On Thursday 30th August, four members of the Singer Capital Markets team visited BCA at its Bedford branch. Bedford’s capacity was expanded 4 months ago by >40%, with a new HQ building and vehicle processing facilities built across the road from the original remarketing centre. This added capacity for another 1,300 cars (vs 3,000 previously) and Bedford’s gross transactional value could now increase to over £1bn p.a. For reference, the group auctioned over 1 million vehicles last year.
Thursday is a major sale day, so the site was heaving. Despite having only just been expanded to become the group’s 2nd largest site, the complex was absolutely packed to capacity highlighting the strength of BCA’s supply dynamics (broadening vendor base and services) and buyer interest (vehicle mix and buyer services) being channelled straight away into extra volume.
The whole process was extremely impressive and unbelievably slick and fast-moving, with 1,100 cars up for auction in the space of one day having been received, checked, processed, imaged and then listed. With all that high value data on each car, auctions took as little as 20-30 secs each to complete via a combination of in-hall and online buyers. Online buyers are growing rapidly in the mix.
The used car market is 3x the size of the new market and structural drivers (e.g. PCP contracts) means the share of the market being transacted via auction is growing; trade press suggest market growth over 5% YTD. Alongside significant enhancement to its end-to-end services for volume sellers BCA is winning new contracts (like BMW) and gaining share in this growing market. In fact, BCA could drive volume growth well above forecast levels for some time including a strategic mix shift from lower into higher quality and margin volume.
BCA are already advanced with their digital/online capabilities and doing high volumes through online auctions. We had a demo of the innovative new Buyer App which was impressive, with a real-time live feed of the auction hall, allowing customers to participate in live auctions whilst being in different auction halls, somewhere else on site, or just in their dealership. This ongoing strategic development poses a real threat to smaller competitors which are progressively losing contracts.
WLTP came into force on 1st September and will trigger higher volume through auctions. There may be a lag of some defleet activity in its Automotive Service division though, from H1 to H2.
Growth dynamics are also very exciting in its less talked about European operations and there is no reason why Europe couldn’t be a larger business than the UK in the future (currently only 18% of EBITDA). The building blocks are now in place (namely its One Europe buyer platform) and growth looks set to accelerate.
Market cap: £1.75bn
Share price: 220p
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