Motus Holdings Limited (MTH) Earnings Call Transcript & Summary

Good morning, everyone. Thanks for joining us on this webinar. Last year, this time, when I spoke to you, I thought we'll be over with the webinars, and we'll be talking to you in meetings and conference rooms where we'd be face-to-face, but it doesn't look like that's going to happen in the near future. We can see this variance is now mutating, and it's going to create its own journey from here onwards. So we'll try our best talking to you on a webinar. But as soon as we can get out of this, we'd like to talk to you face-to-face in meeting rooms. The one thing we miss as well is the Investor Relation days that we used to have. And hopefully, by next year, we can get back to that as well where we can talk to you during the year about our business instead of talking to you twice a year with our interim results and with our annual results. So thank you for joining us. I believe we've got some Board members who have joined us this morning. Thank you to Graham and his team, our Chairman and the team. We've got ExCo members, and we've got teams of the Motus management that are with us as well. And to each one of you, thank you for joining us. Like you see, we've got quite a busy agenda for this morning. We're covering quite a few points. Because we have so many slides, we won't cover every slide and not every point on the slide. So we'll pull out the highlights of each of the slides. But for the purpose of completeness, we normally prepare this in full, so you can access this on our website and then you get the full picture even after the presentation. Okay. So here we go. So firstly, just to remind everyone that what makes Motus so resilient is this diversified automotive business that's integrated and we're one of a kind in Africa. We're the only people that have this model. And in the U.K., we know there's 1 company or 1 group of companies that do this, but the balance of them are either manufacturers or retailers and you don't get a company like ours, which has an integrated business model. So what have we got? So we've got -- we import passenger and light commercial vehicles. We've got parts and panels. And from there, where do we go to? Then, we go to the retail division, where we sell new and preowned vehicles, and we sell passenger and light commercial vehicles in the U.K., Australia and Africa. And those dealerships then provide, together with our financial services business, we provide service and maintenance plans, extended warranty plans. And although in the U.K. and Australia, our workshops, where we get to in point 4 are very busy. But remember, in South Africa, we sell these products at the time of sale or through financial services. And then obviously, in the workshops, we provide the workshop services and parts. And then from there, the retail division moves on to renting passenger and light commercial vehicles in South Africa. And from there, then we get to our Aftermarket Parts business, which is a distributor, wholesaler and a retailer of parts and accessories. And as you know that we've got a business in Taiwan, distribution center in China and we sell in Southern Africa as well. Then we move on to Financial Services. And there, we're a developer and provider of vehicle-related financial products and services, and that ensures that we provide contact with the customer all the time, continuity in our business. And it's a cash-generative business that's got annuity income as well. And then the Financial Services provides fleet services. In South Africa, we do that to mostly companies -- obviously, car rental companies and other corporates as well. So that's a nutshell about our business. We don't talk about these businesses again. So I thought I'd just do that with you. Okay. We all know, I mean, we read the same press and we watch the same channels, TV channels. The trading environment in South Africa have been very challenging. Obviously, we're trying to get out of COVID, but with coming out of COVID, we created other problems was the violence and the riots that happened in our country. So yes, the economic outlook remains challenging, and it's low and the economic growth is low as well. So COVID exacerbated the problem. The violence added additional problems. Despite that being South African and being fighters, we will ride the storm. The consumer confidence is fragile and disposable income is lower than it was 2 years ago. The fiscal position, as we know, we're borrowing a lot more money than we borrowed 3, 4 years ago to fund all PPE and all the development that we need. High unemployment and we saw the results last week. We had the highest unemployment levels at the moment, rising poverty levels, the political and social challenges that we're going through. I mean, amongst the ruling party and its competitors, the economy and the high unemployment all creating a perfect recipe for a very challenging environment we find ourselves in. Slow vaccination rollout. Yes, when we wrote this, we were quite slow. But since the age has been dropped to 18 where people can go for vaccination, we see we've passed the 12 million mark now. So that's quite positive. And hope it all continues that we can get to the 30 million and 40 million mark. While all this is happening, our legislators are quite busy with new regulations. Firstly, was POPIA, which was started 2 years ago. It became effective 1 July this year. It took us 12 months. We prepared well for it. And touch wood, it's all going well. People have been well trained and implementation is going well. Right to Repair that started in 1 July. It's creating more structure, but touch wood, it's not impacting the business in terms of its profitability. What it made us do is become more aware of our customer, become more competitive and make sure that we're all inclusive and make sure that our businesses are taking opportunities on the transformation side as well. On the AARTO side, I mean, that's been postponed now to 1 July next year. Although they were working on trail runs, but I think it becomes effective next year. And I think it is the right decision based on the challenges we have with the driver's licenses and with all the computer problems that we have in our Department of Transport. Then on top of that, we still have the load shedding problems, which are hampering economic growth. So that's a challenge we're getting -- we're trying to get used to, but because of our load shedding being volatile, it makes it a bit difficult and expensive as well. Obviously, it's not cheap to run generators, so that becomes expensive. And electricity is becoming more expensive as well. And the added problem we have in South Africa is obviously the volatile currency. I mean, we can see our currency strengthened towards June, then it weakened and now we seem to be going the right direction. But volatility in the currency is a challenge because you've got to understand when to be in the market, when to stay out for a while. What's interesting is that the other geographies are more stable, like the U.K. and Australia, where we have businesses. Being first world countries, the recovery there was faster. Very good government stimulus we had in the U.K., which has furloughed payments to the staff. And obviously, there were rates rebates. There were some tax breaks as well. So that all has stopped now, but it's been good. Australia has got -- had the JobKeeper's fund. So that helped as well during the difficult times. The added problem we had in the U.K. was the Brexit problem, but that seems to have settled down. There's no major issues. There are certain problems at the borders, but that's more paperwork with -- there's more paperwork now than before, but