Lending Arm Dents Carsales Earnings
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Shares in online vehicle classifieds business carsales.com jumped nearly 3% as investors looked through the headline figures in what looked like a weak full year result and found some things to like.
While the shares rose 2.9% to $12.89 yesterday, the 0.2% headline lift in profit to $109.5 million didn’t appear to justify the improvement.
Carsales’ revenue rose an encouraging 8.2% to $372.1 million in the year to June 30 and the fully franked final dividend of 21.5 cents a share, up two cents from a year ago was another thing in boosting the stock’s appeal. That made a total for the year of 40.2 cents, up from 37.2 cents a share paid for 2015-16.
The 8% rise in revenue to $372 million for the year, driven by its domestic private listing businesses which saw 27% surge in revenue growth.
What put a lid on the figured for Caresales was a weak result from its finance company, Stratton.
Earnings from the company’s finance services arm Stratton Finance fell 12% to $55.4 million due to what it called “volume capacity reductions at a major lender” which hurt its performance, the company said. Profit was also hit by one-off charges related to investments made in its international business, including a $7.1 million impairment in iCar Asia.
Pre-tax profit was up 7%, thanks to that strong listings growth, and when adjusted to strip out non-controlling interests and fair value re-measurements and amortisation, net profit increased 8% to $119 million, which was a net profit margin of more than 31% (better than the CBA’s 22%).
Newish CEO, Cameron McIntyre said the group’s core Australian business enjoyed strong revenue growth and the company expects the domestic businesses to continue to build scale in 2017-18.
“This year has seen solid contributions from carsales’ core domestic business units and very pleasingly Stratton Finance moved back into revenue growth in the fourth quarter of the year,” he said in yesterday’s statement.
He said the company expects the domestic businesses to continue to build scale in this year in line with 2016-17.”Domestic core business performance in July has remained solid,’ he said. “Assuming market conditions remain stable we anticipate revenue, EBITDA (earnings before interest, tax, depreciation and amortisation) and NPAT growth will remain solid in the domestic core business,” he added.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.