Wrap Text
Interim results for the six months ended 31 December 2018
Motus Holdings Limited
Incorporated in the Republic of South Africa
Registration number 2017/451730/06
Share code: MTH
ISIN: ZAE000261913
"Motus" or "the Company"
Interim results for the six months ended 31 December 2018
MOTUS is South Africa's leading automotive group with over 18 500 employees
Business overview
Motus is a Johannesburg Stock Exchange (JSE) listed South African-based automotive holding company.
Motus Holdings Limited was listed on the JSE in November 2018, following its unbundling from Imperial
Holdings Limited.
A three-year history of our results has been published in the prelisting statement and can be found on
the website www.motuscorp.co.za.
Our unique business model is fully integrated across the automotive value chain through four key business
segments.
Business segments
1. Import and Distribution
2. Retail and Rental
3. Motor-Related Financial Services
4. Aftermarket Parts
Key investment highlights
1. Diversified (non-manufacturing) business in the automotive sector with a leading position in South Africa
and selected international presence (primarily in the United Kingdom (UK) and Australia).
2. Fully integrated business model in South Africa across the vehicle value chain: Import and Distribution,
Retail and Rental, Motor-Related Financial Services and Aftermarket Parts.
3. Unrivalled scale in South Africa underpins a differentiated value proposition to OEMs, suppliers,
customers and business partners, providing multiple customer touch points supporting customer loyalty
through the entire vehicle ownership cycle.
4. Profitability from high free cash flow generation underpinned by annuity income streams, with Return on
Invested Capital (ROIC) exceeding Weighted Average Cost of Capital (WACC) and providing a platform for an
attractive dividend yield.
5. Defined organic growth trajectory through portfolio optimisation, continuous operational enhancements and
innovation, with a selective acquisition growth strategy inside and outside South Africa leveraging
best-in-class expertise.
6. Highly experienced management team with deep industry knowledge of regional and global markets, and a
proven track record with years of collective experience, including an independent and diversified board.
Group financial highlights
Revenue stable Operating profit up 7% EPS down 7%
R39 379 million R1 838 million 436 cents
(2017: R39 358 million) (2017: R1 721 million) per share
(2017: 468 cents per share)
HEPS down 2% Normalised EPS up 10% Normalised HEPS up 15%
456 cents 516 cents 536 cents
per share per share per share
(2017: 465 cents per share) (2017: 468 cents per share) (2017: 465 cents per share)
HEPS: Headline earnings per share
EPS: Earnings per share
Normalised: this excludes the once-off impact of share-based payment expenses amounting to R160 million
Cash generated from operations down Net Debt to Equity up Return on Equity up
R382 million 63,4% 16,8%
(2017: R2 321 million) (2017: 72,4%) (June 2018: 16,7%)
Return on Invested Capital up Weighted Average Cost of Capital up Dividend up 15%
14,3% 10,8% 240 cents
(2017: 12,7%) (2017: 10,6%) per share
(2017 pro forma*: 209 cents per share)
ROE, ROIC and WACC are calculated on a rolling 12-month basis
* Pro forma: Group was not listed in the prior period.
Environment
The South African operations generated revenue and operating profit of 68% and 92% respectively, for the six
months ended to December 2018, with the remainder generated mainly in the United Kingdom and Australia.
We are operating in a subdued economic environment with pressure on disposable income expected to continue
until the South African and global economic and political situation settles down. The current electricity
crisis and the elections in May will not provide economic stability in the short term. Economic growth will
only kick in when the global economy stabilises and the President's revised economic action plans produce
positive GDP growth. President Ramaphosa's State of the Nation Address (SONA) to parliament in February was
well delivered and generated confidence in the President's ability to lead South Africa. The address contained
a number of encouraging features, such as the general drive to improve education and skills, the commitment to
fighting corruption and state capture, restructuring of State-Owned Enterprises (SOEs), restructuring of some
of the oversight bodies, including the National Prosecuting Authority (NPA), the South African Revenue Service
(SARS), the State Security Agency (SSA) and the National Security Council (NSC). The challenge now is on the
South African government and the private sector to turn these initiatives into job creation and economic growth.
Should the implementation thereof be effective, economic growth could be enhanced in the short to medium term,
albeit at a slow pace.
According to NAAMSA, South Africa retailed 552 000 vehicles (1,0% down from the prior year) and exported 351
000 vehicles (4,0% up from the prior year) for the 2018 calendar year. The downward trend is continuing, as
January new vehicle sales declined by 7,4% year on year and passenger vehicle sales declined by 10,8% year on
year.
The Importers maintained their retail sales, but reduced car rental sales. We expect consumers to be
cautious in the first half of the calendar year, with some improvement in the second half of the 2019
calendar year. We project no growth year-on-year in national vehicle sales for the 2019 calendar year at
around 550 000 units. Our retail market share is 19,3% at December 2018 (June 2017: 19,9%).
We continue to see structural risks to vehicle ownership in South Africa namely the emergence of ride
sharing and car sharing behaviour, increasing pressure on vehicle affordability and concentration of vehicle
ownership in urban areas. Industry margins will remain under pressure as the market remains highly competitive
and consumers continue to trade down to smaller, more affordable vehicles. With no new jobs being created,
political uncertainty locally and globally, Rand volatility, and no imminent interest rate cuts, there is no
real economic growth in sight in the short term. This does not bode well for the consumer and economic growth
in the short term.
Brexit in the UK is creating uncertainty in that market although our UK operations were largely unaffected
by this to date. The UK economic growth has been suppressed with the latest GDP growth recorded at 1,3%.
The Australian economy has performed well, with the latest GDP growth recorded at 2,8% but in a competitive
environment. Looking forward, the GDP growth in Australia is expected to reach an average of 2,4% in the
next 12 months.
Performance
We produced solid results in challenging trading conditions and recorded an improvement in key financial
metrics in the six months to December 2018. Participation across the automotive value chain and a
diversified portfolio in the industry provided resilience amid the market deterioration.
The passenger and commercial vehicle business (including the UK and Australia), retailed 68 725 new units
(2017: 72 570) and 41 071 pre-owned units (2017: 40 067) during the six months. This is due to a decline in
vehicle sales to the consumers, as a result of market contraction and reduced sales to the car rental
industry, where the margins are lower. UK and Australia acquisitions have contributed positively to sales
volumes.
National unit vehicle sales declined by 1% as reported by NAAMSA. The market has experienced a decline in
sales of luxury brands, in favour of entry level vehicles and small SUVs, as consumers continue to trade
down. Our fully integrated business model and representation across all business segments have provided a
competitive advantage from which many of the brands which we represented have benefited.
Revenue remained stable for the period despite reduced sales volumes attributed to market contraction and
the sales mix enhanced by price increases and acquisitions. The Import and Distribution segment reported
low growth in revenue with a 28% increase in operating income, the Retail and Rental segment reported
unchanged revenue and operating income, the Motor-Related Financial Services segment reported an increase
of 5% and 3% in revenue and operating income respectively and the Aftermarket Parts segment reported an
increase of 8% and 20% in revenue and operating income respectively.
For the group and in the Aftermarket Parts segment, the prior period's revenue was restated to recognise
that certain revenue raised relating to wholesale procurement arrangements as a principal, will now have
to be excluded (parts ordered but delivered directly to customers). Under the revised revenue accounting
standard, certain revenue of the business will now be accounted for as an agent only. There is no impact
on operating profit, as the cost of sales was reduced by the same amount. The December 2017 revenue and
cost of sales was reduced by R326 million.
Operating margin improved from 4,4% to 4,7% as a result of the Importer segment benefiting from price
increases, fewer vehicles sold to car rental companies resulting in higher margins realised on sales
through the dealer channel, enhanced by improved retail execution at the dealership level, the
acquisitions in the Aftermarket Parts segment and general cost control initiatives during these
economically challenging times. Management remains focused on financial discipline and cost
containment.
A full reconciliation of earnings to headline earnings is provided in the financial performance section.
An interim dividend of 240 cents per ordinary share has been declared compared to a prior period
(pro forma) dividend of 209 cents per ordinary share, representing an increase of 15%.
Net working capital increased by 20% to R8 415 million from a low base in December 2017 of
R 6 998 million and an increase of 25% compared to June 2018. This can be attributed to the normalisation
of inventory levels at the Importers as vehicle supply normalised, higher inventory carried at the
dealerships arising from recent acquisitions and a market slowdown in vehicle sales. In the Aftermarket
Parts segment additional inventory was carried due to acquisitions, customer requirements to improve
inventory availability and the strategy of wider brand representation to capture lower-end consumers.
Net Debt to Equity is 63,4% (June 2018: 50,7%). Debt is higher in December than in June due to the
increase in working capital attributed to the normalisation of working capital levels. The current Net
Debt to Equity is within the target levels of 55% to 75%. The Debt to Equity ratios are expected to
improve by June 2019.
