Uni-Select Inc. (TSX:UNS) reported its financial results for the second quarter ended June 30, 2017, highlighting improved performance for its Canadian business.
“We are very pleased with the improved performance in our Canadian business on both sales and EBITDA. We are seeing strong performance from our Independent customers as well as our Bumper to Bumper and FinishMaster corporate stores in all regions. Commercial customers represent more than 90% of our business, and our growth initiatives are positively impacting our performance. FinishMaster USA is highly focused on growth for all customer segments to overcome the product line changeover headwinds. Our industrial product and customer initiative is showing strong early signs of success.” said Henry Buckley, president and chief executive officer of Uni-Select.
Buckley added that the closing of The Parts Alliance acquisition, which will add a U.K.footprint for Uni-Select is an added positive. “We are excited to welcome all the new team members and customers of The Parts Alliance business in the UK. This will be a substantial new runway for profitable growth at Uni-Select.”
Second Quarter Results
Consolidated sales for the second quarter were $340.3 million, a 5.1% increase compared to the same quarter last year, driven by the sales generated mainly from recent US business acquisitions, adding sales of $33.7 million or 10.4% as well as by the organic growth of 6.2% in the Canadian Automotive Group.
The consolidated organic sales of -2.8% were affected, as expected, by the product line changeover in the FinishMaster US segment. Without this impact, the consolidated organic growth would have been approximately 2.1%.
The Corporation generated an EBITDA and EBITDA margin of respectively $29.5 million and 8.7%. Once adjusted for net charges related to The Parts Alliance acquisition, adjusted EBITDA was $32.5 million or 9.5% of sales for the quarter, compared to $29.7 million or 9.2% of sales in 2016. The EBITDA margin increase of 0.3% is the result of optimized buying conditions, lower stock-based compensation in 2017 as 2016 expenses were impacted by a share price appreciation as well as by a reduction in commissions and bonuses to align with the level of sales.
These factors were partially offset by a lower absorption of employee benefits and fixed costs in relation to the organic growth and by a different revenue mix. Net earnings and adjusted earnings were respectively $13.7 million and $16.6 million. Adjusted earnings decreased by 1.0% compared to the same quarter last year, and were impacted by additional amortization on customer relationships and finance costs related to recent business acquisitions.
As at June 30, 2017, the total net debt stood at $189.3 million, representing a decrease of $9.7 million compared to March 31, 2017. Funded debt to adjusted EBITDA ratio (1) improved to 1.69 from 1.82 as at March 31, 2017, a result of the net debt decrease and a growing adjusted EBITDA.
Segmented Results FinishMaster US recorded sales of $209.5 million, up 6.6% from the same quarter in 2016, strengthened by the recent business acquisitions representing a growth of $29.8 million or 15.2%. The product line changeover impacted sales by approximately 8.0%. EBITDA for this segment was $24.0 million, compared to $24.3 million last year. EBITDA margin decreased by 0.9% and is resulting from lower absorption of fixed costs related to the organic growth.
FinishMaster US is progressing in the development and execution of the new industrial growth program. Organic growth initiatives are in place to focus on each customer segment. Expanding geographic coverage continues with the opening of two greenfield stores. Additionally, mergers and acquisitions’ synergy plans are being executed, and seven locations were consolidated during the quarter. Sales for the Canadian Automotive Group were $130.8 million, compared to $127.3 million in 2016, an increase of 2.8%, a direct result of the organic growth of 6.2% as well as the performance of the recent business acquisitions. The impact of the declining Canadian dollar on its conversion to US dollars penalized sales by 4.5%.
The distribution centres and both Bumper to Bumper and FinishMaster corporate stores reported a positive organic growth, a result of the concerted efforts and initiatives of the management and sales teams.
The EBITDA margin increase of 1.6% compared to 2016 is mainly related to improved gross margin and lower information technology expenses. These factors were compensated by a different revenue mix and ongoing investments required in relation to the corporate store initiative. Once the integration of the corporate stores and the implementation of the new point of sales systems will be completed, additional synergies and efficiency are expected.