Carsales share price marches higher on profit and dividend boost

Carsales said demand over the six-month period was higher than pre-pandemic levels.

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Key points

  • The Carsales share price is up 3% in early afternoon trade on Monday
  • The ASX 200 tech share released its half-year results this morning
  • Carsales increased its interim dividend by 12% after strong profit growth

The Ltd (ASX: CAR) share price is back in the green after opening more than 2% lower on Monday.

The S&P/ASX 200 Index (ASX: XJO) tech share closed on Friday trading for $22.54. Shares are currently changing hands for $23.18, up 2.8%.

This comes after Carsales – the largest online automotive, motorcycle and marine classifieds business in Australia – released its results for the half year ended 31 December (H1 FY23).

Carsales share price gains on revenue boost

  • Pro-forma revenue of $388 million, up 15% from the prior corresponding period (pcp) 
  • Pro-forma earnings before interest, taxes, depreciation and amortisation (EBITDA) of $211 million, up 17% from the pcp
  • Adjusted net profit after tax (NPAT) increased 37% from the pcp to $122 million
  • Adjusted earnings per share (EPS) came in at 34.9 cents, an increase of 14% from the pcp
  • Declared a fully franked interim dividend of 28.5 cents per share, up from 25.5 cents per share in H1 FY22

(* Note: Pro-forma calculations assume 100% ownership of Trader Interactive in H1 FY22 and H1 FY23.)

What else happened over the half year?

In September, Carsales completed its acquisition of the remaining 51% of United States based, non-auto digital marketplace, Trader Interactive. The company said the performance of Trader Interactive during its first three months as the 100% owner was "very pleasing".

The Carsales share price could also be getting a boost from the strength of its Australian business, reporting record private advertising results and double-digit growth in its dealer and media segments.

Double digit revenue and EBITDA growth were also achieved in its US and Korean businesses.

The company said demand over the six months was higher than pre-pandemic levels.

What did management say?

Commenting on the results helping lift the Carsales share price today, CEO Cameron McIntyre said:

The performance of the first half of FY23 has been exceptional for Carsales. The group delivered double-digit revenue and earnings growth demonstrating both a highly resilient business model with a track record of growth through the cycle as well as strong operating discipline…

We continue to ramp up the digitisation of vehicle buying and selling in all markets, integrating finance into our product portfolio. We are seeing excellent adoption of our digital trade-in products in Instant Offer and Dealer Direct.

What's next?

Looking ahead to what may impact the Carsales share price over the coming months, the company said it expects to deliver "very strong growth" in adjusted revenue, adjusted EBITDA and adjusted NPAT in FY23.

Carsales also forecasts an expansion in its group adjusted EBITDA margin on both a pro-forma and actual basis in FY23.

"We are seeing good levels of consumer demand in our key markets and inventory is approaching pre-pandemic levels. This growth in inventory is driving demand for dealer premium and depth listings," McIntyre said.

"This all gives us confidence that Carsales is in a strong position to deliver outstanding shareholder returns in FY23."

Carsales share price snapshot

As you can see in the chart below, the Carsales share price has been a strong performer in 2023, up 12% year to date.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended 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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