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BMTC Group Inc. announces financial results for its year ended January 31st, 2018

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BMTC Group Inc. announces financial results for its year ended January 31st, 2018

Canada NewsWire

MONTREAL, April 17, 2018 /CNW Telbec/ -

Results

For the year ended January 31st, 2018 (a 13 month period), the Company's revenues increased by $63,495,000 to $810,144,000, compared to $746,649,000 recorded for the year ended December 31st, 2016 (a 12 month period). The increase in revenues for the comparable periods would have been 1%. Same store revenues for the comparable periods would have increased by 1%. Net earnings for the year ended January 31st, 2018 (a 13 month period), amounted to $49,335,000 compared to $43,830,000 recorded for the year ended December 31st, 2016 (a 12 month period). Basic net earnings per share amounted to $1.36 compared to $1.17. The contribution to net earnings for the month of January was $167,000, which had no impact on net earnings per share.

The $25,433,000 increase of the gross margin can be explained by the increase of revenues.

The following summarizes the Company's operations as well as the impact of the increase in commercial and administrative expenses as at January 31st, 2018 and December 31st, 2016.

 

Adjusted retail operating earnings

($ in thousands)




Jan. 31, 2018


Dec. 31, 2016


Variation




(13 months)


(12 months)



Operating earnings

65 372


51 845


13 527

Adjustment








Variation of cost of options before tax

241


(44)


285




65 613


51 801


13 812









Income tax





(3 855)

Variation in adjusted operating earnings





9 957









Commercial expenses

($ in thousands)




Jan. 31, 2018


Dec. 31, 2016


Variation




(13 months)


(12 months)



Commercial expenses

208 003


198 874


9 129











Variable cost of sales*





10 564



Decrease in amortization





(1 435)








9 129









Adjusted administrative expenses

($ in thousands)




Jan. 31, 2018


Dec. 31, 2016


Variation




(13 months)


(12 months)



Administrative expenses

50 176


47 612


2 564


Adjustments








Variation of cost of options before tax

(241)


44


(285)

Variation in adjusted administrative expenses

49 935


47 656


2 279









The increase in the adjusted administrative expenses of $ 2,279,000 is explained as followed:















Salary and administration





3 277


Expenses related to pension plans





(2 102)


Expenses related to web and IT





1 548


Other





(444)









Increase in adjusted administrative expenses





2 279


* The increase in variable cost of sales is directly related to the increase of $63,495,000 in revenues.

 

The effect of the cost of options had no impact on basic net earnings per share for the year ended January 31st, 2018 (a 13 month period) and December 31st, 2016 (a 12 month period).

For the year ended January 31st, 2018 (a 13 month period), the share repurchase program contributed to an increase in basic net earnings per share of $0.03.

Excluding all these effects, the variation to the adjusted net earnings would have been $5,715,000 or $0.16 per basic share for the year ended January 31st, 2018 (a 13 month period).

The $5,715,000 variation in adjusted net earnings is as follows:

 




($ in thousands)




Jan. 31, 2018




Dec. 31, 2016



13 months




 12 months








Net earnings


49 335




43 830

Variation of cost of options (after-tax)


178




(32)

Adjusted net earnings


49 513




43 798

Minus: Adjusted net earnings for 2016


43 798












Variation


5 715





 

This variation in adjusted after-tax income is allocated throughout the quarters as follows:

 


($ in thousands)








Increase


Increase


Increase


 (decrease)


(decrease)


(decrease)


retail operating


investment


adjusted


earnings


income


operating earnings







1st quarter

(1 479)


2 424


945

2nd quarter

2 618


(999)


1 619

3rd quarter

5 360


(2 515)


2 845

4th quarter *

3 458


(3 152)


306

Total

9 957


(4 242)


5 715







* A 4 month period ended January 31st, 2018.

