It just keeps getting better for shareholders of Burson Group Ltd (ASX: BAP) with the automotive aftermarket parts business posting its full-year earnings results today, revealing a strong lift in same-store sales growth and an impressive lift in margins.
What you need to know
Burson Group is Australia's largest trade-focused auto parts distributor which expanded its store count from 116 to 130 during the period, while management said it has opened another three stores since the end of the financial year.
As you'll see below, this expansion strategy is working wonders for the company's margins while it is also increasing the group's dominance in the market.
On 31 July 2015, Burson completed the strategic acquisition of Metcash Limited's (ASX: MTS) Automotive business, adding brands such as Midas, Autobarn, Autopro and ABS (as well as Opposite Lock) to its fleet. Meanwhile, it opened its first stores in Western Australia late in the financial year with the company now operating in every state and territory – a feature that will better allow it to serve customers with national needs.
The Results
In its first full financial year as a publicly listed company, Burson Group, led by Darryl Abotomey, recorded a 9.9% lift in pro-forma revenue to $375.3 million, topping its prospectus forecast of $366.4 million. Of course, this result was bolstered by the 14 acquisitions management made during the period, although same-store sales also grew an impressive 4.6%.
Perhaps even more impressive was the company's ability to lift its gross margin by 70 basis points to 43.7%, a result that also topped its prospectus forecast of 43.5%.
The consistent improvement in the gross margin (as seen in the chart) shows how much from every dollar in revenue the company gets to keep after operating expenses and reflects the benefits being generated from its aggregation of smaller businesses into its network.
Some of the other important figures you need to know include a 19.1% lift in net profit and earnings per share (EPS) to $23.1 million and 14.12 cents per share, respectively, as well as a reduction in the group's underlying debt by $15.4 million. The company also announced a final dividend of 4.7 cents per share, taking its full-year distribution to 8.7 cents per share.
What now for Burson Group?
Although it hardly seems like an exciting industry to invest in, Burson Group is making leaps and bounds that could reward shareholders very nicely in the long run.
Indeed, the industry is counter-cyclical whereby economic uncertainty can actually be great for business. Greater uncertainty means more people will stick with their older cars, creating more demand for Burson's products as those cars need servicing and repairing. With its recent acquisition of Metcash's Automotive division, it should also recognise cost benefits and even greater margins in the future.
The shares actually retreated 0.9% following today's results, and investors could look to take advantage of any pullback by building a position in the company.
