RONA Announces its 2012 Fourth Quarter and Year-End Results
- Disciplined management of capital and strong balance sheet maintained - Sales initiatives and $10.5M run rate benefits of 2012 New Realities, New Solutions partially mitigate the negative impact of change in product and customer mix and increased competition
(firmenpresse) - BOUCHERVILLE, QUEBEC -- (Marketwire) -- 02/21/13 -- RONA inc. (TSX: RON)(TSX: RON.PR.A), the largest Canadian distributor and retailer of hardware, renovation and gardening products, today reported its financial results for the 14-week and 53-week periods ending December 30, 2012. All figures in this release are in Canadian dollars and presented according to IFRS accounting standards.
Highlights
"In 2012, our management team and employees focused on the execution of our New Realities, New Solutions plan and initiatives to improve our performance in line with our three financial priorities. While financial results fell short of our expectations, we maintained a disciplined management of our capital structure and generated free cash flow. Building on the assessment undertaken when we launched our plan at the beginning of the year, which was addressing only 20% of our network, we undertook a complete re-assessment of all parts of our business in order to identify additional value creation opportunities to rapidly turnaround our financial performance," said Dominique Boies, Acting Chief Executive Officer and Executive Vice President and Chief Financial Officer of RONA.
"The results of this complete re-assessment were presented in a separate press release issued today in which we unveiled our 2013-2015 transformational plan. The overall objective of this plan is to become the best distributor for dealers across the country, optimize our retail and contractor proximity models across Canada and strengthen our leadership position in Quebec. In each of these three areas, RONA holds a leading position and the transformational plan seeks to further reinforce this. While we expect significant near-term benefits, it will take a certain time to implement the necessary actions to address a number of strategic and financial priorities. The management team, supported by the Board, is working aggressively to build on the Corporation's solid financial position and transform many aspects of our operations that have held back our overall performance" added Mr. Boies.
RONA's fourth quarter and year-end results include unusual and non-recurring items which had a one-time impact on the Corporation's financial performance. As announced at the beginning of the fiscal year, the unusual items are related to the implementation of our plan. Most of the non-recurring costs were, for their part, incurred following the unsolicited, non-binding expression of interest from Lowe's, severance payments stemming from an administrative services reorganization, the temporary increase in advertising expense for the 2012 Summer Olympic campaign and the impairment of long-term assets. These unusual and non-recurring items represented $24.5 million after-tax in the fourth quarter and $62.0 million after-tax for the full year 2012. In 2011, unusual items totalling $173.3 million after-tax in the fourth quarter and full year were recorded for restructuring costs relating to the New Realities, New Solutions plan, fees and premium related to the $283 million repurchase of debentures maturing in 2016 and goodwill impairment. For ease of comparison and in order to highlight the operational performance of the Corporation, the following presentation of annual and quarterly results excludes these elements. Reconciliation with GAAP measures is provided at pages 6 and 7 of this document.
For fiscal year 2012, RONA posted sales of $4.9 billion, a 1.7% increase over 2011. This growth is mainly attributable to the recording of a 53rd week, growth in the Commercial and Professional Market division and the opening of new proximity and satellite stores. Comparable sales across the RONA network were up 0.7% and at the same level as last year when excluding the 53rd week. For the retail and commercial segment alone, same-store sales were down 0.3%, while same-store distribution sales to all RONA dealers grew 6.4%. Sales of lumber and building materials in corporate stores and to RONA dealers were particularly strong this year. EBITDA excluding unusual and non-recurring items went from $269.2 million in 2011 to $229.5 million in 2012. EBITDA margin decreased by 90 basis points, from 5.60% to 4.70%. Change in product mix impacted our margin. In fact, lumber and building products generated a gross margin of about 30% less than the margin generated on hardware products and, the growth in sales of these products and the increase in sales to contractors negatively impacted the overall profitability of RONA over the year. In addition, EBITDA and EBITDA margin were affected by heightened competition. Although the decrease in EBITDA was partially offset by the decrease in financial expenses and amortization and depreciation expense, net income before unusual and non-recurring items attributable to participating shares after the dividend on preferred shares was down from $86.9 million, or $0.66 per share (diluted) in 2011 to $70.0 million, or $0.57 per share (diluted).
