New boss expects division’s turnaround to impact on financial year second half performance
Automotive Holdings Group (AHG) management is looking to the new calendar year for a boost from its refrigerated logistics division.
In a pre-annual general meeting update, AHG CEO and incoming MD John McConnell indicates financial pain followed by restructuring gains from this underperforming arm would be how the financial year pans out.
“The timing of the turnaround in Refrigerated Logistics will be reflected in our first half results, but we have worked hard to implement cost cutting and growth initiatives that are expected to deliver significantly stronger earnings in the second half,” McConnell says.
The restructuring of the division that boasts Scott’s Refrigerated Freightways, Rand Refrigerated Logistics, Harris Refrigerated Logistics, and JAT Refrigerated Road Services, was flagged in the August annual results after 2015-16 revenues and earnings fell.
It includes including “moving to a single operational structure, administrative and operational headcount reductions, site consolidation, and the implementation of new commercial and pricing initiatives”.
“These will deliver substantial cost savings and productivity gains through the remainder of FY2017 with an expected full‐year annual run rate saving of more than $20m,” AHG says of a segment that is the subject of sale speculation.
The first four months saw ‘operating EBITDA’, a measure that excludes non-operational cost and gains, for the refrigerated logistics division fall 7.8 per cent from $68 million to 62.7 million.
In contrast, its ‘other logistics’ segment, now without mining and industrial supplies firm Covs but including warehousing and distribution businessAmcap , distributor KMT Sportmotorcycles and VSE Solutions & Genuine Truck Bodies, rose 18.5 per cent from 2.7 million to $3.2 million.
While group unaudited operating EBITDA was $62.7 million for the four months ended October 31, 7.8 per cent lower than the prior corresponding period (pcp), unaudited net earnings after tax were $22 million, down 20.8 per cent on the pcp.
This reflected “costs of acquisitions made during FY2016 and depreciation to AHG’s fleet” and the group “experienced higher depreciation and interest charges for the period ending 31 October”.
It will continue to rely on its huge car sales business, which saw EBITDA rise 8.4 per cent to $52.9 million in the four months, for the heavy lifting.
McConnell says it remained well positioned to continue to participate in market growth through continued strategic investments in acquisitions and targeted greenfield developments alongside the pursuit of opportunities in the non‐conventional and digital car sales space.
“The diversified nature of the Automotive division, both in terms of the brand portfolio and the geographic footprint, provides a strong platform to withstand the significant downturn in the WA economy,” he adds.