Richelieu Hardware : Press Release - Q4 2020

Press release

for immediate release

Richelieu increased its sales by 8.3% to $1.128 billion in 2020

A 29.3% increase in net earnings per share

5 acquisitions completed in North America

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• For the fiscal year ended November 30, 2020, sales reached $1,128 million, up 8.3% over 2019. Earnings before income taxes, interest and amortization (EBITDA) amounted to $154.5 million, up 24.4%. Net earnings attributable to shareholders increased by 28.2% to $85.2 million and amounted to $1.50 diluted per share, up 29.3%.
• For the fourth quarter salestotalled $319 million, up 20.4%. EBITDAincreased by 33.5% to $46.7 million. Diluted net earnings per share amounted to $0.48, up 41.2%.
• Repurchase of 678,362 common shares for $25.0 millionin 2020.
• Five acquisitionsclosed in North America during the fiscal year, for additional sales of more than $70 million on an annual basis.
• Sound and solid financial position.As at November 30, 2020, cash amounted to $73.9 million, total debt was $5.8 million and working capital of $377.4 million (ratio of 3.6 : 1).
• Dividend increase of 4.9%to $0.07 for the first quarter of 2021 and payment of a special dividend of $0.0667.

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Montreal, January 21, 2021 - "In 2020, Richelieu (RCH/TSX) achieved solid growth under the circumstances. Our improved results reflect our One-stopshop service approach, our innovation strategy, the diversification of our market segments, as well as the substantial contribution of our acquisitions and rigorous cost control. We ended the year with strong liquidity and a sound financial position. In addition to the implementation of all needed prevention measures in the pandemic context, extra vigilance and dedication at all levels of our organization were required during the year. Building on our value-added service concept and the commitment of our team, we spared no effort and did our utmost to provide maximum support to our customers," said Richelieu president and CEO Richard Lord.

"In the fourth quarter, our sales in the manufacturers market rose 15.8% in Canada and 15.8% (US$) in the United States, while sales in the retailers market increased 42.6% in Canada and 184.3% (US$) in the United States. For the fiscal year, sales were up 2.1% in Canada and 7.3% (US$) in the United States in the manufacturers market, while sales in the retailers market rose 27.0% in Canada and 53.5% (US$) in the United States. In light of the solid growth in results, the Board of Directors approved a 4.9% increase in the quarterly dividend, to $0.07 per share. In addition, a special dividend of $0.0667 per share will be paid to shareholders as compensation for the the dividend that was not declared in the first quarter of 2020 to mitigate the possible financial impact of the COVID-19crisis. We will continue our strategies in 2021 by remaining solidly focused on our customers, innovation, and value-addedservice," added Richard Lord.

RICHELIEU - Press Release

ANALYSIS OF OPERATING RESULTS FOR THE YEAR ENDED NOVEMBER 30, 2020, COMPARED WITH THE YEAR ENDED NOVEMBER 30, 2019

Consolidated sales

Consolidated sales reached $1,127.8 million, an increase of $86.2 million or 8.3% over 2019, of which 0.7% from internal growth and 7.6% from acquisitions. At comparable exchange rates to 2019, the consolidated sales growth would have been 7.9% for the year ended November 30, 2020.

Sales to manufacturers grew to $938.2 million, compared with $898.2 million for fiscal 2019, an increase of $40.0 million or 4.5%, of which 5.4% from acquisitions and 0.9% from internal decrease resulting from the slow down in the second quarter due to the pandemic. Sales to hardware retailers and renovation superstores grew by 32.2% or $46.2 million to total $189.7 million, of which 10.2% from internal growth and 22.0% from acquisitions. This increase in sales is attributable to the favourable fallout from strong demand in the renovation market in the context of the COVID-19 pandemic.

