AP Eagers Group (APE) managing director Martin Ward, considers himself a ‘custodian of an icon’ and one that has sold cars in Queensland for almost a century. Since joining in 2005 he’s driven the company interstate, organised a share buy-back scheme when the rest of the market was capital raising and acquired a few handy businesses too. He tells Brisbane Business News how the company’s size could triple within 10 years.
WITH a ‘grossly undervalued’ share price in early-2009, you don’t need to be a mathematician to understand why AP Eagers started buying back shares.
In the wake of a global economic downturn it was not a common move, but Ward is a mathematician through and through so he acted accordingly.
“To put it in perspective, at a share price of $4.45 our tangible asset value at the time was around about $8 a share, so basically we were being discounted below the value of our assets,” says the 47-year-old Englishman.
“Given a significant proportion of our assets is in real estate – about $302 million now – the market was saying our properties were half the value, which we knew they weren’t. We just knew that at that price buying back our shares was better than buying anything else, so it would be crazy to make any other choice.”
With shares sitting around $12.50, you might think AP Eagers would stop the buy-back, but the company applied to the ASX again in April saying it would renew the process for another 12 months.
Ward doesn’t rule out the prospect of finishing the scheme as the company has already spent $6.3 million, but he’s reluctant to give anything away about what might happen next.
“It was an absolute no-brainer when the shares were trading below our asset value and as they cross the asset value line you’ve got to ask yourself ‘are there better things I can do with my cash?’
“Every dollar is important and the decision of what to use the dollar on is determined by changing circumstances every six to eight weeks. Today, the best thing might be to buy back our shares, in six weeks time, debt might become an ugly number again.”
The share buy-back seems small in comparison to AP Eagers’ $12 million acquisition of Caloundra City Motors in April, but Ward has aggressively expanded the business since taking on the role of managing director in 2005.
Just before he arrived, the company bought Darwin-based Bridge Autos for $13 million; while in 2007 Newcastle-based Kloster Motor Group was added for $29 million; and the company invested $14.4 million in South Australia-based Adtrans. Then in 2008, AP Eagers bought Bill Buckle Auto Group in Sydney for $36 million.
“While our weakest state is Victoria in terms of spread, the reality is we are in every area and location on the eastern seaboard and the only place we’re not in is Western Australia,” he says.
“AP Eagers owns 3.4 per cent of the Australian industry, but what you’ve got is this consolidating industry where 85 per cent plus is owned by independents.”
Ward points to a growing trend of independent owners wanting to sell, which presents significant opportunities for companies like AP Eagers to expand.
“There’s two phenomenons out there – either a second or third generation son is running the business, depending on circumstances, or there isn’t and in a lot of cases there’s no succession, so there is consistently a large number of businesses that are constantly for sale,” he says.
of the industry and back in 2000 we were probably less than 1 per cent of the industry so we’ve gone from that to 3.4 per cent now.
“I don’t see any reason why we can’t triple in the next decade and that in essence is my view and the company’s view, that there’s no reason why we can’t grow to around 10 per cent of the market in up to 10 years.”
With so many dealerships looking to sell, Ward is in no hurry to rush through acquisitions as right now, he’s holding the trump cards.
“I will confirm we’re reviewing a number of them and the ability to make acquisitions this side of Christmas will depend on whether we believe the economics are there and we can get the right deal to buy the business,” he says.
“I can’t speculate which ones and the good news is that because there’s more than one being reviewed, I don’t actually want to do them all. If one says the price we’re offering isn’t enough, I’ll say ‘that’s fine’.”
Not only is Ward focused on diversifying the business geographically, but brand diversity is also an important cog in the wheel.
“In every one of our presentations we show the brands and we now have a total of 26. It’s not about ego and it’s not about saying ‘we think we’re great because we’ve got all these brands’, but it’s about spread,” he says.
“The motor industry is very cyclical because of product. Literally one day Toyota could come out with a new model in the small car range and it could move them up 2 or 3 per cent and then that goes for a while, before Honda or Ford comes up with something for example.
“Because of that cyclical nature of the industry, it is particularly dangerous as a public company to be wedded to say just a single large manufacturer and not get that spread across the industry.”
