First half results down in period marked by complicating factors
Automotive Holdings Group (AHG) has launched a strategic review of its Refrigerated Logistics division in the midst of one of its tougher first halves of recent times.
But in a period that saw the parent firm adjust to changed circumstances following last year’s failure of Chinese company HNA to complete its Refrigerated Logistics purchase, the fruits of AHG’s efforts to restructure that operation appear to have started being felt.
Refrigerated Logistics saw a 2.2 per cent rise in revenue compared with previous comparable period (pcp) to $297.7 million lead to a 56.3 per cent rise in profit before tax to $3.1 million, though earnings before interest and tax slid 3.2 per cent to about $8 million.
“The Refrigerated Logistics division is delivering an improved performance following the recent transformation program and the business has a strong business development pipeline,” the company reports.
This has been built on efforts over the past two years to gain operational benefits from single warehouse management systems and transport management system.
Presently, the division boasts more than 20 sites, about 600 prime movers and rigid trucks, 1,260 refrigerated trailers and 500 refrigerated rail cars.
It estimates its vehicles cover 4,000,000km weekly
The second half performance in RL “will be a substantial improvement over pcp and that will add to Group earnings momentum”.
Meanwhile, AHG has begun a strategic review of the Refrigerated Logistics business and has appointed UBS and Luminis Partners as joint financial advisers.
The review will:
- consider all options to maximise value for its shareholders
- assess how future growth opportunities can best be unlocked.
AHG MD John McConnell views the division’s transformation program as “well progressed, and now is the right time to consider go‐forward options for the business.
“The transformation program undertaken since early FY2017 has established Refrigerated Logistics as a fully integrated service provider in temperature‐controlled transport and storage with improved operating efficiency and an enhanced ability to realise the benefits of its market leading position.
“The strategic review will assess how future growth opportunities can best be unlocked, including through potential changes in ownership, partnerships or mergers.”
The company sees four main longer-term opportunities:
- capacity expansion
- acquisitions
- move into more end‐to‐end complex solutions
- building an Asia‐Pacific supply chain.
AHG warned the market it would undertake writedowns. Read about that here
During a record-breaking year in the market, the trucks segment’s sales performance and long-term relationships with leading truck makers such as Mercedes-Benz, Freightliner, Fuso and Hino were both described as “strong”, though details were scarce.
Group revenue rose from $3.17 billion to $3.22 billion but operating net profit after tax declined from $42.1 million to $24.2 million, with figures skewed by accounting complications around the cancelled Refrigerated Logistics sale.
The real challenge was in the regulatory and car spheres.
“Automotive retail across the country is tough and that is reflected in the half‐year earnings result,” McConnell says.
“That has obviously impacted the share price and while we are not happy with that, the market conditions also presented an opportunity to take some tough decisions and clean up the company’s balance sheet.
“That process and the consequential accounting adjustments are very deliberate and focused on simplifying AHG’s operations so we are ready and able to capitalise on opportunities.
“There is no doubt that our businesses have been adversely affected by regulatory changes that have impacted our traditional strength in finance and insurance sales, our exposure to lower‐growth brands and locations, and the results in the reporting period of some of our non‐automotive businesses, however we remain confident in our strategy.
“To manage through the current cycle, we are taking a disciplined approach to address costs across the business, including headcount, the expansion of shared services and the reduction of non‐floorplan debt to strengthen the balance sheet and to position the company for the future.
“As part of the process the Company has taken the decision to close a number of under‐performing businesses, which is reflected in the unusual items for the period. The company has a near‐term target of a further $23 million in recurring cost reductions for FY2020.”