Motor retailers running on empty
CMH director missed out on bonus, makes up by share sales
FEW WOULD HAVE felt the sting of the higher inflation and interest rates more than stakeholders at vehicle retailer Combined Motor Holdings (CMH) and its peers in the industry. The sharp drop in passenger vehicle sales of between 15% and 20% resulted in a 42% decline in net profit at CMH in the year to February 2008, wiping out directors’ performance bonuses and about 76% of the group’s market capitalisation.
“These seemingly modest falls mask the more severe decline in the dealer market as car hire, Government and single unit sales boosted the total market,” wrote CMH CE Jebb McIntosh in its February 2008 annual report. By “modest falls” McIntosh was referring to the 12,9% drop in CMH’s vehicle sales. Along with that, CMH’s price dropped from 2100c in March 2007 all the way to 1200c/share a year later and further down to 525c/share in July this year. Its price has since rebounded to the current 750c/share. At the same time bigger rival Imperial Holdings came crashing down from R168 to R75/share and currently R50/share.
CMH executive director Stoffel Odendaal decided at around those levels to salvage some value and cash in his 362 500 shares last week. The 725c/share sale netted Odendaal R2,6m – twice the performance bonus he received during the year ended February 2007 but missed a year later.
CMH’s franchise director for Investment Cars – Lamborghini, Volvo, Jaguar, Land Rover and Volkswagen – Odendaal has been a consistent seller since June, having sold a total 450 000 of 515 000 shares he held as at February 2008. He still has 338 000 share options, exercisable at 512c/share in February.
“Mid-2007 was a period during which a number of negative events coincided to produce a dramatic change,” wrote McIntosh. He mentioned the Transport Department’s eNATIS vehicle registration system’s introduction in April, the National Credit Act in June and the interest rate increases since June as factors that conspired to crash the company’s speedy sales record of 10 years. “During the first two weeks (of the NCA) almost no vehicle sales were invoiced by the group.”
Then there was Jacob Zuma’s election as ANC party president, the electricity crisis and yet more interest rate hikes. The used car market traditionally compensates for a fall in new vehicle sales as consumers “buy down” to more affordable levels. But not this time, as the NCA exposed consumers’ over-indebtedness. “During the last quarter (to February 2008) used vehicle sales plunged and margins were decimated as traders were forced to liquidate their investments,” says McIntosh. However, CMH still managed a net profit of R111,9m and declared a dividend of 61,6c/share, which was nearly two-thirds of headline earnings per share.
Dave van Niekerk, CE of microlender Blue Financial Services, sold 31m of his shares for completely different reasons. He swapped the shares for single stock futures to release approximately R207m to settle his cash liability to the shareholders of Credit U Holdings. As part of Blue’s R278m allshare offer for the acquisition of its fellow AltX-listed microlender, Van Niekerk has undertaken to buy half the Blue shares received by Credit U shareholders as a partial cash settlement of the buying consideration. His 668c/share open market sale compares favourably against the 540c/share purchase on settlement of the Credit U transaction.
Sales crashed. Jebb McIntosh