On 7 February 2019, Automotive Holdings Group Ltd (ASX: AHG), an automotive retail and logistics company from the retailing industrial sector, stated that it is observing the possible impacts on car dealer as per the recommendations from the Financial Services Royal Commission.
As per the recommendations from the Financial Services Royal Commission, the company believes that there will be no impact in the current financial year which will end on 30 June 2019. Even if there is any impact, the extent will be minimum that too in the following year.
On Financial Services Royal Commission recommendation (FSRC) on the point of sale (POS) exemptions, the federal government has acknowledged FSRC that it would consider how the reforms are implemented carefully.
For the implementation of POS exemptions, there will be a requirement to regulate more than thousands of finance and insurance consultants who deal in new car dealerships across Australia. It will further require thousands more employed in credit?lending positions across other businesses which includes furniture, appliance and electronics retailers.
In case the point of sales exception gets abolished, then one can say that the company is in a position where it can efficiently manage the change either its related to existing finance providers or using its own existing Australian Credit License.
Also, any cap on add-on insurance commissions will reportedly formalize a practice already adopted by key insurance firms. Currently it is not confirmed if the recommendation includes any additional reduction in the commission rates.
At present, the concept of deferred sales model for add-on insurance is under ASIC, and the Association of Australian Automotive Dealer is requesting Treasury to adopt a model which will delay the sales by 3 to 4 days and also provide waivers to those customers who are well informed.
For the FY2018 which ended on 30 June 2018, the company made a net profit of $37.792 million. The EPS during the period was 9.8 cents. The total currents asset increased by 17.36%. The total current liabilities increased by 22.75% as a result of growth in interest-bearing loans and borrowings. The total shareholders’ equity was A$776.514 million.
By the end of the FY2018 on 30 June 2018, Automotive Holdings Group Ltd had net cash and cash equivalent worth A$73.046 million which decreased by A$21.989 million during the period. The reason for major cash outflow during the period was the investing activities of the company where it paid the dividend to the members and repayment of borrowings.
Since the listing of AHG on ASX, the stock has generated a positive performance of 203.24%. However, in the last year, the stock has given a negative return of 49.57%.
By the closure of the trading session on 7 February 2019, the closing price of the shares was A$1.740 which was 4.192% above the previous trading day’s closing price. Today, the stock is trading at A$1.685 (as at 1:16PM AEST, 8 February 2019) with a market capitalization of A$577.02 million with approximately 331.62 million outstanding shares and a PE ratio of 17.760x.
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