they'll get used to it and life's moving on. And we all know that the U.K. has been one of the successful countries with their vaccination rollout. And what we're hearing from the U.K. is that the more people you vaccinate, they may get COVID after that, but they don't need a hospital. So that helps that people are recovering at home and they get back to work sooner. Australia, they started slowly with the vaccination program. But obviously, at the moment, we have a lockdown in Victoria, in Melbourne and then in New South Wales, where Sydney is. They're in a complete lockdown. So it's going to be difficult for August and a bit of September until they get out of it. But with the population size they have, I'm sure by December, they'll make great strides in their vaccination rollout because a smaller population with good infrastructure, I'm sure they should be able to be in a much stronger position. Okay. So that's the geographies we operate in. So let's say, what are the immediate risks into the next 12 and 24 months? The slow economic growth is going to be with us for a while. So that will be a challenge we're all going to deal with, predominantly in South Africa. I think the U.K. and Australia will be -- they'll recover faster like we've seen in the last 12 months. Yes, there are some constraints with supply of new vehicles globally, not only South Africa because of the microchip problem that we have. And touch wood, we're managing. Dealerships haven't start producing losses because they don't have vehicles. We're still continue in selling new vehicles that we have that are being supplied, preowned vehicles and the workshops and parts business are doing quite nicely as well. Yes, there is a short supply of preowned vehicles. Remember, it's exacerbated by the short supply of new vehicles. And new vehicles actually selling at retail plus at the moment. Nothing is selling at retail minus. So whatever you see in trade values, book and trade, no one's talking about book anymore. Everyone's selling at trade plus. So that will continue for a while until we get the new supply of vehicles back to normal, which we think could take up another 3 months or so. If a bit longer, then we'll -- by January, we must get back to a new normal. I've talked about the rand volatility like you've seen in the last 6 months. 1 minute, we're strong. 1 minute, we're weak. And sometimes we're in between. At the moment, we're at the in between state. So that's something we manage quite well with our foreign exchange meetings monthly and regular discussions with the CEOs in the various divisions. And yes, the business that I'll talk about a bit more about is our car rental business. We all know that international travelers are not coming into our country and local travel is less than what it was, and that business is hurting, but I'll talk a bit more about it when I discuss the various businesses. And then obviously, the government support in all the geographies that we're in has been withdrawn. So we are on our own now. And we'll row the boat without any government assistance and we'll continue. Okay. So 18 months ago, we were in trouble in South Africa and globally with -- especially in South Africa with the lockdown. We had solid 6 weeks of not a car being sold, no dealerships being open, no stores being open. And as a result, management had to respond, and this is how we responded. And the lessons we learned from then are still alive and well today, and they'll be alive and well going forward. So what has management done? Obviously, we're very fortunate. We've got a young management team that are flexible and agile, so we could adapt and change quickly. We've maintained a cost structure and all the strict financial disciplines that we had last year. We're continuing with that. We were very privileged with our support from our customers and with our bankers that we managed to convert our inventory in the dealers and the car rental de-fleet into cash, and Ockert will talk a lot more about the cash. While we're doing all that, we've been actively talking to our stakeholders. We've been talking to bankers. We've been talking to suppliers, customers, yourselves in more SENS announcements. And we're just making sure that we keep everyone in a loop including our Board members. So communication is top priority. And then while all this is happening, we haven't forgot our focus making sure that we're operating in an environment to be friendly, from an environment, social and governance point of view. We're making sure that our risk processes, our environmental processes, our governance processes, our contribution to charity. We've kept a focus on those issues to make sure that we don't lose sight of those critical initiatives that we started 2.5 years ago. We're continuing with them. And all in all, what has that done to us? We've delivered strong operating results with fantastic cash flows as well with it. Okay. So let's get back into the South African motor industry and tell you where we are. I'll try to give you some comparatives. So you can see how deeply this business hurt. In 2019, we -- this country sold 536,000 vehicles. In 2020, with all the lockdowns we've had, the slowdown in the economy. And you can see we went to 380,000 vehicles. And for 2021, the projection is between 430,000 and 450,000. And our financial year, we're projecting that to be slightly better between 450,000 and 470,000. You could ask the question, so where does that growth come from? We're hoping that the car rental companies, including Europcar and Tempest and our competitors will start up-fleeting, and we're hoping that we could pick up about -- the country could pick up about 20,000 to 25,000 cars from that sector by June next year. And that we're hoping will give us some growth as an industry into financial year 2022. Okay. So how did that come home to Motus. Motus still sells 1 in 5 cars in the country, and we've been doing that for a while. So we're holding a 20% market share. And our importers have done a great job. Like you can see, Hyundai has grown market share from 7% to 7.7%. You've got Kia from 3.4% to 3.7%. And Renault looks like a major decline from 5.6% to 4.2%. But what happened in 2020? We sold 6,000 vehicles to the car rental industry. We had very good support from our counterparts in France, Renault France, and they gave us good support to get our vehicles into the car rental industry. So this year, our cars were sold in dealers, but very little to the car rental industry. So yes, from a market share point of view, we look like we've gone down significantly. But as far as our sales via dealerships are concerned, we've had excellent sales in our dealerships. And despite all that, we maintained a market share of 16,1%. When we say controllable, we mean light commercials and passenger vehicles. Okay. Ockert is going to talk quite a bit about numbers, but I thought the one point I wanted to make to you before putting the slide on is trying to show you that the unit sales have been very good in the environments we operate in. So if you look at South Africa and the U.K., we all did 6% more units than we did last year, and Australia was 9% more units in new vehicles. So you can see the Australian market. We benefit -- Australia benefited from that a few extra months of Ballarat, which was the acquisition, but generally, a very good market. And then if you look at the preowned market, you can see how that market has grown, and we played well in that game. I mean South Africa, 15% growth. U.K. 16%, and you could say South Africa benefited from the car rental industry. Yes, we did. But the U.K., you can see how active that market has been. Australia was minus 10% in preowned. And the reason for that was they