Receiving updates on a company's progress via the ASX is one thing, but getting up close and personal with the management team can add another layer of transparency you simply can't beat.
That's especially the case with a company like Burson Group Ltd (ASX: BAP), led by Darryl Abotomey, who oozes passion for the business he leads.
I had the pleasure of attending Burson Group's annual general meeting in Melbourne on Monday, 26 October. There was nothing extraordinary about the meeting, nor was there a huge audience (around 40 or so, by my count), but I did walk away with a few key takeaways that I thought were worth sharing.
One of the focuses of the meeting related to the acquisition of Metcash Limited's (ASX: MTS) automotive aftermarket division, which has since been rebranded Aftermarket Network Australia (ANA). Indeed, the acquisition was strategically important for Burson Group in that it will not only improve its competitive position, but will also provide scale benefits (e.g. procurement benefits and economies of scale) and open additional avenues for growth. It also ensures that Burson Group now covers much more of the supply chain, as seen below:
Admittedly, I had hoped for an update on the progress and integration of ANA into the business. There were, unfortunately, few details being spared regarding this, but for reasons I was more than comfortable with.
Darryl stated that, although the transition was running smoothly, ANA is mostly operating as a stand-alone business for now. Fifteen "optimisation projects" are underway – each led by a different senior manager – with the idea being to release synergies slowly. Indeed, Burson Group is now the owner of two great businesses (Burson Trade and ANA) and trying to force them together too quickly could destroy value for shareholders in the long-run.
It is for this reason that management was tight-lipped about the integration of ANA. While the company still expects great things to come from the business, Burson is more focused on creating long-term value than creating a quick jolt of excitement from the market. Further details on the integration of the ANA should be provided after the FY16 half-year results.
Investors should also be pleased with Burson's progress so far in FY16. The company has opened another three stores (taking its total to 133), including its first in the Australian Capital Territory, with same-store-sales up 3.9% and 3.7% for Burson Trade and ANA Autobarn stores, respectively (total sales are up approximately 9% and 6%, respectively).
Margins have also improved on FY15, although Darryl did note "competitive pressure" restricting them. This is likely a reference to Repco's heavy sales tactics which Burson Group's management believes to be unsustainable (it's nice to watch a company have to scrabble over short-term sales to fend off Burson).
On another note, Burson is gradually growing the number of parts it purchases direct from international suppliers. Darryl mentioned that roughly 12% of items are now being sourced direct, thus cutting out the local wholesaler (improving costs) which is another way Burson Group is becoming even more competitive. It is striving to source 25% of its products direct from international suppliers, or through private label brands, by 2019.
Overall, I was very pleased with the company's performance and walked away just as confident for the 2016 financial year, and the years beyond. Burson Group is not only a high-quality business with great leadership, it also operates in a rather defensive industry which should remain sturdy even if the economy takes a turn for the worse.
