CAR fy25 Result - Steady grower --Top 10 position

 CAR GROUP FY25 RESULT

FY25 results saw revenues 8% higher, and NPAT was 10% higher. These numbers were 3% higher in revenues and in line at the NPAT level than my expectations.

Growth results across all business geographies. Perhaps Asia is a little soft; reinvestment was the reason given. Interestingly, for the group, the international businesses are growing faster than the legacy Australian business, but Australia has higher margins, so this growth sees group margin dilution, at least at this stage.

CAR always makes a song and dance about added features with the secure C2C payment and Autogate, the dealer tool assistant perhaps standing out. CAR has made a mission of implementing anything that works across the global empire, which was a justification for the acquisitions. Some work well, some don’t transplant that well. investment is aimed at making the transaction as frictionless as possible for private and dealers.

CAR also showed the ability to take price, which is positive and a feature of network businesses.

The ND is high but manageable after the large acquisitions in the US and LATAM. The ROE and FCF/Cap invested show the weight of the huge investments. CAR never fell below the cost of capital, but it remains a long way below spectacular returns, and these numbers are assisted by gearing. Incremental returns are positive due to the low base, a long way to go for large economic value to be created.

The stock is a solid but unspectacular earner with some inherent risk in the more competitive overseas markets, which it is, so far navigating quite well. Of course, the spend on an auto is ok but not like property, so there is much more nuance to consider in assessing value to customers in this market and the ability to take price.

My assumptions are 10% EPSG for 5 years and an exit multiple of 25x. That exit multiple could be light, as the moat is strong, but concerns around the continued strong growth in Australia and risks in the global expansion yet to be put to bed are the reasons. It could be higher? A different business and bigger prize, but my REA exit is 38X. Buying in the low to mid $30’s.

When we look at the eps profile, we see MSD-type growth until low double digits when the acquisitions were made, then back to HSD now. It's hard to think that CAR can sustainably generate double-digit eps growth, given the mix, maturity and competition in various markets. the business is solid but has a certain growth cadence.

The CEO is retiring after a long tenure as CEO (2017) and CFO before that. The strategy of buying minority stakes and then buying our minorities when CAR was comfortable with the businesses appears to have made a difference.

 

 

 

 

 

 

CALL SUMMARY

Cameron McIntyre   MD, CEO & Director

it's been another excellent year for the group. But these results continue to -- they really continue our track record of long-term growth and demonstrate the strength of our global diversified business model and the commitment that we have to our customers. The pro forma results on the left side of the page, they're really the best reflection of our underlying performance as they really normalized for our Australian tire business that we've recently exited. In constant currency on the right-hand side, the group delivered 12% growth in pro forma revenue, 12% growth in pro forma EBITDA, and that was both an excellent outcome. We've maintained strong EBITDA margin performance at 56%. Adjusted NPAT was up 11% in constant currency, and that was also an excellent outcome.

I'm looking at inventory and inventory levels probably slightly lower than over the course of the year, and that just reflects a robust used car market environment that we're in, in Australia, Brazil, Korea and Chile at the moment. Looking at dealer numbers, they remain stable at around 49,000. So our dealer proposition continues to be strong across all regions reflected in our solid results here and despite some more challenging consumer environments in past.

Look, for many years, our strategy centered around investing in large high-growth markets where we can leverage our intellectual property and our tech to deliver long-term sustainable value for our shareholders and our international investments, they've delivered outstanding financial returns, and we remain highly confident that they're going to continue to grow nicely into the future.

Across the globe, our teams, they continue to excel in delivering on our purpose, and our purpose is about making buying and selling a great experience. Our vision also very bold and clear here to become a global leader in online vehicle marketplaces.

our strategic priorities or pillars to strengthen our core, which is to enhance the scale and the strength of our today. The second one there is extend our marketplaces, which is really to create new experiences for consumers, products and to deepen our value proposition for dealers, private sellers and OEMs. Third one is around diversification and growth, and we're pursuing strategic M&A, we're investing in innovative offerings while also developing products and technologies that are going to drive sustainable long-term growth for the company.

that we expect to deliver another excellent year of growth in FY '26. So we expect to see pro forma revenue growth of between 12% and 14% in constant currency, pro forma EBITDA growth of between 10% and 13% constant currency and adjusted NPAT growth of between 9% and 13% in constant currency. And this outlook reflects our confidence in our strategy and the momentum that we're building across our global operations.

we do operate in large attractive markets with substantial TAMs. And with our current share is still well below 10%, I guess we see significant long-term growth potential across every region that we serve.