had a bit of a lockdown in Pakenham. Pakenham is just outside Melbourne. And we've got a big used car outlet there and that was closed for a while. And then obviously, in the previous year, we had a lot of cars that Holden vehicles that we sold is preowned where Holden has pulled out of Australia now. So we have a very little of that left now. So all in all, you can see that we sold a lot of new cars, 6% more cars, preowned 13% in total, giving us the 10% increase in number of units. Because of all that, you can see what has happened to Motus. We virtually sold 1 new car for 1 preowned. Under normal circumstances, we would sell between 0.6 and 0.75 preowned to a new. But what does that do to us? It helps maintain cost in the business, it helps your economies of scale. And if you're making less margins on new vehicles, you've got the preowned vehicles to help you. So that means you keep your sites profitable and people motivated by making sure that if they all make commissions on the new car, they make it on a preowned. So that was quite an important phenomenon this year where we virtually sold 1 new for 1 preowned. The other important point that I want to make to you today as well is that when we trade in new -- preowned vehicles, our market is between 1 and 6 years old. There are a lot of cars between 7 and 12 and 13 years old. We don't play in that game. And the reason we don't play in that game is that if you bring a 12-year-old car in for a trading, yes, we'll buy it. But immediately, we would offload that vehicle to a small dealer group. And there's an auction platform that you can use to do that. And the reason for that is that when you get these old vehicles that you sell on your floor, the customer thinks because he bought it from your branded outlet either VW, Toyota, Hyundai, Kia or Renault, that means it comes with a lifetime warranty, you're going to repair things. It doesn't suit our premises to have all these old cars. As a result, we limit our purchases to preowned vehicles between 1 and 6 years old. Yes, there is a market, which is older than 6 years old. Yes, there are players that will do that, but that's not the Motus market. We stay out of that. And if we have to buy, we'll offload that quite quickly with other dealer groups as well. So that was quite an important point that I wanted to make to you this morning. Moving on, you can see I'm not going to go through every line item, which Ockert talks about. But the point I want to make to you on this slide is that despite our car sales, the new cars going up by 6%, our turnover going up by 22%. How does that happen? It happened predominantly in South Africa. Why does that happen? You sold extra units, firstly, for 6%. There were price increases of 7% to 8%. And then last year, we included, in the unit preowned -- cars that we sell to the rental industry are included in the units. But that does not -- is not included in your turnover because remember, those cars come back to us. So they're short-term rentals. So that is about an 8% number that you can put on to this number, where those vehicles that were sold to car rental are now sold in our dealerships, and we recognize revenue for that. So if you add it up, it's car rental, pricing, volume and a bit of currency that would have caused the turnover to go up by new vehicles, 22%. And the preowned will be -- partly would be the extra units, but it would be a mix as well. So that was just to give you a bit of a flavor on the turnover when Ockert talks in detail about the turnover and the operating profit. And the other important point on this slide is the South African business has generated 80% of the profits, and our international business has done a great job bringing in 20% of the operating profit. Whereas last year, they only brought in 1% of our profit. So you can see great turnaround from our international business. Okay. So I wouldn't take credit for this slide. I'll give credit for this slide to Justine, the lady that prepares my slides. And she thought it's very appropriate that we tell you where our activity levels are at the moment, and she was quite innovative with this pedometer that you're seeing in front of you. Thank God, they're all on the right side of it. So you can see as far as the Import and Distribution business is concerned, when we compare to pre-COVID levels, we're virtually at 90%. So I think in the environment and all the economic challenges I told you about, I think this business has done a great job getting to 90% of pre-COVID. Our retail business coming at 80% of pre-COVID. Our international business, like I told you a minute ago, I mean, that one is in excess of 100%. So they've actually surpassing pre-COVID. The industry that's suffering the most is the car rental industry, and we know the problems for that are firstly, we don't have international tourists. Locally, we're traveling less. We're making less accidents. The replacement business is down. And then obviously, people are traveling less and using webinars and other ways of communication. So that business is at about 50% of pre-COVID. The Financial Services business has kept up very well at 85%. But remember, you're talking of 85% of the business that's cash generative and that's got annuity type of income. So this business has done great things for us. And then lastly, but not least, our Aftermarket Parts business has done great things. We had the stock available with the distribution centers in Taiwan and China. And that business is actually operating at greater than 100% of pre-COVID. So all in all, you can see the integrated business model does help you. When the 1 person falls down, the next person picks them up. And all in all, you get a recipe for a great business between -- when you add up all the businesses together. I'm not going to spend too much time on the financial highlights because Ockert covers them, but I just thought I'll give you some big picture numbers. And every number on this slide, you can see the actual performance for June 2021 is in excess of the pre-COVID number that we had was in June 2019. So you can see that every number on the slide has exceeded our expectations, and we have performed at pre-COVID levels. So obviously, the major highlight was the operating profit. You can see we're back in the ZAR 3.8 billion category, where we were ZAR 3.64 billion and ZAR 2.1 billion last year. So you can see great strides in trying to build our business into a sustainable business with operating profit. We managed our taxable well, and then you can see the pretax profit at ZAR 2.8 billion. And what shareholders take home is the earnings per share and the headline earnings per share. You can see, we're back to where we wanted to be in past ZAR 11 numbers, so we had ZAR 11.53 and ZAR 11.79 for the HEPS number. So great trading results. And obviously, because of that, we -- the Board approved a ZAR 4.15 per share as a dividend. And we've paid ZAR 1.6 of that, and we'll be paying another ZAR 2.55 by end of September. So then that was a great income statement. But we put the whole thing together and your cash flow tells the story because what did you do with your money and we generated free cash flow at ZAR 5.9 billion. Net to debt equity, you can see how that was brought down. And then the return to the shareholders on our capital is 14.8%. And obviously, that's helped our bank covenants very well with our net debt-to-EBITDA at 0.8x and EBITDA at 10,9. Now remember, the 10.9 should be more than 3. So that's a fantastic gap that we've got. The 0.8 should be below 3 again, a fantastic number from bank covenants point of view and a liquidity point of view. Ockert, I'll hand it over to you now to get into more details on the financial results.

