MotorCycle Holdings goes full throttle on expansion as profit drops

MotorCycle Holdings (ASX: MTO) has reported a drop in net profit of 25 per cent to $4.2 million for the half year as it continues to increase its market share despite the "adverse conditions" in the motorcycle sales industry.

However, the Brisbane-based company achieved record motorcycle sales and underlying earnings on the back of the expansion of its motorcycle dealership network and the acquisition of the Cassons motorcycle business in October 2017.

MotorCycle Holdings bought Cassons, a wholesaler and retailer of motorbike accessories and parts for $123 million, in a deal that company founder and managing director, David Ahmet, says made "strategic sense".

MTO's underlying earnings, which excludes $1.6 million in acquisition costs, rose five per cent to a record $9 million and motorcycle sales increased four per cent to 8,867 units in the six months to December 2017.

Ahmet says the new stores and the Cassons acquisition will provide significant opportunities to lift sales and reduce costs across the group as the industry as a whole faces a downturn in sales.

"We are continuing to grow our sales numbers and increase market share despite the adverse conditions in the industry, and that demonstrates the resilience of our business model and the expertise of our team," Ahmet says.

MotorCycle Holdings added four dealerships since December 2016, taking the total network to 28 motorcycle dealership locations and Ahmet says the Cassons acquisition has further enhanced the company's business footprint.

He says it adds wholesale distribution of motorcycle parts and accessories as well as expanding retail sales through the Cassons' network of Motorcycle Accessories Supermarkets (MCA) in New South Wales, Victoria and online.

Cassons and MCA contributed approximately $12.3 million to sales in the two months under Motorcycle Holdings ownership and the company says it expects to boost revenues by more than $70 million in a full year.

On Tuesday, shares in MTO fell five per cent from $4.00 to $3.80. In early trade on Wednesday, they recovered to $4.04.