Eagers share price edges higher after 'robust first half'

The automotive dealership company has released its results for 1H22. Here are the details.

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Key points

  • Eagers announced its 1H22 results this morning, revealing a fall in revenue and net profit after tax
  • An ordinary interim fully franked dividend of 22 cents per share was declared for 1H22
  • Management is confident in the outlook despite global uncertainty and macroeconomic challenges

The Eagers Automotive Ltd (ASX: APE) share price is bouncing back this afternoon after the company announced its results for the first half of 2022 on Thursday morning.

The Eagers share price is currently up 019% at $13.335. That comes after it fell as low as $12.74 earlier in the day, a fall of 4% on Wednesday's closing price.

Let's see what the ASX-listed automotive dealership company reported.

Eagers share price edges higher on 1H22 result

Here is a quick snapshot of the key results for 1H22:

  • Revenue of $4.2 billion, down 10.3% from $4.7 billion in 1H21
  • Net profit before tax fell 7.8%, from $267.4 million in 1H21 to $246.5 million
  • Net profit after tax (NPAT) fell 11.6%, from $202.3 million in 1H21 to $178.7 million
  • Earnings before interest, tax, depreciation, amortisation, and impairment (EBIDTAI) of $336.2 million, down 9.9% from $373.4 million in 1H21
  • Announced a record interim fully franked dividend of 22 cents per share (cps) for 1H22

Revenue was adversely impacted by the one-off divestment of the Daimler Trucks in 2021 and ongoing supply chain constraints on new vehicle deliveries. Supply chain issues have caused disruption to logistics and labour.

As a result, Eagers' bottom line also fell in line with revenue but to a lesser extent.

The company said demand for new vehicles continues to exceed supply as its order book is 32% greater on a like-for-like basis since December 2021.

Even though revenue fell and profit went down, operating cash flow rose from $204.2 million in 1H21 to $232.6 million.

A record ordinary fully-franked interim dividend of 22 cps was approved for payment on 23 September to shareholders who registered on 5 September. That's a 10% increase on the 20 cps in 1H21.

Eagers' dividend reinvestment plan will not operate in relation to the ordinary dividend.

What else happened in 1H22?

The automotive company continued to invest in scaling the independent pre-owned business easyauto123 to drive more revenue and volume growth across Australia and New Zealand.

Eagers rolled out new automotive retail formats like the AutoMall West located at Indooroopilly
Shopping Centre in west Brisbane, which opened in April.

The company continued to expand its network to include new vehicle energy manufacturers in the hybrid, electric and hydrogen space.

Eagers also announced plans to carry out an on-market share buyback of up to 10% of issued share capital. It said the buyback "reflects the Board's focus on active capital management and is testament to the Company's strong balance sheet and record available liquidity".

The company reported $842.8 million of available liquidity at 30 June 2022, which it said was "a record level". The liquidity position includes available cash and undrawn commitments under corporate debt facilities.

What did management say?

Commenting on the results, Eagers CEO Keith Thornton said:

The robust first half performance reflects the strength of our underlying business, disciplined management of our rebased cost profile and strong progress on strategic frowth initiatives, which have together enabled us to capitalise on favourable market dynamics.

Demand has materially exceeded supply during the first half and our key lead indicators, including new vehicle order bank, remain at record levels.

Our leading position in large addressable markets, balanced economic model and diverse geographic footprint, ensure the business is able to withstand changes in market conditions. In addition, the combination of growth from our existing business, new entrants to the market wanting to partner with us and strategic acquisition opportunities provide a significant platform for sustainable earnings growth over the long term.

What's next for Eagers?

Management expects demand for vehicles to continue to outstrip supply in 2H22.

The management team is focused on enhancing productivity via property and staff and rolling out omnichannel offerings. It expects the ACT and South Australian acquisitions to be fully integrated in 2H22.

As for future acquisition opportunities, management will continue to evaluate this via existing partnerships and new market entrants.

Eagers share price snapshot

The Eagers share price has dropped by around 21% over the past year and 5% year to date, but is up 7% over the past month.

In comparison, the S&P/ASX 200 Index (ASX: XJO) has fallen 6% over the past year and 7% year to date, but has risen 4% across the last month.

Eagers has a market capitalisation of $3.4 billion.

AP Eagers is currently trading at a price-to-earnings multiple of around 10x.

Motley Fool contributor Raymond Jang has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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