 

Annual Financial Information




($ in thousands, except for per share amounts)






Jan. 31, 2018


Dec. 31, 2016



 13 months


12 months



$


$

Revenue

810 144


746 649

Net Earnings

49 335


43 830

Total Assets

312 569


309 483

Net Earnings Per Share





Basic

1,36


1,17


Diluted

1,36


1,17

Dividends Per Share

0,24


0,24

 

Financial Position and Dividends

Cash and investments increased by $5,931,000 during the year ended January 31st, 2018. Investments consist of bank notes, which at the close of the year had a market value of $90,848,000 (including cash).

As at January 31st, 2018, the working capital showed a deficit of $8,331,000 a decrease of $22,067,000 compared to the year ended December 31st, 2016. The Company's shareholders' equity increased from $199,681,000 as at December 31st, 2016 to $204,376,000 as at January 31st, 2018. As of January 31st, 2018, the book value per share stood at $5.82, compared to $5.42 as at December 31st, 2016.

Pursuant to the normal course issuer bid put in place on March 14th, 2016, and renewed on March 23rd 2017, accordingly, 1,740,000 Common Shares were repurchased and cancelled by the Company. As a result of this change, the Company had as of January 31st, 2018, 35,120,000 Common Shares issued and outstanding.

During the year ended January 31st, 2018 (a 13 month period), no options were granted or exercises.  As at January 31st, 2018, options for 219,000 Common Shares, representing 0.6% of the Company's outstanding shares remain issued and 5,710,864 authorized share options, representing approximately 16.3% of the Company's outstanding shares, may still be granted pursuant to the Plan. The issued and outstanding options may be exercised at a price of $17.85 per Common Shares.

During the fiscal year ended January 31st, 2018, the Company paid eligible dividends totaling $0.24 per Common Shares to holders.

Company Pension Plans and treatment of future actuarial gains and losses

As at January 31st, 2018, the Company established the accounting cost of pension benefits according to the International Financial Reporting Standards (IFRS).

The accounting cost of pension benefits earned by employees is determined by actuarial calculations based on management's best estimate assumptions, with the exception of the discount rate used to calculate the present value of projected pension liabilities, which is dictated by IFRS.

In accordance with IFRS, a discount rate of 3.55% was used as at January 31st, 2018, whereas a discount rate of 3.95% was used as at December 31st, 2016. The discount rate must reflect the rate of return of high quality corporate bonds which cash flows match those of the Pension Plans.

According to IFRS, the plans presented a surplus of $6,767,000 as at January 31st, 2018. In 2016, the surplus was of $18,042,000. The financial position of the Pension Plans has decreased over the last year. This change is mainly due to the increase of the present value of obligations arising from a decrease in the discount rate.

For the period between January 1, 2017 and January 31, 2018, the pension expense amounted to $9,011,000 while contributions made by the Company for all plans combined amounted to $15,505,000, of which $8,617,000 was for current service and $6,888,000 for special contributions (compared to a pension expense of $11,113,000 in 2016).

The current IFRS result in a relatively predictable pension expense. For the year ending January 31st, 2019, the pension expense is estimated to be between $8,750,000 and $9,750,000.

An actuarial valuation for funding purposes of the supplemental pension plan as at December 31, 2015, revealed a surplus on a going-concern basis of $26,197,000 and a deficit on a solvency basis of $18,872,000. The Company has no special payments to make since there is a surplus on a going-concern basis and the stabilization provision is fully funded. The date of the next actuarial valuation for funding purposes is December 31st, 2018.

As at January 1st, 2016, the supplemental pension plan was modified in a way that any eligible employee hired after December 31, 2015 is solely entitled to defined contribution benefits.

