RONA INC.
TSX : RON
TSX : RON.PR.A

RONA INC.

August 11, 2015 08:25 ET

RONA Announces Its Second Quarter 2015 Results

Same-Store Sales Up for Fourth Consecutive Quarter and Increase in the Common Share Dividend

BOUCHERVILLE, QUÉBEC--(Marketwired - Aug. 11, 2015) - RONA inc. (TSX:RON)(TSX:RON.PR.A) ("RONA" or the "Corporation") announces the results for its operations for the 13- and 26-week periods ended June 28, 2015. All figures in this press release are in Canadian dollars.

SECOND QUARTER HIGHLIGHTS

  • Increase of 5.4% in same-store sales in the Retail segment
  • Increase of 8.8% in adjusted EBITDA compared to last year, to $96.9 million
  • Adjusted net income up by 19.1% to $50.0 million compared to $42.0 million last year
  • Improvement of 31.4% in adjusted net income per share, to $0.46 compared to $0.35 in the second quarter of 2014
  • Increase of 14.3% to the dividend on common shares

"For the second quarter of 2015, RONA has recorded a strong 5.4% increase in same-store sales throughout its retail network. We are satisfied with this fourth consecutive quarter of growth, which was achieved despite the ongoing decline in housing starts across the country and a stagnant economy. This performance underscores the success of the various merchandising and banner repositioning strategies we implemented just over a year ago. They have improved RONA's competitive position and enhanced customer satisfaction," said Robert Sawyer, President and Chief Executive Officer of RONA.

"Continuously improving our product and service offerings to customers is the foundation of RONA's success. Building on the progress made, we have begun optimizing product selection in certain key categories in all our stores. These initiatives, combined with disciplined expansion of our network and integration of our Coupal banner into Marcil, with 17 stores, will give our banners an even higher profile, and stimulate internal growth," continued Mr. Sawyer.

FINANCIAL HIGHLIGHTS Quarters ended Six months ended
(in millions of dollars, except per share data) June 28, 2015 June 29, 2014 June 28, 2015 June 29, 2014
Revenues 1,263.5 1,193.5 2,042.2 1,957.8
EBITDA 97.1 88.2 109.2 96.1
Adjusted EBITDA (1) 96.9 89.1 109.1 99.1
Net income attributable to participating shares 49.9 42.0 38.2 25.4
Per share - basic and diluted ($) 0.46 0.35 0.35 0.21
Adjusted net income attributable to participating shares (1) 50.0 42.0 38.8 27.6
Per share - basic and diluted ($) 0.46 0.35 0.35 0.23
Weighted average number of shares outstanding (in millions) 108.5 119.5 109.4 120.0
(1) See non-IFRS performance measures below.

"The increase in the return on invested capital still remains a financial priority for RONA. For a sixth consecutive quarter, this indicator has risen on the strength of our performance. Furthermore, completing the proposed acquisition of the 20 franchise stores in our network will simplify our business model, allowing RONA to rely more on its banners' proven success and the proposed optimization measures. By continually making the most of those elements which are under our control, we can continue to grow our return and further create value for shareholders," added Dominique Boies, RONA's Executive Vice President and Chief Financial Officer.

SECOND QUARTER 2015 RESULTS

Consolidated revenues for the second quarter of 2015 totalled $1.26 billion, up 5.9% from $1.19 billion recorded in the second quarter of 2014. This increase mainly reflects 6.7% higher revenues in the Retail segment due to the success of merchandising strategies and a repositioned Réno-Dépôt banner in Quebec. These factors helped grow same-store sales in RONA's retail network by 5.4% in the second quarter of 2015. Sales in the Distribution segment rose 3.7% due to the positive impact of new programs for affiliate stores as well as a shift in sales from the first quarter to the second quarter.

Adjusted EBITDA rose to $96.9 million, or 7.7% of revenues, compared to $89.1 million, or 7.5% of revenues recorded in the second quarter of 2014. The increase reflects same-store sales growth in the Retail segment and tight management of operating expenses in the stores. Retail segment's adjusted EBITDA margin was stable, while the Distribution segment's margin increased by 72 basis points.

Adjusted net income attributable to participating shares for the second quarter of 2015 amounted to $50.0 million, or $0.46 per share basic and diluted, compared to $42.0 million, or $0.35 per share basic and diluted, in the second quarter of 2014.

2015 FIRST HALF HIGHLIGHTS

  • Increase of 5.2% in same-store sales in the Retail segment
  • Increase of 10.1% in adjusted EBITDA compared to last year, to $109.1 million, and adjusted EBITDA margin up by 28 basis points
  • Adjusted net income up $11.2 million to $38.8 million, compared to $27.6 million last year
  • Improvement of 52.2% in adjusted net income per share, to $0.35 compared to $0.23 in the first six months of 2014

2015 FIRST HALF RESULTS

Consolidated revenues for the first six months of 2015 totalled $2.04 billion, up 4.3% compared to $1.96 billion in the same period of 2014. This change mainly reflects a 6.4% increase in the Retail segment, including strong 5.2% growth in same-store sales.

Adjusted EBITDA increased 10.1% to $109.1 million or 5.3% of revenues, compared to $99.1 million or 5.1% of revenues in 2014. The margin increased 42 basis points in the Retail segment driven by growth in same-store sales, while the Distribution segment's margin decreased 12 basis points.

Adjusted net income attributable to participating shares for the first six months of 2015 amounted to $38.8 million, or $0.35 per share basic and diluted, compared to $27.6 million, or $0.23 per share basic and diluted, in the first six months of 2014.

