Tiger Auto Mauls a 19 Per Cent Headline Earnings Increase

Tiger Automotive has thrived since its unbundling from Tiger wheels last December, and the company’s latest financial bear testimony to the wheel and tyre distributor’s good health. Tiger Automotive reports that in its first full year as a company listed with South Africa’s JSE stock exchange in its own right, it has achieved a 19 per cent increase in headline earnings, to Rs 1.242 (£0.085) a share. Revenue has risen 17.3 per cent to Rs 1.1 billion (£75.3 million). The company reports that these results counter the typical pattern of lower earnings in the second half. At the half-year stage, headline earnings were 15.2 per cent up at Rs 0.61 (£0.042), and the forecast was for a slight increase in full-year earnings.

“This pleasing rise in earnings was achieved because we were able to rectify – although not completely – problems that impacted on the first half,” said group managing director Keith Rivers.

Pre-tax profit (for the year to 30 June) increased 15.5 per cent to Rs 101.3-million (£6.9 million), while attributable profit was up by almost Rs 10 million to Rs 73.7 million (£5.04 million). In lieu of an annual dividend, the company is making a capital distribution of Rs 0.49 (£0.03) a share.

Global sales of the company’s TSW aftermarket wheels maintained market share year-on-year in what the company has described as a “tough trading environment.” Rivers said the earnings increase for the year reflects the benefits – which came through in the second half – of improved deliveries from key supplier Yokohama Rubber Company, the resumption of normal supplies of the Runway budget tyre line from China, and the retraction by the South African Revenue Service of what Tiger Automotive called the “discriminatory” 16.5 per cent anti-dumping duty imposed on certain imported Chinese tyres.

These factors have enabled Tiger Automotive’s wholesale business to budget on an improved performance in the coming (2008) year.

According to Rivers, the picture at YHPT in the UK has been different, with supply problems involving the Japanese tyre manufacturer persisting. “This caused a dragdown on operational income in the 50.8 per cent owned subsidiary in the UK and prevented us from achieving an even better earnings increase.

“The growth in Tiger Automotive’s operating income for the year, at 12.7 per cent, was also impacted by a few other abnormal items – such as forex losses caused by the cancellation of forward exchange contracts on tyres not delivered, relocation costs incurred by the South African wholesale business, and the increase in new retail store start-up expenses.”

Looking ahead, Rivers says he is “optimistic” that Tiger Automotive’s “average historical rate of growth in earnings can be maintained or improved upon” – this confidence is based on the significant increase in the Southern African vehicle population over the last three years and the company’s plans to slightly increase the rate of new store developments, although he has expressed caution about the impact of the high cost of new retail sites and store developments. At present 52 Tiger Wheel & Tyre stores – 35 company owned and 17 franchised – are open for business, and the company is committed to opening two new stores in the first half of next year.

Rivers says the firm’s budgeted capex of Rs 51 million (£3.49 million) in the coming year includes Rs 44 million (£3.01 million) for the acquisition of new and existing leased properties.