Material priorities

Our material priorities are those factors most likely to influence the conclusions of our stakeholders when assessing our ability to create value over time.

In determining if a factor is material, we consider its potential to impact strategy (opportunity and risk), performance (financial and non-financial) and prospects in the short, medium and longer term, and ultimately our ability to create, sustain and limit the erosion of value. In line with the six capitals model of value creation, endorsed by King IV, the effectiveness with which we manage our material priorities is likely to influence the decisions of our stakeholders in relation to the capital inputs they provide, and the outcomes they expect in return.

Determining our material priorities

The following inputs informed the determination of the material priorities for Motus in 2020:

• Motus' vision, mission and strategy.
• Discussions to elicit and distil the views and concerns of leadership.
• The material concerns of key stakeholder groups, including customers, business partners, OEMs, our people and investors. These key concerns were obtained from the relevant relationship owners in the Group.
• Top business risks.

Material priorities structure

Within the context of the uncontrollable factors in our operating context (discussed in detail in Automotive industry), our material priorities are those factors we can control. They are grouped into three key themes, which represent the key drivers of value for the Group in view of current market conditions and our expectations for the short, medium and longer-term trends shaping our markets. These material priorities are discussed throughout the integrated report and supplementary sustainable development report.

Resilience

1

Sustain capital management discipline

Sub-issue		Strategic priorities
Align cost base to revenue and preserve cash to maintain profitability.		Rightsize businesses in line with new market realities, including footprint rationalisation and responsible headcount reduction where unavoidable. Manage costs conservatively while ensuring effective cash flow management, with a particular focus on cash generation to restore the Group to ideal gearing and liquidity position following COVID-19. Maintain effective controls to monitor and manage currency risk, including the application of the forward cover policy. Achieve revised revenue and income growth targets and maintain sound financial leverage ratios to ensure we remain within loan covenants.
Maintain working capital management discipline.		Streamline distribution (vehicles and aftermarket parts) to effectively manage inventory levels. Improve working capital management while containing costs in a recessionary economic environment. Maintain healthy liquidity ratios.
Continue to optimise our portfolio to ensure optimal capital allocation.		Meet changing or declining demand in products and services by realigning our network. Exit or dispose of non-strategic dealerships and businesses that do not enhance competitive advantage or show low return on effort. Allocate more capital to digital projects that leverage our existing infrastructure and capability, reducing investment in premises that increase the operating cost base. Ensure a strong presence in chosen markets by investing in key regions.

2

Leverage competitive advantages to recover, replace and diversify earnings streams

Defend business segment profitability in line with new market realities.		Maximise the organic growth potential of each business segment in line with emerging opportunities. Support affordability in a highly constrained consumer environment by offering cost-effective and competitive vehicles, parts, financial service products, product enhancements and extended repayment terms to qualifying customers. Mitigate against higher cost pressure in the COVID-19 environment by defending operating margins in each business segment through efficiencies and process improvements. Enable simpler, faster ways of working by accelerating digitisation. Distribute and sell competitively priced vehicles and parts by leveraging Group buying power. Drive defensive, annuity income streams from financial services and workshops, and from well sourced imports in the Aftermarket Parts business. Capitalise on market shifts to pre-owned vehicles through expanded VAPS offerings and competitively priced booster products and expand offerings to entry level vehicle buyers. Grow the distribution channel for financial services produces by enhancing/growing relationships with importer independent dealers. Provide a range of products in the aftermarket parts space that satisfies all tiers of demand.
Grow competitive market share by leveraging the integrated value chain.		Trade out of the overstocked position caused by the accelerated de-fleeting in the car rental business by leveraging the Motus dealership network. Leverage scale and operational synergies across the integrated automotive value chain. Enable value-led pricing rather than cost-pushed pricing to customers by leveraging the Group's scale and capabilities to create cost efficiencies. Add value to customers, foster deeper customer loyalty and attract new customers by creating differentiated digital platforms. Develop a customer-facing centralised vehicle stock aggregator to increase consumer visibility of inventory availability across the Group. Increase Motus team collaboration and improve customer engagement by harnessing digital platforms and creating specialised digital channels. Drive importer volumes to support parts sales, panel sales, workshop servicing and financial services. Provide superior market penetration opportunities through marketing excellence and well-developed distribution channels and retail footprint. Grow the pre-owned vehicle market share through digital lead generation, improvement of stock mix in line with market demand and excellent customer service. Extend reach into vehicle servicing beyond the captive OEM space, through franchised dealerships and aftermarket brands. Understand all variables relating to the vehicle car parc under cover by the Financial Services and optimise revenues and manage related costs. Offer competitively priced vehicle rentals by leveraging the Motus integrated value chain to procure vehicles.
Leverage data and expertise to drive responsiveness to customer needs and market trends.		Understand the disruptive impact of COVID-19 on customer preferences for automotive brands, particularly in relation to the current market trend of 'buying-down'. Develop innovative value-added products by extracting meaningful business insights from our customer and vehicle data. Drive growth across the automotive value chain by unlocking efficiencies and customer potential through data analytics within existing and new channels. Explore and develop new partnership opportunities, including opportunities to improve customer loyalty and build online customer platforms and portals.
Pursue highly selective strategic growth in international markets.		Diversify revenues and mitigate against an economic recession in South Africa by accelerating the planned expansion of Aftermarket Parts operations outside of South Africa. Delay acquisitions in selected international markets unless critical to protect our market positions and complement existing networks.

