BCA remained largely unaffected by the disruption in new car markets experienced during the period as a result of the introduction of the new Worldwide Harmonised Light Vehicle Test Procedure (WLTP) emission testing regime, which affected new car supply across Europe. The group increased revenues by 22%, adjusted EBITDA by 13%, adjusted PBT by 17% and fully diluted adjusted EPS by 19% in H119. The interim dividend was raised by 15% to 3.0p per share. The improvement was delivered by strong performances across the vehicle remarketing activities in the UK and across Europe, as well as continued double-digit growth of We Buy Any Car (WBAC) vehicle buying. The WLTP disruption primarily affected the Automotive Services division where activities such as storage, pre-delivery inspections, transportation and refurbishment suffered from lower vehicle supply levels. We feel the growth in volumes and EBITDA per vehicle validates the belief that BCA’s model is resilient to short-term car market volatility and may in fact benefit from it.

The rest of FY19 may prove to be less volatile as the WLTP supply-side impacts should diminish and Brexit looms at the year end. At present we feel it is prudent to assume the strength of the H119 performance is likely to prove hard to maintain, but we expect volume trends to continue to be positive in both vehicle remarketing and buying activities. We anticipate good progress to be maintained in FY20 despite Brexit. While we maintain our adjusted EBITDA estimates, PBT and EPS rise 1.4% in FY19e and FY20e due to lower depreciation.

Our DCF valuation returns 251p, which compares to 237p at the time of our initiation note. The current FY20 P/E multiple is 15.7x, a c.20% discount to its remarketing peer group average, and the shares also offer an attractive dividend yield in excess of 4%.