The Carsales.Com Ltd (ASX: CAR) share price is up slightly after the company provided FY19 guidance.
Carsales was founded in 1997, it’s the largest automotive, motorcycle and marine classifieds business in Australia. It is headquartered in Melbourne and employs more than 1,200 people around the world. The company has operations in the Asia Pacific region and has stakes in businesses in Brazil, South Korea, Malaysia, Indonesia and Thailand.
Carsales’ FY19 Update
Carsales said that it is conducting a strategic review and is looking to sell its 50.1% stake of Stratton Finance, which is a vehicle finance broking business, it also provides insurance. Stratton has been operating for 22 years and helps customers finance over $750 million of assets each year.
Due to the decision to sell the business, Stratton is going to be classified as a ‘discontinued operation’ in FY19.
Carsales Managing Director Cameron McIntyre said: “The decision to divest Stratton when market conditions permit will allow Carsales to focus on other core business growth opportunities in our Australian and International operations while repositioning our finance services strategy.”
As for the rest of the company, Carsales said that the performance of the classifieds business in Australia has proven resilient in the current economic environment. Meanwhile, the ‘International’ business continues to perform well and is building scale in each market.
Carsales is now predicting that the FY19 adjusted net profit after tax (NPAT) will be between $130 million to $132 million. Excluding Stratton this would represent growth of 1% to 3%. Including Stratton it represents growth of 0% to 1%.
Excluding Stratton, Carsales thinks that revenue will be $418 million to $420 million (up 10% to 11%) and adjusted EBITDA (click here to learn what EBITDA means) is expected to grow by 7% to 8% to $209 million to $211 million.
Is Carsales A Buy?
It’s hard to know if Carsales is a buy today with how unsure the Australian economy is at the moment.
The international segments are doing quite well, but you have to take into account the Australian division, which is barely growing profit, and that’s where a large amount of profit comes from. I think the growth shares in the free report below could be better than Carsales at the current prices.
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