Carsales.com firing on all cylinders as profit accelerates to $161m

Australia’s dominant online vehicle marketplace Carsales.com (ASX: CAR) is firing on all cylinders with buoyant conditions in its domestic and international operations leading to a 23 per cent increase in FY22 profit to $160.8 million.

The result has been bolstered by a bigger contribution from US vehicle marketplace Trader Interactive after Carsales.com earlier this year bought out the remaining 51 per cent it didn’t already own for about $1.17 billion. Trader Interactive is expected to deliver low double-digit earnings per share growth in the first full year of ownership, with higher upside in the following years.

Carsales.com posted a 19 per cent increase in revenue to $509.1 million in FY22, while underlying EBITA rose 12 per cent to $269.9 million.

The group, which has been riding a high over the past couple of years due to a spike in demand for cars, says it has strengthened its competitive position in all of its key markets with demand still holding well above pre-pandemic levels.

The company’s FY22 result is supported by the latest 2021 census data which shows car ownership in Australia has risen faster than the population over the past five years – at 14 per cent versus 9 per cent – reflecting significant growth in the sector.

Carsales.com CEO Cameron McIntyre also credits the group’s strategic initiatives supporting the rising trend of online vehicle sales for its progress in the Australian, Korean, US and Brazilian markets.

“We are continuing to drive more of the vehicle buying and selling process online across all our markets,” says McIntyre.

“We launched our end-to-end online digital buying experiences in Australia and the US, with great progress made in both markets. We have significantly increased the adoption of our online instant trade in products in Australia and Korea, which are now material contributors to our growth.

“We continue to see robust levels of demand in all our key markets, reflecting the strength of our market position and the resilience of marketplace businesses through economic cycles. This gives us confidence we can continue to deliver great results for our shareholders in FY23.”

McIntyre says the Trader Interactive acquisition is part of an ongoing strategy to expand the group's global reach.

“The acquisition is a natural evolution of our international growth strategy into large, attractive markets and brings further growth opportunities as well as increasing the diversification of our business across geography and customer segment,” he says.

“We have an excellent track record of delivering strong shareholder value through investment in international markets and moving to 100 per cent ownership of Trader Interactive will enable Carsales' shareholders to capture the significant upside potential of that business.”

Carsales.com’s US business increased revenue by 11 per cent, while EBITDA rose 16 per cent, which the group says reflects solid growth across RVs, powersports and equipment. It is expecting further upside as inventory levels improve in the trucks and powersports sectors.

Brazil was its fastest-growing market in FY22 with revenue up 26 per cent and EBITDA increasing 23 per cent, largely due to ongoing growth in dealer subscriptions and higher inventory levels.

Carsales.com is expecting the market to sustain its momentum in the current financial year with forecasts of higher EBITDA margins in FY23.

It says Australia’s underlying auto market conditions are strong and it is expecting solid growth in dealer revenue over the year through a deeper penetration of premium products such as dealer finance.

Carsales.com is paying a final dividend of 24.5c per share, up 9 per cent on the previous year.