MONTREAL, Feb. 20, 2017 /CNW Telbec/ -
Results
For the year ended December 31st, 2016, the Company's revenues increased by $29,311,000 to $746,649,000, compared to $717,338,000 recorded in the corresponding 2015 period, a 4% increase. Same store revenues grew by 3% during the same period. Net earnings for the year ended December 31st, 2016, amounted to $43,830,000 compared to net earnings of $41,528,000 for the corresponding 2015 period. Basic net earnings per share increased to $1.17 compared to $0.99 in 2015.
The $14,317,000 increase of the gross margin can be explained by the increase of revenues as well as its profit margins of $11,578,000 and $2,739,000 respectively. This increase of gross margin was completely erased by the increase of commercial expenses and administrative expenses.
The following summarizes the Company's operations as well as the impact of the increase in commercial and administrative expenses as at December 31st, 2016 and 2015.
| Adjusted retail operating earnings |
($ in thousands) |
|||||
| 2016 |
2015 |
Variation |
||||
| Operating earnings |
51 845 |
54 294 |
(2 449) |
|||
| Adjustment |
||||||
| Gain on disposal of land before tax |
- |
(1 880) |
1 880 |
|||
| Variation of cost of options before tax |
(44) |
(495) |
451 |
|||
| 51 801 |
51 919 |
(118) |
||||
| Income tax |
45 |
|||||
| Variation in adjusted operating earnings |
(73) |
|||||
| Commercial expenses |
($ in thousands) |
|||||
| 2016 |
2015 |
Variation |
||||
| Commercial expenses |
198 874 |
193 628 |
5 246 |
|||
| Variable cost of sales* |
6 285 |
|||||
| Decrease in amortization |
(1 039) |
|||||
| 5 246 |
||||||
| * The increase in variable cost of sales is directly related to the increase of $29,311,000 in revenues. |
| Adjusted administrative expenses |
($ in thousands) |
||||||
| 2016 |
2015 |
Variation |
|||||
| Administrative expenses |
47 612 |
36 295 |
11 317 |
||||
| Adjustments |
|||||||
| Gain on disposal of land before tax |
- |
1 880 |
(1 880) |
||||
| Variation of cost of options before tax |
44 |
495 |
(451) |
||||
| Variation in adjusted administrative expenses |
47 656 |
38 670 |
8 986 |
||||
The increase in the adjusted administrative expenses of $ 8,986,000 is explained as followed:
| Expenses related to pension plans |
3 806 |
| Professional fees |
2 109 |
| Expenses related to web and IT |
2 675 |
| Other |
396 |
| Increase in adjusted administrative expenses |
8 986 |
During the period ended December 31st, 2015, the Company proceeded with the sale of land for an amount of $2,393,000 resulting in an after tax gain of $1,617,000 or $0.04 per basic share.
The effect of the cost of options had no impact on basic net earnings per share for the year ended December 31st, 2016 and an increase basic net earnings per share of $0.01 for the corresponding 2015 period.
For year ended December 31st, 2016, the share repurchase program contributed to an increase in basic net earnings per share of $0.12.
Excluding all these effects, the variation to the adjusted net earnings would have been $4,249,000 or $0.11 per basic share for the year ended December 31st, 2016.
The $4,249,000 variation in adjusted net earnings in 2016 is as follows:
| ($ in thousands) |
|||
| 2016 |
2015 |
||
| Net earnings |
43 830 |
41 528 |
|
| Gain on disposal of land (after-tax) |
- |
(1 617) |
|
| Variation of cost of options (after-tax) |
(32) |
(362) |
|
| Adjusted net earnings |
43 798 |
39 549 |
|
| Minus: Adjusted net earnings for 2015 |
39 549 |
||
| Variation |
4 249 |
||
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 2016 |
1 099 |
(1 946) |
(847) |
||
| 2nd quarter 2016 |
(887) |
1 086 |
199 |
||
| 3rd quarter 2016 |
229 |
3 077 |
3 306 |
||
| 4th quarter 2016 |
(514) |
2 105 |
1 591 |
||
| Total |
(73) |
4 322 |
4 249 |
||
| Annual Financial Information |
||||
| ($ in thousands, except for per share amounts) |
||||
| 2016 |
2015 |
|||
| $ |
$ |
|||
| Revenue |
746 649 |
717 338 |
||
| Net Earnings |
43 830 |
41 528 |
||
| Total Assets |
309 483 |
274 022 |
||
| Net Earnings Per Share |
||||
| Basic |
1,17 |
0,99 |
||
| Diluted |
1,17 |
0,99 |
||
| Dividends Per Share |
0,24 |
0,24 |
||
Financial Position and Dividends
Cash and investments increased by $22,428,000 during the year ended December 31st, 2016. Investments consist primarily of bank notes and common shares, which at the close of the year had a market value of $84,917,000 (including cash).
