AutoCanada Inc. reports second quarter 2017 results

Date : 08/10/2017 @ 5:00PM
Source : PR Newswire (Canada)
Stock : Autocanada (ACQ)
Quote : 23.1  0.05 (0.22%) @ 3:15PM
AutoCanada Inc. share price Chart

AutoCanada Inc. reports second quarter 2017 results

AutoCanada Inc. (TSX:ACQ)
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EDMONTON, Aug. 10, 2017 /CNW/ - AutoCanada Inc. (TSX: ACQ), one of Canada's largest, and only publicly traded, multi-location automobile dealership groups, today provided a corporate update and reported its financial results for the three-month and six-month periods ended June 30, 2017.

"Management has undertaken several significant steps over the last number of months toward achieving our strategic goals of broadening our brand portfolio and our geographic footprint," said Steven J. Landry, President & Chief Executive Officer. "We added Alfa Romeo to our brand profile April of this year. The acquisition of Mercedes-Benz Rive-Sud in Montreal not only adds the Mercedes-Benz and Smart brands, but also provides us with a facility in full compliance with brand image standards, adds 28 service bays and is one of only three authorized Mercedes-Benz collision centres in Quebec. We are very pleased with the early results from this store and will continue to pursue similar opportunities in other markets while our discussions continue to enhance our various OEM relationships. In short, we are very committed to organic year-over-year margin growth at our existing stores while generating incremental growth through smart accretive acquisitions. While we have set high performance dealership goals for ourselves, our Q2 operating profit performance is an example of having a strong focus on margin improvement."

Second Quarter Highlights

  • Revenue in the quarter was up 6.3% compared with the second quarter of 2016. Operating expenses as a percentage of gross profit declined to 78.5% compared with 80.1% over the same period last year.
  • Gross profit was $143.8 million in the second quarter, compared with $134.7 million in the same quarter of 2016, with gross profit as a percentage of revenue increasing slightly to 16.1% from 16.0%.
  • New vehicle unit sales were 13,429, up 11.0% from the same period in 2016. Revenue from new vehicle sales was $558.7 million in the quarter, up 12.4% from 2016. New vehicle sales accounted for 62.4% of the Company's total revenue and 26.8% of gross profit versus 59.0% of revenue and 25.5% of gross profit in the second quarter of 2016.
  • Used vehicle unit sales were 5,061, down 5.0% from the same quarter last year. Revenue from used vehicle sales was $182.9 million in the quarter, down 12.1% from last year. Used vehicle sales accounted for 20.4% of the Company's total revenue and 9.1% of gross profit, versus 24.6% of revenue and 10.2% of gross profit in 2016.
  • Parts, service and collision repair generated $114.0 million of revenue in the second quarter, up 13.6% from 2016. This accounted for 12.7% of the Company's total revenue and 39.1% of its gross profit, versus 11.9% of revenue and 39.3% of gross profit in 2016.
  • Finance and insurance generated $39.3 million of revenue in the second quarter, an improvement of 6.6% from 2016. This accounted for 4.5% of the Company's total revenue and 25.0% of its gross profit, reflecting similar numbers from 2016.
  • EBITDA attributable to AutoCanada shareholders was $43.7 million, up 61.4% from last year. Operating profit before other income was $30.9 million, up 15.5% from last year.
  • Adjusted earnings per share were $0.57. Including a one-time payment of $9.8 million, net of related expenses and tax, as part of a settlement with an OEM, earnings per share were $0.91 in 2017.
  • The Company renegotiated the terms of one of its credit facilities to match an existing facility and free-up $20.5 million of working capital.

"There were a number of encouraging signs for the Company this quarter," said Chris Burrows, Chief Financial Officer. "New vehicle sales were up as was revenue from parts, service and collision repair. We continue to focus on managing costs at both the store and corporate level, and that contributed to an improvement in operating profit. While the gains have been incremental to date, they speak to the success of our broader strategy of maintaining operational excellence, continuously managing costs, and capturing market share through accretive acquisitions."

