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Edited Transcript of BAP.AX earnings conference call or presentation 16-Feb-21 11:15pm GMT

·63 min read

Half Year 2021 Bapcor Ltd Earnings Call Feb 19, 2021 (Thomson StreetEvents) -- Edited Transcript of Bapcor Ltd earnings conference call or presentation Tuesday, February 16, 2021 at 11:15:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Darryl G. Abotomey Bapcor Limited - MD, CEO & Director * Noel Anthony Meehan Bapcor Limited - CFO ================================================================================ Conference Call Participants ================================================================================ * Anna Guan Goldman Sachs Group, Inc., Research Division - Research Analyst * James F. Casey Ord Minnett Limited, Research Division - Equity Analyst * John Campbell Jefferies LLC, Research Division - Equity Analyst * Josephine Little Morgans Financial Limited, Research Division - Senior Analyst * Matthew Nicholas Crédit Suisse AG, Research Division - Director * Sam Teeger Citigroup Inc., Research Division - Head of the Australian Small Caps Team & Director * Thomas Godfrey UBS Investment Bank, Research Division - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to Bapcor H1 FY '21 Financial Results Investor Conference Call. (Operator Instructions) I must advise you that this conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Darryl Abotomey. Thank you. Please go ahead. -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [2] -------------------------------------------------------------------------------- Thank you, operator, and good morning, everyone, and thank you for joining us for Bapcor's July to December 2020 results presentation. I have with me today Noel Meehan, Bapcor's Chief Financial Officer. On behalf of the Board, leadership team and Bapcor's talented team members, I am very pleased to be announcing our results for the first half of the 2021 financial year. Bapcor's delivered another record half year result driven by growth in revenue, operating leverage and profitability in all business segments. Along with the strong financial performance, Bapcor has continued to progress its major projects that will underpin the group's future success. And the company is in a very solid position and capable of capitalizing opportunities as they arise. So I'll turn to Page 3 of the presentation that was lodged with the ASX this morning and is also available on Bapcor's website. And what it shows is on Page 3 is the headline results, pro forma headline results that show extremely good performances in every measure, with revenue up 26% to $885 million, EBITDA up nearly 37%. And importantly, net profit after tax up 54% to $70.2 million. Also, we've got earnings per share, they're up 29%. And that reflects the 20% increase in shares that were issued in April and May 2020. And with that, we've declared an interim dividend of $0.09 a share, that's up 12.5% on the same period last year. There's 2 other key figures, cash conversion and net leverage, I'll let Noel cover in more detail. But just to mention that we have had a deliberate inventory build to take account of supplier availability and shipping difficulties that are happening around the world mainly because of COVID, and that's been a very deliberate step so that we actually have product to sell. And that's put us in a very good position going forward. And we have been flagging this buildup to analysts and investors well before December. The good thing with us building up inventory, we're not talking about perishables, and we're not talking about fashion. So they're all in our fast movers. So -- so it's -- we've put ourselves in a good position for the next 6 months because we do believe that we're going to continue to have and generally, Australia and other countries will continue to have supply difficulties because of shipping and wharf issues and container issues that are happening around the world. Turning to Page 4 with our highlights. As I mentioned, we've got increase in revenue and earnings in every business segment. And really, it's showing the results reflect the resilience of our business model. We've always indicated it's resilient, and this is just another reflection that it is a resilient business. During the period, we added 27 new branch locations, and it takes us -- or we continue to now be over 1,100 locations throughout Australia and New Zealand and Thailand. And we've made excellent progress on our new Melbourne DC at Tullamarine, which I'll talk more about later. We've increased our volume of private label, and I mentioned we've had the increase in inventory. Just importantly, there are no government subsidies in the 6 months, particularly JobKeeper. And just reinforcing that we have not, in Australia, taken or had any subsidies from the government during the whole COVID period. We have benefited from very low levels of discretionary spend, and this is us as a company. We've had low levels of discretionary spend on -- particularly on things like travel, marketing and sponsorships. And that we will see turnaround a bit in the next 6 to 12 months as we start to reinvest as things loosen up that we can actually get out and do the things we need to do as a business. And as I mentioned before, we did declare an increase of 12.5% in our interim dividend to shareholders to be $0.09 per share. So a solid set of results right across the board. And that's continuing Bapcor's trend of excelling. And if you look at Page 5, which is the graphs from 2017 onwards, every key indicator shows improving performance, and it does still one of the top performances on the ASX. Just a couple of points. I'll make a note now on these graphs and that follow through the whole presentation, is that you see a shaded area under areas like EPS and under net profit after tax. And that's showing the areas that -- with the change of the standard, the leasing accounting standard, AASB 16, the historical data that has not been amended because it's almost impossible to go back and amend it for what the lease accounting standard may have been back in prior years. Then the figures that were reported that are in the shaded area and then the new areas or the ones that aren't impacted are not shown as shaded. So that's just to explain what you'll see throughout the whole presentation. If we turn to Page 6, and again, pointing out here that these figures include -- or pushed down to the business segments. It's the lease accounting standard. So particularly, when you look at the EBITDA as a percentage of revenue, just understand that basically doesn't include rental cost because of the way the lease standard works. So if you were looking at the historical figures, they are quite considerably lower. And in the appendix, there's a reconciliation that shows what the figures would have been excluding AASB 16 and what they're doing, including AASB 16. So -- but going forward, this is the way we have to report it. What you're seeing on this page is that every single segment in revenue has had a good solid performance. And I'll cover each segment separately. But -- and also in EBITDA and EBITDA to percentage of revenue, everything has improved and increased. The other thing to point out, as it shows on the bottom of the page, intercompany sales increased by 25% and that's what drives it -- a large driver of our private label growth through the business. So now looking at each segment, and the first one on Page 7 is the Trade business, which is predominantly the Burson business, which celebrates this year, 2021, its 50 years. So 2021 is 50 years for Burson. And it's -- and they've kept -- started off with an outstanding 6 months performance. So with record revenue being up 12%, earnings before interest, tax and depreciation being up 25%. Same-store growth was a staggering 11%. We added 9 new stores, and that's in 6 months. So we're probably going to blow out 10 to 12 in (inaudible) we haven't been able to expand. The equipment business is continuing to form -- has performed very well. And as our own brands within Trade is up 29% -- sorry, is at 29% of revenue. So the Burson business in Trade continues to perform really well. And if you look at the graphs on Page 8, it speaks for itself. It's just -- it's an engineering direct for our business. And it's a continually good performing end business. And the team in this business is doing an amazing job. Just looking at New Zealand. So Page 9, New Zealand -- was a difficult period for New Zealand, but they still delivered an increase in revenue on the prior year. So same-store sales for the Trade business being up 1.3% and the Specialist Wholesale, up 3.8%. And they delivered record EBITDA. So the business has performed well, but it is in difficult conditions in New Zealand and will continue to be so, we believe, and especially when we got locked down every so often. And our own brand, there's 31% within the New Zealand business. One of our very strong performance in the period is Specialist Wholesale, on Page 10. And it achieved record revenue. So it was up 40% and EBITDA was up 55%. It could be said, well, what about the acquisitions? Well, we acquired Truckline and Diesel Drive in December 2019. So if it's comparing like-for-like periods, you still see revenue up 17% and EBITDA up 36%. So it's a very strong performance out of this business. And particularly, there's solid improvement in the Truckline profitability, so -- and it's well ahead of our business case. So the Truckline profitability is a nice driver to it. And our move into the whole truck parts area has certainly been very successful. And