company overview & 2011 third quarter results presentation...1960 1965 1970 1975 1980 1985 1990...
TRANSCRIPT
![Page 1: Company Overview & 2011 Third Quarter Results Presentation...1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Total Vehicle Sales (Thousands) Calendar Year Trendline Actual Source:](https://reader036.vdocuments.net/reader036/viewer/2022071403/60f74e63a303622c2c1b45f0/html5/thumbnails/1.jpg)
Company Overview
& 2011 Third Quarter
Results PresentationNovember 16, 2011
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Senior Management Team
J.J.S. (Jeff) Christie
Vice President, Finance
S.R.E. (Steve) Rose
Executive Vice President, Corporate Services
T.L. (Tom) Orysiuk
President
P.J. (Pat) Priestner
Chief Executive Officer
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1 INDUSTRY OVERVIEW
BUSINESS OVERVIEW
FINANCIAL REVIEW
STRATEGY
2
3
4
Presentation Agenda
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Certain of the information presented today looks forward in time
and deals with other than historical or current facts for the
AutoCanada Inc. (the “Company”). Such statements are qualified
in their entirety by the inherent risks and uncertainties
surrounding future expectations, including, but not limited to, the
risks associated with: the retail automotive industry; our business;
our acquisition strategy; our dependence on automobile
manufacturers; and our structure. For additional information with
respect to these factors, please refer to the prospectus and other
information filed by the Company with Canadian provincial
securities commissions.
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.
Forward-Looking Statements
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Total Canadian Vehicle Sales
1960 – 2011F
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
To
tal V
eh
icle
Sale
s (
Th
ou
san
ds)
Calendar Year
TrendlineTrendlineTrendlineTrendline
ActualActualActualActual
Source: Scotia Economics - Global Auto Report, November 3, 2011
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Annual consumer spending more than any
other Canadian retail segment
Franchised Auto Dealerships Operate
Four Complementary Business Segments
Used vehicle
sales
Finance and
insurance Parts, service and
repair
New vehicle
sales
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Well-Established Business
Model
Dealerships provide
manufacturers:
Manufacturers provide
dealerships:
• Sales support • Exclusive sales
territories
• Service support • No-cost consumer sales
incentives
• Brand protection • Brand marketing
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Dealership and OEM Business
Models are Different
Dealership Groups: Manufacturers:
• 4 income streams • 1 income stream
• Multiple brands • 1 brand
• Variable cost structure • Fixed cost structure
• Lower capital
requirements
• Higher capital
requirements
Dealerships less vulnerable to cyclical
downturns
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• 24 owned dealerships
• Approximately 24,000 new and used vehicles
sold in 2010
• More than 317,000 service and collision
orders completed at 339 service bays in 2010
Our Business
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24 Dealerships in 6 Provinces
B.C.
Alberta
Saskatchewan
ManitobaOntario
Quebec
Newfoundland
N.B.
Nova Scotia
P.E.I.
GRANDE PRAIRIEGRANDE PRAIRIEGRANDE PRAIRIEGRANDE PRAIRIEGrande Prairie Chrysler Jeep
Dodge RamGrande Prairie HyundaiGrande Prairie MitsubishiGrande Prairie NissanGrande Prairie Subaru
PRINCE GEORGEPRINCE GEORGEPRINCE GEORGEPRINCE GEORGENorthland Chrysler Jeep
Dodge RamNorthland HyundaiNorthland Nissan
MAPLE RIDGEMAPLE RIDGEMAPLE RIDGEMAPLE RIDGEMaple Ridge Chrysler Jeep
Dodge Ram FIATMaple Ridge VolkswagenAbbotsford VolkswagenChilliwack Volkswagen
VICTORIAVICTORIAVICTORIAVICTORIAVictoria Hyundai
EDMONTONEDMONTONEDMONTONEDMONTONCrosstown Chrysler Jeep Dodge
Ram FIATCapital Chrysler Jeep Dodge
Ram FIATSherwood Park Hyundai
KELOWNAKELOWNAKELOWNAKELOWNAOkanagan Chrysler Jeep
Dodge Ram
PONOKAPonoka Chrysler Jeep
Dodge Ram
THOMPSONTHOMPSONTHOMPSONTHOMPSONThompson Chrysler Jeep
Dodge Ram
GTA PLATFORMGTA PLATFORMGTA PLATFORMGTA PLATFORM401 Dixie HyundaiCambridge Hyundai
Newmarket Infiniti/Nissan
DARTMOUTHDARTMOUTHDARTMOUTHDARTMOUTHDartmouth Chrysler Jeep
Dodge Ram
MONCTONMONCTONMONCTONMONCTONMoncton Chrysler Jeep
Dodge Ram
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64%
20%
11%
5%
