Bapcor Limited (BAP) Earnings Call Transcript

Good day, and thank you for standing by. Welcome to the Bapcor Full Year FY '21 Financial Results Investor Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Darryl Abotomey. Thank you. Please go ahead.

Thank you, operator, and good morning, everyone, and thank you for joining us for Bapcor's 2021 results and strategy update. So Noel Meehan, Bapcor's CFO, and myself will go through the presentation deck that was lodged with the ASX this morning and is available on Bapcor's website. In addition, the financial accounts [ for full year ] have also been lodged with the ASX and are available on Bapcor's website. Bapcor's main objective is to grow shareholder value, and to achieve this, we focus on 6 key areas, which are shown on Page 2 of the presentation. These are achieved by implementing Bapcor's values in everything we do. So we're committed to growing shareholder value, and the 6 key areas are team, customers, suppliers, community, environment and that we do the right thing. Just one of the things I'd like to point out up front is that as far as the team, we have introduced things like pandemic leave in the last year, and we've also announced that we're rewarding all full-time members with a $600 bonus, and that's paid in 2 installments. And that's in addition to their normal incentives. Our team are the leaders in what we do, and we want to make sure we always look after them. On Page 3, Bapcor's success has not been a 1-year event, but it's been continuous since we listed on the ASX in 2014 and in fact, even before that. We've delivered outstanding results by our talented team by implementing our strategies, and what this particular page shows is key highlights of the presentation. So you see that our store numbers have increased dramatically. Our team members have increased, our own brand percentage have increased. They're core parts of our strategy. And the financial results are superior for shareholders, and you can see in all of those just how significant the journey has been since 2014. And 2021 is no exception to that and has delivered an amazing result. So Page 4. Bapcor, and along with Tye Soon, now cover 8 countries across the Asia Pacific. This is significantly greater than any other automotive aftermarket business. So what that says is we have material opportunities ahead of us that we can continue and will continue to grow this business. And all of what I've just outlined on the first 3 pages has led to an incredible result in 2021, as shown on Page 6 of the presentation. So despite lockdowns, restrictions, uncertainty, Bapcor's delivered record results across every single measure. A few of the highlights that are shown on Page 6. Our revenue increased 20% up to nearly $1.8 billion. EBITDA increased 29%, and profit after tax or net profit after tax, and these are all on a pro forma basis, increased nearly 47% up to $130 million. It was above every benchmark that anyone had in the market, and it's -- it was a very outstanding result. We also had EPS. Our earnings per share increased by nearly 27%. Now that's even after having issued nearly 20% additional equity at the end of 2020. So we had a weight on the EPS calculation this year that actually depressed that down from what it would have been had we not done that equity issue. So a very significant jump in earnings per share. And all that was done with a leverage ratio sitting around about 0.7x EBITDA. So shareholders have benefited very strongly throughout the year. Between June 2020 and June 2021, the share price rose over 44%. And in addition to that, there was -- we declared an increase in dividends of around 14%, an extremely good year across the group. On Page 7, you'll see that every single Bapcor business segment has achieved solid growth and contributed to the overall outstanding results. So in revenue, strong growth through increased market share. There was elevated demand during the period, which I think is fair to see, but there was also a lockdown. So how those 2 balanced out, you never really know, but there was some additional market demand through Super and some of those areas. We've contributed through our ongoing network expansion, and we've launched a number of new brands, our own brands, and I'll cover a little bit more about that, particularly in the retail side. Our earnings EBITDA, top was driven by top line sales growth, focusing on managing our business. There was some benefit from constrained costs due to COVID. So things like travel, entertainment, training, et cetera, they were lower than what they would otherwise have been, but that's part of the overall result. But we also -- all the acquisitions that we've done and the new stores we've invested in, they've all delivered on their business cases. So you're seeing the whole initiatives that we've had over the number of years continue to deliver and continue to contribute. So now we're looking at each of the segments separately. Page 8 shows a solid Trade business, and it continues to be solid, it continues to perform, and it continues to grow. So it was a year of milestones with our Trade business and particularly the Burson Trade business achieving its 50th year. So that's quite a milestone. And amazingly, and also in the same year, the 200th store opened, and it was a record result. And just to put that in context, in 2011, there were 90 -- just circa 90 Burson stores when we originally took over this business, and they've more than doubled in that period. So we've now got a national and a leading trade distributor in Australia. So the other