Weak car sales fail to dent big retailer profits

AUSTRALIA'S biggest car retailer, Automotive Holdings Group Ltd (AHG), and major east coast retailer AP Eagers Ltd this week chalked up record profits, with both companies pointing to used-car sales as one of the key reasons for the buoyant results.

AHG this week posted a record profit and revenue statement for the full 2014-15 financial year, while the report for the final six months revealed after-tax profit that was up 20 per cent to $94.2 million on a 10.8 per cent boost in revenue to $5.2 billion.

The final dividend is 13 cents a share fully franked, taking the year’s dividend to 22c a share.

AHG managing director Bronte Howson said the result underlined the company’s growth strategy and noted the contribution from the recently acquired Bradstreet Motor Group in New South Wales.

“In addition to an outstanding result in NSW, we’ve also recorded improved performances in Queensland, Victoria and New Zealand, while the WA businesses continued to outperform the broader market in the face of the acknowledged downturn in the mining and resources sector,” Mr Howson said.

AHG also bought Paceway Mitsubishi (Perth), Leo Muller Chrysler/Jeep/Dodge (Brisbane), and Diesel and Westpoint Star Mercedes-Benz (Perth) in the past financial year.

Meanwhile, AP Eagers today announced its full calendar-year 2014 results, also showing record returns. Its revenue jumped 19 per cent to $1.64 billion and profit after tax was $44.1 million, up 32.2 per cent.

AP Eagers issued a fully-franked interim dividend of 12c a share, up from 9c a share.

Eagers said dealership acquisitions and increased used vehicle volumes lifted returns, along with a full year of dividends from AHG (it owns 19.9 per cent of AHG stock) which contributed $12.2 million, and insurance claim proceeds of $19.5 million from the November 2014 Brisbane hail storm.

But it said truck sales and contributions from its South Australian division were down.

“The National Truck division (Truck Retail segment) recorded a poor result providing a profit contribution of $3.5 million in 2014 compared to $8.4 million in 2013, the decrease due to significant used truck trading losses,” it said in its statement to the Australian Stock Exchange.

“The new heavy truck market shrunk by 1.2 per cent (VFACTS) compared to 2013, and substantial price pressure on new and used trucks was evident.”

But AP Eagers is optimistic about the future. It stated that though “less favourable” exchange rates are affecting some vehicle imports, and consumer and business confidence were “challenges”, it believes the historically low interest rate levels and the high quality and value of new-vehicle products would increase future profits.

“Overall new vehicle sales are expected to remain stable on 2014 levels allowing sufficient opportunity for quality operators,” it said.

In July 2014, AP Eagers bought the Ian Boettcher Motor Group in Ipswich, Queensland which has franchises for Mazda, Nissan, Volkswagen, Suzuki and Proton.

It added the Craig Black Group in October, which operates in south-west and central Queensland representing Toyota, Hyundai, Volkswagen, Mitsubishi and Great Wall.

“Combined, these groups will increase annual group sales by approximately 15 per cent,” it said.

“Additional Subaru brand representation at Reynella, South Australia and Kedron, Queensland was established during the year, as was a Volvo representation on the Sunshine Coast.”

It also had a full-year return from its 2013 purchase of the Main North and Unley Nissan-Renault business that it said had “exceeded our expectations”.