Equity 21 May 2012, 2:18pm

AAA Auto triples net profit in the first quarter of 2012

Portfolio

AAA Auto has reported a significant year-on-year growth in its key results published in its first-quarter earnings report on Monday. As a result of the used car dealer’s rising revenues, the increase in the ratio of highly profitable financial services within sales and a splendid performance in Russia, AAA Auto’s net profit tripled compared to the base period.

AAA Auto implemented a change in its accounting in Q1 2009, as it altered the structure of its profit and loss statement after withdrawing from the Hungarian, Polish and Romanian markets. The usual details in the P&L are available only for the continued operations (Czech Republic, Slovakia), while the result of discontinued operations are shown in a single row. For the sake of correct comparability the charts contain only the data according to the new accounting rules.

AAA Auto has published its Q1 earnings report on Monday morning. Overall, the figures testify that the positive trend observed in the preceding quarters has continued. The strong Q1 performance was already in the air, given the company had published preliminary sales figures.

Car sales, which account for about 80% of total revenues, totalled EUR 64 million, which marks a 16.6% yr/yr growth. The number of cars sold went up by 10% compared to the base period. The Czech market was the main driving force, but contribution was strong from Russian operations too.

The Group’s sales results in Russia have been steadily growing from 80 in January to 168 in March and 200 in April “indicating that Russian operations will be the leading growth driver of the Group’s sales in 2012 (e.g. without Russian sales, the sales growth for April of 17.1% would stand at 11.9%)," the company said.

“AAA AUTO Group benefited from very good sales results in 1Q 2012, which outperformed the market; the Group’s increasing revenues from financial services and strong profit margins. We are also very pleased to see the increasing contribution of our Russian operations. Our Russian division achieved excellent sales result of 200 cars sold in April and as a result, we expect to reach a breakeven point at the level of net income in June," commented Karolína Topolová, Chief Operating Officer and Deputy CEO of AAA AUTO Group.

Besides volume impacts price changes also had a beneficial impact on revenues, with the average sales price rising to EUR 5,258 from EUR 4,970 previously.

AAA Auto Group’s total revenues for January-March grew by 21.6% to EUR 76.9 m compared to the same period last year thanks to the 10.2% year-on-year increase in unit sales that the company recorded in the first quarter and 56.8% increase in revenues from financial services.

Financial services play a key role in the company’s life, although their share within total sales remains relatively low, but their profit margins are high. This is attested by the fact that the contribution of financial services and upsale products to the Group’s total gross profit grew to 62.8% in Q1 from 56.7% a year earlier.

As a result gross profit on sales increased by 41.6% yr/yr EUR 20.1 m and tThe gross profit margin strengthened to 26.2% in compared to the average profit margin of 25.9% for the whole 2011 vs. 23% a year earlier.

Together with the sales growth in the first quarter of 2012, operating expenses increased by 31.4% to EUR 15.1 million. This rise outpaced the increase in total revenues of 21.6% on the back of operating costs for Russian operations (where the company has not reached the breakeven point yet) and costs for opening of new branches and training new personnel in the CR and Slovakia. However, the opex / revenue ratio remained below a 20% level.

As a result of the improved operating performance, EBITDA grew by 79.2% in Q1 to EUR 5.1 m compared to EUR 2.9 m achieved a year ago.

The financial profit row did not pull profits lower, which has not happened for years. As a result the group’s total net profit soared threefold to EUR 2.8 million in Jan-Mar from EUR 0.7 million realised in the same period of 2011.