As of December 31st, 2016, the working capital showed a surplus of $13,736,000 an increase of $11,826,000 compared to December 31st, 2015. The Company's shareholders' equity increased from $172,968,000 as at December 31st, 2015 to $199,681,000 as at December 31st, 2016. As of December 31st, 2016, the book value per share stood at $5.42, compared to $4.56 as at December 31st, 2015.
Pursuant to the normal course issuer bid put in place on March 14th, 2016, accordingly, 1,053,850 Common Shares were repurchased and cancelled by the Company. As a result of this change, the Company had as of December 31st, 2016, 36,860,000 Common Shares issued and outstanding.
During the year ended December 31st, 2016, no options were granted. As at December 31st, 2016, options for 219,000 Common Shares, representing 0.59% of the Company's outstanding shares remain issued and 5,710,864 authorized share options, representing approximately 15.49% 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 December 31st, 2016, the Company paid eligible dividends totaling $0.24 per Common Shares to holders.
Company Pension Plans and treatment of future actuarial gains and losses
In 2016, 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 3.95% was used as at December 31, 2016, whereas a discount rate of 4.15% was used in the previous valuation. 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 $18,042,000 as at December 31, 2016. In 2015, the surplus was of $16,070,000. The financial position of the Pension Plans has improved slightly over the last year. This improvement is mainly due to the combined effect of special contributions made by the Company, and a gain on investment returns which was offset by a loss of the present value of obligations arising from a decrease in the discount rate.
For the 2016 fiscal year, the pension expense amounted to $11,113,000 while contributions made by the Company for all plans combined amounted to $12,598,000, of which $7,641,000 was for current service and $4,957,000 for special contributions (compared to a pension expense of $7,307,000 in 2015).
As at December 31, 2016, the Company has an accrued defined benefit asset included in the consolidated balance sheet of $18,042,000 (assets of $8,811,000 as at December 31, 2015). This increase is mainly caused by the fact that, following the adoption of Bill 57, accrued benefit asset is no longer limited by the economic benefit, as the company will have full access to the surplus. Moreover, funding on a solvency basis is eliminated and replaced with a modified going-concern funding basis.
The current IFRS result in a relatively predictable pension expense. For 2017, the pension expense is estimated to be between $7,500,000 and $8,500,000.
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 $18,872,000. The Company has no special payments to make since there is a surplus on a going-concern basis and the stabilization provision is fully funded. The date of the next actuarial valuation for funding purposes is December 31, 2018.
| Quarterly Results |
||||||||||
| ($ in thousands, except for per share amounts) |
||||||||||
| March 31st |
June 30th |
|||||||||
| 2016 |
2015 |
2016 |
2015 |
|||||||
| $ |
$ |
$ |
$ |
|||||||
| Revenue |
154 943 |
149 280 |
197 043 |
188 373 |
||||||
| Net (Loss) Earnings |
(958) |
59 |
12 407 |
12 196 |
||||||
| Net (Loss) Earnings Per Share |
||||||||||
| Basic |
(0,02) |
- |
0,32 |
0,27 |
||||||
| Diluted |
(0,02) |
- |
0,32 |
0,27 |
||||||
| September 30th |
December 31st |
|||||||||
| 2016 |
2015 |
2016 |
2015 |
|||||||
| $ |
$ |
$ |
$ |
|||||||
| Revenue |
197 612 |
189 385 |
197 051 |
190 300 |
||||||
| Net (Loss) Earnings |
14 708 |
13 037 |
17 673 |
16 236 |
||||||
| Net (Loss) Earnings Per Share |
||||||||||
| Basic |
0,40 |
0,31 |
0,47 |
0,41 |
||||||
| Diluted |
0,40 |
0,31 |
0,47 |
0,41 |
||||||
For the quarter ended December 31st, 2016, the Company's revenues increased by $6,751,000 to $197,051,000, compared to $190,300,000 recorded in the corresponding 2015 period, a 4% increase. Same store revenues grew by 3% during the same period. Net earnings for the quarter ended December 31st, 2016, amounted to $17,673,000 compared to net earnings of $16,236,000 for the corresponding 2015 period. Basic net earnings per share increased to $0.47 compared to $0.41 in 2015.
The effect of the cost of options had no impact on basic net earnings per share for the year ended December 31st, 2016 and an increase basic net earnings per share of $0.01 for the corresponding 2015 period.
For the three month period ended December 31st, 2016, 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 $1,591,000 or $0.04 per basic share for the quarter ended December 31st, 2016.
