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Why the Carsales (ASX:CAR) share price dropped 4% today

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The Carsales.Com Ltd (ASX: CAR) share price was out of form on Friday and dropped notably lower.

The online auto listings company’s shares fell 4% to $20.77.

Why did the Carsales share price drop lower?

Today’s decline appears to have been driven by the release of the company’s annual general meeting presentation this morning.

At the meeting, Managing Director and CEO, Cameron McIntyre, spoke about FY 2021 and his expectations for the new financial year.

He commented: “The world is clearly an uncertain place at the moment to say the least but where our focus is going to be coming into FY21 will be around managing our costs and investing in product and our market positions.”

“We expect to continue benefiting from the resilience of the used car market, and the trends we have been observing should support this. We are well funded with low gearing, strong liquidity and cashflows that will continue to fund growth and dividends,” he added.

How are Carsales’ businesses performing?

The presentation also included an update on how different areas of its business are performing in FY 2021.

The release explains that overall lead volumes in the first quarter of FY 2021 have been impacted by the closure of dealerships in Metro Melbourne.

However, excluding Metro Melbourne, management notes that its overall lead volumes grew strongly on the prior corresponding period.

In addition, Carsales has provided a 100% rebate for all metro Melbourne dealers since 6 August. It will continue to do so until dealers’ retail offerings reopen.

It estimates that this support has cost ~$12 million to date in FY 2021. This brings the total support provided to dealers since the start of the pandemic to approximately $40 million.

Over in South Korea, the company is observing key operating metrics of inventory, listing volumes, and traffic all growing well. This is reinforcing continued good growth in revenue and EBITDA over the prior corresponding period.

But given the continuing uncertainty due to COVID-19, Carsales isn’t providing specific guidance on its financial expectations for FY 2021 at this stage.

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Returns as of 6th October 2020

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