Uni-Select Inc. reported solid results for the first quarter ended March 31, 2014. EBITDA and net earnings improved sharply compared to the same period last year notwithstanding a slight decrease in overall sales. The corporation generated 1.7% organic growth.
"I am pleased to report strong consistent profitability growth since the implementation of our Action Plan last summer. During the quarter, our team efficiently executed operational improvements, which, in turn, generated positive sales despite unfavorable weather conditions that prevailed across many U.S. regions. Its unparalleled commitment accounts for our success. It translated into positive outcomes for our customers, suppliers and shareholders," said Richard G. Roy, President and Chief Executive Officer of Uni-Select.
"In the coming months, we will continue to focus on organic sales growth while seeking profitability and efficiency gains through the implementation of the final stages of our Action Plan. We shall follow our operational plan, which should lead to reduced inventory and lower operating costs and reduced debt. We intend to remain the partner of choice for independent wholesalers and to continue to strengthen our leadership position in the automotive aftermarket product distribution," added Roy.
First quarter results
(All percentage increases and decreases represent year-over-year changes for the first quarter of 2014 compared to the first quarter of 2013, unless otherwise noted.)
Uni-Select recorded a decrease in sales of 2.1% to $413 million in the first quarter of 2014, resulting from projected store closures under the Action Plan, a weak Canadian dollar, and temporary closures caused by severe winter conditions in many U.S. regions. In the first quarter, organic sales grew by 1.7%. Sales of the U.S. operations reached $311 million, up 1.0% organically. Canadian operations delivered $102 million in sales in the same period, organically up 3.8%. The overall positive organic growth comes from the success of the various sales initiatives and the recruitment of new customers, supported by improved service levels stemming from now fully implemented ERP system.
The corporation’s adjusted EBITDA margin increased by 22.0% to reach 5.0% compared to 4.1% last year. This solid increase is mainly attributable to savings realized under the Action Plan, including the closure of non-profitable distribution locations and headcount reductions. Organic growth and tighter expense controls also contributed to the increase. In the first quarter, these recurring savings totaled $5.6 million resulting in cumulative savings of approximately $18.6 million, despite higher utility costs due to the colder temperatures experienced across North America. The combination of cost savings and organic growth resulted in an increase of 117% in free cash flow, from $6.3 million to $13.7 million.
As scheduled under the corporation’s Action Plan, one corporate store and two warehouses were closed while one regional distribution center was opened over the course of the first quarter. Inventory has been reduced by $9 million in the first quarter, for a cumulative reduction of $13.2 million since the implementation of the Action Plan. The corporation said it remains confident that its total inventory reduction objective of $40 million will be reached by 2015 as previously announced.
The Uni-Select Board of Directors approved an increase of 15.4% in the corporation's dividend and declared a dividend of C$0.15 per share payable on July 22, 2014 to shareholders of record on June 30, 2014.
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