Bapcor Ltd (ASX: BAP) just reported its result for the six months to 31 December 2017.
Bapcor is Australia's leading auto parts provider with its Burson and Autobarn chains, along with many smaller specialist businesses.
The company reported 'pro-forma', 'continuing' and 'including discontinuing' results, mainly due to its acquisition of the Hellaby's business. Below are some of the highlights for Bapcor against the prior corresponding period. Most of the numbers I refer to will be continuing operations because that is Bapcor's core business and its preferred measure.
Continuing operations revenue increased by 41.6% to $616.1 million, with the gross margin growing to 45.6% from 45% last year.
Continuing operations pro-forma earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 42.8% to $70.2 million and the EBITDA margin increased to 11.4% from 11.3%.
Continuing operations net profit after tax (NPAT) was $40.4 million, which was a 45.2% increase from last year's continuing operations pro-forma NPAT and a 60% increase from last year's continuing operations statutory NPAT. Total statutory NPAT growth was 72.2%.
Continuing operations pro-forma earnings per share (EPS) increased by 36% to 14.48 cents whilst statutory EPS increased by 62.1% to 15.66 cents.
Bapcor management increased the dividend by 27.3% to seven cents per share.
One of the main drivers of the result was the solid performance by Burson Trade, Bapcor's core business. Burson's revenue grew by 6.6% and EBITDA grew by 8.7%. Same store sale growth was 3.4% and the EBITDA margin increased to 13.9% from 13.6%. It increased its store count by three during the half-year, ending at 163 stores.
The specialist wholesale segment also reported an impressive set of figures. Revenue grew by 25.4% and EBITDA increased by 25.4%. Like-for-like sales growth came in at 5%. Acquisitions boosted this segment and in the next report the ex-Hellaby and Bapcor NZ specialist wholesale subsidiaries will form part of this segment.
Bapcor New Zealand delivered revenue growth of 7.2% and EBITDA growth of 32.2% with the EBITDA margin increasing from 9.6% to 11.9%. Bapcor said that Trade NZ grew same store sales by 8.5% after it expanded the range and optimised the organisation. Procurement savings should benefit the business in the next six months and beyond.
The one less-than-stellar area of Bapcor's report was the retail and service category, which includes Autobarn. Revenue increased by 5.4% but EBITDA was flat at $14.2 million whilst the EBITDA margin actually decreased to 11.5% from 12.1%. Management said that the EBITDA was flat because of the high ratio of stores in their first or second year of operation.
On the balance sheet net debt was $337.1 million at 31 December 2017, which represents an annualised EBITDA ratio of less than 2.2 times and the business is on track for it to be under two times after its divestments.
Outlook
Bapcor said that organic, geographic and other strategic growth opportunities remain with store expansions and well placed electrical & electronics componentry to meet changing demand.
The first Asian store is on course to be opened by May 2018 and management are targeting at least five stores in 2018.
Management aim for continued margin growth through own brands, economies of scale and 'warehouse evolution'.
Bapcor re-affirmed that it is on target for 30% continuing operations pro-forma NPAT growth in FY18.
Bapcor CEO, Mr Darryl Abotomey said "the first half of FY18 has delivered a very good result and in line with our expectations. This financial year is a period of consolidation, integrating the ex-Hellaby businesses and working through the many optimisation opportunities."
Foolish takeaway
I thought this was another excellent result for Bapcor. Management have successfully grown revenue, EBITDA and profit margins through good organic growth and synergies. The 27.3% increase to the dividend is a good reward for shareholders, yet the payout ratio actually decreased, leaving more profit for re-investment.
If the share price doesn't move much today I think today's share price could be a good medium-term buy, although there is a question mark in the long-term regarding the share to electric vehicles.
