AUTO RETAIL GROUP DRIVES CAR SALE OPTIMISM FOR 2012
Written on the 12 April 2012
A FORTITUDE Valley automotive retail group reveals a tough market does not necessarily translate into reduced motor vehicle purchases.
AP Eagers (APE) is upbeat about car sale prospects, despite the struggling retail sector.
This is because motor vehicles are significantly cheaper than in previous decades, according to CEO Martin Ward (pictured).
“People have done calculations on how many weeks of wages it took for people to pay 10 to 15 years ago and found modern cars are significantly cheaper,” he says.
“Retail is tough, but Federal Chamber of Automotive Industries evidence does not show motor vehicle intake is much less. Before the GFC hit car sales exceeded the annual million mark, but dropped to around 950,000. Last year it returned to more than a million and this year we expect 1.08 million units.”
However, a balance has to be made within the million and 1.05 million range otherwise it will have major market effects, he says.
“If all motor vehicle producers decided to bring 1.3 million vehicles into the market it would bring the biggest disaster. It would force them into a market where demand does not meet supply,” says Ward.
“It is better to sell fewer vehicles and discount less due to the shortage of supply. We do not want to follow the US where unit intake fell from 16 to 10.5 million during the GFC.”
APE reported a $40.3 million net profit after tax for calendar 2011, representing a 27 per cent increase on 2010. Revenue rose 32 per cent to $2.384 billion as a direct result of acquisitions.
“There was no revenue growth in the existing businesses. We acquired the 73 per cent stake in Adtrans Group we did not own during October 2010. We thought the price ($100 million) was right,” says Ward.
“(South Australia-based) Adtrans had a corporate structure and infrastructure it did not need, so we made direct savings from the lack of need for a separate company structure and achieved synergies in telephone, finance and areas of buying across the two groups.”
APE also bought the Eblen Subaru Group in March 2011.
Corporate debt owing to ANZ, NAB and St George reduced 10.8 per cent to $150 million during calendar 2011.
“We also reduced debt on individual vehicles via our floor-plan financing arrangements,” says Ward.
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