Retail and Rental

The Retail and Rental business segment operates an unrivalled dealership footprint in South Africa, which underpins our leading market share of 20%, with a select presence in the UK and Australia.

The South African dealerships (91 pre-owned, 215 passenger vehicle and 35 commercial vehicle dealerships) are strategically located in growing urban areas, while our 119 UK dealerships are mainly located in provincial areas. In Australia, our 36 passenger vehicle dealerships are in New South Wales and Victoria.

We operate a centralised financial products and services business across the dealer network, which provides economies of scale. We provide rental vehicles via the Europcar and Tempest brands, each with targeted offerings to customers. We operate 85 car rental branches in South Africa and 15 branches in the neighbouring countries.

Corné Venter

CEO – Retail and Rental South Africa

Rob Truscott

CEO – Retail UK

John Johnson

CEO – Retail Australia


Geography

Primarily South Africa, with a selected presence in the UK and Australia

Leading retail market share

20% in South Africa

Rental market share

~25% in South Africa

Vehicles sold annually

>115 000 new vehicles
>105 000 pre-owned
vehicles

Represent

24 OEMs in South Africa
18 OEMs in UK
19 OEMs in Australia
2021 priorities
  • Grow pre-owned vehicle market share.
  • Rationalise dealership footprint, aligned to OEM strategies, and refine the multi-franchise dealershipmodel.
  • Enhance retail strategy and customer experience throughout the vehicle ownership cycle.
  • Invest in technology to drive digitisation and support customer service and experience.
  • Selective bolt-on acquisitions to improve brand representation.
  • Optimise passenger dealership model (UK and Australia).
  • Optimise rental business to adapt to new market realities.
  • Right size the vehicle rental business.

Retail and Rental

Financial Services Integration
The full value chain presents unique opportunities for innovation and differentiation

 

Representing leading brands

South Africa

United Kingdom

Australia

Growth opportunities

We have invested in innovation and technology to improve our digital capabilities and grow market share. The need to protect our market position and enhance existing networks will drive expansion of the retail operations in select locations. The multi-franchise dealerships and bolt-on acquisitions allow us to introduce additional brands in areas close to existing dealerships over the medium to longer term. We are also implementing a range of strategies to expand our pre-owned vehicle offering within the existing footprint.

2021 performance

Market leadership

The political uncertainty in South Africa and negative economic outlook, together with the global recession resulting from the COVID-19 crisis, will continue to constrain growth in the short term. In addition, customers’ shift away from luxury vehicles continues and will result in a permanent structural realignment of the market to more affordable and pre-owned vehicles.

The car rental industry de-fleets provide significant volumes of pre-owned vehicles to the dealerships. The COVID-19 crisis has negatively impacted the car rental industry, and this will result in severe shortages of pre-owned vehicles in the 2022 calendar year. In addition, the general shortage of pre-owned vehicles has supported margin growth in this business.

Ongoing global shortages of semi-conductors will constrain the availability of certain models through to the end of the 2021 calendar year but are expected to ease after that. In the UK market, around 15% of new vehicle purchases are now electric and hybrid vehicles and this is expected to grow due to government subsidies and tax incentives.

While the change to electric and hybrid vehicles in the geographies where we operate will largely depend on government’s will and ability to support the affordability of electric and hybrid vehicles, stimulate consumer demand, the transition will also in part be dictated by our partner OEMs. OEMs are making headway in the production of batteries, hydrogen fuel cells, liquefied petroleum gas (LPG) and hybrid vehicles. We monitor global trends and OEM developments so that when policy changes are implemented in the countries where we operate, we will be able to have the infrastructure for electric and hybrid vehicles in the dealerships. Motus UK has implemented a policy for employee company vehicles to be electric and hybrid vehicles and is installing charging points at its sites.

We have invested in innovation and technology to improve our digital capabilities and grow market share.


The customer buying process has evolved from a traditional process to one with multi-entry processes.

The customer buying process has evolved from a traditional process to one with multi-entry processes. This shift in customer demands toward digital channels was already reshaping the marketing, distribution and selling of vehicles by April last year. However, the COVID-19 crisis and the initial hard lockdowns have accelerated this trend significantly. As a result, the industry faced unprecedented challenges over the past year and accelerated transformation to enable Motus to provide multiple channels to satisfy the needs of different market segments. We continue to accelerate our omni-channel retail strategy and improve the overall customer experience. We are embracing change and incorporating non-traditional thinking and technology in our innovation and digital capabilities for a truly seamless digital and in-dealership customer experience.

