Bronte Howson

AUSTRALIA’S biggest vehicle retailer, Automotive Holdings Group (AHG) Ltd, has posted yet another record for the past financial year, reporting revenue up 7.2 per cent to $5.63 billion despite the effects of a weak Western Australian economy.

Its 2015-2016 financials showed operating profit also hit a record, up 2.2 per cent to $97.2 million. The company will finish with a final half-year dividend of 13 cents a share, making a total of 22c per share fully-franked for the whole year.

The news coincided with AHG today announcing it had bought an Audi and Skoda dealership in Newcastle (see separate story) and news it had finalised the purchase of 100 per cent of online finance broker 360 Finance.

AHG managing director Bronte Howson, who is delivering the yearly report for the last time ahead of him stepping down as company head, called the result was “solid”.

“The automotive result is very pleasing considering the challenges of the Western Australian market and is testament to AHG’s strong operating model and growth strategy,” he said.

Revenue from AHG’s Automotive Retail division was up 10.6 per cent to $4.72 billion, with profit before tax up 11.3 per cent to $135.7 million.

History of sustained growth – Click to enlarge

Mr Howson said that strong trading performances from NSW, Victoria, Queensland and New Zealand more than offset the weaker market conditions in Western Australia.

“We have seen outstanding results from our operations in Sydney, Newcastle and Auckland and strong improvements in Melbourne and Brisbane,” he said.

“While new vehicle volumes were down in Western Australia it was pleasing to see strong growth from our used vehicle division, increasing organic volumes by 9.2 per cent.

Automotive – Operating Performance – Click to enlarge

“This was mainly attributable to the introduction of the easyauto123 fixed-price warehouse model which will be further rolled out throughout Australia in the current financial year.

“During the year we have completed a number of attractive acquisitions that will continue to support our growth strategy.

“It was also exciting to have expanded our prestige portfolio by acquiring Mercedes-Benz in Western Australia, Jaguar Land Rover in Melbourne and the announcement today of Audi in Newcastle.”

AHG’s Refrigerated Logistics division reported a revenue of $580.4 million, down 4.7 per cent on the previous financial year while profit before tax was down 59.6 per cent to $8.2 million.

Mr Howson said: “The Refrigerated Logistics result is disappointing, however we are well advanced with our planned restructuring activities and are determined to deliver shareholder value”.

The company said it is now implementing a “substantial transformation program” to address the slide.

In its statement to the Australian Stock Exchange, AHG said the fall in the Refrigerated Logistics division were attributed to a reduction in volumes from the east coast to WA because of the slowdown in mining.

Blame was also put on “changes to the supermarket retail model with entry of new competitors placing pressure on margins and increased volumes of imported goods direct to port of consumption”.

National sales of new vehicles remain strong outside WA – Click to enlarge

“The revenue performance and margins delivered by the Refrigerated Logistics division in the period are disappointing, and the AHG board is focused on taking the steps necessary to realise the value in this division for shareholders,” the statement said.

“With this in mind a substantial transformation program is being implemented to improve operational performance and financial returns.

“The business is in the process of a substantial program to upgrade technology platforms, leverage operational efficiencies, drive productivity and cost outs.

“We have in place a clear plan to achieve these objectives which will improve our operating performance and financial returns, whilst remaining focused on business development to grow revenue in the (current) 2017 financial year.”

Mr Howson said the expected improvements would “create a market leading refrigerated logistics business in Australia that is well positioned in the Asian food bowl”.

AHG’s Other Logistics division saw revenues fall by 12.2 per cent to $320.5 million, with profit before tax down 7.5 per cent to $4.9 million.

Mr Howson said contributing factors were a weaker Australian dollar that eroded the 12 per cent sales gains made by motorcycle importer KTM.

The Genuine Truck Bodies business improved from a loss-making position in 2015 to breaking even in 2016 with a strong order book supported by a recent contract for the delivery of 500 truck bodies.

“It was pleasing to complete the divestment of the Covs business during the year which will allow us to focus on the continuing operations and their ongoing improvement,” Mr Howson said.

By Neil Dowling