Motus making an acquisition in Europe following solid annual earnings growth
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Motus rebounded stronger than expected in its first full year of trading during the Covid-19 crisis and is in pursuit of strategic growth initiatives such as further, timely, share buy-backs and acquisitions, chief executive Osman Arbee said on Tuesday.
The group’s strong annual results was reflected in the share price, which was up 4.4 percent to R93.83 yesterday afternoon. The price is up about 240 percent over a year. In the year to June 30, headline earnings grew 298 percent to 1 179 cents per share.
He said cash reserves were healthy and the balance sheet was sound. One such strategic initiative included the current final negotiations to expand its Aftermarket Parts business footprint through the acquisition of a wholesale operation in Europe for around R700 million.
Also, in the year to June 30, Motus acquired a 49 percent stake in getWorth – a technology innovator in South Africa’s pre-owned vehicle sector. An additional 11 percent was subsequently acquired.
In the past year the group bought back 6.5 million shares at an average price of R75 during a period when there were not many acquisition opportunities, and when the share price was trading at a low price compared with net asset value.
Significant free cash flow of R5.9 billion (R3bn) was generated through the year from solid operating profits, lower finance costs and reduced working capital.
The full year payout came to 415 cents per share, comprising a 160 cents interim dividend and a 255 cents final dividend.
“We are well-positioned to maintain our leading position in South Africa and grow in selected international markets. Our focus is on deepening competitiveness and relevance across the automotive value chain, by driving organic growth through optimisation, innovation and with selective bolt-on acquisitions,” he said.
“We have continued to build on our back-to-basics plan,” he said.
The impact of the Covid-19 crisis on the global automotive industry had been extensive, resulting in disruptions across manufacturing, supply chain and a weak economic environment, he said.
Motus dealt with these and other challenges by converting excess inventory and vehicle rental fleet into cash, aligning operations to the changing environment and by utilizing government relief programmes, mainly outside South Africa.
New model launches, an increased online presence and lower interest rates in South Africa also allowed it to quickly attract customers once lockdown restrictions eased.
Cost containment in the prior year and a faster than expected industry recovery saw operating profit increase 78 percent to R3.79bn. All business segments improved their contribution to operating profit except Financial Services, which was marginally lower than the prior year.
Group revenue improved by 19 percent to R87.2bn supported by a better performance in the Import and Distribution segment, the retail businesses (in South Africa, the UK and Australia from increased sales of new and pre-owned vehicles), and the Aftermarket Parts unit, via volume increases.
The Import and Distribution business segment increased revenue 13 percent in line with the increased sales volumes for vehicles through the retail channel and parts, selling price increases and new model releases. Operating profit was up 10 percent off.
Revenue in Retail and Rental, although dampened by a lower revenue contribution from car rental, increased 18 percent from higher revenue at the South Africa new and pre-owned retail dealers.
Arbee said he hoped the car rental sector would grow again when international tourism recovered, possibly in March or April next year.
Pre-owned dealerships were positively impacted by de-fleeting of car rental vehicles, UK retail operations improved September 2020 and March 2021 registration months, and Australia was assisted by acquisitions. Operating profit increased across all areas of the Retail and Rental business.
Reduced fleet rental and replacement of units, and lower revenue on service and maintenance plans saw Financial Services revenue fall 7 percent and operating profit decline by 3 percent.
Aftermarket Parts reported revenue and operating profit increases of 21 percent and 74 percent respectively. This was from servicing pent-up demand, inventory availability, range expansion and synergies from vertical integration.