BCA Marketplace PLC (LON:BCA) is the topic of conversation when Zeus Capital’s Head of Research Mike Allen caught up with DirectorsTalk for an exclusive interview
Q1: BCA Marketplace have just issued their half-year report, can you give us an outline of the results?
A1: Some really good results this morning, BCA are at the upper end of the market expectations and strong growth across the piece. So, we saw 28.8% growth from revenues, 18% increase in EBITDA which translated through to a 17% growth in earnings, the dividend per share also matched the earnings growth as well and with strong year-on-year too.
So, overall a really good picture, they were ahead of our expectations at a PBT level by about 9% and 5% on the earnings level.
Q2: What were the key themes in the report?
A2: I think if you look at the key four divisions, all of those divisions delivered good progress year-on-year and remain ahead of our expectations.
Within the mix, the UK core remarketing business again demonstrates its strong volume growth which translated into good EBITDA growth as well so the EBITDA in that division is up 11%. Revenue growth was ahead of that, but they won some good outsource marketing contracts there which the momentum there has been very strong.
In Europe, there was an FX benefit on translation, but the organic volume growth was good, about 4%, adjusted EBITDA was up 10% and the EBITDA per vehicle was also ahead as well. The picture in Europe was a bit more mixed though, Scandinavian markets were very strong, driven by exports, areas such as Netherlands and Spain were stable, but Italy and Germany were a bit more challenging. I think management have done a good job behind the scenes with system integration, management changes so I think there’s good foundations there.
WeBuyAnyCar, again, delivered really strong growth in a controlled manner so volumes were up 14% and there was an increase in revenue per vehicle sold as well and that translated into good EBITDA growth which was ahead of our expectations.
Finally, the automotive services which is the collection of a number of acquisitions that they’ve done, again performed ahead of our expectations. The BCA Logistics business in particular performed well in the period there as well as they continue to drive good efficiencies in that market.
So, good progress across the board really.
Q3: Have these good results changed your forecast in any way?
A3: No, so in terms of our headline forecasts they’re unchanged. We’ve tweaked up our revenue assumptions, a couple of little tweaks in net debt but we do expect that to come down from the H1 position at year-end but we’re towards the top end of the consensus range and are happy to stay there.
Q4: What are your thoughts on the stock valuation at the moment for BCA Marketplace Plc?
A4: Well, we think this is a really quality way to take the motor industry and I think there’s significant growth potential across Europe here in future years. We think BCA is an attractive critical infrastructure, it touches over 3.5 million vehicles in the UK supply chain alone and we’d expect this business to deliver growth on the most post-Brexit scenarios
So, in our view, it offers an attractive mix of organic growth, the yield is around 4% and will grow with earnings as well and I think it’s got a unique market position really which has been executed by proof at management teams, so it ticks a lot of boxes in our view.
