CMH leaves rivals eating dust
Growth in new-car sales far outstrips industry average, but consumers steer towards more affordable vehicles
Combined Motor Holdings (CMH), whose long-term earnings have been driven by a reliable profit engine, hiked its final dividend 15% to 115c a share as new-car sales recorded through its sprawling dealership network raced well ahead of the national average.
On Tuesday, the company’s financial statements for the year to end-December reflected new-vehicle sales growth of almost 12% compared with a slender growth in the national average of just 0.4%.
CMH CEO Jebb McIntosh said the Toyota, Nissan, Honda and Mazda brands had mainly driven the above-average growth in new-vehicle sales.
The luxury market continued its declining trend, with sales slipping 8.1%, he said. Sales had declined by a third in three years in this niche.
"Fortunately, the luxury brands form a relatively low proportion of the group’s model mix. However, the Jaguar, Land Rover and Volvo dealerships experienced a difficult year."
CMH’s revenue was up only 3% to R10.6bn. McIntosh said that the growth in new-vehicle sales had not translated into significant revenue growth because the model mix of sales trended towards lower-priced and more affordable options.
CMH was able to achieve most manufacturer sales targets, with the incentives earned boosting gross margin. Gross profit margin increased to 16.7% from 16.4% previously with operating margins fattening to 4.14% (3.7% previously).
McIntosh said CMH’s used-vehicle unit sales increased 6.3% from continuing operations with the back-end departments such as the workshop and parts segments also recording pleasing, steady growth.
These departments produced the stable and dependable base on which all successful dealerships were founded. "Their ongoing contribution is reassuring," he said.
While CMH has diversified into car rental and financial services, the core vehicle retailing business accounts for 93% of turnover and 70% of profit before tax.
McIntosh was pleased with the car hire division’s profitable traction with the R64m profit contribution representing 19% of group pretax profits.
The car hire division faced severe headwinds during midyear when the traditionally slow winter months were aggravated by political turmoil and lower inbound tourist numbers. But in the summer, from November, the car hire division substantially increased its fleet utilisation rate and rental income per day.
The CMH financial services hub shrugged off the three-year trend of declining vehicle sales with growth of 234% in premium income.
McIntosh said that CMH was well positioned for continued growth. "We have remedied our loss-making businesses, pared operating costs and are keenly focused on marketing and customer service."