Shares to Buy Automotive Holdings Group (AHE)

Automotive Holdings Group ASX AHEAutomotive Holdings Group (AHE) is a leading automotive retail and logistics group that can trace its origins back to 1952.  AHE operates 106 dealerships over four Australian states and New Zealand.

The group is the largest vehicle dealer group in Australia, with high profile passenger and commercial vehicle dealerships primarily operating from leased premises.

AHE has been one of the hot stocks since November, surging from around $2.13 to be currently trading around $2.76.

Earlier this month, AHE announced a net profit after tax of $29.6 million for 1H11, up 103% on the prior year’s half.

Underlying earnings improved 13.8% on year to $65.9 million, while AHE’s automotive division saw a strong 1H11 result, with solid profits on strong consumer demand.

Diversified auto ace

AHE is Australia’s largest automotive retailer, operating its businesses throughout Australia through subsidiaries.

The group has its major operations in Western Australia, New South Wales and Queensland.

AHE also operates the Prestige Hino truck dealership in Dandenong, Victoria – one of the largest in the country, and a leading Toyota dealership in Melbourne.

The company operates its logistics businesses in Australia through subsidiaries Rand Transport (transport and cold storage), AMCAP (motor parts and industrial supplies distribution) and VSE (providing vehicle storage and engineering).

Other subsidiaries include Genuine Truck Bodies (which provides body building services to the truck industry) and KTM Sportmotorcycles (motorcycle importation and distribution in Australia and New Zealand).

With its expanded network, AHE boasts franchises covering 10 out of the top 11 passenger vehicle brands in Australia by new vehicle sales volume.

This diversification provides a level of protection against shifts in consumer preference.

Pumping profit

On 18 February, AHE announced a net profit after tax of $29.6 million for the six months to 31 December 2010, up 103% on the prior year’s half.

This was achieved on group revenue of $1.69 billion, up 5.1%.

Statutory net profit after tax (NPAT) for 1H11 was $33.6 million, which included $4.92 million from the profit of shares.

Underlying earnings improved 13.8% on year to $65.9 million, while the group EBITDA margin was stronger at 3.9%, up from 3.6% previously.

Underlying earnings per share (EPS) came in at 13.1 cents, up from 12.7 cents previously, and AHE declared a half dividend of 7 cents per share, flat on year.

Automotive Holdings Group noted the result was strong considering increased interest rates, a higher company tax rate and soft results in Queensland.

Divisional strength

AHE’s automotive division saw a strong 1H11 result, with solid profits recorded in operations in Western Australia, New South Wales and New Zealand.

Underlying earnings for the division were up 115.1% on the previous year’s half on strong consumer demand.

National vehicle sales increased 4.4% to 1.04 million for the CY10 and industry forecasts a similar result for CY11.

AHE’s Logistics division contributed underlying earnings of $16.5 million (an increase of 9.8% on year) whilst the Transport and Cold Storage segment benefitted from increased storage and transport volumes.

AMCAP, the automotive parts distribution business, had a solid first half with strong results from the truck parts and automotive refinish areas.

Despite a national motorcycle market decrease, KTM Sport motorcycles enjoyed increased volume of 12%, boosted by new model releases in the motocross segment and the continued demand for its Husaberg line of bikes.


AHE remains optimistic about the economic outlook and general trading conditions for 2H11 after reporting a bumper 1H11 result.

The company states its automotive division will continue to perform following key management changes to its Queensland operations and continued demand for new vehicle registrations following the flood damage on the eastern seaboard of Australia.

The steady performance from AHE’s Logistics division is also expected to continue as AMCAP maintains its strong market position.

AHE is pursuing growth opportunities in both Automotive and Logistics and the company’s resilient business model means AHE is well-positioned to deliver solid financial results going forward.

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