AutoCanada Reports 2019 Second Quarter Results
EDMONTON, Aug. 8, 2019 /CNW/ - AutoCanada Inc. ("AutoCanada" or the "Company") (TSX: ACQ), a multi-location North American automobile dealership group, today reported its financial results for the three month period ended June 30, 2019.
"We are very proud of our strong Q2 performance - our same store metrics are up across the board and we thoroughly outperformed the Canadian new vehicle market. We also made solid progress in stabilizing our U.S. Operations this quarter," said Paul Antony, Executive Chairman.
"We are going through a period of great change in implementing our Go-Forward Plan and the results in the second quarter confirm that we're on the right track", said Michael Rawluk, President. "Improvements were realized in every aspect of Canadian Operations in the quarter, from volume and margins, to an improved operating expense profile."
Second Quarter 2019 Key Highlights (year-over-year comparable basis)(1)
-- Consolidated gross profit grew to $153.4 million, an increase of $12.8
million or 9.1%
-- Consolidated Adjusted EBITDA increased 90.9% to $32.1 million, an
increase of $15.3 million; of the $15.3 million increase, $10.4 million
was attributed to the impact of IFRS 16, and $4.9 million was due to
operational improvements
-- Canadian Operations new vehicle sales increased 0.9% compared to the
decrease of 5.5% in the Canadian new vehicle market as reported by
DesRosiers Automotive Consultants.
Consolidated Results for 2019 Second Quarter (year-over-year comparable basis)(1)
-- Revenue was $945.8 million, an increase of $65.2 million or 7.4%
-- Gross profit grew to $153.4 million, an increase of $12.8 million or
9.1%
-- Operating expenses increased to $129.2 million, up 1.3%; the adoption of
IFRS 16 resulted in a reduction of operating expenses of $3.3 million
-- Operating profit (loss) was $17.9 million, up 141.9%; the adoption of
IFRS 16 resulted in an increase in Operating profit (loss) of $3.3
million
-- Net income (loss) for the period was $(4.5) million (or $(0.16) per
diluted share) versus $(39.4) million (or $(1.44) per diluted share) in
2018; The adoption of IFRS 16 resulted in additional total expenses,
which increased the Company's net (loss) in 2019 by $2.6 million
-- Adjusted EBITDA increased 90.9% to $32.1 million, an increase of $15.3
million; of the $15.3 million increase, $10.4 million was attributed to
the impact of IFRS 16, and $4.9 million was due to operational
improvements
-- Total vehicles sold increased to 19,353, an increase of 4.3%
Canadian Operations Highlights for 2019 Second Quarter (year-over-year comparable basis)(1)
The Company made significant progress in implementing its Go-Forward Plan for Canadian Operations during the second quarter. This progress is projected to continue in the coming quarters and the Company expects the ongoing impacts of the Go-Forward Plan to continue to be realized. The plan has improved the operational focus of the Canadian dealership network, while new profit centres are continuing to enhance volume and margins.
-- Revenue was $829.7 million, up 6.4%
-- Gross profit grew to $138.1 million, an increase of $11.5 million or
9.1%
-- Operating expenses as percentage of gross profit decreased from 89.6% to
81.0%; the adoption of IFRS 16 resulted in a reduction to operating
expenses of $2.5 million or 2.3%
-- Operating profit from Canadian Operations was $31.6 million, an increase
of $30.6 million; the adoption of IFRS 16 contributed $2.5 million
-- Operating profit before other income (loss) was $26.3 million, up 100.0%
compared with the second quarter of 2018; the adoption of IFRS 16
resulted in an increase in Operating profit (loss) of $2.5 million
-- Net income (loss) for the period was $12.8 million ($0.46 per diluted
share), up 311.6% from $(6.0) million; the adoption of IFRS 16 resulted
in additional total expenses, which decreased Canadian Operations Net
income (loss) by $1.3 million
-- Adjusted EBITDA increased 101.4% to $32.3 million, an increase of $16.3
million; IFRS 16 resulted in an increase to Adjusted EBITDA of $8.4
million
-- Total retail vehicles sold increased 9.4% to 15,192
-- Canadian Operations new vehicle sales increased 0.9% compared to the
decrease of 5.5% in the Canadian new vehicle market as reported by
DesRosiers Automotive Consultants.
Same Store Metrics
Total same store new and used retail unit sales for Canadian Operations increased 8.3% to 13,651, with new retail units down 1.4% and used retail units up 24.5%. The decrease of new retail units by 1.4% compares with a decrease of 7.8% in the Canadian new vehicle market for the brands represented by AutoCanada, as reported by DesRosiers Automotive Consultants.
