Commentary
Environment
The impact of the COVID-19 crisis on the global automotive industry has been extensive. In its wake, the industry is absorbing manufacturing, supply chain and operational disruptions. This has resulted in vehicle shortages and substantial increases in production, freight and logistics costs. The industry has responded well, supported by strong consumer demand and continuous funding by the Banks. We believe that vehicle volumes will grow as the global supply chain stabilises with increased production to satisfy pent-up demand and normalisation of inventory levels.
South Africa
The South African new vehicle market is performing ahead of expectations as the market recovery continues to gain momentum. According to naamsa1, South Africa retailed 236 682 units for the six months to 31 December 2021 (8,6% ahead of the prior period 217 860 units). At December 2021, our retail market share at ~22,6% was ahead of the prior year which was ~20,2%. The forecast to 30 June 2022 is between 470 000 to 490 000 vehicles. Motus' increased market share to date has been supported by an expansion of its vehicle model range, particularly in the growing entry-level and small to medium SUV categories (due to consumers buying down), coupled with exciting new model launches. The region was also impacted by erratic inventory supply.
The South African economy remains subdued with 2021 gross domestic product (GDP) forecasted to be 5,0%2. Existing political and economic challenges have been further exacerbated by the slow rollout of the COVID-19 vaccine programme. Continuing low growth, reduced disposable income, depressed consumer confidence, high unemployment, increasing interest rates and high social vulnerabilities have been countered by improvement in the overall economic environment.
The South African 2022 GDP has been revised to increase by between 1,9%3 and 2,8%2, with the economic recovery forecast to continue in the short term.
United Kingdom (UK)
The UK new vehicle market has declined for the six months to December 2021, with the passenger market declining by 25%4, the LCV market declining by 11%4 and the heavy commercial vehicles declining by 10%. The market was constrained due to erratic vehicle supplies being experienced by OEMs. Despite this, Motus maintained its retail market share. The UK automotive market is showing positive signs of recovery in both the passenger and commercial segments with annual new vehicle sales (excluding heavy commercial vehicles) increasing by 4%4 to 2 008 549 vehicles for the 12 months to 31 December 2021.
The economy is recovering and expected to reach pre-crisis levels during 2022, with annual UK real GDP growth in 2022 forecasted to be between 4,5% to 5,1%5.
Australia
The Australian automotive industry remains highly competitive. The market grew by 2%6 for the six months to December 2021, with Motus maintaining its retail market share. The market was also constrained due to erratic vehicle supplies experienced by OEMs. Annual new vehicle sales amounted to 1 049 831 vehicles6 for the 12 months to 31 December 2021, compared to 916 968 vehicles6 in the comparative period, up by 14,5%6 for the calendar year.
Economic activity in Australia was disrupted and contracted in the last quarter of the calendar year, due to the reintroduction of COVID-19 restrictions amid rising infections. Annual Australian GDP growth in 2022 is forecasted to be 5,5%7.
Motus continues to grow and expand its participation in all aspects of the vehicle value chain with competitive products and services that maximise our share of the customer’s vehicle investment and engender loyalty.
Our business model allows us to maximise the income opportunities for each vehicle sold, enhanced by indirect vehicle-related revenue streams including VAPS, parts and accessories. This is further supported by annuity income-earning streams, strong cash-generation ability, and an experienced and entrepreneurial management team.
The Group’s ability to create value for all stakeholders over the long term is underpinned by its strategic agility as we deepen competitiveness, maintain market shares, and position the business to respond to changing market conditions.
| 1 | naamsa l The Automotive Business Council. |
| 2 | Econometrix: Macro Forecast – South Africa l Q1 2022. |
| 3 | IMF l Jan 22. |
| 4 | The Society of Motor Manufacturers and Traders. |
| 5 | PwC UK Economic Outlook l December 2021. |
| 6 | Federal Chamber of Automotive Industries – Australia. |
| 7 | Reserve Bank of Australia. |
Performance
The results for the six months ended 31 December 2021 reflect strong strategic and operational achievements with the automotive industry continuing on its journey to recovery. The business has established a new "normalised level", supported by improved profitability, a strong financial position and healthy cash generation.
The South African operations contributed 66% to revenue and 82% to operating profit for the period (2020: 64% and 83%, respectively), with the remainder being contributed by the UK, Australia and South East Asia.
The Group’s passenger and commercial vehicle businesses, including the UK and Australia, retailed 66 705 new units (2020: 57 503 new units), a 16% increase, and 47 533 pre-owned units1 (2020: 57 599 pre-owned units1), a 17% decrease, during the six-month period.
