TORONTO, Aug. 9, 2018 /CNW/ - Leon's Furniture
Limited ("Leon's" or the "Company") (TSX:
LNF), today announced financial results for the second quarter
2018.
Highlights – Q2-2018
- Total system wide sales1 grew 2% to $650,012,000 in Q2-2018 compared to $637,475,000 in Q2-2017.
- Revenue grew 1.5% to $546,729,000
in Q2-2018 compared to $538,899,000
in Q2-2017.
- Adjusted EBITDA1 increased 5.3% to $42,291,000 in Q2-2018 compared to $40,163,000 in Q2-2017.
- Adjusted net income1 increased by 13.2% to
$22,595,000 in Q2-2018 compared to
$19,968,000 in Q2-2017.
- Adjusted diluted earnings per share1 grew 12% to
$0.28 in Q2-2018 compared to
$0.25 in Q2-2017.
Highlights – six months end June
30th
- Total system wide sales1 grew 3.3% to $1,251,153,000 year to date June 2018 compared to $1,211,464,000 year to date June 2017.
- Revenue grew 2.4% to $1,047,448,000 year to date June 2018 compared to $1,023,088,000 year to date June 2017.
- Adjusted net income1 increased by 19.7% to
$34,140,000 year to date June 2018 compared to $28,511,000 year to date June 2017.
- Adjusted EBITDA1 increased 7.3% to $68,867,000 year to date June 2018 compared to $64,169,000 year to date June 2017.
- Adjusted diluted earnings per share1 grew 16.7% to
$0.42 year to date June 2018 compared to $0.36 year to date June
2017.
1Refer to the non-IFRS financial measures section
of this press release
In recognition of our record positive results and confidence in
our organization, the Directors are happy to announce that the
quarterly dividend will be increased by 16.7% from 12 cents to 14
cents.
"We would like to thank the entire team for their productive
efforts during the first half of fiscal 2018. During this period,
Leon's continued to produce significant operating leverage, driving
adjusted diluted earnings per share up by 12% in Q2 and by 16.7% in
the first half of the year," said Edward
Leon, President and Chief Operating Officer of Leon's. "For
the balance of 2018 and into 2019 our team will remain focused on
select initiatives to drive traffic and average ticket, with robust
cost control and efficiencies. We are well-positioned to continue
to generate meaningful value for our shareholders over the next
several years, leveraging our national retail bricks and mortar
footprint, service related companies, real estate portfolio,
successful online properties and industry-leading distribution
infrastructure."
The Board is announcing today that effective October 1, 2018, Terry
Leon is retiring as CEO and will become the Vice Chair of
the Board. Edward Leon
will become CEO in addition to his current position as President of
Leon's Furniture Limited.
The Directors have also approved, subject to obtaining
regulatory approvals, the reinstatement of the Company's Normal
Course Issuer Bid, which last expired on September 9, 2013. Pursuant to the bid, the
Company intends, in the twelve months commencing September 10, 2018, to purchase up to the lesser
of 4.99% of its Common Shares outstanding on August 31, 2018, and the amount equal to 4.99% of
its Common Shares outstanding on the date the Toronto Stock
Exchange accepts the notice of intention to make a normal course
issuer bid.
For a full explanation of the Company's use of non-IFRS
financial measures, please refer to the next page of this press
release.
Summary of Financial Highlights
|
|
For the three
months ended June 30
|
|
(000's of $ except
% and per share amounts)
|
|
2018
|
|
2017
|
$
Increase
|
%
Increase
|
|
Total system wide
sales (1)
|
|
650,012
|
|
637,475
|
|
12,537
|
2.0%
|
|
Franchise sales
(1)
|
|
103,283
|
|
98,576
|
|
4,707
|
4.8%
|
|
Revenue
(2)
|
|
546,729
|
|
538,899
|
|
7,830
|
1.5%
|
|
Same store sales
(1)
|
|
536,191
|
|
533,907
|
|
2,284
|
0.4%
|
|
Gross profit margin
as a percentage of revenue
|
|
43.13%
|
|
43.27%
|
|
|
|
|
SG&A(3)(excluding mark-to-market
impact)
|
|
203,236
|
|
202,525
|
|
711
|
0.4%
|
|
SG&A(3)as a percentage of revenue
(excluding mark-to-market impact)
|
|
37.17%
|
|
37.58%
|
|
|
|
|
Adjusted
EBITDA(1)
|
|
42,291
|
|
40,163
|
|
2,128
|
5.3%
|
|
Adjusted net
income(1)
|
|
22,595
|
|
19,968
|
|
2,627
|
13.2%
|
|
Net income
|
|
23,975
|
|
18,863
|
|
5,112
|
27.1%
|
|
Adjusted basic
earnings per share(1)
|
$
|
0.30
|
$
|
0.28
|
$
|
0.02
|
7.1%
|
|
Adjusted diluted
earnings per share(1)
|
$
|
0.28
|
$
|
0.25
|
$
|
0.03
|
12.0%
|
|
Common share
dividends declared
|
$
|
0.12
|
$
|
0.12
|
$
|
-
|
0.0%
|
|
(1) Non-IFRS
financial measures. Refer to "Non-IFRS Financial Measures" section
in this press release for additional information.
