Uni-Select — Investor Day (November 2017)
47 slides from Uni-Select's investor day presentation, Nov 28, 2017
Slide 1: Investor Day Corporate Overview
Investor Day Corporate Overview Henry Buckley, President & CEO and Eric Bussières, CFO November 28, 2017
Slide 2: Preliminary Comments
Preliminary Comments Forward-looking statements: The information provided in this presentation contains some forward-looking information, which includes certain risks and uncertainties, and may cause the final results to be significantly different from those listed or implied within this presentatio
Slide 3: Agenda
Agenda ● Corporate Overview ● Industry Landscape ● Financial Results ● Strategic Priorities ● Value Creation Drivers ● Conclusion p3
Slide 4: Estimated normalized run rate revenues reached US$1.7B per year
Uni-Select estimated normalized run rate revenues reached US$ 1.7B per year as of October 2017 20% Sales by Sales by 46% 50% Region Industry 54% 30% US Canada UK Automotive aftermarket parts Automotive paint & related products Estimated run rate revenues ($US M) US Canada UK Total per year as of Oct
Slide 5: A dedicated & experienced Executive Team
A dedicated & experienced Executive Team Henry Buckley Brent Windom Steve Arndt Peter Sephton President and President and President and President and Chief Executive Officer Chief Operating Officer, Chief Operating Officer, Chief Executive Officer, Canadian Automotive Group FinishMaster US European
Slide 6: Strong coverage in each geographical market
Strong coverage in each geographical market Extensive distribution coverage US Canada UK Total Distribution centres 4 10 2 16 Independent customer locations served 0 1,100 27 1,127 Corporate stores operated 212 61 171 444* Installer and Collision Repair customers served 6,800 16,000 23,400 46,200 Te
Slide 7: Canadian Automotive Group: A 2-step and 3-step distribution model
Canadian Automotive Group: A 2-step and 3-step distribution model Automotive Aftermarket Parts Paint & Related Products National + Private Brands Manufacturers Manufacturers Drop Ship Drop Ship Capability 10 Distribution Centres Capability Bumper to Bumper Independent Member FinishMaster Corporate S
Slide 8: FinishMaster US – A 2-step distribution model
FinishMaster US – A 2-step distribution model Paint & Related Products Manufacturers and Private Brands Drop 4 Distribution Centres Ship 212 FinishMaster Corporate Stores 2-Step 6,800 Collision Repair Centre Customers p8
Slide 9: The Parts Alliance – A 2-step distribution model
The Parts Alliance – A 2-step distribution model Member of the Nexus Buying Group OEM Products – National Brands – Private Brands Manufacturers 2 Distribution Centres Primarily Private Brands 171 Parts Alliance 27 Independent Member Corporate Stores Parts Stores 2-Step 2-Step Part of Parts Alliance
Slide 10: A proven track record of successful acquisitions
A proven track record of successful acquisitions United States Canada United Kingdom 2015: 8 2015: 8 2015: 1 2016: 7 2016: 7 2016: 3 2017: 4 2017: 3 2017: 2 TOTAL: 19 TOTAL: 18 TOTAL: 5 In 2016, we began the year with 209 corporate stores… +235 As at October 31, 2017, we are at 444 corporate stores
Slide 11: Agenda
Agenda ● Corporate Overview ● Industry Landscape ● Financial Results ● Strategic Priorities ● Value Creation Drivers ● Conclusion p11
Slide 12: Strong industry fundamentals in our geographic markets
Strong industry fundamentals in our 3 geographic markets United States Canada United Kingdom Addressable US$2.7B market C$2.6B market £4.1B market Market Average Age 11.6 years (2016) 9.62 years (2015) 7.7 years (2016) of Car Park This number has been 1.15% increase from 14.9% increase from flatteni
Slide 13: Leadership position in each geographic market
Leadership position in each geographic market United States Canada United Kingdom FinishMaster Canadian The Parts Alliance Automotive Group ~29% Market Share ~19% Market Share ~7% Market Share of a US$2.7B market of a C$2.6B market of a £4.1B market Automotive Paint and Related Warehouse Distributio
Slide 14: The acquisition of The Parts Alliance resulted from a thorough strategic analysis
The acquisition of The Parts Alliance resulted from a thorough strategic analysis 1 Look outside North America ● To access a new market with high consolidation potential ● To create a third growth pillar for Uni-Select ● To achieve geographic diversification and improve the business risk profile 2 S
Slide 15: 150-day integration update
150-day integration update ● 8 different integration task forces working in parallel, with specific objectives and plans ● Strong early focus on governance, performance measurement / monitoring and IT systems ● Negotiations already started with manufacturers to revaluate pricing and payment conditio
Slide 16: Industry Landscape – Recap
