The Autosports (ASX:ASG) share price is up 6%. Here’s why

The car dealer’s share price is revving higher on increased earnings and a new acquisition.

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a happy dog puts its head out of a car window with a road in the background, indicating a positive share price for ASX automotive shares

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The Autosports Group Ltd (ASX: ASG) share price has ramped into fifth gear today after Autosports announced an earnings update and a new acquisition.

At the time of writing, shares in the retail automotive company are up 6.56%, trading at $2.60. For context, the S&P/ASX 200 Index (ASX: XJO) is currently 0.27% lower.

Let’s take a closer look at today’s news.

What did Autosports announce?

Full-year earnings update

In its first statement to the ASX, Autosports advised it was expecting revenue for FY21 to be between $1.92 billion and $1.96 billion, an increase of 13%-15% on FY20. The company expects net profits before tax to be between $68 million and $70 million – an increase of around 200% on FY20.

Autosports says these better-than-expected results are due to 37.5% growth in the car market. Despite some issues around semi-conductor computer chips in cars, supply is as anticipated.

The company said easing of COVID-19 restrictions, especially in Victoria, has seen a recovery in its vehicle servicing and spare parts sales.

John Newell Mazda purchase

In its second statement today, the company announced it will buy an 80% interest in John Newell Mazda, Alexandria. The John Newell dealership is opposite the Autosports Group luxury car dealership in Alexandria, an inner suburb of Sydney.

The purchase will cost Autosports $16 million – comprising $12 million “for goodwill” and $4 million for 80% of the net assets. Autosports expects the purchase to be completed by 1 July 2021. It’s conditional on several factors including a new lease and the “release of encumbrances and vendor securities”.

Autosports share price snapshot

Over the past 12 months,  the Autosports share price has increased 127%. Since the beginning of this year, the value of the company’s shares has risen by almost 79%. Shares reached a record high of $2.77 in February this year.

Autosports Group has a market capitalisation of around $511 million.

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