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Bapcor share price jumps on record interim result

Brendon Lau
Planting a flag at the top of a mountain

The Bapcor Ltd (ASX: BAP) share price jumped in morning trade after the automotive parts supplier and retailer posted record first half revenues and earnings.

Babcor shares jumped 0.9% to $6.76 when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index gained 0.5% at the time of writing.

The big and long drop in new auto sales may be helping the group. If owners are keeping their vehicles for longer or turning to the second hand market, they will require more spare parts to keep their cars and trucks working.

This isn’t an easy environment for consumer-facing stocks and that makes Bapcor’s results that much more notable. JB Hi-Fi Limited (ASX: JBH) is another that beat expectations, which shows that not all consumer stocks are in the doldrums.

Shifting to higher gear

Coming back to Bapcor, management posted a 10.4% jump in revenue to $702.5 million and a 5.1% increase in proforma net profit to $45.3 million for the six months ended December 31, 2019.

Recent acquisitions and the rollout of new stores are helping its top-line, while some of its brands experienced same-store sales (SSS) growth. SSS measures growth from stores that are open for at least a year and is a key measure looked at by investors.

Bapcor acquired Truckline and Diesel Drive on December 2, 2019, and the group added 35 new stores and branches to its network, which number over 1,000 across Australia, New Zealand and Thailand.

Margin falls for first time

“In the first half of FY20, Bapcor has delivered another record result, with every segment of our business growing in revenue and profit,” said Bapcor chief executive Mr. Darryl Abotomey.  

“Whilst it was very pleasing that revenue grew by 10%, the challenging environment is revealed in our EBITDA [earnings before interest, tax, depreciation and amortisation] margin which reduced by 0.6 percentage points.”

EBITDA margins shrunk 0.6 percentage points. This is the first time margins went backwards since the company listed in 2014.

Fighting the headwinds

Mr Abotomey blames stiff competition, especially in the trade businesses in Australia and New Zealand, for the decline. The weakening Australian dollar and trepid economic conditions aren’t helping either.

“The Burson Trade segment, consisting of Burson Auto Parts and Precision Automotive Equipment, grew revenue by 8.5% with same store sales growing by more than 5%,” he added.

“The Specialist Wholesale segment, consisting of thirteen Specialist Wholesale business units, increased revenue by 19.9% and EBITDA by 20.9% including the acquisitions of Don Kyatt (Qld) light commercial truck, Truckline and Diesel Drive.”

Upbeat outlook

Burson also gave an upbeat outlook. It noted that solid SSS sales continued into January and overall performance is in-line with expectations.

The group is forecasting middle single digit proforma net profit growth for the current financial year, and that means another record result.

However, it did warn that Truckline is not expected to grow earnings this year but said steps are being taken to ensure the acquisition generates a 15% return on investment in FY21.

The post Bapcor share price jumps on record interim result appeared first on Motley Fool Australia.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020