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Motus planning to expand into selective international markets

The UK and Australia are two markets where Motus is actively looking to grow.

Motus, the vehicle business of Imperial Holdings that was unbundled and separately listed on the JSE, is considering expanding and growing its operations in selected international markets.

Osman Arbee, the chief executive of Motus, said on Wednesday this expansion would be very selective and entail the introduction of additional brands in areas close to its existing dealerships via bolt-on acquisitions.

Arbee confirmed the UK and Australia were two markets where Motus was actively looking to grow and expand.

He said Motus already owned 19 commercial vehicle dealerships and about 30 passenger vehicle dealerships in the UK but those dealerships did not give them critical mass in the UK.

Arbee said Motus would be comfortable doubling the number of car dealerships it owned in the UK through bolt-on acquisitions and would like to expand the number of brands represented by these dealerships.

He said Motus did not have any Toyota dealerships in the UK, would like a few more Volkswagen dealerships and possibly a few Mazda, Nissan and Ford dealerships.

Arbee said 60 car dealerships in the UK would give Motus nice economies of scale in terms of the power to leverage with the original equipment manufacturers (OEMs), banks and financial services companies.

He said Motus planned to use the same logic in Australia, where it had about 30 dealerships split between an area outside of Melbourne and in Sydney.

“The Australian market is very fragmented so we believe if we get to 50 or 60 dealerships, we could be a number four to five player in that game and be a big fish in a small pond.

“That again will enable us to negotiate better deals with banks, insurance companies, OEMs and financial services companies,” he said.

Arbee said the UK and Australian dealerships owned by Motus currently contributed 10% to the group’s total operating profit and they would like to grow that to more than 20%.

He said Motus’ dealerships in the UK and Australia would provide the group with a rand hedge.

The group was focused on right hand drive countries, which assisted them because there were not any language barriers and the services and laws in those countries were similar to South Africa, he said.

“We understand them and know how to apply them and can duplicate some of our skills in terms of financial services products and services and the used car business,” he said.

Arbee said Motus’ international expansion would also provide a career opportunity for the group’s employees who could go into their businesses in foreign countries.

These countries would also adopt electric and hybrid cars quicker than South Africa and make Motus more agile because they would be able to bring the learnings from these countries quicker to South Africa, he said.

Ockert Janse van Rensburg, the chief financial officer of Motus, was not bullish about Motus expanding its dealerships business in Africa.

Van Rensburg said the vehicle market in Africa outside South Africa was tough because of the lack of any protection from grey imports.

“We do distribute Nissan into East Africa so we are into Tanzania, Zambia, Kenya and Malawi but the volumes are quite small. Although they are profitable, they are not a meaningful contributor to our overall profitability.

“I think the real opportunity long term with the rest of Africa probably sits closer to the aftermarket parts side of the business. All those grey imports do need to get serviced so you do have an opportunity in that space. But that is still work in progress and we have not got too far into that yet,” he said.

Arbee said they were pleased with the broadly solid financial performance of Motus in the year to June given the uncertainties in the markets in which they operated.

He said the automotive industry, particularly in South Africa, continued to underperform as consumers delayed purchases and traded down to cheaper vehicles.

Motus on Wednesday reported a 3.5% increase in revenue to R79.7 billion in the year to June from R77.0 billion in the previous year.

Operating profit improved by 1% to R3.62 billion from R3.59 billion.

Normalised headline earnings a share grew by 11% to 1 090c from 986 cents.

A final dividend a share of 250 cents was declared, lifting the total dividend for the year to 490 cents.

Shares in Motus rose 11.16% on Wednesday to close at R75.60.

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Another South African management team with excessive self-confidence? History tells us that the destruction of shareholder value follows.

Yeah…I’m just going to sit with my popcorn and watch if they like so many other SA companies go and burn their fingers overseas…to many previous examples to care to name…

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