The 30%-plus plunge in the Bapcor (ASX:BAP) share price after Thursday’s trading update told the story of why incoming CEO, Paul Dumbrell, recoiled and quit the gig a day before he was due to start on May 1.
In short, the update confirmed the bad news of a plunge in project profits, and the shares fell out of bed to levels not seen for more than four years.
Bapcor revealed a huge drop in forecast earnings for the year to June 30, which puts in doubt any dividend for shareholders – or at least the size of any payment – especially with the company yet to decide on the size of an expected impairment write-down, which will be decided after June 30.
The shares were down 31% just after 10:30 am after hitting a low of $3.76. That’s the lowest the shares have been since the great sell-off in March 2020 as the pandemic swept across the country and the economy.
They peaked at $6.29 on April 10, more than 35% higher than around the $4 they were trading at Thursday morning.
Bapcor said that based on performance to date and current trading conditions, Bapcor expects that the "second half Pro-Forma net profit after-tax results will be below that of the December half of $54.2 million."
"As a result, Bapcor expects Pro-Forma NPAT for FY24 to be between $93m and $97m, noting May and June are historically the strongest trading months for the Trade and New Zealand businesses.
"A decline in the performance of the Retail business may result in an impairment of tangible and intangible assets. This will be confirmed as part of the year-end process," directors said.
In the update to the ASX, directors listed factors behind the profit slide: Trading conditions in our Retail business have remained challenging due to weak consumer confidence and lower levels of discretionary spending; • The Wholesale business (within Specialist Wholesale) is being impacted by competitive pricing, resulting in volume and margin compression; • The benefits from the Better than Before (“BTB”) program have not been realized to the extent expected in 2H FY24; • Incremental overheads which were based on the expected benefits of BTB and higher sales volumes; and • Higher interest costs.
Bapcor’s Interim CEO, Mark Bernhard, said: “Trading conditions since our last update to the market have remained challenging as consumers continue to pull back on spending, primarily impacting our Retail business.”
"Pleasingly, our Trade and Specialist Networks businesses have continued to grow sales, on what was a strong prior year comparative."
"Management is actively working to reduce the cost base to be more appropriate for the current trading environment.
"Bapcor remains confident in the long-term outlook for the Group and the resilience of the automotive aftermarket industry as evidenced by the continued growth in sales of our two largest segments being Trade and Specialist Networks," he said.
He is staying on as the acting CEO while the company looks for someone to replace Paul Dumbrell.
Bapcor has already paid an interim of 9.5 cents a share and paid a final for 2022-23 of 11.5 cents a share. The interim could end up being the only income for shareholders from the 2023-24 financial year if the results are as weak as they seem they will be before any write-downs.
