Uni-Select Inc. reports a strong ‘start to the year’ in its financial results for the first quarter ended March 31, 2021, though U.S. headwinds kept sales performance below Q1 2020.

“We had a strong start to the year, as our adjusted EBITDA(1) and related margin were up a robust 68% and 350 basis points, respectively, essentially driven by the sustainable benefits provided by our continuous improvement initiatives in all of our businesses despite being up against a comparable quarter that was marginally impacted by the early stages of the pandemic. As expected, our sales were down 9% year-over-year, essentially attributable to the slower recovery in our refinish business in the U.S.,” stated Brent Windom, President and Chief Executive Officer of Uni-Select Inc.

“In the first quarter, we typically invest in our working capital. This investment was partly mitigated by the active management of our working capital and capital deployment. Given our improved profitability and proactive cash management, we ended the quarter with a total net debt to adjusted EBITDA ratio(1) of 3.8x, from 4.2x in the fourth quarter of 2020, as well as available liquidity of $267 million.

“Looking forward, with the visibility we have today, we expect our 2021 consolidated results to progressively improve over 2020. We also anticipate ramping up capital investments to pre-COVID levels and end the year with a level of total net debt similar to 2020. We are confident in the sustainability of the improvements realized in our business. We are continuing to focus on our sales initiatives and the next phase of our continuous improvements, to further build shareholder value,” concluded Mr. Windom.

Uni-Select Inc. 2021 First Quarter Highlights
• EBITDA(1) of $24.8 million; adjusted EBITDA(1) of $28.2 million or 7.6% of sales, up $11.4 million or 350 basis points versus the first quarter of 2020, reflecting sustainable efficiency gains realized over the last twelve months;
• Positive free cash flows(1) of $27.4 million generated, up 100.0% from the first quarter in 2020;
• Minimized working capital impact through the cash collection activities and active inventory management. Net debt (1) level similar to December 2020;
• Consolidated sales of $370.1 million, down 9.2% year-over-year, impacted by consecutive waves of the COVID-19 pandemic; negative consolidated organic growth(1) of 10.2%; and
• EPS of $0.01; adjusted EPS(1) of $0.09, up from ($0.10) last year.
Unless otherwise indicated all amounts are expressed in thousands of US dollars, except per share amounts and percentages.

FIRST QUARTER RESULTS

Consolidated sales of $370.1 million for the quarter decreased by 9.2% compared to the same quarter in 2020, mainly impacted by the COVID-19 pandemic (“COVID-19”).

The Corporation is reporting negative consolidated organic growth of 10.2%, predominantly from a slower recovery in the U.S. paint business affecting the FinishMaster U.S. segment and, to a lesser extent, The Parts Alliance U.K. segment. Furthermore, consolidated sales were adversely affected by less billing days in all segments representing 2.2%.

These unfavourable variances were partially compensated by the performance of the Canadian segment, which is steadily closing the gap to pre-COVID level, and favourable fluctuations of the British and the Canadian currencies. Overall organic growth reported for the first quarter reflects a similar pattern than what was observed during the second semester of 2020 and mirrors the industry in each segment’s respective market.

The Corporation generated an EBITDA of $24.8 million for the quarter, which was impacted by special items for restructuring and other charges related to the Continuous Improvement Plan (“CIP”) of $1.7 million, as well as other charges of $1.7 million for severance and retention bonuses.

Once adjusted, the EBITDA and the EBITDA margin increased by $11.4 million and 350 basis points respectively to $28.2 million and 7.6%, from $16.8 million and 4.1% in 2020. This performance was largely driven by benefits derived from improvement plans, optimizing the workforce and the network, which, combined with cost-control measures put in place to face the pandemic, represents approximately 340 basis points.

In addition, this performance is the result of improved gross margins in the Canadian Automotive Group and The Parts Alliance U.K. segments, and a partial reversal of the bad debt provision due to improved collection.

The same quarter last year was affected by foreign exchange losses in relation to the depreciation of the Canadian dollar and the British pound, as well as a one-time charge, together representing approximately $4.5 million or 110 basis points. These elements were partially offset by a lower absorption of fixed costs, a direct effect of the decrease in volume of sales, representing circa 270 basis points.

