Carsales takes $48m hit from lending changes

Carsales takes $48m hit from lending changes

Tightened credit conditions and a ban on flex commissions have taken a Carsales.com (ASX: CAR) subsidiary down a gear with a non-cash impairment charge of $48 million.

The digital automotive classifieds company holds a 50.1 per cent stake in Stratton Finance Group Cash Generating Unit (GCU), whose car financing operations have been dented by the Australian Securities and Investments Commission's (ASIC) ban on flex commissions in the market since 1 November.

Carsales had already flagged these issues as impacts of the Royal Commission in its FY18 financial report, but now adds the business has also been affected by delays in operational benefits that were expected to offset yield reductions.

The group claims Stratton's total finance contract volumes have been higher year-on-year for the five months to November 2018, but at $1 million anticipated FY19 profits are set to be half what they were last financial year.

Despite the challenging circumstances, Carsales sitll believes the finance market remains attractive in supporting its core business over the longer term, with plans to continue evolving both product and operating models to leverage opportunities.

"Excluding the change in Stratton's financial performance and the associated non-cash impairment charge, based on current market conditions carsales affirms its performance outlook statement provided at the FY18 AGM," the company said.

In its AGM the group had forecast "moderate" NPAT and EBITDA growth, with earnings growth weighted towards the second half backed by expectations of improved display advertising performance.

CAR shares were down marginally by 1.27 per cent at $11.60 at noon AEDT.

Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.

Business News Australia

Get our daily business news

Sign up to our free email news updates.

 
Unpacking equity: Finding your funding fit
Partner Content
Armed with a growing business and a great opportunity, a business owner’s next challe...
Australian Business Growth Fund
Advertisement

Related Stories

Meta slammed over "dereliction" of commitment to Australian news

Meta slammed over "dereliction" of commitment to Australian news

The decision by Meta (NASDAQ: META) to "deprecate" the Fa...

AF Legal acquires Armstrong Contested Wills & Estates in deal worth up to $3.75m

AF Legal acquires Armstrong Contested Wills & Estates in deal worth up to $3.75m

A year on from the failure of an $11 million merger with Go to Cour...

GreenCollar buys into EnergyLink Services to tackle agribusiness decarbonisation

GreenCollar buys into EnergyLink Services to tackle agribusiness decarbonisation

Environmental markets project developer GreenCollar has made a stra...

Going concerns notices raised for ASX cannabis players Cann Group and Althea

Going concerns notices raised for ASX cannabis players Cann Group and Althea

Material uncertainties have been raised about two of the largest&nb...