Motorcycle Holdings revs up with record result

Results released today show MotorCycle Holdings (ASX: MTO) has reaped the benefits of a boom in motorbike sales that was boosted by early superannuation withdrawals, but the Brisbane-headquartered group has also outperformed the market thanks to a bullish strategy to bring on new sites and brands.

After reporting a record performance today with net profit up 86 per cent at $28.3 million, the company revealed new motorcycle sales rose by 20 per cent to 13,264 units, versus a national market rise of approximately 12 per cent.

Revenue rose by a higher percentage still at 32 per cent to hit $170.9 million, while improved margins also made the business more profitable.

Restricted supply meant the number of used motorbikes sold was down by 7 per cent, but this was offset by higher sales prices prompting a revenue increase of 8 per cent to $102.5 million.

MotorCycle Holdings saw an improvement - although not as drastic - in its retail accessories, parts, servicing and repairs businesses to a combined level of $102 million, versus $88.7 million in FY20.

CEO David Ahmet said the company’s growth strategy of expanding the business by adding new product ranges and brands to existing sites, without increasing the cost base, was delivering sustainable growth and profit.

"The strong result this year was underpinned by improved margins on new and used motorcycles driven by restricted supply," Ahmet said.

"We made a conscious decision to sharpen our focus on the key profit drivers across the business, and we have seen the results of that strategy with significant growth in our underlying EBITDA and profit after tax for the year.

"Our two most recent acquisitions provided strong full-year contributions, Harley-Davidson dealerships continued to produce strong profit results and the Indian Motorcycles and Polaris products added to existing stores contributed strongly with increased sales and ongoing margin growth."

Ahmet said product diversification contributed strongly to the improved performance, with significant increases in gross profit for both retail and wholesale accessories, up 51 per cent and 30 per cent respectively.

"In addition, our finance joint venture contributed profit for first time with our 50 per cent share being $0.9 million NPAT.

"The improved trading conditions also enabled us to retire almost all bank debt with $4.7 million at bank as at June 2021."

Ahmet said he believed the current heightened level of demand would continue in the short to medium term and was optimistic about the forthcoming year.

"The industry as a whole has stabilised, with consistent volumes and new motorcycle sales growth of 12 per cent for the year, which is a good indication that our current performance is sustainable," he said.

"We recorded new motorcycles sales growth of 20 per cent for the year and expect the current elevated profit margins to continue for at least the next 12 months.

"While COVID-19 lockdowns continue to present challenges due to restricted trading conditions and will impact on results while they continue, demand is expected to remain strong in locations where stores are trading without restrictions.

"The company’s solid balance sheet provides us with the ability to make strategic acquisitions should opportunities present themselves, and our intention is to continue to expand both our geographical footprint and our diverse product range across all areas of the business."

In other vehicle-related business news, increased tyre demand lifted profits at RPM Automotive (ASX: RPM) and National Tyre & Wheel (ASX: NTD).

RPM Automotive recorded a net profit after tax of $2.9 million, compared to a $1.5 million loss in the previous financial year, while National Tyre & Wheel saw its profit almost quadruple to $21.1 million.

Last week, Peter Warren Automotive Holdings (ASX: PWR) reported a profit of $37.5 million, which was 143 per cent higher than its prospectus forecast, and Australia's largest listed car dealership company Eagers Automotive saw its statutory profit accelerate 17-fold to hit $202.3 million.