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Carsales Posts 6 Per Cent Rise in Profit

Carsales Posts 6 Per Cent Rise in Profit
Total operating revenue was $344 million, a 10 per cent increase on the prior corresponding period, while EBITDA increased 10 per cent to $170.3 million.
Aug 09, 2016 By Simon Herrmann Tags: CAR, Earnings

Australian based online classified company carsales Limited (ASX:CAR) posted a 6 per cent rise in full year profits to $109.3 million.

Revenue up 10 Per Cent to $344 Million

Total operating revenue was $344 million, a 10 per cent increase on the prior corresponding period, while EBITDA increased 10 per cent to $170.3 million. The strong performance resulted in a 10 per cent lift of the final distribution to 19.5 cents.  The dividend is fully-franked and payable on 17 October 2016 with the record date on 22 September 2016.

Growth was achieved on the back of steady performance in the domestic market and due to carsales’ international growth strategy. Dealer revenue in the domestic business was up 10% year on year, while the Brazilian and South Korean business delivered strong local currency revenue growth. International revenue rose 54 per cent to $4.4 million, however still accounts for only a fraction of group revenue. 

Management Expects Further Growth in FY17

Managing Director Greg Roebuck is pleased with the “record result” and said that carsales’s ability to consolidate the domestic market leading position “is testament to the strength of the carsales team”. Furthermore, he commented on the outlook of the company: “We are building a dynamic global business; the economies of scale that come with this along with our world leading technology are helping us evolve our business. Dealers and consumers have the same high expectations in all of our markets. As we continue to transfer our world class technology and know-how into these markets we see improved performance.”

During the year carsales acquired 83 per cent of Chileautos, the leading auto classified business in Chile and 65 per cent of SoloAutos in Mexico.

While carsales did not provide a clear guidance for FY17, management expected to post a “solid uplift in revenue and earnings in the coming year”. This is expected to achieved through carsales’ international expansion strategy, especially in Americas and also Korea, while the domestic business will provide the foundation for company.

Wise-owl recommended to buy CAR earlier in the year and we maintain our hold advice.

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Simon Herrmann Author: Simon Herrmann Aug 09, 2016

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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