ROIC is 14,3% and increased mainly due to increased profitability and benefits from lower average
invested capital during the last twelve months. The ROIC is expected to reduce marginally during the
next six-month period to June 2019, as Importer working capital levels normalise.
WACC is 10,8% and increased marginally from 10,6% in December 2017 and 10,7% in June 2018.
While we have provided separate ROIC, WACC and Net Debt to Equity ratios for each business segment,
these ratios should not be analysed in isolation as the business segments in the group operate as an
integrated business, to optimise client offerings and market penetration with numerous cross-selling
initiatives throughout the automotive value chain.
Segment performance
Import and Distribution Retail and Rental Motor-Related Financial Services Aftermarket Parts
- Exclusive South African South Africa - Developer and distributor - Distributor, wholesaler
importer of Hyundai, Kia, - Represents 23 OEMs: of innovative vehicle-related and retailer of accessories
Renault and Mitsubishi 359 vehicle dealerships financial products and services and parts for older vehicles
- Operates in South Africa - Car rental (Europcar and to more than 730 000 clients - Operates in Southern
and neighbouring countries Tempest): 133 outlets in - Manager and administrator Africa and the Far East
- Exclusive distribution Southern Africa of service, maintenance and - 35-owned branches,
rights for Nissan in four - Retail more than 100 000 warranty plans 43-owned retail stores and
East African countries new vehicles annually and - Provider of fleet a network of
- Approximately 80 000 more than 80 000 management services 720 franchised outlets
vehicles imported pre-owned vehicles - Operates a call centre - Franchise base comprises:
annually - 19,3% market share - Resellers (Midas,
- Approximately 15% vehicle retail Transerve and Team Car)
market share in - Approximately 25% - Specialised workshops
South Africa market share vehicle
- Car parc approximately rental
1,1 million vehicles
United Kingdom
- 121 dealerships
(passenger and commercial)
Australia
- 27 dealerships
(passenger only)
22% of group revenue 69% of group revenue 2% of group revenue 7% of group revenue
20% of group operating profit 42% of group operating profit 25% of group operating profit 13% of group operating profit
3,8% operating margin 2,5% operating margin 42,4% operating margin 7,5% operating margin
ROIC: 16,1% ROIC: 9,2% ROIC: 47,1% ROIC: 18,5%
Segment performance
1. Import and Distribution
Exclusive South African importer and distributor of Hyundai, Kia, Renault and Mitsubishi vehicles and parts,
which collectively have approximately 15% market share in South Africa.
Overview
The segment operates in South Africa and neighbouring countries with approximately 80 000 vehicles imported
annually.
We have the exclusive distribution rights for Nissan in four East African countries, namely Kenya, Zambia,
Tanzania and Malawi.
The Import and Distribution segment provides a differentiated value proposition to the dealership model,
enhancing the revenue and profits of the entire automotive value chain.
Financial performance
% %
change on change on
HY1 2019 HY1 2018 HY1 2018 HY2 2018 HY2 2018
Revenue (Rm) 10 104 10 043 1 10 085 0
Operating profit (Rm) 388 303 28 485 (20)
Operating margin (%) 3,8 3,0 4,8
Return on invested capital (%) 16,1 9,2
Weighted average cost of capital (%) 11,8 10,7
Debt to equity ratio (%) 56,3 48,5
Revenue improved by 1% from the prior period despite volumes increasing by 2,5% due to price increases and
the change in vehicle mix aligned to market demand as a result of fewer luxury vehicles sold.
Operating profit improved by 28% from the prior period mainly due to optimal margins realised on sales
through the dealer channel and cost containment. For the period, operating profit growth was recorded for
all our major importers and the East African operations.
Hyundai and Kia have forward cover on the US Dollar and Euro to September 2019, at average rates of R13,75
to the US Dollar and R15,90 to the Euro. As agreed between the shareholders, Renault does not take forward
cover on committed orders. As an interim measure forward cover has been taken to June 2019.With the
exception of Renault, the current guideline is to cover a minimum of seven months' orders limited to 75%
of annual forecast orders, as stipulated by the South African Reserve Bank.
The distributorships in East Africa have recorded significant improvement in profits for the period, due
to improved retail execution and financial disciplines. The African distributors' loan accounts were
capitalised and in-country borrowings established, reducing foreign exchange exposures.
During the period ROIC increased to 16,1% from 9,2%, due to improved profitability, lower average working
capital levels and a lower investment in vehicles for hire to car rental companies over the period.
2. Retail and Rental
We retail vehicles through dealerships based primarily in South Africa, with a selected presence in the
United Kingdom and Australia. We have a leading retail market share in South Africa. Car rental operates
through Tempest and Europcar brands.
Overview
South Africa
We represent 23 OEMs through 359 vehicle dealerships, including 104 pre-owned dealerships, these include
236 passenger vehicle dealerships and 19 commercial vehicle dealerships.
We operate a centralised finance and insurance business across the dealer network, which executes group
financial services strategies and provides economies of scale.
The car rental segment operates under the Europcar and Tempest brands. Each brand has different target
markets, operating through 117 car rental outlets in South Africa and 16 outlets in neighbouring
countries. The market share in South Africa is approximately 25%.
The Retail and Rental segment's unrivalled footprint of strategically located dealerships and in growing
urban areas, underpins its leading market share. The South African retail market share is 19,3% compared
to 19,9% in June 2018.
United Kingdom
We have 85 commercial vehicle dealerships and 36 passenger vehicle dealerships in the UK following the
acquisition of dealerships in December 2018. Further acquisitions in the UK market for passenger and
commercial dealerships will be driven by the introduction of additional brands and regional expansion.
Australia
The group operates 27 passenger vehicle dealerships in Australia, located in New South Wales and Victoria.
Further acquisitions in the Australian market will be driven by the introduction of additional brands and
regional expansion.
Financial performance
% %
change on change on
HY1 2019 HY1 2018 HY1 2018 HY2 2018 HY2 2018
Revenue (Rm) 32 226 32 359 0 30 400 6
Operating profit (Rm) 816 814 0 873 (7)
Operating margin (%) 2,5 2,5 2,9
Return on invested capital (%) 9,2 8,6
Weighted average cost of capital (%) 9,9 9,9
Debt to equity ratio (%) 91,0 85,3
The Retail and Rental segment reported no growth in revenue and operating income for the six months, mainly
due to market contraction, the slow-down in luxury brand vehicle sales and carbon emission issues impacting
inventory availability. The acquisitions in the UK and Australia were included for the full six months and
contributed positively to revenue and operating profit.
Worldwide Harmonised Light Vehicle Test Procedure (WLTP) has negatively affected sales volumes in the
vehicle passenger business in South Africa, the UK and to a lesser extent, in Australia.
In South Africa, the total vehicle market declined by 1% for the six months ended 31 December 2018. Our
South African retail and rental operating profit improved by 7%, due to cost containment, turnaround
processes at dealerships and disposal or closure of unprofitable dealerships. The recent changes to
leverage the expertise of one finance and insurance sales structure across the retail vehicle segment
is providing a competitive advantage for the business. Higher volumes in entry level and small SUV
vehicle sales in South Africa have assisted profit margins, however, this was negatively impacted by
the reduction in profitability of luxury brand vehicle sales.
UK revenue improved due to increased sales volumes. The UK operation has largely been unaffected by the
political uncertainty arising from Brexit. Operating profit declined from the prior period. The DAF
commercial and Pentagon passenger dealerships have performed well in a competitive market and remain
profitable. The Mercedes commercial business was negatively impacted due to once-off restructuring costs
and carbon emission issues, resulting in a lack of inventory availability and the reduction in variable
margin due to a decline in volumes. The prior period included the sales of the London Taxi vehicles,
which resulted in significant once-off income.
The revenue from the Australia operations increased for the period, notwithstanding the decline in the
Australian market (the Australian new car market sales declined for the first time in four years). This
is due to acquisitions that have been included for the six months. The operating profit declined from
the prior period. The recently acquired Melbourne operation performed in line with expectations. The
Sydney operation was negatively impacted by the over exposure to certain brands that underperformed in
the market and relocating one of the Sydney dealerships and the Parts Distribution Centre. The
relocation resulted in once-off costs and will improve profitability in the future.
Car rental reported growth in revenue for the period, in line with inflation, despite the decline in
international tourism volumes. Rental utilisation was maintained at 70%. We gained rental market
share over the past 18 months.
During the period, ROIC increased from 8,6% to 9,2% due to a lower investment in vehicles for hire
and the sale of non-strategic properties.
3. Motor-Related Financial Services
We innovate develop and distribute vehicle-related financial products and services through importers
and distributors, dealers, finance houses, call centres and digital channels.
Overview
The segment is a manager and administrator of service, maintenance and warranty plans and develops
and sells vehicle-related value-added products and services to more than 730 000 clients. We are also
a provider of fleet management services to corporate customers including fleet maintenance, fines
management, licensing and registration services.
