AP Eagers divests refrigerated logistics business to free up debt
27 February 2020, Written by David Simmons
365体育投注 Australia's largest automotive retailer AP Eagers (ASX: APE) has entered into a $100 million deal that will reduce its net debt by around $95 million.
The company has sold its refrigerated logistics division to Sydney-based private equity firm Anchorage Capital Partners on a debt and cash free basis.
AP Eagers acquired the refrigerated logistics division after its merger with Automotive Holdings Group in July 2019.
The division comprises all of the transport, warehousing operations and associated employees of Rand, Harris, Scott's and JAT.
365体育投注 AP Eagers CEO Martin Ward says the sale achieves the group's objective to divest the division as soon as commercially possible at a reasonable price.
"The sale of AHG Refrigerated Logistics is consistent with our strategy to focus on our core automotive retailing business," says Ward.
"Anchorage is the ideal owner for the Refrigerated Logistics business and has indicated a commitment to continue to invest and grow the business. We believe that the business will have a positive future under its new owners."
365体育投注 On completion of the deal AP Eagers will receive cash proceeds of approximately $100 million which will be used to repay all finance leases and hire purchase liabilities associated with the division, resulting in an expected reduction in net debt of approximately $95 million.
AP Eagers accelerates through transformative times
AP Eagers was in the fast lane during 2019, focusing on a program of transformation with a key merger at its heart.
365体育投注 After overcoming an ACCC order to divest the Kloster Motor Group from its core business because of the watchdog's anti-competitive concerns AP Eagers completed its merger with Automotive Holdings Group (AHG) in 2019.
This major moment for the company was reflected in its bottom line however, with the merger resulting in a $209.2 million non-cash impairment.
365体育投注 AP Eagers, now Australia's leading automotive group following the AHG merger, posted an underlying profit before tax of $100.4 million in FY19, down $3.1 million on FY18 due to flat car sales industry-wide.
After tax the company was left with a loss of $80.5 million for the financial year, down from a $97.5 million profit in FY18.
The merger with AHG clearly weighed the company down during the year, considering AP Eagers increased its revenue by 41.4 per cent to hit $5.8 billion in FY19.
AP Eagers managing director and CEO Martin Ward says the AHG merger will benefit the company moving forward as the Australian car market evolves.
365体育投注 "Our rationale for bringing these two businesses together was clear: the industry is undergoing significant structural change and a national business of scale will be better placed to compete and invest as the market continues to rationalise," says Ward.
"While the 2019 result reflects the noise of this major acquisition, some select investments and significant restructuring costs, we are clear on our plan to deliver short and medium term synergies and long term competitive advantage from this strategic combination."
365体育投注 AP Eagers says it is already in a good position in the beginning of its FY20, with the underlying core automotive result for January 2020 demonstrating strong profit growth on the prior corresponding period.
365体育投注 In the near term the group is focussed on delivering improved operational performance through the ongoing integration of AHG, the divestment of non-core assets, and effectively managing the exit of Holden from the Australian market.
At this point in time AP Eagers says it is still too early to assess what impact the exit of General Motors from Australia will have on its business but acknowledges an additional impairment could result in its car retailing segment.
365体育投注 AP Eagers owns 19 Holden dealerships nationally and compensation negotiations with General Motors are ongoing.
The company has confirmed that Holden parts and services outlets will continue to support customers with repairs for the next 10 years, but ultimately General Motors has ended its 90+ year relationship with AP Eagers.
365体育投注 Shares in AP Eagers are up 3.65 per cent to $8.80 per share at 12.34pm AEDT.
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Business News Australia
Author: David Simmons