Auto giant won’t pay back cent of $130m JobKeeper
The country's biggest car dealership group has reinstated and more than doubled its final dividend as it emerges from COVID-19 and another year of sluggish new car sales.
Eagers Automotive shareholders will receive 25c per share, up from 11.25c in 2019, after the company returned to the black with a $156.2m net profit for the 12 months to December, up from a $139.6m loss in the prior year.
The result comes as the company's chief executive Martin Ward announced he was transitioning into a new advisory role, paving the way for chief operations officer Keith Thornton to take the reins as CEO. The move came into effect on Wednesday.
Eagers Automotive slashed 1200 employees in response to COVID-19, forming part of a cost cutting exercise that helped shave $100m from the company's annual expenditure.
JobKeeper followed, delivering $129.6m of financial support for around 6500 staff, and saving 2000 jobs, according to Mr Thornton. The company won't be paying any of the JobKeeper funds back to the federal government.
"Prior to announcement of any broad-based government stimulus, the company had experienced 23 consecutive months of year-on-year new car sales decline - the longest period of decline for the industry on record," he said.
"Government imposed lockdowns and restrictions on trading caused an immediate and severe reduction in demand, and it wasn't until the introduction of government stimulus measures following the lifting of lockdown restrictions that we saw consumer demand return.
"While there are a number of highly successful measures implemented by the government to support businesses across all industries ... it was the instant asset write off and JobKeeper that were two initiatives that were most impactful in our sector.
"We estimate JobKeeper saved around 2000 jobs at Eagers - it enabled us to eliminate the need for further company-wide restructuring, kept employees connected to our business and then facilitated a faster rebound as the broader economy recovered."
Eagers Automotive suspended its interim dividend last year, while director fees were also suspended during the pandemic and senior executives took pay cuts.
A further eight months of declines in new car sales followed the onset of COVID-19, but in November the market recorded its first month of growth, up 12.4 per cent. It has been followed by two more months of increasing sales.
"Consumer demand for motor vehicles has changed as the broader social and economic impacts of COVID-19 unfolded over the past 12 months," Mr Thornton said.
"Restrictions on international travel has resulted in a reallocation of consumer spending while changes in personal attitudes to public transport have also driven higher demand for vehicles."
Revenue at the automotive group was up from $5.8 billion to $8.7 billion in its first full year following the $2 billion acquisition of Automotive Holdings Group, while underlying profit before tax was up from $100.4m to $209.4m.
The company said the merger had delivered synergy savings of $35.8m during the year, exceeding the $30m target.
Meanwhile the exit of Holden from the Australian market delivered $80.7m of impairments to the company's Holden properties and other assets, while several other properties in South Australia and Queensland were revalued down by $10m.
As part of its strategy to emerge from COVID-19, Eagers Automotive is targeting the acquisition of more leased sites following eight acquisitions last year.
A further four sites have been purchased since the start of this year, increasing the value of the company's owned property portfolio to $469m.
After 16 years as CEO, Mr Ward will have responsibility for the company's portfolio of owned and leased properties, and strategic investments such as Auto Mall development at Brisbane Airport.
"It's associated with us choosing certain locations and strategic areas where we want to do more than just buy and own the property - it's where we want to restructure," he said of the asset acquisition strategy.
"It gives us greater flexibility as we exercise over the next decade the approach to this omni-channel which will have more stuff online, more stuff in malls - it's changing over a ten-year period rather than a rush to go and own property for the sake of it."
Mr Thornton has been with the company for 18 years, including as its COO since 2017.
Originally published as Auto giant won't pay back cent of $130m JobKeeper