In the fourth quarter of 2012, RONA posted sales of $1.2 billion, a 2.2% increase over 2011. This growth is mainly attributable to the recording of an extra week, double digit growth in sales of the Commercial and Professional Market division and the opening of new proximity and satellite stores. Comparable sales across the RONA network were up 2.9% and up 0.2% when excluding the 14th week. For the retail and commercial segment alone, same-store sales were up 2.4% (down 0.7% excluding the extra week), while comparable distribution sales to all RONA dealers grew 5.9% (up 5.2% excluding the extra week). As explained for full year results, sales of lumber and building materials in corporate stores and to RONA dealers were particularly strong this year. This growth was however offset by cost inflation and more intense competition. As a result, EBITDA excluding unusual and non-recurring items went from $65.9 million in 2011 to $44.1 million in 2012. EBITDA margin decreased by 194 basis points, from 5.63% to 3.69%. Although the decrease in EBITDA was partially offset by lower financial expenses and amortization and depreciation expense, net income before unusual and non-recurring items attributable to participating shares after the dividend on preferred shares was down from $19.7 million, or $0.15 per share (diluted) in 2011 to $6.6 million, or $0.05 per share (diluted).
For fiscal 2012, cash flow from operating activities before net change in working capital, interest received and income taxes paid was $159.7 million compared to $202.3 million in 2011. The net change in working capital was negative and amounted to $14.9 million in 2012, compared to a net change of $66.7 million in 2011. This significant variation is due to higher inventories of certain products in order to take advantage of particularly attractive purchase conditions and the abnormally low level of comparable inventories in 2011. After the net change in working capital, interest received and income taxes paid, operating activities thus generated $125.5 million in 2012, compared to $230.2 million for the same period of 2011.
The Corporation continued to exercise disciplined financial management and strictly controlled its investments in property, plant and equipment. For fiscal 2012, RONA invested $86.4 million in property, plant and equipment and intangible assets, which was $23.0 million, or 21.1% less than in 2011. Investments were concentrated in continuous improvement of the Corporation's information systems to increase operational efficiency, and in maintenance. The level of investment in property, plant and equipment and intangible assets -- excluding investments related to the New Realities, New Solutions plan, which will be financed through the sale of surplus assets -- remains similar to amortization and depreciation expense, which amounted to $96.4 million in 2012.
Since 2011, RONA has taken a number of steps to optimize its capital structure. Also, in November 2011, the Corporation set up a program to repurchase, in the normal course of its activities between November 11, 2011 and November 10, 2012, up to 11,016,854 common shares, representing 10% of its 110,168,541 public float or 8.4% of its 130,520,489 common shares issued and outstanding on October 31, 2011. Since the repurchase program was instituted in November 2011, the Corporation has bought back 10.4 million shares at an average price of $9.47 per share for a total of $98.5 million at November 10, 2012. These shares were cancelled. RONA did not renew its normal course issuer bid following the expiration of the previous program on November 10, 2012.
Despite a slight increase in leverage, RONA's balance sheet remains strong. As at December 30, 2012, the Corporation's total debt was $328.0 million compared to $256.7 million in 2011. The Corporation's net debt amounted to $307.0 million, compared to $239.6 million at December 25, 2011. The ratio of total net debt to capital was 14.0%, compared to 10.9% in 2011. The ratio of total debt to EBITDA before unusual items remained stable at 1.6.
Achievements with regards to financial priorities
"Our actions are always dictated by our three financial priorities, added Dominique Boies. This disciplined approach is focused on achieving a medium term return on capital greater than 10%. We have made steady progress in this area during the four consecutive quarters ending on June 24, 2012. This upward trend was interrupted in the last two quarters, as a more competitive environment and a change in our sales mix in favour of lower-margin products affected our operating income. However, the continuation of our capital structure optimization initiatives, namely disciplined investment management, allowed us to mitigate the impact of the decrease on our return on capital and protect our strong balance sheet."
The following table shows quarterly achievements since the Corporation's three financial priorities were adopted in the third quarter of 2011.
Achievements under the New Realities, New Solutions plan
Announced in February 2012, the theme of RONA's 2012 business plan was New Realities, New Solutions. The plan addressed the need to adapt the offering in our industry to new expectations and changes in the behaviour of many consumers. It was also aimed at improving the performance of our bottom performing stores. The new store formats are generating promising results in line with the favourable trend observed in recent quarters for smaller stores; the performance of the new stores is already better than that of the big-box stores they replaced.
Early in the fourth quarter, we postponed the roll-out of the plan until we finalized the review undertaken under the Corporation's three strategic priorities that were announced in early December. Accordingly, we deliberately postponed the closing of five big-box stores. With the exception of the transformation of TOTEM stores into the new RONA proximity model, which is almost completed, all other initiatives under the New Realities, New Solutions plan have been re-evaluated and incorporated into RONA's new transformational plan announced earlier today.
