AP Eagers (ASX:APE)

Martin Andrew Ward
Market Cap (AUD): 778.51M
Sector: Consumer Discretionary
Last Trade (AUD): 3.215 +0.2 (+6.11%)
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1. About

A.P. Eagers Limited is a pure automotive retail group with its main operations in Queensland, Adelaide, Darwin, Melbourne, Sydney, the Newcastle/Hunter Valley region of New South Wales and Tasmania. The Company represents a diversified portfolio of automotive brands, including all 20 of the top 20 selling car brands in Australia and 10 of the top 11 selling luxury car brands. In total, the Company represents 33 car brands and 11 truck and bus brands. Its core business consists of the ownership and operation of motor vehicle dealerships. The Company provides full facilities including the sale of new and used vehicles, service, parts and the facilitation of allied consumer finance.

Its operations are generally provided through strategically clustered dealerships, many of which are situated on properties owned by us, with the balance leased.

The company owns $307 M of prime real estate positioned in high profile, main road locations in Brisbane, Sydney, Melbourne, Adelaide, and Newcastle.

2. Business model


The Company operates the following divisions:[1]



Revenue ($000)

% of total Revenue

Segment Profit bef. tax ($000)

Profit drivers[2]

Car Retailing




  • PBT from its Car Retail segment was $84.4 M, a decrease from $104.6 M for 2016. Underlying PBT for the Car Retail segment was $89.6 M in 2017
  • Car Retail segment revenue increased by 6.1%, with the increase primarily attributable to the strong trading in New South Wales, Victoria and Tasmania and an additional 3 months’ trading from the Birrell Group and an additional 6 and 9 months’ trading respectively from the Crampton and Ireland Groups

Truck Retailing




  • The National Truck division continues to improve profitability, delivering a record PBT result of $9.0 M compared to $6.3 M for the pcp, reflecting strong performance in all departments including improved results from the new truck division and service division
  • Revenue increased by 4.9% reflecting strong performance in the Victoria and South Australia truck divisions, partly offset by the divestment of Sydney Truck Centre in June 2017 with the segment continuing to restructure the business to drive business optimisation and deliver improved return





  • The value of the property portfolio increased to $307 M as at 31 Dec 2017 compared to $299 M as at 31 Dec 2016
  • The Property segment profit contribution of $32.0 M was higher than the previous year of $28.2 M, due to strong outcomes achieved from the Company’s management of its property portfolio contributing an additional $10.6 M to pre-tax profit in 2017





  • The Investment segment registered a pre-tax loss of $8.4 M in 2017 compared to a loss of $24.0 M for the pcp, due primarily to an unrealised revaluation loss on the AHG investment of $22.9 M
  • As at 31 December 2017, the 23.81% strategic investment in AHG had a market value of $287.4 M based on a closing share price of $3.64 per share






3. Strategy


Key strategies include:[3]


  • Although the market dynamics remain challenging, the Company is encouraged by the record National new vehicle market volumes with continued record affordability and aggressive manufacturer sales campaigns driving customer demand
  • Operationally, its initial focus during the first half of the year is to complete the portfolio adjustments identified as unsustainable that required the $5.2m restructuring charge. This is expected to be completed by July 2018
  • Concurrently the Company expects to grow EPS from recent (2016/2017) acquisitions in line with historical trends and continue to redevelop and reorganise its inner-city Brisbane facilities (Newstead, Woolloongabba, and Windsor) to provide improved long-term solutions for all stakeholders
  • Strategically, the Company remains focused on being Australia’s leading automotive retail partner and its two-pronged approach of driving value from existing business through process improvement, operating synergies, portfolio management and organic growth, while taking advantage of value-adding acquisition opportunities as they present themselves
  • In addition, the Company continues to grow and invest in alternative and complementary related models while exploring alternate mobility solutions via innovative vehicle usage and ownership platforms. Carzoos continues to be a focus as the Company refines the business model to ensure scalability benefits can be realised and maximised in the mid-term. A.P. Eagers plans to continue to be at the forefront of delivering mobility solutions while being the preferred partner for customers, manufacturers and the communities in which the Company operates.

