Martin Ward

AUSTRALIAN automotive retailer AP Eagers has confirmed its 2017 full-year financial results were off the mark and battered by an extraordinary $5.2 million write-off that clipped four per cent of its net profit compared with a record 2016 result.

In announcing the results yesterday, AP Eagers’ managing director and CEO Martin Ward said the extraordinary items included restructuring “underperforming and unsustainable businesses” but said future results would bear the fruit of the decline.

The company reported a profit before tax of $135.6 million, down four per cent on 2016, on revenue of $4.06 billion, up six per cent on 2016.

The core earner for the retailer, Australia’s second biggest after Automotive Holdings Group Ltd, remains new cars. But even though sales were up, the contribution made to the year’s earnings was down.

In 2017, car sales represented $84.4 million while in 2016, it contributed $104.6 million. Mr Ward said the results were affected by the restructuring of seven operations that were not performing to expectations.

In addition to the $5.2 million of restructuring costs associated with businesses, there was an additional $4.5 million of trading losses put down against businesses in which AP Eagers had exited.

The result would be the removal of $9.7 million from the car operations in 2018.

Mr Ward said the company reported record car sales in Victoria and Tasmania, and in NSW’s Hunter Valley region, but “challenging market conditions” trimmed sales in South Australia and its primary market, Queensland.

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The results partially echo the new-car sales in the respective states, with 2017’s overall automotive market showing a four per cent increase in Victoria, one per cent lift in South Australia and a 0.1 per cent slide in NSW.

Overall, new-car sales results were up 2.1 per cent to 60,249 units compared with the company’s 2016 figures. Queensland reported the bulk of new-car sales again, 44 per cent of the total car sales recorded by AP Eagers in 2017.

This was followed by NSW (21 per cent) and South Australia (17 per cent).

Used-car sales inched forward by 0.7 per cent in the same period, with Queensland the best-performing state followed by South Australia. It sold just over 24,000 used cars in 2017.

While cars were stable, Mr Ward said trucks posted record sales for the company with the segment contributing $9 million to the company’s revenue, compared with $6.3 million in 2016.

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During the year, AP Eagers sold off its Sydney Truck Centre and announced that the move had improved the return on assets.

In other divisions, the company’s property arm sold off non-core properties and received $31 million while, at the same time, adding two new properties to the portfolio.

AP Eagers had bought vacant land at Breakfast Creek, Brisbane, for future car operations, and in Dalby in Queensland. During 2017 it had also built and opened its new Jaguar Land Rover dealership at Newstead in Brisbane.

The investment portfolio held by AP Eagers in rival AHG was valued at $287.4 million at the end of December 2017, down $22.9 million on the stock held at the end of 2016. During the year, AP Eagers increased its shareholding in AHG by 12.65 million shares bought at a cost of $48.5 million. It has also added shares this financial year.

AHG dividends paid to AP Eagers were, however, up. The company received $14.43 million in dividends for 2017.

By Neil Dowling

AP Eagers