we still see significant growth opportunities here. We've launched a number of new programs in Specialist Wholesale and also, in particular, we've added 5 locations in the commercial vehicle group and in our JAS Electrical business, we've added 2 locations, both of those segments will continue to expand the footprint of this current 6 months that we're in now. Retail. So we've been going through a whole process over the last 4 years -- 4 to 5 years with Retail, of turning around, changes, you have to focus, et cetera. And with the new management team that's in there, it's delivered a truly outstanding improvement in performance. We had record sales, and they're up 44% on the prior period, and earnings were up 56%. But look under that and say, well a lot of our balanced same-store sales were up 37%, with company stores up 50%. So it verifies and shows why we have moved strongly into company stores, and we will continue to do so. But the really positive part there also is that the franchise businesses are up 27%. And a lot of those businesses are strong performing businesses anyway. Majority of them are to be up 27% [at this point]. Now the extremely positive areas, Autopro and Sprint. So they're our second level of franchise stores. They had a solid performance with strong growth, with same-store sales being up 25%, never seen at that level before. So the changes that have been done throughout our whole Retail business and the initiatives that are driving the improved performance is the increase in inventory availability, changes and improvements in the way we merchandise. It's a revitalized promotion activity within -- and lend a new point-of-sale system. And we've also implemented, and we're starting to roll out, and I'll show you in a second, the new Autobarn store format that is driving considerable input in the stores where the new format's been implemented. But in fairness, it's also -- there is an elevated demand from discretionary spend and particularly including stimulus. But it's also -- and particularly the fact that we've got a lot more people spending more time in their vehicles and more time in domestic travel because, obviously, you can't do any other type, and that is also driving this business as well. Company stores. But -- and within the mix, we actually closed 3 stores. So we've made sort of decisions that if a store isn't performing or is not going to be sort of profitable, we're going to close it. So 2 of our key fairly big stores, and they've been around a long time, one in Nunawading and one in (inaudible) with Victoria were closed because they just weren't making money. They're in the wrong locations, and they were never going to achieve the hurdles we require. So we're out of them, and we'll open new stores in the right locations that will be able to achieve the right performance. The other areas. Online sales were exceptionally strong. They're up 300% for the first half. A large -- in fairness, chunk of that was driven from the click and collect during COVID lockdowns, but it's still performing very strong. And our own brand increased quite strongly from 28% to 32%. So an overall excellent performance out of our Retail business. And then some photos on Page 12 of the presentation showing the new Autobarn store format. And there are a number of stores that already have the new format, and there's more being rolled out across the network. So every new store that we -- where we're doing new store, they'll all be in this new standard format. And over time, we will roll it out across the existing network. In Thailand, the stores have performed well given the circumstances, especially the COVID restrictions and the impact of those both domestically and on their tourist industry. And due to that, we haven't done any expansion there, particularly given that we can't travel there due to COVID. So we've sort of basically put some of the rapid expansion on hold, but we still continue to see the potential in Thailand to expand when the right circumstances are there. So I'll now hand over to Noel to go through more of the financial details. -------------------------------------------------------------------------------- Noel Anthony Meehan, Bapcor Limited - CFO [3] -------------------------------------------------------------------------------- Thanks, Darryl, and good morning, everyone. Let me add my welcome for you all joining us today. That's much appreciated. What I'll go through this morning. As Darryl said, there's a bit more detail around the financials based on our income statement and also balance sheet and cash flow. If I start on Page 16. As you can see there are all pro forma P&L on the right-hand side. A couple of headline comments first, outstanding results across the board. We've seen, as Darryl has highlighted, top line growth across the business. We've seen excellent cost control. An excellent operating leverage, delivering excellent results. Revenue growth of 25.8%, $181 million. And just to give you some context, the Specialist Wholesale group up $93 million, Retail up $60 million, Trade up $35 million and New Zealand in Australian dollar terms, up $3 million. In local currency, actually, up slightly higher. Gross margin percentage, you can see there a tad under 46%. Slightly down on last year. Two factors govern that, essentially, the mix of business, we've obviously now got a bigger contribution coming through from our Specialist Wholesale business and Retail business. And also a bit of an impact on product mix, where we're selling a number of products that may be sort of lower margins than other products, things like equipment and refracs and those type of things. Cost of doing business, excellent to see the improvement as a percentage of sales, decreasing by over 3 percentage points compared to December last year. There has been a reduction in discretionary spend on things like travel, marketing and promotions, as Darryl mentioned. And COVID dependent, we would expect that to increase in the second half as we continue to sort of move to more promotions, more travel, more normal operating conditions, hopefully. You'll see depreciation, and let me just spend a couple of minutes on depreciation. And the P&L here is on a AASB 16 basis. You will recall at the full year, we've highlighted our depreciation pre AASB 16 was likely to increase on the full year by $5 million. And that was to go from, on a full year basis, from $19 million last year to $24 million this year. You then see the $39 million in the half. The way to think about that in very simple terms, is around about $12 million is normal depreciation. And the other $27 million is the impact of the AASB 16 plan. And so for your modeling purposes, probably the best thing to do is to take the full $39 million, multiply it by 2, add a little bit more on, and that will give you an estimate for the full year. And if I then look at finance costs, you'll see there lower than last year. Obviously, the strength of the balance sheet, the lower debt levels, lower interest rate numbers has contributed to that. A couple of comments now on the net profit after tax number. You can see there a net profit pro forma of $70 million, up 54%. Net profit on a statutory basis, up just under 50%. The only difference between the 2 of those lines, which is explained in full on Page 29 of the presentation, relates to the costs incurred in relation to the Victorian DC. Every other type of, call it, below line expenditure that may come below the line in the past, has been recognized in the pro forma numbers. So that's the only sort of reconciling item there. Conscious of AASB 16, but let me just try and simplify the impact. There is a reconciliation on EBITDA in the appendices on Slide 28, but in very, very simple terms. In the half year, we had $31 million of rentals, which move out from rentals into depreciation. So our EBITDA at a group level increases on the face of the P&L because of AASB 16 by $31 million: $8 million of that is in Trade; $4 million in New Zealand; $6 million in Wholesale; and $12 million in Retail. Our EBITDA, therefore, is lifted by $31 million, 2 other impacts happen. Depreciation increases by $28 million and higher interest increases by $3 million. And so after all of that accounting standards, our net profit after tax on a pre and post AASB 16 doesn't move. But we are in the AASB 16 world. One other comment just to make, and you'll have seen it in one of the earlier slides on corporate costs. At the full year, we indicated the corporate cost number for this year was likely to be high teens. Last year, it was $24 million because we have some conservatism. And we indicated that for the full year this year, we're expecting around $18 million. At the half year, you'll see $12.5 million has been shown in the corporate elimination column, 2 components in there: true cost of about $9 million; and then the other $3 million is in relation to elimination. And that is purely on unrealized profit and stock as we move product from our wholesale business into our Trade and Retail channels. So the underlying corporate center costs for the half, excluding the elimination impact, was $9 million. So again, for the full year, my guidance would be double this and maybe add a little bit more on as we loosen the purse strings, hopefully, on discretionary spending. If I then move to Slide 16, which is our sort of cash flow. If I start with the first bullet point on the left, you sort of see cash generated excluding acquisitions was a negative $6.4 million. Just to be very, very clear, that is after spend on major capital projects, including the Victorian DC. So the business, excluding