thing other than the highlights there with revenue going up and EBITDA going up significantly, same-store sales, 14.3%. In the second half of the year, they actually were higher than the first half, and that was quite an incredible performance. And own brand continues to grow. When you've got revenue going up so strongly, it's hard to get the percentage of own brand up, but the own brand value of sales increased significantly, 23% over the period. And we did launch in retail -- sorry, in Trade, the same as we did in many of the other businesses, new e-commerce platforms. This is a new B2B platform, and that's been widely hailed as a very user-friendly platform. So turning to New Zealand. New Zealand had a solid year. Again, it has achieved record revenue and results on every single measure. Highlight of it would be the BNT, which is the equivalent of Burson and their trade stores. Their sales were up 11%, and that's a pretty good performance in New Zealand. And it's brought them back to a level that's above what the pre-COVID levels were. They've had a good increase in their margin. Their earnings went up significantly, and their own brand sales have increased to nearly 31%, which is a good improvement compared to prior years. And what they're doing in New Zealand, because properties are hard to find and hard to get the size of buildings we need, we're developing what we will call supersites where we've got a number of the different businesses in the same building. They still have their own interests, and they've still got their own identity, but that's the way that we can actually expand and get the amount of product and the ranges into the stores that we want to have there. So a lot of the New Zealand stores are constrained by size, and we'll continue that strategy to increase into superstores or supersites and also to relocate stores that are too small for the business and the ranges we want to carry in that country. Turning to Specialist Wholesale. So the Specialist Wholesale business includes our commercial vehicle. That's the light and heavy. So that's the -- Truckline is the heavy; and WANO, which is now branded as, is the light. And they also, within this business, we've got specialists that focus on product categories and also wholesale businesses. So in this segment, the results speak for themselves in that you've got revenue going up 27%. And some of that is driven by some of the acquisitions, but it's still 17%, excluding the acquisitions. So very good result, very strong EBITDA being up 42%. And we're driving this business through network expansion, the increase in the own brands, and they certainly have had fairly significant market share growth. In the truck side, the commercial, we've rolled out new concept stores for both Truckline and now for WANO, and those stores are much improved and a much better customer experience than what they were historically. So -- and we continue to grow both those networks, and they've both got a significant amount of opportunity to continue to grow. Bapcor Retail. So for a number of years, our Retail business has been evolving. And in 2021, it took a quantum leap with many of the initiatives being implemented, as you can see from the results. Whilst we show revenue of up 26%, which is a very solid increase for our Retail business, the reach of our Retail business, when you include the franchisee sales and their income, is over $700 million. So it's understated in the way it looks here, but it is a business that when it touches the customer, that's a $700 million-plus business. They've grown everything. What hasn't grown is the store numbers. And the reason for that is that -- the reason we're seeing some of the store numbers change and come down, particularly in Autopro and Sprint, is because of the ongoing process which we've been doing for a number of years in Autobarn, and we're continuing to do it, but we're also now doing it in the Autopro network and Sprint network where we're exiting underperforming company and franchise stores. And this will continue until we get stores and businesses that comply with our requirements and the standards and the ranges that we want to see. So -- and you can see in the results, it's paying off. So we closed the number of company-owned stores in locations like in Victoria and Nunawading and in Ringwood that were underperformers, had been forever. And where we've invested in the new superstores, which is the new Autobarn, the new format Autobarn stores, the results they are delivering are exceptional. They are very, very solid. So you saw Autobarn company stores up 28% for the year in same-store sales. That is well above the industry average. And we expect to see Autobarn continue to deliver over the coming years, especially as they continue to grow their footprint and as they continue to implement their new store formats. So the new store format in Autobarn, we've got about 15 stores in that format, and we've also now rationalized our brands. So instead of having a number of brands, we focus on Autobarn and Autopro. So Autopro is pretty much in the country areas or the areas where population is under 20,000, and that's the strategy. So all those former Sprint stores are being branded -- rebranded at the moment, and they are becoming Autopro stores, and that's a very, very positive initiative through that group. So in Autobarn, company stores are now 65% of the total number of stores, and that will continue to grow as we continue to roll out new stores. And I think we will see -- we expect to see a significant increase this year because we will have almost 