The following table summarizes the Company's results for the quarter ended June 30, 2017:


Three months ended June 30

Consolidated Operational Data

2017

2016

% Change

EBITDA attributable to AutoCanada shareholders

43,683

27,072

61.4%

Adjusted EBITDA attributable to AutoCanada shareholders

30,748

29,095

5.7%

Net earnings attributable to AutoCanada shareholders

24,978

14,158

76.4%

Adjusted net earnings attributable to AutoCanada shareholders

15,547

15,523

0.2%

Basic EPS

0.91

0.53

71.7%

Adjusted diluted EPS

0.57

0.57

0.0%

New retail vehicles sold (units)

10,545

9,374

12.5%

New fleet vehicles sold (units)

2,884

2,724

5.9%

New vehicles sold (units)

13,429

12,098

11.0%

Used retail vehicles sold (units)

5,061

5,327

(5.0)%

Total vehicles sold (units)

18,490

17,425

6.1%

Revenue

894,902

842,257

6.3%

Gross Profit

143,823

134,702

6.8%

Gross Profit %

16.1%

16.0%

0.6%

Operating profit before other income

30,926

26,770

15.5%

Operating expenses

112,897

107,932

4.6%

Operating expenses as % of gross profit

78.5%

80.1%

(2.0)%

Free cash flow

10,982

37,922

(71.0)%

Adjusted free cash flow

36,277

21,632

67.7%

*See the Company's Management's Discussion and Analysis for the quarter ended June 30, 2017 for complete footnote disclosures.

 

Outlook

New vehicle sales are on track to set a record in Canada this year as the economy, business investment and historically low interest rates all contribute to the positive outlook. Sales exceeded one million units for the first time ever in the first half of the year and, despite the Bank of Canada raising its overnight rate in July, the contributing factors for January to June performance are expected to continue throughout the balance of the year, fueling a strong second half of sales.

While the macro climate bodes well for AutoCanada, the Company's new vehicle sales do not always mirror the national trends. This is in part owing to the current geographical over-weighting in western Canada (and particularly Alberta) and in part due to the brand mix not being a direct comparable to the brand mix in national sales. It is for both of these reasons that the Company continues to pursue its dual diversification strategy of broadening its geographical footprint while expanding the number of brands offered.

The Company also continues to look to enhance its used vehicle sales, its parts, service and collision repair business and its sales of financing and insurance products, each of which contributes to the total revenue and profitability of AutoCanada. The improvement in new vehicle sales often leads to improvements in each of these other parts of the Company's business.

We remain keenly focused on making further progress on integration, continuous improvements in efficiencies and deepening our IT and analytical capabilities across AutoCanada's network of dealerships and at the corporate office. Acquiring new dealerships and effectively integrating them is key to our long-term success. Same store results, reflecting the performance of dealerships that have been owned for at least two full years since acquisition or opening, is an important metric to assess how well we are doing at integration. Same store sales saw a slight uptick in the second quarter, with revenue up 0.1% and gross profit up 1.1%. Since the end of the second quarter last year, twenty stores have transitioned into our same store count, leaving only ten stores not yet part of the count. Only one new store will be added to the same-store category in each of the next two quarters, so while cost control will continue to be an important focus for the Company, integrating new stores is not expected to have as much of an impact on the Company's performance in the near term.    

Dealership relocations and expansions are important steps to provide long-term earnings sustainability and improvements in overall profitability for growing locations. Our capital expenditure on relocations and expansions in 2017 continue on track. By the end of the second quarter, we invested $10.3 million in dealership relocations and expansions of a planned $29.9 million investment this year. The Company has identified approximately $65.3 million in capital costs that it may incur in order to expand or renovate various current locations through to the end of 2021. Our five-year total capital plan is $124.7 million for contemplated future capital projects.