Thanks, Osman. So yes, 2020 was a very tough year. It was difficult to have these results presentations. So I'm very pleased here today to at least show you how we've now turned this business around in 2021. Obviously, talking about resilience is one thing, but I think the evidence in numbers is what everyone was looking for. So if you look at this year under review, the revenue have improved by 19% and operating profit by 78%. Obviously, not done just by 1 business or 1 division. As you can see, it was this diversified model has really done well for us. Our importer business done very well on the revenue as well as on the operating profit side, so did the Retail and the Aftermarket Parts. On the service side of things, obviously, the car rental, as Osman just spoke about now, not quite to its performance levels yet. And then the business that probably faced the most headwinds were our Financial Services business. But yet, if you look at the numbers, you'll see they were just marginally down, as those annuity income streams are really protecting them. Our operating profit increased by 78%, as I just said. And a faster recovery rate on the -- in the whole automotive industry has actually assisted this. We have good increases in volumes, good inventory availability specifically helped us there. And you would see that we talk about that as a theme throughout is that inventory availability. But where we had the inventory, we're able to sell it. And we got the benefit, obviously, through the big cost-cutting exercise we did a year ago. And you will see that our operating expenses hardly changed year-on-year. Operating profit, like I just said, obviously, a good number. But what do you take away from that? Obviously, we always sit with a large amount of interest that we need to pay. But in this particular year, we, in fact, halved that, where we had more than ZAR 1.2 billion last year, now we're sitting at ZAR 543 million. Now that was 2 factors really, and you'll see it more clearly maybe on the balance sheet, but our vehicles for hire, that car rental fleet came down considerably. And then our inventory was almost ran on a bit of a just-in-time system. We started the year with high inventory levels, then sold off quite nicely during the first part of the financial year. And the second half of the year, inventory did become a little bit scarcer which, on the one side, helped margins. But on the other side, obviously, it also assisted on the no financing cost line. Income tax expenses, obviously, not a big number to talk of, and we have a 25% effective tax rate. The one line that we need to just highlight, however, is this net foreign exchange items. Now normally, this is not a big number in our lives. It's maybe in a normal year, about ZAR 50 million. And that is where you would normally fair value all your foreign financial assets and liabilities. In this current year, about ZAR 99 million did relate to that. But over and above that, we also had an abnormal loss on this line. Now what this loss related to was around hedges that we had in place for our importers. Obviously, with COVID and the erratic stock supply that we then suddenly faced, specifically out of India. They had COVID, their factories had to close. And what you had to do at that particular stage was to effectively close out your orders that were placed with the factory and later replace them again. Now once you do that, in terms of your accounting rules, all those hedges that you had in place then become ineffective, and you had to effectively translate that into your income statement. Once we placed the new orders, again, we obviously took new hedges again and obviously at much more favorable rates. Now why was it a loss in this period is purely because of this volatility of the rand. And I think everyone living in South Africa can attest to how volatile this rand is. In this period, the rand strengthened against the major currencies, more specifically the dollar. And because it strengthened, you were out of the money at that point in time when you have to close it out. The good news, however, is maybe this loss was taken in this financial year, but it will give you the lower rates going into the new financial year, and you'll see later on in the importers that do currently have good forward cover all the way out to February and into March. Earnings and headline earnings, Osman already spoke to you about that. Where we did get an additional kick in, which is just worth mentioning here is that we also were quite aggressive on the share repurchases during the year. As we came out of COVID, there were not that many opportunities for acquisitions. And we used our money well to also buy back quite a few of the Motus shares. Now in buying back about 6.5 million shares, we also gave that additional kick on your earnings per share and your headline earnings per share. And you will see on a weighted basis going into the FY '22 year, we will only start with 177 million as your weighted average that you obviously need to use in dividing your earnings. So if all things stay equal, that's effectively a 3% kicker you start off with the new year. Total dividends declared very pleased to be able to return to dividends to our shareholders and ZAR 4.15 for the full year. A bit of an overview slide. I think Osman already said, as, I mean, we are virtually back to 2019 levels. COVID certainly set us back. And I think as a goal for ourselves, as a management team, we continuously wanted to see if we could outperform the 2019 year. And as you can see from the slide, we performed in every line on revenue, operating profit, PBT and attributable profit. We are higher than those 2019 levels. Thanks to Justine, I also got a similar slide. I think mine is even easier to read. As you can see, we performed very well in all sectors. Our importers and distributors, this is against 2019. So that's the pre-COVID levels. You'll see the operating profit over 100%. Our Retail and Rental in South Africa still slightly behind at 82%, but that's mainly due to car rental. And hopefully, if that business can come back on stream, we can see that improvement as well. Our retail operations in international has performed exceptionally well. And this has given us a lot of profit there. So you can see over 100%. Financial Services, like I said, despite all the headwinds, still holding their own and that annuity income stream just keeps on ticking over. And our Aftermarket Parts business performed exceptionally well. Now to delve a little bit deeper into some of these other segments, I can't spend that much time on every slide, but I'll just highlight a few things for you maybe. On the importer side, we're very happy with the way they've responded to this crisis. And now they've really got out of the blocks even in H1. In H1, they were more focused on just moving the metal effectively as we were finding ourselves a little bit in an inventory bubble there with too much stock. As you can see in H2, the operating profit margin increased to staggering 4.9%. And this was a result of new model launches. Obviously, we did get the price increases through. And good volumes that we'll be able to produce because we had the inventory on hand. That whole change in the mix of vehicles, we continuously see people trading still into small SUVs and hatchbacks and that's exactly where these markets are playing. Maybe the exception to that is maybe the Mitsubishi that we've got on our stable. And so we've got a nice picture just for [indiscernible] so they can keep him happy as well. On the second slide, you can see all 3 of our other imported brands, obviously, Hyundai, Kia and Renault, where the bulk of the money is being made. I think what is important on this slide, 2 things. The one is how this market has changed from the channel where we included the car rental into more -- playing more into the dealer space. So you can see there only 9% of our sales went to the car rental side of the business. Obviously, we believe that will change in the near future. On forward cover, as I already said, we had to replace that cover at -- where the hedges were broken, took out new cover. And at rates of ZAR 14.90 where you could