2011 Q3 YTD Revenue 2011 Q3 YTD Revenue 2011 Q3 YTD Revenue 2011 Q3 YTD Revenue ($ ($ ($ ($ millions)millions)millions)millions)
New Vehicle Used Vehicle Parts, Service & Collision Repair FI & Other
New Vehicle Sales
28%
10%
34%
28%
2011 Q3 YTD Gross Profit 2011 Q3 YTD Gross Profit 2011 Q3 YTD Gross Profit 2011 Q3 YTD Gross Profit ($ ($ ($ ($ millions)millions)millions)millions)
$773.7 $126.4
Lowest Profit Margin at 7.2% YTD
Note: Results for the Company for the nine months ended September 30, 2011
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• Resale of trade-ins
• Sale of third-party financing, service or
insurance products
• Recurring service and repair business
New Vehicle Sales
Drives high-margin related transactions
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64%
20%
11%
5%
2011 Q3 YTD Revenue 2011 Q3 YTD Revenue 2011 Q3 YTD Revenue 2011 Q3 YTD Revenue ($ ($ ($ ($ millions)millions)millions)millions)
New Vehicle Used Vehicle Parts, Service & Collision Repair FI & Other
Used Vehicle Sales
28%
10%
34%
28%
2011 Q3 YTD Gross Profit 2011 Q3 YTD Gross Profit 2011 Q3 YTD Gross Profit 2011 Q3 YTD Gross Profit ($ ($ ($ ($ millions)millions)millions)millions)
$773.7 $126.4
Higher Profit Margin at 8.4% YTD
Note: Results for the Company for the nine months ended September 30, 2011
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• Service contracts
• Reconditioning opportunities for parts and
service
• Recurring parts and service business
• Financing commissions
Used Vehicle SalesDrives high-margin related transactions
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64%
20%
11%
5%
2011 Q3 YTD Revenue 2011 Q3 YTD Revenue 2011 Q3 YTD Revenue 2011 Q3 YTD Revenue ($ ($ ($ ($ millions)millions)millions)millions)
New Vehicle Used Vehicle Parts, Service & Collision Repair FI & Other
Parts, Service and Collision
Repair
28%
10%
34%
28%
2011 Q3 YTD Gross Profit 2011 Q3 YTD Gross Profit 2011 Q3 YTD Gross Profit 2011 Q3 YTD Gross Profit ($ ($ ($ ($ millions)millions)millions)millions)
$773.7 $126.4
High Profit Margin at 50.5% YTD
Note: Results for the Company for the nine months ended September 30, 2011
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“Absorption Rate”
• Percentage of dealership’s
fixed expenses covered by
gross profit generated by
parts and service segment
• AutoCanada’s Q3 2011
absorption rate = 90%
Parts, Service and Collision
Repair
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Parts, Service and Collision
Repair
• High Margins and Excellent Growth
– Increasingly complex vehicles cost more to
maintain
– Highly specialized equipment and skilled
labour required
– Independent repair shops closing
– Number of vehicles on the road is growing,
creating more demand for available
service bays
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64%
20%
11%
5%
2011 Q3 YTD Revenue 2011 Q3 YTD Revenue 2011 Q3 YTD Revenue 2011 Q3 YTD Revenue ($ ($ ($ ($ millions)millions)millions)millions)
New Vehicle Used Vehicle Parts, Service & Collision Repair FI & Other
Finance and Insurance
28%
10%
34%
28%
2011 Q3 YTD Gross Profit 2011 Q3 YTD Gross Profit 2011 Q3 YTD Gross Profit 2011 Q3 YTD Gross Profit ($ ($ ($ ($ millions)millions)millions)millions)
$773.7 $126.4
Note: Results for the Company for the nine months ended September 30, 2011
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• Economies of scale
• Geographic and brand diversification
• Ability to attract management talent
• Implementation of best practices
• Centralized administrative and strategic
functions
Benefits of Multi-Location
Dealership Model
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Strong OEM Relationships
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10.810.810.810.8
13.713.713.713.7 13.813.813.813.8 13.413.413.413.4
15.515.515.515.5
12.212.212.212.2
15.215.215.215.2
0000
2222
4444
6666
8888
10101010
12121212
14141414
16161616
18181818
2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2010 Q32010 Q32010 Q32010 Q3YTDYTDYTDYTD
2011 Q32011 Q32011 Q32011 Q3YTDYTDYTDYTD
Units 000’s
New Vehicle Sales
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8.58.58.58.5
9.69.69.69.6 9.99.99.99.9 9.79.79.79.7
8.88.88.88.8
6.96.96.96.9 6.56.56.56.5
0000
2222
4444
6666
8888
10101010
12121212
2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2010 Q32010 Q32010 Q32010 Q3YTDYTDYTDYTD
2011 Q32011 Q32011 Q32011 Q3YTDYTDYTDYTD
Units 000’s
Used Vehicle Sales
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Revenue By Business Operation
0000
100100100100
200200200200
300300300300