Revenue increased by 1% compared to the prior period. The Import and Distribution segment revenue increased by 17%, Aftermarket Parts by 5% and the Retail and Rental segment by 1%. Mobility Solutions contributed 2% less revenue.
The revenue increase was as a result of a 4% increased contribution equally from new vehicle sales, parts sales and rendering of services. This was offset by an 8% decrease from pre-owned vehicle sales.
Operating profit increased by R398 million (23%), with all business segments contributing towards the increase. The segments generated the following increases: Import and Distribution R189 million (44%); Retail and Rental R150 million (20%); Mobility Solutions R25 million (5%) and Aftermarket Parts R25 million (9%) for the six-month period.
The increased operating profit is mainly as a result of the recovery of the automotive and car rental sectors which positively impacted gross income, coupled with increased margins achieved due to inventory shortages and disciplined cost management. Operations also partly benefitted from increased after-sales activity, acquisitions in the Retail and Rental and Aftermarket Parts segments, and the return to profitability of Bank joint ventures (JVs) in the Mobility Solutions segment. Profit margins were negatively impacted by the substantial increases in freight and logistics costs.
Net financing costs decreased by 28% mainly due to lower average working capital for the period and improved profitability which resulted in lower debt requirements. The decrease was further supported by the increased fair value adjustment gain recognised as a result of the unwinding of the interest rate swap and reduced IFRS 16 – Leases finance costs. We expect increases in finance costs in HY2 of the financial year as working capital levels normalise and global interest rates increase.
Foreign currency exchange losses amounting to R16 million (2020: R82 million) relate to the revaluation of balances denominated in foreign currencies that do not qualify for cash flow hedge accounting. These include forward exchange contracts (FECs) and options (through profit or loss), trade receivables, trade payables and Customer Foreign Currency (CFC) accounts.
Profit before tax increased by 46% to R1 879 million.
A full reconciliation of earnings to headline earnings is provided in the financial overview section.
An interim dividend of 275 cents per share has been declared (2020: 160 cents per share).
Net working capital is an inflow of R507 million in the statement of cash flows.
Net debt to equity is 30% (2020: 24%). Core debt (excluding floorplan and IFRS 16 debt) increased by R726 million from June 2021 primarily due to the higher working capital and vehicles for hire levels, dividend paid in September 2021 and share repurchases. This was offset by profits generated for the six-month period.
Net debt to EBITDA is 0,9 times (2020: 1,0 times) and EBITDA to net interest is 16,5 times (2020: 3,7 times). Both ratios have been calculated by applying the funders covenant methodology and we remain well within the bank covenant levels as set by debt providers of below 3,0 times and above 3,0 times, respectively.
Return on invested capital increased to 15,9% (2020: 12,8%) mainly due to improved profitability and lower average invested capital. Weighted average cost of capital increased to 10,4% (2020: 9,3%) primarily due to increased equity which carries a higher cost.
Net asset value per share amounts to 7 776 cents per share (2020: 6 526 cents per share).
The statement of financial position is detailed in the financial overview section.
We generated significant free cash flow of R2 900 million (2020: R4 759 million) from operating activities before capital expenditure for vehicles for hire. The free cash flow was primarily generated by solid operating profits and reduced finance costs.
| 1 | Includes trade units |
Segmental overview
A diversified business in the automotive industry
Import and Distribution
22%
of Group
revenue
27%
of Group
operating profit
5,4%
Operating
margin
- Exclusive South African importer of Hyundai, Kia, Renault and Mitsubishi
- Operates in South Africa and neighbouring countries
- Exclusive distribution rights for Nissan in four East African countries
- ~19% controllable market share* in South Africa
- Car parc >1 million vehicles
Retail and Rental
68%
of Group
revenue
38%
of Group
operating profit
2,5%
Operating
margin
South Africa
- Represent 23 OEMs: ~345 dealerships
- ~22,6% retail market share
- Car rental (Europcar and Tempest): 105 outlets in Southern Africa
- ~28% rental market share
United Kingdom
- Represent 19 OEMs
- 82 commercial dealerships
- 33 passenger dealerships
Australia
- Represent 20 OEMs
- 36 passenger dealerships
Mobility Solutions1
- Developer, manager and administrator of vehicle-related financial products and services to >730 000 vehicles including third party products under administration
- Provider of fleet management services
- Provider of business process outsourcing through sophisticated technology and call centre capabilities
- Leader of the Group’s innovation centre
2%
of Group
revenue
22%
of Group
operating profit
48,8%#
Operating
margin
Aftermarket
- Distributor, wholesaler and retailer of parts and accessories for mainly out-of-warranty vehicles
- Operates in Southern Africa, South East Asia and the UK
- 564 retail stores (102 owned stores) in South Africa
- Supported by distribution centres in South Africa, Taiwan, China and the UK
- Franchise base comprises:
- Resellers (Midas and Alert Engine Parts)
- Specialised workshops
8%
of Group
revenue
13%
of Group
operating profit
7,6%
Operating
margin
| * | Percentage of passenger and LCV market. |
| # | Operating margin includes profit streams without associated revenue. |
| The above financial measures exclude Head Office and Eliminations | |
| 1 | Formerly known as the Financial Services business segment. The segment was renamed due to the expansion of its products and services offering. |
Segmental performance
Import and Distribution
Overview
The Import and Distribution segment provides a differentiated value proposition to the dealership network, enhancing revenue and profits of the entire automotive value chain. We import, distribute and supply vehicles and parts to the Group and independent dealership networks, government and car rental companies. Between 55% to 60% of vehicle volume sales are generated through Motus-owned dealerships, with the remaining 40% to 45% sold by independently owned dealerships.
