CMH earnings down 9.6% in tough market conditions

Combined Motor Holdings (CMH) has reported a 9.6 per cent decline in headline earnings per share for the 12 months ended February, reflecting the challenging economic environment. The company's revenue dropped by 23.1 per cent during this period. Despite the decrease, CMH CEO Jebb McIntosh remains optimistic about the potential recovery in the car market and the company's prospects going forward. McIntosh shared his insights during a recent interview with CNBC Africa. McIntosh acknowledged that the past year was challenging due to the COVID-19 pandemic and the resulting lockdowns. However, he highlighted that CMH's performance of 11% growth for the year outperformed some of its competitors who experienced declines of 70% to 80%. Looking ahead, McIntosh expressed optimism about the expected market recovery, projecting vehicle sales to range between 420,000 and 460,000 units for the current year. One key driver of the market's upside is exports, with an uptick of 48% observed so far. While CMH focuses on the retail side of the business and is not directly involved in exports, McIntosh emphasized the importance of local manufacturers capitalizing on this opportunity. Discussing the challenges faced by consumers in the current market, McIntosh pointed out that vehicle inflation is primarily driven by the exchange rate, leading to price increases of approximately 15% over the year. However, he noted a more positive outlook for the coming year due to the relative strength of the rand compared to the previous year. Despite consumer pressure, lower interest rates and more flexible bank criteria are providing some relief. The global semiconductor shortage has also impacted the automotive industry, resulting in supply chain disruptions. McIntosh explained that the shortage has affected CMH's stock levels, leading to longer waiting times for certain car models. Despite these challenges, the company has managed to achieve better gross profits on the vehicles sold. When discussing the COVID-related costs incurred by CMH, McIntosh highlighted that the company implemented new plans, processes, and cost-cutting measures during the period. While some costs were temporary and not expected to carry forward, the efficiency improvements and digital sales initiatives will contribute to long-term savings. Regarding the performance of dealerships in the industry, McIntosh expressed satisfaction with the majority of dealers surviving the challenges, with operating profit margins reaching a recent year high in the second half of the year. He remains optimistic about the profitability of the business moving forward, especially with the potential economic recovery and successful vaccine rollout. In terms of delivering value to shareholders, McIntosh mentioned the expected recovery of CMH's car hire division and improved performance in financial services. He anticipates a return to normalcy in these areas, which will drive positive outcomes for the company. Despite the tough market conditions, Jebb McIntosh's optimism shines through as he navigates CMH through the challenges and looks towards a brighter future for the company and its shareholders.