Dividends

Management reviews the Company's financial results on a monthly basis. The Board of Directors reviews the financial results periodically to determine whether a dividend shall be paid based on a number of factors with a goal to efficiently allocate capital to fuel AutoCanada's future growth while also rewarding and sharing the company's success with our shareholders.

On August 10, 2017, the Board declared a quarterly eligible dividend of $0.10 per common share on AutoCanada's outstanding Class A shares, payable on September 15, 2017 to shareholders of record at the close of business on August 31, 2017.

For purposes of the enhanced dividend tax credit rules contained in the Income Tax Act (Canada) (the "ITA") and any corresponding provincial and territorial tax legislation, all dividends paid by AutoCanada or any of its subsidiaries in 2010 and thereafter are designated as "eligible dividends" (as defined in 89(1) of the ITA), unless otherwise indicated. Please consult with your own tax advisor for advice with respect to the income tax consequences to you of AutoCanada Inc. designating dividends as "eligible dividends".

SELECTED QUARTERLY INFORMATION

The following table shows the unaudited results of the Company for each of the eight most recently completed quarters. The results of operations for these periods are not necessarily indicative of the results of operations to be expected in any given comparable period.

(in thousands of dollars, except Gross Profit %, Earnings per
share, and Operating Data)

Q2
2017

Q1

2017

Q4
2016

Q3
2016

Q2
2016

Q1
2016

Q4
2015

Q3
2015

Income Statement Data










New vehicles

558,682

353,540

348,107

444,482

497,025

363,181

368,242

471,018


Used vehicles

182,913

165,408

157,724

179,582

208,016

180,108

167,100

179,270


Parts, service and collision repair

113,983

90,735

92,310

95,585

100,317

94,721

102,220

93,139


Finance, insurance and other

39,324

29,344

31,133

33,529

36,899

28,862

34,752

37,778

Revenue

894,902

639,027

629,274

753,178

842,257

666,872

672,314

781,205


New vehicles

38,555

25,590

25,042

31,578

34,410

27,267

27,482

34,300


Used vehicles

13,095

11,940

10,064

12,950

13,758

10,420

10,326

10,949


Parts, service and collision repair

56,306

47,284

52,957

47,676

52,957

47,669

51,760

48,336


Finance, insurance and other

35,867

26,813

28,722

30,733

33,577

26,353

34,354

35,088

Gross profit

143,823

111,627

116,785

122,937

134,702

111,709

123,922

128,673

Gross Profit %

16.1%

17.5%

18.6%

16.3%

16.0%

16.8%

18.4%

16.5%

Operating expenses

112,897

98,170

97,397

99,041

107,932

96,047

101,310

100,824

Operating expenses as a % of gross profit

78.5%

87.9%

83.4%

80.6%

80.1%

86.0%

81.8%

78.4%

Net earnings (loss) attributable to AutoCanada shareholders

24,978

3,678

13,785

(32,619)

14,158

7,272

(7,361)

11,690

Adjusted net earnings attributable to AutoCanada shareholders

15,547

4,602

7,536

10,327

15,523

6,253

8,610

12,535

EBITDA attributable to AutoCanada shareholders

43,683

14,136

25,260

23,842

27,072

18,312

23,353

26,379

EBITDA attributable to AutoCanada shareholders as a % of Sales

4.8%

2.7%

4.5%

3.6%

3.7%

3.2%

3.5%

3.8%

Free cash flow

10,982

621

23,424

30,897

37,922

4,045

9,066

14,995

Adjusted free cash flow

36,277

15,217

13,133

27,766

21,632

6,035

8,078

18,951

Basic earnings per share

0.91

0.13

0.50

(1.19)

0.53

0.27

(0.29)

0.48

Diluted earnings per share

0.91

0.13

0.50

(1.19)

0.53

0.27

(0.29)