1 store a month in Autobarn rolled out over these 12 months, and all of those are already approved. So we know the timing on them. There was a reduction in retail EBITDA percentage, so that did go down. And part of that was the implementation or continued implementation of the strategy of being market priced in the market. So there was historically a perception Autobarn may have been slightly on the high side. We now do what's called price scraping or comparisons every single day, and we make sure that Autobarn is on the price. And hence, the new logo and the new mnemonic for Autobarn is top gear, low prices. And we -- and hence, the margin impact, but as you can see, it certainly has delivered in the revenue and also the profit. So the other thing that's -- one of the big initiatives that's been going on in retail is the launch of our own brand product. So Chicane, which is a premium automotive hand tool. You may have seen the ads for this. It's being launched, and it's available not just through our retail network, but also through the trade in Burson. It's available through Truckline, and it will be available shortly in New Zealand. So it becomes a market brand in -- Chicane is a premium hand tool. Also, Vyking Force has been released. They have a fantastic range of pressure washers and generators. They sold out of generators, especially after the storms in Victoria, but they are able to assist the community by, in some cases, donating and providing generators, but they are very, very solid range of pressure washers and generators, and we expect that they will also be moved across our overall business. Turning to Asia on Page 12. It shows we've invested in Tye Soon, and I'll just cover the Tye Soon investment. There was a 25 -- it is a 25% equity stake. But on Friday last week, Tye Soon announced their first 6 months earnings, and they had revenue up in their first 6 months 26% and profit after tax of $2.2 million compared with the prior year of $100,000. And in the prior year, there was also government subsidies, which we've not seen in the first 6 months either. So very good performance from Tye Soon. We may have got in at the right time, but it is a business we see significant opportunities to work with them, to develop the business and move forward with them. As I said, we've got -- it puts us in 8 countries throughout Asia Pacific, so it's a very strong structure for us to move forward with. Thailand. With our stores there, Thailand's performance continues to be heavily impacted by the pandemic. It's such a frustrating situation for our team over there and -- with what's occurring. But they're in lockdowns. They have been for a long time. It's not looking as if it's going to improve over the next few months. But our seventh store in Thailand is ready to open. It's down towards Pattaya. And as soon as we see clear air and it's safe to do so, we would open that store, and there's an eighth also on the drawing boards. So Asia, once we get back to some sort of normality, we'll see a lot more occurring there. So apart from the financials, there are a lot of very significant initiatives that have been progressed through the year, and I'll just outline a couple of them. So on the supply chain, the biggest single initiative here is the Victorian consolidated distribution center here at Tullamarine in Victoria. So it's a state-of-the-art. It's got what's called Goods to Persons, it’s an automated system of storage and picking, which 70% of the volume go through. And what's occurred here is that the retail business has transitioned from their warehouse into this DC. And we've got the expectation the 3 biggest warehouses being the Retail, the -- part of the Specialist Wholesale and also our Burson Trade business will transition by around the end of September. And then the balance will be -- we aim to transition them through the balance of 2021. One of the core things with this distribution center, it is being built, and it is environmentally efficient through all the areas you see on the slide, and it will deliver significant benefits to us. It is a massive site. It is the site 3x the size of the MCG, and the warehouse itself is 2x the site. So it's a pity that we've had to delay and then essentially cancel at the moment the Investor Day, but we will aim to reschedule these later in the year because seeing is believing in this place. Everyone that’s been here, that sees it, really then understands what we're doing, and it's a really positive thing. The other area that we've got a very big focus on is digital transformation through the technology area. So we're investing and upgrading our technology to support the growth of the business. So during this last year, we've implemented 4 e-commerce systems: so a new B2C in Australia, so the Retail side I mentioned earlier; a new in B2B in Trade, in Burson; New Zealand launched their B2B this year in New Zealand; and we've also launched it in Thailand. So it's an important area. We've also issued -- sorry, launched what's a vehicle -- an online vehicle booking system for servicing that's called Enji, and that's just been launched. And there are a number of other areas that we've got being worked on and will continue to be worked on. We did a number of ERP system upgrades and consolidations. We've approved the CRM system, and that's now expected to be implemented in this year. So with that all out, I've outlined the key contributors to Bapcor's 2021 results. I'm going to pass across to Noel for more detail on the financials, after which, I'll be back to update our strategy and outlook. Noel?