Innovation of services and products represent a profit opportunity for the business. We have invested
in technology to leverage consumer data, enabling us to offer personalised services enhancing the
customer experience and improving customer retention.
This business segment complements and leverages the automotive value chain, providing high-margin
annuity earnings. The business' ability to analyse proprietary data enables the accurate pricing of
its offerings, profiling for the fleet business and management of claims.
Through its leading service, maintenance and warranty plans, the segment unlocks revenue for the
Import and Distribution and Retail and Rental businesses, by bringing customers back to its
dealerships.
Financial performance
% %
change on change on
HY1 2019 HY1 2018 HY1 2018 HY2 2018 HY2 2018
Revenue (Rm) 1 138 1 088 5 1 078 6
Operating profit (Rm) 482 470 3 419 15
Operating margin (%)* 42,4 43,2 38,9
Return on invested capital (%) 47,1 45,9
Weighted average cost of capital (%) 10,8 11,8
Debt to equity ratio (%)# (97,5) (70,2)
* Operating margin includes profit streams without associated revenue.
# In a cash position due to pre-payment of maintenance funds.
Revenue increased by 5% mainly due to fund income released to revenue on maturity, higher client
penetration through digital marketing of value-added products and vehicle for hire contract extensions.
Financial Services improved operating income by 3% mainly due to the positive contribution from the
realisation of profits on maturity of funds and lower operating expenses. Management remain focused on
financial discipline and cost containment while innovating its product offerings.
We continue to drive development of the fleet management business, building synergies within the vehicle
retail businesses and integration of the M-Sure business.
ROIC increased from 45,9% to 47,1% due to higher profitability during the six-month period.
4. Aftermarket Parts
Distributor, wholesaler and retailer of accessories and parts for out-of-warranty vehicles through 35-owned
branches, 43-owned retail stores and a network of 720 franchised outlets.
Overview
The Aftermarket Parts segments' large national and growing footprint enables it to leverage its buying power
to distribute and sell competitively priced products for a continually growing car parc of vehicles out of
warranty. Expanding into other developing markets such as Africa constitutes a significant opportunity for
this business. Increased participation in this segment will include vertical integration in order to
eliminate intermediaries in the wholesale supply chain. In March 2018, the segment acquired an additional
11% shareholding resulting in a 60% controlling share in ARCO Motor Industry Company Limited in Taiwan to
support this strategy of procuring at competitive prices.
Aftermarket Parts franchise base comprises:
- Resellers: Midas, Transerve and Team Car.
- Specialised workshops: ADCO, CBS, Motolek and Battery Hub.
Financial performance
% %
change on change on
HY1 2019 HY1 2018 HY1 2018 HY2 2018 HY2 2018
Revenue (Rm) 3 259 3 028 8 2 946 11
Operating profit (Rm) 246 205 20 242 2
Operating margin (%) 7,5 6,8 8,2
Return on invested capital (%) 18,5 19,4
Weighted average cost of capital (%) 11,1 11,0
Debt to equity ratio (%) 103,3 72,9
Revenue and operating profit increased by 8% and 20% respectively, mainly due to the international vertical
integration strategy (inclusion of ARCO as a subsidiary) and cost containment.
In South Africa, we continue to experience lower demand for commoditised products and a shift by the
consumers from higher-priced premium products to more affordable products. This results in delivering more parts to
customers at lower margins and higher distribution costs.
Working capital was negatively affected by the expansion of inventory to represent a wider brand of products
to capture lower-end consumers thereby improving availability and longer lead times. This impact should
normalise in the short term. The acquisitions further impacted working capital. However, this should normalise in
the short term.
ROIC decreased from 19,4% to 18,5% due to increased working capital.
Financial overview
Group profit or loss (extract)
Total Total %
HY1 2019 HY1 2018 change
Rm Rm
Revenue 39 379 39 358 0
Operating profit 1 838 1 721 7
Operating profit (%) 4,7% 4,4%
Forex losses (42) (50) (16)
Net finance costs (363) (396) (8)
Share of results of associates and
joint ventures and other (31) (5) greater than 100
Profit before tax and IFRS 2 charge 1 402 1 270 10
Issue of shares at a discount and
modification of share appreciation rights (160) - greater than 100
Profit before tax 1 242 1 270 (2)
Income tax expense (363) (348)
Profit for the year 879 922 (5)
Attributable to non-controlling interests (8) 24
Attributable to shareholders of Motus Holdings 871 946 (8)
Effective tax rate (%) 29 28
Return on invested capital 14,3 12,7
Weighted average cost of capital (%) 10,8 10,6
Note: WACC for each business segment of the group is calculated by making appropriate country risk adjustments
for the cost of equity and cost of debt. The group WACC calculation is a weighted average of the respective
segment WACCs. See glossary of terms. ROIC is calculated based on taxed operating profit plus income from
associates divided by the 12-month average invested capital (total equity and net interest-bearing borrowings).
Group profit before tax (before once-off IFRS 2 charge), improved by 10% due to:
- a 7% increase in operating profit (R117 million);
- a 8% reduction in finance costs (R33 million) due to lower average debt levels;
- a 16% decline in foreign exchange losses (R8 million); and
was offset by impairment losses of R56 million relating to investments and loans in the Zimbabwean
associates and R31 million relating to goodwill on acquisitions of dealerships reduced by the
derecognition of loans on the deregistration of subsidiaries R36 million. Goodwill below R10 million per
acquisition has been written off in line with our policy.
The issue of shares to a black economic partner (Ukhamba) relates to the once-off costs of issuing unlisted
deferred ordinary shares at a discount to their fair value (R141 million) and for the modification of share
appreciation rights on unbundling (R19 million), totalling R160 million.
Profits attributable to non-controlling interests increased, mainly due to improved results in Renault and
the inclusion of ARCO as a subsidiary. In March 2018, a further 11% shareholding was acquired resulting in
a 60% controlling share.
The effective tax rate increased by 1%, mainly due to the once-off cost of the issue of shares to Ukhamba
at a discount and exceptional items relating to impairments of goodwill, associates and other (R51 million),
which do not qualify for a tax deduction.
Any pro forma financial information contained in this announcement, and in particular the information as set
out in the table below which shows the calculations of the normalised earnings and headline earnings are the
responsibility of the directors and have been prepared for illustrative purposes and due to their nature, may
not fairly present Motus' financial position in accordance with International Financial Reporting Standards.
They have the effect of removing the once-off impact of share based equity costs that have no cash flow
effect. In the opinion of the directors normalised earnings give users a useful view of the trading results.
In addition, as 45% of HEPS is used to calculate the dividend pay-out it would have an unnecessary
distortion on the dividend paid.
Reconciliation from earnings to headline earnings
HY1 2019 HY1 2018 %
Rm Rm change
Earnings 871 946 (8)
Profit on disposal of assets/investments (12) (41) (71)
Impairment of goodwill and other assets 85 27 greater than 100
Derecognition of loans on deregistration
of subsidiaries (36) (1) greater than 100
Tax and non-controlling interests 3 9 (67)
Headline earnings 911 940 (3)
Adjustments to calculate normalised earnings
Issue of shares at a discount to a black
economic empowerment partner (Ukhamba)* 141 - greater than 100
Modification of share appreciation
rights on unbundling* 19 - greater than 100
Normalised earnings 1 031 946 9
Normalised headline earnings 1 071 940 14
Weighted average number of ordinary shares 200 202 (1)
* Due to the once-off nature of this expense and that there is no cash flow impact, this amount has been
added back to create normalised earnings and headline earnings.
Earnings and headline earnings per a share
HY1 2019 HY1 2018 % change
Basic EPS (cents) 436 468 (7)
Basic HEPS (cents) 456 465 (2)
Normalised EPS (cents) 516 468 10
Normalised HEPS (cents) 536 465 15
Motus Holdings Limited Financial Position
31 December 30 June %
2018 2018 change
Rm Rm
ASSETS
Goodwill and intangible assets 1 272 1 230 3
Property, plant and equipment 7 034 6 786 4
Investments in associates and joint ventures 281 348 (19)
Vehicles for hire 4 067 3 924 4
Investments and other financial assets 607 653 (7)
Net working capital 8 415 6 731 25
Other assets 1 080 917 18
Assets held-for-sale 208 235 (11)
Net debt (7 690) (5 900) 30
Deferred funds (2 752) (2 724) 1
Other liabilities (372) (535) (30)
Liabilities held-for-sale (20) (21) (5)
Total shareholders' equity (12 130) (11 644) 4
Total assets 37 202 36 716 1
Total liabilities (25 072) (25 072) -
Financial overview
Factors impacting the financial position at 31 December 2018 compared to 30 June 2018
Goodwill and intangibles increased by 3% compared to June 2018, mainly due to acquisitions of
dealerships in the UK and South Africa, at the end of December 2018.
Property plant and equipment increased by 4% due to the expansion of the dealership footprint
in South Africa and the UK.
