Uni-Select Inc. reported its financial results for the first quarter ended March 31, 2018.
“Overall our first quarter results were in line with our expectations when considering the seasonality of our business. For the quarter, revenues increased by 42.0% and EBITDA by 16.5% when compared to last year fuelled by the UK acquisition,” said Henry Buckley, President and Chief Executive Officer of Uni-Select. “The Parts Alliance continued its strategy of network expansion by opening four greenfields and generated an EBITDA margin of 8.7% in a seasonally strong quarter, as expected. The Canadian business demonstrated robust organic growth of 5.9% and generated an EBITDA margin in line with last year, representative of its seasonally softest quarter of the year. Finally, FinishMaster continued to face some headwinds as it rebuilds sales momentum, with early signs of success as a result of winning new business volume.
“Looking forward, considering first quarter results, our business outlook in the U.K. and in Canada and the progressive improvement expected at FinishMaster throughout 2018, we are confident to achieve our consolidated guidance for the year,” concluded Buckley.
FIRST QUARTER RESULTS
Consolidated sales for the first quarter were $422.1 million, a 42.0% increase compared to the same quarter last year, driven by the sales generated from recent business acquisitions, adding sales of $121.6 million or 40.9%, of which The Parts Alliance UK segment represents $110.0 million or 37.0%. The Canadian Automotive Group segment delivered a solid organic growth of 5.9% offsetting the performance of the FinishMaster US segment, which is reporting negative organic growth of 2.8%.
Uni-Select generated an EBITDA and EBITDA margin of $27.0 million and 6.4%, respectively. Once adjusted for net transaction charges related to The Parts Alliance acquisition, EBITDA was $27.6 million (6.5% of sales) for the quarter, compared to $23.2 million (7.8% of sales) in 2017, an increase of 19.2%. The adjusted EBITDA margin decreased by 130 basis points and was affected by a revenue mix impact and lower special buys in the FinishMaster US segment as well as by integration efforts to optimize the growing network of company-owned stores in the Canadian Automotive Group segment.
These impacts were partially compensated by savings resulting from the 20/20 initiative as well as by an improved cost absorption at the Parts Alliance UK segment benefiting from its peak season. Net earnings and adjusted earnings were respectively $10.4 million and $12.1 million. Adjusted earnings increased by 10.2% compared to the same quarter last year and mainly resulted from the Parts Alliance UK segment’s contribution and the reduction of the Corporation income tax rate for its US operations. These elements were partially offset by additional finance costs as well as depreciation and amortization, all related to recent business acquisitions and investments in capital.
The FinishMaster US segment recorded sales of $201.4 million, up 0.8% from the same quarter in 2017, supported by recent business acquisitions representing a growth of $7.3 million or 3.6% and compensating the negative organic growth. However, starting in the second quarter, the FinishMaster US segment will benefit from winning new business volume. This is expected to progressively offset the impact of the first quarter by the end of the third quarter. EBITDA for this segment was $19.9 million, compared to $23.3 million in 2017. The EBITDA margin decrease of 180 basis points is the result of lower special buys in the current quarter and an evolving customer mix as a result of recent business acquisitions that have more MSOs and for which discounts are more significant. These elements were partially compensated by savings arising from the 20/20 initiative, with the integration of 3 stores and the alignment of employee benefits and operating expenses to its evolving cost-to-serve model.
Sales for the Canadian Automotive Group segment were $110.7 million, compared to $97.5 million in 2017, an increase of approximately 13.5%, the result of a solid organic growth of 5.9% stemming from sales to independent customers as well as from sales through its growing network of company-owned stores, the impact of the Canadian dollar on its conversion to US dollar and recent business acquisitions. The EBITDA margin of the current quarter was slightly below last year, mainly due to the internalization of the servers, which was a favorable one-time saving in 2017 compared to the current quarter, as well as integration efforts to optimize its growing network of company-owned stores, which included severance. These elements were partially counterbalanced by higher volume rebates, improving the gross margin of the current quarter compared to the corresponding quarter last year.
The Parts Alliance UK segment recorded sales of $110.0 million and EBITDA of $9.6 million (8.7% of sales). The peak season of this segment, which typically covers the first and the second quarters, is enabling the leverage of its cost base. Further supported by cost actions taken during the last quarter of 2017, the result was an EBITDA margin of 8.7% for the current quarter, in contrast to the 4.0% recorded in the fourth quarter of 2017. As part of its growth strategy, this segment opened 6 greenfields since the beginning of the year.
On May 3, 2018, the Uni-Select Board of Directors declared a quarterly dividend of C$0.0925 per share payable on July 17, 2018 to shareholders of record as at June 30, 2018. This dividend is an eligible dividend for income tax purposes.
The information included within this section contains guidance for Uni-Select in 2018:
- Uni-Select Consolidated adjusted EBITDA margin 7.2% – 8.2%
- Consolidated organic sales growth 2.25% – 4.0%
- Consolidated effective tax rate 22.0% – 24.0%
Segment Organic Sales Growth
- FinishMaster US 2.0% – 4.0%
- Canadian Automotive Group 2.5% – 4.0%
- The Parts Alliance UK 3.0% – 4.0%
The above-mentioned information is related to the 2018 financial year and may differ from quarter to quarter due to seasonality. Other As well, Uni-Select anticipates investments between $26.0 million and $29.0 million on vehicle fleet, hardware equipment, software and others.