Automotive Holdings Group Ltd (ASX: AHE) reported a strong first half with revenue and earnings growth both up double digits. Total Australian industry vehicle sales in calendar year 2014 dipped 2% on CY 2013, however Automotive Holdings Group's acquisition of the Bradstreet Motor Group and development of a number of greenfield sites helped boost revenue 10.6%. Stronger passenger vehicle sales offset weaker truck sales.
As the largest auto retailer in Australia, the company retails over 100,000 vehicles a year. Its range of aftersales services allow the Automotive Holdings Group to be involved in almost every aspect of customer vehicle ownership from finance to repairs, tyres and auto parts.
Source: Half-year report
Operating margins improved over the half year for both the auto sales and refrigerated logistics divisions. Together, the two businesses generated a remarkable 17.4% gain in reported net profit after tax (NPAT). At a time when the general economy isn't strong, Automotive Holdings Group drove sales performance.
Managing director Bronte Howson said, "The comparatively low fuel price and interest rates are expected to boost confidence in the automotive sector in the second half of the financial year." Howson also stated the industry forecasts are for a rise in calendar year 2015 vehicle sales.
The company's refrigerated logistics business saw divisional revenue rise from $210 million in first half FY2014 to $319.1 million for a 51.9% gain. The sudden rise came from two acquisitions during the first half, which now make Automotive Holdings Group the largest refrigerated food transport and warehousing business in Australia. Being number one in two industries gives the company good business diversity and economies of scale.
Here are the half-year results highlights:
– Sales $2.57 billion reported total revenue, up 10.6%
– Operating earnings before interest and tax (EBIT) $84.2 million, up 13.1%
– Reported net profit after tax (NPAT) up 17.4% to $45 million
– Earnings per share 14.7 cents per share, unchanged on expanded capital base
– Dividends per share 9 cents per share, up 12.5% from 8.5 cps
Outlook
Automotive Holdings Group expects to realise more integration synergies for its recent acquisitions, which should improve margins. Also, the continuing low interest rate climate should make car purchases more affordable and support the company's growing sales revenue.
The stock is up about 3.2% in morning trading after the results release. Dividend investors who may be looking for a better home for their savings rather than bank term deposits will be pleased with the stock's huge 5.9% fully franked yield. That yield is currently better than all of the big four bank stocks.