The $1,591,000 variation in adjusted net earnings in 2016 is as follows:
| ($ in thousands) |
||||
| 2016 |
2015 |
|||
| Net earnings |
17 673 |
16 236 |
||
| Variation of cost of options (after-tax) |
(11) |
(165) |
||
| Adjusted net earnings |
17 662 |
16 071 |
||
| Minus: Adjusted net earnings for 2015 |
16 071 |
|||
| Variation |
1 591 |
|||
Operations
BMTC Inc.
The Company has started the restructuration of all of its websites. The first phase of the implementation of a distinct e-commerce platform for its banner Brault & Martineau is now completed and operational since November, 2015. The process of implementation will continue throughout 2017 and 2018 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 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. As at September 30th, 2016, the Company had to re-evaluate its costs related to these modifications, which are now estimated to be $17,000,000. A portion of these costs, $6,500,000 were incurred during 2015 and 2016 and the balance will be recorded in the subsequent years.
Brault & Martineau Division
As previously announced the Company is closing its six Sleep Gallery stores when their respective leases expire. The Company made this decision after a lengthy reflection on its mattress sales strategy. The lease expiry dates of the six stores that will close fall between November 2016 and November 2022. The Company is not excluding the possibility that one or several of these leases will be assigned or subleased before their expiry date. Actually, two stores were close before the year end of 2016, the St-Hyacinthe and St-Jean-sur-Richelieu were closed in November of 2016. During 2017, two more stores will be closed, Granby store as well as the one in Vaudreuil. Even though these stores are profitable, management believes that the level of profitability does not warrant keeping these stores open. The Company will continue to sell the same wide range of mattresses, box springs and bedding accessories at the best prices in its Brault & Martineau stores as it currently does. To that effect, the Sleep Gallery departments located inside the Brault & Martineau mega stores will remain in operation. The Company believes that closure of the six Sleep Gallery stores will not have any material impact on the Company's financial performance.
The Company is well aware of the importance of the web trend and e-commerce have taken in the last few years in the retail market. All of the Company's banners are now transactional online. As indicated earlier, the Company continually invests in order to improve its IT systems as well as its presence on the web and to promote e-commerce. Nevertheless, we have come to realise that the vast majority of our web based clients, for the time being, prefer completing their purchases in our stores. The Company's e-commerce strategies and web based investments have certainly benefited our web sales but they alsohave incited more the "drive-to-store" phenomenon. This is mainly due to the fact that our clients wish to visualise our products, but mostly they want to be able to get advice and negotiate with our sales personnel.
In the last few years, e-commerce has developed exponentially in Quebec, although the Company has come to realise that the vast majority of our clients still wish to shop in our stores. Faced with this reality, the Company developed a new innovative and state-of-the-art in technology prototype Brault & Martineau store, where the web will serve as a gateway and an additional tool in order to complete sales. The objective of this improvement is to offer our clients a unique shopping experience which will help differentiate us from our competitors. This new prototype store will be deployed throughout our network of stores. The Company therefore plans to proceed with the construction or the reconstruction, when possible, of these new stores. Since this is a major undertaking which is different from what was initially planned, that being the refitting of the furniture and electronic departments in all of our stores, the Company has decided to proceed with re-evaluating all of its actual real estate sites in order to determine their long term commercial viability and asses if these sites would allow for the reconstruction of the new Brault & Martineau prototype store.
Following this evaluation, the Company concluded for the time being, that two Brault & Martineau stores are no longer located in an ideal area for our type of retail business and that these real estate sites would not benefit from any additional investments. These two stores are Ste-Thérèse and Repentigny. The Company is currently in the process of purchasing land at the junction of the Highway 15 and route 117, for the construction of the new 80,000 square feet Brault & Martineau prototype store that will replace the Ste-Thérèse store. The opening of this new store is scheduled for the fall of 2017. As for the Repentigny store, no viable real estate site was found in the sought out sectors in order to replace it. Both stores were put up for sale and as for the Repentigny store it will close definitely once the building is sold. Management believes that our current store network will be able to cover this region and therefore not affect the Company's sales.
As for the 8 other Brault & Martineau stores, the Company is currently evaluating the available space on the existing sites in order to proceed with the reconstruction of its new prototype stores. In the event that this option is not possible, the Company will therefore have to look for new replacement sites.
Ameublements Tanguay
Ameublements Tanguay has already begun the reconfiguration and remodeling of its stores, for example the ones in Lévis, Rimouski, Chicoutimi and now the new store in Trois-Rivières. In October of 2016, Ameublements Tanguay proceeded with the opening of a new 74,000 square foot store in Trois-Rivières. The existing store was transformed into a liquidation center which opened in November of 2016. Ameublements Tanguay is also re-evaluating its current real estate sites in order to offer the same experience to their clients across their network of stores.
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 2015 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 for more than a 12 month period. 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.
Mr. Yves Des Groseillers, Chairman, President and Chief Executive Officer, BMTC Group Inc., (514) 648-5757
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