Automotive Holdings Group has reported a decline in operating profit for the 2018 financial year, citing weakening demand in Western Australia despite positive economic indicators.
Perth-based AHG posted an operating net profit after tax of $74.8 million, down 14.4 per cent on last year’s result of $87.3 million, despite a 6 per cent uptick in revenue to $6.47 billion.
The company said its statutory net profit fell 41.2 per cent to $32.6 million, primarily due to lower segment operating contributions and one-off costs associated with the closure of underperforming businesses.
Revenue from AHG’s automotive business increased 7.2 per cent to $5.61 billion, however, operating profit from the division was down 6 per cent due to changes to finance and insurance commissions and falling margins.
The company’s refrigerated logistics division registered a slight increase in revenue, but operating profit before tax fell from $2.8 million last year, to a $2 million loss in FY18.
AHG attributed the performance to disruptions associated with the attempted sale of the business to Chinese conglomerate HNA Group, which fell through last month, and increased depreciation charges.
In its outlook, the automotive company highlighted the weakness in the WA market over the past year, but is hopeful of an improvement in 2019.
“The Western Australian private buyer market continued to decline despite more positive lead economic indicators,” AHG said.
“AHG remains well placed to benefit from the recovery of the private buyer market in WA.
“We remain cautious about the short term outlook given the impact of falling house prices on consumer demand, further potential impact from flex commission changes, and the time taken for the market to recover margins eroded by the current discounting required by the industry to achieve some manufacturer targets.”
Shares in AHG were up 0.84 per cent at $2.41 each at 3pm AEDT.