Total same store gross profit for Canadian Operations increased $8.0 million or 6.8%. This was comprised of:
Department
% Increase in same store gross profit
---
New vehicle retail 6.9%
Used vehicle retail 25.4%
Parts, service and collision
repair 1.8%
Finance, insurance and other 9.1%
===
-- Revenue increased to $741.4 million, an increase of 4.7%
-- Same store new vehicle gross profit per retail unit grew 8.5% or $279
per unit
-- Same store used to new units sold ratio increased to 76% from 60%
U.S. Operations Highlights for 2019 Second Quarter (year-over-year comparable basis)(1)
Tamara Darvish took over as the President of U.S. Operations in March 2019 and formulated a go forward plan for U.S. Operations based on expense management, dealership-level initiatives and department-focused gross profit initiatives. An emphasis was placed on top-grading talent at the dealerships and executing on the expense management initiatives during the second quarter.
A key area of focus has been shifting from a fixed to variable cost structure which has driven positive changes as highlighted on a first quarter 2019 vs second quarter 2019 comparison:
-- Operating expenses decreased to 113.6% in the second quarter of 2019
from 152.7% in the first quarter of 2019
-- Operating profit (loss) for the second quarter of 2019 improved to
$(1.8) million after normalizing for impairment charges of $11.9 million
versus $(6.9) million for the first quarter of 2019
Additionally, the U.S. Operations have been rebranded to "Leader Automotive Group" during the second quarter.
The Company remains committed to optimizing the US dealership portfolio and disposing of non-performing assets.
The U.S. Operations were acquired in April 2018 and as such, the prior year U.S. Operations results do not represent a full three months under our ownership for the three months period ended June 30, 2018. The comparisons presented below are between the three-month period ended June 30, 2019 and the three-month period ended June 30, 2018.
-- Revenue was $116.0 million, an increase of 15.6%
-- Gross profit was $15.3 million, a change of $1.3 million or 9.6%
-- Operating profit (loss) from the U.S. Operations segment was $(13.7)
million, an increase of $30.0 million; the adoption of IFRS 16
contributed $0.5 million
-- Operating profit (loss) before other income was $(2.1) million, a
decrease of $(2.0) million; the adoption of IFRS 16 resulted in an
increase in Operating profit (loss) of $0.5 million
-- Net (loss) income for the period was $(17.3) million versus $(33.5)
million in 2018; the adoption of IFRS 16 resulted in additional total
expenses, which increased U.S. Operations Net income (loss) by $0.3
million
-- Adjusted EBITDA was $(0.2) million, a decrease of $(1.0) million from
2018; IFRS 16 resulted in an increase to Adjusted EBITDA of $2.0 million
1
The
Company adopted IFRS 16 on January
1, 2019 but the comparatives for the
second quarter of 2018 have not been
restated. Accordingly, 2018
comparatives for the second quarter
of 2018 may not provide for a
meaningful comparison to the
corresponding measures for the
second quarter of 2019.
Statement of Financial Position Update
On July 29, 2019, the previously granted increase to the Company's maximum permitted Total Funded Debt to EBITDA ratio from 4.00:1.00 to 4.50:1.00 under the Company's syndicated credit facility was extended for the period from July 1, 2019 to March 31, 2020. After March 31, 2020, the Company's maximum permitted Total Funded Debt to EBITDA Ratio will be 4.00:1.00.
AutoCanada continues to dispose of unproductive real estate assets, which resulted in the sale of $4.4 million of vacant land in the second quarter of 2019. AutoCanada realized a pre-tax net loss of $(0.6) million from these land sales. The Company is actively marketing $23.1 million of unproductive real estate.
On June 25, 2019, the Company completed the sale and leaseback of three dealership properties to Automotive Properties Real Estate Investment Trust for a purchase price of $30.4 million. On the transaction, the Company recognized a pre-tax loss $(0.4) million. Funds from this sale were used to pay down our revolving credit facilities.
Corporate Development
In June 2019, AutoCanada disposed of a Hyundai dealership in Victoria. In July 2019, the Company disposed of a Hyundai dealership in Calgary. The Company is not planning to sell any further Canadian dealerships at this time.
As part of the plan to optimize the U.S. dealership portfolio, the Company is actively engaged in seeking buyers for four of its US dealerships.
Dividends
The Company has declared a quarterly eligible dividend of $0.10 per common share on AutoCanada's outstanding common shares, payable on September 15, 2019 to shareholders of record at the close of business on August 31, 2019.
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 designating dividends as "eligible dividends".
Second Quarter Financial Information
The following table summarizes the Company's performance for the quarter:
Three Months Ended June 30
Consolidated
Operational Data 2019 2018 % Change
---
Revenue 945,767 880,588 7.4%
Gross profit 153,366 140,580 9.1%
Gross profit % 16.2% 16.0% 0.2%
Operating expenses 129,192 127,492 1.3%
Operating profit 17,904 (42,719) 141.9%
Net (loss) income for
the period (4,521) (39,426) 88.5%
Basic net (loss) income
per share attributable
to AutoCanada
shareholders (2) (0.19) (1.47) 87.1%
===
Adjusted EBITDA 1,3 32,100 16,814 90.9%
===
New retail vehicles
sold (units) 10,310 10,264 0.4%
New fleet vehicles sold
(units) 1,794 2,242 (20.0)%
---
Total New vehicles sold
(units) 12,104 12,506 (3.2)%
Used retail vehicles
sold (units) 7,249 6,042 20.0%
---
Total vehicles sold 19,353 18,548 4.3%
---
Same store new retail
vehicles sold (units) 7,764 7,874 (1.4)%
Same store new fleet
vehicles sold (units) 1,684 1,939 (13.2)%
Same store used retail
vehicles sold (units) 5,887 4,730 24.5%
---
Same store total
vehicles sold 15,335 14,543 5.4%
Same store revenue 741,380 707,783 4.7%
Same store gross profit 124,534 116,564 6.8%
Same store gross profit
% 16.8% 16.5% 0.3%
===
See the Company's Management's
Discussion and Analysis or the
quarter ended June 30, 2019 for
complete footnote disclosures.
