Unisync Reports Year Over Year Improvement in Q3 EBITDA Despite Unprecedented Economic Challenges Caused by COVID-19
August 14 2020 - 8:30AM
Unisync Corp. (TSX: "UNI") (the “Company") operates through two
business segments: Unisync Group Limited (“UGL”) headquartered in
Mississauga, Ontario and Peerless Garments LP (“Peerless”) based in
Winnipeg, Manitoba.
Consolidated revenue for the three months ended
June 30, 2020 (“Q3 2020”) of $17.2 million decreased by $4.4
million or 20% over the three months ended June 30, 2019 (“Q3
2019”) on a $5.5 million revenue drop in the UGL segment partially
offset by a $1.1 million revenue improvement in the Peerless
segment. Revenue for the 9 month period ended June 30, 2020 of
$72.0 million was 25% higher than the $57.6 million reported for
the same period last year.
UGL segment revenue of $12.2 million decreased
by 31% over Q3 2019 caused by the impact of the COVID-19
pandemic which particularly effected its customers in the airline
and hospitality sectors. UGL’s major airline customers announced
substantial reductions in flights in conjunction with substantial
staff layoffs resulting in a combined $3.2 million decrease in
uniform sales to these customers from Q3 2019. Hospitality sector
uniform sales to casino and amusement park operators were down $1.4
million as these businesses were either closed or at limited
capacity for most of the current quarter across North America. The
UGL segment’s sales to customers in the retail and food services
industries were also negatively impacted to varying degrees in the
quarter while public safety sector sales were steady. In order to
minimize the impact of the pandemic on Company revenues and to
react to the changing marketplace, the UGL segment pivoted to
pursue personal protective equipment (“PPE”) opportunities
generating sales with existing and new customers of $3.0 million in
Q3 2020. Most of these PPE sales were in the form of disposable and
reusable non-medical masks. Included in the revenue increase
experienced by the Peerless segment in Q3 2020 was $0.3 million of
PPE sales in the form of masks and gowns manufactured at the
segment’s Winnipeg facility.
Gross profit for Q3, 2020 of $2.1 million or 12%
of revenue was down from $2.9 million or 13% of revenue in Q3 2019.
The UGL segment recorded gross profit of $1.2 million or 10% of
segment revenue compared to $2.3 million or 13% of segment revenue
in Q3 2019. The decline in gross profit in the UGL segment was
caused by both the change in sales mix with higher margin managed
uniform program sales being substituted with lower margin PPE sales
plus the effect of a lower volume of sales on the fixed facility
costs. To lessen the impact caused by the decline in revenues, the
UGL segment reduced staffing by 117 employees or 44% at the
beginning of Q3 2020 and accessed the Canadian Emergency Wage
Subsidy and the United States Paycheck Protection programs to
support the payroll costs of the remaining employees. The Peerless
segment recorded gross profit of $1.1 million or 22% of segment
revenue in Q3 2020 against $1.0 million or 25% of segment revenue
in Q3 2019.
Total general and administrative expenses of
$3.3 million for Q3 2020 fell $1.3 million or 28% from Q3 2019
primarily due to both staff reductions and the wage subsidy
programs.
The Company’s net loss of $1.1 million in Q3
2020 compared to a net loss of $1.6 million in Q3 2019. Adjusted
EBITDA (comprehensive income before interest expense, income taxes,
depreciation and amortization, share-based payment, and acquisition
related costs) was a loss of $0.4 million compared to a loss of
$0.9 million for the comparable quarter last year.
More detailed information is contained in the
Company’s Interim Financial Statements for the three months ended
June 30, 2020 and Management Discussion and Analysis dated August
13, 2020 which may be accessed at www.sedar.com.
Business Outlook
Notwithstanding the significant downturn in business caused by the
pandemic, Unisync continues to build its base of long-term managed
uniform customers with major well-known corporations and government
agencies during these difficult times. The UGL segment has added a
number of new corporate clients this fiscal year and is placing an
increased focus on government accounts which has resulted in the
award of a long-term managed contract for the supply of uniforms to
the Canadian Coast Guard. We are also short-listed on a number of
other Requests for Proposals (“RFPs”) both in Canada and the US. As
our base of long-term managed uniform accounts continues to expand
and our larger existing long-term accounts currently experiencing
major layoffs start to gradually return to normal capacity levels
over the next year or two, Unisync is positioned to achieve
continued growth combined with more normal levels of
profitability.
Unisync recently announced the launch of its new
eCommerce venture, Tactical Gear Experts (“TGE”), targeting the
Outdoor, Tactical and Lifestyle product markets across Canada and
the USA. This B2C and B2B eCommerce platform represents a major
growth opportunity for Unisync that will provide consumers with a
broad selection of the very best Tactical and Outdoor equipment
shipped across Canada and the USA drawing on our decades of
experience as a major Canadian military and public safety
supplier.
In addition, our management team is working
aggressively to pursue significant opportunities in the PPE space
with bids ongoing for large volume contracts at all levels of
government in Canada and the United States.
An RFP document for the supply and management of
operational clothing and footwear (“OCFC2”) was released by the
Canadian Federal Government in 2019 soliciting bidders for a
20-year $1 billion contract. The OCFC2 contract involves the DND’s
plans to outsource the procurement, warehousing and distribution of
operational clothing, footwear, and personal equipment under one
contract. The contract is expected to include provisions for the
development of a direct delivery system between the contractor and
the individual military member for select items and include a
services component for the improvement and development of related
items. UGL’s Canadian distribution capabilities combined with
Peerless’ domestic manufacturing experience with the DND provide
industry leading domestic qualifications for the Company’s bid.
Responses to the OCFC2 RFP bid are now due in January
2021.
On Behalf of the Board of Directors
Matthew GrahamCEO
Investor relations
contact: Douglas F Good, Executive Chairman
Tel. 778-370-1725 Email
dgood@unisyncgroup.com
Forward Looking StatementsThis
news release may contain forward-looking statements that involve
known and unknown risk and uncertainties that may cause the
Company’s actual results, performance or achievements to be
materially different from any future results, performance or
achievements expressed or implied in these forward-looking
statements. Any forward-looking statements contained herein are
made as of the date of this news release and are expressly
qualified in their entirety by this cautionary statement. Except as
required by law, the Company undertakes no obligation to publicly
update or revise any such forward-looking statements to reflect any
change in its expectations or in events, conditions or
circumstances on which any such forward-looking statements may be
based, or that may affect the likelihood that actual results will
differ from those set forth in the forward-looking statements.
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