JSE-listed public retail company Combined Motor Holdings (CMH) on Wednesday announced that its directors were disappointed with the company’s six-month financial performance.

Tracking national vehicle sales, revenue declined 23% and attributable earnings and earnings per share declined by 84%. Net profit fell to R7 517 000 from R63 897 000 a year earlier.

The company had, however, achieved a substantial saving in its overhead expenses, and further reductions were expected during the second half of the year. Additionally, the full cost of branch closures and staff reductions had been absorbed, and the directors were confident that the measures taken would benefit the group when sales volumes improved.

However, despite the lower overhead costs, the declining sales volumes resulted in a 72% fall in operating profit, while net finance increased by 65% as a result of a higher average prime overdraft rate.

The company stated that in its retail motor sector, high interest rates and the adverse impact of the National Credit Act continued to dominate the trading environment, and the finance houses significantly reduced credit application approvals.

The group’s workshop and parts departments both recorded revenue and profit growth, while substantial overhead savings and a 17% reduction in net finance costs were, however, not sufficient to offset the revenue reduction, and operating profit was down by 76%.

With regard to the car hire sector, the company reported that, coupled with the higher interest rates, the depressed used vehicle market experienced lower realisation prices and less flexibility to reduce the fleet size during off-peak periods. The price war among the competitors in this sector also placed the gross margins under pressure.

The marine and leisure division reported that the depressed conditions, coupled with the seasonal placement of the six-month review, resulted in a R12,8-million loss. However, the operation had been substantially restructured and six outlets were reduced to two, and head count was reduced by 51%. The directors noted that a significant improvement was expected for the second half of the year.

The company stated that the difficult trading conditions were expected to continue to at least the end of 2009, and the decline in new passenger vehicle and light commercial vehicle sales were set to continue. “International markets are depressed and the effects continue to spill over into the domestic economy.”

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