AP Eagers Limited (ASX: APE) anticipates for the reasonable consultation with the automotive retail and finance industry bodies to ascertain the suitable Government reply to the Hayne Royal Commission Recommendations, applicable to automotive retail industry. Although the application of these recommendations is not going to have material finance influence on the APE.
The Hayne Royal Commission has made numerous recommendations which are exclusively associated with the automotive retail industry, which are as follows-
- The recommendation for removal of Point of Sale (POS) exemption for the dealers to hold Australian Credit Licences (ACL). All the consumer laoans are currently arranged through the company’s dealerships and regulated by the National Consumer Credit Act 2009 (NCCP). The dealerships were already held accountable within lawful agreements with licensed financiers to comply with the NCCP and responsible lending obligations.
The removal of the POS exemption will lead to dealers become more directly responsible for NCCP compliance. This may require dealers either to give credit services as authorised representatives of licensed financiers or to function as licensed credit service providers within the dealer’s own ACL.
APE is well placed in this regard as they have held an ACL for giving Credit Services since the year 2011 in support of their dealership and Carzooz businesses. Also, they have already implemented processes and systems throughout their businesses that principally reflect the ACL essentials. Consequently, they are well-versed in the regulatory and compliance obligations which will flow from the removal of the POS exemption and are well positioned relative to the wider automotive retailing sector.
(2) The other recommendations for add-on insurances are deferred sales model and cap on commissions. The implementation of a deferred sales model and any cap on commissions will reportedly not have any material impact on their outcomes, as supplementary insurances are not a significant part of their business.
The ASIC review into add-on insurances has already resulted in significant reductions in both the premiums and commissions paid for products such as GAP and CCI insurances. They have adjusted their retail model accordingly such that add-on insurances are not a significant part of their business.
The effect of these changes for additional insurances is already accounted for in their results announcement for 2018 which was issued on 23 January 2019, and they do not anticipate any material impact from further changes.
APE also announced the change in interests for one of its directors Mr Nicholas George Politis. The director now owns 69,524,638 Ordinary Shares as compared to previously held 69,503,581 Ordinary Shares, by acquiring 14,459 shares @ $6.0544 per share on 1 February 2019, 1,923 shares @ $6.1920 per share on 4 February 2019, and 4,675 shares @ $6.1803 per share on 5 February 2019.
The company’s stock has generated a negative return of 23.12% during the past six months. The shares of APE are trading at A$6.400 (as at 7 February 2019, 3:28 PM AEST), up by 0.472% or 0.030 points. APE has approximately 191.31 million shares outstanding with a market capitalisation of circa A$1.21 billion. The 52-week high and low of the company are marked at A$8.990 and A$5.660 respectively. The earnings per share of the APE stands at – AUD 0.526 and price to earnings ratio at 12.070x.
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