Eagers Automotive : Full Year 2021 Report & Statutory Accounts

For personal use only

24 February 2022

Company Announcements Office

ASX Limited

FULL YEAR ACCOUNTS

Attached are the following documents for the year ended 31 December 2021.

1. Appendix 4E Preliminary Final Report
2. Financial Report which includes:
3. 1. Directors' Report
   2. Auditor's Declaration of Independence
   3. Financial Statements and notes
   4. Independent Auditor's Report

These documents are given to the ASX under listing rules 4.3A and 4.5.

Authorised for release by the Board.

For personal use only

• Strong demand for new and used vehicles throughout the period, with the strength of demand in the new vehicle market (order book) disconnected from reported new vehicle deliveries due to supply chain and logistics disruption associated with COVID-19.
• Our national, fixed price, pre-owned business easyauto123 continues to deliver profit growth with new sites opened in Sydney, Townsville and across multiple locations in Auckland.
• Significant progress on our omni-channel strategy with a core focus on accelerating our technology platform designed to provide an enhanced customer experience, with increased productivity and efficiency.
• Sale of the Daimler Trucks business completed targeted accretive acquisitions of Toowoomba Ford and multi- franchised dealership groups in Cardiff and Maitland.
• Accelerated property strategy focusing on ownership in key strategic locations, with $169 million of property acquired during the period as well as investment in new automotive retail formats, such as AutoMall West located at Indooroopilly Shopping Centre in west Brisbane.
• Seamless leadership succession executed, with Keith Thornton appointed CEO and Martin Ward remaining a strategic advisor to the Board and CEO.

1. Underlying operating results refers to continuing operations, adjusted for significant items outlined and reconciled to statutory results on slides 34 (FY2021) and 35 (comparative financial information) of the Investor Presentation. Underlying operating figures are non- financial measures and have not been subject to audit by the Company's external auditors.

Commenting on the full year performance CEO Keith Thornton said:

"Our record full year results reflect strong market dynamics, our disciplined focus on maximising operational performance and the continued benefits from executing the five pillars within our Next100 Strategy."

"Our franchised automotive business has delivered a record year. The performance was achieved despite significant COVID-19 related disruption, with government mandated lockdowns heavily restricting trading in the second half and was supported by our simplified business and transformed cost base."

"Our Independent Pre-Owned business, headlined by easyauto123, continues to perform well. The business is benefitting from our investment in proprietary technology that provides a seamless omni-channel customer experience and when combined with unique data insights and analytics, is driving a transformation in productivity."

"With our strong financial position and record order bank, we are well placed to capitalise on the transformation and consolidation opportunities occurring across the industry. We have the flexibility and capacity to invest in organic growth and pursue further acquisition opportunities consistent with our Next100 strategy that deliver accretive growth."

Eagers Automotive Limited (ASX: APE) ("Eagers Automotive" or "the Company"), Australia's leading automotive retail group, today announced its results for the twelve months ended 31 December 2021 (FY2021). On a continuing basis, the Company delivered Underlying Operating Profit Before Tax(1) of $401.8 million, compared to $209.4 million in the prior corresponding period (pcp).

Strong economic conditions and changes in consumer behaviour, primarily in response to the impacts of COVID- 19, generated strong demand for new vehicles, with a 14.5% increase in the new car market(2) compared to the twelve months ended 2020. These market dynamics are further buoyed by demand continuing to materially outstrip supply, with the Company's order bank increasing month-on-month over the last twelve months.

Underlying profit continues to be supported by the ongoing benefits of our material cost out program completed over the last 18 months.

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Statutory Net Profit After Tax (including discontinued operations) for FY2021 was $330.7 million, compared to a profit of $156.2 million in FY2020. On a statutory basis (excluding discontinued operations), the Company recorded a Statutory Net Profit Before Tax from continuing operations of $456.8 million for FY2021 compared to a Statutory Net Profit Before Tax of $280.1 million in the pcp. The FY2021 statutory result included significant items totalling $55.0 million net income before tax, predominately relating to the gain on sale of assets totalling $42.9 million, offset by non-cash impairments of $5.2 million associated with the revaluation of a property.

1. According to Federal Chamber of Automotive Industry (FCAI) statistics sourced through VFACTS.

Key Financial Highlights from Continuing Operations

1. EBITDAI means earnings before interest, tax, depreciation, amortisation and impairment.

Dividend

The Board has approved payment of an ordinary final dividend of 42.5 cps fully franked for the year (FY2020:

25.0 cps). The ordinary final dividend has been approved for payment on 20 April 2022 to shareholders who are registered on 1 April 2022 (Record Date). When combined with the ordinary interim and special dividends paid in October 2021, the total dividend based on FY2021 earnings is 70.9 cps (FY2020: 25.0 cps) fully franked.

