The company navigated a number of COVID-19 disruptions to post another lift in revenues and strong net profits.

Motorcycle Holdings (ASX:MTO) delivered another round of strong earnings results this morning, as it consolidates its position as Australia’s largest motorcycle dealership and accessories group.

For the half-year ended December 31, the company drove a 9% lift in gross revenues to $237m, which flowed through to a 3% uplift in gross profits to $66.6m.

The top-line growth was achieved despite major disruptions from the COVID-19 pandemic, which saw MTO manage temporary forced closures for 16 retail stores.

Despite that, the group’s performance “exceeded management’s expectations”, MTO said.

And the company benefited from a sharp snap-back in sales at the end of last year as restrictions were lifted, leaving it well placed for further growth in the second half of FY22.


Platform for growth

Along with a rebound in sales, MTO has further buffered its momentum by taking steps to manage its inventory amid ongoing challenges to global supply chains.

“Supply chain challenges are ongoing, particularly for accessories, however we have significantly increased our inventory to enable us to minimise any impacts. Although we do expect supply of accessories to improve over the next 12 months,” CEO Dave Ahmet said.

He added that the H1 trading result demonstrates the quality of the national group’s business model, and was also underpinned by the “permanent operational improvements we have implemented across the group over the past 18 months”.

New motorcycle sales increased 14% to 7,699 units. As a measure of MTO’s strong market position, that figure accounted for ~11.4% new bike sales nationally during the December half.

Used motorcycle sales increased 14% to 5,360 units stemming from an increase in supply. Importantly, MTO was able to drive top-line growth in used bike sales while also increasing its profit margins by 9% compared to the previous year.

Looking ahead, the company expects to maintain those growth rates while also benefiting from a rebound in its higher-margin Accessories divisions, which were impacted most strongly by the H1 lockdowns.

The company reported a “strong increase in retail accessories sales since the end of lockdowns”, it said in its investor presentation today.

Net profit for H1 came in at $12.6m, down from the previous half-year (which also included the addition of JobKeeper payments).

During the half-year, MTO also completed the acquisition of Forbes and Davies – New Zealand’s leading importer and wholesaler of motorcycle tyres and accessories.

And early in 2022, it completed its acquisition of Wide Bay Motorcycles – part of the group’s stated strategy to benefit from its strong balance sheet and expand through M&A.


2022 and beyond

Looking ahead, this morning’s H1 result leaves MTO on track for its sixth straight year of revenue growth, with sales set to almost double from 2017.

The company expects that it will continue to benefit from the broader tailwinds that have formed behind the industry in the wake of the pandemic, as industry sales continue to increase.

In that environment, MTO is positioned as the largest motorcycle dealer in the country, with strong demand for both motorcycles and accessories while benefiting from improved supply chain logistics over the next 12 months.

With its growth through sales and M&A, MTO is positioned as the prime beneficiary of that broader demand shift.

The company looks forward to driving strong profit growth in the second half of FY22, and will maintain its dividend payout policy of between 50-70% of net profits.

This article was developed in collaboration with Motorcycle Holdings, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.