|
|
(2) Reclassified
comparative results to conform to the presentation of the three
months ended June 30, 2018
|
|
(3) Selling, general
and administrative expenses
|
Revenue
For the three months ended June 30,
2018, revenue was $546,729,000
compared to $538,899,000 in the prior
year's second quarter. Revenue increased $7,830,000 or 1.5% between the comparative
quarters as we continued to see growth in most product
categories.
Selling, general and administrative expenses
("SG&A")
Excluding the mark-to-market impact of the Company's financial
derivatives, comprised of foreign exchange forwards and a fixed
interest rate swap, SG&A as a percentage of revenue decreased
from 37.58% to 37.17% compared to the prior year's quarter.
The reduction is due primarilly from generating continued operating
leverage as revenues increased 1.5% for the three month period.
Adjusted Net Income and Adjusted Diluted Earnings Per
Share
As we continue to reduce our debt this has enabled us to reduce
our net finance charges by $896,000
between the comparative quarters. As a result of the factors
above, adjusted net income for the second quarter of 2018 was
$22,595,000. This resulted in
an adjusted diluted earnings per share of $0.28 in the quarter ($19,968,000, $0.25
adjusted diluted earnings per share in 2017), an increase of 12%
per share.
Consolidated operating results for the six months ended
June 30, 2018 and June 30, 2017
|
|
For the six months
ended June 30
|
|
(000's of $ except
% and per share amounts)
|
|
2018
|
|
2017
|
$
Increase
|
%
Increase
|
|
Total system wide
sales (1)
|
|
1,251,153
|
|
1,211,464
|
|
39,689
|
3.3%
|
|
Franchise sales
(1)
|
|
203,705
|
|
188,376
|
|
15,329
|
8.1%
|
|
Revenue
(2)
|
|
1,047,448
|
|
1,023,088
|
|
24,360
|
2.4%
|
|
Same store sales
(1)
|
|
1,028,156
|
|
1,013,264
|
|
14,892
|
1.5%
|
|
Gross profit margin
as a percentage of revenue
|
|
42.97%
|
|
42.63%
|
|
|
|
|
SG&A(3)(excluding mark-to-market
impact)
|
|
400,138
|
|
391,171
|
|
8,967
|
2.3%
|
|
SG&A(3)as a percentage of revenue
(excluding mark-to-market impact)
|
|
38.20%
|
|
38.23%
|
|
|
|
|
Adjusted
EBITDA(1)
|
|
68,867
|
|
64,169
|
|
4,698
|
7.3%
|
|
Adjusted net
income(1)
|
|
34,140
|
|
28,511
|
|
5,629
|
19.7%
|
|
Net income
|
|
38,501
|
|
27,477
|
|
11,024
|
40.1%
|
|
Adjusted basic
earnings per share(1)
|
$
|
0.45
|
$
|
0.40
|
$
|
0.05
|
12.5%
|
|
Adjusted diluted
earnings per share(1)
|
$
|
0.42
|
$
|
0.36
|
$
|
0.06
|
16.7%
|
|
Common share
dividends declared
|
$
|
0.24
|
$
|
0.24
|
$
|
-
|
0.0%
|
|
(1) Non-IFRS
financial measures. Refer to "Non-IFRS Financial Measures" section
in this press release for additional information.
|
|
(2) Reclassified
comparative results to conform to the presentation of the six
months ended June 30, 2018
|
|
(3) Selling, general
and administrative expenses
|
Revenue
For the six months ended June 30,
2018, revenue was $1,047,448,000 compared to $1,023,088,000 in the prior year's second
quarter. Revenue increased $24,360,000 or 2.4% for the comparative
period.