In November 2020, we launched motus.cars, our customer-facing centralised vehicle inventory aggregator and online platform, to streamline pre-owned vehicle purchasing. This platform will allow us to improve our customers’ visibility of our inventory of pre-owned vehicles while also enhancing our ability to service them and reducing the time it takes to complete a transaction. The trade-in platform functionality provides valuable insights into inventory pricing, which allows us to improve the accuracy and speed of pricing trade-in vehicles. Over time, we will continue to add functionality and features to the platform. The target market for vehicle trade-ins is vehicles between one and six years old. Older vehicles are sold to the trade as these vehicles do not suit our pre-owned vehicle sales profile.

Our investment in getWorth, which is now a 60% subsidiary of the Group, will also support the fast-tracking of our positioning in the online vehicle buying and warehouse retailing space. This underpins our intention to support new and pre-owned vehicle retail businesses using technology, to reduce risk and increase our access to data for future growth. Our customers and dealer group alike will benefit from this investment and innovation as Motus deploys the innovative vehicle buying and selling processes developed by getWorth. Matching the scale of the trusted and established Motus dealer network with these processes and systems will allow the Group to expedite, and thereby improve, the selling and buying experience for the customers, resulting in increased vehicle sales.

Our willingness to embrace change and incorporate non-traditional thinking and technology in our business will allow us to build on the capabilities these provide for a truly seamless digital and in-dealership customer experience where we connect the online and offline experience for our customers.

We also launched Motus Select, which replaces the long-standing Imperial Select brand, as a trusted place to buy a pre-owned vehicle. There are 22 dealerships in the Motus Select network, making it easier for buyers to find the right make and model to meet their requirements.

The de-fleeting of rental vehicles to the Auto Pedigree network of 69 dealerships will ensure that we have a constant and reliable source of pre-owned vehicles, in the right condition and at the right price. As the pre-owned vehicle volumes available from the rental businesses will be reduced, we are sourcing pre-owned vehicles from other sources.

We have introduced five pilot Auto Pedigree Service Centres to offer convenient, high-quality service and repairs at affordable prices. We aim to offer all vehicle owners access to affordable high-quality vehicle service and maintenance.

Motus will continue to expand the dealership footprint in the UK and Australia. We intend to grow through carefully selected bolt-on acquisitions that will be driven by the introduction of additional brands in the areas that are close to existing dealerships. We will maintain our focus on growing the dealership footprint in provincial areas.

During the year, we have prepared for new legislation and regulation that took effect on 1 July 2021. We have implemented processes to comply with the requirements of the Automotive Aftermarket Guidelines, commonly known as the Right to Repair. Similar legislation has been implemented in Australia and the UK without any significant impact on the OEM/dealer market and we expect this to be the case in South Africa as well. We have also trained our people and implemented plans to ensure we are compliant with POPIA, while full implementation of AARTO legislation has been postponed to 1 July 2022.

We continue to reduce the negative impact on the environment where possible. Waste and water recycling systems are implemented in some of the dealerships and car rental depots. To reduce our carbon footprint, energy-saving lightbulbs are installed when dealerships are upgraded. In addition, solar panels are installed at some existing dealerships and distribution centres and all new dealerships. In the vehicle rental business, our customers are provided with electronic invoices and statements.

Read more about the Group’s ESG priorities.

We embrace change and incorporate non-traditional thinking and technology in our business.

Integration and optimisation

We constantly evolve the dealership footprint by consolidating and multi-franchising dealerships to improve profitability. In addition, we introduce and/or acquire brands via selective bolt-on acquisitions in areas that complement our current network to build critical mass and leverage synergies. This allows us to align to OEM strategies proactively and respond to changes in markets and customer behaviours. We acquired six dealerships in South Africa, one in the UK and two dealerships in Australia. These transactions increased our access to growing markets in these regions. The Group has over 40 multi-franchised operations in South Africa, with new multi-franchise dealerships opening in Edenvale, Bedfordview, Polokwane, Tzaneen, Klerksdorp and Rustenburg. We plan to open our single biggest multi-franchise business in Menlyn (Pretoria) in early 2022.

We will continue to refine the implementation of a multi-franchise model in dealership locations where appropriate.

Support from OEMs was instrumental in achieving progress in implementing the multi-franchise dealership model. In response to developments in our operating environment, we assess our dealership footprint on an ongoing basis. We will continue to refine the implementation of a multi-franchise model in dealership locations where this is appropriate. This includes implementing standardised processes across dealerships and centralised marketing to ensure consistent brand messaging lower advertising costs.

