-19, from announcement to alert level 2, fell squarely in the group’s reporting period.
Full trading only resumed on June 8. However, positive returns were reported in June, July and August, they said.
During lockdown a commitment to buy a property worth R72m was honoured, as was the R24m acquisition of a replacement parts business. There were no additional borrowings.
The car hire fleet, which was most affected by the lockdown because of Covid-19 travel restrictions, particularly at airports, had been liquidated by a net R160m, and the corresponding borrowings settled.
The property purchased had been classified as "held for disposal’’ and was being sold, at cost, to a black economic empowerment partner.
Inventory levels were rebalanced in line with new trading conditions, trade receivables at year-end have been collected without abnormal write-offs, and trade payables have been settled in accordance with due dates.
Restructuring costs and of compliance with Covid-19 protocols had been expensed.
In motor retailing, a rebound following the re-opening of business had seen parts and service trading levels at 80 to 90 percent of the corresponding months last year.
Vehicle sales were hampered in the early days of trade, because testing stations and licensing offices opened only on June 9.
New vehicles sales were about 70 to 75 percent of prior year levels, and used vehicles at around 95percent.
Dealers are experiencing shortages of popular new vehicle models, which would inhibit growth in the short-term.
Customer finance approval rates had improved only marginally over the past two months, despite the reduced interest rate as well as consequent lower monthly repayments and approval rates were still well below pre-Covid levels.
The balancing of the car hire fleet, which took longer than expected due to not being able to trade, the delayed opening of vehicle testing stations, and the flood of vehicles retired by other car hire operators, was expected to complete at the end of the month.
In the meantime, the growth in hire days was slow but steady, off a zero base.
The insurance cells were generally unaffected by the short hiatus.
Although no new policies were written, claim levels were lower, and the annuity income from prior year policies continued.