SA automotive company Motus expects profit will drop as much as 30% in the six months ended December, prompting an 8.5% decline in its shares — the biggest one-day drop since early October.
In a trading update on Thursday the company said operations were hampered by several issues, including lower consumer demand, higher-than-normal inflation in vehicle and parts prices and excess stock from car manufacturers.
“In addition, the oversupply of vehicles from the original equipment manufacturers (OEMs) and additional “discounts” to generate vehicle sales have negatively impacted margins,” it added.
Headline earnings per share, the main profit measure in SA that strips out one-off times, is likely drop to between R6.30 and R7.30 compared with R9.16 a year earlier, Motus said.
Motus imports and sells new and pre-owned cars through its network of dealerships in SA, UK and Australia, which exposes it to the vagaries of the volatile rand exchange rate.
Its integrated business model includes car rental business, as well as aftermarket parts, which sells parts to cars that fall outside warranty.
In recent years, the company has been trying to diversify its income away from the cyclical and competitive vehicle sales market.
In SA, Motus competes with the likes of Combined Motor Holdings and Bidvest, while the car subscription model, designed as an alternative to outright vehicle ownership, is gaining traction and creating further competition.
Motus said it is managing operating and finance costs, and closely monitoring working capital, vehicles for hire and debt levels.
“Management is focusing on variables under their control to reduce stock levels responsibly. Vehicles for hire levels will reduce by June 30 2024 due to the seasonal nature of the business,” it said in a statement.
The group’s shares recovered after the initial slump and closed up 4.7% at R107, the biggest gain in a month.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.