Half Year Result to 31 December 2022

The Colonial Motor Company Limited has released its half year results for the six months ended 31 December 2022.

As anticipated by the most recent guidance update of December 2022, Chair Ash Waugh confirmed the Trading Profit before tax for the first half of the current financial year, at $20.9m, was the second highest on record. This was below the 2021 comparative period’s result but ahead of the $18.2m 2020 result. He reported total revenue was down 6.5% on the same period last year but up 14.4% on the comparative period prior to that. The six-month period to 31 December 2021 had been a record across all measures of revenue and profit.

Ash Waugh said that all of the Company’s major trading operations remain in good shape, with motor vehicles, heavy trucks and tractor dealerships all contributing to deliver a very sound result for the six-month period despite softening market conditions. While the vehicle supply shortage was showing signs of easing, waiting lists for popular models continued to pose challenges for our dealerships and meant lengthy wait times for customers. The trend of shipping arrivals dictating monthly sales results remains, while at the same time the industry works through the tail end of the high vehicle demand of the last two years.

The headwinds of growing economic uncertainty, a relatively low New Zealand dollar, the cost-of-living crisis and rising interest rates had softened new and used vehicle enquiries and increased the cost of doing business. Despite these challenges, the Company’s focus on investing in our people and facilities and supporting our long-term customer relationships has proven to be a successful formula.

Targeted government intervention via the clean vehicle legislation continued to drive demand for electric vehicles, with EVs playing an increasingly dominant role in the Passenger and SUV segments. The new vehicle industry totalled 164,813 registrations for 2022, only slightly down on 2021.

In relation to property, Mr Waugh confirmed the dealership upgrades at Avon City Ford, Dunedin City Ford and Timaru Motors were all on track and due to be completed before the end of the financial year. A complete rebuild of the Fagan Motors showroom and of Agricentre’s tractor dealership in Gore were nearing their start dates. A Mazda brand refresh for South Auckland Mazda and Dunedin City Mazda would get underway later in the year. The Company had purchased a substantial property in Palmerston North. It was planned to develop this as a long-term investment to expand and future proof the Company’s heavy commercial business in the region.

While uncertainty is the constant keyword heading into the second half of the financial year, sales of popular vehicle models were expected to stay robust in the third quarter. The lag effect from lower levels of customer enquiry was anticipated to have a greater impact by the fourth quarter, Ash Waugh said.

He noted the economic environment experienced in the first half is expected to remain and will likely tighten the screws on the industry and wider retail sector as the year unfolds. Also contending with the lead up to the 2023 general election can result in customers deferring major purchase decisions until a degree of certainty resumes.

As showcased at the 2022 AGM, the Company has an exciting array of new and electrified products coming to market across the portfolio of brands we partner with. The combination of great staff, investment in facilities and new products positions the Company well to succeed. However, in the short to medium term we do expect a degree of turbulence as the supply of EV products remains globally scarce for the foreseeable future.

Mr Waugh advised the Board had declared a fully imputed interim dividend of 15 cents per share.

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