Shares of AP Eagers Ltd (ASX: APE) surged higher today after the motor vehicle group provided its latest guidance on earnings for the six months ended 30 June 2015. The car retailer said that it expects to report a net profit after tax (NPAT) of $59.5 million when it releases its results on 26 August, which represents a 29% increase on the $46 million reported in the prior corresponding period.
It also exceeds the guidance set by management in April when it expected NPAT to be between $54 and $58 million, bolstered by strong first-quarter activity as a result of a severe hail storm late last year. The storm generated strong demand for new and used cars as well as parts sales in south east Queensland.
In the latter half of the period, it's likely that AP Eagers also benefited from the budget tax breaks for small businesses, which gives small business owners the ability to immediately write-off purchases up to $20,000.
As a result, vehicles purchased under this price were always going to be in high demand in the lead up to the end of the financial year. Investors embraced the news, bidding the shares almost 6% higher to $9.62 after hitting a high of $9.72 earlier in the day. The update also bodes well for Automotive Group Holdings Ltd (ASX: AHG) (of which AP Eagers owns 19.9%) whose shares also popped 2.2% higher.
