BAPCOR LIMITED — Annual Report 2016

Aug 17, 2016

F Y 2 0 1 6 R e s u l t s P r e s e n t a t i o n

Our Brands

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Disclaimer

The material in this presentation has been prepared by Bapcor Limited (“Bapcor”) ABN 80 153 199 912 and is general background information about Bapcor’s activities current at the date of this presentation. The information is given in summary form and does not purport to be complete. Information in this presentation, including forecast financial information should not be considered as advice or a recommendation to investors or potential investors and does not take into account investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice when deciding if an investment is appropriate.

Persons needing advice should consult their stockbroker, solicitor, accountant or other independent financial advisor.

The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about and observe such restrictions.

This presentation does not constitute, or form part of, an offer to sell or the solicitation of an offer to subscribe for or buy any securities, nor the solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issue or transfer of the securities referred to in this presentation in any jurisdiction in contravention of applicable law.

Certain statements made in this presentation are forward-looking statements. These forward-looking statements are not historical facts but rather are based on Bapcor’s current expectations, estimates and projections about the industry in which Bapcor operates, and beliefs and assumptions. Words such as "anticipates”, "expects”, "intends,", "plans”, "believes”, "seeks”, "estimates”, and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors, some of which are beyond the control of Bapcor, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward- looking statements. Bapcor cautions investors and potential investors not to place undue reliance on these forward-looking statements, which reflect the view of Bapcor only as of the date of this presentation. The forward-looking statements made in this presentation relate only to events as of the date on which the statements are made. Bapcor will not undertake any obligation to release publicly any revisions or updates to these forward-looking statements to reflect events, circumstances or unanticipated events occurring after the date of this presentation except as required by law or by any appropriate regulatory authority.

Agenda

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FY2016 Results Highlights FY2016 Result Details Strategy Update Outlook Q&A

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1 FY2016 Result Highlights 2 FY2016 Result Details 3 Strategy Update 4 Outlook 5 Q&A

FY2016 Result Highlights

$ million	FY2016(3)	FY2015(4)	Variance
Revenue	685.6	375.0	82.7%
Gross Margin %(1)	44.2%	41.4%	2.8
EBITDA	77.0	41.5	85.7%
NPAT	43.6	23.1	88.9%
EPS(2) (cps)	17.85	13.62	31.0%
Final dividend (cps)	6.0	4.7	27.7%
Full year dividends (cps)	11.0	8.7	26.4%

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Strong performance in all areas

• Very pleasing result with EPS growth of 31.0%

• Result reflects acquisition of ANA on 31 July 2015 (11 months of operations)

• Trade delivered strong result

• ANA performed in line with expectations

Note:

• 1 . Gross margin presented in line with statutory presentation. FY2015 includes a reclassification of freight expense from CODB to COGS.

• FY2016 and FY2015 EPS is based on the TERP adjusted weighted number of shares on issue during the year as per accounting standard AASB -133.

• FY2016 includes business acquisition transaction costs of $1.1M.

• FY2015 proforma results adjusted to write back $4.2M ($3.6M after tax) transaction costs related to acquisition of ANA.

Business Segment Contribution to Results

	Revenue	EBITDA	EBITDA % Revenue
	FY2016 FY2015 % Change	FY2016 FY2015 % Change	FY2016 FY2015 Change
Trade	419.1 375.3 11.7%	51.8 44.3 17.0%	12.4% 11.8% 0.6
Retail	191.1 - -	22.2 - -	11.6% - -
Specialist Wholesale	103.4 - -	10.1 - -	9.8% - -
Unallocated / Head Office*	(28.0) - -	(7.1) (2.8) -	- - -
Total	685.6 375.3 82.7%	77.0 41.5 88.5%	11.2% 11.1% 0.1

• Burson Trade continued growth in sales and EBITDA

• ANA solid result and excludes July 2015 (not part of Bapcor)

• Group EBITDA includes impact of intercompany purchases profit in stock eliminations of $1.3M.

• FY2016 includes business acquisition transaction costs of $1.1M.

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Burson Trade

145 stores at the end June 2016, up 15 from June 2015. Network now includes 6 stores in WA and 1 in the ACT – operate in all states and territories.

Total revenue up 11.7%

Same store sales growth of 4.6%

Supplier price increases successfully passed through to market

General selling price increase implemented January 2016

Gross Margin up 1.4 percentage points

Acquisition of Precision Automotive April 2016

Queensland DC now services 40+ stores

Overall market conditions are steady although some aggressive pricing competition, particularly with targeted customers and in WA.

