Down but not out: Bapcor (ASX:BAP) share price slumps on sluggish first half

The first half has been a challenge for the automotive retailer and service provider.

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Key points

  • The Bapcor share price is falling on Wednesday after the company dropped its results for the six months ended 31 December
  • Over the half year, the company's revenue gained slightly while its EBITDA and profits slumped 5% and 14%
  • Bapcor expects better things for the second half of financial year 2022, anticipates it's on track to achieve its full-year guidance

The Bapcor Ltd (ASX: BAP) share price is in the red after the company released its earnings for the first half of financial year 2022 (FY22).

At the time of writing, the Bapcor share price is $6.75, 4.39% lower than its previous close.

Bapcor share price slips despite tracking in line with guidance

Bapcor struggled against COVID-19 lockdowns and restrictions over the first half of FY22.

The company also noted its EBITDA was impacted by the transition to its Victoria distribution centre and support provided to staff. Its revenue picked up during the second quarter of FY22, in line with easing restrictions.

According to Bapcor, its first-half performance is in line with its full-year guidance. That is, to deliver earnings to the level of FY21. The company says it was expecting a soft performance in the first half.

While its revenue, EBITDA, and profits all dropped compared to the first half of FY21, when compared to the first half of FY20 they recorded increases of 28%, 28%, and 27%, respectively.

Bapcor's trade segment, comprising Burson Auto Parts and Precision Automotive Equipment, brought record revenue over the half. Its revenue was up 3.1%, while its same store sales grew 1.1%.

Bapcor New Zealand also saw its revenue boosted 0.5% and its EBITDA increase 0.5% on those of the first half of FY21. Though, New Zealand same store sales were down 1.6%.

Bapcor's specialist wholesale segment recorded strong growth, with revenue up 7.4% and EBITDA increasing 4.3%. The segment added six new sites during the period.

Bapcor's retail leg – encompassing Autobarn, Autopro, and Midas – delivered $197 million of revenue. That's 5.4% less than in the prior comparable period, while its EBITDA dropped 15.7%.

However, the company noted the first half of FY21 was "an exceptional period that included the benefit of government stimulus." Compared to the first half of FY20, Bapcor's retail segment revenue and EBITDA were up 36.7% and 33.6% respectively.

What else happened in the first half?

Bapcor made some significant leadership changes during the first half of financial year 2022.

Its former CEO and managing director Darryl Abotomey announced his intent to retire in November after 10 years at the company's helm.

In the wake of Abotomey's decision, the company appointed former chief financial officer, Noel Meehan, as acting CEO in December. Meehan was officially given the CEO role yesterday.

Bapcor also refinanced its $270 million three-year debt facility in December.

The company ended the half with $203 million of net debt, compared to $164 million at 30 June 2021.

What did management say?

Meehan commented on Bapcor's earnings for the first half of FY22:

Our 5-year strategy to drive sustainable long-term value for our stakeholders remains unchanged. We continue to make solid progress on executing our strategic targets, with a focus during the half on network growth, realising operational efficiencies, expanding our own brand product range, and growing in Asia…

During the half, we expanded our geographic footprint, opening 8 retail stores, 4 Burson stores, and 6 specialist wholesale sites resulting in Bapcor now having a presence in over 1,100 locations throughout Australia, New Zealand and Thailand.

We also developed our group logistics capabilities in the half, including transitioning our 3 largest warehouses in Victoria – Nunawading (retail), Preston (trade), and Derrimu (wholesale) which represent 80% of volumes – to our new consolidated distribution centre at Tullamarine.

What's next?

Those interested in the Bapcor share price will likely want to know what to expect in the company's full year results.

The company says the start of the second half has brought challenges as the COVID-19 Omicron variant spreads in Australia. Despite a resulting drop in demand, revenue for January 2022 was in line with that of January 2021.

Over the second half FY22, Bapcor is expecting stronger performance than the prior comparable period, subject to no more COVID-19 impacts.

Additionally, Burson Trade is expected to expand its network over the current half.

Bapcor share price snapshot

The Bapcor share price has slightly underperformed the broader market in 2022 so far.

It has slipped 3.71% since the start of this year. For comparison, the S&P/ASX 200 Index (ASX: XJO) and the All Ordinaries Index (ASX: XAO) have both slumped — 3.11% and 3.39%, respectively.

However, the Bapcor share price is 17% lower than it was this time last year.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Bapcor. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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