CMH happy with marginal earnings in low-growth environment |

COMBINED Motor Holdings’ directors were satisfied with the marginal 2 percent rise in headline earnings per share to 120.9c in the six months to August 31 given the low growth environment and low consumer confidence levels.

“The results compare favourably with the group’s peers and many of the large companies within the retail sector,” they said at the release of the results yesterday.

The interim dividend was held at 61c per share.

Weak economic growth saw national sales of new cars and light commercial vehicles falling 3.5 percent in the interim period, with a continued trend towards lower-priced models.

“Only the proliferation of sales incentive schemes and subsidised finance rates has kept this level from further decline.”

The used car market fared no better, with an estimated 4 percent to 5 percent drop in sales over the period.

Revenue increased 2.6 percent to R5.72 billion, with 1.5 percent of the growth attributable to the acquisition of two new dealerships. The gross margin improved to 16.8 percent from 16.3 percent.

If the added costs from two acquisitions were stripped out, the like-forlike increase in selling and operating costs was only 3.2 percent. In an industry with thin operating margins, the containment of costs is vital.

The net interest charge also fell 2.9 percent, reflecting better cash flow management, and which enabled the use of surplus to accelerate the repayment of interest-bearing debt.

Once-off legal costs for the acquired dealerships was expenses, and the operations were expected to be cash and profit-generating during the second half.

Trading margins remained under pressure as dealers competed for market share and pressure from manufacturers to hold more inventory was “unrelenting.”

A number of new showrooms were opened that share overheads with an existing dealership.

The costs of refurbishing and signage required to bring the premises to manufacturer standards had been fully absorbed.

In contrast, the renewed focus on the used vehicle departments was “well rewarded”. Sales volume growth of 1.8 percent was complemented by improved margins, resulting in “pleasing profit growth” in the depressed market.

Combined Motor Holdings shares closed 1.67 percent lower at R20.55 on the JSE yesterday.