Our controllable market share (passenger and light commercial vehicles (LCVs)) in South Africa at December 2021 was 19,2% (December 2020: 16,0%) with the overall vehicle market growing by 8,6%. Hyundai achieved 7,6% market share (2020: 7,8%), Kia achieved 5,3% market share (2020: 3,5%), Renault achieved 5,6% market share (2020: 4,3%) and Mitsubishi achieved 0,7% (2020: 0,4%).
Financial performance
| HY1 2022 unaudited^ |
HY1 2021 unaudited^ |
% change on HY1 2021 |
HY2 2021 pro forma* |
FY 2021 audited |
|
| Revenue (Rm) | 11 368 | 9 687 | 17 | 9 996 | 19 683 |
|---|---|---|---|---|---|
| Operating profit (Rm)# | 614 | 425 | 44 | 497 | 922 |
| Operating margin (%)# | 5,4 | 4,4 | 5,0 | 4,7 |
| ^ | HY1 numbers are unaudited and were released in the interim published results for the six months ended 31 December 2020 and 2021. |
| * | HY2 numbers are unaudited and derived from deducting the HY1 results from the annual published results for the year ended 30 June 2021. |
| # | HY1 2021 and HY2 2021 have been adjusted for the re-presentation to include share of results in associates and joint ventures. |
Import and Distribution revenue is up 17% mainly due to increased outright sales to car rental companies and dealers, and increased selling prices. Increased sales were supported by new model releases.
Operating profit increased by 44% for the period mainly due to higher volumes of vehicles sold through the dealer channel, increased margins achieved due to inventory shortages and lower costing rates relating to forward cover.
Hyundai, Kia and Renault have forward cover for the Euro and US Dollar to August 2022, at average rates of R17,80 to the Euro and R15,08 to the US Dollar, including forward cover costs. The current Group guideline is to cover seven to nine months of forecasted vehicle import orders.
Retail and Rental
Overview
We retail vehicles through dealerships based primarily in South Africa, with a selected presence in the UK and Australia. The car rental business operates through the Europcar and Tempest brands. The Retail and Rental segment's unrivalled scale and footprint in South Africa of strategically located dealerships, largely in growing urban areas, underpins its leading market share.
The business provides a consistent superior route-to-market through quality marketing, high levels of customer satisfaction and strategically located dealerships, with a geographical spread in the economic hubs of South Africa.
South Africa
Motus SA represents 23 OEMs through ~345 dealerships. The retail market share for our South African operation increased to ~22,6% (2020: ~20,2%). We will continue to multi-franchise where possible to grow the footprint.
United Kingdom
Motus UK represents 19 OEMs through ~115 dealerships (82 commercial and 33 passenger dealerships) based mainly in provincial areas. Continued organic expansion in both commercial and passenger retail sectors will be considered in the UK. Further selective expansion in the UK will be driven by the introduction of additional brands in areas close to existing dealerships via bolt-on acquisitions.
Australia
Motus Australia represents 20 OEMs through ~36 passenger dealerships, based mainly in provincial areas located in New South Wales and Victoria. Further selective expansion in the Australian market will be driven by the introduction of additional brands in areas close to existing dealerships via bolt-on acquisitions. We remain focused on growing our provincial town footprint outside the large metropolitan areas.