New Realities, New Solutions Plan
Achievements - Fiscal year 2012
1. Set up new integrated digital platform
2. Redeployment of sales volume to proximity and satellite stores in close to 20% of the corporate-store network
3. Further development of the commercial and professional segment
4. Ongoing development of the RONA dealer-owner network
5. Anticipated annual recurring benefit of $10 million in 2012, $30 million in 2013 and $40 million in 2014
6. Planned investment of $70 million in property, plant and equipment, financed from the sale of non-strategic assets over 2012 and 2013
7. Planned restructuring costs of $110 million related to redeployment of the sales volume in 20% of the corporate-store network
DIVIDENDS ON PREFERRED SHARES
At its meeting on February 20, 2013, RONA's Board of Directors declared a quarterly dividend of $0.3237 per share on cumulative 5-year rate reset Class A preferred shares, series 6. The dividend will be paid on April 1, 2013 to holders of record on March 15, 2013.
DIVIDENDS ON COMMON SHARES
At its meeting on February 20, 2013, RONA's Board of Directors declared a semi-annual dividend of $0.07 per share on the Corporation's common shares. This dividend will be paid on March 25, 2013 to holders of record on March 11, 2013.
ADDITIONAL INFORMATION
The Management's Discussion and Analysis (MD&A), financial statements and notes for fiscal-year 2012 can be found in the "Investor Relations" section of the Corporation's website at and on the SEDAR website at . The Corporation's Annual Information form, along with other information about RONA, can also be found on the RONA and SEDAR websites.
TELEPHONE CONFERENCE WITH THE FINANCIAL COMMUNITY
On Thursday, February 21, 2013, at 10:00 a.m. (EST), RONA will hold a telephone conference for the financial community. To join the conference, please call 416-340-2216 or 1 866 226-1792. To listen to the call online, please go to .
NON-GAAP PERFORMANCE MEASURES
In this Press Release as in our internal management, RONA uses the concept of "earnings before interest, taxes, depreciation, amortization and non-controlling interests" (EBITDA). RONA also uses the concept of "adjusted gross margin," which corresponds to revenues less the cost of goods sold, plus adjustments for network support.
While EBITDA does not have a definition that is standardized by IFRS, it is widely used in our industry and in financial circles to measure the profitability of operations, excluding tax considerations and the cost and use of capital. Adjusted gross margin is used by RONA's management to analyze the profitability of our network, after adjustments for network support. Given that these measures are not standardized, EBITDA and adjusted gross margin cannot be compared from one company to the next. Still, we establish them in the same way for each of the segments identified, and, unless expressly mentioned, our method does not change over time. EBITDA and adjusted gross margin must not be considered separately or as a substitute for other performance measures calculated according to IFRS, but rather as additional information. Also disclosed as additional information is the impact of unusual items and non-recurring items on 2012 and 2011 results (refer to sections "Unusual items" and "Non-recurring items" in the MD&A for more details).
The following tables show the reconciliation of these two measures:
FORWARD-LOOKING STATEMENTS
This Press Release includes "forward-looking statements" that involve risks and uncertainties. All statements other than statements of historical facts included in this Press Release, including statements regarding the prospects of the industry and prospects, plans, financial position and business strategy of the Corporation may constitute forward-looking statements within the meaning of the Canadian securities legislation and regulations. Investors and others are cautioned that undue reliance should not be placed on any forward-looking statements.
For more information on the risks, uncertainties and assumptions that would cause the Corporation's actual results to differ from current expectations, please also refer to the Corporation's public filings available at and . In particular, further details and descriptions of these and other factors are disclosed in the MD&A under the "Risks and uncertainties" section and in the "Risk factors" section of the Corporation's current Annual Information Form.
The forward-looking statements in this Press Release reflect the Corporation's expectations as at February 21, 2013, and are subject to change after this date. The Corporation expressly disclaims any obligation or intention to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by the applicable securities laws.
ABOUT RONA
RONA is the largest Canadian distributor and retailer of hardware, home renovation and gardening products. The Corporation operates a network of over 800 corporate, franchise and affiliate retail stores of various sizes and formats under different banners, and a network of 14 hardware and construction materials distribution centres. RONA is also a leader in the specialized plumbing and HVAC market, primarily serving commercial and professional customers with a network of close to 60 sales outlets and four distribution centres across the country. With close to 30,000 employees, the RONA store network generates consolidated sales of $4.9 billion. For more information, please visit .
Contacts:
Media
Valerie Lamarre
Senior Advisor, Communications and Public Affairs
RONA Inc.
514-599-5900, ext. 5271
Financial Community
Stephane Milot
Vice President, Finance and Investor Relations
RONA Inc.
514-599-5951
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Datum: 21.02.2013 - 06:00 Uhr
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