Australian C2C payments product. It's a solution that's been developing -- we've been developing to offer consumers a safer and more seamless way to transfer between private buyers and sellers. And since launching this late last year almost late last calendar year, the product has really gained great traction with significant uptake in both buyers and sellers and in probably a very short period of time, we've already facilitated over $130 million of payments or transactions. The technology is also built in such a way that it's globally scalable, and we see strong potential to roll this out in other markets that we have across time as well.

Project Merlin. And Merlin brings together our previously separate desktop and mobile experiences into a single responsive platform across web, iOS and Android platforms. And this not only simplifies our tech stack in the business, but it also enables faster, more consistent delivery across all devices and lays the groundwork for a more personalized consumer experience. At its core, I guess, Merlin really introduced the business line system and it's there to enhance delivery speed and really improve SEO. And that was a key objective for us as well. It creates a more intuitive and engaging user experience too.

It's called Bello, and that's about making it easier for the dealers, private buyers and sellers to connect via carsales. And with this update, users of the carsales, they can now see the dealership name and the specific car of interest when receiving a call, making them more likely to answer the call and less likely to mistake for a scam call,

Premium Select performance in North America with increases in both the average number of deals utilizing the product and the number of transactions, the growth has been driven by a product that delivers a lot of value, particularly in a more challenging market environment. Media has been a strong growth area for Trader Interactive with direct media revenue up 167% year-on-year, reflecting really the strong advertising engagement and investments we're making there and also the launch of our media agency in Xenara. SSI provides dealers and OEMs with a valuable set of market insights to benchmark performance and make really good informed decisions.

LatAm. The national expansion in Brazil has continued to pace with the gap really between webmotors and the #2 player there in vehicle marketplaces continue to grow significantly. Look, our strong partnership with our major shareholder partner, Santander has been excellent and has enabled that product you've heard us talk about wallet. And that product is really driving with around 9,000 dealers.

Asia and the guaranteed product continues to go really well for us. And I guess it's going from strength to strength with AI utilization now unlocking additional efficiency and accuracy for the Encar business. Guarantee inspections are up 20% year-on-year, driven by the opening of new centers and enhanced efficiency in our existing ones through that use of AI. we continue to improve on our home delivery experience for our Korean car buyers with the introduction of a 24/7 AI agent now facilitating an improved customer journey, particularly for those customers inquiring on cars outside of hours.

William Elliot   CFO

And some of the key initiatives that we've worked on over the last 12 months, C2C payments in Australia, the wallet product in Brazil and our new Marine website in the U.S. Finance costs declined marginally year-on-year, and this reflects stable debt levels and a largely unchanged interest rate environment. Our effective tax rate in FY '25 was about 18%, which was consistent with last year. And this reflects the applicable tax rates in each of our markets, except in the U.S. where we pay minimal tax due to the amortization of purchase price intangibles and as well as us utilizing our prior period tax losses.

Adjusted net profit was $377 million, which was up 11% on a constant currency basis, which was an excellent result.  In FY '25, non GAAP adj is primarily related to noncash amortization of intangibles and one-off costs related to the exit of our Tyres business, and we provide a full reconciliation in the appendix.

And on a segment basis, it was great to see margins increase across all of Australia, LatAm and North America. And in Asia, as we've called out previously, there's been a small decline in margins due to the opening of new branches as well as the increased investment we're making into our dealer direct products.

Cameron McIntyre   MD, CEO & Director

Australian market. So automotive industry, I guess, as I mentioned before, has remained robust, and that reflects the strong audience engagement we've seen and the sustained demand for cars over the carsales platform. Over the past 12, 24 months, we have observed a shift and you can see that on the top right-hand side there in customer behavior with buyers becoming a little bit more price sensitive, as you'd expect due to elevated interest rates. where growing preference for used cars over new cars over the last couple of years. And that has seen lead volumes continue to grow nicely for us through the year. Pricing for used cars on the bottom right-hand side of the slide there remains below the peak levels that we saw, but still well above pre-COVID level benchmarks .

And time to sell, that's returned to pre-COVID levels, driven largely by a slight slowing in the private market after what's been a very buoyant few years. So just a couple of other things there. Clearly, very happy with the Australian business revenue performance growth of 8% and EBITDA growth of 9%, just looking at each of those segments.

dealer growth of 10%. That was driven by strong demand for used cars, resulting in increased lead volumes, improved yield and greater penetration of our depth product. Private seller, we continue to deliver strong outcomes for private sellers, maintaining robust market share in what's been a slightly softer private seller market. At the same time, we've continued to grow private yield through pricing optimization and by scaling our product.