Financial performance
| HY1 2022 unaudited^ |
HY1 2021 unaudited^ |
% change on HY1 2021 |
HY2 2021 pro forma* |
FY 2021 audited |
|
| Revenue (Rm) | 36 269 | 35 965 | 1 | 34 997 | 70 962 |
|---|---|---|---|---|---|
| Operating profit (Rm)# | 892 | 742 | 20 | 1 019 | 1 761 |
| Operating margin (%)# | 2,5 | 2,1 | 2,9 | 2,5 |
| ^ | HY1 numbers are unaudited and were released in the interim published results for the six months ended 31 December 2020 and 2021. |
| * | HY2 numbers are unaudited and derived from deducting the HY1 results from the annual published results for the year ended 30 June 2021. |
| # | HY1 2021 and HY2 2021 have been adjusted for the re-presentation to include share of results in associates and joint ventures. |
Revenue is up 1% for the period with increased revenue contributions from Retail SA and the Car Rental business, offset by reduced revenue contributions from pre-owned vehicle sales and the international operations.
The Retail and Rental segment sold 42 988 new units (2020: 41 106 new units) and 47 038 pre-owned units1 (2020: 54 583 pre-owned units1) during the period. In South Africa, the segment sold 28 038 new units and 35 964 pre-owned units1 (2020: 24 557 new units and 40 778 pre-owned units1), this was 14% up on the prior period for new vehicles when the market was up by 9%. Internationally we sold 14 950 new units and 11 074 pre-owned units1 (2020: 16 549 new units and 13 805 pre-owned units1), this was down 10% on the prior period for new vehicles.
Operating profit increased by 20% for the period with increased operating profit contribution from all businesses, except for our pre-owned vehicle business which benefitted in the prior year from inventory over-supply from rental de-fleets.
South Africa
The South African retail revenue and operating profit increased by 6% and 5%, respectively, from the prior period. This was mainly due to an improvement in vehicle margins as a result of inventory shortages, new model releases and an improvement in after-sales contribution. This increase was offset by a reduced contribution from pre-owned vehicle sales as a result of low inventory volumes following the aggressive de-fleeting strategy from Car Rental in the prior period.
Car Rental revenue increased by 55% and operating profit increased by more than 100% mainly as a result of increased activity relating to increased leisure travel. Vehicle utilisation levels have increased to 72% from 59% at December 2020.
United Kingdom
UK revenue decreased by 9% and operating profit increased by 8%. The reduction in revenue was due to reduced volumes as a result of inventory shortages experienced by the OEMs, with improved margins. The UK operation sold 10 232 new units (2020: 11 931 new units) and 8 786 pre-owned units1 (2020: 10 968 pre-owned units1) for the six months.
Australia
Australia revenue decreased by 2% and operating profit increased by 32%. The inventory shortages experienced by the OEMs resulted in improved margins, and the new contactless delivery of vehicles assisted the business during the various lockdowns across provinces. The Australian operation sold 4 718 new units (2020: 4 618 new units) and 2 288 pre-owned units1 (2020: 2 837 pre-owned units1) for the six months.
| 1 | Includes trade units |
Mobility Solutions (formerly Financial Services)1
Overview
Mobility Solutions develops and distributes innovative vehicle-related financial products and services through importers, dealers, finance houses, insurers, call centres and digital channels. The segment is also a provider of fleet management services to corporate customers including fleet maintenance, fines management, licensing and registration services.
Innovation and unlocking customer potential within existing and new channels represent growth and profit opportunities for the business. We have invested in technology to leverage consumer data, enabling us to offer personalised services aimed at enhancing the customer experience and improving customer retention.
This segment complements and leverages the automotive value chain, providing annuity earnings and strong cash flows. Our ability to analyse proprietary data enables accurate pricing of our offerings, vehicle profiling for the fleet business and management of claims.
Through our leading service, maintenance and warranty plans, we unlock revenue for the Import and Distribution, and Retail businesses by retaining customers within the Group throughout their vehicle ownership lifecycle.
Financial performance
| HY1 2022 unaudited^ | HY1 2021 unaudited^ |
% change on HY1 2021 |
HY2 2021 pro forma* |
FY 2021 audited |
|
| Revenue (Rm) | 1 028 | 1 054 | (2) | 965 | 2 019 |
|---|---|---|---|---|---|
| Operating profit (Rm)# | 502 | 477 | 5 | 435 | 912 |
| Operating margin (%)#~ | 48,8 | 45,3 | 45,1 | 45,2 |
| ^ | HY1 numbers are unaudited and were released in the interim published results for the six months ended 31 December 2020 and 2021. |
| * | HY2 numbers are unaudited and derived from deducting the HY1 results from the annual published results for the year ended 30 June 2021. |
| # | HY1 2021 and HY2 2021 have been adjusted for the re-presentation to include share of results in associates and joint ventures. |
| ~ | Operating margin includes profit streams without associated revenue. |
Revenue decreased by 2% mainly as a result of lower terminations as a result of the shift from mileage to time usage on the service and maintenance plans.
