Colonial hails ‘sound result’

The Colonial Motor Company Limited has announced a trading profit before tax of $20.9 million for the first half of the current financial year, which is the second highest on record for the business.

The total for the six months ended December 31, 2022, was below the $26.5m in the comparative period of 2021 but ahead of the $18.2m achieved in 2020.

Ash Waugh, chairman, says reported total revenue for the half year of $501m was down 6.5 per cent from a year earlier but up 14.4 per cent from the final six months of 2020. 

Colonial’s trading profit after tax also slipped to $14.2m in the latest half year, down from $18m in the same spell of 2021. Waugh notes the six months to the end of December 2021 had been a record across all measures of revenue and profit.

“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,” explains Waugh, pictured.

“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.”

He notes 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 inquiries and increased business costs. 

Property developments

In relation to property, 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 Mazda brand refresh for South Auckland Mazda and Dunedin City Mazda is due to get under way this year, and a rebuild of the Fagan Motors showroom and of Agricentre’s tractor dealership in Gore are nearing their start dates. 

Colonial has also purchased a substantial property in Palmerston North, which it plans to develop as a long-term investment to expand and future proof the company’s heavy commercial business in the region.

Outlook

Waugh says in Colonial’s half-year report, which was released on February 22, that uncertainty is the constant keyword heading into the second half of the financial year

“While sales of popular vehicle models are expected to stay robust in the third quarter, the lag effect from lower levels of customer enquiry is anticipated to have a greater impact by the fourth quarter.”

He notes 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. 

The lead-up to the 2023 general election may also result in customers deferring major purchase decisions until a degree of certainty resumes.

Waugh says the government’s clean car legislation continues to drive demand for electric vehicles, with such models playing an increasingly dominant role in the passenger and SUV segments.

Colonial reports it has an array of new and electrified products coming to market across brands it partners with. 

“The combination of great staff, investment in facilities and new products positions the company well to succeed,” adds Waugh. 

“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.”

The board has declared a fully imputed interim dividend of 15 cents per share.