 

Quarterly Results







($ in thousands, except for per share amounts)








March 31st



June 30th



2017

2016


2017

2016


$

$


$

$

Revenue

161 998

154 943


199 314

197 043

Net Earnings

57

(958)


14 014

12 407

Net Earnings Per Share












Basic

-

(0,02)


0,38

0,32







Diluted

-

(0,02)


0,38

0,32








September 30th



January 31st

December 31st





2018

2016


2017

2016


(4 months)

(3 months)


$

$


$

$

Revenue

203 722

197 612


245 110

197 051

Net Earnings

17 544

14 708


17 720

17 673

Net Earnings Per Share












Basic

0,48

0,40


0,50

0,47







Diluted

0,48

0,40


0,50

0,47

 

For the four month period ended January 31st, 2018, the Company's revenues increased by $48,059,000 to $245,110,000, compared to $197,051,000 recorded for the three month period ended December 31st, 2016. The decrease in revenues for the comparable periods would have been 1%. Same store revenues for the comparable periods would have decreased as well by 1%. Net earnings for the four month period ended January 31st, 2018, amounted to $17,720,000 compared to net earnings of $17,673,000 recorded for the three month period ended December 31st, 2016. Basic net earnings per share increased to $0.50 compared to $0.47. The contribution to net earnings for the month of January 2018 was $167,000, which had no impact on net earnings per share.

The effect of the cost of options had no impact on basic net earnings per share for the four month period ended January 31st, 2018, and the three month period ended December 31st, 2016.

For the four month period ended January 31st, 2018, the share repurchase program contributed to an increase in basic net earnings per share of $0.02.

Excluding all these effects, the variation to the adjusted net earnings would have been $306,000 or $0.01 per basic share for the quarter ended December 31st, 2016.

The $306,000 variation in adjusted net earnings is as follows:

 




($ in thousands)




Jan. 31, 2018




Dec. 31, 2016



 4 months




 3 months








Net earnings


17 720




17 673

Variation of cost of options (after-tax)


248




(11)

Adjusted net earnings


17 968




17 662

Minus: Adjusted net earnings for 2016


17 662












Variation


306





 

Operations

BMTC Inc.

The Company proceeded to change its financial year end date from December 31st to January 31st. This change came into effect with the current financial year end, therefore the accounting period of the 2018 consolidated financial statements corresponds to a 13 month period ending January 31st, 2018. Starting February 1st, 2018, the unaudited interim financial statements will correspond to the quarters ending in April 30th, July 31st and October 31st.

The Company continues to restructure all of its websites and the first phase of the implementation of a distinct e-commerce platform for its banner Brault & Martineau and EconoMax is now completed and operational. The process of implementation will continue throughout 2018 and 2019 for the following phases as well as the restructuring for all the other banners of the Company. The Company is also reviewing its IT systems in to order standardise them throughout the banners, as well as to allow them to be more aligned with our e-commerce strategies. Following this evaluation, the Corporation decided to invest and to modify its existing IT systems, the integration and implementation will continue for a 3 to 5 year period. The cost of these modifications are estimated to be $17,000,000. A portion of these costs, $11,000,000 were incurred and the balance will be recorded in the subsequent years.

Brault & Martineau Division

The Company concluded the purchase of land at the junction of the Highway 15 and route 117 for the construction of the new 80,000 square foot prototype store that will replace the Ste-Thérèse store. The opening of this new store is scheduled in January 2019. In February 2018, the Company sold the Repentigny store for an amount of $9,000,000, which resulted in after tax profit $4,522,000. The store officially closed its operations on November 6th, 2017. Management believes that our current store network will be able to cover this region and therefore not affect the Company's sales.

The Company proceeded to close the last 2 remaining Sleep Gallery stores on January 31st, 2018, the St-Jérôme and the Mascouche stores. The Company will continue to sell the same wide range of mattresses, box springs and bedding accessories at the best price in its Brault & Martineau stores as it currently does. To that effect, the Sleep Gallery department located inside the Brault & Martineau mega stores will remain in operation. The Company believes that the closure of the six Sleep Gallery stores will not have any material impact on the Company's financial performance.