Investments in associates and joint ventures declined by 19% mainly as a result of the impairments
in the two Zimbabwean associates amounting to R56 million.
Vehicles for hire increased by 4% due to:
- the increase in seasonal demand over the December period;
- the change in the mix of vehicles; and
- partially offset by the decline in vehicles placed with car rental companies by the importers.
Investments and other financial assets declined by 7%. This is due to the decline in investments
in cell captives based on a change in regulatory solvency calculations.
Net working capital increased by 25% to R8 415 million (June 2018: R 6 731 million), mainly
impacted by:
- Net working capital in the Importer segment normalised during the six months, as the supply
of inventory from the OEMs improved, as well as accounts payable being lower and a reduction
in the buy-back liability from the sales of vehicles to car rental companies;
- Retail and Rental's inventory increased compared to June 2018, mainly due to recent acquisitions
in South Africa and the UK, and the slow-down in sales in December in South Africa; and
- Aftermarket Parts net working capital increased as a result of an increase in inventory to
improve brand representation to capture lower-end consumers and improve inventory availability.
This impact should normalise in the short term.
Other assets increased by 18% as a result of an increase in deferred tax assets arising on the
remeasurement of foreign currency instruments in the hedging reserve and provisional tax payments.
Assets held for sale are non-strategic properties, mainly relating to Retail and Rental properties
held for sale in South Africa and Australia.
Net debt increased by 30% (R1 790 million) which is aligned with the higher working capital levels
across all segments.
Deferred funds, mainly relating to service and maintenance plans, remained largely stable.
The decrease in other liabilities by 30% is mainly due to the decline in current and deferred
taxation liabilities. Other financial liabilities declined as a result of a reduction in loans due
to associates.
In addition to attributable profits, shareholders' equity was impacted by the:
- Repurchase of 1 965 459 treasury shares to hedge share scheme obligations amounting to
R165 million;
- Dividend paid to the former parent company of R567 million;
- Issue of shares at a discount to the black economic empowerment partner (Ukhamba) amounting to
R141 million; and
- Additional shares issued to the former parent company prior to unbundling of R167 million.
CASH FLOW
H1 2019 H1 2018
Rm Rm
Cash generated from operations before movements
in net working capital 2 398 2 252
Movements in net working capital (1 572) 785
Cash generated by operations before interest,
tax paid and capital expenditure on vehicles
for hire 826 3 037
Finance costs paid (394) (440)
Finance income received 31 44
Dividend income 299 120
Tax paid (380) (440)
Cash generated by operations before capital
expenditure on vehicles for hire 382 2 321
Net capital expenditure - vehicles for hire (613) (1 161)
Cash generated by operations (231) 1 160
Net cash utilised on acquisitions of businesses (368) (653)
Net cash generated by disposals of businesses 9 -
Capital expenditure (excluding vehicles for hire) (229) 20
Movements in investments in associates 12 (193)
(Increase)/decrease in investments and loans (77) 112
Shares repurchased (165) -
Change in non-controlling interests (28) 221
Dividends paid (604) (1 635)
Other - (44)
Increase in net debt (excludes currency adjustments) (1 681) (1 012)
Free cash flow 101 1 819
Free cash flow to headline earnings 0,1 1,9
Cash generated by operations after working capital movements, interest and tax payments was
R382 million (2017: R2 321 million).
Net working capital absorption occurred mainly due to normalisation of working capital within
the Importer segment and higher levels of inventory within the Vehicle Retail and Rental and
Aftermarket Parts segments.
The cash outflow on vehicles for hire is lower due to a decline in sales to external car
rental companies.
The cash outflow on businesses acquired is R368 million, relating mainly to the new dealerships
in the UK and expansion of the dealership footprint in South Africa.
The prior period's capital expenditure included proceeds on the sale of properties.
The movement in associates is as a result of the inclusion of the Aftermarket Parts acquisition
in the prior period.
Shares repurchased related to treasury shares of 1 965 459 ordinary shares amounting to
R165 million.
The change in non-controlling interest outflow relates to cash paid for the buy-out of
non-controlling interests. The prior period's inflow related mainly to the Renault
recapitalisation.
A final dividend was paid to Imperial Holdings Limited during September 2018 amounting to
R567 million.
Net debt increased by 30% from June 2018 in line with working capital increases, however,
declined by 5% year on year.
Liquidity
The liquidity position is strong with R4,8 billion unutilised banking facilities, excluding
asset-backed finance facilities. In total, 66% of the group debt is long term in nature and
27% of the debt is at fixed rates. The group is currently assessing the appropriate mix between
fixed and floating interest rates.
Dividend
An interim dividend of 240 (2017 pro forma: 209) cents per ordinary share has been declared,
in line with our targeted pay-out ratio of 45% of normalised HEPS. This is an increase of 15%
from the prior period pro forma dividend. Normalised HEPS excludes the once-off and non-cash
flow item amounting to R160 million.
Board changes
Messrs MJN Njeke, S Mayet and Mrs K Moloko joined the board as non-executive directors with effect
from 22 November 2018 and Mr RJA Sparks and Mrs T Skweyiya retired from the board with effect from
the same date.
The board thanks the retiring members for their services and we wish them well in their new
endeavours. We welcome the new members and look forward to working with them.
Strategy
We are well positioned to maintain our leading automotive retail market share in South Africa and
grow in selected international markets. We aim to sustain best-in-class earnings, targeted returns
and generate high free cash flows and provide a platform for a consistent dividend pay-out through
the cycle.
We have a strategic focus on deepening our competitiveness and relevance across the automotive
value chain, by driving organic growth through optimisation and innovation, and with selective
acquisitions.
Prospects
The group has produced solid financial results for the six-month period under challenging trading
conditions. We anticipate satisfactory operating and financial results to June 2019, subject to
stable currencies and economic growth in the economies in which we operate.
For the financial year to 30 June 2019 we expect:
- challenging economic trading conditions to remain in all geographies where we operate;
- to increase revenue;
- to maintain operating profit;
- to improve working capital efficiency and reduce debt; and
- to achieve growth in normalised HEPS.
On behalf of the board we thank all stakeholders for their support, and we will continue to
execute on our strategies.
OS Arbee
Chief Executive Officer
OJ Janse van Rensburg
Chief Financial Officer
26 February 2019
The forecast financial information herein has not been reviewed or reported on by Motus' auditors.
Dividend declaration
Declaration of interim ordinary dividend for the six months ended 31 December 2018
Notice is hereby given that a gross interim ordinary dividend in the amount of 240,00 cents per
ordinary share has been declared by the board of Motus, payable to the holders of the 201 971 450
ordinary shares. The dividend will be paid out of reserves.
The ordinary dividend will be subject to a local dividend tax rate of 20%. The net ordinary
dividend, to those shareholders who are not exempt from paying dividend tax, is therefore
192,00 cents per share.
The company has determined the following salient dates for the payment of the ordinary
dividend:
2019
Last day for ordinary shares to trade cum ordinary dividend Monday, 18 March
Ordinary shares commence trading ex-ordinary dividend Tuesday, 19 March
Record date Friday, 22 March
Payment date Monday, 25 March
The company's income tax number is 983 671 2167.
Share certificates may not be dematerialised/rematerialised between Tuesday, 19 March 2019 and Friday,
22 March 2019, both days inclusive.
On Monday, 25 March 2019, amounts due in respect of the ordinary dividend will be electronically transferred
to the bank accounts of certificated shareholders that utilise this facility. In respect of those who do not,
cheques dated 25 March 2019 will be posted on or about that date. Shareholders who have dematerialised their
shares will also have their accounts, held at their CSDP or broker, credited on Monday, 25 March 2019.