see the rand was suddenly sitting yesterday at quite a strong level, only at ZAR 14.60s. Obviously, this is including forward points, what I'm putting out on this slide. So this is including a ZAR 0.06 or ZAR 0.10 for the dollar and the euro, respectively, per month. And we've got cover all the way out to February. And in fact, we've started covering into March. Retail side, I already said, very good performance, South Africa as well as international. International operations certainly came to the fore. There was a bit of pent-up demand initially when we started. But I think the other real benefit here is how we benefit from those cost-cutting initiatives we took in the previous year. Obviously, the trick on our side is to try and hold on to keeping those costs as low as possible for as long as possible. And we've certainly been able to achieve that in the current year. We have reduced footprint slightly. We have moved more into multi-franchising and all of those factors, it will also give us that benefit on the costs. So on the South African side, I think market share, Osman already spoke about. I think one part of our business that was really a positive impacted, was Auto Pedigree. Obviously, with the de-fleeting of the car rental vehicles. But once again, that's a business that keeps on feeding itself. So it is a business that gives you also a bit of an annuity income stream on that side. International operations really did well. And I think what we -- and on the car rental side, obviously, we did well as well. Osman spoke a lot around the U.K. and Australia already. So let me just move on from those. Financial Services, you can see the operating profit, H1 and H2, still virtually in line despite, like I said, some of these headwinds. So what were some of these headwinds? We virtually received no income from the bank JV alliances. Obviously, they had big COVID provisions in play, and we need to wait for those to play out. So that would be something in the future that we'd see it coming back. Also on the life side of things, obviously, we sell life cover and get some cell captive arrangements in that space. Also with what has happened with COVID and you would have seen on the life insurance companies, virtually no revenue coming through on those lines either. So this business was very reliant on service and maintenance plans. They stuck to their guns maybe slightly lower burn rates help them there as well. But as you can see later on the balance sheet, we haven't had to take anything out of those contract liabilities to try and get this number to a higher level. They were just ticking over still and made us the ZAR 900 million for the year. The business that really outperformed in this year was Aftermarket Parts. They're always, in my mind, I always told them that they had a bit of a blockage that they didn't think they can make ZAR 500 million, and the next minute, they made ZAR 559 million. So I think great things to come. We're very happy with the operating margin back to over 7,7%, very high for this business. Obviously, a big trading business. And I think in this regard, some of the strategies that we did put in play a few years back already starting with the DC in China, getting that supply chain right has certainly helped. And we have been growing our market share in this space. The shift from the higher-priced premium products into the more affordable and still continuing, but I think we have adapted to those. And in this space, we continuously also have some bolt-on acquisitions that we will be looking at. And I think this is a business that can still give us more than this. Balance sheet, not too much to say really. I think it's all on the slides, but you will see, obviously, the vehicles for hire came down quite considerably and that is that car rental fleet. Our working capital has reduced considerably from the previous year as well, mainly due to lower inventory. And you'll see on the next slide, I did try and split it out a little bit. But you also have to see that from the context that last year it was slightly bloated and this year may be we're slightly under. So there will be a little bit of averaging between these 2 lines between the 2 years going forward. And you will see our inventory and our working capital probably increasing in the new year. This is the detail around the net working capital, and I'll leave it for you to address in your own time. On our debt side, obviously, this is the story of our lives is obviously to try and reduce that interest line. You can see how the core debt has really reduced as well as the floor plans from our financial institutions. And this is as the -- we had the de-fleeting of vehicles on the one side as well as the inventory we were able to sell everything that we could. I think the contract liabilities, once again, that is the financial services where our service and maintenance plans are. And you can see year-on-year that number, in fact, increased slightly. So less of that revenue were able to be taken through the income statement. So there was a slight build up even there. The slides which we normally like to look at when we pick up the boughtbacks from our divisions and normally quickly pays to the cash flows because there's so much noise these days in income statement. What you really want to see is that this business actually produce the cash that goes hand-in-hand with that income statement. I think you will see that the free cash flow from operations certainly did at ZAR 5.9 billion, a lot of cash generated in this business, and that is after we've even had to pay the finance cost and obviously, the taxes. A nice slide that I normally like to refer to is the -- is our waterfall slide, which doesn't want to appear on my screen now, where I have got the generation, the utilization in. So you can see how we generated a huge amount of cash getting us to this ZAR 5.9 billion. But the big trick is always, well, how are you going to use it? What is that allocation of the capital that you've got? I think in our regard, we certainly were still trying to see if there were any acquisitions available. I think in the first half, we did tell you that even though we looked at some, the ROICs didn't quite make sense. And in our case, it was more a case of bolt-on acquisitions. And we took out some of the minorities, and obviously, and add some bolt-on acquisitions. In the case that we didn't or couldn't really find much value in acquisitions, we did then look at the repurchase of shares. And you can see the benefit to shareholders there really sitting on 2 lines, the 485 million is the amount of shares that we repurchased with our cash and the ZAR 312 million was that initial dividend in -- that was paid out in March. And obviously, as we said, there's an additional dividend being paid out now of ZAR 2.55 in September as well. Our CapEx is quite low still. I mean, this is not the levels that you would normally expect if you've been following us for a while, only ZAR 170 million on the CapEx line, real CapEx in our business, probably closer to about ZAR 500 million a year. Gearing came to an all-time low. This is certainly the lowest that I've seen this since I joined the likes of Motus and even our predecessor, Imperial. So you can see at 28% probably not also a true reflection of where we'd normally see this business operating at. We'd normally see it closer to 40% or 50% maybe. But at 28%, obviously, it does give you that very nice kicker on the interest line. A year ago, we had very harsh discussions with or hard discussions with our funders. Obviously, very close on some of those covenant levels. Now a year later, you can see the resilience of this business suddenly brought it to levels where the covenant is not even really a discussion point at the moment. Then the net debt-to-EBITDA is sitting at just 0.8, so below 1 and also on our EBITDA to interest, where we need to be above 3, we're sitting at 10.9. A huge amount of unutilized funding facilities available to us. And like I said, if any acquisitions come our way, we will certainly look at that. Long-term debt and short-term debt, you can see the fixed and variable parts. Osman, I'll hand over back to you.

