Mo­tor re­tail­ers run­ning on empty

CMH di­rec­tor missed out on bonus, makes up by share sales

Finweek English Edition - - Companies & Markets - SIKONATHI MANTSHANTSHA sikonathim@fin­

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

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