Automotive Holdings Group (ASX:AHG) Share Price, News & Information

1. About

Automotive Holdings Group Limited is a diversified automotive retailing and logistics group with operations in every Australian mainland state and in New Zealand. The Company is Australia's largest automotive retailer, with operations in Western Australia, New South Wales, Queensland, and Victoria.

AHG's logistics businesses operate throughout Australia via subsidiaries Rand Transport, Harris Refrigerated Transport, Scott's Refrigerated Freightways and JAT Refrigerated Road Services (transport and cold storage), AMCAP (motor parts and industrial supplies distribution), VSE (vehicle storage and engineering), Genuine Truck Bodies (body building services to the truck industry), Higer Bus (bus and truck importation and distribution), and KTM Sportmotorcycles and HQVA (KTM and Husqvarna motorcycle importation and distribution in Australia and New Zealand).

2. Business model

The Company operates in the following divisions:^[1]

Divisions	Revenue ($’000)	% of total Revenue	% of Profit (before Int, Tax, Depn & Amort )	Profit drivers^[2]
Automotive Retail	$5,611,515	86.7%	101.4%	Operating 1 EBITDA was $166.1 M, down 2.9% pcp, delivering an Operating 1 profit before tax of $116.7 M, down 6.0% (pcp) primarily due to the impact of changes to finance and insurance commissions and a slower than expected rebound in the Western Australian market.
Refrigerated Logistics	$598,245	9.4%	13.5%	Revenue and earnings were significantly impacted by the disruption and uncertainty caused by the offer from HNA to buy the business.
Other Logistics	$262,379	4.5%	1.9%	Revenue was down 5.0% to $262.5 M ($276.2m pcp) due to lower motorbike sales and softer automotive parts sales in Western Australia. Operating PBT was $3.8 M, down from $10.5 M pcp largely due to adverse foreign exchange in the import of KTM and Husqvarna product.
Property	$432	0.0%	(2.5%)	N/A

3. Strategy

Nearterm uncertainty in the broader automotive retail sector from F&I changes, tighter consumer credit and falling house prices^[3]
Potential mediumterm upside from increased finance penetration
Costout opportunities in automotive retail
Optimistic medium to longer term outlook based on AHG’s scale and diverse business operations
Opportunities for further aggregation in the automotive sector where we see value and as vendor expectations become more realistic
Recovery of private buyer demand in WA
Car affordability remains at attractive levels
Further diversification opportunities in the automotive sector
Generating returns from the investment in easyauto123
Driving improved performance in RL and OL business units

4. Markets

The Company operates in markets including:^[4]

Industry (Australia)	Industry Revenue	Growth Rate (annual 13-18)
Motor Vehicle Dealers	$63 billion (2018)	0.5%
Motorcycle Dealers	$2 billion (2018)	(2.1%)
Motor Vehicle New Parts Wholesaling	$8 billion (2017)	(9.0%)

5. Competition

Major competitors include:^[5]

Super Retail Group Ltd (ASX: SUL)
AP Eagers Ltd (ASX: APE)

6. History

2005^[6]

Lists on ASX

2006

Signs Heads of Agreement to acquired McGrath Lander Group

Acquisition of Ford and Mazda Dealerships in New Zealand

2007

AHG to acquired Queensland Zupps Group for $117 million

AHG Signs Agreement to Distribute Vmoto Scooters

2008

AHG Clarifies Arrangements with GMAC

2009

Extension of KTM Sportmotorcycle Exclusive Importer Agreement

2010

AHG signs Heads of Agreement to acquire Melbourne Toyota Dealership

AHG acquires strategic development site

2011

AHG acquires Diesel Motors Trucks

APE: New Carsguide Joint Venture with News Limited

Participation in New Carsguide Joint Venture with News Ltd

2012

AHG acquires NSW and Queensland Truck Dealerships

Successful launch of API Automotive Trust

A.P. Eagers buys 16.3% of AHG

Rand to buy Toll Refrigerated Logistics

2013

AHG Completes New Zealand Acquisition

Completion of Gary McMillan Acquisition

AHG acquires Victorian dealerships

2014

AHG completes acquisition of Bradstreet Motor Group

Successful Completion of AHG's $115m Placement

2015

AHG completes acquisition of Perth Mercedes-Benz dealerships

AHG to open new Nissan dealership in Brisbane

CHC: Funds $140m acquisition & Group underwrites syndicate

AHG to sell covs parts business

AHG to acquire Perth Mercedes Benz dealerships

2016

AHG completes Daimler Truck Laverton dealership acquisition

AHG completes key Mazda dealership acquisition

Automotive Holdings Group has agreed to extend its sponsorship of the Melbourne Football Club in the AFL

