Uni-Select Inc. has reported its financial results for the fourth quarter and the year ended Dec. 31, 2018.
Uni-Select is reporting 2018 sales of $1.752 billion compared to 2017 sales of $1.45 billion driven by the full-year contribution of The Parts Alliance U.K. segment and the strength of organic growth in all three business segments. The corporation reported adjusted 2018 EBITDA of $119.5 million compared to adjusted 2017 EBITDA of $117.5 million, an increase of 1.7 percent.
Fourth quarter adjusted EBITDA was $21.4 million, down 23.4 percent from $28 million in the fourth quarter 2017. Adjusted earnings per share for the 2018 year amounted to $1.22 versus adjusted earnings per share of $1.32 in 2017.
“Uni-Select’s board of directors and management are aligned with shareholders in the common goal of enhancing long-term value. Over the past year, we have pursued and delivered on several parallel initiatives aimed at improving operating and financial performance of the corporation, such as our 25/20 Plan, which has provided favorable results. We intend to build on this success,” said André Courville, interim president and CEO of Uni-Select. “While 2018 was a year in which we faced challenges, we generated higher sales and adjusted EBITDA, primarily related to The Parts Alliance acquisition and cost savings from our 25/20 Plan. Our adjusted EBITDA margins nevertheless remained under pressure in the U.S. at FinishMaster.”
Michelle Cormier, chair of the board of directors, added that in light of changing market conditions, the board of directors, in collaboration with management, also initiated an in-depth review of the company’s U.S. operations along with the development of a broad performance improvement and rightsizing plan.
FinishMaster US Segment Performance Improvement and Rightsizing Plan
In January, Uni-Select’s board and management initiated the development of a broad performance improvement plan for its U.S. operations with the objective of realigning FinishMaster US to address changing market conditions, including ongoing consolidation by national accounts and pricing pressures. This plan, which is expected to generate additional annualized savings of $10 million by the end of 2019, focuses on the following four streams:
- Consolidation of company-owned stores;
- Margin recovery; and
- Spending reductions.
The development and implementation of the plan is being led by Rob Molenaar, who has significant industry-specific and restructuring expertise including deep knowledge of the automotive refinish space with more than 25 years of experience at one of the largest global paint manufacturers. He has been a member of the Uni-Select board of directors since 2017. Chris Adams, president and chief operating officer of FinishMaster US, will continue to focus on sales and marketing as well as day-to-day operations of the FinishMaster US segment, reporting to the Interim CEO. Molenaar also reports to the Interim CEO and to the board of directors.
Uni-Select said the 25/20 Plan and the FinishMaster US Segment Performance Improvement and Rightsizing Plan combined together, will now be referred to as the “Performance Improvement Plan,” with targeted annualized savings of $35 million.
Initiated President and CEO Search
As the corporation progresses in the strategic alternatives review, the Uni-Select board also initiated a search for a new President and CEO of Uni-Select and mandated the firm Egon Zehnder International Inc. to lead the search. The search is being performed in parallel with the strategic alternatives review and all scenarios relative to that process remain under consideration. During this period, André Courville will continue to act as interim president and CEO.
Fourth Quarter Results
Consolidated sales for the fourth quarter were $419.5 million, a 1.1 percent increase compared to the same quarter last year, driven by organic sales of 2.3 percent, generated mainly by the FinishMaster US segment and The Parts Alliance UK segment. The organic growth was partially offset by the foreign exchange rate conversion for the Canadian Automotive Group and The Parts Alliance UK segments and by timing in the Canadian Automotive Group segment related to many installers and jobbers being closed two additional days during the holiday season.
The corporation generated EBITDA and EBITDA margin of $12.8 million and 3 percent, respectively, compared to $25.9 million and 6.2 percent in 2017 and were impacted by special items of $8.6 million, including restructuring and other charges. Adjusted EBITDA was $21.4 million (5.1 percent of sales) for the quarter, compared to $28 million (6.7 percent of sales) in 2017, a decrease of $6.6 million. The adjusted EBITDA margin decreased by 160 basis points mainly due to pricing pressure and evolving customer mix in the FinishMaster US segment.
The net earnings (loss) and adjusted earnings were respectively $(2.4) million and $5.4 million, compared to $8.7 million and $11.6 million in 2017. Adjusted earnings decreased by $6.2 million compared to the same quarter last year, due to the lower adjusted EBITDA mentioned above, additional finance costs as well as higher depreciation and amortization, related to investments in capital.
12 Month Results
Consolidated sales for the 12-month period were $1.752 billion, a 21 percent increase compared to the same period last year, driven by sales generated from business acquisitions of $287 million or 19.8 percent, mainly from The Parts Alliance UK segment. Consolidated organic growth was 1.5 percent, reflecting the impact of sales’ initiatives and company-owned stores openings.
The corporation generated EBITDA and EBITDA margin of $104.9 million and 6 percent, respectively, compared to $110.8 million and 7.6 percent last year. Adjusted EBITDA was $119.5 million (6.8 percent of sales) for the period, compared to $117.5 million (8.1 percent of sales) in 2017. The adjusted EBITDA margin decreased by 130 basis points, primarily due to pricing pressure and evolving customer mix impacting the gross margin in the FinishMaster US segment as well as the integration efforts undertaken to optimize the network of company-owned stores in the Canadian Automotive Group segment. These impacts were partially compensated for by savings resulting from the 25/20 Plan and improved cost absorption at The Parts Alliance UK segment benefiting from a full twelve-month period of operations.
Net earnings and adjusted earnings were respectively $36.5 million and $51.5 million, compared to $44.6 million and $55.1 million last year. Adjusted earnings decreased by 6.6 percent compared to the same period last year and resulted mainly from additional financial costs associated with a higher average level of debt and by additional depreciation and amortization, mostly related to business acquisitions and investments in capital. These elements were partially offset by lower income tax, mainly related to the lower statutory rates in the U.S.
For 2019, on a consolidated basis, Uni-Select said it anticipates revenues to increase modestly and profitability to decrease, mainly due to the FinishMaster US segment. More specifically, the overall results from the Canadian Automotive Group segment are expected to be more favorable when compared to last year, considering the planned integration of some company-owned stores and distribution centers as well as the contribution of the 18 company-owned stores from the acquisition in November 2018 of Autochoice Parts and Paints Limited. For The Parts Alliance UK segment, while the company expects results for 2019 to improve over 2018, as it pursues its strategy to open greenfield company-owned stores and develop the U.K. market, the next few months are expected to be somewhat more volatile as a result of the uncertainty surrounding Brexit. As for the FinishMaster US segment, 2019 is expected to remain a challenging year since the benefits related to the performance improvement plan should start to materialize in the latter part of the year. Uni-Select said its guidance for 2019 takes these factors and uncertainties into consideration.