On behalf of the board
RA Venter
Company Secretary
26 February 2019
Financial performance
Condensed consolidated statements of financial position
at 31 December 2018
Unaudited Unaudited Audited
31 December 31 December 30 June
2018 2017 2018
Notes Rm Rm Rm
ASSETS
Non-current assets 10 088 10 296 9 799
Goodwill 7 1 017 893 953
Intangible assets 255 256 277
Investments in associates and joint ventures 281 482 348
Property, plant and equipment 7 034 6 731 6 786
Deferred tax 894 939 782
Investments and other financial instruments 607 995 653
Current assets 26 906 25 418 26 682
Inventories 17 024 14 913 15 633
Vehicles for hire 4 067 4 489 3 924
Taxation 186 92 135
Trade and other receivables 4 720 4 910 4 821
Derivative financial assets 121 62 432
Cash resources 788 952 1 737
Assets classified as held-for-sale 208 491 235
Total assets 37 202 36 205 36 716
EQUITY AND LIABILITIES
Capital and reserves
Stated capital 23 525 23 358 23 358
Treasury shares (360) - -
Common control reserve (19 558) (19 753) (19 753)
Hedge accounting reserve 227 (202) 198
Other reserves (516) (805) (716)
Retained income 8 849 8 617 8 553
Attributable to owners of Motus 12 167 11 215 11 640
Non-controlling interests (37) (50) 4
Total equity 12 130 11 165 11 644
Liabilities
Non-current liabilities 7 524 2 037 1 914
Deferred funds 1 570 1 636 1 447
Deferred tax 27 17 31
Interest-bearing debt 5 589 80 81
Provisions 316 228 301
Other financial liabilities 22 76 54
Current liabilities 17 528 22 983 23 137
Provisions 419 291 373
Deferred funds 1 182 1 137 1 277
Trade and other payables 12 681 11 752 13 435
Derivative financial liabilities 34 616 46
Taxation 323 234 450
Interest-bearing debt 2 889 8 953 7 556
Liabilities relating to assets classified
as held-for-sale 20 20 21
Total equity and liabilities 37 202 36 205 36 716
Condensed consolidated statements of profit or loss
for the six months ended 31 December 2018 Restated
Unaudited Restated twelve
six months six months months
ended ended* ended*
31 December 31 December 30 June
% 2018 2017 2018
Notes change Rm Rm Rm
Revenue 0 39 379 39 358 77 001
Net operating expenses (36 902) (36 934) (72 055)
Earnings before interest, taxation,
depreciation and amortisation 2 477 2 424 4 946
Depreciation, amortisation and impairments (639) (703) (1 353)
Operating profit 7 1 838 1 721 3 593
Profit on sale of properties, net
of impairments 25 14 617
Amortisation of intangible assets arising
on business combinations (9) (6) (15)
Net foreign exchange losses (42) (50) (43)
Issue of shares at a discount to a black
economic empowerment partner (Ukhamba) (141) - -
Modification of share appreciation rights (19) - -
Other non-operating items 6 (55) (26) (244)
Profit before net financing costs (3) 1 597 1 653 3 908
Finance costs (10) (394) (440) (803)
Finance income 31 44 66
Profit before share of results of
associates and joint ventures 1 234 1 257 3 171
Share of results of associates
and joint ventures 8 13 39
Profit before tax (2) 1 242 1 270 3 210
Income tax expense (363) (348) (897)
Profit for the year (5) 879 922 2 313
Net profit attributable to:
Owners of Motus (8) 871 946 2 346
Non-controlling interests 8 (24) (33)
879 922 2 313
Earnings per share (cents)
Total earnings per share
- Basic (7) 436 468 1 162
- Diluted (9) 425 468 1 162
* Revenue and net operating expenses were restated, please refer to note 3. The original 30 June 2018 amounts were
audited, the December 2017 amounts and the restatement have not been audited.
Condensed consolidated statements of other comprehensive income
for the six months ended 31 December 2018 Audited
Unaudited Unaudited twelve
six months six months months
ended ended ended
31 December 31 December 30 June
2018 2017 2018
Rm Rm Rm
Profit for the year 879 922 2 313
Other comprehensive income/(loss) 19 (235) 231
Exchange (losses)/gains arising on translation
of foreign operations (10) (57) 9
Movement in hedge accounting reserve (net of tax) 29 (178) 222
- Net change in the fair value of the cash flow hedges (225) (447) 292
- Rolling of open hedging instruments 193 150 11
- Deferred tax relating to the hedge accounting
reserve movements 61 119 (81)
Total comprehensive income for the year 898 687 2 544
Total comprehensive income attributable to:
Owners of Motus 892 725 2 579
Non-controlling interests 6 (38) (35)
898 687 2 544
Earnings per share information
for the six months ended 31 December 2018
Unaudited Unaudited Audited
six months six months financial
ended ended year ended
% 31 December 31 December 30 June
change 2018 2017 2018
Rm Rm Rm
Headline earnings reconciliation
Earnings 871 946 2 346
Recoupment for disposal of property,
plant and equipment (IAS 16) (25) (41) (716)
Loss on the disposal of intangible
assets (IAS 38) 13 - 5
(Impairment reversal)/impairment of
property, plant and equipment (IAS 36) (2) 27 103
Impairment of goodwill (IAS 36) 31 - 63
Impairment of investments in associates and
joint ventures (IAS 28) 56 - 8
Profit/loss on disposal of subsidiaries and
businesses (IFRS 10) - - (4)
Impairment loss on assets of disposal groups - - (3)
Derecognition of loans on deregistration
of subsidiaries (36) (1) -
Tax effects of remeasurements 2 9 189
Non-controlling interests share
of remeasurements 1 - -
Headline earnings 911 940 1 991
Headline earnings per share (cents)
Total operations
- Basic (2) 456 465 986
- Diluted (5) 444 465 986
Additional information
Net asset value per share (cents) 11 6 145 5 552 5 762
Tangible net asset value per ordinary
share (cents) 5 503 4 983 5 153
Number of ordinary shares in issue (million)
- total shares 202 202 202
- net of shares repurchased 198 202 202
- weighted average for basic 200 202 202
- weighted average for diluted 205 202 202
Condensed consolidated statements of changes in equity
for the six months ended 31 December 2018
Common Hedge
Stated Shares control accounting Other
capital repurchased reserve reserve reserves*
Rm Rm Rm Rm Rm
Opening balance as at 1 July 2017 audited 23 358 - (19 753) (34) (683)
Total comprehensive income for the year - - - (168) (53)
Attributable profit for the year - - - - -
Other comprehensive income - - - (168) (53)
Incremental interest purchased from
non-controlling interests - - - - (6)
Additional investment by
non-controlling interests - - - - -
Net acquisitions/(disposals) of
non-controlling interests - - - - -
Hedge premiums paid on share-based equity - - - - (152)
Share-based equity costs charged to the
statement of profit or loss - - - - 52
Dividends paid - - - - -
Transfers to other reserves - - - - 45
Other movements - - - - (8)
As at 31 December 2017 unaudited 23 358 - (19 753) (202) (805)
Total comprehensive income for the year - - - 400 54
Attributable profit for the year - - - - -
Other comprehensive income - - - 400 54
Incremental interest purchased from
non-controlling interests - - - - (17)
Net acquisitions/(disposals) of
non-controlling interests - - - - 1
Hedge premiums paid on share-based equity - - - - (63)
Share-based equity costs charged to the
statement of profit or loss - - - - 69
Dividends paid - - - - -
Transfers to other reserves - - - - 45
Other movements - - - - -
As at 30 June 2018 audited 23 358 - (19 753) 198 (716)
Total comprehensive income for the year - - - 29 (8)
Attributable profit for the year - - - - -
Other comprehensive income - - - 29 (8)
Additional shares issued 167 - - - -
Repurchase of 1 965 459 shares at an
average price of R84,13 per share - (165) - - -
1 853 342 shares acquired at an average
price of R105,02 from former parent
prior to unbundling - (195) 195 - -
Incremental interest purchased from
non-controlling interests - - - - (18)
Hedge premiums paid on share-based equity - - - - (23)
Share-based equity costs charged to the
statement of profit or loss - - - - 67
Issue of shares at a discount to a black
economic empowerment partner (Ukhamba)
and modification of share appreciation rights - - - - 160
Dividends paid - - - - -
Transfers to other reserves - - - - 8
Other movements - - - - 14
As at 31 December 2018 unaudited 23 525 (360) (19 558) 227 (516)
* Other reserves relate to the foreign currency translation reserve, share-based payment reserve and premiums paid on
purchase of non-controlling interests.
Condensed consolidated statements of changes in equity (continued)
for the six months ended 31 December 2018
Attributable Non-
Retained to owners controlling Total
income of Motus interests equity
Rm Rm Rm Rm
Opening balance as at 1 July 2017 audited 9 308 12 196 (274) 11 922
Total comprehensive income for the year 946 725 (38) 687
Attributable profit for the year 946 946 (24) 922
Other comprehensive income - (221) (14) (235)
Incremental interest purchased from
non-controlling interests - (6) 6 -
Additional investment by
non-controlling interests - - 220 220
Net acquisitions/(disposals) of
non-controlling interests - - 38 38
Hedge premiums paid on share-based equity - (152) - (152)
Share-based equity costs charged to the
statement of profit or loss - 52 - 52
Dividends paid (1 635) (1 635) - (1 635)
Transfers to other reserves (45) - - -
Other movements 43 35 (2) 33
As at 31 December 2017 unaudited 8 617 11 215 (50) 11 165
Total comprehensive income for the year 1 400 1 854 3 1 857
Attributable profit for the year 1 400 1 400 (9) 1 391
Other comprehensive income - 454 12 466
Incremental interest purchased from
non-controlling interests - (17) (18) (35)
Net acquisitions/(disposals) of
non-controlling interests - 1 71 72
Hedge premiums paid on share-based equity - (63) - (63)
Share-based equity costs charged to the
statement of profit or loss - 69 - 69
Dividends paid (1 504) (1 504) (1) (1 505)
Transfers to other reserves (45) - - -
Other movements 85 85 (1) 84
As at 30 June 2018 audited 8 553 11 640 4 11 644
Total comprehensive income for the year 871 892 6 898
Attributable profit for the year 871 871 8 879
Other comprehensive income - 21 (2) 19
Additional shares issued - 167 - 167
Repurchase of 1 965 459 shares at an
average price of R84,13 per share - (165) - (165)
1 853 342 shares acquired at an average
price of R105,02 from former parent
prior to unbundling - - - -
Incremental interest purchased from
non-controlling interests - (18) (10) (28)
Hedge premiums paid on share-based equity - (23) - (23)
Share-based equity costs charged to the
statement of profit or loss - 67 - 67
Issue of shares at a discount to a black
economic empowerment partner (Ukhamba)
and modification of share appreciation rights - 160 - 160
Dividends paid (567) (567) (37) (604)
Transfers to other reserves (8) - - -
Other movements - 14 - 14
As at 31 December 2018 unaudited 8 849 12 167 (37) 12 130
* Other reserves relate to the foreign currency translation reserve, share-based payment reserve and premiums paid on
purchase of non-controlling interests.
