UNISYNC Reports Record Q1 Fiscal 2023 Revenues and Improving Profitability
February 14 2023 - 8:42AM
Unisync Corp. (“Unisync") (TSX:"UNI")
(OTCQX:“USYNF”) announces its audited financial results for the
first quarter ended December 31, 2022 of its 2023 fiscal year (“Q1
2023”). Unisync operates through two business units: Unisync Group
Limited (“UGL”) with operations throughout Canada and the USA and
90% owned Peerless Garments LP (“Peerless”), a domestic
manufacturing operation based in Winnipeg, Manitoba. UGL is a
leading customer-focused provider of corporate apparel, serving
many leading Canadian and American iconic brands. Peerless
specializes in the production and distribution of highly technical
protective garments, including military operational clothing and
accessories for a broad spectrum of Federal, Provincial and
Municipal government departments and agencies.
Results for Q1 2023 versus Q1
2022
Consolidated revenue of $28.9 million for Q1
2023 rose by $7.1 million or 32% over Q1 2022 due to a $8.9 million
revenue improvement in the UGL segment less a $1.8 million revenue
decrease in the Peerless segment. UGL segment revenue of $26.4
million increased by 51% over the same period in the prior year on
a $5.4 million or a 104% improvement in sales to the segment’s
airline accounts, revenue of $1.5 million on the sale of inventory
included in the divestiture of the New Jersey division and greater
demand from the balance of the segment’s customers. The dramatic
increase in sales to the Company’s airline accounts was the result
of the post pandemic rebound in the airline industry where staffing
levels have surged above pre-pandemic levels to compensate for the
increased demand and employee turnover. The revenue decrease in the
Peerless segment in the current quarter was due to lower uniform
production caused by delays in the receipt of technical fabrics and
the timely exercise of contract options by the DND.
Gross profit for the quarter of $5.3 million was
up $1.0 million from the same quarter in fiscal 2022 although the
gross profit margin declined to 18.5% of revenue from 20.0% on
account of the lower volume of sales in the Peerless segment. The
UGL segment realized a gross profit of $5.1 million or 20.5%
(excluding the $1.5 million sold at cost in the New Jersey division
divestiture) compared to $3.4 million or 19% of segment revenue in
the same quarter of the prior fiscal year. Gross profit margins
continue to be squeezed as UGL works through higher-than-normal
landed costs for product acquired during the unprecedented increase
in offshore shipping costs when 40 ft equivalent unit (FEU)
container rates reached as high as 10 times pre-pandemic levels.
The Peerless segment recorded gross profit of $0.4 million or 15%
of segment revenue against $1.1 million or 25% of segment revenue
in the same quarter of the prior fiscal year on account of reduced
absorption of fixed costs on the lower volume of sales in the
current period.
At $4.4 million, total general and
administrative expenses for Q1 2023 increased $0.2 million or 5%
over Q1 2022 on account of cost-of-living employee pay increases in
the UGL segment.
Interest expense of $0.7 million in the current
quarter was up $0.4 million from the same quarter of fiscal 2022
due to higher interest costs combined with the need for greater
short-term borrowings to finance the growth in inventory and
receivable levels.
The Company reported net income before tax of
$0.7 million in the quarter compared to a net loss of $0.1 million
in the same quarter last year. Adjusted EBITDA (before a $0.4
million gain on the sale of the New Jersey based hospitality
business and assets) was $2.1 million for Q1 2023 versus $1.2
million for the corresponding quarter last year.
More detailed information is contained in the
Company’s Consolidated Financial Statements for the quarter ended
December 31, 2022 and Management Discussion and Analysis dated
February 10, 2023 which may be accessed at www.sedar.com.
Business Outlook
With most of the world learning to live with the
variants of COVID-19, the Company has experienced an improvement in
demand from its customer base as restrictions are lifted and
confidence returns. The Company’s North American airline accounts
continue to experience strong demand and have returned to
pre-pandemic passenger volumes. The Company expects that this will
continue to result in strong uniform sales to its airline accounts
throughout fiscal 2023. The flow of offshore ocean shipments
continues to improve, and the costs of container shipments are
starting to stabilize at pre-pandemic levels following the inflated
levels experienced during the pandemic. New product orders are at
an all-time high as evidenced by the increase in deferred revenue
to $20.1 million at December 31, 2022 compared to $16.7 million as
at September 30, 2022 and $5.0 million as at September 30, 2021.
Approximately 57% of the deferred revenue at the end of Q1 2023
represents deposits on custom garment production in process, with
the balance representing customer deposits at full selling prices
covering slow moving inventory awaiting a disposition decision. The
Company believes that these trends will allow the Company to
continue to reduce its order delivery backlog and to right-size the
quantity of uniform products held in its distribution centres over
the balance of fiscal year
Following the transition to a more focused
leadership structure announced on February 25, 2022, several major
milestones have been achieved which should bode well for a more
streamlined and cost-efficient business structure going forward.
The recent amalgamation of Utility Garments Inc. and two other
operating entities into UGL, combined with the integration of these
business entities on to a common enterprise resource planning
(“ERP”) system, is resulting in a more unified Canadian business
operation. Although there is still some further work to do, the
implementation of these unified ERP and related systems will
provide the capability for management to achieve optimal
performance and operating efficiency.
In addition to the reduction in ongoing
administrative costs associated with right sizing our corporate and
management structure, the above referenced strategic restructuring
has allowed our key executives to concentrate on our core business
and more actively pursue larger managed workwear opportunities.
UGL management continues to place strong focus
on the US market. As indicated in our December 30, 2022 news
release, UGL is in advanced discussions with a number of major
corporations with respect to their image wear programs totalling
close to US$100 million annually in potential new business.
Additionally, UGL has been added as an approved supplier to an
extensive list of major customers that are also scheduled to come
to market during the 2023 calendar year.
Notwithstanding a disappointing first quarter at
Peerless, we see an improving trend in the delivery schedule of key
technical fabrics and new business opportunities which we expect to
result in an improvement in revenue and profitability for the
balance of Fiscal 2023.
Our primary strategy has been concentrated to
date on building an infrastructure of strong management and
advanced systems and a referenceable base of iconic clients to fuel
future growth and profitability. As we move out of this platform
building phase, management and your board are committed to
achieving continued future growth and the development of an
improved level of profitability to enhance shareholder value.
On Behalf of the Board of Directors
Douglas F GoodExecutive Chairman
Investor relations
contact:Douglas F Good, Executive Chairman at 778-370-1725
Email: dgood@unisyncgroup.com
Forward Looking Statements
This 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. Neither the TSX nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX) accepts responsibility for the adequacy or accuracy of this
release.
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