Selling, general and administration expenses
("SG&A")
Excluding the mark-to-market impact of the Company's financial
derivatives, comprised of foreign exchange forward and fixed
interest rate swap, SG&A as a percentage of revenue was
marginally lower at 38.2% due to the continued effectiveness of
controlling costs.
Adjusted Net Income and Adjusted Diluted Earnings Per
Share(1)
As we continue to reduce our debt this has enabled us to reduce
our net finance charges by $1,735,000
between comparative periods. As a result of the factors
above, adjusted net income for the six month period ending
June 30, 2018 was $34,140,000. This resulted in an adjusted
diluted earnings per share of $0.42
($28,511,000, $0.36 adjusted diluted earnings per share in
2017), an increase of 16.7%.
Dividends
As previously announced, we paid a quarterly 12¢ dividend on
July 6, 2018. Today we are happy to
announce that the Directors have declared an increase of the
quarterly dividend to 14¢ per common share payable on the
5th day of October
2018 to shareholders of record at the close of business on
the 5th day of September
2018. As of 2007, dividends paid by Leon's Furniture Limited
are "eligible dividends" pursuant to the changes to the Income Tax
Act under Bill C-28, Canada.
Outlook
Overall, we are pleased that we were able to improve our
financial results in the second quarter of 2018. We remain
focused on increasing our promotional activities on a selective
basis for the second half of the year, while maintaining gross
margins and continuing to drive efficiencies.
Store Network
The Company has 304 retail stores from coast to coast in
Canada under the various banners
indicated below which also includes 100 franchise locations.
Including our franchises, we have over 10,000 employees across
Canada.
|
Number of
Stores
|
|
|
Number of
Stores
|
|
as at December
31,
|
|
|
as at June
30,
|
|
Banner
|
2017
|
Opened
|
Closed
|
2018
|
|
Leon's banner
corporate stores
|
50
|
—
|
—
|
50
|
|
Leon's banner
franchise stores
|
36
|
—
|
—
|
36
|
|
Appliance Canada
banner stores
|
4
|
—
|
—
|
4
|
|
The Brick banner
corporate stores1
|
114
|
—
|
—
|
114
|
|
The Brick banner
franchise stores
|
65
|
—
|
(1)
|
64
|
|
The Brick Mattress
Store banner locations
|
23
|
1
|
—
|
24
|
|
Brick
Outlet
|
12
|
—
|
—
|
12
|
|
Total number of
stores
|
304
|
1
|
(1)
|
304
|
|
|
|
|
|
|
1Includes
the Midnorthern Appliance banner
|
|
|
|
|
Non-IFRS Financial Measures
The Company uses financial measures that do not have
standardized meaning under IFRS and may not be comparable to
similar measures presented by other entities. The Company
calculates the non-IFRS financial measures by adjusting certain
IFRS measures for specific items the Company believes are
significant, but not reflective of underlying operations in the
period, as detailed below:
|
Non-IFRS
Measure
|
IFRS
Measure
|
|
Adjusted net
income
|
Net income
|
|
Adjusted income
before income taxes
|
Income before income
taxes
|
|
Adjusted earnings per
share – basic
|
Earnings per share –
basic
|
|
Adjusted earnings per
share – diluted
|
Earnings per share –
diluted
|
|
Adjusted
EBITDA
|
Net income
|
For a reconciliation of the Company's non-IFRS financial
measures please refer to the Company's MD&A for the quarter
ended June 30, 2018, which is
available on SEDAR at www.sedar.com.
Adjusted Net Income
Leon's calculates comparable measures by excluding the effect of
the mark-to-market adjustments included in the Company's SG&A
income statement line item, related to the net effect of
USD-denominated forward contracts and an interest rate swap on the
Company's term credit facility;
Management believes excluding from income the effect of these
mark-to-market valuations and changes thereto, until settlement,
better aligns the intent and financial effect of these contracts
with the underlying cash flows. Similarly, excluding from
income the effect of non-recurring expenses better reflects Leon's
normalized SG&A as a percentage of revenue in the period.
