Carsales share price climbing higher on resilient results

The Carsales.com Ltd (ASX: CAR) share price is on the rise this morning after the online classifieds business revealed growth in revenue and profits despite the impacts of COVID-19. At the time of writing, the Carsales share price is trading at $19.88, 2.37% up from yesterday’s closing price. Carsales.com delivered a robust set of results in a challenging environment demonstrating the strength of its Australian business and growth potential of international markets. 

What does Carsales.com do? 

Carsales.com operates the largest online automotive, motorcycle, and marine online classifieds business in Australia. Regarded as one of Australia’s original disruptors, the company has expanded into South Korea and Brazil. COVID-19 has created uncertainty in Carsales.com’s operating markets, but the trends coming out of the pandemic including continued digital adoption and increased propensity for car ownership are a positive for the business. 

How did Carsales.com perform? 

Carsales.com reported adjusted revenue of $423 million for FY20, a 1% increase on FY19. This was a strong outcome given the impact of COVID-19 and reflects good growth in the domestic and South Korean segments. This growth was partly offset by revenue declines in the domestic private and media businesses largely due to the impacts of COVID-19 in H2. 

Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) grew 6% to $237 million, with EBITDA margins of 55% reflecting good operating leverage and strong cost control in both domestic and international businesses. Results were underpinned by earnings growth across domestic and international portfolios, including an excellent performance from South Korea which delivered 18% EBITDA growth. Diversification across product and geography is continuing with international now representing 24% of look-through revenue. 

Carsales.com ended FY20 with adjusted NPAT up 6% to $138 million. Reported NPAT declined 9% to $120 million, primarily due to a $28 million COVID-19 dealer support package. A final dividend of 25 cents per share was declared, on par with the previous year. CEO, Cameron McIntyre, said, “this is a pleasing full year result given the impact of COVID-19 on our business in the second half…..our long standing strategy to grow and diversify our business by geography and product positions us well even in a challenging operating environment.” 

What’s next for Carsales.com? 

The company says it has seen a strong rebound in demand for vehicles across multiple international markets as customers have emerged from lockdown. People have continued to migrate to digital platforms and an aversion to public transport (due to COVID-19 concerns) has increased the propensity for car ownership. While Carsales.com is not providing FY21 guidance due to uncertainty, it has observed that Australian private listing volumes have largely recovered to pre-COVID levels and lead volumes grew strongly in July. 

The Carsales share price has risen 89.9% since its March low and is up 18.4% in year-to-date trading.

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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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