Management Discussion and Outlook for the Future of the Company

The Quebec economy in 2017 has known the most important growth since the last recession in 2008. Consumer spending continues to have an important impact on economic growth and it has increased by 6.2% for all industries during the first semester of the year while the Company's growth was 3%. The unemployment rate is at a historic low in Quebec, which should conjugate with an increase of disposable income, although a survey conducted by the Canadian Association of pay revealed that in Quebec, 34% of people live from one pay check to the other, mainly due to the increase of their debt burden. The continuing trend of interest rate increase during 2018 would certainly risk to further undermine this situation and would therefore have a negative impact on consumer spending.

The retail sector is in complete transformation. The e-commerce and the client's shopping experience are at the heart of this transformation. In fact, the bankruptcy forecast for the traditional brick and mortar retailers south of the border would reach and all-time record. According to Credit Suisse forecast, no less than 8,600 stores would close their operations in 2018.

In Quebec, one person out of ten now shop online with a monthly average basket of $281, according to the data compiled by CEFRIO. Online sales in retail represent 10%, although influences drive to store up to 56%.

The Company is confident that its market positioning thanks to the different banners, the innovation of its brick and mortar stores and the major investments towards IT systems and e-commerce will permit to respond to the changing reality of the retail sector and allow to maintain its leading market shares.

Caution regarding forward-looking statements

This press release contains certain forward-looking statements with respect to the Company. These forward-looking statements are identified by the use of terms and phrases such as "anticipate", "believe", "estimate", expect", "intend", "may", "plan", "predict", "project", "will", "would", as well as the negative of these terms and similar terminology, including references to assumptions.

It is impossible to isolate and measure the importance of each individual risk to which the Company is exposed. In the past, the Company has managed to adapt to these changes and maintain its market share notably by aggressive marketing campaigns and efficient management.

Forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by these forward-looking statements. Results indicated in forward-looking statements may differ materially from actual results for a number of reasons which the Company has identified in the 2016 Annual Information Form under "Narrative Description of the Business - Risk Factors", and other risks detailed from time to time in the Company's continuous disclosure documents.

The reader is cautioned that the factors to which we refer above are not exhaustive of the factors that may affect any of the Company's forward-looking statements. The reader is also cautioned to consider these and other factors carefully and not to put undue reliance on forward-looking statements.

The Company made a number of assumptions in making forward-looking statements in this press release. The Company considers the assumptions on which these forward-looking statements are based to be reasonable.

These statements reflect current expectations regarding future events and operating performance and speak only as of the date of release of this press release, and represent the Company's expectations as of that date. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law.

Non International Financial Reporting Standards (IFRS) financial measures

The Company discloses adjusted net earnings, which includes or excludes certain amounts that are not considered representative of performance measures and financial recurrence of the Company. Management believes that this measure is useful in understanding and analysing the operational performance of the Company and more appropriate to provide additional information.

The Company also discloses same store revenues, which have been realised in stores opened or closed for comparable months. This measure is used by management and is a similar measures presented by other issuers in our industry.

Adjusted net earnings as well as same store revenues are not an earnings measure recognised by IFRS and does not have a standardised meaning prescribed by IFRS. Therefore, adjusted net earnings and same store revenues as discussed in this MD&A may not be compared to similar measures presented by other issuers. This measure of performance should not be considered as an alternative as an indicator of performance calculated according to IFRS, but rather as additional information.

The Company discloses in this MD&A under the section "Results" a reconciliation between net earnings and adjusted net earnings.

BMTC Group Inc.'s Common Shares are listed on the Toronto Stock Exchange and through its subsidiary Ameublements Tanguay Inc., and its two divisions, Brault & Martineau and EconoMax, the Company is a major retailer of furniture, electronic goods and household appliances operating in the province of Quebec.

 

SOURCE BMTC Group Inc.

View original content: http://www.newswire.ca/en/releases/archive/April2018/17/c3106.html

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