BCA Regulatory News (BCA)

27 August 2015

BCA Marketplace plc

("BCA" or the "Group" or the "Company")

Trading Update

The Board of BCA is pleased to provide an update on the Group's trading for the financial period to date, which reflects the trading of the BCA Group of Companies (the "BCA Group") since completion of its acquisition by the Company on 2 April 2015. 

Following the acquisition the Group extended its accounting period to 31 March 2016 in order to include the post-acquisition trading of the BCA Group for a twelve month period. In November 2015 the Group will announce its interim report for the nine month period ending September 2015, which will include six months' trading of the BCA Group. 

Highlights

· Successful equity raise and acquisition of BCA Group completed

· £375 million term and revolving facility agreed

· Board strengthened by appointment of Non-Executive Directors

· Group Auction volume of 274,300 sold units, up 7.7% on the quarter April - June 2014

· Revenue of £243.4 million in the period, up 17.8% on the same quarter 2014

· Adjusted EBITDA1 of £23.0 million in the quarter, trading in line with expectations for the year

· Net Debt2 of £157.7m at the end of June

· Quarter 2 to date shows further enhanced volume trends tracking ahead of Quarter 1

1KPIs and financial information has been taken from the unaudited management accounts of the Group for the months of April, May and June 2015 and the corresponding comparative periods. Adjusted EBITDA at average exchange rates for the respective periods represents the continuing earnings before interest, tax, depreciation and amortisation, excludes acquisition and pre-acquisition costs and has not been adjusted for any acquisition accounting adjustments that may be required under IFRS 3R: "Business Combinations". Adjusted EBITDA also excludes the results of the SMA Group, which was acquired on 1 June 2015, in consideration of the CMA review.

2Net Debt as defined by the Group, which excludes Buyer Finance funding facility.

Chairman's Statement

Haversham Holdings plc, now renamed BCA Marketplace plc, was created during 2014 to acquire and manage companies in the UK and European automotive sector, including support services, leasing, engineering and manufacturing, where the Board believes there are opportunities for consolidation along with the potential to create value from operational efficiencies across the supply chain. 

On 2 April 2015, the Group completed the acquisition of the BCA Group, the market leader in the European vehicle remarketing sector. The acquisition was funded by an equity raise of £1,028.5 million and a term loan of £200 million and was accompanied by a move from the AIM market to the Standard segment of the Official List.

The BCA Group provides a pivotal liquidity service to the automotive market in the UK and across Europe. Its strong vendor and buyer relationships and integral market position offer the potential to increase not only trading volumes but also the penetration of direct, vehicle related value-added services and complementary services in the automotive sector. 

As part of the continuing development of the Board and governance structure it has been separately announced today that Stephen Gutteridge, Jon Kamaluddin and Piet Coelewij have been appointed as Non-Executive Directors of BCA. They will bring valued knowledge and experience to the Board as BCA progresses its strategy.

The experienced operational management within the BCA Group was already very strong and well-placed to deliver the pre-eminent service levels expected by our vendors and buyers. Opportunities and initiatives identified during the acquisition process and subsequently, such as development of buyer finance, building auction awareness in Europe and operational efficiencies are now being further developed and implemented. Combined with the strong core business, these initiatives will enable the Group to focus on its growth ambitions.

The financial structure of the Group has also been advanced during the period. BCA completed a capital reduction which removes any obstacle to dividend payments and also completed a successful syndication of the Group's financing facilities. The Group received strong lender support and was presented with the opportunity to increase its facilities from a term loan of £200 million and £100 million revolving facility by an additional £75 million term loan, funded at competitive interest rates, providing additional headroom for future projects. 

As part of the strategy to accelerate the growth of the Group's auction exchange and support services, the SMA Group of companies ("SMA") was acquired on 1 June 2015. SMA will help us to meet the increased demand that we are experiencing for core auction services. It serves to support our customers' capacity requirements, extends our geographical footprint in the UK and enhances our offering to vendors and buyers through a wider range of services and improved efficiencies. The acquisition is currently subject to a review by the Competition and Markets Authority ("CMA").

The trading performance of the Group in the three months following the acquisition of the BCA business has been positive, reflecting our expectations for volume growth at the time of the acquisition. Group Auction volumes increased to 274,300 units: a 7.7% improvement compared with the same quarter in 2014. Revenue for the same period increased by 17.8% to £243.4 million and adjusted EBITDA, increased to £23.0 million3. 

3KPIs and financial information has been taken from the unaudited management accounts of the Group for the months of April, May and June 2015 and the corresponding comparative periods. Revenue and EBITDA are stated at the average exchange rate for the respective periods. Adjusted EBITDA represents the continuing earnings before interest, tax, depreciation and amortisation, excludes acquisition and pre-acquisition costs and has not been adjusted for any acquisition accounting adjustments that may be required under IFRS 3R: "Business Combinations". Adjusted EBITDA also excludes the results of the SMA Group, which was acquired on 1 June 2015, in consideration of the CMA review. Segmental KPIs do not include central costs.

Outlook

Quarter 2 to date shows further enhanced volume trends tracking ahead of Quarter 1 and the Board is confident that the underlying business will continue to perform well. The Group continues to evaluate projects to promote growth, increase capacity and increase service offerings both organically and through potential acquisitions. 

On 25 August 2015, the Group completed the acquisition of Eddie Stobart's UK Automotive Logistics business. The acquired business operates approximately 450 vehicle transporters with strong, long-term relationships with the majority of the leading OEMs and vehicle leasing companies. The acquisition, funded from BCA's existing cash resources, will bring extensive logistics expertise, geographical coverage across the UK and the scale and capacity to significantly enhance the existing logistics services within the Group.

Finally, I would really like to thank all of our employees for their continuing commitment to deliver to the very highest standards of service and performance to our valued customers and their continuing loyalty to the BCA business.

Enquiries:

Square1 Consulting (PR advisers) +44 (0)20 7929 5599

David Bick, Mark Longson

Cenkos Securities plc (Financial adviser and joint broker) +44 (0)20 7397 8900

Ian Soanes, Liz Bowman

Zeus Capital Limited (joint broker) +44 (0)20 7533 7727

John Goold, Nick Cowles

Operating and Financial Review

Basis of preparation

The Group's trading update for the six month period from January 2015 to June 2015 incorporates the unaudited trading performance of the BCA Group for the quarter following the acquisition. The trading performance has been extracted from the Group's internal management information, and represents underlying trading, before finalisation of the IFRS 3R acquisition accounting entries. 

In line with the BCA acquisition prospectus, the trading performance is analysed by the Group's operating segments. 

The vehicle remarketing business is seasonal due to the biannual new car registrations in the UK, the summer holiday period in Europe, and the shutdown during the Christmas period, and therefore the quarter does not naturally extrapolate to the full year.

The trading update does not include the results of SMA, acquired on 1 June 2015, pending conclusion of the CMA review. SMA auction volume and EBITDA in June was in line with the prior year4. 

4SMA delivered EBITDA of £4.7 million in the year ended 31 October 2014.

Financial summary

* The acquisition of BCA represents the net impact on net debt of the acquisition and includes: the net cash settled in respect of shares (equity raise less cash settled acquisition of shares); the cash and debt acquired; and the cash outflow in respect of acquisition costs and expenses.

Vehicle Remarketing - UK (including buyer finance, logistics and remarketing services)

The Division's quarterly volume sold of 196,600 units represents a growth trend of 8.4% year on year. Live Online and electronic services continued to grow during the period, increasing the number of buyers in the market and driving higher conversion rates.

Increased EBITDA from the strong auction volumes, higher conversion rates and increased levels of buyer finance was partially offset by higher costs in the logistics business, due to the lack of bought-in capacity available. As highlighted at the time of the BCA Group acquisition, logistics will be a key area of focus for management to improve efficiency and build our owned capacity to support the Group's growth aspirations.

UK Remarketing EBITDA was £17.1 million, an EBITDA margin of 26.0%. This corresponds to EBITDA of £87 per vehicle in the quarter compared to £76 in the year to December 2014.

Vehicle Remarketing - International

Year on year volume growth supported by targeted growth initiatives saw a sold volume increase of 6.1% to 77,700 units, representing continued development in the majority of countries in which BCA operates.

As a consequence of improving Auction awareness, increased buyer demand against a supply-constrained market has allowed the division to increase conversion rates improving efficiency, and supporting an increase in the average selling prices.

International EBITDA was in line with management expectations, driven by increased volume, conversion rates and higher average selling prices, as well as increased efficiency gained from the higher conversions. International EBITDA was £4.4 million, an EBITDA margin of 18.3%.

EBITDA per unit in the quarter was £57 compared to £60 in the year to December 2014. Foreign exchange rates experienced a 10.5% adverse movement during this period, if measured at constant exchange rates the EBITDA per unit for the period would have been £63.

The International Remarketing division continues to be developed by the use of country-specific initiatives.

Vehicle Buying

WeBuyAnyCar.com ("WBAC") continues to develop in the market as the 3rd disposal channel, providing the consumer with an alternative to private sale or part exchange. The quick and convenient nature of the process enables the consumer to sell their vehicle more quickly and in turn speed up the process of buying their next new or used vehicle from a franchised or independent dealership. The process also brings incremental volume into the BCA marketplace from the consumer market and further supports dealers by increasing the range and variety of vehicles in the wholesale market.

The number of vehicles sold by WBAC UK in the period was 39,100, a year on year growth of 11.9% and EBITDA of £3.7 million, a margin of 2.4%.

The segment delivered an EBITDA of £3.2 million, a margin of 2.1%. This result includes the losses of the WBAC business in the Netherlands which has been discontinued.

WBAC continues to focus on the development of the 3rd disposal channel in the UK through offering the best value to customers. Strategically we have decided to cease operating the WBAC model in the Netherlands and Germany as alternative corporate car buying initiatives are being successfully piloted to enhance volumes, which in these very early stages are showing encouraging results.