0.47

Basic adjusted earnings per share

0.57

0.17

0.28

0.38

0.57

0.23

0.34

0.51

Diluted adjusted earnings per share

0.57

0.17

0.27

0.38

0.57

0.23

0.34

0.51

Operating Data









Vehicles (new and used) sold

18,490

13,055

12,912

15,955

17,425

13,301

14,150

17,086

New vehicles sold

13,429

8,508

8,449

10,983

12,098

8,502

9,210

12,018

New retail vehicles sold

10,545

6,753

7,590

8,949

9,374

7,078

8,016

9,985

New fleet vehicles sold

2,884

1,755

859

2,034

2,724

1,424

1,194

2,033

Used retail vehicles sold

5,061

4,547

4,463

4,972

5,327

4,799

4,940

5,068

# of service and collision repair orders completed

228,872

197,069

217,418

209,912

227,446

209,194

230,772

202,692

Absorption rate

87%

82%

86%

89%

90%

83%

93%

91%

# of dealerships at period end

57

56

55

53

53

53

54

50

# of same stores dealerships

47

47

44

33

27

27

28

26

# of service bays at period end

977

949

928

898

898

898

912

862

Same stores revenue growth

0.1%

(7.1)%

(10.0)%

(9.2)%

(3.2)%

(3.1)%

(12.1)%

(6.9)%

Same stores gross profit growth

1.1%

(1.2)%

(5.8)%

(11.0)%

(5.3)%

(5.5)%

(14.3)%

(14.1)%

*See the Company's Management's Discussion and Analysis for the quarter ended June 30, 2017 for complete footnote disclosures.

 

The following tables summarizes the results for the quarter ended June 30, 2017 on a same store basis by revenue source and compares these results to the same period in 2016.

Same Store Revenue and Vehicles Sold



Three Months Ended June 30

(in thousands of dollars)

2017

2016

% Change

Revenue Source





New vehicles ‑ Retail

382,664

358,597

6.7%


New vehicles ‑ Fleet

98,308

93,749

4.9%

Total New vehicles

480,972

452,346

6.3%


Used vehicles ‑ Retail

105,351

122,548

(14.0)%


Used vehicles ‑ Wholesale

54,951

71,034

(22.6)%

Total Used vehicles

160,302

193,582

(17.2)%

Finance, insurance and other

34,764

33,689

3.2%

Subtotal

676,038

679,617

(0.5)%

Parts, service and collision repair

95,966

91,240

5.2%

Total

772,004

770,857

0.1%

New retail vehicles sold (units)

8,914

8,435

5.7%

New fleet vehicles sold (units)

2,618

2,559

2.3%

Used retail vehicles sold (units)

4,411

4,883

(9.7)%

Total

15,943

15,877

0.4%

Total vehicles retailed (units)

13,325

13,318

0.1%


 

Same Store Gross Profit and Profit Percentage



Three Months Ended June 30


Gross Profit

Gross Profit %

(in thousands of dollars)

2017

2016

% Change

2017

2016

Revenue Source






New vehicles ‑ Retail

31,758

29,794

6.6%

8.3%

8.3%

New vehicles ‑ Fleet

1,510

1,736

(13.0)%

1.5%

1.9%

Total New vehicles

33,268

31,530

5.5%

6.9%

7.0%

Used vehicles ‑ Retail

9,833

11,292

(12.9)%

9.3%

9.2%

Used vehicles ‑ Wholesale

1,996

1,190

67.7%

3.6%

1.7%

Total Used vehicles

11,829

12,482

(5.2)%

7.4%

6.4%

Finance, insurance and other

31,495

30,694

2.6%

90.6%

91.1%

Subtotal

76,592

74,706

2.5%

11.3%

11.0%

Parts, service and collision repair

47,886

48,382

(1.0)%

49.9%

53.0%

Total

124,478

123,088

1.1%

16.1%

16.0%

 

MD&A and Financial Statements

Information included in this press release is a summary of results. It should be read in conjunction with AutoCanada's consolidated financial statements and management's discussion and analysis for the quarter ended June 30, 2017, which can be found on the company's website at www.autocan.ca or on www.sedar.com.

