AHG on track for refrigerated arm sale

By: Andrew Hobbs

Higher truck sales fail to arrest anticipated profit slide in first half

AHG on track for refrigerated arm sale
The sale of AHG's Scott's Refrigerated Freightways is expected before July this year


Automotive Holdings Group (AHG) says it is on track to offload its refrigerated logistics business to Chinese buyer HNA International before July this year, after announcing an anticipated fall in interim profits.

The company recorded a net profit after tax of $39.9 million for the six months to 31 December 2017, down 2.4 per cent on the same period the previous year, despite a 7.5pc rise in revenues to $2.87 billion over the same period.

AHG attributed the fall to lower finance commissions due to credit lending constraints and a lower gross margin from add-on insurance products over the half.

The company announced its plan to offload its refrigerated logistics business, which comprises the operations of Rand, Harris, Scott’s and JAT, to HNA for $400 million in November last year.

But since then stories have emerged of HNA embarking on a global divestment program in a bid to address a deteriorating balance sheet.

AHG managing director John McConnell says he is aware of the reports, but says it has had no effect on the deal.

"We and our advisers are continuing to work actively with HNA and its advisers towards completing the transaction in the current financial year," he said during an investor presentation.

"HNA continues to work with its advisers to obtain remaining Australian regulatory approvals including [approval of the Foreign Investment Review Board] in accordance with the terms of the share sale agreement."

The refrigerated logistics division recorded a net profit of $780,000 during the half, up from a loss of $2.2 million in the previous corresponding period, on the back of $291.3 million in revenue.

AHG says its other logistics divisions traded in line with expectations with a statutory profit before tax of $2.2 million, on the back of $137.1 million in revenue.

Parts distribution business AMCAP was also stronger after experiencing stronger demand for mining supplies during the half.  

More broadly, the company’s automotive division delivered a statutory profit of $61.4 million on the back of $2.74 billion in revenue.

McConnell says the company’s truck sales division had also performed well during the half, with the company forced to invest in more inventory during the half to leverage higher demand.

"The order book it carried into January is very positive and a good lead indicator for the second half of the year," he said.  

AHG said its outlook for the rest of the financial year would depend on when the HNA deal is completed, but said the broader market for vehicle sales was positive with ongoing low interest rates and higher competition between manufacturers.

"It is particularly pleasing to note the broad levels of increased consumer and business confidence in the Western Australian market, which had been depressed by the sharply reduced level of construction in the resources and energy sectors," McConnell says.

"We will maintain our focus on cost control, with particular attention on continuing to mitigate the effects of changes to automotive finance and insurance."


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