Uni-Select Reports 3rd Quarter 2018 Financial Results

Uni-Select Reports 3rd Quarter 2018 Financial Results

Uni-Select announced the expansion of its 20/20 initiative to at least $25 million of recurring cost savings by 2020. This could include a workforce reduction of less than 5 percent across all business segments, the company said.

Uni-Select has reported its financial results for the third quarter ended Sept. 30, 2018.

Consolidated sales for the third quarter were $448.8 million, a 13.4 percent increase compared to the same quarter last year, driven by the sales generated from business acquisitions of $47.8 million or 12.1 percent, essentially from The Parts Alliance UK segment. All three segments reported positive organic growth for the quarter, producing a consolidated organic growth of 3.4 percent.

Uni-Select generated an EBITDA and EBITDA margin of $29.7 million and 6.6 percent, respectively, compared to $32.2 million and 8.1 percent in 2017. Adjusted EBITDA was $34.9 million (7.8 percent of sales) for the quarter, compared to $33.9 million (8.6 percent of sales) in 2017, an increase of 3 percent. The adjusted EBITDA margin decreased by 80 basis points due to competitive pressure in the FinishMaster US segment, while in 2017, the Canadian Automotive Group segment benefited from a product line changeover incentive. These impacts were partially compensated by a superior absorption of fixed costs as a result of higher sales volume.

Net earnings and adjusted earnings were respectively $10.6 million and $15.5 million, compared to $11.2 million and $15.9 million in 2017. Adjusted earnings decreased by 2 percent compared to the same quarter last year, due to additional finance costs as well as higher depreciation and amortization, entirely related to business acquisitions and investments in capital. These elements were partially compensated by the contribution of The Parts Alliance UK segment and the reduction of the income tax rate for the U.S. operations.

“Our third quarter results demonstrated our focus on execution with improved organic sales growth in all our business units, higher adjusted EBITDA and strong cash flow generation. During the quarter, we deleveraged our balance sheet, bringing our funded debt to adjusted EBITDA ratio to 3.1x and we amended and extended our credit facility to increase flexibility,” said André Courville, interim president and CEO of Uni-Select.

“On Sept. 18, we announced the formation of a Special Committee of independent members of the board of directors to oversee a review of strategic alternatives. Since then, the Special Committee and the Board of Directors have had multiple meetings with its advisors and management to identify, review, analyze and evaluate a comprehensive range of alternatives with the goal of maximizing value for our shareholders.”

“We continued to execute on our 20/20 cost savings initiative launched a year ago to generate annual recurring savings of $20 million by 2020. To date, we have realized $12 million in annualized savings or 60 percent of the target. In the spirit of continuous improvement and to further drive efficiency, we have identified an additional $5 million in cost savings, bringing the total recurring savings to at least $25 million by 2020. To achieve the remaining $13 million in cost savings, we will need to incur restructuring and other charges estimated at between $9 and $11 million.”

“In conclusion, we have the management team and strategy in place to drive the business forward. We will continue to open greenfields and actively pursue select acquisitions, all in an effort to drive our operations to generate continued growth and increased profitability with the aim of maximizing shareholder value. All of this would not be possible without the ongoing support of all stakeholders, including our employees and shareholders,” concluded Courville.

Expanded 20/20 Initiative (25/20 Plan)

On Nov. 14, in the spirit of continuous improvement and to further drive efficiency, Uni-Select announced the expansion of its 20/20 cost savings initiative by at least $5 million. The new plan, now referred to as the 25/20 Plan, builds on the 20/20 initiative and expects to generate at least $25 million of recurring cost savings, on an annualized basis, by 2020. At the end of the third quarter of 2018, $12 million in annualized cost savings were realized under the initial initiative.

The 25/20 Plan includes certain cost-reduction measures across the three operational segments. It will focus on various optimization initiatives, such as the closure or integration of a dozen locations, supply chain optimization as well as workforce reduction. The slight workforce reduction of less than 5 percent of total employees will be spread across all business segments and will be related to site integration and optimization actions. These initiatives are expected to benefit margins in the Canadian Automotive Group as well as The Parts Alliance and support margins at FinishMaster. To achieve the remaining $13 million in recurring cost savings, we will need to incur total restructuring and other charges comprised mainly of cash costs of between $9 and $11 million. These restructuring and other charges will be recognized in the fourth quarter of 2018 and in the following six quarters.

Segmented Results

The FinishMaster US segment is reporting positive organic growth for a second consecutive quarter with sales of $214.2 million, up 3.7 percent from the same quarter in 2017, entirely from organic growth. The company said this performance is attributable to the efforts from the sales team on driving growth by developing business volume and onboarding new accounts.

Sales for the Canadian Automotive Group segment were $131.1 million, compared to $133.6 million in 2017, a decrease of 1.9 percent, reflecting the impact of a weaker Canadian dollar against the U.S. dollar and the number of billing days, partially compensated by business acquisitions and organic growth of 0.5 percent.

The Parts Alliance UK segment recorded sales of $103.5 million, an increase of 85.8 percent, benefiting from a full quarter of sales in 2018 and an organic growth of 9.4 percent. The organic growth was driven by the recent opening of greenfields, expanding the footprint in the UK and providing a superior service for national accounts.

Nine-Month Period Results

Consolidated sales for the nine-month period were $1,332.5 million, a 29 percent increase compared to the same period last year, driven by the sales generated from business acquisitions of $284.8 million or 27.5 percent, mainly from The Parts Alliance UK segment. Consolidated organic growth was 1.2 percent, all three segments reporting positive organic growth for the nine-month period, a direct result of sales initiatives, opportunities generated by future price increases and opening of greenfields.

Outlook

Uni-Select expects consolidated organic sales growth 0.8 to 2.6 percent, with organic sales growth for FinishMaster US 0.5 to 2 percent; Canadian Automotive Group of 0 to 1.5 percent; and for The Parts Alliance UK, 6 to 8 percent.

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