Industry Landscape – Recap ● Leadership position in each of our core markets ● Good fundamentals in each business ● Well positioned to capitalize on growth opportunities ● Growth through organic growth, greenfield store openings and select acquisitions ● Experienced management team p16
Slide 17: Agenda
Agenda ● Corporate Overview ● Industry Landscape ● Financial Results ● Strategic Priorities ● Value Creation Drivers ● Conclusion p17
Slide 18: Total sales by business segment
Total sales by business segment Q3 2017 Highlights (YoY) (Millions of US $) • Total sales up 24.3% to $395.8 million mainly driven by recent acquisitions 395.8 and solid organic growth in Canada 340.3 55.7 • FinishMaster US sales reached $206.5 318.5 million, up 2.1% mainly from business 291.0 297.2
Slide 19: EBITDA by business segment
EBITDA by business segment (1) (Millions of US $) 33.9 (2) Q3 2017 Highlights (YoY) (2) 30.8 32.5 (2) 2.3 • Adjusted EBITDA amounted to $33.9 million, up 10.0% driven 7.6 mainly by The Parts Alliance and 11.3 10.7 25.4 (2) Canadian operations. 23.2 (2) 2.9 • Adjusted EBITDA margin was 5.5 down by ~
Slide 20: Earnings results
Earnings results (1) (Millions of US $) Earnings (1) Q3 2017 Highlights (YoY) 17.3 16.6 15.1 13.1 • Adjusted earnings reached $15.1 million or 11.0 $0.36 per share vs. $0.41 per share in Q3 2016. The $0.05 EPS difference is mostly related to increased intangible assets, amortization and increased fi
Slide 21: Q3 2017 – Operating results highlights
Q3 2017 – Operating results highlights (Millions of US $) % Revenue Q3 2017 Highlights (YoY) Q3 17 Q3 16 Q3 17 Q3 16 Sales 395.8 318.5 • Sales were up 24.3% fueled by contributions from recent business Gross margin 128.5 97.8 32.5% 30.7% acquisitions which represents over Employee benefits 65.0 45.1
Slide 22: Q3 2017 – Sources and uses of funds
Q3 2017 – Sources and uses of funds (Millions of US $) Q3 2017 Highlights (YoY) • Operating activities totaled $49.3 million, down $2.2 million compared to Q3 2016 mainly due to the non- recurring costs related to the acquisition of The Parts Alliance 272.3 282.6 • Free cash flows amounted to $35.5
Slide 23: Q3 2017 financial position
Q3 2017 financial position (Millions of US $) Total Net Debt(1) (end of the period) Q3 2017 Highlights 439 • Total Net Debt(1) outstanding was $439.0 million up $249.7 million from 278 Q2 2017 mainly due to The Parts 260 Alliance acquisition Nil 0 (2) 112 • Leverage ratio of the Funded Debt to Adjus
Slide 24: Q3 2017 YTD – Operating results highlights
Q3 2017 YTD – Operating results highlights (Millions of US $) % Revenue YTD 17 YTD 16 YTD 17 YTD 16 Q3 2017 YTD Highlights (YoY) Sales 1,033.3 906.3 Gross margin 325.1 274.0 31.5% 30.2% • Sales were up 14.0% due mainly Employee benefits 161.2 130.6 15.6% 14.4% to business acquisitions up Other opera
Slide 25: 12-month period pro forma selected financial information
Uni-Select Inc. – 12-month period pro forma (1) selected financial information (Millions of US $) Uni-Select Inc. The Parts Alliance Adjustments Pro forma Dec. 31, 2016 March 31, 2017 (US$) (US$) (£) (US$) (US$) Sales 1,197.3 346.4 265.9 - 1,543.7 EBITDA (2) 106.8 21.4 16.4 (0.7) 127.5 EBITDA margin
Slide 26: Financial Results – Recap
Financial Results – Recap ● Sound cash flow from operating activities, excluding non recurring expenses ● Adjusted EBITDA margin for Q3 at 8.1% ● Adjusted earnings amounted to $15.1 million or 36 cents per share in Q3 ● Expect leverage to decrease over time p26
Slide 27: Agenda
Agenda ● Corporate Overview ● Industry Landscape ● Financial Results ● Strategic Priorities ● Value Creation Drivers ● Conclusion p27
Slide 28: 3 corporate strategic priorities
3 corporate strategic priorities Strategic Priorities Initiatives 1 Drive profitable growth – short and long-term • Organic sales growth in all 3 businesses revenue growth • Selective acquisitions – All 3 segments 2 • Further deploy development programs to all Strengthen our talent base team members
Slide 29: FinishMaster US – Strategic priorities
FinishMaster US – Strategic priorities Strategic Priorities Initiatives • Sales initiatives to increase new customer 1 acquisitions and current customer retention Drive base organic sales growth and select expansion initiatives • Improve FinishMaster geographical coverage through greenfields or acqu
Slide 30: Canada – strategic priorities
Canada – strategic priorities Strategic Priorities Initiatives 1 • Bumper to Bumper corporate store expansion Grow our automotive parts business • Bumper to Bumper brand to more independent customers 2 Grow our Paint, Body & Equipment • FinishMaster corporate store expansion business 3 • Continue to
Slide 31: UK – Strategic priorities