The following table shows the segmented operating results for the Company for the three month periods ended June 30, 2019 and June 30, 2018.
Three Months Ended Three Months Ended
June 30, 2019 June 30, 2018
Canada U.S. Total Canada U.S. Total
$ $ $ $ $ $
New vehicles 480,903 73,783 554,686 464,160 57,990 522,150
Used vehicles 200,716 22,542 223,258 175,096 23,501 198,597
Parts, service and
collision repair 109,989 15,833 125,822 106,485 14,991 121,476
Finance, insurance and
other 38,120 3,881 42,001 34,442 3,923 38,365
Total revenue 829,728 116,039 945,767 780,183 100,405 880,588
---
New vehicles 35,196 1,449 36,645 30,376 272 30,648
Used vehicles 12,172 1,764 13,936 11,910 1,263 13,173
Parts, service and
collision repair 56,118 8,400 64,518 52,335 8,533 60,868
Finance, insurance and
other 34,591 3,676 38,267 32,006 3,885 35,891
Total gross profit 138,077 15,289 153,366 126,627 13,953 140,580
---
Employee costs 67,348 8,957 76,305 66,132 8,945 75,077
Administrative costs 34,889 5,241 40,130 38,582 3,491 42,073
Facility lease and
storage costs (2) 75 910 985 4,775 920 5,695
Depreciation of property
and equipment 4,302 696 4,998 4,009 638 4,647
Depreciation of right-
of-use assets 2 5,210 1,564 6,774
---
Total operating expenses 111,824 17,368 129,192 113,498 13,994 127,492
---
Operating profit (loss)
before other income 26,253 (2,079) 24,174 13,129 (41) 13,088
---
Operating data
New retail vehicles sold
(1) 8,768 1,542 10,310 8,692 1,572 10,264
New fleet vehicles sold
(1) 1,791 3 1,794 2,242 2,242
---
Total New vehicles sold
(1) 10,559 1,545 12,104 10,934 1,572 12,506
Used retail vehicles sold
(1) 6,424 825 7,249 5,195 847 6,042
Total Vehicles sold (1) 16,983 2,370 19,353 16,129 2,419 18,548
---
# of service and
collision repair orders
completed (1) 205,104 37,030 242,134 214,533 33,634 248,167
# of dealerships at
period end 51 14 65 54 14 68
# of service bays at
period end 897 200 1,097 906 200 1,106
===
See the Company's Management's
Discussion and Analysis or the
quarter ended June 30, 2019 for
complete footnote disclosures.
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, 2019, 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 and quarterly report: Adjusted EBITDA; Free Cash Flow; Average Capital Employed; and Return on Capital Employed.
Conference Call
A conference call to discuss the results for the three months ended June 30, 2019 will be held on August 9 at 9:00am Mountain (11:00am Eastern). To participate in the conference call, please dial 1.888.231.8191 approximately 10 minutes prior to the call.
AutoCanada's presentation that will be discussed on the conference call is available at the Company's website at www.autocan.ca.
This conference call will also be webcast live over the internet and can be accessed by all interested parties at the following URL: https://www.autocan.ca/investors/Q22019
About AutoCanada
AutoCanada is a leading North American multi-location automobile dealership group currently operating 64 franchised dealerships, comprised of 27 brands, in eight provinces in Canada as well as a group in Illinois, USA and has over 4,200 employees. AutoCanada currently sells Chrysler, Dodge, Jeep, Ram, FIAT, Alfa Romeo, Chevrolet, GMC, Buick, Cadillac, Ford, Infiniti, Nissan, Hyundai, Subaru, Audi, Volkswagen, Kia, Mazda, Mercedes-Benz, Smart, BMW, MINI, Volvo, Toyota, Lincoln, and Honda branded vehicles. In 2018, our dealerships sold approximately 66,000 vehicles and processed approximately 915,000 service and collision repair orders in our 1,157 service bays generating revenue in excess of $3 billion.
Additional information about AutoCanada Inc. is available at www.sedar.com and the Company's website at www.autocan.ca.
Forward Looking Statements
Certain statements contained in this press release 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. Forward-looking statements 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, actual results or outcomes may 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 press release. The Company's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website at 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.
