AP Eagers : Half Yearly Report and Accounts

24 August 2016‌‌‌‌‌‌

Company Announcements Office ASX Limited

• Record Half Year Net Profit Before Tax of $67.9 million (2015HY: $59.5 million) up 14.0%.
• Record underlying Profit Before Tax(1) of $66.6 million (2015HY: $58.5 million) up 13.9%.
• Record Statutory Profit After Tax of $49.1 million (2015HY: $44.1 million) up 11.5%.
• Record Half Year Earnings per Share (basic) of 26.2 cents (2015HY: 24.5 cents) up 7.0%.
• Record Interim Dividend of 13.0 cents per share (2015HY: 12.0 cents) up 8.3%.

The following documents for our half year ended 30 June 2016 are attached:

1. Half Year Report - Appendix 4D and commentary

2. Directors' Report

3. Interim Financial Report

4. Auditor's Report and Declaration of Independence

These are given to the ASX under listing rule 4.2A and are to be read in conjunction with our most recent annual financial report.

Yours faithfully

The Directors of A.P. Eagers Limited (ASX: APE) are pleased to report a 2016 half year Net Profit Before Tax of

$67.9 million. This compares to a half year Net Profit Before Tax of $59.5 million in 2015, an increase of 14.0% on the previous corresponding period (pcp). Net Profit After Tax for the 2016 half year was $49.1 million as compared to $44.1 million, an increase of 11.5% on the pcp. Earnings per share (basic) for the 2016 half year is

26.2 cents compared to 24.5 cents on the pcp.

Strong trading performances in New South Wales and South Australia and improved trading in National Truck operations more than offset slower trading performance in Queensland compared with its record results in 2015 which benefited from the increased activity generated by the November 2014 hail storm in Central Brisbane.

A fully franked interim dividend of 13.0 cents per share (2015: 12.0 cents) has been approved for payment on 7 October 2016 to shareholders who are registered on 16 September 2016 (Record Date). The Company's dividend reinvestment plan (DRP) will not apply.

According to Federal Chamber of Automotive Industry statistics, Australia's new motor vehicle sales increased by 3.4% in the half year to 30 June 2016 as compared to the pcp. New vehicle sales in Western Australia and Tasmania decreased on the pcp by -4.3% and -2.8%, respectively. Strong growth was experienced in New South Wales (+7.3%) and Victoria (+3.7%) with relatively flat market growth in Queensland (+0.6%) and Northern Territory (0.1%).

Private sales decreased by -4.5% but this was more than offset by a 15.8% increase in business sales. Luxury brands such as Audi, BMW, Mercedes-Benz, Land Rover, Volvo, Jaguar, Mini, Lexus, Porsche, Infiniti and Maserati all recorded record sales as their respective lower-priced product offerings captured market share, with entry to new model segments key to a large part of this growth. This segment grew from 10.1% to 11.7% of total market share.

(1) Underlying adjustments include Business acquisition costs $0.6 million (include taxes, legal and other costs associated with business acquisitions) and benefit from tax refunds associated with previous years' GST payments $1.9 million.

Australian manufactured vehicles represented only 6.8% (2015: 7.9%) of new cars sold in the national market in the first half of 2016.

Nationally, the Heavy Commercial segment recorded a 2.9% increase with significant increases in light duty trucks being offset by declines in heavy/medium duty sales.

The Group's NSW car dealerships, Klosters and Bill Buckle Autos, capitalised on the strong growth in NSW vehicle sales, resulting in the NSW Car Division achieving record financial results for the half year.

The Queensland and Northern Territory division continued to perform at historically strong levels. Year-on-year performance was down however this was more reflective of the exceptional hail driven market dynamics of the 2015 half year rather than a softening of the market or material operational deterioration. A major focus will be the integration of the Crampton Automotive Group acquisition from July 2016 and the Tony Ireland Group in the final quarter. These businesses offer incremental growth along with economies of scale benefits through the establishment of a new Western / Northern cluster.

The Birrell Group acquisition which includes the Motors Group Tasmania, Silver-Star Motors (Mercedes-Benz) in Doncaster and Burwood, Mercedes-Benz Ringwood and Waverley Toyota has made a solid start.

Our current used car business operating across the existing dealership operations was re-branded to Zooper on 1 May 2016. This rebranding supported further investment in the first half with the opening of additional standalone used retail sites and vehicle sourcing activities.

Our all-new Carzoos retail store aimed at delivering a completely new way for customers to buy and sell used cars will be launched in mid-September 2016 at Westfield Garden City shopping centre in South Brisbane. A second store will open in Northlakes in North Brisbane around November. Carzoos will be supported by the Company's new finance initiative, Simplr, aimed at providing a completely new and entirely consumer-centric finance option that leverages the Group's extensive portfolio of partner finance providers.

Redevelopment of the Group's Newstead dealership properties continues with the opening of the new Volkswagen dealership in April 2016. The redevelopment of Land Rover, Jaguar and Volvo dealerships commenced in June and is expected to be completed prior to March 2017 when the Company exits the Fortitude Valley site.

Consolidated results

Total revenue increased by 12.1% to $1.838 billion in the 2016 half year, with all business units reflecting increases in vehicle sales. The additional contribution from the Birrell Group acquisition since April 2016 and strong trading in the NSW car division also combined to boost total revenue. On a like-for-like basis, revenue increased by 5.3% compared to the pcp.

EBITDA increased by 11.8% to $86.7 million in the 2016 half year (2015 half year: $77.5 million). Profit margins were consistent as indicated by the EBITDA/Revenue ratio of 4.7% (2015 half year: 4.7%) and the NPBT/sales ratio improving slightly to 3.7% from 3.6% (2015 half year).

Borrowing costs increased by 8.3% to $12.4 million for the 2016 half year, reflecting higher average debt (including additional bailment finance for the 2016 acquired businesses) being offset by lower margins and interest rates. The decrease in depreciation and amortisation costs of 2.1% to $6.4 million (2015 half year: $6.6 million) reflects the slight reduction relating to the sale of a rental car business last year.

Profit before tax included a half year dividend from Automotive Holdings Group Limited (AHG) of $5.8 million, compared to $5.5 million in the pcp.

Segments (2)

Profit before tax from the Company's Car Retail segment for the period was $50.7 million, compared to $47.7 million for the period ended 30 June 2015. Revenue increased by 12.9%, with the increase primarily attributable to the strong trading in NSW and three months of trading from the newly acquired Birrell Group offset by lower results in Queensland. The strong trading was also reflected in the parts and service business with improvements across all businesses.

The National Truck division (Truck Retail segment) profit before tax result delivered a significantly improved profit performance of $3.2 million for the half year compared to $0.8 million for the pcp. Revenue increased by 5.5%