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.