Condensed consolidated statements of cash flows
for the six months ended 31 December 2018 Audited
Unaudited Unaudited twelve
six months six months months
ended ended* ended*
31 December 31 December 30 June
% 2018 2017 2018
Notes change Rm Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations before
movements in net working capital 6 2 398 2 252 4 607
Movements in net working capital (1 572) 785 2 141
Cash generated by operations before
interest, tax paid and capital
expenditure on vehicles for hire (73) 826 3 037 6 748
Finance costs paid (394) (440) (803)
Finance income received 31 44 66
Dividend income 299 120 230
Tax paid (380) (440) (861)
Cash generated by operations before
capital expenditure on vehicles for hire (84) 382 2 321 5 380
Net capital expenditure - vehicles for hire (613) (1 161) (1 079)
- Expansion (356) (417) (293)
- Replacement (257) (744) (786)
(231) 1 160 4 301
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash utilised on acquisitions of businesses (368) (653) (731)
Net cash generated by disposals of businesses 9 - 57
Expansion of property, plant, equipment
and intangible assets (205) (222) (390)
Net replacements of property, plant, equipment
and intangible assets (24) 242 1 146
Movements in investments in associates 12 (193) (45)
(Increase)/decrease in investments (77) 106 18
Repayments of other loans - 6 6
(653) (714) 61
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of ordinary shares (165) - -
Dividends paid to Imperial Holdings Limited (567) (1 635) (3 139)
Dividends paid to non-controlling interests (37) - (1)
Acquisition of non-controlling interests (28) - (35)
Capital raised from non-controlling interests - 221 220
Repayment of other financial liabilities - (44) (20)
Issue of preference shares to non-controlling interests - 41 40
Increase in floorplan facilities 244 515 81
(Repayments)/advances in unsecured loans with
Imperial Holdings Limited (7 066) 237 (1 350)
Advances in banking facilities 7 241 - -
(378) (665) (4 204)
Net (decrease)/increase in cash and cash equivalents (1 262) (219) 158
Effects of exchange rate changes on cash and
cash equivalents 15 (2) 86
Cash and cash equivalents at beginning of the year 1 187 943 943
Cash and cash equivalents at end of year 8 (60) 722 1 187
* The capital expenditure on vehicles for hire, property, plant and equipment and intangibles was represented to disclose expansion
and net replacement capital expenditure.
Segment financial position
as at 31 December 2018
Import Retail
and and
Motus Distribution Rental
2018 2017 2018 2017 2018 2017
Rm Rm Rm Rm Rm Rm
Financial position
Assets
Goodwill and intangible assets 1 272 1 149 109 125 677 645
Equity investment in associates and joint ventures 196 387 20 23 32 32
Property, plant and equipment 7 034 6 731 745 626 5 720 5 593
Investments and other financial instruments 607 995 4 4 - -
Inventories 17 024 14 913 3 996 3 486 11 170 9 891
Vehicles for hire 4 067 4 489 1 706 2 102 2 302 2 378
Trade and other receivables(1) 4 841 4 972 1 932 2 234 3 139 3 057
Operating assets 35 041 33 636 8 512 8 600 23 040 21 596
- South Africa 25 749 25 874 8 512 8 600 13 956 13 834
- International 9 292 7 762 - - 9 084 7 762
Liabilities
Deferred funds 2 752 2 773 - - - -
Provisions 735 519 104 101 114 69
Trade and other payables(1) 12 715 12 368 4 382 5 438 9 301 8 657
Other financial liabilities 22 76 10 57 11 17
Operating liabilities 16 224 15 736 4 496 5 596 9 426 8 743
- South Africa 10 847 11 002 4 496 5 596 4 094 4 009
- International 5 377 4 734 - - 5 332 4 734
Net working capital 8 415 6 998 1 442 181 4 894 4 222
- South Africa 6 599 5 650 1 442 181 3 141 2 874
- International 1 816 1 348 - - 1 753 1 348
Net debt 7 690 8 081 1 527 1 228 6 525 6 095
- South Africa 5 757 6 463 1 527 1 228 4 507 4 481
- International 1 933 1 618 - - 2 018 1 614
Net capital expenditure (842) (1 141) (174) (374) (543) (757)
- South Africa (756) (1 039) (174) (374) (459) (655)
- International (86) (102) - - (84) (102)
(1) Includes amounts pertaining to derivative financial instruments.
Segment financial position (continued)
as at 31 December 2018
Motor-
Related Head
Financial Aftermarket office and
Services Parts eliminations
Rm 2018 2017 2018 2017 2018 2017
Financial position
Assets
Goodwill and intangible assets 11 18 450 360 25 1
Equity investment in associates and joint ventures 53 61 91 271 - -
Property, plant and equipment 110 105 435 424 24 (17)
Investments and other financial instruments 567 842 - 153 36 (4)
Inventories 306 269 1 596 1 340 (44) (73)
Vehicles for hire 1 797 2 130 - - (1 738) (2 121)
Trade and other receivables(1) 384 355 754 614 (1 368) (1 288)
Operating assets 3 228 3 780 3 326 3 162 (3 065) (3 502)
- South Africa 3 228 3 780 3 118 3 162 (3 065) (3 502)
- International - - 208 - - -
Liabilities
Deferred funds 2 632 2 657 - - 120 116
Provisions 309 318 2 31 206 -
Trade and other payables(1) 632 510 1 170 1 014 (2 770) (3 251)
Other financial liabilities - - - 2 1 -
Operating liabilities 3 573 3 485 1 172 1 047 (2 443) (3 135)
- South Africa 3 573 3 485 1 127 1 047 (2 443) (3 135)
- International - - 45 - - -
Net working capital (251) (204) 1 178 909 1 152 1 890
- South Africa (251) (204) 1 115 909 1 152 1 890
- International - - 63 - - -
Net debt (1 490) (733) 1 079 889 49 602
- South Africa (1 490) (733) 1 169 889 44 598
- International - - (90) - 5 4
Net capital expenditure (152) (301) (34) (4) 61 295
- South Africa (152) (301) (32) (4) 61 295
- International - - (2) - - -
(1) Includes amounts pertaining to derivative financial instruments.
Segment profit or loss
for the six months ended 31 December 2018
Import Retail
and and
Motus Distribution Rental
2018 2017 2018 2017 2018 2017
Rm Rm Rm Rm Rm Rm
PROFIT or LOSS
Revenue(1) 39 379 39 358 10 104 10 043 32 226 32 359
- South Africa 26 831 27 815 10 104 10 043 19 899 20 816
- International 12 548 11 543 - - 12 327 11 543
Operating profit 1 838 1 721 388 303 816 814
- South Africa 1 692 1 564 388 303 708 659
- International 146 157 - - 108 155
Depreciation, amortisation, impairments
and recoupments (623) (695) (171) (307) (399) (366)
- South Africa (572) (648) (171) (307) (349) (319)
- International (51) (47) - - (50) (47)
Interest expense (363) (396) (81) (171) (289) (261)
- South Africa (292) (346) (81) (171) (221) (211)
- International (71) (50) - - (68) (50)
Profit before tax and exceptional items 1 293 1 289 281 78 532 562
- South Africa 1 224 1 190 281 78 498 463
- International 69 99 - - 34 99
Exceptional items (51) (19) (20) (4) 26 5
- South Africa (51) (19) (20) (4) 26 5
- International - - - - - -
Profit before tax 1 242 1 270 261 74 558 567
- South Africa 1 173 1 171 261 74 524 468
- International 69 99 - - 34 99
Additional segment information
Analysis of revenue by type
Sale of goods 34 747 35 062 3 781 3 959 27 968 28 403
Rendering of services 4 632 4 296 109 115 3 813 3 590
39 379 39 358 3 890 4 074 31 781 31 993
Inter-group revenue - - 6 214 5 969 445 366
39 379 39 358 10 104 10 043 32 226 32 359
Analysis of depreciation, amortisation,
impairments and recoupments (623) (695) (171) (307) (399) (366)
Depreciation and amortisation (629) (703) (177) (297) (417) (380)
Recoupments and impairments 15 14 6 (10) 21 18
Amortisation and impairment of intangible
assets arising on business combinations (9) (6) - - (3) (4)
Associate income included in pre-tax profits 8 13 3 2 (5) 2
Operating margin %(1) 4,7 4,4 3,8 3,0 2,5 2,5
(1) Prior year has been restated. This reduced total revenue and revenue related to Aftermarket Parts, with a corresponding reduction in
operating expenses, the operating profit remains the same with an increase in operating profit margins.
