Uni-Select Inc. has reported its financial results for the third quarter ended Sept. 30, 2019.
“Our third quarter results were in line with our expectations despite continued macro-economic and refinish industry challenges in some key markets,” said Brent Windom, president and CEO, Uni‑Select Inc. and president and chief operating officer, Canadian Automotive Group. “Since becoming CEO of Uni-Select, we’ve taken concrete steps to navigate through these headwinds, stabilizing the business where required and strategically investing in our business, optimizing our network, opening greenfield company-owned stores in the U.K. and accelerating our Performance Improvement Plan (“PIP”), which is now expected to generate over $50 million in savings by the end of next year.”
“FinishMaster’s profitability gradually improved on a sequential basis despite a soft market environment and increasing competition in certain markets; in the U.K., while our business faces the prolonged uncertainty surrounding Brexit, the cost saving initiatives recently put in place started to impact the third quarter and will materialize in a more meaningful way starting in the fourth quarter; and for its part, the Canadian Automotive Group continued its growth momentum and increased profitability,” concluded Windom.
Third Quarter Results
Consolidated sales of $450.8 million for the third quarter, when compared to the same quarter last year, were affected by a foreign currency conversion impact amounting to $6.8 million or 1.5%. Consolidated organic loss for the quarter was $1.9 million or 0.4%. The Canadian Automotive Group segment generated organic growth of 1.3%, while The Parts Alliance U.K. and the FinishMaster U.S. segments faced headwinds, reporting negative organic growth of 2.6% and 0.5%, respectively.
Uni-Select generated adjusted EBT and adjusted EBT margin of $14.3 million and 3.2%, respectively, compared to $20.9 million and 4.7% in 2018. This variance is mainly attributable to the contraction of the gross margin as a result of an evolving customer mix in the FinishMaster U.S. segment and a reduced volume of sales in The Parts Alliance U.K. segment. As well, recent opening of greenfields and higher borrowing costs impacted the adjusted EBT margin. However, overall savings realized from the PIP coupled with higher volume rebates from the Canadian Automotive Group segment partially compensated for these elements.
Moreover, the company says benefits from the PIP started to materialize during the summer, as expected, which improved the quarterly adjusted EBT margin by 20 basis points when compared to the second quarter and 150 basis points when compared to the first quarter.
Net earnings and adjusted earnings were respectively $24.6 million and $10.7 million, compared to $10.6 million and $15.5 million in 2018. Adjusted earnings decreased by $4.8 million compared to the same quarter last year, mainly due to a lower adjusted EBT.
Nine-Month Period Results
Consolidated sales were $1,327 million for the nine-month period, representing an increase of 1.9% on a constant currency basis, when compared to the same period last year. Consolidated organic growth for the nine-month period was $14.2 million or 1.1%. The Canadian Automotive Group and the FinishMaster U.S. segments generated organic growth of 3.9% and 1.1% respectively, while The Parts Alliance U.K. segment reported a negative organic growth of 2.3%.
The corporation generated adjusted EBT and adjusted EBT margin of $35.3 million and 2.7%, respectively, compared to $57.3 million and 4.3% in 2018. This variance is mainly attributable to the compression of the gross margin, affected by pricing pressure and evolving customer mix in the FinishMaster U.S. segment as well as reduced volume of sales in The Parts Alliance U.K. segment.
Furthermore, the adjusted EBT margin was affected by the opening of greenfields and higher borrowing costs. These elements were partially compensated by overall savings realized from the PIP, higher volume rebates from the Canadian Automotive Group segment, as well as reduced incentive plans charge due to the overall performance and the share price.
Net earnings and adjusted earnings were respectively $29.6 million and $26.2 million, compared to $38.9 million and $46.0 million in 2018. Adjusted earnings decreased by $19.8 million compared to the same period last year, mainly due to a lower adjusted EBT.