3

Accelerate the implementation of new ways of working and deepen agility

Automate and optimise structures, systems and processes to enable business agility.		Maintain a safe and supportive work environment to safeguard employee and customer health, productivity and engagement, particularly with regard to changes occasioned by COVID-19. Reduce complexity, duplication, costs and capital employed by continuing to drive operational alignment and collaboration across the value chain. Support efficiency, connectivity and networking across the Group and access across businesses where appropriate, by streamlining the IT architecture. Embed standardised IT policies, focusing on cyber-resilience and improved reporting, particularly related to the newly promulgated POPIA. Provide accurate human capital data and reporting to support strategic human capital decision making by consolidating and streamlining our people management systems across all businesses. Drive a programme of continuous improvement in line with defined procedures and policies.
Become a digitally astute organisation by harnessing technology.		Implement technologies and systems that improve organisational efficiency and enhance employee and customer experiences. Accelerate the digitisation of key functions including communications, marketing, administration and e‑commerce, applying learnings from COVID-19. Improve productivity by enabling the development of new and critical skills requiring higher digital dexterity and effective collaboration across multiple workforce segments (virtual and onsite).
Leverage collective intelligence and entrepreneurial skill of a diverse workforce to drive competitiveness.		Drive resilience and agility by deepening our entrepreneurial culture. Safeguard a flat and transparent leadership structure to reduce the time between strategic decisions being made and acted on, to ensure responsiveness amid high uncertainty. Equip leaders to effectively lead diverse teams and embed practices that facilitate a diverse and inclusive culture, driving business growth and performance.
Enforce sound internal process governance, risk management and approval structures.		Embed robust policies and practices for an increasingly virtual work environment. Address the impact of retrenchments on skillsets, capabilities and morale by ensuring transparency, inclusivity and consistency in the related processes. Embed flexible business continuity processes that can be reconfigured to adapt to emerging threads like COVID-19 without re-engineering or additional investment. Test and maintain business continuity and disaster recovery processes and ensure these remain relevant in light of other emerging threats, specifically increasingly unstable national infrastructure for power and water provision. Ensure operational governance standards are met, supported by a well-developed control environment, risk management and deep expertise in finance, treasury and accounting. Continue to drive improvement in operational risk management practices, in line with agreed governance expectations. Ensure data security and proprietary systems are fit-for-purpose and that IT operational risk controls are effective to address increased data security and cyber-related risks arising from new ways of working. Embed risk management processes focusing on the risks and actions that are material in producing a positive outcome, where applicable.

Relevance

1

Deliver exceptional value to customers as their needs change

Sub-issue		Strategic priorities
Provide exceptional products and services at competitive prices across the automotive value chain.		Ensure service excellence at points of sale, rental, service, repair and maintenance. Maintain high dealership standards by empowering dealer principals appropriately. Provide a superior customer experience to increasingly well-informed and diverse customers by training and developing employees, particularly sales, aftersales and online sales representatives. Ensure high-quality workshop services and parts supplies for customers by continuing to deepen collaborative and supportive relationships with suppliers and stringently applying our quality controls. Attract prospective customers by leveraging our high IP and strategically aligning financial service offerings. Actively manage our brand portfolio, increasing our focus on popular brands and reducing exposure to brands with high return on effort, lower quality, or low customer appeal. Become the preferred supplier of brands for which the Group does not hold exclusive distribution by continuing to build trust in the Motus brand.