Thanks, Darryl, and good morning, everyone. Let me add my welcome to everyone joining us on the call. As Darryl said, 2021, just an outstanding year. You've sort of got some of the highlights, and I'll go through a little bit more of the detail. But what it does demonstrate across this business is 3 things in my view: the quality of business; the resilience of the business; and ultimately, the quality of the team members supporting the business. Just outstanding year. If I turn to Page 16, there’s a summary income statement. You'll also find the full statutory accounts in the Appendix 4E. One comment just to sort of start off, all the financials are presented in accordance with the accounting standards as they are in existence. And for those people that follow the company over a long time will notice there has been a transition where leases now are on balance sheet. So everything is prepared with leases as part of the financial statements. Look at the numbers. A couple of sort of big call-outs. Top line growth, 20%; EBITDA growth, 29%; statutory profit up 50%. So across those metrics, you see profitability growth significantly outpacing revenue growth. On top of that, delighted to see the improved financial returns for the shareholders. EPS growth, 27%. Return on invested capital improved to 11.6%. So really, really great improvement. Looking down through the sort of P&L, starting at the top line. You see on the right-hand side, we saw revenue grow 20%. That equates to just under $300 million of growth in the year, outstanding results across the segments. We saw New Zealand grow at just under 9% to Trade at just under 16%; retail, 26%; and the Specialist Wholesale grew about 27%. Across those business segments, then that also then translated to nearly a 29% improvement in EBITDA, which equated to $62 million. Again, if you look at that percentage increase called out in the earlier charts, but just to reinforce the strength of that sort of increase. Trade, 19% up EBITDA; Retail, 20% up; New Zealand, 21%; and the Specialist Wholesale group, up 42%. Excellent contributions across the whole segments. And as Darryl said, the business cases are delivering across store rollouts and also acquired businesses, excellent contributions from the recently acquired Truckline and Diesel Drive businesses. EBITDA margin, 15.9%, as Darryl did call out, driven by a number of things: efficiencies that we're driving through the business, product mix, all that type of thing. It was assisted during this year in some benefits on lower levels of spending on things like travel, training, motor vehicles, those type of things. How much that cost or how much that saved, look, it's probably in the order of north of $5 million, something like that. It's not an exact number, but it would be in that order. The investment that we're doing obviously then translates into higher depreciation and amortization as sort of we position the business for the future, new technology upgrades, consolidation and relocation of warehouses. And the opening of the new office in Victoria, a number of those happened in the second half of the year, but you see that sort of coming through the depreciation line. In terms of a couple of other call-outs, just to complete the picture on the P&L. Tax rate sits at about 30%. You'll see the sort of increase in tax each year as -- in line with the earnings growth. Finance costs decreased this year to the lower levels of average debt across the full year. And then the difference between the pro forma impact of $130 million and the statutory impact of $119 million is detailed further in the appendices to this presentation and also in the stat accounts. But there's 2 items in there: there's the transitional costs relating to the Melbourne DC; and then there was a mark-to-market of our Tye Soon investments, which resulted in a mark-to-market impairment of just over $4 million. But that is sort of reconciled in the appendices. So from a P&L perspective, really, really pleased. If I then move on to Slide 17, the cash flow. Now profit is important, and we also obviously know how important cash is. There is significant investment going on in the organization to create future shareholder value. The Melbourne DC inventory network expansions are all designed, obviously, to create value for shareholders over the longer term. The one number that probably jumps out at people, they see cash converted -- you'll see cash conversion of 74% at the half year, it was running at a higher rate of 84%. The real driver to impact the cash conversion has been the investment in inventory. We've made significant investments in the first half and made a conscious decision to keep that investment going in the second half. It won't come as a surprise to people on the call the global supply chain challenges, the fragility of supply chains around the world, ranging from impacts of COVID, lockdowns, vessel capacity, empty containers being in wrong places, et cetera, et cetera. And so over the year, we invested about $84 million in inventory. And if you break that down in terms of the $84 million, new store development, private