Divisional reports

Automotive

Sustainability

2 024 tons of hazardous waste was recycled

4% less water was used

R112m spend on training, learnerships and bursaries

Regrettably one Car Rental employee lost his life in a motor accident

Steve Keys, chief executive
Notwithstanding trading conditions that have shown no respite the financial year, the division did well to grow trading profit.”
Steve Keys, chief executive

Salient features

  • Trading profit up 1.1% to R609.0 million. Revenues declined 5.1%
  • ROFE: 15.4%
  • Club Bidvest McCarthy remains a unique offering in the South African automotive market

Review of the year

Notwithstanding trading conditions that have shown no respite this financial year, this division did well to grow trading profit. Bidvest Car Rental delivered a pleasing turnaround in trading profit following a poor performance in the prior year. Fleet utilisation improved and reasonable rental rate increases were achieved.

The national new vehicle dealer market volume decreased year-on-year by 3.2% (source: Lightstone) and demand for new passenger cars, especially the luxury brands, remained under pressure. McCarthy dealers sold 5.3% fewer new vehicles.

The well documented industry cost increases resulted in a right-sizing of the business to current levels of activity, and management is continuing to enforce a more balanced business.

McCarthy has closed certain non-profitable business units and increased its focus on improving its balance sheet. It has continued to drive the absorption model at the retail level to ensure an appropriate mix is achieved that aligns to the current economic cycle.

The new vehicle department contribution remains dominant in McCarthy and the strategic imperative going forward is to ensure a more balanced business by increasing used vehicle and aftersales contributions. Pressure on the luxury end of the market continues with most brands delivering significant unit sales declines.

Similarly, difficult conditions remain in the used car departments with owners driving vehicles for longer periods of time, leading to lower stock availability, a decline in residual values, and an increased gap between trade-in and finance settlement values. These have all resulted in pressures on gross margins. The lack of trade-in vehicles has forced dealers to source inventory in the open market. To counter this McCarthy has implemented new software to facilitate the buying of good fast-moving used vehicle stock, which also has access to real time dynamic used vehicle pricing.

Mercedes Benz has changed from a franchise to an agency model, resulting in an overall decline in revenue.

After sales margins remained flat and the margin from parts sales was also slightly down on last year. The overall parts sales contribution was lower following reduced volumes, and this has been receiving attention from management with a cost reduction plan being formulated.

McCarthy is working closely with Bidvest Financial Services on the introduction of innovative insurance and value add products.

Bidvest Car Rental delivered excellent results in a challenging environment. The imperative over the last year has been the successful implementation of a new operating system and a focus on reducing cost of sales, which has been achieved through better fleet management and improved utilisation. Namibia and Botswana sales increased.

Snappdrive Keyless Technology Development is progressing well with improved customer satisfaction ratings and is viewed as the leading innovator in the car rental sector.

Looking forward

The demand for new and used vehicles is expected to remain under pressure into the current financial year as the market continues to be affected by numerous constraining factors. Management will remain focused on its continuous right-sizing of the business, which is ultimately aimed at enhancing current profitability.