Perth-based national car dealer Automotive Holdings Group Ltd (ASX code AHE) says the economic downturn has led to a 30% drop in profit in the first three months of fiscal 2009.
And that news yesterday, in an extensive market update, led to the company’s shares touching a new 52 week low of 90c as they ended down 6.5% at $1. That was in a market up more than 4% in the most positive day’s trading for over a month.
The fall in the share price continues the slump since the shares peaked at around $3.85 a year ago.
AHG says its net profit after tax from continuing operations for the three months to September 30 was $7.1 million, down about 30% on the prior corresponding period.
"With the tightening of consumer discretionary spending across all industry sectors, trading to 30 September 2008 in AHG’s automotive sector has been subdued compared to the same period last year," the company told the ASX.
Thanks to lower revenue and margins in AHG’s vehicle retail business, sales for the period resulted in earnings before interest and tax, depreciation and amortisation (EBITDA) for Automotive Retailing of $15.8 million, down 25%.
A stronger performance came from the group’s logistics division, with EBITDA up by about 67% to $6.8 million.
The company said the subsidiary; Rand Transport has been a strong contributor to the Logistics’ result.
"Rand Transport’s growth is largely due to the consolidation in the market and the strong market demand for cold storage and refrigerated transport services within which it operates, particularly in the recently established cold store facility at Homebush, New South Wales, which is now operating near capacity."
AHG’s Managing Director, Bronte Howson, said in he update statement that the company’s automotive retailing operations were fundamentally very sound, but there was no doubt that the current economic conditions had adversely impacted motor vehicle retail sales and margins.
AHG remained focused on cost saving initiatives to protect the Group’s trading results, Mr Howson said, including the management and/or reduction of inventories, which also had a flow-on effect on the Group’s interest costs.
AHG is also reviewing all costs throughout its business.
"After record Australian new vehicle sales last year of 1,049,982 units, sales in the September 2008 quarter were down 6.5% on the September 2007 quarter. Industry expectations are for FY08 sales of around 1,010,000 – 1,015,000 units," Mr Howson said.
"While acknowledging these expectations, AHG remains cautious about trading for the balance of the year, however, AHG notes that the recent reduction in interest rates will have a direct impact on floor plan and borrowing costs and should provide some stimulus to demand for vehicles."
Mr Howson said AHG’s automotive retailing, with wide brand representation and five revenue streams, "continues to provide opportunities, softening the impact of changes in consumer discretionary spend and economic conditions".
"The EBITDA margin for the Group for the quarter was 2.8% compared to 3.0% in the same quarter the previous year. Higher interest rates in 2008 have been a significant contributor to a reduction in Group net profit.
"AHG’s business model has been constructed for long term sustainable growth. It has a proven history of profitability and has invested heavily in the businesses and structure that should support future revenue and earnings growth.
“While 2009 will be a challenging year for the Group, AHG remains focused on maximising revenues, controlling costs and driving value for shareholders.”
The company reported a record underlying net profit of $48.4 million for the 12 months to 30 June 2008 and of that, the June half performance saw an underlying EBITDA of $60.0 million representing 52% of the full year total.
Revenue for automotive retailing rose by 52.7% to $3.0 billion and EBITDA for the division rose by 64.7% to $96.1 million.
