Johannesburg - Listed vehicle retailer Combined Motor Holdings (CMH) has discontinued the importation and sales of the Chinese-manufactured MG passenger car and Maxus commercial vehicle range in South Africa because of the continuing decline in the value of the rand.
MG, the iconic British sports car brand, is now owned by Chinese automotive giant Shanghai Automobile Industry Corporation.
The operations of the MG and Maxus brands were conducted in South Africa under the banner of Mandarin Motors, the motor vehicle and importation distribution division of CMH. Jeb McIntosh, the chief executive of CMH, said yesterday the inventory of these vehicles had been sold, but the group would continue to offer facilities to support customers and the brand in terms of parts supply, warranty and service back-up.
McIntosh also had bad news for prospective new vehicle buyers and believes new vehicle prices will increase on average by between 12 percent and 15 percent this year compared to 6.5 percent last year.
He said motor manufacturers last year overestimated the size of the market and built more vehicles than needed, resulting in manufacturers and their dealer networks offering generous incentives to boost volumes and clear inventory.
McIntosh said this helped to shield the market from price increases that should have followed the depreciation in the value of the rand.
Improvement
“It is unlikely these special deals will be repeated to the same extent in 2016,” he said.
CMH yesterday reported a 10.8 percent increase in headline earnings to R202 million in the year to February from R182.3m in the previous year.
After adjustment for the lower average number of shares in issue, this translated into a 27.2 percent improvement in headline earnings a share to 247.5c from 194.6c.
The lower number of shares in issue resulted from the group repurchasing 21.1 million shares for a total outlay of R251m during the year. Revenue grew by 2.6 percent to R11 billion from R10.7bn.
McIntosh said that the revenue growth was achieved, despite a revenue loss of about R360m from the closure of two large dealerships. He attributed the revenue increase principally to an increase in vehicle sales volumes.
McIntosh said the gross margin declined to 15.8 percent from 16.3 percent, because of pricing pressure, but was offset by a 2.6 percent reduction in selling and administration expenses. This resulted in a 10.9 percent increase in operating profit before goodwill impairment to R395m from R356m.
A goodwill impairment charge of R22m related to dealerships that were closed.
After eliminating the goodwill impairment, the operating margin improved to 3.6 percent from 3.3 percent.
A dividend of 85c was declared, increasing the dividend for the full year to 131.5c, which is almost 35 percent higher than the previous year.
McIntosh believed the performance of the group was ”excellent” bearing in mind the challenging trading and economic conditions it faced in the year.
Challenging
But McIntosh said the year ahead was expected to be extremely challenging and dominated by higher interest rates, a further rise in unemployment levels and political uncertainty.
McIntosh said that the demand for quality used vehicles was growing as the pricing gap between new and used vehicles grew and a focus on this area during the past three months had led to a 20 percent year-on-year increase in sales volumes. He believed CMH would emerge favourably from a difficult year.
Shares in CMH rose 1.27 percent yesterday on the JSE to close at R16.
BUSINESS REPORT