Net earnings of $0.2 million are reported for the current quarter compared to a net loss of $6.7 million in 2020. Adjusted earnings for the current quarter increased by 186.7% to $3.7 million from an adjusted loss of $4.3 million in 2020, essentially driven by improved operational performance and profitability, reaping the rewards of the CIP and initiatives put in place.

Segmented First Quarter Results

The FinishMaster U.S. segment is reporting sales of $158.2 million, a decrease of 21.7% or 18.6% organically from the corresponding quarter, mainly from the effect of COVID-19. Organic growth for this quarter has slightly improved compared to the third and fourth quarter last year (respectively negative 21.1% and 21.3%). As well, the automotive refinish sector, being somewhat more discretionary, is not expected to recover at the same pace as the automotive parts business.

This segment is reporting an EBITDA of $9.7 million for the quarter. Once adjusted for special items, EBITDA is $10.1 million or 6.4% of sales, compared to $12.1 million or 6.0% of sales in 2020, an improvement of 40 basis points. The current quarter results are benefitting from improvement plans and associated savings as a result of a reduced workforce and the integration of company-operated stores over the last twelve months, the reduction of discretionary expenses and a partial reversal of the bad debt provision. During the same quarter in 2020, this segment was affected by a one-time charge. These elements were partially offset by a lesser fixed cost absorption in relation to the lower volume of sales.

The Canadian Automotive Group segment reported sales of $115.2 million, an increase of 5.7% compared to the corresponding quarter of 2020, driven by the appreciation of the Canadian dollar that is partially compensated by an unfavourable difference in the number of billing days.

The performance of the distribution centres, selling to independent customers, offset the lower volume of sales to installers by the network of stores, more sensitive to the side effects of the lockdowns, which resulted in an organic growth of 0.3%. This segment is reporting an EBITDA of $11.7 million for the quarter. Once adjusted for special items, EBITDA is $11.8 million or 10.2% of sales, compared to $2.7 million or 2.5% of sales in 2020, an improvement of 770 basis points, benefitting from the workforce alignment as part of the CIP, an improved gross margin from additional vendor rebates, in part due to a different timing, a reduction of discretionary expenses, such as travelling, as well as a partial reversal of bad debt provision.

Furthermore, the first quarter of 2020 was affected by large foreign exchange losses, as opposed to minor gains in 2021, representing a variance of about 230 basis points. Despite the context of COVID-19, this segment succeeded, for a third consecutive quarter, in maintaining a level of organic sales and improving adjusted EBITDA, in dollar and percentage of sales, relatively to the respective comparable quarter.

The Parts Alliance U.K. segment is reporting sales of $96.8 million, for a slight increase of 0.2% compared to the same quarter in 2020, benefitting from a strong British pound against the US dollar during the current quarter of 2021, offsetting the negative organic growth of 4.5%, the unfavourable variance in the number of billing days, as well as the expected erosion resulting from the integration of company-operated stores within the last twelve months. Organic growth of this segment is showing signs of improvement, despite the effects of the government-imposed lockdown associated with COVID-19.

The current quarter organic growth, even if negative, represents the best performance of the last four quarters. This segment is reporting an EBITDA and an adjusted EBITDA of $9.9 million or 10.2% of sales for the quarter, compared to $4.7 million or 4.8% of sales in 2020.

The adjusted EBITDA margin increased by 540 basis points compared to the same quarter in 2020, driven by savings in relation to the CIP, mostly from the rightsizing of the workforce, as well as by an improved gross margin from price increases. The current quarter also benefitted from governmental occupancy subsidies amounting to $0.4 million.

These benefits were, in part, offset by a reduction of the fixed costs absorption due to the lower level of sales. This segment generated, for a third consecutive quarter, improved adjusted EBITDA and adjusted EBT related to the respective comparable quarter, both in dollar and percentage of sales.

CONFERENCE CALL

Uni-Select hosted a conference call to discuss its first-quarter results for 2021 on May 13, 2021, at 8:00 AM Eastern. To join the conference, dial 1 888 390-0549 (or 1 416 764-8682 for international calls).

A recording of the conference call will be available from 11:30 AM Eastern on May 13, 2021, until 11:59 PM Eastern on June 13, 2021. To access the replay, dial 1 888 390-0541 followed by 443325#.

A live webcast of the quarterly results conference call will also be accessible through the “Investors” section of the website at uniselect.com where a replay will also be archived. Listeners should allow ample time to access the webcast and supporting slides.