Eagers humming along on all cylinders

Company News

by Glenn Dyer

Earlier this week Peter Warren Automotive revealed the boom for new and used car companies continued in the final half of 2022 even as the supply chain shortages eased and more models became available.

On Thursday, the sector’s major player Eagers Automotive (ASX:APE) confirmed the continuing longevity of the boom saying there’s more to come as the transition to electric vehicles takes over.

Eagers is the country’s biggest car dealership group with around 11% of the market, and not only is it dominating the conventional car business but said on Thursday that it will be a leader in the transition to EVs through more affordable brands, led by Chinese giant BYD and its fleet of EVs.

The Company delivered a Statutory Profit Before Tax of $442.2 million for the 12 months to December, down from $456.8 million in 2021 and a record Underlying Operating Profit Before Tax of $405.2 million, up from just over $401 million.

The statutory before tax result included $37 million of net income before tax, predominately relating to the profit on the sale of Bill Buckle Auto Group in Sydney last year.

Revenue dipped to $8.541 billion for the year from $8.663 billion in 2021.

Eagers will pay a record final dividend of 49 cents per share, up from 42.5 cents a year earlier and taking the total for the year to a record 71 cents per share. That was up 13.6% on 2021’s 62.5 cents per share (excluding the special dividend of 8.4 cents per share).

The result was well-liked by investors who sent the shares up nearly 9% to $13 at Thursday’s close.

In Thursday’s statement CEO Keith Thornton said Eagers’ record 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% 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.

“The industry is at an inflection point and Eagers Automotive is uniquely positioned to capitalise on its scale and expertise while leading the generational shift towards a lower emission future.”

Sales and orders were boosted by two acquisitions in 2022 – the ACT and Newspot (South Australia) multi-franchised dealership groups and associated property acquisitions were integrated into the Eagers operation.

And Eagers said it set new up strategic partnerships with existing carmakers and new entrants to ensure it is “best placed to lead the industry transition in the high growth new energy and low emission vehicle market.”

In June 2022, the Company announced an on-market share buy-back of up to 10% of issued capital. By the end of December, the company had bought back 1.5 million shares, representing 0.6% of shares on issue at the time of the buy-back announcement.

The company available liquidity of $611 million at December 31.

Looking to the new financial year Eagers’ directors said the company had started “with a very strong foundation for the year ahead. 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.”

“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.”

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