James Thomson Editor

James Thomson is the editor of BRW. Previously he was editor and publisher of SmartCompany and a senior editor at Business Spectator. He writes regularly on Australia's wealthiest entrepreneurs and has deep expertise in small business and the mid market.

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Growth and margin give Carsales’ Roebuck time to expand

Published 14 February 2013 00:50, Updated 15 February 2013 08:28

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Growth and margin give Carsales’ Roebuck time to expand

A 53 per cent profit margin, growth and market dominance give Carsales’ Greg Roebuck plenty of time to plot his next move. Photo: Will Salter

Another profit reporting season, another impressive result from Carsales.com.

The company produced a 14 per cent profit rise to $37.6 million, with revenue up 17 per cent to $102 million. If you’re playing along at home, that’s a profit margin of 53 per cent. Yep, 53 per cent.

Those hard-to-please investors weren’t as impressed as me though, and Carsales shares fell 5 per cent yesterday to $8.40, mainly because the net profit posted was about $2 million below analysts’ expectations.

Still, the stock is up 66 per cent in the past 12 months, so long-term shareholders aren’t likely to be too upset.

As our deputy editor Michael Bailey writes today, Carsales and its online classifieds cousins in Seek and REA Group (owner of realestate.com.au) have transformed themselves from media industry disrupters to dominant forces in the space of a decade. Today they hold what appear to be impregnable positions in their individual sectors – and they’re rolling in cash.

Of course, with market dominance comes the question of where growth comes from.

Carsales chief Greg Roebuck – who owns 3 per cent of the $2 billion company – is trying to expand into the general classifieds space with the launch of Quicksales.com.au.

It’s the expansion of this business that dragged ever so slightly on the group’s profits. Carsales will spend a seven-figure sum on a marketing campaign for the site (it will be headed by former tennis star Pat Cash) and the increased marketing expenses were responsible for the group’s overall profit margin dipping from 55 per cent to 53 per cent.

Still, as Roebuck says, he’s prepared to live with that little dip if it means he can grow in an area that he tried to get into through the acquisition of Trading Post, which the Australian Competition and Consumer Commission knocked back.

Roebuck also says the company continues to look overseas for opportunities, which is hardly a surprise given its position in the Australian market.

As long as Carsales can keep producing these impressive results investors will give him plenty of time to nail that next move down.