label investment, new programs in the Specialist Wholesale channel equated for probably around about just over $40 million of that sort of $80-odd million increase. There's around a temporary $45 million investment increase in inventory to cope with the fragility in supply chain. Had that $45 million not been invested, cash conversion would be north of 90%. Looking then at the CapEx, and you'll see on the left-hand side, we provided some detail to try and give investors a clearer picture of the way the business invests its capital. Network expansion is something that's very important for the business as they roll out new stores. And you can see there, we've invested between inventory and new stores around about $25 million. Sustaining capital ran at sort of $28 million. That would be akin to what I would call normal depreciation [ stack ]. So we try and sort of keep that as best we can in sync. Lots of then sort of other ups and downs. But if you look at it, you sort of sit there and say, "Okay, cash generated before we made major CapEx was negative $26 million." That is after the increase in inventory and also after the network expansion. On top of that, the 2 large growth projects, just under $20 million spent in the year on the Victorian distribution center at Tullamarine and then $14 million spent on part -- 2 things, the Tye Soon investment, the 25% stake; and then a deferred payment in relation to the CVG Light. What does that all mean at the bottom line? Cash generated went backwards by $60 million. But the point I would make there, $45 million was on inventory and then there's obviously $34 million on major growth. So still a very, very strong cash flow performance from the business. Moving now to balance sheet. There's a summary balance sheet you'll see on the left-hand side, and there's a full detailed balance sheet with all the notes in the Appendix 4E and financial reports. A couple of comments I'd make on the balance sheet. The balance sheet is very strong. We are lowly geared at 0.7x. We've got lots of opportunities ahead of ourselves. The business has done a really good job in managing its balance sheet. Major movements in the year. If I just call out a couple, you'll see the movement in trade and other receivables going from $164 million to $193 million. That's just under an 18% increase in trade and receivables. Bear in mind, revenue grew at 20%, so the business and the accounts receivable teams across the portfolio have done an outstandingly good job at ensuring our trade debt book is managed appropriately. So to have that increase at lower than revenue is really, really good. I've mentioned the inventory. You see the inventory jumping from $363 million to $447 million. The $84 million, as I said, around about $40 million is new stores, on brand-new programs and about $45-ish million on temporary increase. If you then look at sort of a couple of other key sort of metrics on sort of the balance sheet towards the bottom of the page. Our average net working capital as a percentage of sales, that's how we go over the whole year rather than just point in time, is running at 17.4%. And then inventory as a percentage of sales, despite the $45 million increase in the year, is running at 23%, again, in line with where we were last year. Net debt, $164 million. So a really good, strong balance sheet. If I move then to the liquidity position. Just a couple of call-outs here. As you can see, our balance sheet and our liquidity position puts us in a significant ability for flexibility and to be able to move and fund growth as and when it comes forward, whether that be new stores, new supply chain initiatives, all those type of things. We've got the balance sheet to do that. In terms of undrawn facilities at the end of the year. We had $300 million -- $312 million in undrawn facilities. We have no maturities for the next financial year. It's in July '22 is the next one, but we'll actively sort of work on that as we move through the year. So liquidity is really good. If I may just move to Slide 20. As you can see on this chart, this goes back to FY '15. Every single year that Bapcor's been listed, dividend has increased. The full year dividend for FY '21 has been increased by $0.025 to $0.20 per share. $0.01 was increased at the half year, $0.015 at the full year. That will be fully franked, the final dividend. It represents a 15.8% increase on prior year. It will be paid on the 14th of September. And in terms of payout ratio, that payout ratio for the full year dividend -- total dividend runs at 52% against a policy of between 50% and 60%. Given the strength of the balance sheet, the Board have again decided for the final dividend -- to suspend the dividend reinvestment plan. And just echoing the comment that Darryl made in terms of the capital raise. On the last bullet point you'll see at the bottom of that chart, our shares on issue now sits at 339 million shares, following the 54 million increase in shares on the rights issue in April-May 2021. So look, from a financial perspective, just outstanding results across the organization. Now I'll hand back to Darryl.

Great. Thanks, Noel. And now I'm on Page 22 of the presentation. So Bapcor's strategy is continuing to grow the business, and we don't stop growing and developing. We're always looking for new and achievable targets. So through our team members' safety -- sorry, our team members, safety and our customers is always at the core of what we do. Safety is the #1 thing, and we will continue to focus on safety, and I'll cover that in a little bit. So the 4 core areas that we use to drive our business is through the expansion of the network footprint, through the growth of our own brands and realizing the benefits of the initiatives that we do such as the supply chain, the new DC, the technology, et cetera. And we continue to invest in and develop our people, the core 4 areas that we do. And there's more details on each of these in the strategy documents that we've circulated previously. If you then turn to Page 23. It does show graphically our 5-year targets. And we've got very clear targets that we've got over the next 5 years, and a lot of them revolve around the size of our network and our own brands. So we're looking for a 36% growth over 5 years in our network, which is a substantial amount. But in addition to that, we're also developing our e-commerce systems, as you saw, so that we'll have a combination so that -- that will drive out performance of our business. We want to supplement the market-leading brands with Bapcor's own brands. We've launched a number of own brands in the last year. We've done a lot of facelift and packaging improvements, especially through Specialist Wholesale, and there's a big focus on that area as well. And we will continue to drive own brands because they drive improved profitability and improved margin. In the supply chain, this is one of the core areas for Bapcor, we're investing in the supply chain initiatives because they will continue to drive profitability and will provide a significant competitive advantage. So we're -- our focus is to complete the transition into the Victorian DC, as I mentioned earlier. It does deliver significant environmental benefits. And we will also, and I'll come on to this on the next page, develop a Queensland consolidated distribution center. We'll continue to focus on procurement where we can leverage our DC opportunities or capabilities. We can leverage bringing product indirectly from overseas and get costs out of the supply chain. On transport. Because of the way we're consolidating, we will have a much more efficient transport fleet and also, we will be able to drive significant costs out of there. Inventory management. Noel's made some points on why our inventory has gone up significantly over the last 12 months. No apologies for that, and in fact, we expect that over the next year or 6 months to a year, it may not go down significantly. It all depends on when the global supply chain actually gets back into balance and is reliable. One of the worst things that we can have and others in this industry have experienced in the last 12 months is not have the inventory because you couldn't get it, which means you couldn't sell it. So we don't want to be in that position. Otherwise, you'll see it affect our revenue and our profit. So we're managing inventory very closely, and we're leveraging things through centralized inventory management and optimizing across our group. So as we complete our transition of our Melbourne state-of-the-art DC, we're also announcing that the Bapcor Board has approved the investment in developing a Brisbane state-of-the-art DC, and that's on Page 25. So -- and the Queensland DC will deliver new capabilities and drive efficiencies and will also lead us to have better market share, and that will provide Bapcor with the most modern and efficient supply chain in this industry. We will be in a position to be able to do things that others can't, and we will obviously aim to capitalize on that. The DC will be a similar DC using the same technologies as we've got in Melbourne. So we're using the synergies of the programs they've had here. So we're learning off the learnings in Victoria. We've got an experienced project team that will deliver the project because the 2 DCs will be of similar capabilities. It will enable us to use flexibility and consistency, allow more inbound freight to come direct from overseas, not having to go through secondary warehouses, come straight in, and it will allow the growth in particularly our truck parts business because the DC will be capable of handling that product. So we're looking at a 44,000-square-meter DC in Brisbane, slightly smaller than Melbourne, but not a lot. It will have a smaller Goods to Person system because of the -- Brisbane is the home of our truck parts business, and those don't go through Goods to Person. So total project investment we're looking at is about $34 million. When you're taking the working capital reductions we will [incur], we’d get about $29 million, and we expect to achieve annual benefits between $4 million and $6 million. So that's a good return in project in the second year of operation. But more importantly, the things that we don't put into the assessments is what's it going to do for us on market share, what are we going to be able to drive. There's markets that we don't currently touch such as mining, such as government, such as defense. That by having all their products in -- at these individual 2 DCs where they'll pretty much replicate each other, we can supply markets that we just couldn't do previously because trying to pull things together from 13 or so DCs with different systems, different front ends and back ends just wasn't able to achieve. We will be able to achieve it through the new supply chain we're setting up. The other core area for us is that we're very committed to accelerating our efforts in ESG, and we do aspire to be net carbon neutral. We're undergoing this year a process of measuring our base footprint so we then can develop a plan to move forward on the various initiatives. So in the areas of positively impacting our community, we're not really good at publicizing a lot of this, but you will see in the annual report, when it's published, the amount -- there'll be a sample of the work our local businesses do in their local community. We're all about 1,100 locations is for those locations to be supporting their local communities, and that's exactly what they do. You'll see that all around the country. So we're aiming to continue that, but we will highlight it and actually do a much better job at making what we're doing available to people. Environment sustainability. Well, we're streamlining our waste and recycling activities. We're continuing our reforestation program, et cetera. And one of the core other areas is on the governance in supporting and developing our people. So as I mentioned earlier, we've introduced pandemic leave. We will shortly be announcing an incentive for people to be vaccinated, and it will be a positive incentive, not anything else. And we've also got extensive menu of training and development programs for our people, and we'll continue to develop those. So in short, Bapcor continues to implement a clear, focused strategy that has and will continue to enhance shareholder value while supporting our team members and being a good citizen. So now I have to go to the most important page, I think, which is the trading update. I thought about skipping this page, but there seems to be a lot of interest in it, so here we go. Despite the COVID lockdowns, our business continues to perform well. It'd be fair to say that in July, we were below last year, and that would be expected because of the sheer amount of lockdowns. However, the positive is we were still more than 30% above July 2019. So the business still continues to perform well despite the lockdowns. The fundamentals of our industry and the vehicle aftermarket remains strong. The number of cars on the road continues to grow. The travelers continue to seek social distancing, and the lockdowns of COVID is doing nothing to change that. And more people are spending their holidays domestically utilizing their vehicles. Not that they have a lot of choice about that because you can't go anywhere other than domestically. So -- and we're continuing to see that occurring. And our service part of our business continues to deliver continuing good growth and showing that there are cars on the road, and people are using them. The other significant thing that we're doing is growing our network, and we continue to grow it. We continue to improve our capabilities and et cetera. We continue to operate at, as I said, a higher level of inventory until the global supply chain actually improves dramatically. We've -- as we've seen this week, lockdowns in Australia and New Zealand and anywhere else in the world and future government restrictions are having an impact on trading, and who knows what that's going to be going forward? However, having said all that, Bapcor aims to deliver, in 2022, pro forma earnings at least at the level of 2021. And -- however, if there are major lockdowns and other government restrictions, it's hard to predict. But taking everything into balance, we do believe and we're aiming to deliver pro forma earnings at least at the level of FY '21, and we will update everybody at the AGM as to how we're progressing. So with that, I'll say thanks to everybody for listening. And I got to pass across to the operator to handle the questions and answers.