major growth, continues to generate sufficient cash to the store rollouts, pay our tax bill, pay our dividends and be cash positive at that level. We then have the major capital going through on the Victorian DC. CapEx on the year -- I'm sorry, on the half year, 2 components there, you'll see on the right-hand side. Store acquisitions around about $10 million. There was 27 new locations added in the half. That $10 million also includes the inventory fill into that number, which is of that $10 million, runs at about $7 million. The $24 million, you then see excluding new stores of CapEx is made up of a number of items across the business as we sort of invest in IT, particularly in things like e-commerce, point of sale, warehouse management systems. Obviously, growing business, we need more sites, more vehicles. And in the half, we spent just over $10 million on the Victorian DC. The dividend, you'll see there on the right-hand side, we have more shares on issue. And at the year-end, as is the same case for this half year, a decision was made by the Board to suspend the DRP. So the dividend paid we're paying out more shares with dividends attached to it. And it's done by cash rather than dividend reinvestment plan. So that explains some of the increase. Because last year, the dividend reinvestment plan was still in place. Business acquisitions this half, very small compared to the prior year, where you see a large number, $65 million. Two components last year. The Truckline and Diesel Drive as well as the deferred payment on CVG Lights. Just rounding out then on the CapEx numbers for the full year. If you take the major CapEx to one side of the Victorian DC, depending on the number of stores we roll out, and obviously, the number of new initiatives we're putting through the organization, the CapEx bill for the full year, in round numbers, will be somewhere between $50 million and $60 million, excluding the DC. The DC will be on top of that. And then as we pointed out at the 30 June accounts, we will then have an incentive, which we now will expect to fall through in the first part of next fiscal year as opposed to the second half of this year. So hopefully, that gives you some clarity around what to expect from a cash flow perspective. Moving to Slide 17, a very strong balance sheet across all the metrics. If you work your way down, roughly then on the right-hand side, you can see the major movement since June. We've repaid a significant amount of debt, which is reduced by cash on hand from the $126 million to just under $60 million. Inventory, you'll see there, and Darryl mentioned it in his opening. There's been a deliberate strategy across the business to ensure we have inventory in our warehouses and stores to cope with the challenging supply chain demands across the world that you'll be all very familiar with. Inventory dollars since June have increased by $55 million to $418 million. That impacted the cash conversion that is shown on the earlier slide of 84%. A couple of comments I would make there. Our stock in transit for the half year sits at just over $42 million. And in some cases, to get that stock, we are having to essentially pay upfront to get stock. Traditionally, the business at June '20 and last December ran stock in transit at about $20 million. So we've got an incremental $20-plus million of stock in transit. If we adjusted cash conversion to account for the extra $20-odd million of stock in transit, our reported cash conversion instead of being 84% would be closer to 98%. Very, very importantly, and you'll see on the bottom of the balance sheet, 2 metrics that we monitor on an ongoing basis, which is the working capital to sales percentage and the inventory to sales percentage. You can see there the strength of the balance sheet, particularly around working capital, which now sits at 17.8% compared to 21.6% last December. Inventory as a percentage of sales was elevated slightly. We are holding at 25%. You can still see that consistency. So very, very pleased with what we're doing there. I'm very pleased to have the inventory in our warehouses and in our stores. If I then move on to liquidity position. You'll have seen throughout the presentation, we have a very strong balance sheet. We've got net debt of $120 million. We've got leverage of 0.6x. We've got interest cover of over 12x. We have a very, very strong liquidity position. The net debt maturity is in July 2022. And we have undrawn capabilities of $346 million. So again, a very, very strong balance sheet. Moving then to my last slide, which is on dividend, on Slide 19. A couple of comments I would make. The Board declared the interim dividend fully franked at $0.09, up 12.5% compared to the prior year. With the record date and payment date as you can see on the left-hand side. Given the increase in shares from the rights issue last year and the strength of the balance sheet, to avoid any dilution to earnings per share and the like, the dividend reinvestment plan has continued to be suspended for the interim dividend. The number of shares on issue is now sitting at 330 million -- just over 339 million shares, which is up 20% compared to what it was in April and May last year. The business has continued to deliver good increases in dividends. So my conclusion on the financials, I think they are excellent financials across the board. I think the balance sheet is in enormously good shape. And I think the business is in great shape going forward. I'll now hand back to Darryl to sort of go through the rest of the presentation. -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [4] -------------------------------------------------------------------------------- Yes. Thanks, Noel. And what I'll do now to your update on our strategy. So if you turn to Page 21, we show our 5-year targets. These have been very public. We've updated the actual figures that show on the chart, so where they stand at the end of the 6 months. And there's been no real change in our actual targets. So we're continuing to make good progress on the targets, and there is just no change to the targets themselves across every business. And on Page 22, our strategy is to continue to grow each of our businesses, and that has not changed. And our formula is not complicated. So the 4 pillars of our -- or the way we run the business is that we want to drive expansion in the network footprint and grow the existing store sales. And that includes, over time, to have geographic expansion in Southeast Asia. Second pillar is to increase our private label brands. Third, is realizing the efficiencies across the group and the efficiency of being a group. And I'll come back to those, which are listed on the next page at the moment. And the -- one of the core pillars for us is investing in our main asset, which is our people. So we continue to invest in our people. So -- and then looking at the major projects that we've got underway. Our warehouse evolution project, and this is the consolidated DC at Tullamarine in Melbourne. It's a massive building, 50,000 square meters. But we expect to get the building handover later this month. And then for it to be -- to be operational with the first transition, which will be our Retail business in April this year. Now that's all dependent on these lockdowns that we keep getting hit with. So -- and then we will transition the other -- of our [13-odd] warehouses over the balance of 2021 calendar year. As you've heard in the past, our Retail point-of-sale system is now installed in Autobarn, and that's complete. We're undergoing a number of digital transformation projects. And we've got a new e-commerce platform that will be launched in Retail and our Trade business over the next 2 months. And we're working on customer relationship management or CRM system that's in development. And we've done a number of other projects in this area. So we're very focused on our digital transformation side of it. And you saw some of the benefits there in the retail side with online sales up over 300% and the majority of those are click and collect anyway. But also the Trade side of the business has got -- as sales continue to increase. And we did launch in New Zealand, also an online system, a catalog system that is going extremely well. The other areas cover category leadership and brand management, and this is focusing on selected categories is largely through our private -- through our specialist wholesale group. But there are some private label products that we do direct as well. So we've launched the [Chicane] brand of tools, and that's now out in our Retail business. And over the next 6 months, it will be launched into each of our other businesses. So it will be a market brand, not a business segment brand. And we're looking forward to that progressing and then there are a number of other areas we're doing. And as we've mentioned, we're always on the lookout for future acquisitions that fit with our core strategy. So -- but they've got to be financially appropriate as we've clearly shown in the past. Just looking at Page 24, so a few photos here of our biggest project, that as I mentioned is proceeding extremely well, and that we're looking forward to the state-of-the-art technology that we'll have there. We were out visiting it last week with our leadership team -- a number of the leadership team. It's the first time they've seen this facility, and their summary of it when they came back was simple. It was wow. So it's going to be a magnificent step later in the 6 months. So now turning to our trading update and outlook. Probably the main thing that people like out of this presentation. So