Q2 2020 Richelieu Hardware Ltd Earnings Call

The new ladies and gentlemen, and welcome to the Vishal Your hardware second quarter results Conference call. At this time all lines are in listen only mode. Following the presentation. We will conduct a question and answer session, which will be restricted to analysts only if at any time. During this call you'll be quite immediate assistance. Please press star zero five.

Operator also note that this call is being recorded on slide nine 2020.

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Sure Good conference calls for the second quarter.

Well at six months period ended may 31st what do.

With me is not one of last year.

No that's almost what did you shouldn't look forward looking information.

Which is provided with the usual disclaimer Walter.

International flights.

The second quarter was mark.

Never before experience business I'm buying.

Just a context, Michigan.

Nevertheless, the allies and appreciate both <unk> financial performance and mentoring.

And a healthy penetrate bush.

Well just performance, though a one stop shop.

Okay.

What does it scares shouldn't have all market segments.

Customer service.

The contribution of all equity issuance.

Measures, we rapidly and effectively implemented to mitigate the impact of the situation.

That's right.

Dump or anything else.

He's working hours and salaries.

Suspension of old travel.

Okay do unfortunately, 60% of our workforce has been impacted by doing measures.

And about 20%.

Still affected.

As we speak.

In addition.

600 employees employees I also working for tanks. So I see department that agency provided the <unk> infrastructure and support intruding compliance with the sea bass security.

I like we do think of it trend.

Much stopped at very strong but April was impacted.

Finally as well.

Oh, no it's sort of showed some doors in kinda, though I need the U.S. with the exception to treat Quebec that <unk> Darfur lever for only a few days.

Oh, the orders I mean, <unk> <unk> central services with resources adapted sort of going because there's a lot.

We saw substantial improvement in me, which continued in June into manufacturers market, but especially in the retailers I didn't know visions of course towards market.

Oh, probably thing is to show customers.

We therefore decided to maintain oh and venture level.

Which bulls eye popping up here today, the higher than expected. The man. We are currently experiencing namely the retailers and it'll be films for South America.

I should also point out that's well, let's look down our acquisition strategy.

During the quarter, we continue to.

We don't if I knew acquisition.

Sounds good that meets all the valuation criteria.

On June 29, we completed.

Yes, we just trying to that got the asset central also supply.

What's your is a specialty distributor over anything in one location in Richmond, Virginia.

We are pleased to ship all presence you this strategic marketing function.

In addition.

Suddenly signed an agreement in principle for news tried to get equity you said in Canada.

To get a it will generate sales.

Fortunately $10 million.

No go towards one, but if you know children.

Thanks Richard.

Second quarter sales reached 248 point, threemillion down by 11.7% of which 6.6% growth from acquisition and 18.3% from internal degrees.

In Canada sales amounted 255.2 million down by 15.2% of which 4.1% growth from acquisition and 19.3% from internal degrees.

Were sales to manufacturers reached 124.5 million down by 18.2%.

That's where the hardware retailer is entering ovation superstores market.

Sales to that 30.8 million down <unk>, 0.6% of which 7.2% growth from acquisition and 7.8% from internal decreased largely impacted by the month of April with improvement in May.

In the U.S. sales totaled 66.5 million in U.S. dollar down 9%.

Sales to manufacturers reached 59 million your Wes.

A decrease of 8.2% over the second quarter of 2019 of which 5.9% growth from acquisition and 14.1% from internal degrees.

Sales in U.S. dollar to hardware, we theaters and renovation superstores were down 14.8% compared to last year, including 45% growth from acquisition and 59.8% from internal decrease resulting from higher cyclical sales last year.

Excluding this effect the internal growth in this market would have been 34%.

Total sales in the U.S. reached 93 million in Canadian dollar a decrease of 5% representing 37.5% of the total sales.

For the first half of 2020 sales totaled 497.7 million down, 1.9% of which 6.6% growth from acquisition and 8.5% from internal decreased.

In Canada sales reached 312 million down by 14 point, ninemillion or 4.6% of which 5% resulted from acquisition and 9.6% from internal decreased.

Sales to manufacturers reached 252.2 million down by 17.8 million or 6.6% of which 4.7% growth from acquisition and 11.2% from internal degrees.

Sales to hardware, we theaters and renovation superstores reached 59.8 million compared to 56.9 million up 5.1%.

And the U.S. sales amounted 236.8 million U.S. dollar up by 1.2% of which 9.6% growth from acquisition and 8.3% from internal decreased.

