The Carsales.Com Ltd (ASX: CAR) share price is going nuts this morning after the company reported its 2019 financial year results. At the time of publishing, shares are up nearly 12%.
Carsales was founded in 1997 and is 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 Results
Carsales recorded an 11% increase in revenue to $418 million, underpinned by the core Australian classifieds businesses. Net profit after tax (NPAT) was down 53% to $85.3 million due to a previously announced one-off impairment charge against its 50.1% stake in the underperforming Stratton Finance.
After adjusting for the impairment, Carsales reported an adjusted net profit of $131.3 million, up 2.8% on last financial year.
The international portfolio continued to deliver strong growth. South Korea and Brazil in particular were stand-out performers with underlying local currency revenue growth of 13% and 35% respectively. The businesses in Chile, Mexico and Argentina all reported double-digit revenue growth on a constant currency basis.
Carsales declared a final dividend of $0.25, bringing the full year dividend to $0.455 and placing the shares on a fully franked dividend yield of 2.9% at the time of writing.
Management Comments
Commenting on the result, CEO Cameron McIntyre said, “We are very pleased with the company’s performance and our ability to respond to challenging market conditions in order to deliver continued growth while investing for the long term. The result is testament to the strength, resilience and diversified nature of our business, as well as our investment in new products and entry into new markets.”
Mr McIntyre was particularly pleased with the continued growth of the international operations saying, “Our global businesses all made excellent progress in FY19, delivering an increasingly significant contribution to our results and building the foundations for long-term growth. Our two largest international businesses in South Korea and Brazil recorded particularly good revenue and earnings growth.”
Blue Skies Ahead
Carsales expects to see a gradual recovery in the Australian automotive market throughout the year, supported by lower interest rates, an improved lending environment, a recovering property sector and recent tax changes.
Growth in their two main international businesses of South Korea and Brazil is expected to be similar to FY18.
The company didn’t provide any specific profit guidance but did say that it expects growth to be ‘solid’ in FY20.
Is It Time To Buy In?
The Carsales share price has had a great run and is now up more than 40% since the start of this year. It’s a wonderful company capable of generating high returns on equity and through its international businesses, it has tremendous potential for future growth. Whilst shares are certainly not cheap, I think Carsales would make a solid investment for long term investors.
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At the time of publishing, Luke has no financial interest in any companies mentioned.