Operating profit increased by 5% mainly due to the recognition of income from Bank JVs, higher interest income and improved performance on the cell captives.
| 1 | Formerly known as the Financial Services business segment. The segment was renamed due to the expansion of its products and services offering. |
Aftermarket Parts
Overview
The Aftermarket Parts business's large national and growing footprint enables us to leverage our buying power to distribute and sell competitively priced products to a continually growing car parc of out-of-warranty vehicles.
The international distribution centres in Taiwan, China and the UK allow for procurement at competitive prices for distribution to Southern Africa, the UK and Eastern Europe.
Expanding into other markets provides an opportunity for this business. Increased participation in this segment will include backward integration in order to eliminate intermediaries in the wholesale supply chain.
Financial performance
|
HY1 2022 unaudited^ |
HY1 2021 unaudited^ |
% change on HY1 2021 |
HY2 2021 pro forma* |
FY 2021 audited |
|
| Revenue (Rm) | 3 970 | 3 773 | 5 | 3 522 | 7 295 |
|---|---|---|---|---|---|
| Operating profit (Rm)# | 301 | 276 | 9 | 302 | 578 |
| Operating margin (%)# | 7,6 | 7,3 | 8,6 | 7,9 |
| ^ | HY1 numbers are unaudited and were released in the interim published results for the six months ended 31 December 2020 and 2021. |
| * | HY2 numbers are unaudited and derived from deducting the HY1 results from the annual published results for the year ended 30 June 2021. |
| # | HY1 2021 and HY2 2021 have been adjusted for the re-presentation to include share of results in associates and joint ventures. |
Revenue increased 5% and operating profit increased 9% for the period. South African revenue was unchanged with reduced operating profit, and Asian and the UK revenue and operating profit contributed positively. The recently acquired FAI Automotive plc (FAI) in the UK was included for three months from 1 October 2021.
The South African business was negatively impacted by decreased demand from customers that were negatively impacted by the social unrest, inventory shortages as a result of reduced availability of vessels and containers which extended lead times and a substantial increase in freight and logistics costs. This was offset by the canopy business performing well due to increased sales and improved efficiencies during the period.
The Asian business performed well as a result of increased foreign activity and better service levels from the new logistics supplier.
The shift from higher priced premium products to more affordable products and increased supplier and competitor activities in a tighter South African market is continuing.
Financial overview
Group profit or loss (extract)
| for the six months ended 31 December 2021 | HY1 2022 Rm |
HY1 2021 Rm |
% change |
| Revenue | 44 823 | 44 343 | 1 |
|---|---|---|---|
| Operating profit before capital items and net foreign exchange losses1 | 2 148 | 1 750 | 23 |
| Impairment of property, plant and equipment, net of profit/(losses) on sale | (29) | (25) | 16 |
| Other income/(costs) | 16 | (24) | (>100) |
| Net foreign exchange losses | (16) | (82) | (80) |
| Net finance costs | (240) | (332) | (28) |
| Profit before tax | 1 879 | 1 287 | 46 |
| Income tax expense | (466) | (359) | 30 |
| Profit for the period | 1 413 | 928 | 52 |
| Attributable to non-controlling interests | (23) | – | >100 |
| Attributable profit for the period | 1 390 | 928 | 50 |
| Operating profit (%) | 4,8 | 3,9 | |
| Effective taxation rate (%) | 25,1 | 28,5 |
| 1 | The prior period has been adjusted for the re-presentation to include share of results from associates and joint ventures. |
Revenue improved by 1% mainly due to improved performance in the Import and Distribution segment, the SA retail business, Car Rental and the Aftermarket Parts business segments. The increase was offset by a decreased revenue contribution from the international retail businesses and Mobility Solutions. The increase in Group revenue was supported by an increase in the sale of new vehicles and parts (including acquisitions), offset by reduced sales of pre-owned vehicles.
Operating profit before capital items and net foreign exchange losses improved by 23% with all business segments improving operating profit contribution.
The increased operating profit is mainly as a result of the recovery of the automotive and car rental sectors which positively impacted gross income, coupled with increased margins achieved due to inventory shortages and disciplined cost management. Operations also partly benefitted from increased service activity in workshops, acquisitions in the Retail and Rental and Aftermarket Parts segments, and the return to profitability of Bank JVs in the Mobility Solutions segment. Profit margins were negatively impacted by the substantial increases in freight and logistics costs.
Net foreign exchange losses decreased to R16 million. Foreign currency exchange losses amounting to R16 million (2020: R82 million) relate to the revaluation of balances denominated in foreign currencies that do not qualify for cash flow hedge accounting. These include forward exchange contracts (FECs) and options (through profit or loss), trade receivables, trade payables and Customer Foreign Currency (CFC) accounts.
