Ann: 2020 Half Year Results Presentation, page-2

I listened to this morning's webcast. MD Martin Ward (a Pom) and Sophie Moore took from about 0915 to 0943 hours to deliver their spiel. Too long given the webcast was for just an hour.

UBS asked about the COVID-19 situation. The 'rebound' in daily order intakes is only in line with or slightly below with last year's sales in all states but Victoria.

Victoria is a standout for poor sales. Mr Ward said it could cope with short term periods of shutdowns but doesn't want further shutdowns.

APE's growth is as 'strong as it's ever been'. Supplies (of motor vehicles) are OK and so are deliveries to customers.

The fixed price auto (used car - Easy123) is based on the USA model. Later in the year, it plans to do a major presentation to the investment community (an online day) on the pre-owned car business.

Credit Suisse asked about permanent cost savings (reductions of 1295 staff and rationalisation of some former AHG sites.

APE has achieved its $30 million 'synergies' post the AHG merger. It is 'all one company' now so everything is being reported on an aggregated basis.

APE retains $75 million in used car inventory. It has funding from captive financiers to further expand.

Post 30 June 2020, APE has concluded an 'arrangement' with General Motors that is consistent with the impairments ($34m) taken in the half year to 30 June. However it has received compensation of a similar amount that will be reported (presumably) in six months time.

Toyota Finance has given APE $175m for property purchases. Mr Ward said it will mostly be properties bought that assist in making changes to other parts of its property portfolio.

For instance, in one capital city, it will buy five properties to substantially reduce the number of other properties by a net five (in other words were 10, will be five). In another capital city, eight existing properties will be sold but three new bought. Neither will be bad for net profit and other indicators.

Morgans asked re 'cost out' of $72m: this relates to 1295 employees retrenched. The balance of $6m relates to property cost savings. All these were in this first half. Most of these employees were retrenched on 23 March 2020.

Sophie Moore said April and May sales were poor.

APE has 34 per cent more shares on issue than a year ago. The MD viewed that as a target for net earnings. In the first quarter, it was greater than 34 per cent up. It was 'decimated' in April and May, the worst result in 107 years. In June, it rebounded to be above 34 per cent up on the same corresponding period, 'back to where the company wanted it to be.'

Inventory: the industry has realised what APE has been saying for five years, that Ponzi-schemes of ever-increasing inventory to sell is not a good economic model for anyone, including manufacturers. There won't be an endless supply of vehicles to every motor dealership. Globally,. factories are closing, 'a million units' are being taken out of the equation. APE expects leaner inventory across the entire subsector, operating on a smaller footprint and doesn't have excess stocks (of cars). But it's not going to be quite as tight as it has been in the last few months, as some factories are reopening but it won't be back to what it was pre-COVID-19.

Presnetly, in one city, APE has one owned site and 10 leased. This will change to four owned and one leased, meaning much lower lease expenses and an improvement in bottom line profit. Just on rent savings, it means $3-4 million saved. Unfortunately fewer sales staff will be needed. This is but one of the property deals being done.

Re Victoria specifically, APE has 'exited a number of lossmakers in the previous AHG portfolio that we took over in August 2019.'

1000 employees are in Vic/Tas region: the car dealerships are shut down except for some servicing. Trucks not so badly affected.

Have chosen not to move used vehicles out of Victoria into other states, as when it reopens, there'll be some pent up demand. APE has a couple of weak dealerships in Victoria it'd like to get rid of but 'still a strong business' in Victoria.

The whole car sales industry needs to run on fewer physical sites. APE is proud of its new Brisbane mall and the other development in Albion, Brisbane.

Despite removing 1300 people who were all on probation on 23 March when sacked (100 are now back at APE), APE didn't have to pay a dollar in redundancy costs. It was 'the worst day in the country's history', followed by the two worst trading months the company has experienced in 107 years.