Burson Group Ltd: One of Australia’s best businesses

Credit: NRMA Motoring and Services

Burson Group Ltd (ASX: BAP) held an investor day yesterday and confirmed that it was continuing to see strong sales growth and was on track deliver on its previous guidance of net profit between $41.5 million and $43 million. A name change is also coming.

The company says same store sales (SSS) growth was tracking well in April, with Burson Trade (Auto Parts) SSS up 4.5% and AutoBarn up 4%.

Should the auto parts distributor meet its guidance, that will reflect earnings per share growth of more than 24%.

The company also outlined its goals for its various businesses yesterday.

  • A strategic review is being undertaken on the Midas and ABS mechanical servicing businesses, which have around 140 stores. That could potentially mean the sale or divestment of these businesses.
  • The Trade / Auto Parts business is targeting 200 stores by 2021, up from the current 143 stores.
  • Specialist wholesale category is targeting $200 million in turnover, up from $115 million (annualised).
  • Autobarn (retail automotive accessories) is targeting 200 stores, up from the current 113 stores.
  • Opposite Lock (specialist 4WD parts and accessories) is planning to double its store count to 120 stores and stockists, up from 64 stores currently. 10 of those stores are stores within Autobarn and Midas centres).
  • Independents – Burson supplies a range of parts and accessories to 235 independently owned stores, such as AutoPro, CarParts and Sprint.

So growth will come organically as the number of stores increases and sales rise from existing stores, as well as from acquisitions. Burson acquired two specialist businesses in February, Bearing wholesales and Precision Automotive Equipment, which will add $40 million in sales and $6 million in earnings before interest, tax, depreciation and amortisation (EBITDA) from an investment of $32 million.

Burson says it is in the process of acquiring Sprint Auto Parts South Australia – adding another 40 franchisees, dealer and company stores and more acquisitions are expected.

As well as growing revenues, Burson also outlined its focus on efficiency and improving costs, with a number of projects targeting things like better terms from suppliers, marketing, warehouse optimisation, supply chain and inventory duplication. That’s a great sign – most companies only start focusing on those parts of their business when they can no longer generate revenue growth.

The company also announced that it plans to change its name to Bapcor to remove confusion over its Burson Trade division, and its other businesses now all under the one umbrella.

Foolish takeaway

Burson is truly one of Australia’s best businesses, providing growth under virtually any economic conditions, and with plenty of potential to grow organically and via acquisitions. Investors may be put off by the lowly dividend of just 2% (fully franked) at the current share price of $4.80, but this is one company that has the potential to grow that dividend substantially over time.

Could these just released franked dividend picks turn $15,000 into over $30,000?

When renowned dividend investing pros like Andrew Page issue buy alerts, it pays to listen. Because investors who followed Andrew's recommendation of Australian Pharmaceuticals in early 2015 could've doubled their money in just over a year, turning $15,000 into over $30,000 by the time he recommended they sell and lock in their profits. Chances are you won't want to miss uncovering the names of Andrew's newest share recommendation and short list of 3 dividend Best Buys Now Shares.

Click here to learn more about these potentially life-changing shares, no credit card required.

Motley Fool contributor Mike King owns shares of Burson. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia owns shares of Burson. 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 Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.