Please refer to note 3.
Segment profit or loss (continued)
for the six months ended 31 December 2018
Motor-Related Head office
Financial Aftermarket and
Services Parts eliminations
2018 2017 2018 2017 2018 2017
Rm Rm Rm Rm Rm Rm
PROFIT or LOSS
Revenue(1) 1 138 1 088 3 259 3 028 (7 348) (7 160)
- South Africa 1 138 1 088 3 038 3 028 (7 348) (7 160)
- International - - 221 - - -
Operating profit 482 470 246 205 (94) (71)
- South Africa 482 470 208 205 (94) (73)
- International - - 38 - - 2
Depreciation, amortisation, impairments
and recoupments (80) (86) (26) (16) 53 80
- South Africa (80) (86) (25) (16) 53 80
- International - - (1) - - -
Interest expense (28) (20) (54) (31) 89 87
- South Africa (28) (20) (51) (31) 89 87
- International - - (3) - - -
Profit before tax and exceptional items 455 450 191 179 (166) 20
- South Africa 455 450 156 179 (166) 20
- International - - 35 - - -
Exceptional items - - (57) (20) - -
- South Africa - - (57) (20) - -
- International - - - - - -
Profit before tax 455 450 134 159 (166) 20
- South Africa 455 450 99 159 (166) 20
- International - - 35 - - -
Additional segment information
Analysis of revenue by type
Sale of goods - - 3 258 2 964 (260) (264)
Rendering of services 715 545 1 1 (6) 45
715 545 3 259 2 965 (266) (219)
Inter-group revenue 423 543 - 63 (7 082) (6 941)
1 138 1 088 3 259 3 028 (7 348) (7 160)
Analysis of depreciation, amortisation,
impairments and recoupments (80) (86) (26) (16) 53 80
Depreciation and amortisation (81) (86) (21) (20) 67 80
Recoupments and impairments 1 - 1 6 (14) -
Amortisation and impairment of intangible assets
arising on business combinations - - (6) (2) - -
Associate income included in pre-tax profits 2 1 8 8 - -
Operating margin %(1) 42,4 43,2 7,5 6,8
(1) Prior year has been restated. This reduced total revenue and revenue related to Aftermarket Parts, with a corresponding reduction in
operating expenses, the operating profit remains the same with an increase in operating profit margins.
Please refer to note 3.
Notes to the condensed consolidated financial statements
1. Basis of preparation
The unaudited consolidated financial statements have been prepared in accordance with and contain the information required by the
International Financial Reporting Standards (IFRS) and its interpretations adopted by the International Accounting Standards Board (IASB)
in issue and effective for the group at 31 December 2018 and the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council. The results are presented in
accordance with IAS 34 - Interim Financial Reporting and comply with the Listings Requirements of the Johannesburg Stock Exchange Limited
and the Companies Act of South Africa, 2008. These unaudited condensed consolidated financial statements do not include all the information
required for full annual financial statements and should be read in conjunction with the consolidated annual financial statements as at and
for the year ended 30 June 2018.
These unaudited condensed consolidated financial statements have been prepared under the supervision of Mr OJ Janse Van Rensburg, CA(SA)
and were approved by the board of directors on 25 February 2019.
2. Accounting policies
The accounting policies adopted and methods of computation used in the preparation of the unaudited condensed consolidated financial
statements are in accordance with IFRS and are consistent with those of the annual financial statements for the year ended 30 June 2018,
with the exception of new policies as required by new and revised International Financial Reporting Standards issued and in effect.
3. Adoption of standards issued and effective and restatement of prior periods
International Financial Reporting Standards that have become applicable to Motus for the 2019 financial year include IFRS 9 - Financial
Instruments and IFRS 15 - Revenue from Contracts with Customers (both standards are effective for Motus from 1 July 2018).
IFRS 9 - Financial Instruments
The standard requires that impairment provisions for receivables are to be calculated on an expected loss basis rather than incurred loss
basis. This is mainly effective in our Motus Financial Services segment, where the banks are now required to accelerate their provision for
bad debts on non-arrear portfolios resulting in lower impairments when the loans become irrecoverable. This has a minor impact on the
results of the profit share arrangements that Motus has with the banks. The change from the incurred loss to the expected loss model will
also apply to other receivables within the group and due to the credit policy in place for sales to external customers the impact is minor.
The standard has also resulted in a more simplified approach to hedge accounting which affects the Motus Import and Distribution segment.
The application of IFRS 9 had no material impact on amounts reported in respect of the group's financial assets and financial liabilities.
However, there is a requirement for increased disclosure.
IFRS 15 - Revenue from Contracts with Customers
A detailed review of the potential impact of IFRS 15 has been finalised. All material contracts have been assessed for any impact in terms
of the five-step approach. The only change that this review resulted in, was a change to the application of the principal and agency decision
processes in the recognition of revenue. As a retailer, the nature of the sales process is that transactions are completed in a short space
of time and so the impact of the new accounting standard would be expected to be minor.
Under the previous accounting standard (IAS 18 - Revenue Recognition) one of the indicators relating to the principal and agency decision
processes was who took on the credit risk. In terms of the agreements with certain of the suppliers in the Aftermarket Parts division, one of
the entities agreed to carry the credit risk and reimburse the suppliers in the event of default. As this was seen as an unusual practise in
the industry, it was agreed in that entity to treat the accounting as a principle arrangement and recognise the revenue accordingly.
Under the new accounting standard, IFRS 15, credit risk is no longer an indicator, requiring that the transactions are now accounted for on
the basis of an agency relationship.
The restatement had no impact on profits, cash flows and the financial position, it only affected revenue and net operating expenses as
detailed below. Due to there being no impact on the statement of financial position, an additional statement of financial position was
not disclosed.
Rm 2018 HY1 2018 FY
Statement of profit or loss
Revenue decrease (326) (658)
Net operating expenses 326 658
Profit from operations before depreciation and recoupments (no impact) - -
4. New and revised International Financial Reporting Standards in issue but not yet effective
International Financial Reporting Standards that will become applicable to the group in future reporting periods is IFRS 16 - Leases
(effective for Motus from 1 July 2019). Details of these standards were outlined in the 30 June 2018 annual financial statements. An update
of the group's assessment of the potential impacts of the new standards on the group's financial statements is as follows:
Based on an assessment of operating leases that would be raised as assets and liabilities relating to 30 June 2018, adopting IFRS 16 would
have the following indicative impact, with the Retail and Rental segment being the main contributor.
As at 30 June 2018 the right of use asset for the leases would amount to R1 828 million. This balance is the take-on balance at inception
of the leases being the present value of the minimum lease payments less the amortisation to 30 June 2018. The related lease liability would
amount to R2 074 million being the present value of the minimum lease payments plus the related interest less the rental payments to
30 June 2018. The difference between the asset and the liability would be adjusted to retained income.
In total, operating expenses would decrease due to a reduced rental expense partially offset by an increased amortisation on the right of
use asset. Interest would be increased by the interest on the lease liability. The impact on net profit before tax would be minor.
5. Exchange Rates
Closing rates Average rates
December June December December June December
2018 2018 2017 2018 2018 2017
US Dollar 14,39 13,71 12,31 14,17 12,86 13,43
British Pound 18,42 18,10 16,64 18,34 17,31 17,69
Australian Dollar 10,14 10,13 9,62 10,27 9,97 10,45
Euro 16,46 16,01 14,77 16,32 15,34 15,79
6. Other non-operating items
Unaudited Unaudited Audited
Rm 31 December 31 December 30 June
2018 2017 2018
Derecognition of loans on deregistration of subsidiaries (36) (1) -
(Gain) on derecognition of financial instruments - - (5)
Impairment of goodwill 31 - 63
Impairment of non-current receivable - 20 173
Impairment of associates and joint ventures 56 - 8
Other non-operating items - - (2)
Total exceptional items 51 19 237
Business acquisition costs 4 7 7
55 26 244
Unaudited Unaudited Audited
Rm 31 December 31 December 30 June
2018 2017 2018
7. Goodwill
Carrying value at beginning of period 953 539 539
Net acquisition of subsidiaries and businesses 86 400 447
Impairments (31) - (63)
Currency adjustments 9 (46) 30
Carrying value at end of period 1 017 893 953
Unaudited Unaudited Audited
Rm 31 December 31 December 30 June
2018 2017 2018
8. Cash resources
Cash resources 788 952 1 737
Bank overdrafts (848) (230) (550)
(60) 722 1 187
9. Fair value of financial instruments
9.1 Fair value hierarchy
The group's financial instruments carried at fair value are classified in three categories defined as follows:
Level 1 financial instruments are those that are valued using unadjusted quoted prices in active markets for identical financial
instruments.