They reached 185.7 million in Canadian dollar up by 2.9% accounting for 37.2% of total sales.

Sales to manufacturers total are done and 21.8 million U.S. dollar an increase of 1.6 million or 1.3% over the same for your last year of which 4.3% growth from acquisition and 2% from internal decreased.

Sales to hardware retainers anyway innovation superstars were up 1% compared to last year.

Second quarter, EBITDA reached 33.8 million down by 5.6 million or 1.7% over last year, resulting from lower sales, partially offset by cost reduction measures and government grants.

Gross margin remained stable and the EBITDA margins stood at 13.6% compared to 12.2% last year.

First off EBITDA reached 58.7 million up 6%. The gross margin remained stable as for the EBITDA margin it stood up 11.8% compared to 10.9% last year, thanks to our cost control measures.

Second quarter net earnings attributable to shareholders totaled 17.7 million down 7% to 7.2% net earnings per share were 31 cents basic and diluted compared to 33 basic and diluted last year, a decrease of 6.1%.

First off net earnings attributable to shareholders reached 29 point Fivemillion up 1.5% diluted net earnings per share stood at 52 cents compared to 50 up 4%.

Second quarter cash flow from operating activities before net change in working capital balances amounted to 26.7 million or 40 cents 47 cents per share same level as last year, including the change in working capital balances our operating activities generated 49.4 million during the quarter.

For the first ask they were up 7.4% totaling 47 million or 83 cents per share.

For a second quarter of 2020 financing activities use cash flow of 3.8 million compared to 10.9 million last year.

This change mainly reflects the shares repurchase of four point Fivemillion and dividend paid to shareholders of 3.6 million in the second quarter of 2019, no dividends were declared for this second quarter of 2020.

First that financing activities use cash flow of 10.6 million compared to 17.5 in 2019.

During the first six months, we invested 29.4 million, including 23 point Fourmillion for the three act business acquisition, and 6 million primarily for the purchase of equipment to maintain an improved operational efficiency and software licenses.

We continue to benefit from a healthy and solid financial position cash balance of 42.6 million almost no that are working capital of 358 million for current ratio of 2.7 to one.

I now turn it over to Richard.

Hey, John one.

The quarterly trend that we have seen in May and June both in the manufacturers, especially in the retailers and innovations personal bucket is encouraging.

What we obviously remains very mindful on how the situation on the evolves in order to take action and address effectively when and as needed.

But we remain focused on keeping up business model, whether that they need a lot of customers both in Canada, India.

In order to meet the elite and not state that expectations.

We will ensure that just figure that you either concept.

Based on our diversified and unique longtail affordable products.

Oh distinctive multi so service access we must access service outstanding online. So this would you attribute that gone are the strongest spends about TV.

Supports effectively all customers in Canada and the ones.

With a strong financial position, we are pressuring Oh inhibition and equity is trying to strategies.

Which are the two key quote a long term value creation drivers for Richard.

We also I'd be drawn on that this morning, the board of directors.

The payment of a quarterly dividends of six points it since 67 cents per share.

Payable on August seven.

Conclusion.

I would like to warm it thanks.

Oh team and business partners for their support in this challenging period.

Thank you everyone now I'd be happy to answer your questions.

Thank you ladies and gentlemen, if you do have a question. Please press star followed by one on your Touchtone phone.

Here Athree, Tom from acknowledging you request and if you would like to withdraw your question simply press star followed by too and if you using a speakerphone. Please lets the handset before pressing entities.

I do note the questions are restricted to analysts.

And your first question will be from Hamir Patel ATSI RBC capital markets. Please go ahead.

Good afternoon.

Richard that can you comment on how the year over year sales comps changed over the course of sub Q2 and also what was the June sales comps.

The June sales year over year, I think you we see you will see the result.

Well, so far this quarter compared to last year, but the the amount of joined movie. So you can pull my first of all the the you stopped with very strong distributor was on the way it wasnt a good start to happen next tenants year.

And next time farmlands regarding the the does something EBITDA increased incentive and everything. So unfortunately the questions that you mentioned you know.

Took all sales down FFO for the last quarter it started with the down by 46%.

As of April.

And it went back up to 20.

Down to 20% in May open up to four to six enough. It rose by Big improvement and we've seen the retailers market basically booming since the month of me and this is continuity in June we just to give you an example.

The Monday June if we if we because wed.

All these in June that we had that last year, but if we go back for the same number. These sales are in June or how you go up by 4% although with the.

