AP Eagers announces market update on profit guidance and AHG takeover bid

AP Eagers’ stock slipped on ASX after the company lowered its profit expectation for 1H 2019 compared to the prior corresponding period.

In the Annual General Meeting held on 15 May 2019, AP Eagers Limited (ASX: APE) stated that it expects first half operating profit before tax to be between 7 – 10% lower than the 1H 2018. The forecast outlines the company’s lower confidence due to challenging trading conditions in the national automotive retail sector and a decline of 8.1% in overall new vehicle sales market to the end of April 2019.

However, the management advised that APE’s balance sheet remains strong with the management focused on executing Next100 growth strategy.

Latest Update on AHG takeover bid by A.P. Eagers Limited

To keep the market updated, APE today forwarded the target statement and Independent Expert Report published by Automotive Holding Group (AHG) on APE’s improved offer to acquire all shares in AHG that it does not already own.

The Independent Expert Report by KPMG Corporate Finance stated that as per their opinion APE’s improved offer of 1 APE Share for every 3.6 AHG Shares is not fair but reasonable to AHG non-associated shareholders.

But to the contrary, AHG Directors recommended shareholders on unanimous basis to accept the improved bid in the absence of a superior offer. If the transaction goes through, AHG shareholders would own ~25.5% of interest in the merged group compared to ~24.5% holding as proposed in the initial offer.

2018 financial performance review –

Despite challenging market conditions and a decline in new vehicle market last year, APE outperformed and delivered robust financial performance for full-year 2018. Total like-for-like revenue increased by 1.3% to $4.1 billion for 12 months ended 31 December 2018, taking net profit after tax to A$101.2 million, which represents an increase of 3.1% on year-on-year basis. EPS witnessed an increase of 3.4% to 52 cents compared to 50.3 cents for the prior period.

Source: Company’s AGM Announcement, May 2019

Next 100 –

The new strategy has five key elements as per the announcement:

  • Engaging Customers – APE secured 64,000 m2 in Brisbane Auto Mall to unleash world-class customer experience and develop an omni-channel retail approach.
  • Redefining Workforce – Improving sustainable and productive cost base to deliver superior customer experience.
  • Optimised vehicle finance – Five-point operating plan to improve finance solutions for vehicle sales. APE intends to become a preferred provider of these services.
  • Supporting innovation – Innovation to support dynamic preferences of customers through emerging product, electric vehicle and services.
  • Reinvesting – The strategy intends to review existing operations as well as new operations to support long term goals.

Source: Company’s AGM Announcement, May 2019

APE is an automotive retail group which deals in twenty-seven car brands and ten truck brands in Australia. The core business of the company is operating wholly owned motor vehicle dealerships in addition to core business other services including sale of new and used vehicles, service and parts.

At the time of writing, 16 May 2019 (3:41 PM AEST), stock of the company is down 3.674% to $8.390. The performance of the stock in long run appears to be attractive with 61.30% return in five years. The stock has also witnessed a 30% upside movement in the past three months.

Also Read: A.P. Eagers To Obtain $24 Million Profit On The Sale Of Newstead Properties


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