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Profit drops at AHG

Posted on 27 February, 2017

The Australian Automotive Holdings Group (AHG) reported a $46.89 million after-tax profit for the second half of 2016, down 11 per cent on the previous corresponding period. Operations revenue grew seven per cent to $3.15 billion, up from $2.93 billion for the same half-year period in 2015. This growth was eroded by an eight per cent increase in raw materials and inventory expenses to $2.36 billion. Other expenses, such as employee benefits, vehicle preparation and occupancy costs, also increased. Automotive retail revenue remained static at $2.41 billion, compared to the corresponding 2015 period. Market growth is currently varied across Australia. The eastern and northern states, including Victoria, ACT, the Northern Territory and New South Wales had increasing sales in 2016. Sales fell, however, in Queensland, Western Australia and South Australia. Despite the lacklustre Western Australia market, AHG managing director John McConnell said the company saw “above-average” results in Queensland, and “strong automotive revenue and earnings growth in New South Wales and New Zealand.” McConnell said Automative Holdings remains focused on growth and cost control and would “continue to monitor underperforming businesses with a view to turnaround or divest as required.” Outlook is strong for the second half of 2017, although potential upcoming policy changes around automotive retail has the AHG board cautious of the future. “The current ASIC [Australian Securities and Investments Commission] and ACCC [Australian Competition and Consumer Commission] reviews of finance and insurance commissions, once finalised, will most likely lead to industry‐wide changes to the revenue mix and cost base at dealership groups and the relative shares of vehicle sales margins, finance and insurance sales, aftermarket and vehicle servicing,” McConnell said. “We expect these changes to commence across the industry after the current financial year with an extended transition period,” he added. “What we do not expect to change is AHG’s position as Australia’s largest automotive retailer.” AHG has 110 dealerships across Australia and seven Holden, Nissan and Mazda dealerships in New Zealand.