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CMH interim headline earnings dramatically up

‘There’s a bigger shortage, I think, in the used-car space, than…in the new-car space at the moment’: Jebb McIntosh – CEO Combined Motor Holdings.

SIMON BROWN: I’m chatting now with Jeff McIntosh, CEO of Combined Motor Holdings. Results for the six months ending in August saw headline earnings up 1 529%. But let’s go to that versus 2019 – headline earnings up 65%, revenue 3% below those 2019 numbers, and a dividend of 110 cents. Jebb, I appreciate the early morning time. A weird situation, I suppose, where in a huge crisis locally and globally you and your team have actually managed to, I suppose, use it to your advantage in many ways – get rid of some costs – some businesses that perhaps weren’t a perfect fit, and pick up some improved margins due to stock challenges.

JEBB McINTOSH: Good morning, Simon. You are right on the money there, and we have used it to our advantage. We have this ongoing stock shortage, which is worldwide, and we are expecting to come right in six months, we are told, and every six months going forward [we’re told it’ll be] another six months. But I think gradually we will loosen up in the new year.

SIMON BROWN: That’s it. I mean, every time I ask someone they say six months, and I’m glad that you’re getting the same answers in that place. It’s a challenge then put into it – there’s less new-car stock. I’m imagining a lot of customers who perhaps would prefer a new vehicle simply aren’t able to [buy one], so they move into the second-hand space, and of course that pushes up prices due to increased demand.

JEBB McINTOSH: Well, there’s a bigger shortage, I think, in the used-car space, than I think there is in the new-car space at the moment, Simon. Largely I think if we are not selling new cars, as you said, they are moving across to used.

It’s pushed up the prices, which the customer who’s trading a car is obviously benefiting from. That has actually reduced our margins, put pressure on the margins on the used-car side of the business.

SIMON BROWN: Of course the challenge is, I trade my car, and I need to buy another one nonetheless. The July riots – that really hurt you. You make the statement that it took almost what, 12% off headline earnings per share? I’m imagining that is now behind you, and you’re back to full operating. That was quite a hit in what has been a tough 18 months, and that was truthfully the last thing that corporates needed.

JEBB McINTOSH: Well, with the third wave coming through we were hit quite badly and since then we’ve managed to get about 85% of our staff vaccinated, which should help going forward. But the riots, a big part of our business is in KwaZulu-Natal. KZN was traumatised by these events Simon. You didn’t live through it –we called it a war. The security forces were not to be seen during this period. It was quite nerve-wracking for everybody.

SIMON BROWN: Yes. My sister was down there – she’s in Glenwood – and it was horror stories.

A last point – car rental. Obviously those fleets were cut and I imagine you are struggling to restock them. Is demand starting to return? We’ve got the English, all things being equal, hopefully starting to come for holidays. Is that a space where things should be getting, maybe not back to pre-Covid, but certainly with demand picking up?

JEBB McINTOSH: Simon, it’s picking up remarkably, and I think the Christmas in Cape Town season should be as good as it ever was.

But unfortunately a lot of people would be walking, because there just aren’t enough cars – in not only our fleet but the national fleet of car hire.

It’s quite remarkable. I think people were in ‘jail’ for this period and they’ve now gow an opportunity to get out. So we’ve seen the bookings picking up quite remarkably.

SIMON BROWN: And the lesson seems to be if you’re going to need a car, get it quick, because there might not be one if you wait too long.

That’s Jeff McIntosh of Combined Motor Holdings, talking interim results. I appreciate the time.

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