Net finance costs decreased by 28%. Net financing costs decreased by 28% mainly due to lower average working capital for the period and improved profitability which resulted in lower debt requirements. The decrease was further supported by the increased fair value adjustment gain recognised as a result of the unwinding of the interest rate swap and reduced IFRS 16 finance costs.
Effective tax rate is 25,1%. The current tax rate was lower than 28% mainly due to increased profitability in one of the subsidiaries with an assessed tax loss and higher exempt income due to an increase in dividend income and Bank JV income.
Reconciliation of earnings to headline earnings
| for the six months ended 31 December 2021 | HY1 2022 Rm |
HY1 2021 Rm |
% change |
| Earnings | 1 390 | 928 | 50 |
|---|---|---|---|
| Impairment of goodwill and other assets | 90 | 56 | 61 |
| Profit on sale of businesses and other | (43) | (9) | >100 |
| Profit on disposal of assets | (34) | (8) | >100 |
| Adjustments included in results of associates and joint ventures | (1) | – | 100 |
| Tax and non-controlling interests | 5 | (4) | (>100) |
| Headline earnings | 1 407 | 963 | 46 |
| Weighted average number of ordinary shares (million) | 177 | 183 | (3) |
| Earnings and headline earnings per share | |||
| Basic EPS (cents) | 785 | 507 | 55 |
| Basic Headline EPS (cents) | 795 | 526 | 51 |
The Group repurchased 3 077 000 shares during the period at an average price of R101,40 per share which resulted in lower weighted average number of shares, of which 1 000 000 shares were acquired as treasury shares for the share incentive schemes.
Financial position
| as at 31 December 2021 | 31 December 2021 Rm |
31 December 2020 Rm |
30 June 2021 Rm |
December vs December % change |
December vs June % change |
| Goodwill and intangible assets | 2 126 | 1 589 | 1 546 | 34 | 38 |
|---|---|---|---|---|---|
| Investments in associates and joint ventures | 257 | 250 | 289 | 3 | (11) |
| Property, plant and equipment | 7 378 | 7 589 | 7 024 | (3) | 5 |
| Right-of-use assets | 2 330 | 2 248 | 2 132 | 4 | 9 |
| Investments and other financial assets | 361 | 411 | 414 | (12) | (13) |
| Vehicles for hire | 3 642 | 2 640 | 2 426 | 38 | 50 |
| Net working capital1 | 6 370 | 4 173 | 5 165 | 53 | 23 |
| Tax assets | 1 276 | 1 541 | 1 474 | (17) | (13) |
| Assets classified as held-for-sale | 636 | 126 | 649 | >100 | (2) |
| Contract liabilities | (2 904) | (2 767) | (2 828) | 5 | 3 |
| Lease liabilities | (2 679) | (2 587) | (2 449) | 4 | 9 |
| Core interest-bearing debt | (3 254) | (2 079) | (2 528) | 57 | 29 |
| Floorplans from financial institutions | (1 005) | (807) | (873) | 25 | 15 |
| Other liabilities | (401) | (274) | (275) | 46 | 46 |
| Total equity | 14 133 | 12 053 | 12 166 | 17 | 16 |
| Total assets | 40 822 | 38 834 | 38 457 | 5 | 6 |
| Total liabilities | (26 689) | (26 781) | (26 291) | – | 2 |
| 1 | Net working capital includes floorplans from suppliers amounting to R4 129 million (December 2020: R5 037 million and June 2021: R4 479 million). |
Factors impacting the financial position at December 2021 compared to June 2021
Goodwill and intangible assets
Increased mainly due to acquisitions and currency adjustments, offset by the impairment of goodwill which is in line with the Group policy. The Group impairs goodwill below R15 million on acquisitions.
Intangible assets increased mainly due to acquisitions which resulted in the recognition of Customer Lists and Trademarks for FAI (UK) and currency adjustments, partly offset by amortisation.
Property, plant and equipment
Increased mainly due to additions and currency adjustments, offset by depreciation, impairments and disposal of properties. The significant additions were two dealerships in South Africa and one dealership in the UK.
Right-of-use assets
Increased due to the FAI (UK) acquisition, new leases entered into and currency adjustments, offset by depreciation.
Vehicles for hire
Increased mainly due to increased demand from car rental companies. Import and Distribution vehicles for hire increased mainly due to increased vehicles delivered to car rental companies. Retail and Rental increased due to up-fleets in preparation for the festive season with anticipated increased local and international travel as a result of travel restrictions being eased.