Burson Trade - Summary of Key Performance Indicators

Store Numbers

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145
130
116
100 105
FY2012 FY2013 FY2014 FY2015 FY2016
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Gross Profit Margin#

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45.1%
43.7%
43.0%
42.2%
39.4%
FY2012 FY2013 FY2014 FY2015 FY2016
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Revenue and “Same Store” growth

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419.1
375.3
341.6
306.3
284.3
4.6% 4.6%
3.9%
2.1%
1.4%
FY2012 FY2013 FY2014 FY2015 FY2016
Revenue ($ million) Same Store growth %
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EBITDA Margin

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12.4%
11.8%
10.5%
9.9%
8.0%
FY2012 FY2013 FY2014 FY2015 FY2016
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*Restated for HO costs now part of “unallocated” segment # Freight expense consistent with management reporting

Retail

• Total store numbers up by 48 in FY2016. Includes 40 Sprint Auto Parts stores acquired April 2016, 3 independent Autopro and CarParts Stores, 3 Autobarn and 2 service workshops

• Autobarn same store growth for FY2016 was 5.2%

• EBITDA margin of 11.6%

• Strategy of growing company owned Autobarn stores in progress with 15 company owned stores at June 2015

• Supplier price increases successfully passed through to market

• Market conditions are stable

Specialist Wholesale

• Wholesale segment comprises AAD and Opposite Lock (acquired August 2015) and Bearing Wholesalers (acquired March 2016)

• Good progress in growing level of intercompany sales

• Some sales loss of products traditionally sold to Burson’s competitors

• 10 additional Opposite Lock – mainly store in store

• Selling price increases implemented to pass on impact of lower Australian dollar but not fully recovered

• Market has stabilised

1 FY2016 Result Highlights

2

FY2016 Result Details

3 Strategy Update 4 Outlook 5 Q&A

Summary Income Statement

• Revenue growth of 82.7% delivered by

• ANA acquisition contributed 67.9%

• Burson Trade up 11.7%

• Bearing Wholesalers and Sprints contributed 3.3%

• Same Store sales growth

  • Burson Trade 4.6%

  • Autobarn 5.2%

 Gross margin % up 2.8 percentage points

• GM% increase partially reflects change in business mix. Trade up 1.4 compared to FY2015.

• Supplier price increases passed through to market. Trade and Retail fully and Specialist Wholesale partially.

• GM% is a continuous focus

 CODB as a % of sales up 2.6

• Increase in CODB partially reflects change in business mix. Trade CODB% up 0.8% due to store overheads related to start ups, particularly WA, and costs related to Brisbane DC.

• Includes additional corporate management costs consistent with larger business.

• NPAT up 88.9%

• EPS up 31.0%

Pro forma, $ million	FY2016	FY2015	Change
Revenue	685.6	375.3	82.7%
Gross Profit	303.0	155.4	94.9%
Margin (%) CODB	44.2% (226.0)	41.4% (113.9)	2.8 98.3%
CODB (%)	(33.0%)	(30.4%)	(2.6)
EBITDA	77.0	41.5	85.7%
EBITDA (%)	11.2%	11.1%	0.1
Depreciation and Amortisation	(10.1)	(5.2)	94.8%
EBIT Finance Costs	66.9 (4.9)	36.3 (3.4)	84.4% 41.9%
Profit Before Tax	62.1	32.9	88.8%
Income Tax Expense	(18.5)	(9.8)	89.5%
NPAT	43.6	23.1	88.9%
NPAT (%)	6.4%	6.2%	0.2
EPS(1) (CPS)	17.85	13.62	31.0%

Notes:

1. FY2016 and FY2015 EPS is based on the TERP adjusted weighted number of shares on issue during the year as per accounting standard AASB-133.

2. Gross margin presented in line with statutory presentation. FY2015 includes a reclassification of freight expense from CODB to COGS.

Summary Cash Flows

 Working capital

• Working capital movement reflects increase in sales

• Total year end working capital 18.9% of FY2016 sales compared to 11.2% June 16 due nature of ANA’s franchise business not including end store sales.

• Strong debtor collections

 Capex and Acquisitions

• Capex mainly reflects investment in new stores, purchase of motor vehicles, IT development and front of store refurbs

Net cash generated (before ANA transaction)

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• Tax includes a deferred amount of $5.9M relating to the FY2015 financial year.

• Excluding FY2015 deferred tax payment, and acquisition costs of $23.5M, cash generation was positive after payment of dividends.

