Why did Eagers Automotive (ASX:APE) Upgrade 2020 Profit Guidance?  

Summary

  • Eagers Automotive has lifted its profit guidance for 2020 from its earlier guidance given in December 2020.
  • The improved profit result is expected on the back of robust performance of the truck and car segments.

Australian car retailing group Eagers Automotive Limited (ASX:APE) has released its first full-year trading update after its merger with Automotive Holdings Group Limited (ASX:AHG). The trading update is for the 12-month period ended 31 December 2020.

For 2020, APE is anticipating an underlying operating profit before tax of AUD 209.4 million as against AUD 100.4 million in the same period a year ago. The figure surpasses the earlier guidance provided in December 2020, when the company forecast profit at AUD 195 - AUD 205 million.

Robust Performance

For the improved profit result compared to the guidance, the company has attributed robust underlying operating profit before tax for the truck and car segments. Following the completion of an external audit, Eagers Automotive plans to release the final report on 24 February 2021.

During the market guidance released by the end of 2020, Eagers Automotive had highlighted that the strong rebound of vehicle sales was driving the company's recovery. Orders were pouring in, with VFACTS recording a 12% uptick in national vehicle deliveries during November 2020.

The robust underlying trading performance was attributed to the tight inventory position of the industry and cost reduction measures implemented.

Last month in December 2020, the company also executed a binding agreement with US-based Velocity Vehicle Group for the sale of its Daimler truck business. To know more, read here: Eagers Automotive (ASX:APE) sells Daimler Truck business, Milperra property for A$108 million

Profitable Results in FY2020, APE Focuses On Strategic Priorities

For the period from January to September 2020 in FY20, the underlying operating profit before tax stood at AUD 96.6 million.

The company is focused on strategic priorities despite the challenging market conditions. As highlighted in the investor update in November last year, Eagers Automotive has the following strategic priorities:

 

  1. Next100 Strategyis to deliver integrated mobility solutions for the next century. The strategy involves engagement with customers everywhere through digital platforms, at shopping malls, airports, offices, homes and in multi-brand service hubs.

APE is also planning to offer optimised, ultra-competitive, highly tailored vehicle financing solutions, in addition to support its partners to launch autonomous, connected, and electric vehicles along with other emerging product innovations.

The company remains committed towards getting the most out of the emerging trends to accelerate this strategy.  

2.Under the cost out strategy, APE has an ongoing optimisation program. It achieved permanent annualised cost reductions of AUD 78 million during the initial response to the pandemic.

3.Synergies: The company surpassed its synergy target of AUD 30 million, and the focus has been shifted to driving more operational efficiencies.

4.Divestments: APE continued rationalisation of dealership portfolio through non-core divestments and finalised the sale of its Refrigerated Logistics business.

On 28 January 2021 (AEDT 11:50 AM), APE traded at AUD 12.880, down by 4.024%.

Also Read: How Eagers Automotive (ASX:APE) emerged as a winner in 2020?

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