on Page 26. A couple of things I mentioned though is that Andrew Harrison, who has been our Chairman, we started with us in 2014 when we did the IPO and is one of our founding directors, and he's been Chairman of the Board for the past few years. So after a 7-year service, Andrew has decided to step down and retire. So that was effective last night. So we thank Andrew for his contribution and wish him well in his future endeavors. Margaret Haseltine, who joined us in 2016, has taken over as Chair. In our business performance. January, the month just passed, continued at similar levels for the first 6 months of the year. So the performance continued. I will have to add though that in February, with lockdowns through the various states, we will be at a lower level of performance in the month of February than what we had been. But the fundamentals of the vehicle market -- aftermarket continue to remain strong. And there are trends that we've talked about in the past, but there are things that have occurred in the last year, the increase in secondhand vehicle sales, just the fact that people are adding more cars to themselves. The fact that you had overseas travelers come back and they've also then acquire a vehicle. It's pushed that heavily. The fact that there's more domestic holidays. People using the vehicles and the fact that in the sort of stat the other day that until this last closure, traffic on [mobile drives] were, for example, were up about 15%. And so that's great for us. I hate sitting in a traffic jam, but it's great for the business. So there's significant opportunities within our business to continue to drive growth, including further -- our further network expansion, procurement and supply chain efficiencies and certainly our own brand development. So in looking at -- so how are we going to go for the rest of the year? The mean market consensus for Bapcor has got a pro forma full year net profit after tax of around $122 million, which -- that means that for the second half, we would need to have a 21% growth on net profit after tax compared to the prior period. So we believe that, that does not appear unreasonable. However, that's all cautioned around the impact of the economic uncertainties. And particularly with a variety of lockdowns that are being imposed on businesses and individuals, and they have a material impact on businesses. They also have a material impact on the well-being of our team members and our people generally. So from -- as a business, and we've faired fairly well because we know how to handle these now. But for a lot of other business, it's pretty tough. And it's probably about time the governments started to think very carefully about the impact they're having on individuals and the impact they're having on businesses because otherwise, we're going to have a pretty sad economy. So everyone, thank you for listening and supporting Bapcor. And I'll now hand over to the operator to take questions and answers. And we'll see if we can answer the questions that come through. So operator, questions and answers, please. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And our first question comes from the line of Jo Little from Morgans Financial. -------------------------------------------------------------------------------- Josephine Little, Morgans Financial Limited, Research Division - Senior Analyst [2] -------------------------------------------------------------------------------- Sorry, Darryl, can you just repeat what you said around the trading update in around February? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [3] -------------------------------------------------------------------------------- Yes. With the closures that we've had in February, Jo, with the impact in Victoria around Retail or the impact in New Zealand, et cetera, we wouldn't expect February to be as strong as the rest of the last 6 months. But it still will be an okay month, but the point just being that the more we have the snap lockdowns and the impact they have on business, it just makes looking out for the next 6 months very difficult. So it's just probably using that more as a bit of an example. That does have an impact on us. But it's certainly -- it's not a disaster, let's put it that way. -------------------------------------------------------------------------------- Josephine Little, Morgans Financial Limited, Research Division - Senior Analyst [4] -------------------------------------------------------------------------------- Yes. No, fair enough. But the end of the [prepared] you said that January was a consistent trend there or thereabout? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [5] -------------------------------------------------------------------------------- Yes. Yes, absolutely. January is consistent with the first 6 months. February will be a bit lower simply because of the lockdowns. And better luck Jo, you've taken over the role from somebody else of being first on our calls this time. -------------------------------------------------------------------------------- Josephine Little, Morgans Financial Limited, Research Division - Senior Analyst [6] -------------------------------------------------------------------------------- I know. It's amazing. I guess the next natural question goes just around the competitive landscape. I guess there's been a bit of a clear aware for 7 months, just as everyone enjoyed a pretty reasonable time. Have you seen any change to the intensity in that backdrop more recently? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [7] -------------------------------------------------------------------------------- Yes. No, it's still a reasonable market generally. And it's always -- there is always the skirmishes. There's always a competitive tension, which we are seeing a bit, particularly, in say, in the Trade area, but we just -- it's just normal business for us. The fact that we've been able to clear and we've got inventory actually says a lot. And that's where I don't expect to see, over the period, substantial change in the [high views] simply because if you want to give away inventory and sell it, then you've got to be able to replace it. That's not the easiest thing at the moment for anybody. -------------------------------------------------------------------------------- Josephine Little, Morgans Financial Limited, Research Division - Senior Analyst [8] -------------------------------------------------------------------------------- Yes, perfect. And just on that discretionary spend savings. I imagine you do have a lot of people traveling in your business. Can you just quantify over the last 6 months, what you've kind of been saving there from a travel, et cetera, perspective per month? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [9] -------------------------------------------------------------------------------- I can't, unfortunately. It's just so that one's a very difficult one, Jo, because it's a mixture of promotions of travel. It's also, from a training perspective, we're not getting people together, et cetera, et cetera, but it is -- it would be -- it's in the millions. -------------------------------------------------------------------------------- Josephine Little, Morgans Financial Limited, Research Division - Senior Analyst [10] -------------------------------------------------------------------------------- Millions per month, yes? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [11] -------------------------------------------------------------------------------- No. Not per month. No, sorry. For the 6-month period. -------------------------------------------------------------------------------- Josephine Little, Morgans Financial Limited, Research Division - Senior Analyst [12] -------------------------------------------------------------------------------- Yes. Got it. Excellent. -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [13] -------------------------------------------------------------------------------- We're not that big at travels, Jo. -------------------------------------------------------------------------------- Josephine Little, Morgans Financial Limited, Research Division - Senior Analyst [14] -------------------------------------------------------------------------------- Got that. Now just talking about CapEx. Did you say, so for the full year, 50 to 60 ex the DC? -------------------------------------------------------------------------------- Noel Anthony Meehan, Bapcor Limited - CFO [15] -------------------------------------------------------------------------------- Ex the DC, yes. Yes, dependent on, obviously, a number of stores we rolled out. And that does include the inventory fill as well. -------------------------------------------------------------------------------- Josephine Little, Morgans Financial Limited, Research Division - Senior Analyst [16] -------------------------------------------------------------------------------- Oh, got it. Okay. -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [17] -------------------------------------------------------------------------------- And it's probably worth adding there that one of the things that is not -- that we haven't risen -- CapEx might be a little bit higher this year than may have been anticipated originally is that the incentive that we're getting for the DC won't come through until July next year. So then -- and that's quite substantial, that's shown on the DC figures we've given in the past. And that's because of the delays that have gone on over the year, so it's just a timing thing. -------------------------------------------------------------------------------- Josephine Little, Morgans Financial Limited, Research Division - Senior Analyst [18] -------------------------------------------------------------------------------- Yes. I understand. And just lastly though, you talked -- I'm talking about EVs. But I guess the conversation is certainly getting louder at the moment and probably will continue to. Just interested in what you guys are discussing internally and planning for this despite how long the -- that might be. -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [19] -------------------------------------------------------------------------------- Yes. Well, we've got a team that is -- in fact, we're [putting some -- moves in our fleet] to test them and to actually see how well they do, really perform. And the team's also ripping them apart to find out what parts are needed, et cetera, et cetera. So we're not ignoring it, but for -- I wouldn't be putting money on it. When there's 82 million vehicles in the world -- the 82 million vehicles produced each year, and there's lots -- there's only about -- last year, there's about 5 million actually made. It's going to take a long time before we see that dial move. Next question please, operator. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- And your next question comes from the line of Anna Guan from Goldman Sachs. -------------------------------------------------------------------------------- Anna Guan, Goldman Sachs Group, Inc., Research Division - Research Analyst [21] -------------------------------------------------------------------------------- Congrats on a good set of numbers. Just a couple of questions for me. First one is on the pricing environment at the moment for the industry, just given, I suppose, the supply-demand dynamic that's been played out. Can you give us some color there and also, I suppose, your willingness to pass on some pricing pressure? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [22] -------------------------------------------------------------------------------- Yes. Anna, the -- we would be passing on as -- we haven't -- while there's been a little bit of pricing pressure, it's probably more of the freight and that side of the biggest pressure more than anything at the moment. But there are some signs that there may be some pricing pressure coming. We would be doing exactly as we've always done in the past. If prices go up on products, we pass and so on. So -- and because -- and all the -- we can call our competitors in the industry would be doing the same thing because otherwise absorbing that, it just doesn't make any sense at all. -------------------------------------------------------------------------------- Anna Guan, Goldman Sachs Group, Inc., Research Division - Research Analyst [23] -------------------------------------------------------------------------------- Yes. Okay. That makes sense. And perhaps as far as that's a good segue to my second question, which is for the Specialist Wholesale business. So can you give us some color around what are your suppliers saying at the moment in the context of contract negotiations? Are you seeing any sort of upward pricing pressure given the logistics costs you were talking about there? Or are you getting any pushbacks given there's some surge in demand? You got a sense... -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [24] -------------------------------------------------------------------------------- Yes, there's probably a mixture there. And so what -- some of the suppliers have signaled some potential pricing upside. However, this is that -- however, we will push back very heavily on it because the offset is the Australian dollar. When a lot of our pricing was -- when the pricing was last, probably, negotiated, a lot of the suppliers that was based on a dollar that was probably closer to 65 and now it's up around 75 or above, they're usually very quiet during that time as far as any price changes go. It's because the share didn't give us a whole lot of reductions. So we would be pushing back pretty hard because it's not a one-way street. So I don't expect at this point any significant or material pricing pressure, but that's always on the radar, but we will be pushing back very heavily on anything. -------------------------------------------------------------------------------- Anna Guan, Goldman Sachs Group, Inc., Research Division - Research Analyst [25] -------------------------------------------------------------------------------- Yes. Okay. That makes sense. And just lastly, on the inventory build you guys talked about earlier. Do you -- looking ahead into second half '21, do you guys see -- do you think you have sufficient inventory at the moment? Or are you happy to invest a bit further? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [26] -------------------------------------------------------------------------------- I -- look, we've got -- a bit of a roller coaster for us at the moment. We're talking about this at our lease [of term. We have] like 70 components coming in this week, I think it is. And we'll have ups and downs, but I don't expect to see it grow on an ongoing basis much above where it is because otherwise, we can end up being far too overstocked. So -- but we -- it may go up at times, but then it'll come back down. So it just -- it's driven a bit more by the shipping and how that's all occurring than there's anything else. But we've got plenty of inventory. We're well placed. In fact, we've got our supply chain EGM sitting in this room at the moment, and he's not -- and he's -- we've had to take an extra warehouse in Brisbane to put it in. So [we're complete]. Operator, next questions. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- And your next question comes from the line of Sam Teeger from Citi. -------------------------------------------------------------------------------- Sam Teeger, Citigroup Inc., Research Division - Head of the Australian Small Caps Team & Director [28] -------------------------------------------------------------------------------- Look, your Australian business is doing exceptionally well. But I was just wondering if you can talk to us about what's holding back the business in New Zealand from doing as well as the Australian business and how you can resolve these issues. -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [29] -------------------------------------------------------------------------------- Yes. Look, there's a whole range of things that are affecting -- in New Zealand. And part of it is just -- and it comes down a simple demand and the -- and some of it is the demand impact of COVID. Some of it has been internal performance. I think there's a little bit of it as well. Because we've had some very strong years in the last 2 years and digesting that, we've ended up with a little bit of what I call indigestion, which interestingly we had about 2 or 3 years ago in the Burson business when it was -- it just keeps running hard and we forget about planning for the future. So there's a little bit of that. And there's certainly a process going on at the moment, started in January, to look at the efficiency and performance of each location. And then the other part that I think gets missed a bit in New Zealand is because of the New Zealand economy is so heavily reliant on tourism, which includes, the -- in our case, the vehicles that are used in tourism over there, and that is having a bit of an impact there as well. So I think it's that whole combination of things. -------------------------------------------------------------------------------- Sam Teeger, Citigroup Inc., Research Division - Head of the Australian Small Caps Team & Director [30] -------------------------------------------------------------------------------- Got it. Makes sense. And can you talk about what's driven the slowdown in private label penetration in the Trade business? And just your outlook -- I know you've got longer-term targets, but get your outlook for that over the rest of this year? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [31] -------------------------------------------------------------------------------- Yes. Look, the Trade become -- and the same as all our businesses, when you get your top line growing so heavily, [it's time] to keep up with -- at the -- and to even grow private label as a percentage. So it's actually up in dollar terms significantly within the Trade business and every business. It's only when we get to that percentage. So it's a not a bad problem to actually have. So I'd expect Trades just to improve a little bit over the next 6 months, but it will also be very lumpy because as you introduce new programs, they will be lumpy. So there's not all -- at all -- impact in these next 6 months. There's a few bits, but there are a few new programs going to Trade, including like the tools and a few other things, what we're doing, this and that. But a lot of that won't happen until later in the 6 months, so it won't have a material impact on the percentage, but it should drive it into next year. So I wouldn't expect it to go backwards from where it is, but it will slowly move that couple of percent over the next year or so. -------------------------------------------------------------------------------- Sam Teeger, Citigroup Inc., Research Division - Head of the Australian Small Caps Team & Director [32] -------------------------------------------------------------------------------- Got it. And then can you just talk about the impact over the next 6 to 12 months from the stronger dollar, particularly in that Specialist Wholesale business, but also across the whole group and maybe just any comments around hedging profile? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [33] -------------------------------------------------------------------------------- It doesn't -- realistically, the Australian dollar doesn't have a lot of impact on us overall because in Specialist Wholesale, product comes through and that costs us more because of the Australian dollar moving, then we did pass it through into the market. A significant proportion of what we buy is in Australian dollars. So even if there -- a lot of them are overseas suppliers, we're buying in Australian dollars. So it's -- a very, very high percentage of our procurement is in Australian dollars. So that doesn't have an impact. However, having said that though, you may get that negotiation coming back. But if the Australian dollar continues to increase, then we'll be looking for those -- some of the suppliers for price reductions. Not that we would necessarily pass those through to the end market as historically we haven't, but then you look at the other side of it, we have got some set -- they've got some [caustic process for] metals and everything else that they have to absorb. So we don't expect to see too much impact that we never had in the past, and I don't think we will in the next year or 2. Noel, do you want to talk about the profile of the hedging that we do? -------------------------------------------------------------------------------- Noel Anthony Meehan, Bapcor Limited - CFO [34] -------------------------------------------------------------------------------- Yes. So in simple terms, what it is -- yes, as we look at sort of that committed purchases when we take hedges out accordingly so we don't speculate, and we do that over a 12-month sort of view. So we'll take 100% in sort of short term and then we'll blend it down. And so we've got -- we do have some hedges in place. As we speak today, the hedges on average in U.S. dollars are running at a hedge rate of just under [$0.73]. But as Darryl said, it's not a big issue. -------------------------------------------------------------------------------- Sam Teeger, Citigroup Inc., Research Division - Head of the Australian Small Caps Team & Director [35] -------------------------------------------------------------------------------- Got it. That's good. And then Darryl, just last question quickly. It's a bit of an elephant in the room type of question, but I guess people in the market are talking about it, so it'd be good to get some comments on it. Just keen for your thoughts and -- your thoughts about your tenure at the company and how long you wish to stay there for. -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [36] -------------------------------------------------------------------------------- If I just sum it up by saying I'm not going anywhere soon, that probably answers it. But I'd expect over the next month, there will be an announcement on it. Having said that, I'm not going anywhere soon. Let's put it that way. So I'm hanging around. Let's put it -- because we've still got a few things we've got to finish. -------------------------------------------------------------------------------- Sam Teeger, Citigroup Inc., Research Division - Head of the Australian Small Caps Team & Director [37] -------------------------------------------------------------------------------- Yes, I hope so because you're doing a great job. I just want to clarify, when you said there's going to be announcement in a month but you're not going to go anywhere soon, when you say soon, are you talking about a month or longer than... -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [38] -------------------------------------------------------------------------------- I knew somebody would come back with that. I mean a bit longer than a month, like a lot longer. Yes. No, it's -- the current -- I'm definitely not going anywhere before April 22, which is in the current contract. And I think that you'll see something come out in the next month regarding the team. But we've got some things to finish over the next couple of years, so I'd like to see that all occur. Operator, next question. -------------------------------------------------------------------------------- Operator [39] -------------------------------------------------------------------------------- And your next question comes from the line of John Campbell from Jefferies. -------------------------------------------------------------------------------- John Campbell, Jefferies LLC, Research Division - Equity Analyst [40] -------------------------------------------------------------------------------- Darryl, look, good results, obviously. Just a couple of questions from me. Firstly, around your own brand targets. And you've always had fairly conservative targets and you keep edging towards them. And I think it's been asked a number of times, but when you look at a number of your offshore peers, in the U.S. particularly, who have much, much higher own brand share of total sales, I mean, longer term, can you give us some color on those targets, whether they're -- whether they -- there's scope to materially change them? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [41] -------------------------------------------------------------------------------- Yes. Look, I think it would be fair to say that long term, and this is long term, so more than 5 years, that the targets would be seen as super conservative. When you look at -- I tend not to look so much, even at the U.S., because some of that's -- they've got its own unique reasons. And volumes is the biggest part of it. But if I look at our 2 competitors in Australia, they run a -- just around 45%, 50% private label. So it should not be unreasonable to consider that we get to those sorts of levels over time. So we're just about -- we're working through finalizing an update to our 5-year strategic plan at the moment. But normally, we would have had it completed by now. But that's another impact of COVID when we can't get people together to do it. So I'd expect by June that we'll have an update on those targets, and I'm referring to all our 5-year targets. But private label would be one that I would expect which you'll probably likely to see a bit of an increase in it. But I'll still be conservative. -------------------------------------------------------------------------------- John Campbell, Jefferies LLC, Research Division - Equity Analyst [42] -------------------------------------------------------------------------------- Yes. Terrific. And just on M&A, there's been a hiatus on bolt-on acquisitions due to -- obviously, due to COVID and the difficulty in you guys doing due diligence, et cetera. Could you just give us a little bit of a feel as to whether there's any pipeline -- what the pipeline is like and what areas, what divisions are most likely going to see sort of bolt-on acquisitions in the next few years? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [43] -------------------------------------------------------------------------------- Yes. Look, it's probably -- and we don't spell this out, but we have done a number of acquisitions over the last 6 months. But we just actually refer to them as new locations. And so we -- even in the Truckline business, we bought a couple of sites that were previously privately owned, et cetera. And the same even in the Trade side. So we don't -- because we see those as relative, that's a -- sort of day-to-day business, we don't point them out. But we have been doing a number of those. We continue to do them, where -- and they're detailed actually in the detailed financials in the actual accounts. So we continue to do those. As far as anything of a material nature, we have worked at a couple of things over the last 6 months, but nothing has -- our whole mantra is, number one, it's got to make money and it's got to be sensible for us. It's got to fit within our strategy. And the ones that we've looked at, we -- just don't touch those areas. And -- well, they're not core for us. And we just don't want to fall into the trap of feeling like we're desperate to do an acquisition or something. The go-forward pipeline, there's a few things around. But what tends to happen with anything of substance is you don't know about it a long time before it happens. They tend to pop up and then you pounce on them. And we would do that if something was sensible. And like realistically, we can get as much, if not, pretty good benefit out of some of the -- I'll call them the efficiencies that [we do like our] Tullamarine DC and potentially a similar one in Brisbane as some of those acquisitions would give us. So there's significant benefit there. There's significant benefit in the private label in our store footprints. So we're reasonably comfortable if we don't do what -- I'll call it, a big acquisition because a lot of our success, and a lot of our profitability has been in what I call the Pac-Man acquisitions, which is just the ones that you just gobble up the things that -- the businesses. Or the small one might just add significantly to the overall business. -------------------------------------------------------------------------------- John Campbell, Jefferies LLC, Research Division - Equity Analyst [44] -------------------------------------------------------------------------------- Yes. Okay. Terrific. Just a last question for me. Your cost of doing business came down pretty materially by 3 percentage points. Obviously, there was -- you said due to efficiencies, but also due to a bit of a hiatus period in spending on discretionary items. That's understandable. Can you -- I mean, do you -- given your -- the group continues to build scale over -- year in, year out, would you expect maybe FY '22, there's a bit of a bringing back of discretionary expenditure and travel and the like, so it goes up a bit? But do you have ambitions that cost of doing business continues to go down year after year as a percentage of sales? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [45] -------------------------------------------------------------------------------- No, not specifically. Because a lot of what we do is it's in individual locations, which means that your cost of doing business is pretty much a straight line, where we will see that come down is a lot -- for example, the -- as we do move into the DC in Tullamarine, we will see a benefit there. But that's the sort of -- the lumpy benefits. Beyond that, we don't see significant changes there. There will be -- and the other bit you'll get is -- and I'm being very transparent about this. As you see the different mix of business, not every one of our businesses has the same cost of doing business, so that can play a bit on that percentage as well. So I wouldn't read a lot into it. We've always indicated that we don't -- other than something like DCs and other negotiations or freight or something like that, most of our cost of doing business is pretty much linear to the business. And the real benefits that we get are footprint and also the negotiation with suppliers, private label. That's where you get your leverage. Next question, operator. -------------------------------------------------------------------------------- Operator [46] -------------------------------------------------------------------------------- And your next question comes from the line of James Casey from Ord Minnett. -------------------------------------------------------------------------------- James F. Casey, Ord Minnett Limited, Research Division - Equity Analyst [47] -------------------------------------------------------------------------------- Darryl, just on the Retail business, specifically Autobarn, so you've rolled out the new format now. Have you got a sense of the uplift in sales you're achieving from the new format? Or are they new stores largely at the moment? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [48] -------------------------------------------------------------------------------- There's a mixture. I can tell you that one of the stores -- don't -- this is a figure, but it's up 160%, and that was a revamped store. So we would expect to on -- but there's other stores that you don't get that sort of level. So I'm obviously going to quote a really good one and a really bad one. So you -- but on average, you would be expecting a 15% to 20% uplift on the stores. -------------------------------------------------------------------------------- James F. Casey, Ord Minnett Limited, Research Division - Equity Analyst [49] -------------------------------------------------------------------------------- Okay. And then with your conversions, how many of those are you planning per year? I know you've got lot of other projects, but how many you're planning to convert per year? And then how do you deal with the franchise stores? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [50] -------------------------------------------------------------------------------- We're not -- when you say "convert," you mean to the new format? -------------------------------------------------------------------------------- James F. Casey, Ord Minnett Limited, Research Division - Equity Analyst [51] -------------------------------------------------------------------------------- To the new format, yes. Yes, converted to the new format. -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [52] -------------------------------------------------------------------------------- Yes. Look, we would probably -- and we -- most of it, we haven't gone through. But you -- if we could do 3 or 4 a year, I think that's probably about it. Because our real focus is probably more on getting the footprint and expanding the footprint. That's our real aim at the moment. And you'll see -- I think you'll see when we get to the full year and particularly this calendar year, we got such a long pipeline now of new stores in Retail, in Autobarn that have already been approved, but these are going to take the time to get -- some of them are new builds or parts of new developments, et cetera, that's where you're going to see the growth. And that's where the core focus is, is in those. But we will -- that's why there would be a fairly small number in the short term on the -- [relay] because you wouldn't redo a store unless you know you're going to stay in that location in the long term. Operator, any more questions? -------------------------------------------------------------------------------- Operator [53] -------------------------------------------------------------------------------- Yes. So we have -- and the question comes from the line of Tom Godfrey from UBS. -------------------------------------------------------------------------------- Thomas Godfrey, UBS Investment Bank, Research Division - Analyst [54] -------------------------------------------------------------------------------- If I could just go back to the guidance for my first question, and I appreciate you sort of already spoken through the exit run rate momentum you're seeing, and you guys don't have control over the sort of COVID-19 operational disruptions, but it does imply a pretty decent sort of step down in the earnings run rate for the first half to the second half. So I'm just sort of wondering, can we frame it as if there aren't any further material sort of lockdowns or disruptions, there's upside to the $122 million? Or are there some sort of material offsets moving into the second half from the first half [that we should be wary]? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [55] -------------------------------------------------------------------------------- Yes. Just remembering that the first half will be much stronger because you -- especially when you look at Retail and some of those because it is -- that should be leading days, big sales days, which are like -- things like Father's Day, Black -- [like] Black Friday and Christmas, that's a very strong period there. And you don't have as much of those in the second half. But also we had some very strong months, you might recall in May and June in -- last year, but to cycle over those is probably a decent jump. And we actually like -- if we're going to be up 20% in the second half, given some of that was pretty strong as we would have to be up at least 20% to achieve the consensus, that's probably given all the uncertainty that's about as good as we think we can predict. -------------------------------------------------------------------------------- Thomas Godfrey, UBS Investment Bank, Research Division - Analyst [56] -------------------------------------------------------------------------------- Got it. Okay. That helps. Maybe just a second one from me. I think you'd previously said about a $10 million sort of run rate EBIT benefit target for the new Melbourne DC. Can you just sort of give us a sense for is that still the target and what the sort of time frame to achieving that would be? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [57] -------------------------------------------------------------------------------- Yes. Look, what we've -- what I've indicated in the past, just being consistent with that is that we don't really get those benefits until we get all our sites across because then it's hard to split up. So we won't have all sites across until December this year. Maybe January, depending on timing. And then you've got to get the ramp-up. So there might be a little bit in next financial year, but the bulk of it will come in the -- in [F '22]. -------------------------------------------------------------------------------- Thomas Godfrey, UBS Investment Bank, Research Division - Analyst [58] -------------------------------------------------------------------------------- Great. And then maybe one just around the Trade business and the acceleration you've seen in store rollout there. Nine new stores is sort of a phenomenal jump. We probably shouldn't be expecting that in the second half and beyond. But can you just give us a sense for what you expect that run rate to look like medium term? And is it getting harder to find new sites? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [59] -------------------------------------------------------------------------------- My answer here would have been hell no. It's about double it a month ago. But the -- in fairness, there has been a little bit of a catch-up because of the -- because if we went back and looked at last year, we didn't have that many stores in -- again because of COVID, but we are now finding ways to get around that. So if we were able to do somewhere around 14 or 15 this year, I'd be happy with that. And I think we probably will because there's a bit of a pipeline there. But then I would still go back to our standard 10 to 12 a year for next year, and that's an ongoing level. But if we can find the right locations, but more importantly, the right people in those locations, and then that could be -- it can be accelerated, which is what we're doing this year. There's no real issue finding sites as a general comment. But in certain areas, it's impossible [to find sites]. And that sometimes ends up both in Trade and Retail for that matter. And the truck business -- so I'll give you an example. We're looking to close the truck business side in Bentley. It wasn't in the right place. Finding an appropriate site is very difficult. For us to find a site in western -- west of Melbourne, around that sort of perimeter area for the first in the stores, very difficult. So it's area specific that -- more so than anything. And the teams, if they can't find a site in an area, they'll have a [flag that] we want to put a store there. But then they'll move on to the -- to another area and find the right site for that next store. So I don't see them as things that hold us up, overall. They can, for some specific areas, just delay when we can actually get the store because we really don't want to compromise, unless we really have to, a site. And I can tell you, there's one here in Preston, that we've been trying to find a site somewhere in Preston, Victoria, we can't find one. So it just [wasn't that we're cautious]. -------------------------------------------------------------------------------- Thomas Godfrey, UBS Investment Bank, Research Division - Analyst [60] -------------------------------------------------------------------------------- Got it. Maybe just last one for me, just on the Retail business. I'm just wondering, sort of 150 basis points of margin expansion, could we have expected to see more operating leverage, just given the benign pricing environment and the volume leverage you've seen in that business? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [61] -------------------------------------------------------------------------------- Yes. No, what actually happened there, and probably we haven't gone into this detail, but in the Retail side, we have to reposition our pricing because we're -- and this is a -- as a broad statement. We've repositioned our pricing on core lines so that we were in the market and not above it. And that's repositioned that quite a bit, and that's reflected in, obviously, in the margin, but it's more than offset, as you can tell, in the volume. So we looked at all the factors that might have been holding the business back. And this is an exercise Tim and his team have done, including the daily price scraping as it's thought to make sure we stay in the market. And that has sort of repositioned our starting point, if that makes sense. So... Operator, just one more question, if there's one, and then we need to probably finish it up. Operator? -------------------------------------------------------------------------------- Operator [62] -------------------------------------------------------------------------------- Yes. I'm sorry, I was on mute. Yes. We've got one more question. It comes from the line of Matthew Nicholas. -------------------------------------------------------------------------------- Matthew Nicholas, Crédit Suisse AG, Research Division - Director [63] -------------------------------------------------------------------------------- I'll try and keep it nice and punchy. Just in terms of Specialist Wholesale, I'm just curious if that's predominantly a Trade-driven business. And even if you back out the acquisition, your growth there is well above the growth that you've done organically within your Trade business, so I'm just curious why that's the case. And I suppose as a follow-on to that Specialist Wholesale business, your profitability is well above certainly what I was expecting. Can you just talk a bit on the profitability initiatives you've executed on Truckline and how far above the acquisition case you've actually delivered? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [64] -------------------------------------------------------------------------------- Yes. So we -- the starting point with Specialist Wholesale was a lot lower than Trade. So I would expect it to be high -- the growth in that segment to be higher. And because it's actually made up of 12 businesses, then it's a real blended figure. And a lot of those businesses -- and including the Truckline business, started well below where you -- where we would expect it. And some of the other businesses like [Autobarn and Opposite Lock] and some of those have improved dramatically. And that's -- that was our expectation. So there's a big mix there. So I wouldn't really compare where those businesses focused to the Trade because they're just different markets that they sell into. On your second part, the -- a big part of what we've been doing in Truckline and CVG generally is moving them across to -- and look at the product mix. Looking at synergizing for [a lot of] better work procurement prices, where we've got common suppliers with other parts of our business. And it's also on the, I call it, the levels that you staff your various areas. So there's been a whole range of things that have been done in there, and they're performing very, very well. But it's particularly around that product pricing, the product mix that we're doing, they're pushing very hard in that business in the private label because it's very well suited to it. So it is certainly performing very well. -------------------------------------------------------------------------------- Matthew Nicholas, Crédit Suisse AG, Research Division - Director [65] -------------------------------------------------------------------------------- Right. And just a quick one on the corporate line, Noel spoke to some stuff earlier. If I remember in the second half last year, I think there was, I think, $5 million or $6 million of abnormal provisions taken at the result at that point in time. Can we just confirm those provisions haven't been unwound as yet? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [66] -------------------------------------------------------------------------------- Not [as yet. So -- well, the -- can I just cover those questions? I should take it.] So the 2 of them, one of them is on receivables, one was on inventory. The receivables was always on the basis of the wind off from the government stimulus and JobSeeker in that because we think it might have a bit of an impact. So -- and that really hasn't happened yet, so that's definitely not unwound. And the other part was inventory. And some of that's related to the move into the new DC, et cetera, that would be a driver for us to look at it and say, "Okay, do we need this? Do we not need it sometime in the future?" But certainly, no, nothing has been wound back whatsoever. So we haven't -- as you might call it, clocked up the results from the provisions. -------------------------------------------------------------------------------- Matthew Nicholas, Crédit Suisse AG, Research Division - Director [67] -------------------------------------------------------------------------------- Not a problem. And just the last one for me, probably another one that sits in that elephant-in-the-room category. Just in terms of the sustainability of everything we're seeing right now, I think people can make their own judgment on Retail and how that looks like going forward, but I think the focus in the market very much is on Trade. And I think, typically, that's a 3% to 5% growth business in a normal year. You printed an excellent result plus 11%, which looks like it's accelerated in the second half -- in the second quarter. But as you roll through to '22, what's the best indication? What's the best way of looking at Trade? There's more cars on the road at the moment, that's pretty clear and that's probably going to be that way for the next 18 months. Do you look at what the Trade business is doing right now, not necessarily the growth rate, but do you look at the absolute levels of sales and say, well, this is sustainable into the medium term? -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [68] -------------------------------------------------------------------------------- Yes. Look -- and part of what's there is that we've had that, I'll call it, a little bit if a step up, we'd expect it to probably flatten out back to more historical levels. So more of that sort of 3% sort of rates. To see the continued elevated demand, obviously, could be probably very unrealistic. But to drop back, unless there's some major change in the market, I'm not sure we'd expect to see that either. So at least over the next 2 to 3 years. I just don't see a big readjustment there at all. And you've also got coming up behind it, like the -- what we're doing on stores, what we do on private label, et cetera. And look, [we're always striving] to get more market share, et cetera. So I'm not sure that we'd be too happy if it did fall back. -------------------------------------------------------------------------------- Matthew Nicholas, Crédit Suisse AG, Research Division - Director [69] -------------------------------------------------------------------------------- Sounds good. Well done on the result. -------------------------------------------------------------------------------- Darryl G. Abotomey, Bapcor Limited - MD, CEO & Director [70] -------------------------------------------------------------------------------- Thanks, Matt. And just for everybody, we'll finish it off there, but I think most people -- if anyone's got questions, we've got a lot of meetings over the next 2 days. And I've got to dash. So with that, thank you, everyone, for calling in. And operator, we need to finish it there. Thank you. -------------------------------------------------------------------------------- Operator [71] -------------------------------------------------------------------------------- Thank you so much. And that does conclude your conference for today. Thank you for participating. You may all now disconnect.