Thanks, Ockert. It must be pleasing for the CFO to be reporting those kind of numbers in a COVID year. So thank you to you and the accounting team and the business unit leaders. Well done. It was an excellent set of results. But most importantly, we don't forget what we're going to do into the next 3 to 5 years, and we've stuck to our strategic objectives by ensuring that we maintain market leadership, enhance the financial performance. And I'll talk to each one of these in a minute, drive the innovation. I want to talk a bit about technology, what we're doing. And we haven't forgotten our people. We're still working very closely and making sure we look after them. And then we haven't forgot our ESG, which is environment, social and governance issues. So let's talk a bit about -- more about them. So if we look at the market leadership, you know a lot of this. I mean we've got -- we represent 24 OEMs in South Africa, 18 in the U.K. and 19 in Australia. I'll talk a bit more about our acquisitions. I know Ockert gave you a number, but I want to talk a bit more about where the acquisitions were. So I'll talk in a bit more detail about that. And like I said, we held our market share. We're selling 1 in 5 cars in the country. Operating profit, you've just seen all that. So great results. And our offerings are still very relevant where we're selling new and preowned parts, rendering services. They all talk to the innovation and the technology that we're putting into place will all support these initiatives. And then we look at what we do, where is our people. We still had 16,700 people. We've got 73% black representation in South Africa. And we continued with all the training programs and diversity programs. And yes, on the environmental side, we're sticking to our knitting, which is managing our water, electricity, wastage, fuel. And now we've got into using solar panels into our business to avoid using too many generators. And yes, most important to be following the OEMs journey as well from ICE, which is the internal combustion engines, to the EV and the hybrids. We're following the journey. It's going to be tougher in South Africa because of pricing and subsidies. But in the U.K. and Australia, that business is doing quite nicely, and it's increasing every year. Okay. So let's talk a bit about our acquisitions. I mean, Ockert mentioned that we did acquisitions. But the point we are trying to make to you is that while we were managing our business, managing cash flows, we did acquisitions of ZAR 543 million. Renault, we brought out the Midas stores that helps our integration forward. We go backwards and forward sometimes. We buy wholesalers, when we go backwards. We buy a few retailers, when we go forwards. We've got 6 new dealerships in South Africa. We bought out the minority in Australia. We got the GetWorth acquisition, which is -- now we've got 60% of that business, and we bought a commercial business in the U.K. and 2 in Australia. So you can see all in all, wherever we see opportunities, we buy. Whenever the returns are right, the fit and have synergies in our business, we buy. We're busy with the current acquisition. That's not the only one, but we thought we'll mention the one because that's the closest. If all goes well, we could sign that by end of September. And that one, we're looking at the European business in the Aftermarket Parts business and the pricing could be in the region of about ZAR 700 million or ZAR 750 million depending on the final numbers. And that business is not only good as an international acquisition, but it will support our distribution center in Taiwan and in China as well. It will help our buying power, help our rebates and it will just strengthen our position with our purchases from the suppliers. So I think that will be a great acquisition from a complementary point of view. Then on our people, like I always say, people are most important in our lives and transformation being a South African business, which is critical. You can see we've made some great strides in top management, senior management. Middle management, we've had challenges because when we retrenched people last year, that the middle and the junior management areas took a bit of a hit. But remember, some people have migrated from middle to senior. Our job is to top up the middle management now. So the ExCo members are very aware of the targets and their objectives and they need to focus on that area. So hopefully, we can get past the 50% mark next year, and hopefully, we can get close to 60% by 2023. So it's a journey, and we're working on it. But the important thing is that that's the one side of the story. The other side of the story is that, yes, we continue with the training. A very important thing that we've done for the first time in our business was start the YES program. We all know that was a program started by our President, where we take unemployed youth, we employ them in the business. We employed 400 of them, and they're doing great things. We're developing them. And we're very confident that a number of the 400 youth will be employed by our business after July 2022. And if all goes well, we will embark on another journey with the YES program because we believe that it's a very good initiative to help youngsters get trained and create an opportunity for them where they can get bigger jobs after that. We continue with the apprentice training program. We all know what's happened with government, they stopped training. There's no technical schools around, so we have to develop one ourselves. And we have one in Johannesburg and in Cape Town, and we have 1,500 apprentices trained every year, but that's not the amount of people we can use. So a number of these people, a majority of these people are then employed in commerce and industry with other dealerships, opening up their own workshops, things like that. So again, it's very fertile training grounds. And our responses to COVID? I mean, we've done exactly what we did last year. We're continuing with those as we go along. So on the one side, you can help the business with being agile, have a good management team continue with acquisitions, but doesn't mean innovation stops. We've continued with innovation. And why we're keen on innovation is that, we produce South African solutions for South African challenges. But remember, before you can get into innovating things, you need to develop your people and you need the DNA of your people to change so that they become -- they think like innovators. I agree with you, you can't have your 12,500 South African staff think or behaving like innovators. But if you've got 25% of them thinking like innovators, they're going to help the other 75%. So what have we done? Under the chairmanship of Kerry Cassel that heads up of the Financial Services business, they run the innovation program for the group, not for Financial Services only. They've created a club we call the MX Club. The MX Club is now 3,900 members. They have various events and part of the event is to invite leaders from offshore, Harvard people, people from San Francisco, European leaders and South African leaders who talk about innovation. And that's how we get our people excited about new ideas, new way of doing things. And we've created a population of 3,900 people in our organization who are thinking differently today. So again, they have team leaders. They develop projects, and there's 12 business initiatives now that are in progress. We're not going to tell you about all the achievements because some of them are processes, which just happen in the business and others come up with new businesses and new profit streams. So let me give you 1 or 2 examples. We've got the JV with Discovery Insure, where we've created a world-class telematics business by selling vehicle warranty products, not to our client base but to their client base as well. We've now developed the www.motus.cars website. Again, why is that important? Previously, you could only see cars if you went into Motus Toyota or Hyundai or Kia or Renault. Today, if you go into this website, you see all our cars. We call it a one-stop shop. The GetWorth acquisition has helped us with technology, which will help us to value preowned vehicles much quicker, faster, accurately. And they've got a strategy of growing their business. We're starting with the first one in Cape Town, where we're setting up the equivalent of a value mart for cars. And once that product -- process has matured, there will be a rollout in Durban. We want to do 1 in Bloemfontein and maybe 2 or 3 in Gauteng as well. And then the other area that we're quite excited about is digital onboarding, and let me talk a bit about that because that's a gain. Digital onboarding is not a destination. You never arrive somewhere and say I've arrived, and I'm digitally all sorted out. It's a journey. It will chop and change, will develop and will develop further and ultimately, that what makes you relevant in the market that you operate in. So here's our journey. Digital market, we're doing a great job, and that's what was our winning streak for last year, where people, while in COVID, were using our search engines, the websites, the social media, e-mails, mobile apps. And we've done a great job in that area. Digital showrooms, that's when motus.cars, GetWorth, all these now come to light because now the customer has access to a lot more vehicles in his study or in his lounge than he had before. The next leg that we're investing heavily in is in the digital transaction. The one area that's very time consuming for the individual, it's time consuming for our sales and F&I people. F&I are your finance and insurance people in dealerships, is finance applications. We want to make that smoother. We want to make that faster. We want to make sure that we can do rough scoring of people before they even send it to the banks. Because remember, every application you sent to the bank, there's a cost attached to it, which we pay for. If we can reduce that cost, make the customers' life easier. And ultimately, for every one application, if you can put into a bank in -- for every 10 applications, and you can sell 3 and 4 cars or 5 cars, that will be very cost effective. So we've embarked on this journey. It's going to take us at least 12, 18 months to develop the project, which is the finance application. And then from there on, we'll link it to the preowned together with what we're doing at WeBuyCars