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CAR Group Shares Surge Following Exit from Tyres Business

Prime Highlights:

The company announces its decision to exit the Australian tyres business unit to improve profitability and streamline operations.

CAR Group will sell assets of its wholesale division, Tyreconnect, to a third party by February, while its e-commerce platform tyresales.com.au will be shut down immediately.

CAR Group’s shares surged nearly 4%, reaching A$38.95, following the announcement.

Key Background:

Shares of CAR Group Ltd (ASX: CAR) experienced a notable uptick on Tuesday after the company unveiled its decision to exit its Australian tyres business unit. The move is part of a broader strategy to enhance overall profitability and streamline operations, which was prompted by a comprehensive strategic review.

CAR Group, which operates in the automotive sector, disclosed that it had faced challenges in generating sustainable profits within the competitive and highly fragmented tyre retail and wholesale markets. As a result, the company has opted to divest key assets from its wholesale division, Tyreconnect, to a third party, with the transaction expected to be completed by the end of February. Additionally, the company’s e-commerce platform, tyresales.com.au, will be shut down immediately.

This decision has been well-received by investors, with CAR Group’s share price climbing nearly 4%, reaching A$38.95 per share. The market response reflects investor optimism that the exit from the tyres business will provide greater financial clarity for the company moving forward.

In its statement, CAR Group reiterated its full-year (FY25) guidance, excluding the Tyres business, and projected growth across key financial metrics, including revenue, EBITDA (earnings before interest, taxes, depreciation, and amortization), and net profit after tax (NPAT). The company also forecasted that its EBITDA margins would remain stable compared to the previous financial year, FY24.

Although the exit will result in some non-material costs, including redundancies and asset write-downs, CAR Group emphasized that these would be classified as abnormal items and would be excluded from its adjusted financial results. The company’s decision to withdraw from the tyres market reflects a strategic shift designed to focus on higher-margin, more sustainable business operations moving forward. Investors are optimistic that this move will help CAR Group refine its business model and improve long-term financial performance, with analysts predicting that the company’s streamlined operations could lead to more focused growth in the future.