Preliminary result and dividend

The Chair of the Colonial Motor Company, Ash Waugh, today announced a Trading Profit after Tax for the 30 June 2024 financial year of $17.88m.

He noted that, over the past two years, the Company had reported deteriorating market conditions. This resulted in an increasingly challenging trading environment and the deterioration is evident in this year’s result. It was still a year of two halves. The first half produced a respectable result in a weakening market, albeit with high inventory carrying costs. The second half bore the full brunt of recession with softer light vehicle demand, continuing high interest rates and an oversupplied market across the industry. New and used vehicle margins have been squeezed, reducing dealer profitability. The dealer response has been to review cost structures while remaining focused on delivering positive bottom-line results. For context, he pointed out the June calendar year-to-date new vehicle market was 26.2% down on the prior year.

Mr Waugh said the Company’s heavy truck business continued to perform well as customers replaced their existing vehicles with long awaited new units. Meeting that demand came with adverse imposts on efficiency, productivity and inventory carrying costs. We have seen no such replacement policy in our tractor operations, which are heavily impacted by the negative sentiment in the agricultural sector.

We remain confident that the ongoing investment in the JAC Motors brand will bear fruit in future years. The team continues to work through vehicle compliance, on-road testing and the set-up of a sales and service network, all of which incur the normal challenges associated with establishing a new brand.

In relation to property, he noted the Company has trimmed facility investments in response to rising building costs and the downturn in the vehicle market. We have progressed the Fagan Motors dealership rebuild, an extension to Dunedin City’s parts warehouse and refreshed facilities in South Auckland and Christchurch to represent the JAC brand. In addition, the consenting process is well underway for a new Southpac truck facility on the land purchased in Palmerston North.

Mr Waugh reconfirmed that as reported in a recent release to the Stock Exchange, a one off non-cash deferred tax adjustment of $12.7million was made at 30 June 2024. This was in response to the Government’s decision to remove the depreciation allowance on commercial buildings with an estimated life of 50 years or more. The impact will see a minor increase in the tax payable over a period of decades. While the adjustment reduced the Profit for the Year, it had no effect on the determination of the final dividend. It also did not affect the 2024 financial year’s cash flows, income tax liability, operating activities or value of the Company’s property portfolio.

He considered that, during this new financial year, the state of the New Zealand economy will dominate the direction of retail markets. Demand for light vehicles is likely to remain subdued for as long as interest rates remain relatively high. Oversupply will continue to be a challenge the industry has to manage, hand in hand with a growing number of new brand entrants competing for a declining market. These market forces will impact margins across our businesses, particularly in the new light vehicle fleet. Despite this, Ranger and Everest are expected to maintain their momentum, providing a degree of support to our Ford dealerships, although they too are not immune to market conditions.

Mr Waugh said one positive development has been the Government’s decision to align New Zealand and Australian emissions standards. This will unify New Zealand’s pattern of vehicle supply and demand across the Trans-Tasman region; so a rational change that has been welcomed by the industry.

The Directors had declared a fully imputed dividend of 20 cps to be paid on Monday, 7 October 2024, with a record date of Friday, 27 September. This would take the total dividend for the year to 35 cps, 64% of the Trading Profit after Tax.

ENDS

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Announcement PDF