platform. And then ultimately, we want to add on the value-added products that we sell, but that we want to do it digitally. And then obviously, in the delivery side, we create click and collect in the U.K., in South Africa and Australia. And we've seen a study produced by Deloitte's globally that people still want to come to a dealership to collect a vehicle, to create a rapport with the salesperson, the technicians and the service workshop. So dealerships are here to stay, maybe not in the form of these large dealerships, but they are here to stay, where we will be delivering cars from, where we will be talking to customers and servicing cars. So they're not going to disappear, but the formats may change slightly. Then on the IT side, the other 2 businesses that are making great strides is the car rental business. Obviously, the car rental business is only doing 50% of their turnover, but it gives them a great opportunity now to help develop their self-service capabilities. They're going on to a new platform for their CRM, credit notes, invoicing customers quickly for repairs and damages, so they're making great strides on that. And the Aftermarket Parts, obviously, that business has come about with various acquisitions over time. And what they're doing now is that they've sorted out the DCs. They've sorted their buying. Now they're sorting out getting one integrated ERP system that can talk to each other and make it a seamless operation from the sales side of it, to the accounting side of it. And ultimately, the financials side of it as well. And to add our -- to assist our customers in that area, what we're doing is we're developing a cataloging software system that will allow us to be centralized, that will avoid human error, that will make sure that people like workshops or people like the stores when they want to place orders, they can do it seamlessly and they can do it electronically and without -- and we all know, did we try and read a part number how long the part number is, whether it's got a capital and no capital and whether it's got numerical numbers, very long, a lot of room for errors. But I think the cataloging system will help all that and make sure that we simplify the selling processes for workshops and dealerships. We normally get these questions on the roadshows, and we thought we'll preempt the question for you. What are we going to do with our money? So we've got acquisitions lined up. I talked about Aftermarket Parts, one of them, but there are a few of them. There's an IT company. There's other companies. We've earmarked ZAR 1 billion for that. We know, like Ockert said, we're at the lowest point with our vehicle inventory. We want to grow that. Thus growing the working capital doesn't mean that inventory will grow. It'll grow more than that, but we'll use our floor plans for that, but we're going to grow that by about ZAR 2 billion. Once supplies get back to normal, the car rental fleet will eat up between ZAR 1 billion and ZAR 1.5 billion of our cash, but again, for the right reasons. Capital expenditure, we think will be between ZAR 500 million and ZAR 700 million for next year. And that will help us develop that multi-franchise model as well. The share purchase and the shareholder dividends will be ongoing and debt reduction as we go along. So there's quite a bit of money on the screen, but remember, we -- if all goes well, we can produce ZAR 2 billion from our business. Then our debt is on the low side. So if we add our debt by another ZAR 3 billion or ZAR 4 billion, that gives us a good opportunity to capitalize on these opportunities on this slide. It's important always to sit back and saying, what value are we creating for the shareholders? What are we doing in the communities? What are we doing for our people? We don't forget that we have stakeholders that come from different sectors. So the dividend we've talked about, the share buyback, the growth in the share price, not something we manage. Well, that's what the market does for us. I've talked about achieving our black representation for the group at 73%. We've got 22% black DPs in our business. On the social side, it's been a very active year because of what's happened in our country with COVID and with what happened with the violence in KZN and Gauteng. We've contributed ZAR 47 million, but we continued with our library program. We've got 52 libraries now that we manage with our people, stocked by us, developed by us and managed by us and we've got -- we're benefiting 60,000 learners in the rural communities in and some other areas as well. The scholar patrol, we touched -- we've been 2,080 schools touching the lives of 1.8 million children. And obviously, we've dished out some reflective jackets as well. Something that's close to our heart as well is the health side of our people, and we've created 92 clinics, which are managed by people in the townships. We recruit them. We help them stock their businesses, their clinics. They operate normally out of containers. They have 350 staff, and they're doing 720,000 annual consultations. Now these people would have been waiting in queues either at our health care centers or in hospitals that can't cope. But today, if you have a slight flu or you have a running stomach, you can have a quick access in your township at one of our clinics. And then obviously, I've talked about the YES program and I've talked about the apprentices. Okay. So in the business world, it doesn't stand still. We finished June 2022, where do we go to for -- 2021, where do we go for 2022 and 2023? We've stabilized the business. We produced great results. And we've got a great platform now to continue building from this because we have the strong balance sheet, and we have great cash on our balance sheet that allows us to grow. We've scaled our business down in this new economic environment we find ourselves in. And we've done it in a very sustainable way, not only from a people point of view, but from all the other initiatives that we've got in play, our ESG, which is in the environment we operate in, social and governance point of view. We've done the scaling down in a very responsible way. So the platform we've created. The only analogy I can give you is that we're building the 20-story building. We were at 20 stories. We came down to 10, but the objective is now to get back to 20, but we have a very strong foundation that can take us into the next 5 years in the growth trajectory. Like I said, we delivered great results for this year, and we're committing to delivering stable operating and financial results to June 2022, but there is a caveat. What's the caveat? touch wood, we have no further stringent lockdowns. Those inventory shortages, if they continue at current levels, that shouldn't be a problem. If they get drastically worse, then obviously, that will be a problem. But at current levels, what we can see with what the cars we have on the water, the cars that have been shipped to us, we seem to be okay. And touch wood, if the social unrest in our country can remain at these levels where it happened, but we don't repeat these. I think we'll be in a very stronger position now. We will be in a strong position by next year this time and in 2023 when we will have a much more solid economy and a solid business that Motus has. I know it's early days. We've only had 1 month of trading. I know we've had the violence and the riots, but touch wood, we have -- we started well in our first month of trading. August seems to be going well as well. So all in all, we're in a comfortable space. And like I said, we've got strong balance sheet, strong foundation and strong cash to consider all the opportunities that come our way. Before I take any questions from people that are listening, we have our heartfelt condolences to the families and friends and colleagues. We've lost 27 employees, which is the highest in a year since I've been in this business for the last 17 years. 24 of these people have passed away from COVID. So you can see how serious COVID is for the country. It's serious in our businesses. It's serious in our working environments and it's very difficult because you work with people every day and tomorrow morning, we don't know who's coming back and who's not. So it's creating a lot of stress, emotional stress for our people as well, but very strong people, they're managing. A particular thank you to our 2 Board members, and Phumzile Langeni and Keneilwe Moloko, who resigned this year for other commitments. And then we had Janine Jefferies, who was the Company Secretary, has decided to leave South Africa. So she's overseas now, and we thank all 3 of them for their commitment and service to our group. But we don't sit still. So we welcome some people: Smit Crouse and Bridget Duker, who joined us as Board members as Non-Executive Directors. And then Ntando Simelane, who has joined us as Company Secretary and Legal Counsel. So all 3 of you, we wish you well, and thank you for joining us. And I'm sure you will be making great contributions to this great group. And at the end of the day, what's most important, we thank each one of our staff members, our ExCo members, our business unit leaders, our staff members in every division in South Africa, in Africa, in the U.K. and Australia and Asia, in Taiwan and Beijing. We thank our customers, our suppliers, our funders, that have made it possible for our customers to buy cars, our shareholders. And most importantly, we thank our Board members for providing guidance and leadership during these difficult times. We do get stress sometimes, but we've got a very levelheaded Board that keeps us on the straight and narrow to make sure that our emotions don't override our business decisions. And we thank each one of you guys for the support. And most importantly, we thank our staff and you, the funders and you, the shareholders, that allow us to do what we need to do. So thank you to each one of them. Thank you to Ockert for presenting with me and Justine for making these presentations possible, all the accounting people that pulled these numbers together, well done to you as well. And then we mustn't forget that [ Bastian ] has provided us a good platform to talk to you in a very professional environment, in a very smug boardroom with all the screens and the sound systems. So thank you to [ Bastian ] as well. So Justine, do you have any questions that we need to talk about today or has everyone fully understand our numbers?