2

Remain the strategic partner of choice for OEMs and suppliers

Deepen OEM and supplier partnerships, maintaining a superior route-to-market and strong brand positioning.		Preserve longstanding importer and retail partnerships with OEMs, providing market access through quality marketing, high levels of customer satisfaction and dealerships strategically located in growing urban areas. Work with OEMs to ensure we offer the most relevant and competitive products, aligned to our view of their market appeal and competitiveness. Partner with OEMs on new ways of penetrating the market and realign route-to-market channels to match evolving customer expectations of product services and support. Provide a digital platform to access an additional channel to market. Extend financial services offerings to more dealers and improve lead generation processes by collaborating with independent dealers. Deepen collaboration with local and international suppliers in our integrated parts supply chain.
Secure strategic partnerships to drive growth and competitiveness.		Ensure that our partners are aligned to our strategic objectives and complement our capabilities by proactively managing and deepening our strategic alliances. Grow strategic partnerships with industry leaders to unlock new channels through tailored financial services products which benefit from access to their customer bases. Offer relevant and innovative vehicle asset finance (VAF) and VAPS offerings to the large customer bases of financial services partners with established channels to market by leveraging Motus' specialised expertise, data and product design ability. Gain access to highly specialised skills and innovative thinking by partnering with technology developers and solution providers. Enhance our competitive advantage in Aftermarket Parts procurement by partnering with selected international distributors and increasing buying power through the forward integration of the parts supply chain.

3

Be an employer of choice in the automotive industry

Attract and retain high-calibre employees.		Implement best people practices across the Group while ensuring the necessary flexibility to enable practical and cost-effective delivery of human capital management in different business segments. Ensure effective performance development, talent management and succession planning that aligns employee capabilities and expectations with business objectives and career opportunities. Develop and empower employees through relevant training interventions, which also promote the mindset, skillset, flexibility and responsiveness required in times of change. Embed inclusivity and collaboration within the Motus culture. Develop secondment opportunities for young talent between our operations as a unique employee value proposition in our sector. Maintain investment in skills development with a particular focus on expanding our learnerships for differently abled people.
Ensure a strong focus on transformation and diversity.		Deliver diversity training to managers and employees to create an environment in which everyone can perform to their full potential. Implement targeted interventions to develop and promote internal candidates from designated groups (black people, women and people living with disabilities) and strategically source external talent within these groups to drive transformation and diversity at management level. Drive talent pipeline programmes at Group level to create a pool of entry-level candidates from designated groups from which we are able to fill posts when they become available.

4

Innovate practically and proactively

Accelerate agility and ability to adapt to market changes and drive innovation.		Leverage first-hand access to developments in different markets to assess the impact on business models and the expected timeframes, to implement the necessary changes. Continue to ensure executives understand new technological developments and their potential impact on markets. Leverage IT solutions and data to drive innovation across the vehicle value chain, with the aim of securing higher market penetration in the medium term. Identify opportunities to collaborate with key strategic partners to share intellectual property and drive innovation in line with the principles underpinning the 'open economy'. Closely monitor and increase awareness to understand both automotive trends that could disrupt our business, for example connected, electric vehicles, and broader innovation trends that add value to our business in the form of efficiencies, risk management or new products and services, including artificial intelligence, machine learning, computer vision, cloud computing, block chain and business process automation. Commercialise mobility service solutions that attract new and non-traditional customers, by identifying appropriate solutions. Develop brand-agnostic buying tools, for example Moov, leveraging off our broad brand representation which allows us to fulfil on almost any customer buying choice.
Optimise and evolve current business models and structures while designing new solutions and operating models.		Identify opportunities to accelerate innovation and digitisation as consumer habits and buying behaviour shifts in favour of digital platforms. Align continuously with digital, mobility and automation trends and changing customer needs by working with OEMs to deliver innovative solutions and business model changes. Use innovation hubs and capabilities to facilitate innovation within all business segments. Develop new products aligned to the vehicle to extract more meaningful data.
Continue to differentiate our offering through innovative VAF solutions, VAPS and mobility services offerings.		Deliver the most relevant, personalised and competitive offerings that meet customer mobility needs by leveraging data analytics to monitor customer behaviour and understand customer preferences, increasing our understanding of OEM strategies and mobility-related technologies. Ensure convenient, consolidated and compelling access to all of the Group's offerings, by consolidating and improving Motus' online presence. Develop a single view of the customer across all offerings by leveraging existing data warehouses and lakes, which support all direct marketing and customer relationship management initiatives across the value chain. Deepen understanding of customer data to retain customers and expand market share of vehicle sales and VAPS. Accelerate the use of technology, leveraging digitisation, big data and ecommerce platforms. Develop a fully integrated parts e-commerce platform that enhances both our businesses and our franchisees. Solve for underserved needs of customers (safety, convenience, affordability) by enabling ride-sharing, safe commuting and parts purchasing.

