ANNUAL REPORT 2016 - AHG Limited

1 ANNUAL REPORT2016 ANNUAL REPORT2016 AHG Vision Through measured growth and improvement, we will build on our position as Australia s largest diversified motoring and logistics will continue to attract, develop and retain the best people in the industry; exceed the expectations of our stakeholders, and deliver superior returns for our AHG Established in 1952 as a single motor vehicle dealership, Automotive Holdings Group today is the largest automotive retailing group in Australasia, has two significant logistics divisions with operations in every mainland state, and employs more than 7,500 2016 the Group operates 188 motor vehicle franchises at 108 dealership locations, automotive and truck parts warehousing and distribution, national refrigerated transport and storage, truck and trailer bodybuilding, engineering and storage.

2 And distribution across Australia and New Zealand of KTM and Husqvarna General Meeting The 2016 ANNUAL General Meeting of Automotive Holdings Group Limited will be held at: Crown Perth (Botanicals Rooms), Great Eastern Highway, Burswood, Western Australia from 10am (WST) on Friday 18 November this REPORT This ANNUAL REPORT is a summary of the operations, activities and financial position at 30 June 2016 of Automotive Holdings Group Limited (ABN 35 111 470 038) and its subsidiary this ANNUAL REPORT references to AHG , the Group , Group , we , us , our and ours refer to Automotive Holdings Group unless otherwise stated. References to a year are to the financial year ended 30 June 2016 unless otherwise stated. All dollar figures are expressed in Australian currency unless otherwise is committed to reducing the environmental effects of producing its ANNUAL reports and printed copies are only posted to shareholders who have elected to receive them.

3 The printer s production process is 100% carbon Financial Highlights 4 Chairman s Message 7 Managing Director s Review 10 Operating and Financial Review 14 Corporate Responsibility Highlights 33 Directors REPORT 37 Financial Statements 66 Shareholder and Optionholder Information 144 Corporate Directory 146 The Company s Corporate Governance Statement and Compliance details are available online at Babetti, Daimler Trucks Holdings Group Limited again delivered record revenues, profit and dividend in the 2015- 2016 Financial Financial PerformanceFY2016 ($m) FY2015 ($m) % change Statutory IFRS Profit after Tax ReconciliationStatutory Net Profit after in relation to integration and acquisition-related activities, profit/loss on sale of assets and operations, impairment of assets and benefits applicable to GST refunds (Son of Holdback) Net Profit after Tax (Non-IFRS) Earnings Per Share (cps) Performance (Non-IFRS)Revenue5,6265, % % Net Profit after Tax (Non-IFRS) Earnings Per Share (cps) Interest Cover (times) Financial Highlights HIGHLIGHTS Record Group revenue of $ billion (up pcp) IFRS Statutory Profit after tax $ million (up pcp) Record Operating1 Profit after tax $ million (up pcp) Operating1 EPS of cents (up pcp)

4 Final dividend of 13 cents per share; full year dividend cents fully franked (22 cents pcp) Auto acquisitions completed in FY2016: Western Pacific Mercedes-Benz (Perth), West Auckland Nissan, Knox Mitsubishi (Melbourne), Sinclair Hyundai (Penrith) Greenfield developments: Hillcrest Mazda (Queensland), Aspley Nissan (Queensland) Record performance by Automotive Disappointing result from Refrigerated LogisticsKey financial data (Operating1) (Non-IFRS)FY2016 ($m)FY2015 ($m)Revenue5, , assets2, , debt (excluding floorplan) share dataFY2016 centsFY2015 centsEPS1 (Non-IFRS) per per share ratiosFY2016FY2015 ROCE1 (Non-IFRS) (excluding floorplan) excludes costs and fees in relation to integration and acquisition-related activities, profit/loss on sale of assets and operations, impairment of assets and benefits applicable to GST refunds (Son of Holdback).

