Market and takeover events spill red ink though revenues rise
AP Eagers’ interim results may have been overshadowed by the long-expected sale of AHG Refrigerated Logistics (AHG RL) but the cash injection comes at an important time.
The truck and car dealership firm is in the midst of a new vehicle sales downturn now in its 21st month and the market, particularly for cars, is in substantial transition towards electric drive and changing tastes.
The half-year results compared with the prior corresponding period (pcp) are also indicative of the expanded AP Eagers following its Automated Holdings Group (AHG) takeover.
In results skewed by that event, the bigger entity that AP Eagers dubs ‘mergco’ sees the company’s revenues up 48.5 per cent from its previous restated first half to $5.48 billion.
This is a cause for management optimism for the future and the paying of a 22 cent dividend but, for now, it leads to a bottom-line loss of $129 million from a pcp profit of $97.5 million.
Truck sales failed to help, due to “challenging market conditions and material decline in [the National Truck division’s] sales”, albeit from a record previous first half performance.
“The National Truck division delivered a loss before tax from continuing operations of 9.9 million compared to a $10.5 million profit for the pcp,” the company states.
“Underlying operating profit before tax was $7.8 million (excluding impairment totalling g $11.6 million), a decrease of $3.1 million, reflecting softer trading conditions and a $1.3 million profit contribution from AHG, with APE down $4.4 million on pcp on a standalone basis.”
Read about the sale of AHG RL to private equity firm Anchorage, here
While the $100 million AHG RL sale will end up being a huge help, it has a sting in the tail as far as impairments are concerned.
This is manifest in last year’s AHG valuation process seeing net asset values down $145 million against property, plant and equipment along with AHG RL’s assets and business.
There was also a $209.2 million impairment against goodwill and $35.7 million against property, plant and equipment in the car and truck retailing segments, along with at $34.8 million impairment on discontinued operations relating to the write-down of the AHG RL business to reflect market valuation.
Meanwhile, the new lease accounting standard that has affected all companies exposed to it, means recognition of a $1.2 billion lease liability, a $1 billion right of use asset and a $54 million deferred tax asset.