AP Eagers slumps to $80.5m annual loss

Car dealer AP Eagers cites tough trading conditions, impairments and costs as it swings to a $80.5m full-year loss.

AP Eagers CEO Martin Ward. Picture: Mark Cranitch.

The nation’s biggest car dealer, AP Eagers, has slumped to a full-year net loss of $80.5 million, a reversal from the $97.5m profit booked for calendar 2018 as impairments, acquisition and integration costs, along with back payments of wages, drenched the company’s accounts in red ink.

It booked $244.9m in total impairments for the year

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.

In November some of the toughest car trading conditions in years forced market leader AP Eagers to warn of declining profits, with its recent $2.3 billion takeover of car sales rival Automotive Holdings also set to dent earnings.

AP Eagers said on Thursday that new car sales in 2019 fell 7.8 per cent on the previous corresponding period.

AP Eagers cited impairments to goodwill, the integration costs of its AHG acquisition and the cost of addressing underpaid wages as it announced a loss.

The company said underlying operating profit came in at $69.2m for 2019, down from $71.4m in 2018.

Revenue for year rose 41.4 per cent to $5.817 billion, helped by the AHG purchase.

AP Eagers declared a final dividend of 22.5 cents per share, flat with 2018, payable on April 20.

The company said the drop in new vehicle sales across the market also impacted AP Eagers’ finance and insurance division. Notwithstanding the market softness, the result from parts and service was solid and the result from used cars was strong, with profit increasing.

AP Eagers also experienced a decline in underlying profit due to the strategic divestment of five properties, with the property segment impacted by loss of internal rent.

It said that according to Federal Chamber of Automotive Industry statistics, Australia’s new motor vehicle sales decreased by 7.8 per cent in 2019 as compared to 2018. The decline in new vehicles sales for the month of December 2019 on the previous corresponding period represented the 21st consecutive monthly decline.

The challenging market conditions were reflected across Australia, with every state recording a decline, AP Eagers said.

The larger markets of Queensland, New South Wales and Victoria, recorded sales declines on last year of 7.2 per cent, 8.4 per cent and 8.7 per cent respectively.

The statutory loss before tax for 2019 was impacted by impairment charges, merger and integration costs, employee underpayment and restructuring costs, the new lease standard and the AHG board not declaring a dividend for the six months to December 31, 2018, compared to dividend income of $13.9m in the previous year.

It said in 2020 it was focused on driving earnings per share growth, helped by scaling its fixed price used car business, unlocking value in its property portfolio and increasing penetration for its finance and insurance arm.