After a rough couple of weeks, leading automotive retail and logistics company, Automotive Holdings Group (ASX: AHG), released its half-yearly results earlier today reporting substantial losses and scrapping its dividend on the back of the writedowns it flagged last week.
The Automotive giant posted a statutory net loss (NPAT) of $225.6 million despite its increase in revenue of 1.7% from $3.16 billion to $3.22 billion. The loss, comparable to the prior period profit of $40.7 million, reflects the slowing car sales and softening consumer confidence with the Group announcing a combined $226 million non-cash goodwill impairment against its struggling Automotive Franchise and Refrigerated Logistics business earlier last week. The Group specified that the write-down followed a review focused on the carrying value of the Company’s assets and reflects the ‘soft market conditions’ across the automotive and logistics sector as well as the underperformance of specific brands and locations. Additionally, the firm blames the chaos in the banking industry, with Managing Director John McConnell noting that the “regulatory changes to the automotive finance and insurance” and the “negative sentiment in property prices”, particularly in Sydney and Melbourne, have all affected the automotive industry. Mr McConnell has said that the company is “not happy”, however current market conditions presented an opportunity to reshape the company’s balance sheet making them ‘ready and able’ to capitalise on opportunities.
The loss primarily came from Automotive Holding’s automotive retail operations copping a $144.6 million hit, while $29.1 million in one-off costs were related to the restructuring and trading losses on the closed operations of its underperforming businesses.
Furthermore, the Group has stated that it will not pay an interim dividend, having paid a fully franked 9.5c per share a year ago. Mr McConnell announced the suspension of their existing dividend policy of 65-75% of operating profit while moving to a targeted gearing range of 1.5-1.75 times. The Chief Executive states that the decision to modify the policy was based on the uncertainty around the automotive industry as well as the opportunity for the company to re-invest in the balance sheet and build long-term shareholder value.
Moving forward, consistent with the decline in the automotive market, the company has also advised its forecast for full-year operating NPAT to be cut from $56-59 million to $52-56 million. Despite this, the company remains positive stating that “they have a number of initiatives underway” and that they are confident in their strategy. The firm believes that it is well-placed to benefit from the inevitable cyclical recovery in the retail market, especially in the Western Australian market and from manufacturers. In addition, due to the stagnant growth, AHG has also announced that it has commenced a strategic review of its refrigerated logistics business and has appointed Luminis partners as joint advisers.
Upon the release, Automotive Holdings Group experienced a rather interesting trading session, falling almost 9% at its intraday low (early in the trading session), Subsequently, the stock experienced a swing intraday, closing ………………
The question moving forward, is the company’s ability to rebound operationally; and with regards to its share price, are we simply seeing a dead-cat bounce?