 ANA transaction

• ANA acquisition funded by retail capital raising, cash on hand as a result of the institutional capital raising and new debt

Note:

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Pro forma, $ million FY2016
Cash flows excluding ANA associated cash flows
EBITDA 77.0
Change in working capital (3.4)
Capital expenditure (excluding new stores) (10.2)
Operating Cash Flow 63.4
New store greenfields and acquisitions (1) (17.4)
Other business acquisitions (23.5)
Financing costs (4.0)
Tax Paid (18.0)
Dividend paid (23.7)
Cash generated excluding ANA acquisition cash flows (23.2)
ANA associated cash flows
Payment to acquire ANA (270.5)
Capital raising (retail) 54.3
Transaction costs paid (1.4)
Net cash outflow from ANA transaction (217.6)
Opening cash on hand 107.9
Cash acquired 6.5
New borrowings 148.8
Net cash movement (240.8)
Closing cash on hand 22.4
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1. Acquisitions and Greenfield stores include inventory

Summary Balance Sheet

 ANA acquisition

• Balance sheet reflects impact of ANA acquisition

• Fair value exercise undertaken with third party valuation of intangibles

• $221M intangibles relate to the ANA acquisition

 Net Debt/Cash

• Cash at June 2015 was due to retail capital raising for ANA acquisition

• Net debt at June 2016 is $126.4M

• Represents annualised leverage ratio of <1.5X

• Interest cover ratio circa 12X

 Dividends

• Final dividend declared FY2016 of 6.0 cents per share fully franked. Total dividends in relation to FY2016 of 11.0 cents per share represents 62% of NPAT.

• Total FY2016 dividend up 26.4% compared to previous year

• Record date 31 August 2016

	$ million	Jan 2016	June 2015
	Cash	22.4	107.9
	Trade and Other Receivables	87.8	33.4
	Inventories	163.0	77.2
	PP&E	36.2	23.1
	Deferred Tax Assets	20.6	11.8
	Intangible Assets	348.9	99.9
	Other Assets	4.5	0.9
	Total Assets	683.4	354.2
	Trade and Other Payables	121.5	68.5
	Tax Liabilities	6.2	5.1
	Provisions	39.5	13.7
	Borrowings	148.2	-
	Other	1.8	-
	Total Liabilities	317.2	87.3
	Net Assets	366.2	266.9

• Pay date 30 September 2016

1 FY2016 Result Highlights 2 FY2016 Result Details

3 Strategy Update

4 Outlook

5 Q&A

Subsequent Events

Since 30 June 2016;

• Trade has opened 5 stores

• Retail has opened;

• 4 Autobarn stores (3 company, 1 franchise)Strategy

• 1 Autopro store (company)

• 1 Midas (franchise)

• Specialist Wholesale has added:

• Baxters - auto electrical

• Roadsafe – 4WD & suspension

• 1 Opposite Lock store in store

Group Business 5 year Strategic Targets and Current Status

																					CURRENT STATUS	CURRENT STATUS	CURRENT STATUS	CURRENT STATUS	CURRENT STATUS	CURRENT STATUS	CURRENT STATUS	CURRENT STATUS	CURRENT STATUS	CURRENT STATUS	CURRENT STATUS
	TRADE						Trade focussed “parts professionals” supplying			Target 25% Home									AUS Target 200								150 Stores
							workshops			brands										Stores						10% home brand
	RETAIL						Premium Retailer of Automotive Accessories 4WD & Vehicle Accessories			Target 35% Home brands										Target 120 AUS Target 200 AB Stores						116 AB Stores 67 OL stores (incl SIS) 14% home brand
																				OL Stores
							Supplying the independent parts													Target Over
	INDEPENDENTS						stores via the extensive supply chain													200								235 stores
							capabilities and brand support													Stores
							#1 or #2 Industry Category specialists							in	parts					programs
	SPECIALIST WHOLESALE						Brake Suspension Cooling Engine Bearings Gaskets					Auto New			Electrical Target $200M Turnover 4WD Category													Annualised $160M
	SERVICE					Experts at scheduled car servicing at affordable prices								Strategic Review														143 stores

1 FY2016 Result Highlights 2 FY2016 Result Details 3 Strategy Update 4 Outlook 5 Q&A

Outlook

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FY2017 will continue to deliver business and profit growth

• Solid growth in Trade and Retail

• New stores – circa 40

• Full 12 months trading from former ANA businesses

• Inclusion of full 12 months Bearing Wholesalers, Sprint Auto Parts and Precision Automotive Equipment

• Acquisitions of Baxters and Roadsafe

• Optimisation benefits of between $5M and $7M (as per previous advice)

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For year to June 2017 we expect NPAT to increase between 25% to 30% from FY2016

Thank You