Parts and accessories value chain

Growth opportunities

Expanding into markets outside of South Africa provides a significant opportunity for the business to increase utilisation and improve profitability of the distribution centres in Asia. Increased participation in this segment will also include backward integration to eliminate intermediaries in the wholesale supply chain. Our controlling interest in Arco in Taiwan and the distribution centre in China support this strategy and enables us to leverage our buying power to procure parts at competitive prices.

We will also explore selective acquisitions to drive growth in international markets that complement global wholesale opportunities.

We are in advanced stages of acquiring a distributor of replacement automotive parts in Europe. The acquisition offers synergies across the operations, with a product line-up that is complementary to the Group's offering.

2021 performance

Market leadership

The COVID-19 crisis, the sovereign downgrade in South Africa, together with high unemployment, has reduced consumer disposable income levels, shifting demand from higher priced premium products to more affordable products. This trend of 'buying down' continues to compress margins compensated by our broad product mix and increased volumes. We will continue to develop an end-to-end supply chain with a broad product offering that is supported by our access to the right suppliers, products at the right prices, and ability to leverage our group buying power.

Our channels to market are supported by our franchisee model, which gives us an extensive footprint and allows us to offer our products to a range of customers around the country and beyond. In addition, the South African car parc has a wide range of vehicle models that are out of warranty, resulting in the need to hold a broad product range of parts and accessories. This requires increased working capital investment initially to meet the demand.

We continued to strengthen our core business by streamlining our distribution capability, shortening our routes to market and leveraging our ability to procure large volumes at lower prices to cater for broader market penetration. We partner with selected global parts distributors to facilitate competitive purchasing and continue to increase our buying power through the backward and forward integration of the parts supply chain.

We joined Nexus, the largest automotive global parts buying group from 1 January 2021. Nexus is represented in 137 countries and has buying agreements with 76 global component manufacturers and an additional 12 emerging suppliers. The Nexus footprint and focus on innovation complement the Group's footprint and strategy. Nexus invests in innovation projects that are mobility aligned through a mobility fund and has a buying office in Shanghai that focuses on supplier evaluation, ensuring consistency of quality from a variety of component suppliers via regular safety audits. We are also a member of the Nexus strategy and ESG committees, represented by the business segment CEO, which has a key focus on transforming the industry starting with 'clean green' workshops.

Motus has not escaped the social unrest in South Africa unscathed, which has impacted our operations and that of our franchisees and independent stores, as several Midas and Alert stores were looted and destroyed to varying degrees. Although the Group did not suffer significant direct losses, we are impacted by the economic after-effects thereof.

Integration and optimisation

Our improved supply chain and distribution strategy supports our product management ability by providing visibility of inventory availability and, allows us to better manage inventory levels. We will continue to optimise our supply chain through selected acquisitions, specifically to grow our distribution capabilities in China. In South Africa, we have simplified our distribution centres to reduce complexity and cost of distribution.

We have continuously expanded our spectrum of private label products and focus on effectively managing our brand portfolio to ensure the customer base has access to a bouquet of appropriately priced quality products. We have started a low-cost product distribution channel, called Right Way Distributors, to service the entry level parts markets.

We will continue to enhance our online product catalogue, improve lead times, create greater visibility of product availability and therefore improve the overall customer experience. Our journey to improve our ERP system is in the core design and build phase, focusing on streamlining business processes and reducing complexity. Once complete, it will enhance visibility over the full supply chain.

Our people

We continue to invest in our people to build an agile and responsive business and deepen accountability. The safety and wellbeing of our people has remained our top priority during the COVID-19 crisis, and we continue to ensure that we have a safe workplace for our people. The Group's culture of high performance and innovation is supported by our ongoing investment in providing relevant and effective training, job support and career development for our people.