Combined Motor Holdings earnings fall amid economic ‘onslaught’

Combined Motor Holdings (CMH), whose brands include First Car Rental, said earnings fell in the year ended February amid an “onslaught” of political and economic obstacles.

“The widespread corruption, mismanagement of state-owned enterprises, uncertainty regarding land expropriation threats, and political leadership focused on short-term tactics ahead of the election, have combined to reduce business confidence to near all-time lows,” CEO Jebb McIntosh said.

Headline earnings per share fell 8.3% even as revenue grew 5.5% to R11.2bn, McIntosh said in the group’s financial report.

Revenues were up due to a “slight increase” in vehicle sales volumes, a greater mix of higher-priced luxury models, and new vehicle prices being 2% to 3% higher. But margins fell amid heightened competition, he said.

Despite the fall in earnings, CMH said it would keep its dividend unchanged at R1.15 per share.

“It is not easy to be optimistic about the short-term future of the domestic market,” McIntosh said. “The brief euphoric spell, which prevailed during the first months following the election of our new president early last year, soon evaporated in the face of daily revelations of large-scale corruption, further job losses, higher indirect taxes, and a power struggle ahead of the May elections between the ANC and the labour unions, and within the party itself.”

Eskom’s troubles were “highly disruptive and costly”, he said.

At the same time, forecasts of national motor sales growth for 2019 varied from a decline of 1% to growth of 2% — implying the worst level in almost a decade, McIntosh said.

“On the positive side, interest rates appear to be stable, and, in real terms, new vehicle affordability continues to improve.”

New vehicle price increases were likely to remain low, he said. Further, CMH was “in a sound financial position”. 

“The missing ingredient is a boost to the revenue line.”

hedleyn@businesslive.co.za