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Carsales share price races higher on first-half results

The Carsales.Com Ltd (ASX: CAR) share price was up more than 11% this morning following the release of the company’s first-half results.

The automotive advertiser recorded adjusted net profit after tax (NPAT) of $63 million, up 7%. Revenue increased 5% to $214 million, while earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 6% to $107 million. 

Revenue and profits increasing 

Between H1 FY16 and H1 FY20, Carsales’ revenue has increased at a compound annual growth rate (CAGR) of 12%. Adjusted EBITDA has increased at a CAGR of 9% over the same period, while adjusted NPAT has increased at a 6% CAGR. 

International business growth

Both the domestic and international businesses delivered impressive growth during the period. International geographies now represent 23% of look-through revenue and 18% of look-through EBITDA. International look-through revenue and EBITDA grew 14% and 25% respectively.

Revenue increased 13% in Korea, while EBITDA increased 16% against the prior corresponding period (pcp). In Brazil, underlying revenue growth of 30% was recorded with 38% growth in EBITDA. 

Carsales reported that more than 880,000 cars are for sale on its sites around the world at any one time. More than 500 million sessions on car sales sites worldwide were recorded, an increase of 3% over the pcp.

Globally, there are over 33,000 car dealers on carsales.com sites, an increase of 9% over the pcp, whilst 12 million leads were recorded, up 26% over H1 FY19. 

Australian industry leader

Carsales states that it is the most trusted place for buying and selling cars in Australia (+73% compared to its nearest competitor), as well as the most preferred site for buying and selling cars in Australia (+243% vs nearest competitor). Visitors spent 2.3x more time on caresales.com.au than its nearest competitor in Australia. 

The domestic core business margin expanded from 59.8% to 61.3% in 1H20, reflecting benefits from exiting low margin contracts, strong cost discipline and operating leverage. EBITDA margin was reduced by 1% due to investments in the tyresales and RedBook Inspect businesses. 

Online advertising revenue increased from $147 million in H1 FY19 to $152.6 million in H1 FY20. Dealer revenue increased by 6% to $79.4 million while Private revenue came in 7% higher at $44.3 million for the period. Display revenue declined by 5% to $28.8 million. Meanwhile, Data, Research and Services revenue was flat at $21.8 million. 

FY20 outlook 

Solid growth is expected for Carsales’ group revenue, adjusted EBITDA and adjusted NPAT in FY20. Domestic business performance was solid in January, with the exception of display advertising, reflecting continued resilience in these sectors. Continued good growth is expected in revenue and earnings in Korea and Brazil. 

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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Kate O'Brien