And then DRS is our data business, and that reflects the continued demand for trusted vehicle data and insights and reinforcing is a key contributor to the broader data services that we offer.

It's been an excellent year for TI with revenue growth of 10% and earnings growth of 11% in constant currency. And this is a very good result given the North American market for leisure vehicles remain a little bit challenging with RV and Powersports registrations for both new and used units showing small declines in 2025 versus 2024. And there's been some recent uptick in transaction volumes, but still early days. We remain focused on growth regardless of market conditions. So look, meanwhile, the truck equipment markets have had -- they've been very robust, highlighting the benefits of our diversified portfolio across multiple industries. Our customer numbers remain similar year-on-year, which demonstrates the strength of our value proposition. Growth continues to come from multiple sources, including an uplift in premium select transactions yield increases, for instance, the recent dealer price rise, that went very well as well, growth in media, data and insights and then a small but growing contribution from our Marine business.

LatAm continues to deliver outstanding performance with good revenue growth of 26% and EBITDA growth of 28% in constant currency, largely driven by webmotors. In Brazil, while interest rates have increased there, but we've seen no material impact on vehicle trading. There's been some softening in credit availability, but it's been quite marginal, and that's affected our finance revenue. The Brazilian auto market remains strong with 14.6 million new and used car transactions over the past 12 months, presenting a significant growth opportunity for us. Our national expansion strategy continues to deliver adding new dealers and growing our audience. The digital advertising market in Brazil is still a much less mature market than Australia, and that positions us well for growth too longer term.

Average revenue per dealer is increasing too, so driven by a greater premium product penetration and price increases. We're also seeing revenue diversification with strong growth in finance volumes and media, which should emerge as key growth drivers over the next 12 to 24 months.

South Korea. consumer confidence has increased recently and used car transactions remained stable over last year, year-on-year, underscoring the real strength in the stability of the Korean car market. And that was supported by the macro backdrop. Encar had another excellent year with revenue up 16% and EBITDA up 11% on a constant currency basis. We've added 4 new branches and extended our operating hours in our select inspection centers, which is beginning to leverage AI for efficiency improvements. And these initiatives have driven an increase in penetration of guarantee inspection products, reinforcing its value in market. Revenue growth was further supported by a 10% price rise in guarantee ads, and we introduced that gradually from August last year.

autogate revolution. transformative leap in for our dealers, in particular, evolving from what has been a publishing-only tool in autogate to a powerful omnichannel SaaS platform. And with the integration of AI capabilities, dealers gain access to predictive insights on time to sell, pricing and inventory optimization tools like LiveMarket and promote fair price. Autogate now includes a marketplace scouting feature that helps dealers identify high-value vehicles, natural language interfaces for actionable guidance and automatic transcription of buyer conversation surfacing intent signals in those conversations, such as budget and finance eligibility. And this is certainly one of the larger investments that we've made in enhancing our dealer capability for this core part of our business for some time now.

TI, and we're enhancing our dealer experience in North America as well. And through Xenara, which I mentioned before, our new in-house media agency, we manage end-to-end digital advertising now from search engine marketing to social and location-based campaigns for our dealers to really drive traffic back to the TI network. We've strengthened lead inventory management by implementing carsales, telephony systems, fraud filtering and our new CRM tools within Trader Traxx, which is the equivalent of autogate, and that's all bolstered by the acquisition of DP360. .

North America, we're also targeting the $1 billion marine market opportunity that we have through the launch of BoatMart that many of you are aware of and the rollout of a pay per lead model, which we're very happy with how that's going. And this approach really aligns dealer spend with performance, and it's already driving a really strong early traction through dealer participation and lead volumes that we're seeing. And so with these enhanced tools and the redesigned marketplace experience, BoatMart is really well positioned now as a key growth driver for Trader Interactive and their portfolio. And we'll be investing more money into marketing here in FY '26 to continue that -- to grow value

Our international markets present significant upside with new products driving customer acquisition and take rates across the board. We're also leveraging our IP and technology across our regions of base with much more to come.

Q&A session  

NA business outlook

But if I think about the way we finished the FY '25 year, I mean, -- we -- traffic and connections has really ticked up, which has been nice. The price rise that we did in Q4 went very, very well. So that was really pleasing. Our Premium Select product continued to outperform. Our private volume notably lifted, which was nice because we hadn't seen that for a while. So that coupled with the yield work that we've done is really beneficial. From a media standpoint, we had an exceptional sort of finish to the year, and we take that into FY '26. And our data business went from strength to strength as well as lay down a really strong foundation as it related to marine.

