The Bapcor Ltd (ASX: BAP) share price raced 6% higher in early ASX trading today following the release of its FY20 financial report.
At a time when other physical retailer stocks have hit the skids, Bapcor’s network seems to be holding firm.
Here are the key metrics:
- Revenue of $1.46 billion, up 13%
- Net profit down 18.4% to $79 million
- Underlying net profit was down 5.5% to $89 million
- A dividend of 9.5 cents per share was declared — in line with 2019
What Bapcor shareholders need to know
At the top line, revenue, it was a record result for Bapcor. The additional of acquisitions and new stores across its various networks helped drive sales higher despite impacts from COVID-19 across both Australia and New Zealand.
Popping the hood on Bapcor’s revenue (pun intended), its Trade business reported 7.1% revenue growth to $561 million. The Trade segment includes Burson Auto Parts and Precision Automotive Equipment. These business lines often benefit from more people opting to maintain their used car rather than buying new vehicle since more people will be seeing a mechanic for repairs and parts — which Burson provides.
For retail companies, you should exclude the addition of new stores (five, in Bapcor’s case) since it makes it easier to compare organic growth results from one year to the next. This is known as the ‘same-store sales’ metric or SSS for short. Bapcor’s Trade segment increased same-store sales by 6%, which is very good in my opinion.
By far the business experiencing the most growth however is Bapcor’s Specialist Wholesale division, which reported sales growth of 26% to $520 million — and increased underlying EBITDA by 8.7%. This business distributes specialist equipment (think: truck parts, bearings, etc.). The Specialist Wholesale Business benefitted from the acquisitions of Truckline and Diesel Drive in 2019. Excluding them, revenue was up 5.5%.
Across the pond, Bapcor’s NZ business reported a 5% decline in revenue and a 14% drop in operating profit.
Finally and perhaps surprisingly to some readers, Burson’s retail business — which includes the names you’re likely familiar with including Autobarn, Midas, Autopro and ABS — reported growth of 14.7% and an EBITDA result of $30.5 million, up 13%.
The driver of these results was a transition to more company-owned Autobarn stores and a maturing of newer stores. Bapcor now runs 60% of the Autobarn network, which means it controls more of the customer experience and reports more of the revenue from each store. The Retail segment had 350 stores at June 30, 2020, down from 365 last year.
Financials
In recent times, many of us analysts are growing concerned that some ASX-listed companies are currently receiving lots of Government support which is temporarily and positively impacting their cash flow (i.e. masking their true performance). Bapcor said it did not receive any Jobkeeper payments but it did benefit from:
- $1.5 million in rent reductions
- $3.9 million from the New Zealand Government
- A payroll tax reimbursement in Queensland
Thanks to a capital raising this year, Bapcor says it is now more conservatively geared. The balance sheet shows $126 million of cash and $411 million of debt and lease liabilities.
The company generated $200 million of net cash from operations during the year, and by my calculations around $105 million of free cash flow, which is excellent. I think it was this robust free cash flow which enabled management to declare and maintain its fully franked dividend of 9.5 cents per share.
My takeaway
Acquisitions, store closures/additions and changes in the mix of what’s company-owned and what’s not can muddy the picture of the company’s financials. Nonetheless, while I wouldn’t say this is a great result it does demonstrate the resilience in Bapcor’s core business model of servicing mechanics and the used car industry.
I’m not falling over myself to own Bapcor shares today because there are strong industry fundamentals working both for and against it. While a fall in new car sales and pick-up in used car maintenance bodes very well for the business in the next five years, there’s a longer-term headwind from more self-driving and electric vehicles, as well as more working from home, that concerns me.
I’d be happy to hold shares of Bapcor due to its reliable dividend and cash flow resilience, but if you’re looking for more dividend shares or ASX share ideas, be sure to use your web browser to bookmark our ASX dividend shares page. The Rask Media team updates the page with new companies every hour or so.
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