AP Eagers Ltd (ASX: APE) reported its result for the full year to 31 December 2017.
AP Eagers is one of Australia's largest automotive retail groups and certainly the oldest, having operated for more than a century.
Here are some of the highlights compared to the prior corresponding period:
- Revenue increased by 6% to $4.06 billion
- Earnings before interest, tax, depreciation and amortisation (EBITDA) decreased by 2% to $176.7 million
- Cash from operating activities increased by 32% to $145 million
- 'Underlying' profit before tax up 2% to $140.8 million
- Statutory earnings per share (EPS) down 9% to 50.3 cents
- Dividend up 3% to 36 cents
One of the main detractors from the performance was a $5.2 million write-off and restructuring of underperforming and sustainable businesses.
A worrying factor that I noted in the report was that operating earnings has dropped from $88.5 million in the second half of 2016, to $82.9 million in the first half of 2017 and then dropped to $80.8 million in the second half of 2017. If this trend continues then it will start putting a bigger dent in AP Eager's business.
The operating profit margin is also slowly dropping. In 2015 it was 4.8%, in 2016 it was 4.5% and in 2017 it was 4%.
You can usually count on AP Eagers to increase the dividend, with the GFC being the only year with a reduction since 2003. The dividend has grown every year since 2008.
The car retailer said that it generated record results in Victoria and Tasmania, but there were challenging market conditions in South Australia and Queensland. Perhaps this is a sign that the Aussie consumer is struggling to justify, or afford, a new car purchase in the current climate.
Outlook
The company is going to complete portfolio adjustments relating to underperforming operations. AP Eagers aims to grow EPS from acquisitions in line with historical trends.
It will continue to develop its Brisbane facilities and drive value from existing businesses through process improvements, operating synergies, portfolio management and organic growth.
Foolish takeaway
The market was indifferent to the report with the share price being flat at $8.40 today. I thought the report was okay, but the trend seems to be that profits are heading downwards. If I were a shareholder I might want to consider selling, I don't believe it is a market-beating opportunity at the current price.