Adjusted EBITDA
Adjusted earnings before interest, income taxes, depreciation
and amortization, mark-to-market adjustment due to the changes in
the fair value of the Company's financial derivative instruments
and non-recurring charges to income ("Adjusted EBITDA") is a
non-IFRS financial measure used by the Company. The Company
considers Adjusted EBITDA to be an effective measure of
profitability on an operational basis and is commonly regarded as
an indirect measure of operating cash flow, a significant indicator
of success for many businesses. Adjusted EBITDA is a non-IFRS
financial measure used by the Company. The Company's Adjusted
EBITDA may not be comparable to the Adjusted EBITDA measure of
other entities, but in management's view appropriately reflects
Leon's specific financial condition. This measure is not
intended to replace net income, which, as determined in accordance
with IFRS, is an indicator of operating performance.
Same Store Sales
Same store sales are defined as sales generated by stores that
have been open for more than 12 months on a fiscal basis. Same
store sales is not an earnings measure recognized by IFRS, and does
not have a standardized meaning prescribed by IFRS, but it is a key
indicator used by the Company to measure performance against prior
period results. Same store sales as discussed in this press
release may not be comparable to similar measures presented by
other issuers, however this measure is commonly used in the retail
industry. We believe that disclosing this measure is
meaningful to investors because it enables them to better
understand the level of growth of our business.
Total System Wide Sales
Total system wide sales refer to the aggregation of revenue
recognized in the Company's consolidated financial statements plus
the franchise sales occurring at franchise stores to their
customers which are not included in the revenue figure presented in
the Company's consolidated financial statements. Total system wide
sales is not a measure recognized by IFRS, and does not have a
standardized meaning prescribed by IFRS, but it is a key indicator
used by the Company to measure performance against prior period
results. Therefore, total system wide sales as discussed in this
press release may not be comparable to similar measures presented
by other issuers. We believe that disclosing this measure is
meaningful to investors because it serves as an indicator of the
strength of the Company's overall store network, which ultimately
impacts financial performance.
Franchise Sales
Franchise sales figures refer to sales occurring at franchise
stores to their customers which are not included in the revenue
figures presented in the Company's consolidated financial
statements, or in the same store sales figures in this press
release. Franchise sales is not a measure recognized by IFRS, and
does not have a standardized meaning prescribed by IFRS, but it is
a key indicator used by the Company to measure performance against
prior period results. Therefore, franchise sales as discussed in
this press release may not be comparable to similar measures
presented by other issuers. Once again we believe that
disclosing this measure is meaningful to investors because it
serves as an indicator of the strength of the Company's brands,
which ultimately impacts financial performance.
About Leon's Furniture Limited
Leon's Furniture Limited is the largest retailer of furniture,
appliances and electronics in Canada. Our retail banners include: Leon's;
The Brick; Brick Outlet; and The Brick Mattress Store.
Finally, with The Brick's Midnorthern Appliance banner alongside
with Leon's Appliance Canada banner, this makes the Company the
country's largest commercial retailer of appliances to builders,
developers, hotels and property management companies. The Company
has 304 retail stores from coast to coast in Canada under various banners. The Company
operates three websites: leons.ca, thebrick.com and
furniture.ca.
Forward-Looking Statements
Information in this press release that is not current or
historical factual information may constitute forward-looking
information within the meaning of securities laws, including
future-oriented financial information and financial outlooks. This
information is based on certain assumptions regarding expected
growth, results of operations, performance, and business prospects
and opportunities. While the Company considers these assumptions to
be reasonable, based on information currently available, they may
prove to be incorrect. Forward-looking information is subject to a
number of risks, uncertainties and other factors that could cause
actual results to differ materially from what the Company currently
expects. These risks, uncertainties and other factors include, but
are not limited to: credit, market, currency, operational,
liquidity and funding risks, including changes in economic
conditions, interest rates or tax rates, the timing and market
acceptance of future products, and competition in the Company's
markets.
To the extent any forward-looking information in this press
release constitutes future-oriented financial information or
financial outlooks, within the meaning of securities laws, such
information is being provided to demonstrate the potential of the
Company and readers are cautioned that this information may not be
appropriate for any other purpose. Future-oriented financial
information and financial outlooks, as with forward-looking
information generally, are based on assumptions and subject to
risks, uncertainties and other factors. Actual results may differ
materially from what the Company currently expects. Other than as
required under applicable securities laws, the Company does not
undertake to update any forward-looking information at any
particular time. The reader should not place undue importance on
forward-looking information and should not rely upon this
information as of any other date. All forward-looking information
contained in this press release is expressly qualified in its
entirety by this cautionary statement.
SOURCE Leon's Furniture Limited