Bapcor Ltd (ASX: BAP) has reported its half year result to 31 December 2018.
Originally called Burson Group, Bapcor is a specialist auto parts business. What most consumers don’t know is that it’s more than a retailer of spare parts. Its bread and butter is trade services. For example, when you get your car serviced by a mechanic, the mechanic doesn’t store all of the parts for the make and model of your car in their shop. Instead, they rely on a nearby distributor like Burson’s who can deliver the exact parts within a matter of hours.
Here’s What Bapcor Reported
Bapcor has made a number of acquisitions and divestments over the past couple of years, so the comparatives are hard. Bapcor reports ‘pro forma’ figures to adjust for acquisitions, restructuring and other one-off activities to show the underlying performance of the business.
Bapcor’s continuing operations revenue grew by 3.2% to $636.1 million. Pro-forma EBITDA increased by 8.2% to $76 million (click here to learn what EBITDA is) and pro-forma net profit after tax (NPAT) grew by 6.6% to $43.1 million. Pro-forma earnings per share (EPS) increased by 5.9% to 15.34 cents. On a statutory basis, continuing EPS grew by 11.9% to 16.2 cents.
However, excluding the TRS divestment from the prior year, pro-forma net profit from continuing operations was up 9.2% to $43.1 million.
What Drove The Growth
The two important segments for Bapcor are Burson Trade and Autobarn.
Burson Trade’s revenue increased by 4.8% with same store sales growth of 2.1%. Burson Trade EBITDA grew by 8.2% and the EBITDA margin improved 0.4% compared to a year ago. During the six months the Burson network grew by 8 stores to 178.
The retail & service division, which includes Autobarn, grew sales by 8.8%. However EBITDA was flat at $14.2 million with the EBITDA margin contracting by 0.9% – management explained this was due to challenging retail market conditions, lower wholesale sales and the company’s expansion.
Excluding TRS, Bapcor New Zealand grew revenue by 4.9% and EBITDA increased 20.6%. The Specialist Wholesale division grew revenue by 7.8% and saw an increase of EBITDA by 11.4%.
Intercompany sales across Bapcor increased by 37% with the Specialist Wholesale segment selling more “own brand” products through Trade and Retail.
Bapcor Thailand
The company is now operating three stores in Thailand and plans to open another three in the second half of FY19.
Bapcor said the stores are making positive progress in new market dynamics and good relationships are being established with significant chains.
Bapcor Dividend And Balance Sheet
Based on the underlying growth, Bapcor decided to increase the dividend by 7.1% to 7.5 cents per share.
Net debt increased by $61 million to $350.9 million over the six months due to the acquisition of the Commercial Truck Parts Group in November 2018. The leverage ratio has increased to 2.1x, but is expected to decrease to less than 2x by the end of FY19.
Management Comments And FY19 Guidance
Bapcor CEO Darryl Abotomey said: “We remain confident in the future growth prospects and strategic direction of all our businesses. Bapcor is forecasting FY19 proforma NPAT [growth] of circa 9% above FY18…Whilst at the lower end of previous guidance, the forecast reflects the market conditions Bapcor is experiencing.”
Is Bapcor A Buy?
The Bapcor share price has fallen nearly 10% in early response to today’s profit result. Only forecasting hitting the bottom of its previous profit guidance seems a little disappointing.
However, there is plenty to be positive about with Bapcor continuing to expand its Burson network in Thailand & Australia and the expansion of profit margins. Rask Media’s Owen Raszkiewicz recently provided his analysis on Bapcor’s valuation in this article, “Can Bapcor Bounce Back To $7”.
Although it’s in the red today, Bapcor could be one to watch over the next few years, along with the two growth shares mentioned in the FREE report below. .
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Disclosure: At the time of publishing Jaz owns shares of Bapcor, but that could change at any time.
