Unveiling Bapcor's Financial Trajectory: A Report on Revenue Growth and Net Earnings
Question
Task: How did Bapcor Limited, an Australian automotive retail company, achieve and sustain double-digit revenue growth and address challenges in net earnings from 2019 to 2023, amidst evolving market dynamics and external factors?
Answer
Background of company
Company operates with the vision to create and adopt the long term transformation program, throughout the industry along with its current operational practices and forward and backward business actions. Along with financial growth company is planning to work on sustainable basis. Bapcor Limited is a prominent company in the Asia Pacific region that offers a range of solutions, services, and products related to vehicles. With a history dating back to 1971, Bapcor has evolved into a vertically integrated business that caters to the automotive industry's diverse needs. Bapcor has a strong presence in several sectors, including trade, specialist wholesale, retail, New Zealand, and Asia. It provides specialized knowledge and expertise in these areas, enabling it to deliver tailored solutions to its customers. The company's operations span over 1,100 locations, employing a workforce of approximately 5,000 individuals across Australia, New Zealand, and Asia. Bapcor derives around 80% of its revenue from trade-based activities and 90% from non-discretionary spending. Its focus on delivering high-quality aftermarket parts, accessories, and workshop equipment has earned it a reputation as a trusted provider in the industry.
Review the financial statements
Going through the annual report from one year to another year, and analysing the financial data of past several years. the growth in revenue and the net income of company were consistence. Sound business strategy with intention to ensure the consistent growth through collaboration with associated business entity and expanding the network, are the key areas to grow the revenue of business. through annual report, the top management express the view that we are working to convert the paper based growth into the real one in sustainable manner. Maximize the collective strengths of the team and harness the potential of individuals to drive progress. Prioritize the upkeep of operational excellence while pursuing Bapcor's strategic evolution, with the goal of surpassing previous achievements. Tap into new, lasting opportunities for Bapcor to expand its reach.
Analysing the revenue of Company
In order to grow the revenue and net earning of company, it is not enough that you are delivering an right product among right customers, rather you have to work over your reputation and the market value. The selected company work our it and state that we have achieve the expected growth in revenue through every segment of our operation, with the help of our continues afford, an intention to work on sustainable basis and commitment to deliver something better then what the end users expects from the company.
During FY22, Bapcor Trade experienced a rise in both its revenue and EBITDA, thanks to a robust second half that compensated for losses incurred during the lockdown and the adverse effects of Covid in the first half of the year. The company also continued to expand its network by opening ten new branches and acquiring Blacktown Auto Spares in New South Wales. In the meantime, Bapcor Specialist Wholesale reported a commendable performance, registering a 10% revenue growth and a 16% EBITDA growth. This growth was attributable to a greater penetration of own-brand sales and the expansion of the Commercial Vehicle and Electrical businesses, which saw the addition of 14 new branches.
Review the chart and its performance :
Based on the data provided, we can see that the company's total revenue has been steadily increasing over the past four years.
• Revenue : In 2019, the revenue was 12,96,582, which increased by 12.82% to 14,62,747 in 2020. In 2021, the revenue saw a significant jump of 20.44% to 17,61,673, and in 2022, it increased by 4.55% to 18,41,905.However, the cost of revenue has also been increasing over the past four years, although at a slower pace than revenue.
• In 2019, the cost of revenue was 6,88,811, which increased by 13.60% to 7,82,473 in 2020. In 2021, the cost of revenue increased by 21.32% to 9,49,283, and in 2022, it increased by 3.50% to 9,82,466.We can also calculate the gross profit by subtracting the cost of revenue from the total revenue.
• In 2019, the gross profit was 6,07,771, which increased by 11.93% to 6,80,274 in 2020. In 2021, the gross profit increased by 19.27% to 8,12,390, and in 2022, it increased by 5.45% to 8,59,439.
The summaries data stated above indicate that we have ensure the expected growth through out the past four years, which means, the company's revenue and gross profit have been increasing steadily over the past four years, which is a positive trend. However, the increasing cost of revenue suggests that the company may be facing challenges in managing its expenses. It may be worth analysing the company's cost structure to identify areas for potential cost savings.
Growth in the earning shows the conversion of mission statement of top executive into the reality. The fact has long term impact over the wealth of investors and over the intangible assets of company.
Still now, we have seen the growth in sales or revenue, this growth will not be worth if company is not in position to convert this growth into the net earning and the profitability. Hence it is essential to analysis the EBIT and EAT, as these two factor are collectively associated and related wealth of investors.
In 2019, the EBIT was 1,49,926. In 2020, there was a decrease of 16.75% in the EBIT, which brought it down to 1,24,813. However, in 2021, there was a significant increase of 43.66% in the EBIT, which brought it up to 1,79,305. In 2022, there was a further increase of 3.85% in the EBIT, bringing it up to 1,86,211.
The major variation in growth of EBIT in the year of 2021 was on account of external factor, the external environment factors are not within the control of many company, Covid -19 was the pandemic spread out in the world country, as result of which world country has to discontinues commercial and economic activities. These factor are collective in nature, hence we can state that the major variation in the growth of earning of company on account of external environment factor, can be ignore. we can see that the company's EBIT has been volatile over the years, with a significant decrease in 2020 followed by a substantial increase in 2021. In 2022, there was a moderate increase in the EBIT. It would be interesting to analyze the factors behind these fluctuations to understand the company's performance and potential future trends.
Net earning
Net earnings refer to the amount of money an individual or company has left after deducting all expenses and taxes from their gross income. In other words, it is the profit earned by an individual or organization after all the necessary deductions have been made. Net earnings are a critical metric used to evaluate the financial health and profitability of a business or an individual. It is important because it helps to determine the amount of money available for reinvestment, growth, or other purposes after all the necessary expenses have been paid.
The above stated chart shows the net earning between 2019 to 2022 and the growth in the net earning, here it can be seen that Net Income from Continuing Operation Net Minority Interest:
• The company's net income from continuing operations increased from INR 96,978 in 2019 to INR 1,25,759 in 2022, indicating a growth of 5.89% in 2022, which is a slower growth rate than in the previous year.
• In 2021, the net income grew significantly by 50.01%, while in 2020, it declined by 18.36% compared to the previous year.
In summaries, the company's financial performance showed a positive trend over the last four years, with growth in net income and EBITDA. However, the growth rate in 2022 was slower than in the previous year, indicating a need for further analysis of the company's financial performance.
Conclusion
Based on the above discussion, we can state that the expected growth as plan buy the top executive and the management of company in the year of 2016 were converted into the reality between 2019 to 2023. The double-digit growth with continues expectation to enhance the market share and strong network are the key milestone for company and these milestones were achieved by company through it collective afford of top to bottom level department.
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