Ward expects there will be four Chinese car brands in Australia by the end of next year, but their success will depend on whether they are able to offer lower prices, following a similar path to Great Wall and Hyundai and Kia in the 90s.
“If they don’t and they come in and try to compete on equal pricing, I don’t think they will initially be successful, because there’s no compelling reason for someone to go and buy a Chinese car instead of a brand they’re comfortable with,” he says.
Revved about people not cars
Ward was drawn into the automobile industry through a beverage company he had worked for in the Middle East, which also distributes Subaru in Australia.
“My skill set today is still people and numbers. I couldn’t tell you one end of an engine from the other,” he says.
“People assume that because I’m in the car industry that I’m a car nut (but) I’m a people nut and I love the business of the industry.”
After completing an honours degree in mathematics at the University of Surrey, Ward worked for Allied Breweries which owned around 7000 pubs across the UK. He then worked for Inchcape in Bahrain and Singapore, before settling in Sydney for his first taste of the car industry in 1996.
Before joining AP Eagers he had a five-year stint running Sydney RJV, created by former Ford CEO Jacques Nasser who is now chairman of BHP Billiton.
“I was just as comfortable behind the bar and communicating with the bar staff as I was actually behind the numbers and economics of running a pub,” he says.
“I feel comfortable in the boardroom and I feel comfortable in the workshop having a barbecue and shooting the breeze with anybody. My people skills I would probably like to claim are better than my mathematical skills.”
It’s a good thing too with 2000 employees. He will continue to focus on staff satisfaction to keep the business expanding with good service, while maintaining community involvement through AP Eagers’ dealership.
“You don’t see AP Eagers’ name per se on a lot of things in the community, because AP Eagers is the corporate company, but if you went and saw how many things Southside Honda or Metro Ford sponsors, Eagers Holden or Klosters in Newcastle sponsor, it’s more community than charity,” he says.
“We sponsor local football teams, Rotary clubs and do give charitable donations, but we do loads of little things rather than one big thing.”
Little by little, the same logic applies for the acquisitions ahead and perhaps a larger stake in the company’s ownership.
In January 2013, AP Eagers will celebrate its centenary, the same year Ward will celebrate his own half-century.
“One thing is that because the company is nearly 100 years old it adds responsibilities to the role – if it were 15 years old I don’t know if I’d feel the same pressure, which I enjoy, being a custodian of an icon,” he says.
“Our job is that when we leave it should be in better shape than when we came.”
The car(s) he drives:
It changes almost every month literally and the first thing I’ll add is that if I go to see any of these manufacturers I go in their vehicle. That may sound like an absolutely tiny thing, but you will not believe the number of private owners who don’t do that. For instance you might see a Mitsubishi owner who pulls up to a Mitsubishi meeting in their Mercedes. The number of manufacturers who get annoyed by that is enormous.
The number of sunglasses I’ve lost in cars because I’ve put them in the sunglass holder is also enormous. The salesperson’s sold the car and says ‘I’ve got all your stuff out here in a bag’ and I ask ‘where are my sunglasses?’ It happens all the time.
Unwinding with the family:
I’ve got two young girls of five and seven and an absolutely fantastic wife, so I absolutely love living with the three of them. To unwind we go to the Gold Coast a lot.
I have a small interest in Texas hold ‘em poker, but I’m not a gambler, I only play the free games they have at pubs. I love it because it’s about people, numbers and understanding the odds. I love sitting down at a table with people I’ve never met before and trying to understand them and make decisions in the game. On Monday nights I go to a bar where you can win $500 and there’s $1000 worth of prize money in total which also gets distributed to the final table and I’ve made the final table a lot of times.
I hadn’t played basketball for 15 years until Easter, when I just started one game a night and that’s for my fitness. Between that game and the night I have for poker I don’t have much other time to do anything just for myself.
Brisbane and becoming Australian:
I love hot climates, which is why I went to the Middle East (Bahrain) and Asia (Singapore), so it’s the weather without a doubt. Other than that I’ve become such an advocate for Australia and chose Brisbane over Sydney mainly for the weather. I’ve been an Australian citizen since the early 2000s, it’s nice to hold a European passport as well, but I support Australia over England. Home is where I lay my hat.
Expansion this year:
I think that before Christmas we can move up a few places in your Brisbane’s Top Companies list.
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