The AP Eagers Ltd (ASX: APE) share price is trading slightly lower in early trade after the company released an announcement to the market regarding underpayment of employees.
What did AP Eagers announce?
AP Eagers issued an announcement to the market this morning regarding the underpayment of some employees. According to the company, anomalies in its payroll system have unintentionally resulted in a number of employees not being fully compensated.
AP Eagers estimates that approximately 6,200 employees have been impacted over a 7-year period. The shortfall in payments is estimated to be $4.5 million over that period.
AP Eagers CEO Martin Ward said, "AP Eagers is committed to paying the amounts owed to past and present employees, in full and with interest as soon as practically possible."
The inconsistencies in employee payment were detected whilst the company was implementing a new time and attendance system for its payroll. AP Eagers self-reported to the Fair Works Ombudsman and pledges to fully cooperate if any investigation is conducted.
AP Eagers has also committed to review the payment of AHG employees following its acquisition of the company earlier this year.
How has AP Eagers performed in 2019?
The AP Eagers share price more than doubled in 2019, hitting an all-time high of $14.49. The company's share price came under pressure in early November after AP Eagers warned investors that external conditions continue to make the automotive retails sector challenging.
According to the company the overall market for new vehicle sales has been in decline for 19 consecutive months, representing a decrease of 126,000 units sold over the same period. with national new vehicle sales down 8% on the prior corresponding period, AP Eagers forecasted a 6% decline in underlying profit before tax for the 10 months ending 31 October 2019.
Despite the sell-off, the company's share price is still up more than 75% for the year. Despite today's announcement, AP Eagers is a well-managed business and the acquisition of AHG provides the company with exposure to a further 27 car brands and 10 truck/bus brands.
The company does operate in a cyclical industry, however some analysts believe that the automotive cycle is bottoming. A revival in the sector could see AP Eagers derive significant revenue and cost synergies.
