Eagers Automotive counts cost of Holden’s exit

Car dealer Eagers’ half-year profit slumped 80pc, and it axed its dividend, amid costs forced by its loss of the Holden brand.

Eagers Automotive CEO Martin Ward. The company changed its name from AP Eagers at the beginning of August. Picture: Mark Cranitch.

Car dealer Eagers Automotive has reported an 80 per cent slump in its statutory half-year profit to $8.32 million and cancelled its interim dividend, as Holden’s exit from the Australian car market and restructured property valuations forced it to book impairments of $40.4m.

Formerly AP Eagers, the nation’s largest car dealer also revealed it relied on wage subsidies from the Australian and New Zealand governments of $66m in the six months to June, as around 75 per cent of its more than 8200 workers were put on the JobKeeper scheme.

Eagers said the decision by General Motors to bin the historic Holden brand and walk away from the local market had triggered tens of millions of dollars in impairments.

Impairment charges of $34m primarily related to leased car showrooms associated with Holden dealerships, as General Motors plans to cease from Holden vehicle sales in Australia and New Zealand by the end of 2020.

There were also operating adjustments, including business acquisition and integration costs of $1.9m for the June half, and property revaluation losses of $6.4m. Further, Eagers reported COVID-19 wage subsidies and rent waivers of $72m and employee underpayment costs of $1.3m.

The car dealer, which last year bought rival AHG for $2 billion, said profit before tax from continuing operations rose 4.6 per cent to $61.4m. Underlying operating profit before tax fell 23.8 per cent to $40.3m.

Revenue for the half rose 101.8 per cent to $4.155 billion, as it merged with the AHG business.

Eagers, which is controlled by billionaire Nick Politis, will not pay an interim dividend, as it seeks to maintain a strong balance sheet through the COVID-19 pandemic. It paid 14c per share this time last year.

Eagers chief executive Martin Ward said despite pandemic disruptions, the business was able to increase its share of the new vehicle market and deliver a half year profit.

“Our financial performance was testament to the company’s swift response to the pandemic which included right-sizing our operations, managing our cost base, fortifying liquidity – all while continuing to serve our customers and partners and protecting our people.

“Eagers Automotive is in a strong financial position with a significant liquidity buffer to withstand any future COVID-19 impacts. Importantly, our scale, geographic diversity and financial strength positions us to accelerate execution of our Next100 strategy and provides the flexibility to pursue restructuring and growth opportunities that arise due to the evolving market dynamics and industry transition.”

Eagers said new motor vehicle sales decreased by 20.2 per cent in the half year.

The challenging market conditions were reflected across the industry, with every state recording a decline. The larger markets of Queensland, New South Wales and Victoria, recorded sales declines of 19.4 per cent, 20.8 per cent and 24.2 per cent respectively.

Other markets also recorded a decline, with South Australia down 19.6 per cent, Western Australia down 13.5 per cent, Tasmania down 25.8 per cent, Northern Territory down 29 per cent. The Australian Capital Territory was the only market to record growth, up 26.6 per cent.