4. Markets


The Company operates in markets including:[4]


Industry (Australia)

Industry Revenue

Annual Growth (13-18)

Passenger Car Rental and Hiring

$3 billion (2018)


Motor Vehicle Engine and Parts Repair and Maintenance

$16 billion (2018)


Motor Vehicle Dealers

$63 billion (2017)


5. Competition


Major competitors include:[5]


  • Super Retail Group Ltd (ASX:SUL)
  • Automotive Holdings Group (ASX:AHG)
  • Autosports Group (ASX:ASG)
  • Qube Holdings (ASX:QUB)

6. History



E.G. Eagers & Son Pty Ltd established by Messrs Edward and Fred Eager 



Eagers installed the first motor vehicle assembly plant in Queensland



General Motors-Holden franchises acquired



Eagers Holdings Limited listed on the Australian Stock exchange



Eagers merged with A.P. Group Ltd, a company of which Mr. Alan Piper was the majority shareholder, operating Ford, Toyota, Honda and Land Rover franchises



Porsche, VW, KIA, Volvo, Mazda and MG Rover franchises acquired



Mr. Nick Politis’ WFM Motors Pty Ltd acquired a substantial interest after the death of Alan Piper



Metro/Torque Ford and Toyota business acquired



A.P. Eagers posted a record pre-tax profit of $12.3 million and acquired Jaguar franchise



Market capitalization passed $100 million



City Automotive Group Pty Ltd acquired in July with Mitsubishi, Subaru and Peugeot franchises     

Record Group pre-tax profit of $17.2 million achieved



Record Group pre-tax profit of $19.1 million achieved, turnover surpasses $1 billion

A.P. Eagers acquired a first interstate franchise, Bridge Toyota, in Darwin



Brisbane Motor Auctions and Bayside Honda/Kia businesses acquired in the first quarter

Hidden Valley Ford and the Stuart Motor Group Darwin acquired in August 2006

Record Group pre-tax profit of $36.8 million achieved inclusive of a $15 million profit on sale of surplus property



Record Group pre-tax trading profit of $40 million achieved on turnover of $1.67 billion

Surfers City Holden, Saab, and Hummer acquired in August 2007

Kloster Motor Group acquired in February 2007



Bill Buckle Auto Group acquired in March 2008

The Bill Buckle Auto Group was the premier motor dealership group in Sydney’s Northern Beaches region of Brookvale and Mosman and was A. P. Eagers first acquisition in the Sydney market. They operated four premium brands, Toyota, Volkswagen, Subaru and Audi



Record Group net profit before tax of $52.5 million, record underlying profit before tax of $50.1 million and record annual dividend of 62 cents per share



Late 2010 witnessed further expansion of the Group’s truck and bus operations with the acquisition of Western Star, MAN, Dennis Eagle and Foton truck franchises at Sydney Truck Centre in Narellan, NSW, and Hyundai truck franchises at both Dandenong, Victoria, and Regency Park, South Australia, together with the Higer bus franchises at both Regency Park, South Australia and Narellan, NSW

Adtrans Group acquired in late 2010

Caloundra City Autos group of dealerships acquired in April 2010



Daimler Trucks Adelaide was acquired in September 2011. This business represents Mercedes-Benz,  Freightliner and Fuso products, including trucks, buses, and vans, and was relocated to its existing Regency Park site

Eblen Motors, located at Glenelg and Angaston, South Australia, and representing Subaru, Suzuki, and Isuzu Ute, was acquired in March 2011 to complement Adtrans’ existing motor vehicle operations



Carzoos was established to provide used car buyers with the Carzoos Happiness Guarantee and a 48-hour money back guarantee

Record earnings per share (EPS) of 34 cents



A.P. Eagers celebrated its centenary on 7 January 2013

Main North Nissan and Renault and Unley Nissan and Renault, Adelaide, were acquired in September 2013 to complement the Group’s strongly performing SA cars division

Record earnings per share (EPS) of 36.4 cents

Precision Automotive Technology was established as a new business to source and distribute its own range of car care products under the brand names, Perfexion and 365+



