Key message: Declining finance costs and a new car sales recovery bode well for an earnings recovery into FY26.
- Motus released FY25 results. HEPS increased 5% off a 1% decline in revenue and flat operating profit. A final dividend of 310c was paid (total dividend 550c.
- Key takeaways from the results: the Import & Distribution division had a good 2H with an operating margin of 3.9%. It appears Hyundai have provided good models and pricing for the Hyundai and Kia range and Motus has been able to be more competitive in this space. Management does not expect margins to break 4% yet as the market remains competitive, but the division looks set to post a better FY26 on higher volumes and stronger margins.
- The South African retail division has been adjusting to market demand and has picked up Suzuki and Chinese dealerships. The rental division had been cautious on fleet size and has maintained a high utilisation rate at 71%.
- The offshore motor retail businesses are operating in tough markets. In the UK NEV target set for motor dealerships are onerous and the addition of BYD dealerships into the mix should help. Car sales in Australia are slow, and interest rate reductions would help.
- The Aftermarket Parts division is starting to show the benefits of the integration of wholesale parts into the retail businesses.
- Core debt was reduced by R3.4bn and this will drive reduced finance costs. Working capital declined by R959m, with the sale of MTV contributing R265m of this. Inventories declined by R532m and can be considered to be at normal levels. The continued strong cash generation of Motus should allow further debt reduction and reduced finance costs – this is the main driver of earnings growth in the forecast period.
- Management indicate that acquisitive growth will likely be bolt-on purchases in the aftermarket parts division – we would prefer to see further debt repayment before any significant acquisitions after a period of stretching the balance a bit more than is comfortable.
- We subsequently increase our HEPS forecasts and increase out Target Price to R134 from (R122). Further interest rate declines globally will be a boost to Motus.