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THE nation’s biggest car retailer has posted a strong $218.6 million pre-tax profit for the first half of 2021, up a massive 82 per cent on the same period in 2020.

Eagers Automotive Ltd posted the profit on a massive $4.7 billion of revenue (up 11.6 per cent or $544.2 million) received during the first half of 2020. 

Shareholders will be delighted with a 20 cent per share dividend for the six months, boosted by an extra 8.4c/share on the sale of the Daimler truck retail business, to make a commendable 28.4c/share return in the half-year.

They are likely to be even more delighted by the future. 

Eagers’ result is more than just large numbers as the financial statements shown at an investor presentation subtly shows substantial changes to the focus of the company and an eye to detail that are targeted to bring permanent cost savings.

Notably, it has dramatically increased its return on sales (ROS) – a measure of operational efficiency that Eagers said averaged a positive 3.0 per cent from the 2013 financial year through to FY2020.

The company has moved upward from the 3.7 per cent in FY 2015 before plunging to 1.7 per cent in the middle of 2019 and then soaring to 4.7 per cent in the past half year.

Importantly, Eagers said 1.1 percentage points of that 4.7 per cent or almost 25 per cent has been attributed to cost savings from restructuring the operations.

This saving is now embedded in Eagers’ operations and is expected to continue to be a major contribution to ongoing future profits.

It divested itself of $56 million of property that it concluded it no longer needed. In the past half year alone, it saved $2 million on rent and then spent $110 million to buy back properties it previously leased. 

It now holds a $409 million property portfolio, a rise of $53 million compared with 2020. These are dealership sites that it will no longer have to rent.

The important message within Eagers’ financials is that it has softly changed focus from new cars to used cars, believing that pre-owned vehicles are the core of the near future of the company’s success.

It has promoted its easyauto123 used-car ‘warehouse’ concept that it adopted from its takeover of Australia’s former number two car retailer, Automotive Holdings Group Ltd (AHG).

At the same time, the long-standing Eagers (then AP Eagers) was pushing for shopping centre used-car customer centres under the Carzoos name. 

That name has now disappeared. The focus is on easyauto123. Eagers says that within 18 months it will have 11 easyauto123 outlets, including four in NZ.

It sees strength in the used-car market as it performs an underlying, modest pull back from reliance on new-car sales.

That could be attributed to the delays in new-car deliveries because of the global impact of COVID-19 and the cascade effects of trying to sell into a lockdown environment. 

On the upside, customer demand for new cars continued while unsated buyers switched to the used-car market with dramatic rises in used prices.

Its used-car division, made up of easyauto123 and Carlins auction house, has shown a profit growth of $20 million in three years from a $5 million loss in 2019 to a $15 million profit this year.

Under its ‘engage our customers, everywhere’ mantra, it has opened Automall West Service and Albion Multi-Brand Service Centre in Brisbane which will support the Automall complex now finalising construction at the city’s airport.

The presentation showed that efficiencies were driven from features including its online finance products that aimed at rapid approvals; partnerships with finance providers including St George, Toyota, Mercedes-Benz, Nissan and Volkswagen; and further use of online assets including online service bookings, online service approval and payment for services by SMS.

In its outlook, Eagers said it would continue to restructure its property portfolio and buy the sites occupied by its dealerships; invest in new technology; review consolidation techniques under its Next 100 program; continue to drive up its finance penetration; and boost shareholder value through the growth of easyauto123.

By Neil Dowling

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