In Canada, Richelieu achieved sales of $730.0 million, compared with $686.0 million for fiscal 2019, up by $44.0 million or 6.4%, of which 5.0% resulted from acquisitions and 1.4% from internal growth. Sales to manufacturers rose to $581.0 million, up by $12.2 million or 2.1%, of which 4.1% from acquisitions and 2.0% from internal decrease. Sales to hardware retailers and renovation superstores reached $149.0 million, compared with $117.3 million, up by $31.7 million or 27.0% over fiscal 2019, of which 18.1% from internal growth and 8.9% from acquisitions. This increase is the result of major growth in the renovation market in Canada.

In the United States, the Corporation recorded sales of US$296.3 million, compared with US$267.6 million for fiscal 2019, an increase of US$28.8 million or 10.7%, of which 12.6% from acquisitions and 1.9% from an internal decrease. Sales to manufacturers totalled US$265.9 million, compared with US$247.7 million, an increase of US$18.2 million or 7.3% over fiscal 2019, resulting entirely from acquisitions. Sales to hardware retailers and renovation superstores were up by 53.5% compared to fiscal 2019, resulting mainly from acquisitions. Considering exchange rates, U.S. sales expressed in Canadian dollars amounted to $397.9 million, compared with $355.6 million for 2019, an increase of 11.9%. They accounted for 35.3% of consolidated sales in fiscal 2020, whereas they represented 34.1% of the year's consolidated sales in fiscal 2019.

Earnings before income taxes, interest and amortization (EBITDA) totalled $154.5 million, up by $30.3 million or 24.4% over 2019. The gross margin remained stable compared with 2019. As for the EBITDA margin, it stood at 13.7%, compared with 11.9% for 2019, resulting from increased sales as well as cost reduction measures and government grants.

Amortization expenses amounted to $34.0 million compared with $29.2 million for 2019, an increase of $4.8 million resulting from the increase in the amortization of intangible assets and right-of-use assets mainly relating to business acquisitions made in 2019 and in 2020. Income taxes amounted to $32.1 million, an increase of $6.9 million over 2019.

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RICHELIEU - Press Release

Consolidated net earnings attributable to shareholders

Net earnings rose 28.4%. Considering non-controlling interests, net earnings attributable to shareholders of the Corporation totalled $85.2 million, an increase of 28.2% compared to 2019. Net earnings per share amounted to $1.51 basic and $1.50 diluted, compared with $1.17 basic and $1.16 diluted for 2019, an increase of 29.1% and 29.3% respectively.

Comprehensive income totalled $81.9 million, reflecting a negative adjustment of $3.7 million on translation of the financial statements of the subsidiary in the United States, compared with $66.5 million for 2019, which reflected a negative adjustment of $0.1 million on translation of the financial statements of the subsidiary in the United States.

FOURTH QUARTER ENDED NOVEMBER 30, 2020

Fourth-quarterconsolidated sales amounted to $319.0 million, compared with $265.0 million for the corresponding quarter of 2019, an increase of $54.0 million or 20.4%, of which 12.0% resulting of internal growth and 8.4% from acquisitions. At comparable exchange rates to the fourth quarter of 2019, the consolidated sales growth would have been 20.5% for the quarter ended November 30, 2020.

Richelieu achieved sales of $270.2 million in the manufacturers market, compared with $233.6 million for the fourth quarter of 2019, an increase of $36.6 million or 15.7%, of which 9.8% from internal growth and 5.9% from acquisitions. Sales to hardware retailers and renovation superstores stood at $48.8 million, up by $17.4 million or 55.4% over the fourth quarter of 2019, of which 28.5% resulting from internal growth and 26.9% from acquisitions.

In Canada, Richelieu recorded sales of $215.0 million, an increase of $35.9 million over the fourth quarter of 2019. Sales to manufacturers amounted to $174.5 million, an increase of 15.8% of which 11.6% resulting from internal growth and 4.2% from acquisitions. Sales to hardware retailers and renovation superstores reached $40.5 million, up by $12.1 million or 42.6%. The favourable growth experienced in this market during the third quarter of fiscal 2020 continued to have a positive effect on sales in the fourth quarter of 2020.