Net working capital increased by R1,2 billion (23%)
- The derivatives moved from a net fair valued liability in June 2021 to a net fair valued asset in December 2021 as a result of the weakening of the ZAR against major currencies;
- Inventory increased in the Aftermarket Parts segment to build up inventory due to the Chinese New Year and longer lead times. The other segments inventory decreased as a result of inventory shortages, improved sales and lower stock returns from car rental companies;
- Trade receivables increased due to improved sales;
- Floorplan payables decreased due to inventory shortages;
- This was offset by an increase in creditors stemming from an increase in trading activity, increased goods-in-transit and an increase in the external vehicles for hire creditor (vehicles for hire do not form part of working capital).
Tax assets
Decreased due to the settlement of provisional current tax during the period, coupled with increased deferred tax liabilities recognised on derivative assets.
Assets classified as held-for-sale
Assets held-for-sale relate to the non-strategic properties identified for sale, mainly retail properties in South Africa, Australia and the UK.
Contract liabilities
Contract liabilities consists mainly of service and maintenance plans, as well as scratch and dent plans. The increase was across all funds, apart from the monthly service and maintenance plans which decreased as they were negatively impacted by reduced levels of new business which is representative of the current economic conditions.
Lease liabilities
Increased mainly due to the FAI (UK) acquisition, new leases entered into and currency adjustments, offset by lease payments.
Core debt (excluding floorplan and IFRS 16 debt)
Increased by R726 million primarily due to the higher working capital and vehicles for hire levels, coupled with the dividend paid in September 2021 and share repurchases. This was offset by profits generated for the six-month period.
Floorplans from financial institutions
Floorplan debt increased mainly due to up-fleets with car rental in Mobility Solutions and increased floorplans in the UK. The increases were offset by reduced Australian floorplans which decreased mainly due to inventory shortages.
Equity
Equity was enhanced mainly by retained income of R1 413 million, favourable hedging reserve adjustments amounting to R953 million (foreign currency movements against the ZAR impacted forward cover since the 30 June 2021 position) and favourable currency translation reserve adjustments as a result of the weakening of the ZAR amounting to R373 million, offset by dividend payments to shareholders in September 2021 amounting to R468 million, the repurchase and cancellation of shares amounting to R211 million and the purchase of shares for the share scheme hedges resulting in treasury shares amounting to R101 million.
Cash flow movements
| for the six months ended 31 December 2021 | HY1 2022 Rm |
HY1 2021 Rm |
| Cash generated from operations before movements in net working capital | 2 946 | 2 407 |
|---|---|---|
| Movements in net working capital | 507 | 3 014 |
| Cash generated by operations before interest, taxation paid and capital expenditure on vehicles for hire | 3 453 | 5 421 |
| Finance costs paid | (289) | (450) |
| Finance income received | 7 | 32 |
| Dividend income received | 140 | 57 |
| Taxation paid | (411) | (301) |
| Free cash flow generated from operations | 2 900 | 4 759 |
| Net replacement capital (expenditure)/proceeds – vehicles for hire | (1 586) | 301 |
| Cash generated from operations | 1 314 | 5 060 |
| Net cash outflow on the acquisition and disposal of businesses | (614) | (94) |
| Net capital expenditure (excluding vehicles for hire) | (342) | (125) |
| Net movement in investments in associates and joint ventures | 35 | 5 |
| Net movements in investments | – | 2 |
| Cash received on finance lease receivables | – | 29 |
| Cash generated from operating and investing activities | 393 | 4 877 |
| Repurchase of own shares | (312) | (101) |
| Dividends paid | (468) | – |
| Acquisition of non-controlling interests | (37) | – |
| Other | (16) | 10 |
| (Increase)/decrease in debt | (440) | 4 786 |
The free cash flow was primarily generated by strong operating profits and decreased finance costs.
Net working capital is an inflow of R507 million after adjusting for non-cash movements relating primarily to the derivative asset, acquisition of businesses and currency adjustments.
Net cash outflow on acquisition of businesses relates mainly to the acquisition of FAI in the UK in the Aftermarket Parts business segment and four passenger dealerships in South Africa.
Cash outflow on capital expenditure, net replacement and expansion, amounted to R342 million.
Cash outflow on vehicles for hire of R1 586 million due to increased car rental activity.
A final dividend was paid on 27 September 2021, amounting to R468 million.
Liquidity
The liquidity position is strong and the Group has R14,8 billion in unutilised banking facilities. A total of 61% of the Group debt is long-term in nature and 25% of the debt is at fixed interest rates. Excluding floorplan debt, which can be seen as part of the working capital cycle, 31% of the debt is at fixed interest rates.
Dividend
An interim dividend of 275 cents per ordinary share has been declared, and will be paid in March 2022.