Over the past few years, the vehicle rental business has migrated its legacy IT systems onto a new platform that offers bi-directional system integration capabilities. During the year, we introduced an end-to-end self-service capability for customers to improve their experience. We will continue to create a sustainable technology environment that supports specialised customer digital applications across multiple platforms.

We will continue to assess the technology and innovation requirements of the retail business segment to improve alignment and integration of transaction flows and create information analytic capabilities over existing dealership data to improve business decision making.

Read more about the Group's approach to innovation and technology.

Our people

Our people processes are designed to attract, develop and retain talented, diverse and committed employees. We continue to invest in the development of our people, with a strong focus on technical competence development and transformation. We are creating a purpose-driven workplace that fosters a culture of continual improvement and innovation by continually embracing change and customer centricity in response to emerging disruption in the motor industry.

Read more about the Group's people strategy.

 

2021 financial performance

Revenue

R70 962 million

Operating profit

R1 757 million

Operating margin

2,5%
   HY1 2021 
unaudited^
 
change on 
HY1 2020 
unaudited^
  HY2 2021  
pro forma*
 
change on 
HY2 2020 
pro forma*
  2021
audited
  2020
audited
  %
change on
2020
audited
 
Revenue (Rm) 35 965      34 997    37   70 962   59 898   18  
Operating profit (Rm) 740    (8)   1 017    >100   1 757   332   >100  
Operating margin (%)  2,1        2,9       2,5   0,6      
^ HY1 numbers are unaudited and are extracted from the interim published results for the six months ended 31 December 2020.
* HY2 numbers are unaudited and derived from deducting the HY1 results from the annual published results for the year ended 30 June 2021.

Revenue increased by 18% mainly as a result of increased revenue attributable to South Africa’s new and pre-owned retail dealers, Auto Pedigree (positively impacted by accelerated de-fleeting of car rental vehicles), the UK (mainly due to improved September 2020 and March 2021 registration months) and Australia (assisted by the inclusion of Ballarat acquisition for a full period). This was offset by reduced revenue contribution from the car rental division.

The Retail and Rental segment sold 82 919 new units (2020: 77 772 new units) and 104 459 pre-owned units1 (2020: 92 511 pre-owned units1) for the year. In South Africa, the segment sold 49 290 new units and 77 659 pre-owned units1 (2020: 46 185 new units and 68 005 pre-owned units1), this was 7% up on the prior year for new vehicles when the market was up by 1%. Internationally we sold 33 629 new units and 26 800 pre-owned units1 (2020: 31 587 new units and 24 506 pre-owned units1), this was up 6% up on the prior year for new vehicles.

Operating profit increased by R1,4 billion across all areas of the business. The increased operating profit is as a result of the recovery of the automotive industry in all the geographies in which we operate that resulted in increased volumes and increased gross income, the servicing of pent-up demand following the initial lockdowns and benefits from various cost-cutting measures implemented in the prior year. The car rental business was marginally profitable supported by the aggressive de-fleet strategy conducted in the prior year.

South Africa

The South African retail revenue and operating profit increased by 17% and 119%, respectively, from the prior year mainly due to the increase in vehicle sales volumes of 11% (new 7% and pre-owned1 14%).

Car rental revenue decreased mainly as a result of limited local and international tourism. Operating profit increased mainly due to aggressive cost-cutting measures implemented which included de-fleeting of vehicles, closure of branches and the retrenchment of employees. Vehicle utilisation levels have increased following business model changes from where the business can grow profitably again.

United Kingdom

UK revenue and operating profit increased by 24% and 667%, respectively from a lower base in June 2020. Operating profit benefitted from the improved performance of both passenger and commercial dealerships (mainly due to improved September 2020 and March 2021 registration months), enhanced by government support (rates rebates and furlough payments) and translation benefits due to the weakening of the average ZAR rate from June 2020. The UK sold 24 212 new units and 21 518 pre-owned units1 (2020: 22 912 new units and 18 628 pre-owned units1) for the 12 months.

Australia

Australia’s revenue and operating profit increased by 24% and 553%, respectively mainly as a result of improved performance in Sydney and Melbourne, as well as the full year trading contribution of the Ballarat acquisition. Australia sold 9 417 new units and 5 282 pre-owned units1 (2020: 8 675 new units and 5 878 pre-owned units1) for the 12 months. The business benefitted from government support.

1 Includes trade units.