SOLID FINANCIAL POSITION

As at June 28, 2015, RONA's financial position remained healthy, with net debt of $289.3 million including $177.3 million used on an authorized credit facility of $700.0 million. The ratio of net debt to adjusted EBITDA for the last 12 months was 1.18x as at June 28, 2015, compared to 0.90x as at June 29, 2014. The ratio of net debt to total capital was 0.16x as at June 28, 2015, up from 0.09x as at June 29, 2014.

The increase to ratios since the same period a year ago reflects use of the credit facility to repurchase 10.7 million common shares in the 12-month period, for a consideration of $145.4 million, following share repurchases under normal course issuer bids. Since November 2014, RONA has been authorized to purchase a maximum of 9.2 million common shares in the period up to November 17, 2015. Since the program has been in effect, RONA has bought back 8.1 million common shares for a cash consideration of $109.7 million.

DIVIDEND ON PREFERRED SHARES

At its meeting on August 10, 2015, RONA's Board of Directors declared a quarterly dividend of $0.3281 per share on cumulative 5-year Rate Reset Series 6 Class A preferred shares. The dividend will be paid on September 30, 2015 to shareholders of record on September 15, 2015.

DIVIDEND ON COMMON SHARES

At its meeting on August 10, 2015, the Board of Directors authorized a 14.3% annualized increase in the dividend on common shares, which will rise from $0.14 to $0.16 per share annually, as well as a change in the frequency of payment, from a semi-annual to a quarterly payment. The Board therefore declared a quarterly dividend of $0.04 per share on the Corporation's common shares. The dividend will be paid on September 25, 2015 to shareholders of record on September 10, 2015.

ADDITIONAL INFORMATION

The Management's Discussion and Analysis (MD&A), financial statements and related notes for the second quarter of 2015 can be found in the "Investor Relations" section of the Corporation's website at www.rona.ca and on the SEDAR website at www.sedar.com. The Corporation's Annual Information Form, along with other information about RONA, can also be found on the RONA and SEDAR websites.

CONFERENCE CALL WITH THE FINANCIAL COMMUNITY

On Tuesday, August 11, 2015, at 3:00 p.m. (EDT), RONA will hold a conference call for the financial community. To join the conference, please call 416-340-2217 or 1-866-696-5910. To listen to the call online, please go to: http://webcasts.pqm.net/client/rona/event/1527/en/.

A replay will be available from 7:00 p.m. on Tuesday, August 11, 2015 until August 18, 2015. It can be heard by dialing 905-694-9451 or 1-800-408-3053 and entering the password 4782428 on the telephone keypad.

NON-IFRS PERFORMANCE MEASURES

RONA presents certain performance measures which are not prescribed by International Financial Reporting Standards ("IFRS"). Management's view is that these measures are useful in the analysis of the Corporation's operational performance. These measures must not be considered separately or as a substitute for other performance measures calculated in compliance with IFRS, but rather as additional information.

EBITDA, as defined by the Corporation, represents operating profit before finance costs, income tax expense and depreciation, amortization and impairment of non-financial assets. This measure is widely used in financial circles to measure the profitability of operations.

Same-store sales is a metric used by management and is common throughout our industry. This metric identifies sales growth generated by the existing store network and is adjusted to reflect the effect of acquisitions, store closures and store openings.

The term "organic" is a metric used by management to illustrate the change in items on the consolidated statement of income that can be attributed to the existing store network, in both the distribution and retail segments. This metric excludes the impact of closed stores, acquisitions and new stores.

Management also uses the following non-IFRS performance measures: adjusted EBITDA; adjusted EBITDA margin; adjusted gross margin; adjusted selling, general and administrative expenses; adjusted depreciation, amortization and impairment of non-financial assets; adjusted finance costs; adjusted net income attributable to participating shares, adjusted basic and diluted net income per share attributable to owners of RONA Inc. and debt net of cash. These measures reflect the inclusion or exclusion of certain amounts that are viewed as not representative of the Corporation's sustainable financial performance. For more details on these measures, please see the MD&A for the second quarter of 2015.

FORWARD-LOOKING STATEMENTS

This Press Release includes forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts included in this Press Release, including statements regarding the prospects of the industry and the prospects, plans, financial position and business strategy of the Corporation, may constitute forward-looking statements within the meaning of Canadian securities legislation and regulations. Investors and others are cautioned that undue reliance should not be placed on any forward-looking statements.

For more information on the risks, uncertainties and assumptions that would cause the Corporation's actual results to differ from current expectations, please refer to the Corporation's public filings available at sites www.sedar.com and www.rona.ca. In particular, further details and descriptions of these and other factors are disclosed in the MD&A under the "Risks and uncertainties" section and in the "Risk factors" section of the Corporation's current Annual Information Form.

The forward-looking statements in this Press Release reflect the Corporation's expectations as at August 10, 2015, and are subject to change after this date. The Corporation expressly disclaims any obligation or intention to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by the applicable securities laws.

ABOUT RONA

RONA inc. is a major Canadian distributor and retailer of hardware, building materials and home renovation products. The Corporation operates a network of over 500 corporate, franchise and independent affiliate stores of complementary formats. With its 9 distribution centers, RONA serves its own network as well as many independent dealers operating under different banners, including Ace, for which RONA owns the licensing rights and is the exclusive distributor in Canada. With the help of its nearly 24,000 employees, the Corporation generates annual consolidated sales of $4.1 billion. For more information, visit rona.ca.

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