Shares in listed car dealer and refrigerated transport operator, Automotive Holdings tumbled nearly 10% yesterday after the company revealed an earnings downgrade in a gloomy trading update.
The shares hit a day’s low of $2.99, the lowest since last May before edging higher to end at $3.10, off more than 8.8%.
In its update to the ASX, AHG said automotive retail margins are “challenging”, the WA recovery in private sales is happening slower than expected, regulatory changes aren’t helping and the sale of the refrigerated transport business is taking longer than expected.
The result is that AHG expects to report a full-year operating profit of around $75 million. That will be down 14% from the $87.3 million in 2016-17 and more than 22% under the $97.2 million earned in 2015-16.
That is not good news for the company’s biggest shareholder, AP Eagers which owns just under 25%. Eagers is in turn controlled by Sydney millionaire, Nick Politis.
“Our retail automotive business is adjusting to the changes to finance and insurance sales more slowly than we would have liked and that’s apparent across the sector,” CEO John McConnell said in yesterday’s statement.
In November, AHG announced its decision to sell its refrigerated transport business for $400 million to China’s HNA International (That’s an enterprise value and includes debt).
“The business performed ahead of the previous corresponding period in the first half however second‐half trading has been impacted by the sale process and the relatively long lead time to completion,” Mr McConnell said yesterday.
AHG said it expects to complete the deal on or before June 30. However, a transaction remains subject to an approval from Australia’s Foreign Investment Review Board (FIRB).
Some analysts believe the purchase price offered by HNA is too much and note the Chinese group had a major liquidity crisis earlier this year and has been selling off assets around the world.
