AP Eagers dealt first ‘strike’ over exec pay

Anger over AP Eagers’ performance and share price sparked AGM protest votes over remuneration and board re-elections.

AP Eagers CEO Martin Ward. Picture: Mark Cranitch.

AP Eagers has received a “first strike” for its executive remuneration report, amid investor anger over impairments and other issues that helped drive the car dealer to a loss.

Some directors up for re-election at Wednesday’s annual meeting were also hit with strong “no” votes.

Investor anger was stoked by almost $250 million in impairments in 2019 that forced the company to post a $80.5m loss, and by a collapsing share price and back payments for underpaid wages.

AP Eagers reported from its AGM that the non-binding vote on the adoption of its remuneration report totalled 30.58 per cent for “no” and support of 69.42 per cent.

This generated a “first strike” for AP Eagers. A second strike at next year’s AGM would trigger a spill of the board.

Some directors up for re-election also were the target of investor anger, with high “no” votes against the re-election of Sophie Moore (18.56 per cent against), Michelle Prater (15.32 per cent against) and Marcus Birrell (9.51 per cent against).

Last year AP Eagers, the nation’s biggest car dealer, slumped to a full-year net loss of $80.5 million, from a profit of $97.5m in calendar year 2018, following of $244.9m in impairments, acquisition and integration costs and the back payments of wages.

The dip into the red also came at a time of difficult trading conditions for the car market, combined with more stringent credit conditions and subdued consumer confidence.

Earlier, AP Eagers told shareholders it did not expect any changes in its financial performance for the June half, forecasting a 23.6 per cent decline in first half underlying profit on continuing operations of $40.3m.

This was viewed as a “resilient” performance given volatility and the impact of the coronavirus pandemic.

Chief executive Martin Ward told the AGM that operational initiatives and other cash management strategies had helped to fortify liquidity and further strengthen the group’s balance sheet during the pandemic.

AP Eagers was also focused on cost-cutting and operational transformation, as set out in its recent Next100 strategy.

“Notwithstanding the external environment, the group remains firmly focused on our Next100 strategy which is aimed at delivering a superior customer experience from a more sustainable and productive cost base,” Mr Ward said.

“In fact, the optimisation of our existing business has accelerated out of necessity due to the impacts of COVID-19, with the team working hard to deliver a significant permanent cost reduction of approximately $78m per annum, all achieved within the last three months.”

Mr Ward said it was difficult to give a “simple statement” at the AGM on its half year results but the board was confident that its underlying profit from continuing operations, whilst still subject to audit review, was unlikely to change.

“The board believes this to be a resilient operating performance, particularly as the first quarter was tracking above last year and all of the decline was experienced during April and May – the peak impact of COVID-19 restrictions up to this point.

“Importantly those challenging months were followed by a rebound in June, supported by an opening of the economy and confidence in the government stimulus measures.”

Mr Ward said AP Eagers was now in a strong financial position with a substantial property portfolio and asset base underpinning the company’s financial position, together with $633.9m of available liquidity at June 30.

“This strong financial position provides us with a significant liquidity buffer to withstand any long-term impacts of COVID-19 and also provides us with the flexibility to pursue new opportunities that we expect to arise in a challenging market.

“In this vein, we remain focused on leveraging the current market conditions which are a catalyst to accelerate our Next100 strategy.”