In the United States, sales totalled US$78.9 million, compared with US$64.9 million for the fourth quarter of 2019, an increase of US$14.0 million or 21.6%, of which 6.9% resulting from internal growth and 14.7% from acquisitions. Sales to manufacturers amounted to US$72.6 million, an increase of US$9.9 million or 15.8% over the fourth quarter of 2019. Sales to hardware retailers and renovation superstores were up by US$4.1 million, or 186.4%, from the corresponding quarter of 2019, resulting mainly from growth through the acquisitions. Considering exchange rates, total U.S. sales expressed in Canadian dollars stood at $104.0 million, an increase of 21.1%. They accounted for 32.6% of consolidated sales for the fourth quarter of 2020, whereas they had represented 32.4% of the period's consolidated sales for the fourth quarter of 2019.

Earnings before income taxes, interest and amortization (EBITDA) amounted to $46.7 million compared with $35.0 million in the fourth quarter of 2019, up 33.5%. The EBITDA margin stood at 14.6%, compared with 13.2% for the fourth quarter of 2019, resulting from increased sales together with cost reduction measures implemented.

Amortization expenses amounted to $8.7 million compared with $7.8 million for the corresponding quarter of 2019, an increase of $0.9 million. Income taxes amounted to $10.2 million compared with $7.5 million for the fourth quarter of 2019.

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RICHELIEU - Press Release

Net earnings were up by 42.4%. Considering non-controlling interests, net earnings attributable to shareholders of the Corporation amounted to $27.1 million, up by 41.5% over the fourth quarter of 2019. Net earnings per share rose to $0.48 basic and diluted, compared with $0.34 basic and diluted for the fourth quarter of 2019, an increase of 41.2%.

Comprehensive income amounted to $26.4 million, reflecting a negative adjustment of $0.9 million on translation of the financial statements of the subsidiary in the United States, compared with $19.1 million for the fourth quarter of 2019, which reflected a negative adjustment of $0.1 million on translation of the financial statements of the subsidiary in the United States.

Cash flows from operating activities (before net change in non-cash working capital balances) amounted to $36.2 million or $0.64 per share, compared with $27.9 million or $0.49 per share for the fourth quarter of 2019, an increase of 29.5% resulting primarily from net earnings increase. Net change in non-cash working capital balances used cash flows of $2.7 million, reflecting the change in inventory of $5.9 million, whereas the change in accounts receivable, accounts payable and other items represented a cash inflow of $3.2 million. Consequently, operating activities provided cash flows of $33.5 million, compared with $35.8 million for the fourth quarter of 2019.

Financing activities used cash flows of $31.0 million, compared with $22.9 million for the fourth quarter of 2019. This change was primarily driven by common shares repurchases of $25.0 million in the fourth quarter of 2020 compared with $15.8 million for the same quarter in 2019.

Investing activities used cash flows of $3.2 million in the fourth quarter, mainly for equipment to maintain and improve operational efficiency.

Analysis of principal cash flows for the year ended November 30, 2020

Operating activities

Cash flows from operating activities (before net change in non-cash working capital balances) reached $121.1 million or $2.14 diluted per share, compared with $98.0 million or $1.71 diluted per share for 2019, an increase of 23.5% stemming primarily from net earnings increase. Net change in non-cash working capital balances represented a cash inflow of $24.6 million, primarily representing changes in inventory and accounts payable of $27.7 million whereas accounts receivables and other items used cash flows of $3.1 million. Consequently, operating activities provided cash flows of $145.7 million compared with $100.5 million for 2019.

Financing activities

Financing activities used cash flows of $50.8 million, compared with $52.0 million for 2019. During the year, Richelieu repurchased common shares for cancellation for $25.0 million, compared with $25.2 million in 2019. The Corporation paid dividends to shareholders of $11.3 million, down by 21.8% over 2019 and made a debt repayment in the amount of $5.2 million compared to $1.1 million for the 2019. The Corporation also issued shares for $5.6 million compared to $1.2 million in fiscal 2019.

Investing activities

Investing activities used cash flows of $45.5 million, of which $33.1 million for business acquisitions and $12.4 million, mainly for equipment to maintain and improve operational efficiency and for IT equipment.

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