Motus to continue its acquisitions spree

Will fund the new investments using its strong balance sheet and cash generation.
IT businesses and the aftermarket parts market offer margins that appeal to the group. Image: Supplied

Motus, the JSE-listed integrated automotive business, anticipates using its strong balance sheet and cash generation to continue making strategic bolt-on acquisitions in the short term.

Motus CEO Osman Arbee said on Tuesday the group will look at the acquisition of IT businesses and some other bolt-on acquisitions this year. “We could use about R400 million for that,” he said.

Arbee said the group will also need about R1 billion worth of vehicle stock when car and truck stock levels normalise and hopes to spend another R500 million to R600 million to get more vehicles into its car rental fleet.

He said emerging vehicle brands are doing “quite nicely” and the group will expand its footprint in this area.

Arbee said however that if Motus opened another 10 emerging vehicle brand dealerships, it would provide the group with only another R10 million or R20 million profit.

Strategic approach

“Our focus will be on maximising our returns to our shareholders, looking at margins and looking at our ability to make sure that we invest in businesses that are sustainable into the future, with strong cash generations and margins of between 7.5% and 10%.

“That is what we like because that gives us good sustainability across the value chain in the motor business.

“In Midas, we invested in an IT business. The opportunities for margins are far greater in those kind of businesses,” he said.

“In the aftermarket parts market, your margins could be between 7.5% and 10% so those businesses can give you R100 million or R150 million much quicker, in a single investment, than having another 10 dealerships on the side.”

Motus has since July 2021 invested a total of R890 million in acquiring a number of businesses and further increasing its shareholding in businesses in South Africa, the UK and Australia.

This included the acquisition of four dealerships in South Africa – Hyundai Midrand, Hyundai Rustenburg, Honda Sandton and Renault Vaal – as well as the FAI aftermarket parts business in the UK.

‘Healthy cash position’

Motus chief financial officer Ockert Janse van Rensburg said the group is in a very healthy cash position, which bodes well for additional acquisitions or expansions.

“We’ve still got enough petrol left in the tank with the R2.9 billion in free cash flow generated from operations in the six months [to end-December],” he said.

Van Rensburg added that Motus had reduced its net debt from R8.79 billion at December 2019 to R4.25 billion at December 2021, and has R10 billion in unutilised funding facilities excluding vehicle floorplans.

Vehicle sales

Arbee said in the six months to end-December 2021 Motus in South Africa sold 22.6% of the cars sold in the country, compared with 20% in June 2021 and December 2020.

He said the four vehicle brands it imports into South Africa increased Motus’s overall market share to 19.2% from 16.1%, with Hyundai leading the pack with a 7.6% market share, followed by Renault with 5.6% and Kia 5.3%.

“So all in all, a great achievement by our four importers.”

Arbee said Motus is projecting total vehicle sales of between 510 000 and 530 000 for the 2022 calendar year.

“That is a fantastic number if we compare it to where we were before Covid-19, two years of Covid-19 and where we are getting to.

“So we virtually could be at our pre-Covid-19 [sales] levels in 2022 already,” he said.

“Yes, there is doom and gloom but we have a consumer, financial institutions and an economy that is helping us grow and for us to get in 2022 to pre-Covid-19 levels I think is a fantastic achievement as a country.”

Read: New vehicle sales in 2021 exceed expectations

Toyota South Africa Motors (TSAM) president and CEO Andrew Kirby has forecast new vehicle sales growth of 16.3% to 540 000 units in 2022 from the 464 469 units sold in 2021.

If achieved, this will mean new vehicle sales will this year have fully recovered to pre-Covid-19 levels when most analysts only expect this to be achieved in 2023.

Interims

Motus on Tuesday reported a 1% increase in revenue to R44.8 billion in the six months to end-December 2021 from R44.3 billion in the prior period.

The revenue increase was as a result of a 4% increased contribution equally from new vehicle sales, parts sales and rendering of services, which was offset by an 8% decrease from pre-owned vehicle sales.

Read: Pre-owned vehicles selling for more than book value – Motus CEO

Operating profit increased by 23% to R2.15 billion, with all business segments contributing towards the increase.

This translated into a 51% growth in headline earnings per share to 795 cents from 526 cents.

An interim dividend of 275 cents per share was declared, a 72% improvement on the 160 cents per share dividend declared in the prior period.

Arbee said Motus aims to deliver double-digit earnings growth in the next six months to June 2022.

However, he said this is subject to there not being any stringent Covid-19 lockdowns, any severe inventory shortage and any social unrest like that experienced in SA in July 2021.

Shares in Motus declined by 2.08% on Tuesday to close at R107.31.

Super Group

The release by Motus of its interim financial results coincided with JSE-listed transport logistics and mobility group Super Group on Tuesday reporting an 8.4% rise in group revenue to R21.64 billion in the six months to end-December 2021.

Super Group increased operating profit by 29.7% to R1.59 billion in the same period, with the operating profit margin improving to 7.3% from 6.1%.

Headline earnings per share rose by 19.6% to 190.9 cents.

Super Group CEO Peter Mountford said the group reported an excellent set of results despite ongoing macroeconomic challenges and tough trading conditions in several key markets and industry sectors.

Listen to Fifi Peters’s interview with Super Group CEO Peter Mountford:

Mountford said the performance reflects the four-month impact of the LeasePlan acquisition and strong sales performances in the group’s South African supply chain and fleet businesses.

“The consumer-facing businesses were significantly impacted by the civil unrest in July 2021 but swift action to minimise the disruption to clients and exceptional efforts to regain lost revenue saw them performing ahead of expectations for the period.

“Super Group’s operations in South Africa, Australasia, the United Kingdom and Europe continue to be impacted by Covid-19 related economic upheaval and the business remains focused on cost containment and improved operational efficiencies,” he said.

Shares in Super Group rose 2.33% on Tuesday to close at R36.

AUTHOR PROFILE

COMMENTS   0

You must be signed in and an Insider Gold subscriber to comment.

SUBSCRIBE NOW SIGN IN

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

Podcasts

Instrument Details  

You do not have any portfolios, please create one here.
You do not have an alert portfolio, please create one here.
INSIDER SUBSCRIPTION APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING

Follow us: