It’s been a rollercoaster day for holders of second-hand vehicle seller BCA Marketplace (LSE: BCA) so far. Despite releasing a more-than-decent set of full-year results, shares fell well over 3% in early trading only to recover strongly.
With takeover talk still fresh in the minds of holders, where next for the mid-cap’s share price?
Record performance
Thanks to a combination of strong organic growth and the full-year impact of acquisitions, revenue rose just under 20% from £2.03bn to £2.43m in the 12 months to the end of April — more than the £2.3bn analysts were expecting.
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BCA achieved “increased volumes across all divisions” over the reporting period, including a 6.5% rise in the UK where the company shifted more than one million vehicles. International Vehicle Remarketing sales rose 4.3% to 362,000 and WeBuyAnyCar delivered its sixth consecutive year of double-digit volume with 219,000 sales (up 12.9%). All this helped the company achieve a 17.6% rise (to £159.5m) in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) and reduce net debt by 26.4% to £191.6m.
Having already rejected a £1.6bn bid (equivalent to 200p per share), today’s record results have clearly come at the right time for BCA and will help to justify the company seeking an improved offer from private equity firm Apax. Whether this materialises before the 8 July deadline, however, is questionable.
The fact that BCA has managed to turn things around following concerns over falling demand for new and used vehicles in the UK (causing the shares to sink to as low as 150p back in March) could mean that Apax no longer sees value in the deal. Should this be the case, a spate of profit-taking might kick in as traders see limited upside. Given BCA’s already punchy valuation before today, there’s some logic in that.
It’s a hard one to call. Since it would be against the Foolish philosophy of buying great companies and holding for years rather than days, I certainly wouldn’t recommend picking up the stock as a short-term punt.
Another bid target
Of course, BCA isn’t the only company attracting attention right now. That said, the situation at serviced office provider IWG (LSE: IWG) feels more complicated.
Yesterday’s update on trading wasn’t well received by the market with shares falling almost 3% as the company announced that operating profit would be between £15m-£20m lower than that previously forecast.
In addition to stating that its UK business wasn’t performing as well as expected, IWG revealed that plans to grow its network to satisfy increasing demand would now cost in the region of £30m more than the £200m originally forecast thanks to management’s desire to increase the number of locations from 230 to 275.
With four prospective buyers (Terra Firma, TDR Capital, Starwood Capital and Prime Opportunities) eyeing up the company, the timing of this news wasn’t great. While having multiple suitors will give some reassurance to those already holding stock in the £3bn cap, the fall in profit guidance might lead it to be sold for less than previously hoped.
Clearly, a lot depends on just how patient a buyer is willing to be in order to reap the “good returns” IWG’s management think are possible following the planned investment. With world markets looking increasingly jittery over recent weeks, however, a deal may not look as appealing as it once did.
