Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bapcor Ltd (ASX:BAP, Financial) reported a slight revenue growth of 0.8% to $2 billion, despite challenging market conditions.
- The Trade segment, Specialist Networks, and New Zealand business all grew earnings in FY24.
- The company has maintained a strong balance sheet and good operating cash flows, supporting a final dividend of $0.055 per share.
- Positive actions taken in Q4 are expected to deliver savings of $20 million to $30 million in FY25.
- Revenue growth of 7.7% in the first five weeks of FY25 indicates a strong start to the new fiscal year.
Negative Points
- Bapcor Ltd (ASX:BAP) reported a statutory loss of $158.3 million, including $253.1 million post-tax of significant items.
- The Retail segment experienced a 27.4% EBITDA decline due to higher employee and occupancy costs and lower sales from higher-margin discretionary categories.
- Cost inflation, especially in employee and occupancy costs, combined with increased technology costs and interest, negatively impacted NPAT.
- The Better than Before program did not deliver the expected benefits, resulting in an unacceptable profit deleverage.
- The company is undergoing significant restructuring, including reducing headcount by more than 100 people and closing approximately 20% of its warehouses.
Q & A Highlights
Q: With the first five weeks of sales growth of 7.7%, can you step through that at a segment level and talk about the drivers?
A: We've seen continued momentum from the fourth quarter, with similar growth levels across each segment. Retail is showing a turnaround with like-for-like growth, the trade business continues to perform well, and specialist networks, particularly auto electrical businesses, are also experiencing strong growth. New Zealand is starting to show signs of improvement.
Q: Regarding market share in Trade, even with parts growth at 2.1%, it feels lower than industry-wide growth. What data are you using to say you're not losing share?
A: We use Capricorn data, which is a strong proxy representing 40-50% of the market. We're also growing our share with larger chains like Mycar. Discussions with key suppliers also confirm our confidence in maintaining market share.
Q: The $20 million to $30 million savings on restructuring, is that at EBITDA or NPAT level?
A: The savings will flow through D&A related to restructuring and cost of doing business. It's not at the NPAT level but will impact our costs.
Q: What's the risk around staff disengagement in an environment where you're aggressively cutting costs?
A: We've protected frontline staff who are focused on customers. Internally, there's positive momentum as we turn around the business, and staff are looking forward rather than back.
Q: What are you seeing in terms of promotional and discounting activity in retail and trade?
A: The market is very competitive across all segments. We're confident in our margins, which are holding up well as we work with suppliers and manage promotional activities.
Q: Do you see New Zealand as a leading indicator for Australia?
A: Yes, I concur with that view. New Zealand turning the corner is a positive sign for Australia.
Q: Upon Angus' arrival, what areas of strategy are open to change?
A: The actions we've outlined are underway and supported by Angus. He will review other areas and report back to the market at an appropriate time. We don't anticipate massive changes but will refine our approach.
Q: Can you give more granularity on the $20 million to $30 million cost savings?
A: Headcount reduction will contribute 50-60% of the savings, branch and network consolidation 20-30%, and the rest from DC rationalization.
Q: Can you provide color on employee turnover during the second half, especially in customer-facing roles?
A: Turnover levels have improved during the second half, with more stickiness of employees. Customer-facing staff are working well with customers and driving improvement.
Q: What's the total revenue represented by the non-core businesses being exited?
A: The amount is not significant and will have very little impact on our overall revenue.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
