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

Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support

How communications technology can raise the bar on customer service, employee experience
Partner Content
From capturing feedback early to providing messages with a higher rate of cut-through, ...
Advertisement

Related Stories

EML Payments awarded $320m government contract to help stimulate the Spanish arts sector

EML Payments awarded $320m government contract to help stimulate the Spanish arts sector

Global payment solutions business EML Payments (ASX: EML) will play...

Microbio goes public as med-tech tackles condition that causes 11 million deaths per year

Microbio goes public as med-tech tackles condition that causes 11 million deaths per year

Brisbane-based medical technology company Microbio has stepped...

Available anywhere and everywhere: Lifestyle brand The Somewhere Co. targets global expansion

Available anywhere and everywhere: Lifestyle brand The Somewhere Co. targets global expansion

Despite a difficult few months for everyday wares outfit The Somewh...

G'day space: Australia is "go" for launch

G'day space: Australia is "go" for launch

Just after midnight on Monday 27 June, above the vast wilderness of...