[Operator Instructions] Your first question comes from Anna Guan from Goldman Sachs.

My first one, let's go to the most important slide deck -- slide page, on trading update. Can you just give some color in terms of the moving parts behind your assumptions there for said earnings going to FY '23, please?

Well, it's one, Anna, that is a tricky one. We would expect to see continued growth and development in most of our segments. Retail, we probably -- if we can achieve a similar earnings level as last year, then we'd be satisfied with that because that certainly is the one that's benefited from some of the stimulus that was there in the early parts of last year. So retail, we'd be happy to see where it is or where it was last year. The other parts of the business, everyone would expect to continue to see at least last year's levels, if not slight improvements.

Yes. Okay. That's helpful. And then on trade, just looking at the exit run rate out of Q4. It looks like it's accelerated a little bit in the June quarter, and that's despite you guys are cycling some pretty strong comps. Is that a fair comment?

I think the maths would tell you that, yes.

Yes. Okay. Cool. And then just on the margins in second half '21, that came down a little bit. So is there any color you guys can give on that front?

Look, in the second half of '21, margins, it did come down in most of our segments. And we sort of expected that because we were able to do, some degree, small amounts of travel and other things, and we did a bit more training, but that came to a screeching halt. And there's also -- we are seeing pricing -- significant price increases now slightly come through from suppliers, and that has been happening over the last few months. And some of that's around to deal with freight costs because, as everyone would be aware, the ocean freight costs have gone up like threefold. So some of that's been coming through. Some, we will pass it through over time, but some we just know that we were just absorbing and letting it go through. But it's also a product mix issue as well. So...

Yes. Okay. That's helpful. Last question from me. Noel, can you give us some guidance around CapEx, D&A and corporate costs going to FY '23, please?

Certainly, Anna. Look, in terms of CapEx, the best way to sort of look at CapEx, if you look at sort of network expansion and sustaining CapEx, obviously, predicated on the number of stores we roll out. So we're very disciplined in terms of getting the right store rollout and the right rentals. But if you look at those 2 for next year, it's probably in the order of $70 million plus on those 2. If we do lots more stores, it will go up a little bit more. Major growth. We've got a little bit to spend just to complete the Melbourne DC, but that's in the sort of single digits. And then we'll have a little bit of a spend that will come through on the early start of the Queensland DC. So again, if you look at that major growth CapEx, you're probably talking $7 million, $10 million all up, depending on how that sort of goes. In terms of depreciation, amortization. A number of the projects that we've brought online were in the second half of the year, so you'll have the full year sort of impact and, obviously, new footprint with more leases. And so if I sort of look at total depreciation was just under $79 million in FY '21. An assumption for FY '22 would be in the order of $95 million to $100 million all up with everything in there. And then corporate costs running at about $24 million this year in FY '21, similar to the year before. A couple of things that are in corporate cost this year. Obviously, Darryl mentioned the decision to reward all team members with Visa cards across the organization. So that's sort of in the raw corporate cost number for FY '22 in the absence of a couple of things like unrealized profit and stock and any corporate initiatives is about $20 million. Now if we do some other things, you can swap that in there, but you should not see a major increase in that line.

Your next question comes from Jo Little from Morgans.

Just further on Anna's comments, just where you are actually in lockdown. Have you had a -- well, obviously, there's New South Wales majority-wise, but have you had a similar experience in the national lockdowns where you are kind of down some kind of 30% kind of across the board?

Yes. Jo, with -- what we're seeing is sort of down in the Retail probably close to that 30%, maybe not quite as much as that, because our click-and-collect and the initiatives they're doing are holding it up. Trade is roughly down 20% to 30% as well. So we're sort of seeing those sorts of levels across the board, especially with New South Wales and Victoria or Melbourne, even Melbourne, in lockdown. Now the unfortunate bit is that that's what we're seeing there. With New Zealand now going into a lockdown because their 1 case over there, who knows what's going to happen there? But yes, that's -- in Australia, that's a reasonable assumption.

