CMH reports 121c vs 109.3c earnings

Despite the continued difficult economic conditions, which hampered the ability of potential customers to obtain credit facilities, the group delivered a satisfactory set of results for the year, it said.

A drive to increase sales resulted in market share gains in both new and used cars, and revenue increased 13% to R8.29 billion.

Despite the opening of eight new retail branches, and the launch of an import and distribution infrastructure for the MG range of vehicles, operating costs were well contained at a 6% increase.

As a result, the Group achieved a 2.6% operating margin, which is well ahead of the industry average of 2.2%.

After adjusting for minority interests, the Group recorded a 9.4% increase in earnings, while operating profit rose to R217.1 million from R199.9 million before.

Strong cash generation from operations ensured that after paying dividends of R46.5 million to its listed shareholders, and dividends and loan repayments to its BEE minority partners of R50.9 million, CMH increased its level of cash and cash resources by R83 million, to R395 million.

The board recommended an increase of 20% in the dividend to 36 cents per share.

Looking ahead, the group said the consensus view is that national new and used vehicle sales will show a moderate increase during calendar 2012.

If this is accurate, and coupled with stable interest and currency exchange rates, CMH is confident of continuing its trend of earnings growth.

Seeds planted during the current year, particularly the establishment of the MG/Maxus distribution centre and the opening of the retail branch network, were a drain on current year profits and resources.

However this investment should provide modest returns in the year ahead, and improvement thereafter, it said.

The group noted, however, that it was concerned about the ongoing Middle East conflict and its impact on the domestic petrol price.

"Locally, the inefficiencies of Government and local authorities has resulted in unacceptable and unsustainable increases in electricity tariffs, property rates and toll road fees.

"All of these have the effect of reducing the buying power of the consumer and retarding economic growth," it added.

It concluded that the group is well-structured in terms of personnel, products and resources, and is ideally positioned to take advantage of the prospects that lie ahead.