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Carsales.com Limited moves into high gear with 17% half-year profit gain

Carsales.com Limited (ASX: CRZ) showed the market a 17% gain in NPAT in its half-year report with all of its business segments rising in operating revenue. Total revenue was $112.3 million, up 10% from the prior corresponding period (pcp). The online used and new car sales portal kept its business in high gear while adding on investments of similar auto websites in Asia and Brazil. Earnings per share for the half year were 18.5 cents, up 16% from the pcp. An interim FY2014 dividend of 14.7 cents per share was declared, a two cent gain from the pcp.

In late 2013 there was concern about some car companies changing the way their cars were advertised on the website, and removing online inventory due to perceived competition with their particular car dealership sales, to which the company’s share price reacted downward.

The company acknowledged that in its half-year report, writing that its Mediamotive advertising solutions business was impacted by some car companies’ removal of online inventory, yet that business still saw 9% increase in revenue for the half year. Dealer & data services were up the most by 12%, private car listings the least with a 7% rise.

Investments

Its investment in the Brazilian car related company WebMotors paid off well, with its share of associate NPAT coming to $2.3 million after the business showed a 23% increase in pro-forma revenue compared to the pcp. It acquired a 30% stake in June 2013 in Brazil’s number one car sales website.

Around the same time, it also took a 19.9% stake in iCar Asia Ltd (ASX: ICQ), a company that operates auto websites in Malaysia, Indonesia and Thailand. It listed on the ASX in 2012. Carsales.com’s share of associate pro-forma NPAT was a negative $800,000. Carsales.com noted that the value of associated portion is an estimate for the period ended 31 December 2013, since the timing of iCar Asia’s disclosures are different.

Outlook

The company is giving guidance for FY2014 full-year EBITDA to be about $138 million, or about 15% above the $119.9 million EBITDA in 2013.

Foolish takeaway

To drive this growth, it has developed more advanced mobile phone apps with more information on special offers and added a virtual car display to display cars in various colours. Also, it now has similar mobile selling apps for motorcycles, boats, trucks, and caravans, so it is expanding the potential for more online listings revenue to complement the growth in car sales.

Innovation is the way the company can move forward and deepen the amount of services that the customer can use. Coordinating that is the path to further success.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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