The Bapcor Ltd (ASX: BAP) share price has risen 6% after reporting its FY23 result to investors.
Bapcor has a number of automotive parts businesses including Autobarn, Autopro, Midas, ABS, Shock Shop, Battery Town, Burson Auto Parts, BNT, Truckline and WANO.
Here are some of the highlights from the report for the 12 months to June 2023:
- Revenue increased 9.7% to $2.02 billion
- Underlying EBITDA (EBITDA explained) rose 2.4% to $298.6 million
- Underlying EBIT fell 0.7% to $204.3 million
- Underlying net profit after tax dropped 4.8% to $125.3 million
- Net profit after tax (NPAT) declined 15.4% to $106.4 million
- Full year dividend increased 2.3% to 22 cents per share
The business boasted that the operating margins lifted in all of its trade and wholesale segments in the second half of FY23 compared to the first half of FY23, though the retail segment faced some headwinds because of the economic environment.
Explaining why revenue rose but profit fell, Bapcor said the following about its margins:
Year on year temporary margin compression due to input cost inflation, capability build and higher interest costs
Despite the difficulties, Bapcor was pleased that its diversified business model displayed “continued resilience”.
It worked on its balance sheet and capital efficiency during the year, with a $50 million reduction in inventory, which helped the company achieve a cash conversion of 145.4% in the second half of FY23.
The business achieved practical completion of its Queensland distribution centre in the second half of FY23, while continuing to grow its network of operating locations, and increasing the proportion of on brand sales across all of its segments.
Bapcor is working on its Better than Before transformation, which has certain targets for FY25 including a net benefit of at least $100 million of earnings before interest and tax (EBIT) as well as an increase in the average return on invested capital (ROIC) to more than 12%.
Outlook for the Bapcor share price
In FY24, the business is expecting a solid underlying performance, with solid (but slowing) demand and growth for the trade segment, and the specialist wholesale agreement can benefit from growth and acquisition opportunities in the truck market.
Underlying demand in New Zealand is expected to improve, but the retail segment faces ongoing challenging market conditions.
Bapcor is a fairly defensive business, though it does have quite sizeable retail operations. If it can handle the steady transition to electric vehicles, then I believe Bapcor has a very pleasing future ahead, particularly if it can grow its Asian Burson operations to meaningful scale.