COMPANIES
New car sales flat for Motus, but spares and international business help drive profits
![New car sales flat for Motus, but spares and international business help drive profits](https://www.dailymaverick.co.za/wp-content/uploads/2023/02/GettyImages-1229215788.jpg?w=720)
The group increased its revenue by 16% to R106.32bn in a challenging economic climate.
In government-speak, 2022/23 could be described as “challenging” and for Motus Holdings, which delivered its annual results against difficult market conditions, it meant profits from new vehicles in South Africa were flat, growing by a razor-slim 1% in the year to 30 June.
In a challenging economic climate, diversifying is your friend as the automotive business is spread across various segments, not only here but also in the UK, Australia, Southeast Asia and Africa.
Motus is the exclusive SA importer and distributor of Hyundai, Renault, Kia and Mitsubishi vehicles and parts, which collectively have about 22% of the local passenger vehicle market share.
It also distributes these brands in Botswana, Eswatini, Lesotho, Malawi, Mozambique, Namibia, Zambia and Zimbabwe, with exclusive distribution rights for Nissan in Kenya, Zambia, Tanzania and Malawi.
Despite the sluggish performance of its new car segment, Motus increased revenue by 16% to R106.32-billion (up from R91.98-billion in 2022); hiked Ebitda (gross profit less operating expenses) yields by 19%; raised operating profit by 14%, due to a recovery in the automotive and vehicle rental sectors; increased profitability from value-added products and services, as well as from contributions from international businesses; and saw a 25% increase in net asset value to 10,189 cents per share.
Free cash flow generated from operations came to R90-million — down sharply from last year’s R4.84-billion — which was primarily utilised by increased investment, finance costs and taxation.
It declared a full-year dividend of 710c per share.
Revenue and operating profit in its Retail and Rental segment were up by 14% and 16%, respectively, but it sold fewer vehicles in the year under review. Last year it sold 88,929 new and 88,942 used vehicles; this year, it sold 87,194 new and 84,929 pre-owned vehicles.
All geographies were negatively affected by the increased cost of vehicles and parts, and inflationary operating costs, it said in a statement.
Heavily reliant on consumers’ ability to access finance, the high interest rate climate, compounded by rolling blackouts, the weaker rand, above-inflationary increases in freight and logistics costs, and other pressures have eaten into profits.
International growth
In October 2022, Motus acquired Motor Parts Direct as part of its international growth strategy for its aftermarket car parts segment, which CEO Osman Arbee said strengthens the company’s integrated business model, reduces dependency on vehicle sales and is cash-generative.
“It has exceeded our expectations and contributed for nine months a meaningful 8% towards group Ebitda for the year,” Arbee said.
Motus also acquired three Mercedes-Benz passenger dealerships and one commercial vehicle dealership in Gauteng in November last year.
Its Import and Distribution segment increased revenue by 3% — mainly because of higher selling prices.
Revenue from vehicle rental and operating profit increased by 26% and 12%, respectively, driven by an uptick in tourism and price increases.
In the UK, revenue and operating profit for retail were up by 21% and 17%, respectively, with increased volumes and after-sales contributions from the commercial trucking division, but its passenger division was hurt by OEM supply constraints, logistic issues and reduced consumer disposable income.
Its Australian operations, which had inventory issues, saw revenue and operating profit for retail increase by 21% and 12%, respectively, as greater margins were achieved from the vehicles sold.
Spare parts helped increase revenue and operating profit by 52% and 62%, respectively.
Inflation remains stubbornly high and continued interest rate increases are constraining economic activity globally. The outlook is uncertain, with consumer and business sentiment expected to remain under pressure over the short to medium term.
Arbee said they were fortunate because not only do they have a wide variety of dealerships, but also because profits are not dependent on new car sales.
“We don’t only make money from selling cars, but from parts, workshops and things like that. And if you look at mobility solutions, they are not impacted by a car sale today — they are impacted in two to three years from now,” Arbee said.
The aftermarket segment is consistent because customers need to repair their out-of-warranty cars.
“Because we have the variety — businesses that are in different sectors and segments — we still produce a great set of results, with a 16% increase in revenue and 14% increase in operating income. In this environment, to be producing that kind of result, it’s a great result.”
While 30% of operating income comes from offshore sources, in South Africa, the car rental business is doing particularly well, he said, boosted by a return of leisure and business tourists as well as insurance claims.
“We sold less cars this year than we did last year but the profitability is still up. So, it means the strategy and the model of diversification is working.”
The market didn’t seem too convinced though, with the share price down by almost 4% on Wednesday. DM
![Gallery](https://www.dailymaverick.co.za/wp-content/themes/daily-maverick/images/gallery-icon.png)
Comments - Please login in order to comment.