Board changes
Motus is led by a diverse board of directors (Board), the majority of whom are independent, with extensive industry knowledge and expertise, and who subscribe to ethical leadership, sustainability, stakeholder inclusivity and high standards of corporate governance.
Changes to the Board composition in the past six months:
- Ms. F Roji-Maplanka joined the Board as an independent non-executive director with effect from 1 September 2021 and was appointed as a member of the Social and Ethics Committee (SES Committee) and the Audit and Risk Committee (ARC) with effect from 1 September 2021.
Changes to the Board sub-committees in the past six months:
- Ms. K Cassel and Mr. OJ Janse van Rensburg resigned as members of the SES Committee with effect from 1 September 2021, following the reconstitution of the committee and now attend as invitees.
- Mr. MJN Njeke resigned from the Asset and Liability Committee and the ARC, with effect from 1 August 2021 and 1 September 2021, respectively. In addition, he was appointed as Chairman of the Remuneration Committee (RemCo) with effect from 3 November 2021.
- Mr. A Tugendhaft resigned as Chairman of the RemCo with effect from 3 November 2021, and remains a member.
Strategy
The Group's ability to create value for all stakeholders over the long term is underpinned by our strategic agility as we deepen competitiveness, maintain market shares, and position the business to respond to changing market conditions.
Our long-term strategic priorities remain unchanged and are focused on ensuring that we are the leading automotive group in South Africa, with a select international presence in the UK and Australia, and a limited presence in South East Asia and Southern and East Africa. We continue to look at acquisitions in South Africa, UK, Australia and China.
We remain focused on deepening our competitiveness and relevance across the automotive value chain, driving organic growth through optimisation, innovation, and selective bolt-on and complementary acquisitions.
In executing our business strategy as a responsible corporate citizen, Motus is led in a manner that is environmentally conscious to ensure its sustainability, and adopts policies and practices that enhance the growth of the economies in which it operates.
Our strategic initiatives underpin the delivery of our aspirations:
A skilled, diverse, productive and motivated workforce enables us to operate cost-effectively and efficiently to meet stakeholder needs. In turn, we work to provide our employees with career growth opportunities and a fair, rewarding, and safe work environment. The health and safety of our people is always top of mind, by ensuring that we prevent and minimise the potential spread of the COVID-19 virus through the implementation of additional health and safety protocols.
Prospects
Our integrated business model, continued support from the financial institutions to support customer vehicle purchases, agile and focused management have allowed us to generate strong financial results, a solid financial position and significant cash flows.
We expect to deliver double-digit earnings growth, a solid financial position and strong cash generation for the twelve-month period ending 30 June 2022, provided there are no further stringent lockdowns, severe vehicle inventory shortages from OEMs or social unrest in South Africa. We have sufficient cash available and a strong financial position to support the investment in strategic growth initiatives and we will consider share repurchases as the opportunities arise and pay dividends to shareholders.
Our unwavering commitment to ESG, within our sphere of control, will continue to be a cornerstone of our operations.
We welcome Ms. F Roji-Maplanka to the Board as an independent non-executive director and look forward to her contribution over the coming years.
We would like to thank all employees, customers, suppliers, funders, stakeholders and the Board for their support during these challenging times.
OS Arbee
Chief Executive Officer
OJ Janse van Rensburg
Chief Financial Officer
21 February 2022
The interim, forecast and prospects information herein has not been reviewed or reported on by Motus' auditors.
Declaration of interim ordinary dividend
for the six months ended 31 December 2021
Notice is hereby given that a gross interim ordinary dividend in the amount of 275 cents per ordinary share has been declared by the Board, payable to the holders of the 186 856 942 ordinary shares. The dividend will be paid out of income reserves.
The ordinary dividend will be subject to a local dividend tax rate of 20%. The net ordinary dividend, to those shareholders who are not exempt from paying dividend tax, is therefore 220 cents per ordinary share.
The Company has determined the following salient dates for the payment of the ordinary dividend:
| 2022 | |
| Last day for ordinary shares to trade cum ordinary dividend | Tuesday, 8 March |
| Ordinary shares commence trading ex-ordinary dividend | Wednesday, 9 March |
| Record date | Friday, 11 March |
| Payment date | Monday, 14 March |
The Company's income tax number is 983 671 2167.
Share certificates may not be dematerialised/rematerialised between Wednesday, 9 March 2022 and Friday, 11 March 2022, both days inclusive.
On Monday, 14 March 2022, amounts due in respect of the ordinary dividend will be electronically transferred to the bank accounts of certificated shareholders. Shareholders who have dematerialised their shares will also have their accounts held at their central securities depository participant or broker, credited on Monday, 14 March 2022.
On behalf of the Board
NE Simelane
Company Secretary
21 February 2022