Uni-Select Inc. reported its financial results for the fourth quarter ended Dec. 31, 2016.
“We are pleased with our sales and earnings growth in the quarter. In Canada, we returned to positive organic growth with the Prairies strengthening. Total sales of FinishMaster US were up 17.7%; excluding the impact of the product line changeover, organic sales would have been approximately 4.1%." said Henry Buckley, President and Chief Executive Officer of Uni-Select. “We continue to make great progress building the business at FinishMaster US, and expanding our coverage of the market. In Canada, we are investing in the future, building the Bumper to Bumper® brand, for both independent customers and corporates stores, as well as expanding the newly launched Finishmaster® brand nationally. We continue to be highly committed to building our business for the long term through balanced profitable growth and the expansion of both networks.”
Fourth quarter results
Consolidated sales for the fourth quarter were $291.0 million, a 12.3% increase, mainly driven by the sales generated from recent business acquisitions, for the most part in the US, representing an increase of 15.3%. On an organic basis, consolidated sales decreased by 1.1%, mainly due to the product line changeover in the Paint and Related Products (US) segment, and partially compensated by the performance of the Western provinces in the Automotive Products (Canada) segment, which regained some strength. Excluding the impact of the product line changeover, consolidated organic growth would have been approximately 2.8%.
The corporation generated an EBITDA of $24.6 million for the fourth quarter of 2016, compared to $24.0 million last year. The adjusted EBITDA margin grew to 8.7%, up 100 bps compared to 2015. EBITDA margin enhancement was driven by a combination of optimized buying conditions as well as reduced bonus and other incentive plans following the rightsizing of the corporate office. These factors were partially offset by negative synergies following the sale of net assets, higher professional fees notably for the acquisitions and integration-related costs, and ongoing investments related to the corporate stores initiatives.
Net earnings were $12.7 million compared to $13.9 million last year. Once adjusted for non-recurring items, earnings were 18.3% better than last year and reached $13.1 million and adjusted earnings per share grew by 19.2% from $0.26 in 2015 to $0.31.
Cash flow from operating activities generated an additional $72.2 million in the fourth quarter of 2016 compared to 2015, mainly from additional vendor financing activities and increased operating income.
Segmented results
The Paint and Related Products (US) segment recorded sales of $180.8 million, up 17.7% from 2015, strengthened by the recent business acquisitions. The negative organic growth of 2.5% is mainly due to the implementation of a product line changeover. Excluding this impact, organic growth would have been approximately 4.1%. The segment EBITDA margin and adjusted EBITDA margin were 12.0%, up 130 bps from last year’s adjusted EBITDA margin. The improvement is a direct result from the optimized buying conditions, partially offset by an evolving revenue mix, acquisition and integration related costs as well as lower cost absorption due to the negative organic growth.
Sales for the Automotive Products (in Canada for 2016) segment were up 4.3% to $110.2 million, from $105.7 million in 2015, mainly driven by recent business acquisitions. Organic sales increased by 1.0% driven by the Western provinces and partially offset by a reduced volume from existing customers in relation to softer economic conditions in the rest of Canada. The EBITDA and adjusted EBITDA for this segment amounted to $5.5 million in the fourth quarter, compared respectively to $13.0 million and $7.1 million last year. The adjusted EBITDA margin decreased to 5.0% from 6.7% in 2015, attributable to a different revenue mix, ongoing investments required in relation to the corporate store initiative, including the BUMPER TO BUMPER branding, and integration costs, net of synergies, pertaining to recent business acquisitions.
Twelve-month period results
Consolidated sales for the twelve-month period were $1,197.3 million, a 11.7% decrease, mainly due to the sale of the net assets in 2015. Consolidated sales grew 13.4% compared to last year, once sales of net assets sold are excluded. Sales generated from recent business acquisitions representing $157.9 million or 15.0% exceeded the impact of the Canadian dollar on its conversion to US dollar, which penalized sales by $14.2 million or 1.4%. On an organic basis, consolidated sales grew by 0.2%, supported by existing customer growth and net customer recruitment in the Paint and Related Products (US) segment, which was partially offset by the product line changeover and the softness of the economic conditions in the Automotive Products (Canada) segment.
The corporation generated an EBITDA of $106.8 million for the twelve-month period of 2016, compared to a negative EBITDA of $53.3 million last year affected by impairment and transaction charges related to the sale of net assets. The adjusted EBITDA margin grew to 9.0%, up 190 bps when compared to 2015. That enhancement was driven by the sale of net assets bearing a lower margin compared to the remaining operations, optimized buying conditions, reduced bonus and other incentives plans in relation to the rightsizing of the corporate office, as well as accretive business acquisitions. These factors were partially offset by negative synergies following the sale of net assets, ongoing investments related to the corporate stores initiatives as well as acquisitions and integration related costs.
Net earnings were $58.3 million compared to a net loss of $40.2 million last year which was affected by impairment and transaction charges related to the sale of net assets. Adjusted earnings amounted to $58.6 million, up 3.2% from last year, while adjusted earnings per share increased by 3.8% from $1.33 in 2015 to $1.38 as the benefits from recent business acquisitions compensated for the impact of the sale of net assets.
Cash flow from operating activities increased by $117.7 million compared to 2015, due to the benefit of additional vendor financing activities, lower investment in inventory, income tax refunds and higher operating income.
Segmented results
The Paint and Related Products (US) segment recorded sales of $752.9 million, up 21.7% from 2015, strengthened by the recent business acquisitions. The organic growth of 1.1% is a direct result from the sales team efforts, which counteract the impact of the product line changeover. Excluding this impact, organic growth would have been approximately 3.8%. EBITDA and adjusted EBITDA for this segment amounted to $93.4 million for the twelve-month period compared, respectively, to $70.0 million and $70.4 million last year. The segment adjusted EBITDA margin reached 12.4%, up 100 bps from last year. This performance is notably attributable to optimized buying conditions and the contribution from recent accretive business acquisitions.
Sales for the Automotive Products segment were $444.5 million, compared to $736.6 million in the prior year. Sales increased by 1.6% compared to 2015, once sales of the net assets sold are excluded. Sales from recent business acquisitions exceeded the effect of the Canadian dollar which had a negative impact, on its conversion to US dollar, of $14.2 million on sales or 3.2%. Organic sales in Canada decreased by 1.1% in the twelve-month period due to a reduced volume from existing customers in relation to the softer economic conditions, delivery delays on some products and reduction in benefits from price increases compared to 2015. EBITDA and adjusted EBITDA were $26.6 million compared, respectively, to ($103.9 million) and $36.9 million in 2015. The adjusted EBITDA margin reached 6.0%, up 100 bps from 5.0% in 2015, an increase attributable to the weaker performance from the operations sold on June 1, 2015. The increase is partially offset by reduced fixed-cost absorption resulting from the negative organic growth, ongoing investments required in relation to the corporate store initiative, reduction in benefits from price increases compared to 2015 as well as acquisition and integration costs pertaining to recent business acquisitions.
On Feb. 8, 2017, the Uni-Select Board of Directors declared a dividend of C$0.085 per share payable on April 18, 2017 to shareholders of record on March 31, 2017.
Subscribe to Aftermarket Business World and receive articles like this every month….absolutely free. Click here.