5 Operating1 excludes costs and fees in relation to integration and acquisition-related activities, profit/loss on sale of assets and operations, impairment of assets and benefits applicable to GST refunds (Son of Holdback). ANNUAL REPORT 2016 For the year ended June 201645On behalf of the Board of Directors of Automotive Holdings Group, it is my pleasure to present the Company s 2016 ANNUAL financial year in review once again delivered to Shareholders record revenue, operating profit and revenue for FY2016 was $ billion, an increase of on the preceding financial year. Operating1 NPAT increased to $ million. The Group s Statutory profit after tax was $ million, an increase of on the previous received a fully-franked full year dividend of cents per share, up from 22 cents on the previous Automotive result was extremely pleasing considering the challenges of the Western Australian market and is testament to AHG s strong operating model and growth Company completed several significant automotive dealership acquisitions, Greenfield developments and property redevelopments during the year in review.

6 All of which complement the Board s focus on delivering superior returns to Refrigerated Logistics result was disappointing however your Company is well advanced with its restructuring activities and remains determined to deliver Shareholder from the Automotive Retail division was up to $ EBITDA improved to $ million, delivering an Operating1 Profit before tax of $ million up Group benefitted from strong trading performances from its dealerships in New South Wales, Victoria, Queensland and New Zealand, which more than offset weaker market conditions in Western Australia. The results from AHG s operations in Sydney, Newcastle and Auckland were outstanding and were supported by strong improvement in Brisbane and further growth in while new vehicle volumes were down in Western Australia, in line with the broader state economy, it was pleasing to see strong organic growth in used vehicle numbers, largely attributable to the Company s easyauto123 fixed-price warehouse model that is expected to be rolled out throughout Australia in LOGISTICSAHG s Refrigerated Logistics division contributed revenues of $ million, a decrease of and Operating1 EBITDA of $ million which was down Operating1 Profit before tax was down to $ million.

7 The major contributing factors were a fall in east-west volumes due to the slowdown in WA mining, changes to the supermarket retail model with entry of new competitors placing pressure on margins and increased volumes of imported goods direct to port of revenue performance and margins delivered by the Refrigerated Logistics division in the period are disappointing and a substantial transformation program is being implemented to improve operational performance and financial returns. The Board is determined to ensure that the Refrigerated Logistics division delivers the best value outcome for excludes costs and fees in relation to integration and acquisition-related activities, profit/loss on sale of assets and operations, impairment of assets and benefits applicable to GST refunds (Son of Holdback).

8 Operating1 excludes costs and fees in relation to integration and acquisition-related activities, profit/loss on sale of assets and operations, impairment of assets and benefits applicable to GST refunds (Son of Holdback).Group Financial Highlights (continued)Chairman s MessageOperating1 NPAT ($m) Dividends (cps) EPS (cps) EBITDA ($m) ($m)5,0004,0003,0002,0001,00006,000FY123 ,920FY134,278FY144,735FY155,246FY165,626 Statutory NPAT ($m) REPORT 2016 For the year ended June 201667 OTHER LOGISTICSThe Group s Other Logistics division saw revenues decrease by to $ million, contributing Operating1 EBITDA of $ million, down and Operating1 Profit before tax of $ million, down A number of factors impacted the result in the Other Logistics revenues grew strongly, up 12%, however the weaker Australian dollar during the reporting period negatively impacted inventory purchases from Europe and hence margins.

9 The Genuine Truck Bodies business improved from a loss-making positon in FY2015 to breaking even in FY2016 with a strong order book supported by a recent contract for the delivery of 500 truck bodies. AMCAP remains a solid contributor to the Group in its automotive parts distribution operations and showed significant year-on-year growth in mining and industrial the contribution from Covs prior to its sale in March 2016 , revenues from continuing operations increased by and profit before tax increased Company remains focused on its core strategies with the clear aim of generating superior Shareholder returns. The capital raising undertaken in September was well supported by institutional and retail investors, raising more than $110 million to refresh the Group s balance sheet and support the Company s future growth outlook for new vehicle sales in Australia and New Zealand remains strong except in Western Australia.

10 AHG is well placed to continue its growth strategy including Greenfield developments and acquisitions where the benefits of such investments have been clearly identified. The Company also expects to realise significant future benefits from the national expansion of its used car Board and management are closely monitoring the outcome of reviews by ASIC into commissions paid to dealerships by financiers and insurers. As the industry response to future regulatory reforms is developed, AHG will be better placed to quantify any potential impact on future earnings. Based on current understanding of the likely timetable for implementing these proposed reforms, AHG does not anticipate any material impact on earnings in the current financial year ending 30 June 2017.