UK – Strategic priorities Strategic Priorities Initiatives • Selective acquisitions 1 • Open new greenfield locations to expand Drive base organic growth and network geographic coverage expansion initiatives • Add independent motor factor customers to the network 2 • Integration of IT systems and pe
Slide 32: Agenda
Agenda ● Corporate Overview ● Industry Landscape ● Financial Results ● Strategic Priorities ● Value Creation Drivers ● Conclusion p32
Slide 33: Six drivers of value creation
Six drivers of value creation #6 #1 Capital Base Structure Organic Growth #5 #2 “Greenfield” Capital Value Creation Branch Allocation Opening Create & Protect #4 #3 Cost Selective Discipline Acquisitions p33
Slide 34: Driver #1: Base organic growth
Driver #1: Base organic growth Customer Service Driven Store High Network Fill Rates Development Base Technology Building IT our Brands Organic (PartsWatch Growth Allicat) Private Label Execution Product Excellence expansion Continuous Improvement p34
Slide 35: Driver #1: 2018 organic growth outlook
Driver #1: 2018 organic growth outlook United States Canada United Kingdom GDP Forecast: 2.2% GDP Forecast: 2.3% GDP Forecast: 1.5% Our Goal: 3-4% Our Goal: 2.5-3.5% Our Goal: 3-4% Source: Bloomberg as at October 24, 2017 Weighted average based on a list of 30-70 bank forecasts. Greater weight is ap
Slide 36: Driver #2: Greenfield branch openings in US and UK
Driver #2: Organic → Greenfield branch openings in US and UK Implement Standard Operating Model Efficient and Relentless Cost Effective Customer Construction Focus of New Stores Greenfield Branch Openings Market Execution Analysis Excellence Continuous Improvement Process p36
Slide 37: Driver #3: Selective Acquisitions
Driver #3: Selective Acquisitions Business Units Responsible for Integrations & Synergies Implementation M&A – Centralized Build Market Decision on Density Capital Strategy Allocation Selective Acquisitions Expand Centralized Geographic valuation Coverage & pricing Targets identified by the Business
Slide 38: Driver #4: Cost discipline
Driver #4: Cost discipline Uni-Select 20/20 initiative Optimize and implement Leveraging Cost-to-serve • Save $20M in operating costs by the end of 2020 Systems and model • So far, approximately 50% of the total targeted Processes costs savings have been identified • ~25% of the total costs savings
Slide 39: Driver #5: Capital allocation
Driver #5: Capital allocation Maintenance CAPEX Working Dividends Capital Capital Allocation Greenfield Growth CAPEX Acquisitions p39
Slide 40: Driver #6: Capital structure
Driver #6: Capital structure Adjusted(1) Leverage Ratio 3.14:1* Pro Forma Average Costs of Debt $439M* of Net Debt(1) ≈3.3%* Capital Structure Free Cash Disposal of Flow(1) Non-Core $35.5M** Assets $234M* Available Under Credit Facilities (1) This information represents a non-IFRS financial measure.
Slide 41: We expect to bring our leverage below 2.5X Total Net Debt to EBITDA
We expect to bring our leverage below 2.5X Total Net Debt to EBITDA over the next 24-36 months 500 3.50x Total Net Debt Funded Debt to Adjusted EBITDA Ratio 450 3.00x 400 350 2.50x 300 2.00x 250 1.50x 200 150 1.00x 100 0.50x 50 - 0.00x FY14Q4 FY15Q1 FY15Q2 FY15Q3 FY15Q4 FY16Q1 FY16Q2 FY16Q3 FY16Q4 F
Slide 42: Driver #6: Capital structure & financial flexibility
Driver #6: Capital structure & financial flexibility Credit Facilities Total Net Debt(1) 439.0 ● TERM FACILITY • A new US$100 million financing executed to support the Parts Alliance acquisition 298 • Maturity: June 2020 260 199 189 166 ● REVOLVING CREDIT FACILITIES 134 112 • Increased fund availabi
Slide 43: Driver #6: Strong adjusted EBITDA to Free Cash Flow conversion
Driver #6: Strong adjusted EBITDA to Free Cash Flow (1) (FCF) conversion (1) ● Over the last 5 years, Uni-Select EBITDA(1) conversion rate to FCF(1) has averaged 80% ● Uni-Select objective is to have a conversion rate ranging between 75% and 85% 120 120% 100 102% 100% 92% 80 81% 80% 75% 72% 60 60% 6
Slide 44: Result of the value creation equation – Increased dividend per share
Result of the value creation equation – Increased dividend per share and return on equity growth DIVIDEND PER SHARE ($C) ADJUSTED RETURN ON AVERAGE TOTAL EQUITY(1) 12.9% 0.335 12.0% 0.315 10.9% 0.29 9.8% 0.26 0.26 8.7% FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16 (1) This information represents
Slide 45: Agenda
Agenda ● Corporate Overview ● Industry Landscape ● Financial Results ● Strategic Priorities ● Value Creation Drivers ● Conclusion p45
Slide 46: In summary
In summary Leadership position in our 3 key markets Well positioned for growth • Strong industry fundamentals • Productivity improvement in all 3 segments • Good financial flexibility for the future Strengthening our talent base across the organization We have the best team in the business! p46
Slide 47: UNI-SELECT.
UNI-SELECT.