Like Fletcher Building, auto parts group Bapcor (ASX:BAP) was always likely to report a substantial loss given the trading and management challenges exposed from February onwards.
These problems prompted an unwanted approach from private equity firm Bain & Co of the U.S. at $5.40 per share, which was rejected. As the company struggled to address its issues, its shares plummeted.
On Wednesday, Bapcor announced a statutory loss of $158.3 million, including significant items of $253.1 million (post-tax, or over $300 million pre-tax), primarily non-cash impairments and write-downs in the Retail segment as previously indicated.
Bapcor preferred to focus on the “pro-forma” net profit of $94.8 million, which was down 24.3% year over year (in line with company forecasts). Pro-forma earnings before interest, tax, depreciation, and amortization (EBITDA) totaled $268.4 million, down 10.1%.
There are signs of improvement in the latest numbers. Revenue for the June 30 fiscal year was $2.03 billion, up 0.8% from $2.02 billion in 2022-23. This was a smaller increase than the 1.7% seen in the December half-year.
The company attributed the slower growth to its retail and New Zealand divisions, which have been major concerns for over a year.
The full-year revenue increase was significantly below the near-inflation rate of 4%, indicating a decline in real terms. Earnings also decreased in all respects.
Despite the weak results, shareholders will still receive a final dividend of 5.5 cents per share, bringing the total for the year to 15 cents per share.
Given the poor performance, this dividend was understandably lower than the 22 cents per share paid for 2022-23. However, it still offers a payout to shareholders who have seen their shares decline by more than 20% in the past year.
Cost-cutting measures are expected to deliver $20 million to $30 million in savings in the coming year. However, investors with long memories may recall the company’s previous underperformance in achieving its cost-saving targets.
Interim CEO Mark Bernhard expressed confidence in Bapcor’s recovery, stating that “FY24 has been a challenging year with significant disruption to the business, through management changes and difficult trading conditions.”
He added, “That said, since the trading update in May, we have taken decisive action as a management team to right-size the company’s cost base and reduce operational complexity to set Bapcor back on the right path.
Bapcor’s fundamentals remain strong. We have a great business in a rational and resilient industry. We have great brands and strong market share in each of our segments with competitive strength in our fulfilment model and an amazing team of industry experts.”
The baton will now be passed to Angus McKay, who takes over as CEO on Thursday.
The board is optimistic about the future, stating, “With the new team in place, the positive actions already underway and trading momentum, we are confident in the future of Bapcor and its ability to deliver an improved financial performance.”
Investors seem to agree. The shares were up more than 4% in the afternoon session, although still well below the $5.40 price from Bain.