Bapcor (ASX:BAP) talks 1H17 results and outlook

Interviews

by Carolyn Herbert

Transcription of Finance News Network Interview with Bapcor Limited (ASX:BAP) Managing Director and CEO, Darryl Abotomey.


Carolyn Herbert: Hello I’m Carolyn Herbert from the Finance News Network and joining me from auto parts specialist, Bapcor Limited (ASX:BAP) is Managing Director and CEO, Darryl Abotomey. Darryl, welcome to FNN.

Darryl Abotomey: Thank you Carolyn.

Carolyn Herbert: Can you start by giving us an introduction to Bapcor?

Darryl Abotomey: Bapcor started in 1971. Garry Johnson, the founder was selling car mats out of the garage of his house to service stations. From there it grew. We got involved in 2011 acquiring the business, 2014 it listed on the ASX and it was known as Burson Auto Parts. Subsequent to that, we bought Metcash Limited (ASX:MTS) automotive business in 2015 and the business has just grown from there. And we’re now Australia’s leading auto parts distributor.

Carolyn Herbert: Now to your first half 2017 results, what were the highlights?

Darryl Abotomey: We had an extremely good first six months of the year. Our sales were up 34 per cent, our earnings before interest tax and depreciation were up 42 per cent. And earnings, or net profit was up 44 per cent. Also our earnings per share were up 34 per cent, which was an extremely good result.

Carolyn Herbert: What was the dividend and how did it compare to the same time last year?

Darryl Abotomey: The dividend was 5.5 cents a share, it was up 10 per cent on the prior year and we pay a fully franked dividend.

Carolyn Herbert: What drove the results?

Darryl Abotomey: The results were very heavily driven by our trade business. So sales were up in that business by over 14 per cent and earnings were up substantially, with same store sales above five per cent. We also had a very good period in our retail business, where sales were up over 40 per cent; earnings were up over 40 per cent. And we had a lot of growth in the specialist wholesale business, where we grew the business through acquisitions and underlying growth. And the sales and earnings in that sector more than doubled in that period.

Carolyn Herbert: A bit more on your various business segments. How did they perform?

Darryl Abotomey: The engine to our business at this stage still remains our trade business. And what the trade does, it’s delivering the parts to the mechanics’ workshops that repair and service your car. That business added 15 stores during the year, it’s now at 156. It had underlying same store sales growth of above five per cent.

In the retail side, as I mentioned, it went up by over 40 per cent in sales and earnings. But in fairness, part of that was because we had one more month this year than the prior year, when we acquired the business. If you strip that out, it went up in sales by 18 per cent and earnings went up by more than 20 per cent. And the specialist wholesale businesses doubled both their earnings and their revenue streams, throughout the period.

Carolyn Herbert: Now to your acquisition of Hellaby Holdings Limited (NZE:HBY). Why is Hellaby a good fit for Bapcor?

Darryl Abotomey: Hellaby’s being it’s split between New Zealand and Australia. Its primary business has been its automotive parts business, which parallels our existing auto parts business very closely. So they’re very big in New Zealand with over 56 stores. And they have an auto electrical wholesale specialist business in Australia, that is one of their biggest customers. So it lines up very well with our specialist wholesale business. And we can actually see significant opportunities going forward, in the synergies between those two businesses.

Carolyn Herbert: What were the terms of the offer and when does the takeover close?

Darryl Abotomey: Actually the takeover is closed; it closed on the 7th of February. We ended up offering $3.60 per share; we had more than 90 per cent acceptances. So we’re now in the compulsory acquisition phase, and that compulsory acquisition phase finishes on the 8th of March. And Hellaby will be delisted from the New Zealand Stock Exchange and be 100 per cent owned by the Bapcor Group.

Carolyn Herbert: Finally Darryl. What’s your focus for the next six months and your guidance for the second half of 2017?

Darryl Abotomey: Our focus over the next six months is to bed in the Hellaby transition. And to look at the synergies that we can achieve out of that transition, as well as in our base business to continue to grow the number of stores, particularly in trade and retail. As far as guidance goes, we’ve upped our guidance for the full year for a net profit after tax in our traditional business, to be between $57 million and $59 million. And will also have Hellaby on top of that, which is $8 million to $12 million additional. So our overall earnings per share for this year will be a minimum of 35 per cent.

Carolyn Herbert: Darryl Abotomey, thanks for the update on Bapcor.

Darryl Abotomey: You’re welcome Carolyn, thank you.


Ends

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