Investors flocking to buy shares in dealership group

In the past 12 months Australian investors flocking to buy shares in vehicle retailer Eagers Automotive have pushed the value of the company’s shares up by 300%

Eagers Automotive operates more than 250 new vehicle franchise dealerships across Australia and New Zealand as well as the easyauto123 used vehicle retail brand.

According to The Motley Fool, despite its limited exposure to e-commerce, Eagers Automotive has been an unexpected post-pandemic winner.

In its recently released trading update Eagers Automotive expects to record an underlying operating profit before tax from its operations for the three months ended 31 March 2021 of approximately $98 million.

It says the net profit before tax from continuing operations for the three months is expected to be $105 million.

“Unusually strong market dynamics, characterised by demand outstripping supply, combined with the ongoing benefits of our material cost out program completed over the last 12 months, have underpinned this result,” the company says in a statement.

Eagers Automotive says it remains focused on balancing the risk of changing market dynamics with the continued internal execution against its Next 100 strategy and disciplined cost base management.

The announced sale of its Daimler Truck Operations and Milperra property for $108 million to US-based Velocity Vehicle Group is not included in the financial results of this trading update.

The transaction is on track for completion in the first half of 2021, subject to satisfaction of conditions precedent.

It will represent a key step in the simplification of the company’s automotive retail business, delivering an estimated net gain before tax of $32 – $36 million subject to adjustments on completion.