Directors of investment holding company Combined Motor Holdings (CMH) say they are satisfied with the results achieved in the six months ended August 31, during which time the local economic environment continued to battle impediments to growth and national dealer new vehicle sales dropped 9%.

However, the company’s greatest headwinds came in the form of continued labour disruptions.

“The period under review was extremely disrupted. After the many national holidays in March and April, which reduced productivity, the motor manufacturing industry was hit by protracted strike action, which brought           production to a virtual standstill.

“The first strike at the assembly plants was followed by a second at the component manufacturers, and a third at the steel and engineering suppliers. Labour extremists seem to consider the motor industry – South Africa's biggest manufacturing industry – to be a legitimate target in pursuit of their political aspirations,” it said in an interim results statement on Wednesday.

Describing the loss of income to both workers and the fiscus as “severe,” CMH reported that it had implemented a strategy, in April, to “eliminate” the group's lossmaking retail motor operations.

“This exercise has borne fruit, and prior period net losses in excess of R10-million have been eliminated,” it stated.

FINANCIAL PERFORMANCE
The company’s headline earnings per share for the “disrupted” half-year increased 10% and continued strong cash generation enabled the directors to recommend a dividend of 32.5c a share, up 16% over that declared in the prior year’s comparable period.

Off marginally increased revenue, the gross profit margin improved from 13.2% to 13.4%, expenses were contained at a 5% increase, and the operating profit margin reduced from 3% to a “still creditable” 2.9%.

Despite the closure of operations, the group’s new vehicle unit sales declined 8.3% compared with the dealer industry decline of 9% during the period under review.

Operating margins remained under pressure at 2%, but expense levels had been contained below inflation.

Tight control over working capital resulted in a 12% reduction in finance charges, and profit before taxation, at R73.5-million, was marginally up on the prior period.    

The car hire segment, meanwhile, recorded “excellent” growth, with an 18% increase in pretax profit, while the segment’s profit margin had improved from 9.3% to 10.3% after absorbing the effects of the interest rate hikes on the cost of financing the fleet.

“The improvement is largely as a result of the stable used car prices, which have generated a higher return for the retired fleet, and improved daily rental returns,” the company outlined.

The rental division increased its footprint over the period, with the opening of two new branches.

The results of the marine and leisure division, meanwhile, were “disappointing”.

Despite various restructuring and cost-cutting measures, this segment continued to suffer the effects of consumers' reduced disposable income.

“Management is reviewing its options regarding the future viability of this operation,” CMH stated.

PROSPECTS
After “a slow start” to the financial year, the group experienced an improvement during July and August, and the early signs were that this trend would continue.

Improved national new vehicle sales in September showed there had been a pickup in business activity, albeit off a relatively low base.

“While the motor industry expects further price hikes this year, attractive incentive packages, pre-emptive demand and expected stable interest rates should sustain demand,” it said.

CMH would shortly open six Datsun and four Mazda outlets, all of which would be accommodated within the existing overhead structure.