Sophie Moore

AP EAGERS Ltd, fresh from confirming its 2016 annual results that showed an 18.1 per cent rise in revenue to $3.83 billion, will expand its Carzoos concept and rationalise its warehouse assets through 2017.

In announcing the results at the annual general meeting, AP Eagers CEO and managing director Martin Ward said the increase was attributable to the acquisitions made in 2016 including expansions into new territories.

New dealership acquisitions and strong trading conditions in NSW spurred revenue and led to the year’s net profit after tax figure lifting 16.4 per cent to $103.98 million.

Mr Ward previously said major acquisitions were not on the cards in the immediate future – after a busy buying year in 2016 – but there would be steps taken to improve efficiency.

AP Eagers director and chief financial officer, Sophie Moore, told GoAutoNews Premium that one of those efficiencies would be an expansion of the company’s main parts warehouse in the Brisbane suburb of Pinkenba.

Martin Ward

The company took a lease on part of the logistics complex in 2015 and will increase floor area as it moves stock from another warehouse that will be closed. The plan, Ms Moore said, was to rationalise the logistics division to reduce costs and improve stock delivery and control.

AP Eagers has fitted out Pinkenba with a million-dollar-plus conveyor and computerised storage system that fully automates the warehouse process. The cutting-edge technology reduces staff numbers, but more importantly is more efficient because computers load and retrieve stock based on vacant storage space, not storage location.

Ms Moore also said AP Eagers this year plans to increase its innovative shopping centre-based used-car Carzoos product. She said the plan was to add “two or three” sites this year but the locations are yet to be made public.

Ap Eagers and AHG report

The company last year opened two of its new Carzoos shopping centre-based used-car outlets – one each in the north and southern suburbs of Brisbane – and linked these to its new finance initiative, Simplr.

Asked why AP Eagers’ share price had slipped towards the end of 2016 (it is now $8.39, down from December 2016 at $9.22) Ms Moore said it was partly attributed to the erratic movements of the stock market, and more the result of continued investor wariness of the effects of the ASIC review into the finance and insurance structures of the automotive industry.

In announcing the 2016 results at the annual general meeting, Mr Ward said 2016 represented the first time that the company had expanded into Melbourne, Tasmania, Toowoomba, Hervey Bay and Townsville.

It was also the first time it had a franchise relationship with Mercedes-Benz coming after dealership purchases in Doncaster and Ringwood (Victoria) and Toowoomba (Queensland).\

“The disciplined integration of these acquisitions has created earnings growth during 2016 and … further growth for 2017 as the full operational benefits are extracted from these acquisitions,” he said.

Changes were made to its home ground with its Fortitude Valley site being reduced as the company moved its Volkswagen and Jaguar Land Rover franchises into new premises in Newstead.

Mr Ward said the car retail segment lifted on the strength of the NSW market and results of its 2016 acquisitions, but also from returns in service departments “with the focus on service retention, transactional margins and workshop efficiency all driving a record service result”.

An even better result was shown by the truck retail segment. The annual report spells out a “significantly improved profit performance” of its truck business with a $6.3 million profit compared with a $3.2 million loss – affected by a write down – in 2015.

The truck revenue for calendar 2016 was up 5.4 per cent with major contributors being in used trucks and the service division.

For the 2017 outlook, Mr Ward said “the national new-vehicle market continues to grow with low interest rates supporting customer affordability and exceptional product offerings driving customer demand”.

The key focus areas for 2017 as listed by AP Eagers are:

• Delivering further earnings per share growth from the Birrell Group, Crampton Automotive Group and Tony Ireland Group acquisitions.
• Implementing appropriate operational changes in response to any announcement by ASIC regarding regulatory rule changes for finance and insurance. We expect an 18-month lead time.
• The ongoing development and optimisation of our existing used-car business model now re-launched and branded Zooper
• The further expansion of the all-new Carzoos and Simplr business model following the opening of two shopping centre stores in 2016
• Continued redevelopment and reorganisation of inner-city Brisbane facilities (Newstead, Woolloongabba and Windsor) to provide improved long-term solutions to all stakeholders.
• Further rationalisation of our parts business to reduce the cost base, improve efficiency and eliminate sub-economic business trading terms
• A renewed focus on all business processes to deliver the optimal operating cost, and
• Earnings accretive dealership and ancillary market acquisitions.

The 2016 performance pushed up earnings per share to 55.4 cents, up from 47.6 cents per share in 2014, and has resulted in the company declaring a dividend of 22 cents a share for the second half. Added to the 13 cents per share paid in October, shareholders will receive 35 cents per share fully franked, up from 32 cents per share paid for the 2014 year.

By Neil Dowling