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STRONG demand for new and used cars and new strategic alliances have boosted the profit of Australia’s biggest car retailer, Eagers Automotive, with a record financial performance posted for the 2022 calendar year.

Eagers delivered a statutory profit before tax for the 12 months of $442.2 million (down from $456.8 in 2021) and a record underlying operating profit before tax of $405.2 million, up from $401.8 million in 2021.

The company said that the higher statutory result was attributed to “significant items” of $37.0 million net income before tax, mostly on the sale of Bill Buckle Auto Group.

In its report to the Australian Securities Exchange (ASX), Eagers attributed its performance to the continued demand for vehicles; an ongoing focus on technology to boost return on sales; strategic partnerships (such as the exclusive retail deal with BYD); and the successful acquisition and integration of the ACT (formerly owned by Nick Politis) and South Australia (Newspot) multi-franchised dealership groups.

Eagers will pay a record dividend with the fully franked, ordinary final dividend of 49 cents per share up 15.3 per cent on FY21 (42.5c/share). 

Keith Thornton

It said that the total ordinary dividend based on 2022 earnings was a record 71c/share, up 13.6 per cent on 2021 (62.5c/share excluding the special dividend of 8.4c/share). 

Eagers Automotive CEO Keith Thornton said: “Our record full year underlying profit reflects the strength of ongoing market dynamics combined with our reset and more productive operating platform, while our record dividend underlines the confidence the board has in our outlook for 2023 and beyond.

“Our new car order bank grew by 74 per cent in 2022, representing an all-time record level with an extended run-off period and providing material embedded gross profit that will support future trading results.”

Mr Thornton said that the automotive industry “is at an inflection point” and that Eagers was “uniquely positioned to capitalise on its scale and expertise while leading the generational shift towards a lower emission future.” 

Eagers noted that market demand was continuing to materially outstrip deliveries, leading to further order book growth that provided a strong foundation into 2023 and beyond.

“Delivery of new automotive retail formats, such as AutoMall West in Brisbane and the continued focus on building Australia’s largest national fixed price pre-owned business, easyauto123, saw revenue increase by 25 per cent and total volume up by 20.3 per cent,” the company said in its report to the ASX.

It said that the strategic partnerships established with existing OEMs – such as the exclusive, nationwide retail agreement with Chinese brand BYD – and new entrants would ensure that Eagers was better placed “to lead the industry transition in the high growth new energy and low-emission vehicle market.”

In examining the financial position, the company said it was holding a substantial property portfolio and asset base that combined with $631.1 million of available liquidity (at December 31, 2022).

“During the period the company acquired a further $148.3 million of property via the prudent and disciplined allocation of capital to invest in strategic property assets,” it said.

“The total value of owned property at December 31, 2022 was $607.6 million (up from $448.3 million at December 31, 2021 excluding assets held for sale).

“In June 2022, the company announced its intention to conduct an on-market share buy-back of up to 10 per cent of issued share capital. 

“To December 31, 2022, the company bought back 1.5 million shares, representing 0.6 per cent of shares on issue at the time of the buy-back announcement.

“The buy-back reflects the board’s prudent focus on active capital management and is testament to the company’s strong balance sheet and record available liquidity.”

Mr Thornton said Eagers had started 2023 with a strong foundation.

“Demand for new vehicles continues to outstrip supply as we transition to a new normal under which the industry operates with a sustainable order bank,” he said.

“While we continue to closely monitor the macroeconomic environment, the company remains in a very strong financial position and has a record order bank with a significant run-off period. 

“We will continue to manage costs closely, driving productivity improvements across the business and leveraging the robust platform built over recent years to underpin a sustainable strong return on sales.”

He said that in 2023 and beyond, Eagers was focused on key initiatives to deliver earnings growth to its shareholders. These were:

  • Delivering top line revenue growth associated with the investments, new strategic partnerships and greenfield opportunities established during FY22.
  • Maintaining our sustainable strong return on sales by leveraging new and existing margin levers, combined with cost base discipline and deliberate productivity improvements.
  • Playing a leading role in the transition to new energy and low emission vehicles through our unique strategic partnerships and leveraging our scale and retail expertise in the Australian market.
  • Continuing disciplined review of accretive and strategic M&A opportunities consistent with our Next100 Strategy as well as leveraging existing and new partnerships to create a distinct market advantage.

By Neil Dowling

AdTorque Edge