Driving steady

1H23 RESULT

Need To Know

• Strong result as expected, although slightly below consensus (NPAT $121.8m vs $124.0m)
• Positive outlook language, broadly unchanged guidance from the AGM update 
• Some 2H23 downside risk on slightly lower EBITDA and higher interest costs

Double digit revenue growth was seen across all major geographies on a constant currency basis to a group total of $331.7m (up 37%) and continued discipline in cost management saw EBITDA grow to $177.9m (up 41%), with a 150bps margin expansion to 53.6%. The large jump was driven by the acquisition of the remaining 51% stake in Trader Interactive during the period, with pro-forma underlying revenue growth of 15% and EBITDA growth of 17%. 

Strong Australia Private revenue growth of 39% was above market, driven by yield, delivery of new dynamic pricing initiatives and growth in Instant Offer. Dealer revenue grew 10% driven by resilient demand for used cars and yield growth including the benefit from the introduction of a premium price tier. Media delivered double digit revenue for the fourth consecutive half year supported by strategy of diversifying into non-automotive segments. 

International segments continue growth with Brazil growing 23% and Asia growing 12%. Korea was driven by growth in higher inventory at dealers and branch network expansion. Brazil saw continued dealer subscription growth and yield.

USA Trader Interactive yields improve and continued growth in customer penetration saw 11% revenue growth (on a pro-forma basis) and strong cost discipline saw EBITDA margins rise 2% to 59%. CAR communicated a price increase across all verticals in early February to offset inflationary pressures.

Balance sheet remains solid with net debt at 2.5x. Cash conversion fell slightly to 97%, and capex spending of ~9% of revenue remains in-line with prior periods. CAR declared an interim dividend of 28.5cps, up 12% on the pcp.

Outlook remains unchanged from the AGM, expecting to deliver ‘good’ growth in FY23 and expect to see margin expansion. Australia growth will be driven by ‘strong’ growth in private, with only ‘solid’ growth in dealer, where we expected ‘good’ growth given price rises in October.
 

Investment View

CAR continues its market leadership, and all businesses are performing well. The outlook remains ‘good’ although increased debt levels are impacting finance costs. There is continued speculation about acquisitions, providing future catalysts for upside potential, or synergistic risks. Trading in-line with its longer-term PER, we retain our Hold recommendation.

Figure 1: Pro-Forma underlying geographical revenue up double digits on a constant currency basis (assuming 100% ownership of Trader Interactive over both periods)

Figure 2: Actual financials delivering operating leverage on an EBITDA level, offset by higher interest costs on an NPAT level

Figure 3: Forward PE ratio in line with its 5-year average