Repco on the right track for investors

By Duncan Bridgeman

Friday 20th February 2004

After a somewhat disappointing share float, auto parts retailer Repco Corporation is back in favour with investors following an improved interim profit.

The December half net profit of $A12.4 million ($13.9 million) revved the shares up above $3.10 as the company confirmed it was on track to meet its prospective forecasts.

Repco, which listed on the NZX and ASX in November last year, recorded sales growth of 4.3% for the six months to December 2003. Earnings before interest and tax rose 14.2% to $A27.8 million. The shares had traded between $2.70 and $3.16 since listing.

The company forecast a 2004 net profit of $A26.4 million on revenue of $A786. That would give it about 14% of the auto parts and accessory market or two-and-a-half times the size of the next biggest competitor in either country, according to management estimates.

The company planned to open 44 new stores this year, including 11 in New Zealand, as it rolled out a dual trade and retail store format.

Another 66 stores were planned for next year, including 16 here, managing director Peter Mummery said.

Shortly after Repco listed, rival operator Super Cheap Auto set up seven new stores in New Zealand as part of a transtasman expansion that could see 25 stores here.

Mr Mummery saw no long-term effect from the competition, which Repco was familiar with in Australia.

While the stronger dollar on both sides of the Tasman had brought some currency gains in the first half, the benefits were not overly significant.

"Typically in this market you get about a six-month window of opportunity before the market starts to discount the advantages back into the pricing," Mr Mummery said.

The company's "step ahead" programme, launched in December last year, was producing favourable results, he said.

"Initial sales of the new items have been encouraging and we expect solid growth in overall trade sales in the second half of the year."

By the end of the year an additional $16 million investment in inventory would be allocated for the Step Ahead retail range, which was designed to cater for increasing vehicle diversity in both countries.

Net debt at the end of December was $138.7 million, up from $148.5 million at the same date last year and $130.4 million at June 30.

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