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A $47.8 million impairment charge has seen Carsales.com Ltd's (ASX: CAR) NPAT slide by 82 per cent to $11.1 million in H1 FY19.
Tightening regulations by ASIC about car financing appear to be the major cause of Carsales' woes representing yet another casualty of the findings of the banking and finance royal commission.
The impairment hit what would have otherwise been a relatively strong result for Carsales.
Revenue for the period was up by 17 per cent to $235 million and EBITDA was up to $98 million.
Tightening regulations appear to have constricted the company according to CEO Cameron McIntyre.
"As foreshadowed in December, we also recognised an impairment of $47.8 million in relation to our investment in Stratton, reflecting the adverse impact of ASIC's legislative changes on car financing, as well as continued tight credit market conditions," says McIntyre.
The company's international exploits also paid off during the half. Webmotors (in Brazil) was a "standout" for Carsales with underlying revenue growth of 31 per cent. SK Encar (in Korea) delivered revenue and EBITDA growth of 20 per cent and 22 per cent respectively.
"The long-term investment in our international growth strategy is generating significant upside, with excellent revenue and earnings growth recorded in our two largest investments in Korea and Brazil," says McIntyre.
The company also completed the acquisition of the remaining 16.7 per cent stake in its Chilean business chileautos.
Carsales is still the leader in the auto sales sector in Australia. Revenue locally was up 12 per cent on the prior corresponding period, underpinned by growth in advertising products.
"We continue to be the clear market leader in auto classifieds in Australia, with the largest and most engaged customer audience," says McIntyre.
"We are making excellent progress advancing our international growth strategy, and it is very pleasing to see the increasing international contribution to the company, which should only continue given the growth trajectory of these businesses."
"Brazil's success continues to provide the strategic roadmap for our earlier stage Latin American businesses in Mexico, Argentina and Chile, and it also reinforces that we can achieve significant long-term upside from investment in these attractive markets. We are seeing positive operational metrics that demonstrate the progress we are making towards being a clear market leader in each of the countries in which we operate."
The Carsales board has declared a dividend of 20.5 cents per share which will be paid on April 5, 2019.
Shares in Caresales.com are down 7.06 per cent to $11.32 per share at 11.28am AEDT.
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