Bapcor share price revs higher despite difficult FY23 result

Some parts of the company continue to perform.

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The Bapcor Ltd (ASX: BAP) share price is up more than 5% after releasing its result.

The auto parts business released its result for the financial year ended 30 June 2023.

Bapcor share price falls as financials drop down a gear

Turning to the individual segments, trade (including Burson) revenue rose 11.3% to $763 million and EBITDA grew 7.9% to $124 million.

In the specialist wholesale division, revenue rose 9.5% to $766 million and EBITDA slightly increased by 0.9% to $103 million.

Bapcor retail (including Autobarn and Autopro) revenue rose 8.3% to $426 million and EBITDA increased 1.7% to $68 million.

New Zealand revenue went up 3% to $176 million, while EBITDA dropped 8.9% to $30 million.

Bapcor said that operating margins lifted in all trade and wholesale segments in the second half of FY23 compared to the FY23 first half, while retail faced "some headwinds" due to the economic environment.

The business noted "temporary" margin compression in this result because of input cost inflation, capability building and higher interest costs.

What else happened in FY23?

Bapcor said it has an ongoing focus on capital efficiency with around $50 million of a like for like reduction in inventory, leading to "significantly improved" cash conversion of 145.4% in the second half of FY23.

The company revealed continued network expansion as well as growth in the proportion of own brand sales across all of its segments.

During the year it announced its strategic multi-year transformation called 'better than before'. By FY25, it wants to achieve at least $100 million of net earnings before interest and tax (EBIT), an increase in average return on invested capital (ROIC) to greater than 12% and enhanced employee engagement.

The Bapcor share price fell slightly on the day when this strategy was announced.

What did Bapcor management say?

The Bapcor managing director and CEO Noel Meehan said:

Bapcor achieved a solid financial and operational performance during FY23. Our diversified model has demonstrated the continued resilience of Bapcor's business. Financial results were in line with guidance and good progress was made on the Better than Before transformation program. Our focus on capital efficiency resulted in a significant reduction in 2H23 inventory levels and improved cash generation.

Outlook

The company said its priority is to continue to perform operationally and deliver on the 'better than before' transformation program.

In FY24, Bapcor is expecting a "solid underlying performance", based on a few different things.

First, continuing solid demand in the trade segment. The specialist wholesale segment is expected to benefit from growth and "consolidation opportunities" in the truck market.

The retail segment is expected to face ongoing challenging market conditions and a more uncertain trading environment. However, the loyalty program and increase in its own brand sales are targeted to mitigate some of these market impacts.

Bapcor also said the underlying demand in the New Zealand segment is expected to improve (year over year).

It's also expecting ongoing economic headwinds on its margins such as cost inflation, increasing payroll taxes, investing for growth and higher interest.

Bapcor share price snapshot

Before the release of the FY23 result, the Bapcor share price had fallen 5% over the past 12 months. That compares to a 2.8% rise for the S&P/ASX 200 Index (ASX: XJO).

Motley Fool contributor Tristan Harrison 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 Scott Phillips.

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