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GIANT Australian vehicle logistics company Autocare Services has stunned the automotive industry by announcing it has been placed in voluntary administration after being hit by the chronology of falling vehicle sales, slow vehicle movements caused by COVID-19, and increased operating costs.

Administrators from FTI Consulting were called in today and, responding to questions, said it was “too early” to gauge the extent of the problem or the outcome, though it said it aimed for a “restructure” to “maximise the chances” of coming out of administration “in a sustainable position”.

Over the past few years Autocare Services has handled the vehicle logistics accounting for about 50 per cent of the vehicles imported into Australian and their forwarding on to dealerships.  Its clients include Toyota and Hyundai. It also operates a customisation assembly line for Toyota HiLux in Port Melbourne.

The 60-year-old Autocare Services is majority owned by LINX Cargo Care Group with a smaller 20 per cent shareholder. LINX is owned by Canadian-based Brookfield Asset Management. It is understood Autocare Services was working to update legacy systems that left them exposed to a downturn in volumes but the COVID-19 impact on imports and dealer deliveries proved too much.

Administrators FTI said it would be a case of “business as usual” through the administration process and said OEMs and dealerships and other customers would not be affected.

They said they would “conduct an independent assessment of the financial position and ongoing viability of Autocare Services” and would “work with management and staff in continuing to trade the business while the review takes place.”

“We will undertake an independent assessment of the financial position and ongoing viability of the company and its business operations,” said the administrators in a statement. The voluntary administrators are Christopher Hill, Joseph Hansell and Ross Blakeley of FTI Consulting.

“As administrators, we will act independently at all times, and we will work with Autocare Services management and staff in continuing to operate the business.”

They said they would provide a high-level update at a creditors meeting expected in March 2021.

According to The Australian newspaper, the company’s auditors Deloitte raised concerns about the financial stability of the company last year as revenue declined 10 per cent to $215.7m in the year to the end of December 2019. Losses grew from $8.1m in 2018 to $46.76m in 2019.

According to its 2019 financial statement lodged with ASIC, Autocare Services received a letter of support from LINX confirming it would not seek early repayment of any related party loans. LINX also had offered access to additional cash through a working capital facility.

The financial statement said the COVID-19 pandemic had had a negative impact on the transport and processing operations of the company.

Autocare is Australia’s biggest provider of on-wharf and off-wharf pre-delivery inspection facilities and prior to COVID, processed more than 500,000 vehicles a year.

In its company website, it said it handles more than one-million vehicle movements a year and has storage capacity around Australia for in excess of 80,000 vehicles. It has nine depots in Australia.

Autocare Services has about 600 employees working at 20 sites in Australia.

The company said that it has “been exposed to the automotive industry market downturn for three consecutive years now and vehicle volumes are not forecast to return to levels that can sustain the business in its current structure.”

“Despite slight increases in sales in November and December 2020, Australia’s new vehicle market continues to remain depressed.

“Since a record year in 2017, there has been a sustained decline driven by weakening economic conditions, shifting market and supply chain requirements and changing consumer preferences.

“This decline along with the impacts of COVID-19 has seen a 22.9 per cent fall in new car sales since 2017. In 2020 alone, results were down 13.7 per cent on calendar year 2019.”

LINX Cargo Care Group CEO Anthony Jones said Autocare continues to be “significantly impacted by the vehicle logistics market decline across the business’ portfolio of processing, storage and transport services.”

“Autocare Services has been working closely with its customers, and the wider supply chain, to evolve the business in alignment with the changing market conditions however, the material movement and volatility has been heightened by the ongoing COVID-19 pandemic,” Mr Jones said.

“Voluntary administration can provide Autocare Services with a pathway for the tough, but necessary, change it needs for the evolution of its business model to keep delivering services valued by customers today, and into the future, to the Australian automotive industry,” he said in a statement.

Mr Jones said LINX Cargo Care Group values Autocare Services as part of its wider group portfolio and is hopeful for the future of the business post the administration process.

“The appointment of an administrator is an unsettling time for our people, customers and stakeholders, for both Autocare Services and LINX Cargo Care Group, however we are confident in this process as the best chance for a profitable and sustainable Autocare Services on the other side,” he said.

“Importantly, Autocare Services’ current financial difficulties are not indicative or reflective of wider financial instability for LINX Cargo Care Group.

“As an operating group, LINX Cargo Care Group remains unaffected by the appointment of voluntary administrators to Autocare Services and is in a sound financial position with the strong support of our shareholders and financiers.”

By Neil Dowling

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