Its Queensland operations expanded through the acquisition of Ian Boettcher Motors representing Mazda, Nissan, Volkswagen, Suzuki and Proton in Ipswich, and the Craig Black Group representing Toyota, Hyundai, Volkswagen, Mitsubishi and Great Wall at multiple locations in the south-west and central Queensland. Volvo Sunshine Coast and Reynella Subaru were also added to the group



Growth in the group portfolio with the acquisition of Motors Group Tasmania, including state-wide representation for Holden, HSV, Hyundai, Citroen, Isuzu Trucks, Volvo Trucks, Mack Trucks and UD Trucks, together with the Victorian businesses Silver Star Motors (Mercedes-Benz) in Doncaster and Burwood, Mercedes–Benz Ringwood and Waverley Toyota in Glen Waverley

The Company launched its first Carzoos retail stores at Westfield Garden City and North Lakes, introducing an entirely new way for customers to buy and sell used cars. Carzoos is supported by the company’s new finance initiative, Simplr



The Company committed to establishing a major new automotive retailing and mobility hub on 61,400m2 within Brisbane Airport’s new $300 M BNE Auto Mall project in 2021. The plan is to create a world-class automotive retailing experience for its customers of the future

7. Team


Board of Directors[7]


Timothy Boyd Crommelin – Chairman of the Board, Member of Audit, Risk & Remuneration Committee

Martin Andrew Ward – Managing Director, Chief Executive Officer

Nicholas George Politis – Director

Daniel Thomas Ryan – Director

David Arthur Cowper – Director, Chairman of Audit, Risk & Remuneration Committee

Marcus John Birrell – Director, Member of Audit, Risk & Remuneration Committee

Sophie Alexandra Moore – Director, Chief Financial Officer




Martin Ward – Managing Director and Chief Executive Officer

Denis Stark – General Counsel & Company Secretary

Sophie Moore – Chief Financial Officer

Keith Thornton – Chief Operating Officer – Cars

Hazel Cromie – Group Human Resources Manager

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8. Financials


2018 Half Year Results Presentation


Financial Year 2016/2017 (ended 31 December):[8]



Revenue ($000)

% Change

Segment Profit before tax ($000)

% Change

Car Retailing





Truck Retailing

























9. Risk


Major risks include:[9]


Credit Risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. Further, it is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. Trade receivables consist of a large number of customers, spread across geographical areas. Ongoing credit evaluation is performed on the financial condition of debtors and other receivable balances are monitored on an ongoing basis, with the result that the Group’s exposure to bad debts is not significant. The consolidated entity establishes an allowance for doubtful debts that represents its estimate of incurred losses in respect of trade and other receivables and investments. With respect to credit risk arising from financial assets of the Group comprised of cash, cash equivalents and receivables, the Group’s maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date is in the carrying amount as disclosed in the statement of financial position and notes to the financial statements. The Group’s credit risk on liquid funds is limited as the counter parties are major Australian banks with favourable credit ratings assigned by international credit rating agencies.


Liquidity Risk

Liquidity risk is the risk that the consolidated entity will not be able to meet its financial obligations as they fall due. The consolidated entity’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions.

The Group’s overall objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans. The Group also manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities


Market risk

Market risk is the risk that changes in market prices, such as interest rates, will affect the consolidated entity’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and monitor market risk exposures within acceptable parameters, whilst optimising the return on risk.


Interest Rate Risk

The Group is exposed to interest rate risk as a consequence of its financing facilities. Funds are borrowed by the Group at both fixed and floating interest rates. The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debt.

The Group’s policy is to keep between 0% and 50% of its borrowings at fixed rates of interest. As at 31 December 2017, approximately 29% (2016: 42%) of the Group’s borrowings were at a fixed rate of interest. The Group hedges part of the interest rate risk by swapping floating for fixed interest rates. The consolidated entity classifies interest rate swaps as cash flow hedges. The net fair value of the swaps at 31 December 2017 was $138,000 liability (2016: $416,000 liability), with the movement being recognised in equity for the consolidated entity.