The COVID-19 lockdown has taken its toll on the financial performance of JSE-listed Combined Motor Holdings (CMH), which anticipates reporting a loss for the six months to end-August.
The group said the full period of COVID-19, from the announcement of the implementation of the hard lockdown to Level 2, fell squarely within the reporting period. It added that the group’s activities were not classified as essential services and were effectively closed from March 27until the phased opening from mid-May to June 8 2020.
“The result was that substantial trading losses during the first three months were followed by positive returns in June, July and August 2020,” it said.
CMH anticipates headline earnings per share for the reporting period to be between 110% and 113% lower than the previous corresponding period and to report a loss of between 12 cents and 16 cents per share compared to the 120.9 cents per share profit in the prior period.
The group said all restructuring costs and the costs of compliance with the COVID-19 protocols have been expensed. It reported that the group remains in a sound financial position in terms of both equity reserves and cash resources, with both at levels little-changed from February 29 2020 and that it did not require any additional borrowings.
Commenting on its motor retail business, CMH said the rebound following the re-opening of business has seen parts and service trading levels at 80% to 90% of the corresponding months last year. However, it said vehicle sales were hampered because licensing offices opened only on June 9 2020.
“New vehicle sales have reached 70% and used vehicle sales 90% of prior year months. It is expected that these levels will be maintained for the rest of the financial year. Inventory levels have been rebalanced, and no abnormal write-offs of trade receivables have been experienced,” it said.
CMH said its car-hire segment was the hardest hit by the COVID-19 lockdown, and its recovery “has been slow but steady”. The group said the car-hire business has been rightsized in terms of staff complement, and the fleet size will be at optimum by the end of October.
CMH reported in June this year that its staff complement had been reduced by 15% and a further 15% to 20% reduction was anticipated over the coming months. The group also downsized its car-rental fleet by 15% in April and May this year and was expecting to reduce it by a further 2% to 3% a week when business resumed until the optimum level was reached.
CMH stressed this week that airport activity is traditionally the prime source of business but local business travel has grown slowly off a zero base over the past three months and “it will be some time before the international business and tourism markets return”.
Turning to its financial services business, CMH said the group’s insurance cells were generally unaffected by the short hiatus.
“Although no new policies were written, the annuity income from prior years continued. The finance joint ventures were impacted by severe bad debt provisioning. Time will tell whether the provisions will prove to be sufficient or excessive,” it said.
CMH anticipates publishing its interim financial results later this month.
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