Osman Arbee. Picture: ROBERT BOTHA
Osman Arbee. Picture: ROBERT BOTHA

Listed automotive group Motus Holdings expects full-year revenue to be flat thanks to low GDP, pressure on disposable income, high unemployment and Brexit uncertainty.

In an update to shareholders, Motus, the automotive unit that unbundled from Imperial Holdings and listed separately on the JSE in November 2018, said it expected to “maintain” revenue in the financial year.

This is contrary to the company’s previous forecast in February when it said it expected to increase full-year revenue. 

“Much water has flowed under the bridge since the previous forecast due to major deterioration in confidence and lack of disposable income,” Ron Klipin of Cratos Wealth said on Wednesday.

Motus said pressures on disposable income in SA had weighed on spending, with consumers shifting to affordable vehicles from premium-brand vehicles.

‘Negative consumer behaviour’

“This was caused by increases in utility bills, principally from higher electricity prices as well as increased municipal charges, whilst uncertainty regarding SA and global scenarios added to negative consumer behaviour,” Klipin said.

He said the macroeconomic factors were beyond the control of the company’s management. The company had a niche in the market as it imported affordable Korean vehicles, said Klipin.

Motus said it expected to maintain operating profit, improve working capital efficiency, reduce debt and grow normalised headline earnings per share in the financial year.

“Worldwide, the automotive industry is facing considerable change, with major disruptive trends likely to change the way vehicles are purchased, used and maintained in the medium to long term.”

Motus said its UK business had been affected by political uncertainty arising from Brexit.

“The Mercedes commercial dealerships have been negatively impacted due to the once-off restructuring of the business, carbon emission issues resulting in a lack of inventory availability, lower truck and van sales resulting in a reduction of variable margin earned,” Motus said. 

Independent analyst Anthony Clark of Small Talk Daily Research said Motus was a well-run business and its unbundling from Imperial should allow management to focus on the operations.

Motus’s exclusive rights to certain vehicle brands gave the firm an advantage over some of its competitors. “Thus it is better placed in its market segment as many of its brands, such as Hyundai, are seen as affordable in a tight economic segment,” Clark said.

But he said that since the unbundling, Motus’s share price has been lacklustre. Since its debut on the JSE on November 22 2018, Motus shares have increased by 1.12%, while in the same period the JSE all share index is up 14.39%.

“We have seen from results [from investment holding company Combined Motor Holdings] that vehicle sales in all sectors remain tough and the only benefit is that the vehicle park is getting older, which bodes better for vehicle spare parts and maintenance sales,” Clark said.  

Motus shares were up 1.33% to R85.41 on Wednesday.