400400400400
500500500500
600600600600
700700700700
800800800800
900900900900
2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2010 Q32010 Q32010 Q32010 Q3YTDYTDYTDYTD
2011 Q32011 Q32011 Q32011 Q3YTDYTDYTDYTD
$ millions
New Vehicle Used Vehicle Parts, Service & Collision Repair FI & Other
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Gross Profit by Business Operation
0000
20202020
40404040
60606060
80808080
100100100100
120120120120
140140140140
160160160160
2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2010 Q32010 Q32010 Q32010 Q3YTDYTDYTDYTD
2011 Q32011 Q32011 Q32011 Q3YTDYTDYTDYTD
$ millions
New Vehicle Used Vehicle Parts, Service & Collision Repair FI & Other
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Adjusted EBITDA
21.021.021.021.0
25.125.125.125.1 24.524.524.524.5
18.418.418.418.416.716.716.716.7
13.313.313.313.3
21.621.621.621.6
0000
5555
10101010
15151515
20202020
25252525
30303030
2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2010 Q32010 Q32010 Q32010 Q3YTDYTDYTDYTD
2011 Q32011 Q32011 Q32011 Q3YTDYTDYTDYTD
$ millions
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Same Store Growth
2006 2007 2008 2009 2010 Q3
YTD
2011
Revenue 4.4% 10.2% (9.9%) (10.5%) 10.5% 15.1%
Gross Profit 10.6% 10.7% 5.9% (7.8%) 4.1% 11.6%
# of Dealerships
Included
9 9 14 19 22 21
Management focusing on same-store growth
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Same Store Growth
Keys to same store growth
– Head office administration and support
– Advantages to being part of a dealer
group
• Cost efficiencies
• Leveraging of best practices
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2011 Q3 Results - YTD
Revenue $773.7 14.6%
Gross Profit $126.4 10.9%
EBITDA * $ 21.6 62.6%
EPS $ 0.66 87.8%
Adjusted Free Cash Flow $ 20.3 80.6%
Strong performance in 2011
$ millions (except EPS)
* EBITDA does not include interest on floorplan financing
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2011 Q3 Results
Trailing 12 months
Revenue $973.4 12.7%
Gross Profit $162.4 9.7%
EBITDA $ 25.1 52.1%
EPS $ 1.04 * 136.0%
Adjusted EPS $ 0.74 ** 68.2%
Adjusted Free Cash Flow $ 23.0 60.8%
$ millions (except EPS)
* Includes reversal of impairment of intangible assets in Q4 of 2010** Excludes effect of intangible asset impairments and resulting future incometax impact.
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Strong Balance Sheet
Current Assets $254.8
Current Liabilities $211.8
Net Working Capital $ 43.0
Corporate Debt $ 20.2
$ millions
New and Used Vehicle Inventory Turned 4.75 Times
in the First Nine Months of 2011
Floorplan debt of $175.3 million included in current liabilities and netted against inventory which is included in current assets
Very liquid inventory
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DividendPolicy
Organic Growth
AcquisitionPolicy
SustainableReturns
Contributes toEnhanced Shareholder
Value
Strategy
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• OEM resistance to public ownership model
• Modest acquisition growth
• Target quarterly dividends between 70% and 80%
of fully diluted earnings per share
• Quarterly review of dividend takes into account
historical and anticipated future results and
capital requirements
• Dividend rate currently at 67% based on the
internal model used
Dividend Currently at Annualized Rate of $0.48
Per Common Share with Yield in Excess of 9%
Dividend Policy
Strategy
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Organic Growth
Strategy
• Focus on continuous improvement
• Leverage dealer group synergies and
economies of scale
• Leverage experience of long time dealers to
mentor new dealers
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• OEM resistance to public ownership model
• Trading multiples approximately half of US
public dealer group peers
• Pursuit of accretive acquisitions
• Private purchases permitted if Independent
Board Members determine that acquisition
opportunity does not meet investment criteria
• Build manufacturer relationships
• Create synergies through platforms
• Retain key employees
Acquisition Policy
Strategy
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We believe the current strategy will contribute to
enhanced shareholder value, the direct effect being:
• Improved trading liquidity and share price
• Improvement in trading multiples
• Future acquisition opportunities
become more accretive
Conclusion
Strategy
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Question and Answer