Eagers Automotive shares go up a gear

Shares in the nation’s biggest vehicle retail group rallied more than 7 per cent when it provided a trading update.

Shares in the nation’s biggest vehicle retail group rallied more than 7 per cent when it provided a trading update. Photo: Glenn Hunt

Shares in the nation’s biggest vehicle retail group, Eagers Automotive, rallied more than 7 per cent on Thursday when it provided a trading update to the market that said it had recorded an underlying operating profit of $96.6m before tax for the nine months ending September 30.

This represented a 45.4 per cent increase on the previous corresponding period.

The company, previously known as AP Eagers, said that in the states and territories not currently locked down, sales had rebounded strongly from the historical lows experienced during April and May when nationwide restrictions were in place.

“While customer orders have been strong, supply constraints caused by global manufacturer factory closures during the June quarter resulted in lower vehicle deliveries to customers,” the company said.

Eagers Automotive said cost-cutting flowing from last year’s $2bn merger with AHG was bolstering its performance.

“The reduced inventory position combined with the company’s cost-reduction programs, initiated following the merger with AHG and in response to COVID-19, have led to a strong rebound in Eagers Automotive’s underlying trading performance,” the company said.

The results are still subject to an external audit review that will be conducted following the completion of the financial year ending December 31. Eagers Automotive shares have more than tripled since their lows in March when global sharemarkets were caught up in the COVID-19 pandemic and the company was forced to temporarily close some of its outlets and send thousands of workers home.

In August, the company reported an 80 per cent drop in statutory half-year profit to $8.32m 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.

At the time, the Eagers Automotive also revealed it had relied on wage subsidies of $66m from the Australian and New Zealand governments in the six months to June after about 75 per cent of its more than 8200 workers were put on the JobKeeper scheme.

Shares closed up 68c, or 6.1 per cent, to $11.88 on Thursday.