Yes. That's helpful. And just in terms of like-for-likes early into FY '22, excluding the lockdown, and you can probably use WA and Queensland as the proxy. But just in Retail and Trade, for instance, I imagine Retail is down, obviously, given the comp you're cycling, but just any color around those 2?

Probably on the Retail, you're right, we're down. And that would be expected because July last year was beginning Christmas, and that's just exceptional. So that'll be down. But they're not so far out from what our target was for this year. In some of the other states that are still in -- that weren't in lockdown in the Trade, et cetera, they're comping okay. They're not big comps. And then certainly, we don't expect the comps this year to be anywhere near what they were last year because, as I said, we're now comping over, but will we expect them to be sort of single-digit, low single digits or mid -- somewhere around there? Yes, and that's sort of the levels that we are seeing.

Yes. That would be a great outcome.

I'm just cautious with that in that it's just so hard to get a fix on it with it being jerked around all the time with lockdowns and everything else. So like Western Australia isn't probably representative for us, and Queensland is actually tracking up -- is at those sorts of levels. But we're not seeing them go dramatically backwards would be the right way to put it.

Yes. Perfect. And just again on that question around the guidance for '22. So at least in line, which probably assumes you're forecasting it a modest kind of growth. Can you just kind of break out, Darryl, how you think about top line versus like comps versus footprint versus margin and then modest DC benefits kind of coming through? months, there was 2 provisions that

That's probably a little bit more detail than I can give you at the moment. But I'd rather come back on that one, Jo, if we can.

No worries. So in terms of the footprint growth, I mean it kind of implied that 36% or whatever you said, kind of 7% per annum. Is that more back weighted with some of your other operations? We wouldn't get that this year or...

No, no, no. It's -- footprint growth is pretty -- I would -- overall, I'd say it's pretty much evenly weighted because like this year, as I mentioned, Retail, we've already got at least 12 stores coming through. Trade's got quite a number, and the truck side of business also got a number. So I'd be using the average out of the strategic plan as being what we would expect to achieve this year.

Yes. Okay. That's great. And just lastly, I'll hand over to someone else, just always on the acquisition pipeline. How is that looking domestically? Is there anything chunky? Or should we expect more modestly accretive deals from here?

Yes. Well, I think what we will see over the next 12 months is probably more likely to be investment in our -- in the things that we're doing like some of the technology areas, the DCs, that sort of thing because there is investment. There's no -- and again, acquisitions, they come up so suddenly and can happen suddenly that I would say that we haven't got a huge pipeline at this point, but that can change overnight sort of thing, as you know, Jo. So -- but there's nothing that I would say is imminent simply because everyone is locked down, and so it's bloody hard to do anything. So...

Your next question comes from Sam Teeger from Citi.

Given the well-documented supply chain challenges that Bapcor and, I guess, the whole industry is facing right now, but just keen to try and get some comments from you around Bapcor's relative ability to source, procure and ship sufficient levels of private label stock to Australia with some of the national brands, which, at this point in time, might be a bit larger than you.

Yes. No, we haven't had any real issues with that, Sam, and we don't probably expect this at this point. But it's -- a lot of our, call it, our product line has been and the products that we've been developing has been fairly heavily preordered. It's things like -- and if I use the example, generators, if we get the sort of demand that we had there that just nobody would have ever have dreamt of, it was probably almost like a fantastic thing for it to be sold out, but then you've got to replace it. So it is impacted by sheer availability. And we have got a lot of stuff at the moment that's coming out of areas like in China, where 15 sort of areas are shut down. So we've got containers sitting on the wharf now over there. They just can't get shipped. So it's -- whilst we try and plan ahead and we're planning around it, it's just so unpredictable. And that's part of the reason why we're quite comfortable to have an elevated level of inventory for a period of time until we can get over those problems. The amount of challenges in the supply chain just can't be underestimated in that -- the types of issues that are happening in China, where a chunk of our home brand is coming from, but also out of Taiwan and also out of South Korea. So it is a challenge simply because of the unreliability of shipping, the unreliability of being able to get it manufactured. There's very few areas where I'd use the description that we can't get product because there's others in the queue ahead of us, so to speak. There's been a little bit of that in some areas like batteries and those sorts of things and some car care products out of the U.S., but beyond that, no.

All right. Cool. And in terms of that, I think it was roughly a $4 million provision for credit losses on trade receivables you took up in the last financial year, FY '20. Seems that you've released roughly $800,000 this financial year. Just can you provide an update in terms of how many potential of releasing that in the current half for FY '21?