Car Group Reinforcing Its Competitive Moat

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The company is included in ASX50, ASX100, ASX200, ASX300, ALL-ORDS and ALL-TECH

While FY25 results for CAR Group met expectations, upbeat FY26 guidance and a stronger US performance have lifted market sentiment.

-Car Group’s FY25 result in line with expectations
-Trader Interactive performance eases fears
-FY26 guidance well received, shares climb
-Morgans expects sustained growth locally and overseas

By Mark Woodruff

Despite tough operating conditions, global digital automotive classifieds business Car Group ((CAR)) achieved double-digit growth across management’s three key financial metrics, revenue, earnings, and net profit.

Management has guided to similar revenue growth in FY26.

Given international platforms nowadays account for around 57% of group revenue, highlights included a resilient US performance, countering lingering market concerns, and strong momentum in Latin America.

FY25 results were consistent with management’s forecasts outlined on July 17, when the company also announced Will Elliott’s appointment as CEO.

Normalising for the exit of the Australian Tyres business in January, pro forma revenue, and earnings (EBITDA) of $1,144m and $641m, respectively, grew by 12% on the prior year, while earnings margins of 56% maintained the same level.

Adjusted net profit rose by 11% to $377m, in line with the consensus forecast.

Morgans describes a resilient performance from Car Australia (still the group’s largest market), with proforma revenue growth of 8% and around 100bps improvement in earnings margin to circa 66% from 65% in the prior year.

FY26 guidance is for respective growth in pro forma revenue, earnings, and adjusted profit of between 12-14%, 10-13%, and 9-13%.

Citi suggested guidance would be well received, noting investor concern had centred on the outlook for Trader Interactive.

This view has been borne out, with shares post the market update rallying towards the all-time record high set in 2024 of $42.70.

While earnings margins are expected to be lower year-on-year, Citi highlights key positives arising from improving momentum across all business, including Trader Interactive, as well as the strong product pipeline.

On the improving outlook for Trader Interactive in the US, management highlighted a 63% increase in Premium Select uptake and improvement in RV dealer inventory throughout the fourth quarter of FY25, with momentum continuing into FY26. Also, price rises are expected to be at least similar as in FY25.

Previously, UBS had been concerned around the impact from a potential US macroeconomic slowdown heading into FY26.

Management outlook and business summary

Managing Director and CEO Cameron McIntyre reminded investors the company operates “in large, underpenetrated addressable markets, and we have multiple levers to drive future growth.”

The “strength and resilience” of the group’s diversified business model and ongoing growth potential of new products and services were also noted.

Car Group operates across diverse vehicle categories –automotive, commercial, industrial, and leisure– and spans several geographies including Australia (carsales), South Korea (Encar), the US (trader interactive), Chile (chileautos), and Brazil via its majority shareholding in webmotors.

While Australia is a mature market, Macquarie sees high single-digit growth as achievable, driven by pricing power and product innovation, enabling participation across the entire transaction process without creating channel conflict.

This broker cites the new consumer-to-consumer (C2C) payments offering as a prime example of innovation.

During the period, management launched C2C in Australia, enabling secure transactions, which removes buying and selling friction points while unlocking future global growth opportunities including insurance cover, ownership information, and finance.

Car Group’s overall business model is primarily an online marketplace augmented by value-added services.

This approach has certainly worked over time, with shares rising to above $41 from $10 at the start of 2019, while also paying out around $4 per share in dividends over the period.

A 40% franked final dividend of 41.5c was declared, a rise of 8% on the previous year, for an 80c payout in FY25 (versus 73c in FY24, up from 45.56c in FY19).

Dealer, Private & Media

In FY25, Online Advertising revenue (Dealer, Private, and Media) rose 8% to around $433m.

Dealer remains the core income stream, generated from charging auto dealers to list inventory via subscriptions, per-listing fees, and “depth” upgrades, which boost the visibility of a listing. Private sellers also pay listing fees, which, while smaller in scale, contribute meaningfully to the classifieds business.

Citi views the March acquisition of DP360 for -$60m plus up to -$25m in contingent consideration as a positive step, enhancing Trader Interactive’s integration into dealer workflows.

This broker notes Private revenue slowed to 3% year-on-year in the second half of FY25 due to negative volumes, positively, though FY26 guidance anticipates a return to volume growth.

Media involves selling display advertising to automotive manufacturers, finance and insurance companies, and other corporate advertisers. Banner ads or sponsored content are displayed on the websites, often promoting new car models or related services.

Management reports strong FY25 media growth at Trader Interactive, underpinned by closer relationships with OEMs and the launch of Xenara, the group’s in-house media agency.

The company also supplies data and analytics to dealers and industry participants, including pricing guides, market insights, and valuation tools, notably through its ownership of RedBook.

Elsewhere, Adjacent Services provides complementary offerings such as vehicle inspections via RedBook Inspect, finance and insurance referrals, and parts and accessories marketplaces.

Latin America and Asia

In Latin America, management is prioritising expansion into regions beyond Sao Paulo and Rio de Janeiro, where webmotors already holds a dominant position.

Morgans describes FY25 as a standout year, with pro forma revenue up 13% to $205m, driven by geographic expansion, premium product launches, and the introduction of the ‘Wallet’ loyalty program, while finance revenue rose 20% on improved credit access.

It is management’s view momentum will carry into FY26, with operating leverage increasing and core vehicle trading remaining resilient despite high interest rates.

In Asia, Encar is enhancing quality for consumers and dealer margins through AI-powered guarantee inspections, lifting revenue 12% to $136m on stronger uptake of the Guarantee product (59% of listings) and Encar Home (transaction volumes up 24%).

Ongoing investment is expected to cause modest margin compression in FY26.

Although finance revenue growth in Latin America eased to 6% year-on-year in the second half from 34% in the first, Citi viewed the result as better than feared amid concerns over limited credit availability.

Investments weighing on margins

Australia experienced a small improvement in margin, alongside ongoing product investment to drive growth.

In North America, minor margin growth reflected contributions from yield increases, media products, and depth.

Latin American margin expansion was driven by strong revenue growth, along with ongoing investment in national expansion, media products, private seller, and the Banco Santander Pioneer finance integration with webmotors.

A decline in Asia margin was due to new branch expansion and investment into marketing and product development for Dealer Direct.

Management flagged strategic investment in Trader Interactive’s Boatmart and Korea’s Dealer Direct which will impact FY26.

UBS highlights the strategic merit of the Boatmart investment, citing the sizeable US boat market with an estimated $1bn total addressable market (TAM), the largest within the Trader Interactive portfolio.

Outlook

Macquarie expects medium-term EPS growth of 10–15% for Car Group, driven by expansion in existing, mainly international markets. Growth is further supported by product innovation and pricing improvements.

The broker also notes benefits from AI adoption, including revenue gains and efficiency improvements.

Highlighting management’s efforts to reinforce the competitive moat by enabling dealers to complete most transactions online, Morgans believes management is laying the groundwork for sustained growth in both domestic and international markets.

The average target price of six daily covered brokers in the FNArena database who cover Car Group rose to $42.14 from $41.56 following FY25 results.

There are four Buy or equivalent ratings, Morgans has an Accumulate (midway between Buy and Hold), and Macquarie has a Hold-equivalent rating.

Outside of daily coverage, Jarden is also Neutral/(Hold) with a $34.50 target.

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