We've got a great product road map as it relates to our dealer business, with premium AI, as well as Xenara, the digital agency. The media business is growing from strength to strength. We launched Xenara, so we've not only built a media business, but we've also got a new in-house agency, which is going to be really strong for us moving forward. Our OEM relationships continue to improve. And yes, that's been what we've been doing over the last 18 months, and I feel really confident moving into FY '26.

The other thing is that our biggest segment, RV has really started to show signs of improvement in Q4 and into FY '26, which is pleasing for us. Retail sales have grown for the first time in a long time. Dealers are looking for inventory now, which is the first time they wanted that for a long time, used inventory, so via our cash offer product. Our OEMs are very active. The tariff impact for RV is also a lot less because a lot of it is locally sourced and produced. And from a customer perspective, big customers and smaller customers are starting to do well. So that -- all in all, that's why we're looking for double-digit growth in revenue and why we're targeting double-digit growth for profit even with the marine investment. without the investment in Marine, we would have seen margin improvement,

Pop Sells this gives us a great point of difference versus Facebook and our competition as well.

I don't expect price increase to be any less than last year. We have seen a slight improvement in private yield in the back half in H2 in the '25 financial year, and we expect that to carry into the '26 financial year with a pretty strong start in July, August.

So, as it relates to BoatMart, look, I'm really pleased with the guys and with the business in terms of the launch of CPLs, we launched that essentially in Q4. As you guys know, as a challenger brand and with a model that's different to the U.S., it's the Australian leads model, and we're really standing behind what we sell, which in that competitive landscape like a smart thing to do. So customer growth has been moving along really, really well. We signed MarineMax, the biggest marine dealer in the world. So that's really pleasing and obviously helps other customers take note of the platform.

Our traffic is growing rapidly we're approaching 2 million visits a month. So -- and the nice thing about that is that our organic traffic is really starting to accelerate now, which is pleasing based on a lot of the strong SEO work that the company has done. And with that, clearly, leads are at record highs. And there's some real interest from the industry itself in terms of dealers really just craving an alternative. And the nice thing is with both acquisitions, so DP360 has a lot of really large overlap with our marine dealers and Pop Sells, the second part of their business is RV and then boats. So we'll introduce that into that environment as well.

 

LATAM

What I can say, look, of course, as the base growth is going to become harder and harder to keep this 25% level of growth. But I think that we have several levers to keep growing strongly, and I'm very confident of that. Asking your question about slowing down, I'm not seeing right now any slowing down in this segment. I still believe that we have opportunities in terms of premium products and the integration with Wallet is working very well and a lot of things to evolve. Media also, we developed a lot of products that we shared the knowledge with Craig's team in Australia.

Financing, of course, we have the highest points in terms of interest rate, we are seeing the market some impact, but not -- Santander is really resilient in terms of that because they are more focused on high-end clients, and we are not seeing a relevant impact of that. And Loop and Car10, still a lot of things to do and to grow. So that's my expectation and the reason that I'm bullish looking ahead.

Guidance-Revenues growing better than ebitda, margins lower.

One is investment in Marine next year, we're going to step up a little bit because we see a huge opportunity there. The second one is we're continuing to invest in marketing in Dealer Direct in Encar and also the small deals in the U.S. that we've acquired will add some revenue, but minimal EBITDA. And so all of those mean that there will be a slight gap between revenue and EBITDA growth likely.

The thing that is pleasing is you're seeing the top end of the revenue growth range being higher than what we delivered in FY '25, and that reflects us targeting growth. We are a growth business. And as we discussed before, we've got so many opportunities in front of us. That doesn't mean we don't have operating margin expansion potential going forward, which we certainly still have, but we reserve the right to continue to invest in things to drive growth going forward.

Korea

Upon the penetration of guarantee, I remember there was a relatively early 50% about a year ago. Now it's 59%. So I still believe that I mean there's no reason why we cannot make it grow until 70% or above 70%. Of course, it will be harder to increase compared with when we are at the beginning stage, to make it grow from 10% to 20% or 20% to 30%, but still, we can grow that. there are 2 things that we have been focusing on. The first one is to launch the Guarantee 2.0, as you may have seen in the past, because there must be a customer who is willing to pay more in the Guarantee 1 customer segment. So I mean, we would like to provide better services for them to be able to pay more on that. And the second one is in order to increase 50% to the 70% penetration, we need to be a little more innovative to address the inventories of dealers in the rural area with a lighter brand format. So to make our brand format a bit more lighter and innovative is the second thing that we have been focusing on that. So by doing these two things, I mean, there's no reason why we cannot reach higher percentage as well as capturing more value of the Guarantee in the future.