EAGERS Automotive has pointed to its vehicle order book as being a key, not only to helping it achieve its record profit before tax of $405.2 million for 2022, but as a strong financial stream that will continue for at least another two years.

In his address to shareholders, Eagers’ CEO Keith Thornton said the unusual trading events of the past two years and the on-going difference between demand and supply “continued to build our order book.”

“This order book is at record levels across the business, increasing in size every month since the middle of 2020 and by more than 74 per cent in 2022 on 2021 levels,” he told shareholders

“This order book provides a minimum two-year run off period and will help support on-going strong margins and act as a hedge against any economic headwinds.”

Mr Thonton said that the significance of Eagers’ order book “cannot be overstated.”

“It is a key differentiator against other consumer discretionary companies that Eagers Automotive is sometimes compared to but which face more immediate impacts from tightening general economic conditions,” he said.

He also warned that new-vehicle supply continued to be impacted by a shortage of components including semiconductors to varying degrees across most OEM partners, while the on-set of the conflict in Ukraine further exacerbated supply limitations.

“Continuing COVID-related disruptions to global shipping and logistics channels and further extended lockdowns in China also added to an extremely uncertain supply environment,” he said.

“While supply remained constrained, consumer demand for new and used vehicles remained strong, with monthly average order-write across the period improving even further on the strong 2021 levels.”

He said that the strong demand embedded in the order book was supplemented by “a very significant generational shift towards lower emission vehicles.”

“The shift is supported by government incentives, mandated by ESG demands on fleets and driven by evolving consumer preferences,” he said.

“This dynamic will continue over the coming decade and we believe will only gain momentum in the foreseeable future.”

Eagers says it has capitalised on the market shift to electrified vehicles from ICE vehicles.

Mr Thornton said the company had been proactive in positioning the business “to play a leading role in the transition to a lower emission future.”

“We have deliberately and uniquely positioned the company to support our customers and OEM partners, both existing and new, to capitalise on this incredible market shift.”

He said this was particularly in the affordable NEV or ‘new energy vehicle’ segment, which includes both battery-electric vehicle (BEV) and plug-in hybrid electric vehicle (PHEV) categories.

Eagers has the exclusive national retail business of pure-electric car brand BYD as well as franchises for other brands with pure-electric models including Hyundai, Kia, Lexus, MG, Mercedes-Benz, Nissan, Porsche and Volvo.

“We continue to make progress with our plans uniquely positioning the company to deliver on this generational opportunity for our shareholders,” he said.

As an outlook, Mr Thornton said that for the remainder of this year, the company was “encouraged by the pipeline of stock expected to be delivered by major partners as well as the general easing of supply constraints.”

“When combined with the strong margin environment which is underpinned by a multi-year run off period from our order bank, disciplined cost management, clear strategic plans and expected revenue growth, we remain confident 2023 will be another solid year for our company,” he said.

“We remain very confident that our business structure, scale and strategy, combined with the strength of our balance sheet provides the company with the capacity and flexibility to pursue accretive growth opportunities while mitigating against economic headwinds.
“Our aim is to continue to balance growth with profitability, investing carefully in the future of automotive retail, while continuing to produce strong and sustainable annual returns.”

By Neil Dowling