Uni-Select Inc. a major automotive aftermarket product distributor with activities in Canada and the United States, has reported strong results for the third quarter ended September 30, 2013, which saw growth in consolidated sales, EBITDA, net earnings and earnings per share. This performance reflects the effectiveness of the Corporation’s various sales initiatives, overall efficiency gains as well as improved service levels made possible by the ongoing implementation of a new ERP software. These results were also driven by favourable gains realized under Uni-Select’s internal strategic and operational plan (Action Plan), announced on July 11, 2013.
“I am very pleased by our third quarter results and by the performance displayed by our US and Canadian activities. Our team was able to deliver positive organic sales growth by recruiting new customers, supporting existing customers with their business expansion and signing distribution agreements with large collision centres and multi-shop owners for paint products. Our team’s ability to deliver significant 20.4% adjusted EBITDA margin increase, to 6.5% from 5.4% last year, illustrates that the aggressive Action Plan in place is starting to yield tangible results,” said Richard G. Roy, president and chief executive officer of Uni-Select.
“As we enter the fourth quarter, we will continue to improve our services and product offering to remain a partner of choice for our independent jobbers. We will remain focused on delivering growth and continuing the implementation of our Action Plan to further improve the profitability of our distribution network in the United States. This approach should enable us to deliver healthy free cash flows and to continue to make strategic investments to strengthen our leadership position in the automotive aftermarket product distribution,” added Roy.
Uni-Select generated an overall 1.6% sales increase in the third quarter to $465 million, fuelled by an overall 2.8% growth of organic sales. Sales of the US operations reached $334 million, up 1.8% organically. Canadian operations delivered $130 million in sales in the same period, up 5.3% organically. The overall positive organic growth throughout the system is attributable to the good performance of our sales initiatives which resulted into the recruitment of new customers. A more stable ERP system and increased efficiencies also allowed the Corporation to greatly improve service level. This had a positive impact. In summary, overall organic growth exceeded the 1.6% decline in sales resulting from store closures.
The Corporation’s adjusted EBITDA margin grew by 20.4% in the third quarter to 6.5%, compared to 5.4% last year. The increase mainly resulted from cost savings initiatives under the Corporation’s Action Plan – mostly productivity and headcount reductions – as well as from savings derived from the closure of non-profitable locations. These combined initiatives, net of the reduction in gross profit from closures, resulted in an increase in EBITDA of $3.3 million in the third quarter, representing annualized cost savings of approximately $13 million. Organic growth also contributed to the EBIDTA margin.
Under the Corporation’s Action Plan unveiled on July 11, 2013, 18 corporate stores and three warehouses were closed in the third quarter. Sales volumes saved from these closures were higher than expected as a result of strong internal execution. The Corporation also benefitted from an extensive support and a strong collaboration from its suppliers in coordinating inventory movements related to distribution centres openings and closures. Subsequent to quarter-end, the Corporation divested three of its stores to one of its customers.
In the third quarter, the Corporation generated $38 million in cash from operating activities, of which $23 million was applied towards debt reimbursement. The remaining $15 million was applied towards dividend payments, share repurchases and capital investments – for equipment, fleet renewal and ERP development. As of September 30, 2013, the Corporation’s outstanding net debt stood at $262 million, down 17% year-over-year.