Carsales.com stands down staff, cuts pay, as car sales slump

Classifieds site Carsales.com stands down 250 workers and slashes executive pay as the coronavirus hits trade in vehicles.

Carsales.com CEO Cameron McIntyre. Picture: Stuart McEvoy.

Online automotive classifieds site Carsales.com has stood down 250 workers and slashed executive pay in response to a coronavirus-induced plunge in buying and selling vehicles.

Sales leads at its Australian flagship business were 25 per cent lower due to disruption from the pandemic, the company told the ASX.

To cut costs 250 employees, predominantly in external customer-based roles, would be stood down “temporarily”.

Executive and board remuneration had also been cut by 20 per cent until the end of the financial year. Other discretionary spending across the business, such as outdoor marketing, would also be reduced.

Carsales.com blamed the fall in buying and selling activity on the site to social distancing measures implemented by the government.

While things had improved since Easter, potential Australian sales volumes had fallen 25 per cent between March 10 and April 21 from a year earlier, contributing to total inventory increasing from 210,000 to 230,000 over April.

The almost 10 per cent rise in total inventory on its site alsoe came as dealers took advantage of the company’s decision to waive fees for April, and to discount fees by 50 per cent for May. The company said it was also deferring payment of the fees for May as part of its cost-cutting measures.

Brokerage Morgans said last week that Carsales’ quick action to offer dealers fee breaks has helped increase its share of the vehicle classifieds market, and that the gains would probably be permanent.

The performance of the company’s overseas operations was mixed.

The South Korean Encar business “continues to perform well”, Carsales.com said, with the economic impact significantly less than other countries.

However, the deterioration of the health crisis in Brazil had seen lead volumes fall 30 per cent in the past two weeks.

Despite the cost-cutting measures, the company said it retained a “strong” balance sheet and prudent gearing levels which would position the business well in the current environment.

At the end of March, the company’s net debt position stood at $355m, with a debt-to-earnings ratio of 1.6. It has approximately $190m in available cash.

In a statement, chief executive Cameron McIntyre said: “We remain focused on managing short-term performance while positioning the business to come out of the current environment in good shape.”

“Our market leading position, strong customer proposition and diversification across geography and product supports our resilience and positions Carsales well into the future.”

Carsales.com shares were up 1.8 per cent $13.22 in midmorning trade.

With Dow Jones