Responsibility

1

Demonstrate best-in-class governance

Sub-issue		Strategic priorities
Establish a credible reputation for ethical, effective and independent leadership.		Demonstrate the independence and effectiveness of the board. Ensure relevant skills and experience in relation to strategy by formulating board and management succession plans for the short and long term, including for the CEO, his direct reports and other levels of senior management.
Maintain best governance practices.		Deepen application of King IV principles and recommendations. Maintain and enhance robust control and risk management systems. Embed effective reporting processes for board visibility.
Comply with laws and regulations across multiple jurisdictions and maintain our moral compass.		Manage the complexity and cost impact of compliance with regulations and fiscal policy, including alignment with the new financial services regulatory landscape. Proactively monitor and engage with regulators on upcoming legislation, for example the Competition Commission's Automotive Aftermarket Advocacy Programme in South Africa. Follow international trends to understand potential upcoming regulatory changes and how these can be used to enhance customer experiences. Embed a strong culture of ethics and integrity, supported by the code of ethics, current ethical practices and governance standards.

2

Manage the economic, social and environmental consequences of our activities

Maintain strong relationships with broader communities.		Achieve a Level 4 B-BBEE rating (without discounting) by 2021. Increase the number of black people in management positions and develop the skills of black employees. Establish a network of second tier workshops and explore potential aftersales product offerings to ensure we successfully participate in right-to-repair. Direct more spend to B-BBEE-compliant businesses that fall within our controllable spend parameters (including exempt micro-enterprises and qualifying small enterprises). Continue to deliver supplier and enterprise development initiatives, including training, mentoring and financial assistance for black-owned small, medium and micro-enterprises. Invest in corporate social investment programmes that support education, health and road safety.
Operate in an environmentally conscious and responsible manner.		Continue to improve our sustainability reporting to remain eligible for the FTSE4Good Index Series and obtain a CDP1 rating. Continue to strengthen engagement between head office and the business segments to ensure accurate reporting on sustainability projects. Develop specific water and electricity usage strategies. Understand where solar power installations are feasible.

3

Consistently deliver on stakeholder expectations to protect our reputation

Strengthen relationships with all key stakeholders.		Maintain high standards of accountability, transparency and integrity in running the business and reporting to shareholders and other stakeholders. Ensure responsiveness to the legitimate concerns of all stakeholders through accurate and transparent disclosures.
Retain current investors and attract new investors both locally and internationally.		Deliver on our vision, the related strategic objectives and our investment proposition. Defend and grow the leading market share in South Africa, continue to grow annuity income streams, and grow in selected international markets. Maintain strong free cash flows. Deliver best-in-class earnings and targeted returns. Maintain a consistent dividend pay-out through the cycle.
Position Motus as a proudly South African market leader.		Develop and deploy an effective 'thought leadership' public relations strategy that reinforces Motus' agility, entrepreneurial innovation and relevance, developing our brand recognition and online presence. Improve disclosure of our significant contribution to South Africa's socioeconomic objectives, particularly in terms of black ownership, fiscal contribution and people development and contributing to community-based projects.

1	Formerly the Carbon Disclosure Project.