Non-GAAP Measures

This press release contains certain financial measures that do not have any standardized meaning prescribed by Canadian GAAP.  Therefore, these financial measures may not be comparable to similar measures presented by other issuers.  Investors are cautioned these measures should not be construed as an alternative to net earnings (loss) or to cash provided by (used in) operating, investing, and financing activities determined in accordance with Canadian GAAP, as indicators of our performance.  We provide these measures to assist investors in determining our ability to generate earnings and cash provided by (used in) operating activities and to provide additional information on how these cash resources are used. The following "Non-GAAP Measures" are defined in the annual MD&A; EBITDA; Adjusted EBITDA; Adjusted Net Earnings and Adjusted Net Earnings per Share; EBIT; Free Cash Flow; Adjusted Free Cash Flow; Adjusted Average Capital Employed; Absorption Rate; Average Capital Employed; Return on Capital Employed; and Adjusted Return on Capital Employed.

Conference Call

A conference call to discuss the results for the quarter ended June 30, 2017 will be held on August 11, 2017 at 9:00 am MT (11:00 am ET).  To participate in the conference call, please dial 1.888.231.8191 approximately 10 minutes prior to the call.

This conference call will also be webcast live over the internet and can be accessed by all interested parties at the following URL:  http://investors.autocan.ca/Q22017

About AutoCanada

AutoCanada is one of Canada's largest multi-location automobile dealership groups, currently operating 57 franchised dealerships, comprised of 65 franchises, in eight provinces and has over 4,500 employees. AutoCanada currently sells Chrysler, Dodge, Jeep, Ram, FIAT, Alfa Romeo, Chevrolet, GMC, Buick, Cadillac, Infiniti, Nissan, Hyundai, Subaru, Mitsubishi, Audi, Volkswagen, Kia, Mercedes-Benz, Smart, BMW, and MINI branded vehicles.  In 2016 with $2.9 billion in revenue, our dealerships sold approximately 60,000 vehicles and processed approximately 864,000 service and collision repair orders in our 928 service bays.

Dealerships generate their revenue from the following four inter-related business operations: new vehicle sales; used vehicle sales; parts, service and collision repair; and finance and insurance. While new vehicle sales are the most important source of revenue, they generally result in lower gross profits than parts, service and collision repair operations and finance and insurance sales. Overall gross profit margins increase as revenues from higher margin operations increase relative to revenues from lower margin operations. The Company earns fees for arranging financing on new and used vehicle purchases on behalf of third parties. Under agreements with retail financing sources, the Company is required to collect and provide accurate financial information, which if not accurate, may require us to be responsible for the underlying loan provided to the consumer.

Forward Looking Statements

Certain statements contained in management's discussion and analysis are forward‑looking statements and information (collectively "forward‑looking statements"), within the meaning of the applicable Canadian securities legislation. We hereby provide cautionary statements identifying important factors that could cause our actual results to differ materially from those projected in these forward‑looking statements. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "will likely result", "are expected to", "will continue", "is  anticipated", "projection", "vision", "goals", "objective", "target", "schedules", "outlook", "anticipate", "expect", "estimate", "could", "should", "plan", "seek", "may", "intend", "likely", "will", "believe" and similar expressions are not historical facts and are forward‑looking and may involve estimates and assumptions and are subject to risks, uncertainties and other factors some of which are beyond our control and difficult to predict. Accordingly, these factors could cause actual results or outcomes to differ materially from those expressed in the forward‑looking statements. Therefore, any such forward‑looking statements are qualified in their entirety by reference to the factors discussed throughout this document.

The Company's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website www.sedar.com describe the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference.

Further, any forward‑looking statement speaks only as of the date on which such statement is made, and, except as required by applicable law, we undertake no obligation to update any forward‑looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of such factors and to assess in advance the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward‑looking statement.

Additional Information

Additional information about AutoCanada is available at the Company's website at www.autocan.ca and www.sedar.com.

SOURCE AutoCanada Inc.

Copyright 2017 Canada NewsWire

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