Osman, there are a few questions that have come through. Also quite a few complements, which is pleasing. Okay. First off, what is Motus' strategy around car rental?

Okay. So if the only business Motus had was car rental, then we should look at closing it. But because we have a family and this family has 4 children, and they all mature at different times. So what car rental does, it feeds the importers because we take cars from importers, we put them into the car rental base. After a year, they go into and we sell them as preowned vehicles. After that, they continue coming to us for keeping our workshops and our parts business alive. So that's the one side of the business. The other side for the local OEMs, it helps us with our purchasing power with the local OEMs like Toyota, VW, BMW. So again, they create preowned vehicles. So COVID has hurt us. The business is at 50%. But with the integration that we have with the importing business, the retail business, the financial services business. And then ultimately, when they're going to be 6 years and 7 years older, they're going to start supporting the Aftermarket Parts business. The car rental industry feeds the whole family. So that doesn't mean if a child fails in 1 year, we take them out of school and we put them at home and we never send them to school again. No. What we do? We developed the child. We put tutors on the child. We develop it. And in 2 years' time, this business will be back to normal, feeding the family again. Other businesses may not do well, but this one will come back, and we're very confident with the integrated model, the infrastructure we have and the people we have that in 2 years' time, we'd have forgotten that we were at 50% of pre-COVID.

The next question is around the ratio of new to used. How do you see the sales ratio of new to used in the next financial year?

In the short term, the preowned will be taking priority because there's a bit -- there's a shortage of new vehicles. But under normal circumstances, like I said, we'll be at about 0.6, 0.7 preowned to 1. But I think by next year, we can hold on to 0.8, 0.9 preowned to new for 1 more year. And once we get the stock from new vehicles, then that will change. We'll get back to 0.7 preowned to new. So for this year, it will be similar, maybe slightly less. We had the benefit of car rental de-fleets this year, so we'll be missing a few cars. But that's not going to drop into 0.5. It's not going to keep it at 0.9, but we may be at about 0.8 preowned to 1 new car.

Next question. What were the main drivers of H2 international retail margin? And will these margins hold into the new financial year?

I think -- remember, this is 1 year, but we've been working hard in the U.K. and Australia to correct our businesses, rightsize them, close dealerships that are not profitable to all the hard work that was done in '19 and '20 came to bear in 2021. So it wasn't one magic thing or one magic number that made this business. It was a hard work of '19 and '20 that allowed us to operate with fewer staff, fewer sites, making sure that we sweat the assets. And yes, in 2021, there was some assistance from the government, for example, in the furlough and the JobKeeper fund and some of the rates rebate. But now when we don't have that, and we can get our business back to normal then we will replace some of the JobKeeper fund and the furlough money with our own profitability because in the U.K., they're fully operational. I mean, for those of you that talk to your friends and your colleagues, the U.K. is fully operational, back to normal. And we think that will continue for the next 12 and 18 months, 24 months. So that business will then -- whatever it will lose on the one, it will make up on the other. Australia, we're not going to make up all of it because, obviously, they're in lockdown. So when they get out of lockdown, we will recover some, but it will be difficult to replicate 2021 for Australia in 2022. But the U.K., we are a lot more confident. And remember, the U.K. is a much bigger business than Australia. The other monies that we hope -- that we will make in international is in Aftermarket Parts business. They're maturing quite nicely. China is doing well for us in terms of the product sourcing and delivering. So ALCO is doing quite well in Taiwan. So the international business will get there.

Next question is around the preowned volumes. Your preowned volumes were very strong in H2 despite prior concerns raised about stock availability. Do you expect these very good volumes to continue?

They won't continue in exactly the same numbers, but that doesn't mean they're going to drop from 100% to 50%. We will drop from 100% to about 80%. Generally as a rule of thumb, H2 is always better than H1 on preowned vehicles. So don't compare us now in H1 and say, but you halved your business. Compare the halves. Why does that happen? In the car rental industry, generally, you fleet up in H1, you de-fleet in H2. What happens to those de-fleets? They come into our preowned business, and we sell them there. So historically, H2 has been very strong for the preowned business because of the de-fleeting. And remember, the de-fleeting is not only about Europcar and Tempest de-fleeting, [indiscernible] our competitors de-fleet and they're de-fleeting our vehicles. So those vehicles come back to us in the dealership flows, and we sell them. So H2 was very strong because of the car rental de-fleets. We'll miss them in H1. But in H2, we'll get a few more, but not exactly at 100%, but we think at 80%, we should be able to carry the business through.

Ockert, some 2 questions coming through for you. Can you share further forward-looking views around the bank JVs return to profitability?

Yes. I think on the bank JVs, obviously, they run quite conservatively at banks in normal times. So I think that COVID layers that they had on top of the normal provisions would probably be something that will unwind itself in the next few years. So I think even in this current year, we'll probably start seeing that swing coming through. Obviously, if there's losses, you still need to get into that profit cycle, but we should see some profitability coming through in the next year.