DISTRIBUTORSHIPS

Manny de Canha  Daan van der Linde  Martin Banner 
Manny de Canha,
Chief executive officer of Associated Motor Holdings 		 Daan van der Linde,
Chief executive officer of Imperial Parts division. 		 Martin Banner,
Chief executive officer of National Airways Corporation (NAC). 
The carefully selected range of brands and complementary services in this portfolio reduced the worst impacts of an extremely weak motor market. Prudent rationalisation and the focus on service operations have positioned the business correctly for a vehicle market that is likely to remain weak in the short term.
                    
   2009  2008  Change  H2  H1  Change 
   Rm  Rm  %  Rm  Rm  % 
Revenue  13 112  15 056  (12,9) 6 051  7 061  (14,3)
Operating profit  491  744  (34,0) 309  182  69,8 
Operating margin (%) 3,7  4,9     5,1  2,6    

DIVISIONAL CONTRIBUTION

 

25%

 
Revenue  

20%

 
Operating profit 

23%

 
Profit before tax and exceptionals 
           
DISTRIBUTORSHIPS 
        % 
   2009 2008  change 
Revenue  13 112 15 056  (13)
Operating profit  491 744  (34)
Net financing cost  (188) (186) 1 
Profit before tax and exceptional items  307 514  (40)
Operating assets  6 656 7 061  (6)
Non-interest-bearing liabilities  2 708 2 424  12 
Capital expenditure  545 1 219  (55)
Operating margin (%) 3,7 4,9    
Employees  5 465 6 137  (11)

Associated Motor Holdings (AMH) imports and distributes a range of passenger and light and heavy commercial vehicles, automotive products and motorcycles on behalf of principals in Asia, Europe and the United States. These brands are well accepted in the marketplace with good demand in the used car market. It also distributes home and industrial generators. It retails Ford passenger cars in Australia. The division is building meaningful related financial services operations in conjunction with banks and insurance companies.

The business of National Airways Corporation (NAC) is reported in this division, following the discontinuation of Imperial’s aviation division. NAC is the leading aircraft sales organisation in the African general aviation market, with distribution rights for Bell and Robinson helicopters and Beechcraft, Hawker, Diamond and Tecnam fixed-wing aircraft. NAC owns and operates 43 Air School, the largest pilot training school in the southern hemisphere, with bases in Port Alfred and Bisho. It also undertakes contract and charter flying to many African destinations.

The division’s parts distribution operation supplies generic and original automotive and engine parts through Imperial Autoparts, Alert Engine Parts and Mikar.

During the year, Imperial acquired a 50% stake in McCarthy Automobile Distributors to create a joint-venture import and distributorship company for Chinese cars in South Africa.

Results

AMH responded effectively to the extremely weak motor market by cutting costs and closing unprofitable operations in the last quarter of 2008. Seventeen sales outlets were closed in the first half of the review period and, regrettably, headcount reduced by approximately 800. As a result, margins recovered well in the second half for the division as a whole, despite revenue being lower than the first half of the year.

New car sales volumes in AMH declined by slightly more than the market given that entry-level products were worst affected by the scarcity of bank credit. Any increase in risk appetite by banks will benefit this subsegment.

Dealership closures cost approximately R30 million, resulting in annualised savings of over R100 million. This rationalisation will position the business correctly for a vehicle market that is likely to remain weak for the foreseeable future.

Currency fluctuations throughout the period had a marked impact on results. The rand was weak for most of the period, which was partly offset by price increases and some manufacturer assistance. However, benefits from the recent strengthening of the rand have already started to flow.

In line with our stated strategy of focusing on service operations, the division held its revenue from services at R1 214 million against R1 286 million last year while total revenue declined by 13%.

The Australian dealerships made a net profit after interest, even without a once-off VAT recovery of R25 million realised in the first half.

NAC posted good results, as aircraft sales were maintained and other activities contributed well. However, the forward order book is lower, which will put pressure on next year’s results. As the leading general aviation sales organisation in Africa, NAC benefits from some stability in demand from African governmental agencies.

The auto parts business improved strongly over last year and returned solid results.

Trading conditions in our joint venture with Renault remained difficult, and we advanced a secured shareholder loan of R75 million to Renault SA in the first half of the review period.

HIGHLIGHTS

  • Against a weak motor market, cost management and rationalisation protected margins and limited decline in revenue
  • Revenue from services maintained, in line with group strategy of focusing on service operations
  • Australian dealerships recorded net profit after interest
  • Good results from aircraft sales activities