Why the MotorCycle Holdings (ASX:MTO) share price is racing higher

The MotorCycle Holdings Ltd (ASX:MTO) share price is revving upwards after the company released its FY21 half-year result.

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The MotorCycle Holdings Ltd (ASX: MTO) share price went up more than 6% after the company released its FY21 half-year result.

This business was founded in 1989. It is a motorcycle dealership and accessories group with 48 franchises operated from 31 dealership and eight retail accessory locations in Queensland, New South Wales, Victoria and the ACT.

MotorCycle Holdings FY21 half-year result

The company revealed that it sold 11,467 motorcycle units, which is 12% more than it did in the prior corresponding period, with new motorcycle unit sales increasing by 30% to 6,770.

MotorCycle Holdings said that motorcycle sales grew as an outcome of introducing new products into existing stores and the dealership network expansion. The overall national market of new motorcycle sales increased by approximately 20%. The company grew its market share, securing approximately 12.1% of national new bike sales during the financial year, compared with 11.1% in the prior year.

Used motorcycle sales decreased 6% to 4,697 units due to tightening stock availability. However, the sales value increased 5% and improved margins generated a gross profit increase of 30% compared to the prior corresponding period.

Online accessory sales grew by 75% with major projects underway to improve e-commerce systems to generate further growth.

Retail accessories and parts revenue grew by 19% and servicing and repair revenue went up by 33%. Retail finance, insurance and mechanical protection plan income increased 6%.

Wholesale accessory sales rose by 23% with divisional gross profit rising 30% and demand is expected to remain high in the second half. Stock supply has been subdued but is gradually improving and margins are expected to increase as benefits of a lower US dollar are realised.

The increase in unit sales led to revenue rising 23% to $218.4 million. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 168% to $26.8 million. The underlying EBITDA margin more than doubled, rising from 5.6% last year to 12.3% in this half-year.

MotorCycle Holdings grew net profit after tax (NPAT) by 256% to $17.2 million.  

Did MotorCycle Holdings pay a dividend?

The company announced that it would pay an interim dividend of 10 cents per share.

The $47.6 million bank debt at 30 June 2020 has been reduced to $0. It has $7.4 million of cash on hand.

How much has the MotorCycle Holdings share price recovered from COVID-19?

Over the last 12 month the MotorCycle Holdings share price has risen by 54%, which includes the COVID-19 crash. However, since the start of 2021 the MotorCycle Holdings share price has dropped a little.

CEO commentary on the outlook

MotorCycle Holdings CEO David Ahmet said that the half-year results reflected the continuing increased market demand for recreation and leisure products, new franchises and expanded product ranges, lower overheads and a disciplined approach to ongoing expenses resulting in margin growth. Mr Ahmet said:

Our growth strategy of expanding the business by adding new ranges and products to existing sites without increasing our cost base is delivering sustainable growth and profit.

The Harley-Davidson dealerships are performing above expectations and the Indian Motorcycles and Polaris products added to existing stores contributed strongly to the results.

The CEO also said that after paying down debt, it’s now in the position to make acquisitions if the opportunity is there.

It’s expecting increased market demand and strong trading conditions to continue for the rest of the financial year.

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