2017

Automotive Holdings Group has announced that reached agreement in principle to acquire the Ford and Mitsubishi dealerships at the Essendon Fields automotive precinct near Melbourne

New joint venture targets vehicle remarketing and fleet opportunities

Automotive Holdings Group has pleased to announce that it has agreed to acquire five franchised automotive dealerships trading as the Hunter Motor Group at Maitland and Rutherford near Newcastle (NSW)

2018

Automotive Holdings Group (ASX:AHG) has agreed to acquire two franchised automotive dealerships in the southern Auckland suburb of Manukau

7. Team

Board of Directors^[7]

Richard England - Chairman

John McConnell – Managing Director

Giovanni (John) Groppoli – Non-Executive Director (Independent)

Greg Duncan OAM – Non-Executive Director (Independent)

Howard Critchley – Non-Executive Director (Independent)

Jane McKellar – Non-Executive Director

Andrea Hall – Independent NonExecutive Director

David Blackhall – Non-Executive Director

Management Team

John McConnell – Managing Director

Adam Irving – Chief Financial Officer (Appointed 1 May 2018)

David Rowland – Company Secretary and General Counsel

8. Financials

2019 Half Year Results Presentation

Financial Year 2017/18 (ended 30 June):^[8]

Division	Revenue ($,000)	% Change	Profit (before Int, Tax, Depn & Amort)	% Change
Automotive Retail	$5,611,515	7.2%	$149,979	(2.2%)
Refrigerated Logistics	$598,245	0.5%	($6,233)	(126.2%)
Other Logistics	$262,379	(5.0%)	$7,126	114.2%
Property	$432	35.0%	($2,932)	32.2%
Total	$6,472,571	6.0%	$147,939	(16.0%)

9. Risk

Major risks include:^[9]

Interest rate risk

In the context of Group activities, interest rate risk arises from exposure in respect of:

inventory financing arrangements via its floorplan financing for its dealership group;
surplus cash within the Group businesses (including monies on deposit); and
specific debt financing as a result of acquisitions or strategic developments of the Group.

The Group’s main interest rate risk arises from its cash and short and long-term borrowings. Borrowings sourced at variable rates expose the Group to cash flow interest rate risk. Borrowings sourced at fixed rates expose the Group to fair value interest rate risk.

Foreign currency risk

The Group is exposed to foreign exchange risk arising from the currency exposures centred on the purchase of inventory (and associated trade payables and finance company loans) and, accordingly, had entered into forward exchange contracts to buy EUR $5.35 million (2017: EUR $5.40 million) as of 30 June 2018.

Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Group’s functional currency. The risk is measured using cash flow forecasting and sensitivity analysis. The Group’s Treasury Committee assists the Group subsidiaries in managing their foreign exchange risk exposure through the use of forward exchange contracts such as detailed above. All material short-term foreign exchange exposures are hedged and therefore changes in exchange rates will have an immaterial impact on profit or loss or equity.

PRICE RISK

The Group holds available-for-sale financial assets in DealerMotive Limited and AHG Property Syndicate No. 1 Unit Trust (launched by Australasian Property Investments). These are unlisted securities and units that are immaterial in terms of the possible impact on profit or loss or total equity.

CREDIT RISK

Credit risk is managed at both the business unit and Group level. Credit risk arises predominantly from credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions.

Specifically, the Group’s credit risk arises from:

fleet customer purchases where deferred payment terms have been negotiated; and
concentration of high volume/frequency fixed operation customers in like industries.

LIQUIDITY RISK

The objective of the Group’s liquidity risk policy is to ensure that it has adequate financing facilities and operating cash flows available to meet its financial commitments. The Group’s liquidity risk management approach is to identify and manage its financial commitments on the following basis:

long-term liquidity management involving the structuring of the Group’s statement of financial position and debt maturity profile to protect against liquidity problems in the future; and
maintain flexible funding arrangements with financiers so as to allow for additional lines of credit to be established as required.

Automotive Holdings Group (ASX:AHG)