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The Eagers Automotive (ASX:APE) share price is driving higher

The Eagers Automotive Ltd (ASX: APE) share price is driving higher after the business released a profit update for FY21.

Eagers Automotive is a very large car dealership business.

Profit expectations

Eagers Automotive said that it expects to record an underlying operating profit before tax from continuing operations for the 12 months to 31 December 2021 of approximately $390 million to $395 million, compared to $209.4 million in the prior corresponding period.

On a statutory profit before tax basis, the expected result from continuing operations is between $440 million to $445 million.

In summary, Eagers Automotive has had a strong year despite lockdowns with continuing strong trading conditions.

Lockdown impact

Eagers Automotive said that it has been impacted by the lockdowns, with a reduction of profit in the impacted markets.

There has also been deferral of new and used vehicle sales and deliveries, as well as continued variability in new vehicle supplier from a number of key manufacturers.

This impact is expected to result in a reduction in underlying operating profit before tax of around $20 million to $25 million, which is reflected in the forecast that was given.

Even so, the company has seen demand continuing to outstrip supply on a month on month basis since June 2020.

Outlook and developments

Management said that the company is well placed to enter 2022 in a strong position where it is expected to benefit from some easing of supply restraints for the first quarter of FY22, pent-up demand in locked down markets and unrestricted service and parts trading.

Eagers Automotive is focused on finding opportunities aligned with its strategy of identifying growth for shareholders.

It has acquired a number of dealerships in the Toowoomba and Newcastle regions, which have completed or are expected to completed before the end of December 2021. These dealerships include the purchase of multiple properties in each region for a total property purchase price of $45 million.

Eagers Automotive also said that its trans-Tasman, fixed price, pre-owned vehicle business easyauto123 is continuing to deliver growth with significant year on year improvement and strong performance in non-locked down areas.

Summary thoughts on the Eagers Automotive share price

Eagers Automotive continues to grow and it is performing well. However, it remains to be seen how the company can grow in the long-term. I’m not sure how the automotive market is going to evolve in the coming years, which is why I’m happy just to watch with interest from the sidelines.

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