Target AHG downgrades FY profit guidance
May 14, 2019
header-image

Takeover target Automotive Holdings has downgraded its profit guidance and warned that its full-year results could also contain writedowns.

AHG - which last week recommended an improved offer from rival auto retailer AP Eagers - said on Tuesday that challenging retail conditions and subdued trade in its refrigerated logistics division around Easter meant it expects operating profit of about $50 million.

That compares to previous guidance of $52 million to $56 million.

AHG also warned the full-year result could be adversely affected by consumer patterns around this weekend's federal election plus any impact from a review of the carrying value of previous and current year receivables.

"While this review is ongoing and the extent of its financial impact on the AHG Group is not yet certain, it may result in some write down of the division's receivables generated across one or more periods," AHG said in a statement.

The company in February reported a $226 million first-half loss after writing down its franchised and refrigerated logistics businesses by $223 million.

AHG said it does not believe there would be a material impact on its balance sheet or future cashflows from any additional writedowns, and they would not affect the AP Eagers bid.

The two companies last week entered into an implementation deed after AP Eagers raised its all-scrip offer to one share for every 3.6 AHG shares, instead of one for 3.8.

Assuming regulatory approval is granted, the merged group is expected to have a market capitalisation of approximately $2.3 billion.

At 1152 AEST, AHG shares were 1.3 per cent lower at $2.35, in line with the overall decline in the Australian share market.

The stock is still up about 50 per cent this calendar year on AP Eagers' interest.