Combined Motor Holdings [JSE:CMH], which owns dealerships for car brands like Honda, Isuzu, Land Rover, Nissan and Toyota, says the struggling car market is being kept alive by sales incentives and subsidised loans.
During the six months to end-August, sales of new passenger and light commercial vehicles fell by 3.5% across the SA market, with used car sales down an estimated 4% to 5%.
"Only the proliferation of sales incentive schemes and subsidised finance rates has kept this level from further decline," CMH said, adding that there's a continued trend towards lower-priced models.
CMH saw a 2% decline in the sales of new vehicles over the half-year to August, while its used vehicle sales grew by 1.8%.
Revenue rose by almost 3% - largely due to two new dealerships. Its gross profit margin improved, from 16.3% to 16.8%.
"In an industry with such thin operating margins, the containment of costs is vital," CMH said. Its interim headline earnings rose by 2%.
Its financial services division recorded a 30% improvement in profit, thanks to increased premium income and a reduction in claims.
Its car rental division, First Car Rental, maintained its revenue level despite a decline in both the national business and tourism sectors.
CMH warned that the recent rate cut, and more cuts, will be offset by higher petrol prices.
"The unemployment rate remains high, and general strike action more prevalent, although this appears to have been averted in the motor sector. Business confidence remains low and exacerbated by government's indecision and lack of remedial implementation in key economic areas," says CMH.
"From the group's perspective, improvement will hinge on the bedding down of the new acquisitions, disposal of loss-making operations, and a small up-tick in new vehicle sales volumes."
A dividend of 61 cents per share was declared.