Level 2 financial instruments are those valued using techniques based primarily on observable market data. Instruments in this
category are valued using quoted prices for similar instruments or identical instruments in markets which are not considered to
be active; or valuation techniques where all the inputs that have a significant effect on the valuation are directly or
indirectly based on observable market data.
Level 3 financial instruments are those valued using techniques that incorporate information other than observable market data.
Instruments in this category have been valued using a valuation technique where at least one input, which could have a significant
effect on the instrument's valuation, is not based on observable market data.
9.2 Fair values of financial assets and liabilities
The fair values of the remainder of the group's financial assets and financial liabilities approximate their carrying values.
The following table presents the valuation categories used in determining the fair values of financial instruments carried at fair
value.
31 December 2018 Total Level 1 Level 2 Level 3
Rm
Financial assets carried at fair value
Listed investments (included in investments) 40 40 - -
Unlisted investments (included in investments) 552 - - 552
Foreign exchange contracts and other derivative instruments 121 - 121 -
Financial liabilities carried at fair value
Foreign exchange contracts and other derivative instruments 34 - 34 -
There were no transfers between the fair value hierarchies during the period.
Movements in level 3 financial instruments measured at fair value
The following table shows a reconciliation of the opening and closing balances of level 3 financial instruments carried at fair value.
Financial assets Total
Rm
Carrying value at beginning of period 637
Fair valued through profit or loss 104
Cash receipts (266)
Additional investments 77
Carrying value at end of period 552
Level 2 valuations techniques
The valuation technique utilised to measure the fair value of foreign exchange contracts is based on the discounted future gains or
losses on the underlying instruments. The future gain or losses are determined by taking the rate implicit in the underlying instrument
in comparison to a forward rate which is calculated on the current spot rate plus forward points to the date of maturity of said
instrument.
Level 3 sensitivity information
The fair values of the level 3 financial instruments of which consists of the fair value of the preference shares and the accrued
dividend income were estimated by applying a cash flow projection technique. Cash flow projections are based on expected dividends
receivable. These cash flow projections cover a five-year forecast period, which are then extrapolated into perpetuity using a discount
rate of 17%. The fair value measurement is based on significant inputs that are not observable in the market. Key assumptions used in the
valuations includes the assumed probability of achieving targets and the discount rates applied. The assumed profitabilities were based
on historical performances but adjusted for expected growth. The following table shows how the fair value of the level 3 financial assets
as at 31 December 2018 would change if the significant assumptions were to be replaced by a reasonable possible alternative.
Increase in Decrease in
Carrying carrying carrying
value value value
Financial instruments Valuation technique Key assumption Rm Rm Rm
Unlisted investments (asset) Income approach Present value of expected cash flows 552 10 (10)
10.Contingencies and commitments
31 December 31 December 30 June
Rm 2018 2017 2018
Capital commitments# 233 69 343
Contingent liabilities* 3 330 3 049 3 700
# The capital commitments relate to the construction of buildings to be utilised by Motus.
* The contingent liabilities include letters of credit and guarantees issued by banks with the corresponding guarantee by the group to the bank.
11.Acquisitions and disposals during the period
Acquisitions
Please refer to acquisitions for the period.
Disposals
There were no material disposals noted during the period.
12.Events after the reporting period
Shareholders are to be advised that an ordinary dividend has been declared by the board of Motus Holdings Limited on 25 February 2019. For
further details, please refer to the dividend declaration.
Business combinations during the period
Businesses acquired Nature of business Operating segment Date acquired Rm
Pentagon Ford Based in the United Kingdom, Retail and Rental December 2018 266
this relates to three dealerships
that primarily retail Ford
motor vehicles.
Individually immaterial acquisitions 102
368
FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED AT DATE OF ACQUISITION*
Rm Individually
Pentagon immaterial Total
Ford acquisitions Motus
Assets
Property, plant and equipment 103 5 108
Investments and other financial instruments - 35 35
Inventories 127 68 195
Trade and other receivables 1 - 1
Deferred tax assets - 13 13
Income tax assets - 68 68
231 189 420
Liabilities
Interest-bearing borrowings 15 32 47
Other financial liabilities - 2 2
Trade and other payables and provisions - 89 89
15 123 138
Net assets acquired 216 66 282
Purchase consideration transferred (cash paid) 266 102 368
Excess of purchase price over net assets acquired 50 36 86
* The initial accounting for the business combinations is incomplete and based on provisional figures.
Process involved with obtaining control
The acquisitions related to the purchase of the underlying assets and liabilities of businesses. The underlying businesses were included
into Motus as operating divisions.
Reasons for the acquisitions
The acquisitions are in line with the group's objective of increasing market penetration globally, through achieving economies of scale
via selective acquisitions in local and international markets that complement the group's existing networks.
Acquisition costs
Acquisition costs for business acquisitions concluded during the year amounted to R4 million and have been recognised as an expense in
profit or loss in the "other non-operating items" line.
Impact of the acquisition on the results of the group
From the dates of acquisition, the businesses acquired during the period contributed revenue of R151 million and after tax loss of
R4 million. Had all the acquisitions been consolidated from 1 July 2018, they would have contributed revenue of R1 099 million and an
after tax loss of R11 million (including the after tax impact of funding costs). The group's total revenue would have been R40 327 million
and an after tax profit of R872 million (also including the after tax impact of funding costs).
Other details
Trade and other receivables had gross contractual amounts of R1 million. None of the goodwill is deductible for tax purposes.
Glossary of terms
Net asset value per share Equity attributable to owners of Motus divided by total ordinary shares in issue net of
shares repurchased.
Tangible net asset value per ordinary share Equity attributable to owners of Motus less goodwill and other intangible assets divided
by total ordinary shares in issue net of shares repurchased.
Net debt Is the aggregate of interest-bearing borrowings less cash resources.
Net capital expenditure Includes expansion and net replacement expenditure of property, plant and equipment,
intangible assets and vehicles for hire.
Net working capital Is inventories plus trade and other receivables (including derivative assets) less trade
and other payables (including derivative liabilities) and total provisions.
Operating assets Total assets less loans receivable, cash and cash equivalents, tax assets and assets
classified as held for sale.
Operating liabilities Total liabilities less interest-bearing borrowings, tax liabilities and liabilities
classified as held for sale.
Operating profit margin (%) Operating profit divided by revenue.
Exceptional items Impairment of goodwill and profit or loss on sale of investment in subsidiaries,
associates and joint ventures and other businesses.
Return on equity (%) The return is calculated as the headline earnings divided by the average shareholders'
equity attributable to owners of Motus Holdings.
Return on invested capital (%) This is the return divided by invested capital.
The return is calculated by reducing the operating profit by a blended tax rate, which is
an average of the actual tax rates applicable in the various jurisdictions in which Motus
operates, increased by the share of result of associates and joint ventures.
Invested capital is a 12-month average of total equity plus interest-bearing borrowings
less cash resources.
Weighted average cost of capital (WACC) (%) Is calculated by multiplying the cost of each capital component by its proportional weight,
therefore: WACC = (after tax cost of debt % multiplied by average debt weighting) plus
(cost of equity multiplied by average equity weighting). The cost of equity is blended
recognising the cost of equity in the different jurisdictions in which Motus operates.
Free cash flow Is calculated by adjusting the cash flow from operating activities to exclude the expansion
capital expenditure on vehicles for hire and deducting replacement capital expenditure on
other assets.
Johannesburg
26 February 2019
Directors
GW Dempster (Chairman)*
OS Arbee (CEO)
OJ Janse van Rensburg (CFO)
MJN Njeke*
P Langeni*
S Mayet*
A Tugendaft
K Moloko*
*Independent non executive
Company Secretary
RA Venter
Group investor relations manager
Nicole Varty
Business address and registered office
1 Van Buuren Road
Corner Geldenhuis and Van Dort Streets
Bedfordview, 2007
(PO Box 1719, Edenvale, 1610)
Transfer secretaries
Computershare Investor Services Proprietary Limited
1st Floor Rosebank Towers
15 Biermann Avenue
Rosebank
Johannesburg, 2196
Auditors
Deloitte and Touche
20 Woodlands Drive
The Woodlands
Woodmead
2025
Sponsor
The Standard Bank of South Africa Limited
30 Baker Street
Rosebank
Johannesburg, 2196
1 Van Buuren Road
cnr Van Dort and Geldenhuis Streets
Bedfordview
2008
South Africa
Tel: +27 (0)10 493 4335
www.motuscorp.co.za
Date: 26/02/2019 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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