The manufacturers market, both in Canada, both bucket being down by 10% Andy a they are there any thought on market before the the what we call the cycle sales in Canada is up by 55% why did the same comparable sales in the U.S. off by 80%. So we see a very bidding on QUADRA.

Trend or what's going to happen. The next few months, we don't know, but I think actually we're quite happy with the equity Commission. We had we have to keep our eyes open about what will happen in the future.

Okay nurture that that's very helpful and as are we saying was that for Q2 of this year the whole quarter.

The sales day going to be similar to a a year ago.

20, so would there be same thing.

The extra color would be at same number.

With all the quarter this.

Got it.

Third quarter I'd say, it's one additional day one additional okay.

Okay, great. Thanks, that's helpful and Richard could you guys said.

Disclose what was the price you're paying for central wholesale supply and.

The.

The other transaction that you have under agreement.

The other I'd I.

The other transaction is a it's only a letter of intent that should be should be in a position to close or transaction in the room in the next few weeks, so nothing that position to disclose anything on this one but that far central on sales are we pay 2 million.

Okay, and then just last one I had in the last conference call you indicated that that you'd reduced senior management compensation in Q1, and some other I head count reductions that you have you started to maybe reverse some of those initiatives clearly the businesses, forming a lot better than you expect.

Good.

Like we said a few minutes ago equity.

60% of all I'm pleased with touch it via when we make the first movie early.

April and now about 20% or people that Phil Dutch all the people that that if you sort of answered what are we seeing two weeks ago that title results that were going to have for the second quarter. So I think that it's been a wise decision.

We established decided we wanted to get the central though that's the way of walking five days, a week and add the annual salary we all the above 20%. So that's what we've done the last couple of weeks, but would feel as though.

As we speak equity, we still have that trends with people equity on the on photos and we've got the 225 employees.

The war.

Our full days a week instead of fight.

I now being phased out accordingly.

Right Okay.

That's a that's all I had I'll I'll turn it over thank you. Thank you.

Thank you next question will be from Zachary Eversheds at National Bank Financial. Please go ahead.

Thank you good afternoon, congrats on the quarter.

Yes.

As the first question for you is on your EBITDA in the quarter. This strong margins how much of that can you attribute to the government grants and how much goes to cost saving initiatives.

Yeah.

The government grants that.

Is that 2.2 million. So if you exclude that 2.2 million the EBITDA would still be slightly higher than the EBITDA percentage was that we're still be slightly higher than the slightly higher than last year.

That's helpful. Thanks, and you have visibility on how much of that 3.2 will correct in Q3 and beyond.

Yeah. We're currently evaluating that the amounts relating to the period eligibility ability period ending June 6th.

It should that should be it should be in the same at the same ballpark.

Excellent. Thank you.

You also need a reference to some postpone payments, which provided a lift to cash from operations.

Is that specifically the swing in accounts payable and Thats what accounts for it.

Yes, you are you are correct yet.

Close to $15 million. So some of these these delays were up for payment in June.

June Thirtyth. So those are done but were worse there we're benefiting from a from everything we weekend and that's one of the reason why you've you've seen the the payables increased.

Absolutely So June thirtyth, you've you've already caught up on that.

Yes.

Perhaps.

And then we covered the in selections Q3 beautiful.

How is your how's your pipeline looking on going forward on M&A. After the two most recent ones close.

I still strong is still strong in both the both Canada and U.S. So we're.

We're keeping our eyes open so this situation might.

Might also creates a more opportunities so but as we speak we have a though we still have nice files the open and the way.

We we are not slowing down.

Perfect and then one last one from me, there's real infection hot spots developing in the us.

Making any specific preparations for shutting down operations of gas closures. There are you going to take it as it comes.

Prepare for everything we now.

We know how we now equity to operate in those circumstances, so things get worse in such an area. We certainly will react as rapidly as we did in the past.

Talk to our U.S. management people last week, so far things I'd, rather stable, but we keep our eyes opened on that and that is necessarily we've taken this is any actions very quickly.

Hopefully that will not result in closing some some decent.

Fantastic Thats helpful I'll leave it there.

Okay. Thank you.

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Once again, ladies and gentlemen, if you do have a question at this time. Please press star followed by one on your Touchtone phone.

And at this time Mr. law, we have no other questions I'd like to turn the call back over to you Sir.

So it's always a figure to talk to you guys do not hesitate to call. It asks if you have any more question I have a unit holder whereby.

Thank you ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.

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