Combined Motor Holdings (CMH) expects to report a more than two-fold jump in annual earnings, triggering talk of a bumper dividend and sending shares of the owner of car showrooms and other motoring related businesses higher.
The share price rose by as much as 5.4% to R29.50, its best level in three years, before paring gains to end the day up 3.18% at R28.89, valuing the company at over R2.1bn.
The global chip shortage hit the vehicle industry in 2021 halted vehicle manufacturing across regions. Car rental companies in SA trimmed their fleets during harsher levels of lockdown and have since been struggling to restock amid global supply-chain disruptions and a shortage of semiconductors.
Yet the motor dealership and car hire group said that headline earnings per share (HEPS) from continuing operations were expected to rise between 110% and 120%, to between 483.8c and 506.9c per share. That compares to a HEPS of 230.4c per share for the comparative period.
The indicated surge in earnings outstrips the group's February trading statement which had flagged a HEPS, the primary measure of profit that strip out certain one-off items, increase of between 70% and 90%.
Adding non-trading, one-off items, CMH said earnings per share (EPS) were expected to surge by between 115% and 125%, to between 485.1c and 507.6c per share as compared with an EPS of 225.6c per share for the comparative period.
Independent analyst Anthony Clark noted the improved numbers from the company’s February trading update, saying despite depressed vehicle sales numbers, the group was lifted by a booming car rental business.
Clark pointed out that in 2021, CMH paid a dividend of R2.25, and was sitting at the interim stage on net cash of about R640m, so the upcoming payout was expected to be bumped up significantly.
“My estimates right now given these improved numbers, they are probably sitting on just shy, if not slightly north, of R1bn in cash,” Clark told Business Day.
“I’m expecting not just a fat normal dividend, but potentially a special dividend,” he said, adding that the company on average required about R350m of cash on its balance sheet to fund its ongoing operations.
The majority shareholders in the firm led by CEO Jebb McIntosh include Ninety One SA and Absa Asset Management.
The motor group is scheduled to publish its results for the year ended February 28 on May 3.
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