Trucks silver lining for AHG in 'challenging' year

Truck sales, refrigerated logistics are positives in otherwise sluggish time

Trucks silver lining for AHG in 'challenging' year
AHG is optimistic in a turnaround


Automotive retail and logistics company Automotive Holdings Group (AHG), which owns more than 150 vehicle dealerships, has admitted to a difficult financial year from an automotive perspective but has been buoyed by strong truck sales and resilience in its refrigerated logistics division.

In July to October for the 2019 financial year, the group EDITBA was $54.1 million, compared to $63.3 million in 2018, with its automotive arm down 16.1 per cent but refrigerated logistics up 5.5 per cent.

It notes trading in the first four months has been lower than anticipated, with full‐year operating net profit after tax forecast in the range of $56 million to $59 million.

"The entire private buyer market has been weaker, with the east coast, especially NSW and Victoria, being affected by a falling housing market and the negative flow‐on effects to consumer confidence and auto sales," managing director John McConnell says in the company’s trading update.

"Other sectors of the auto market were relatively stronger, including trucks and fleet sales. Of course we are also heavily exposed to the WA market which is yet to see any rebound in private sales."

"We are continuing to reposition the cost base of the automotive business to respond to the current market conditions.

"We are adapting to industry changes to finance and insurance, including the changes to flex commissions that came into effect on 1st November.

"The short-term impact of these changes are built into our forecast. Longer term we see upside from these changes for dealerships and our customers."

AHG hits choppy waters as annual profit slides. Read more, here

Its trading price also recently hit a six-year low and, earlier in the year, China’s HNA Group pulled out of a $280 million deal to purchase its refrigerated logistics business after failing to obtain Australian regulatory approval.

Commenting on the past financial year at the annual general meeting, board member Andrea Hall reflected on a "challenging" period.

Looking at the positives, however, the company notes it continued to grow its new car and truck market share, to about 6.7 per cent in Australia and 3 per cent in New Zealand.

In particular, AHG was buoyed by the strong year for truck and fleet sales.

"The company last year separated the Trucks business into a separate division under the leadership of Simon Ramsay and it has been pleasing to see the strong performance delivered under his leadership," Hall says.

"We see the strength of the market in heavy commercial vehicles as an encouraging lead indicator of the economy, particularly here in Western Australia."

And despite the setback for refrigerated logistics, it also sees an upside to the division, with its fleet now comprising about 600 prime movers and rigid trucks, 1,260 trailers and 500 rail containers.

"We are confident of improved returns from Refrigerated Logistics, where the management team has moved on from the disruption caused by the HNA bid and the simultaneous implementation of new ERP systems, Warehouse Management System and Transport Management System," Hall says.

"The business has transitioned from being substantially transaction‐focused to a fully integrated service provider.

"It is a strong and growing market leader in temperature‐controlled transport and storage, where scale (again) offers enormous opportunity."

The company moved to reassure shareholders that uptake in vehicle technology means the future outlook was strong

"AHG is mindful of the myriad changes that are possible and we will leverage the relationships we have.

"Whether it is electric vehicles, hydrogen fuel cell vehicles, ride‐share vehicles or autonomous vehicles, manufacturers will need a distribution channel to deliver those vehicles and to maintain and repair them."


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