The dividends reflect a payout ratio of 57% on the attributable Statutory Net Profit After Tax (including discontinued operations) and 65% on the attributable Underlying Operating Profit After Tax(1) for the twelve months ended 31 December 2021. The payout reflects the Board's confidence in the strength of the Eagers Automotive business and future strategy, balanced with the desire to ensure the Company has the capacity and flexibility to invest in restructuring and growth initiatives while maintaining a prudent approach to managing through the ongoing uncertainty of the COVID-19 environment.

The Company's dividend reinvestment plan (DRP) will not operate in relation to the ordinary or special dividend.

External Environment

The new car market continues to be driven by strong consumer demand, with favourable economic conditions and changes in social trends and consumer behaviour contributing to a strong recovery relative to the prior period, which was heavily impacted by the onset of the COVID-19 pandemic. According to Federal Chamber of Automotive Industry (FCAI) statistics, the new car market was up 14.5% compared to FY2020.

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Financial Performance

Statutory and Underlying(1) revenue from continuing operations decreased by 1.0% to $8,663.5 million, with the marginal decline driven by the divestment of our Daimler Trucks business in April 2021. On a like-for-like basis Statutory and Underlying(1) revenue from continuing operations increased by 6.5% to $8,390.0 million. In both periods revenue was impacted by the COVID-19 pandemic and supply constraints.

EBITDAI(3) from continuing operations increased to $651.6 million in FY2021 (FY2020: $625.5 million).

Underlying(1) EBITDAI(3) increased to $455.9 million in FY2021 (FY2020: $284.2 million). Profit margins increased

as indicated by the Underlying(1) operating EBITDAI(3)/Revenue ratio of 5.3% (FY2020: 3.2%), with a comparable

increase in Underlying(1) operating NPBT(4)/Sales ratio of 4.6% (FY2020: 2.4%). The strong margins predominately reflect the ongoing benefits of our material cost out program completed over the last 18 months, supported by market dynamics.

Statutory borrowing costs from continuing operations decreased by 10.0% to $79.6 million (FY2020: $88.4 million), driven by a reduction in lease liabilities resulting from the sale of the Daimler Trucks business. Underlying(1) borrowing costs decreased by 12.0% to $30.9 million for FY2021 (FY2020: $35.1 million), reflecting Group bailment charges benefiting from a reduction in inventory and associated bailment levels. Included within statutory borrowing costs is interest expense recognised in accordance with AASB 16 Leases of $48.7 million (down from $53.3 million in the pcp).

Statutory depreciation and amortisation charges from continuing operations decreased by 27.6% to $120.4 million for FY2021 (FY2020: $166.3 million), driven by a reduction in the right-of-use asset resulting from the sale of the Daimler Trucks business and prior year impairments. Underlying(1) depreciation and amortisation charges decreased by 41.7% to $23.2 million for FY2021 (FY2020: $39.8 million). The decrease is predominately driven by the sale of the Daimler Trucks business and its associated buyback commitments. Included within the statutory depreciation expense is an additional $97.2 million of depreciation expense recorded in accordance with AASB 16 (down from $126.5 million in the pcp).

1. NPBT means Net Profit Before Tax

Segments

The Car Retailing Segment(5) delivered an Underlying(1) Operating Profit Before Tax of $388.4 million, an increase of $189.0 million compared to $199.4 million in FY2020. The profit performance reflects the first full year contribution to a reporting period from significant permanent cost reductions in response to COVID-19, supplemented by strong market dynamics. The increase is reflected across all regions in Australia and New Zealand. Performance across both periods was impacted by Government lockdowns, particularly in April and May 2020 - the peak impact of COVID-19 restrictions and in the second half of 2021. The Car Retailing Segment(5) recorded a Statutory Profit Before Tax from continuing operations of $403.0 million compared to a profit of $272.7 million in FY2020.

Continued focus on our fixed price, pre-owned strategy via the easyauto123 business, with operations across Australia and New Zealand, is delivering strong results. The easyauto123 business delivered a strong performance for the year ended 2021, despite the impacts of lockdowns in key regions. The significant improvement in financial performance demonstrated across all key metrics, was underpinned by a more efficient cost base and the benefits from scale and integration into the wider business.