Shares in car dealer AP Eagers jumped more than 8% at one stage yesterday after it sprang a surprise earnings upgrade on investors.
The shares hit a high of $6.77 before settling back to end at $6.63 – up 7.2%. That’s the highest the shares have been for six weeks.
Yesterday’s rise took the gain so far in 2018 to more than 10%, but the shares are still down more than 18% in the past 12 months.
The company said it was looking at a 3% increase in financial-year net profit after tax of $101.2 million.
Profit before tax is expected at $133.7 million for the year to December 31, down 1.4% from 2017 but higher than a guidance range of $126 million to $130 million issued by the company in November.
The improvement means the stronger trading conditions will help offset an expected lower dividend from its 25% plus stake in Automotive Holdings, the country’s biggest listed car dealer.
AP Eagers says operating net profit strengthened at its car and truck businesses.
“The improved profit result compared to guidance has been delivered by stronger operating net profit before tax for both the car and truck retailing businesses.
“Both businesses achieved record operating results for the month of December 2018, with the truck business also achieving a record operating net profit before tax for the 2018 financial year.
“This is a very strong full-year operational result for the group considering the widely reported challenges within automotive retailing during 2018.
“The strong operational result offsets the previously flagged reduced gains on the sale of non-core operations and property, in addition to a decline in returns from the company’s investments which includes a reduced dividend from Automotive Holdings Group Limited (AHG)”.
New car sales fell 3% nationally last year with sales sliding late in the year as house prices weakened, especially in Sydney and Melbourne.
AHG has been hit by the slowdown in WA sales for several years now and the sluggishness in eastern states markets had added to the pressures on revenues and profits.
In its last trading update in late-November, AHG revealed a 45% slide in operating profit — net earnings before one-off items — to $11.7 million for the first four months (July and October) of 2018-19.
AHG has tipped a June-year profit of between $56 million and $59 million. APE Eagers reckons it will ride out the weakness at AHG.
