By Jeff Sanford
Winnipeg, Manitoba -- March 23, 2016 -- Winnipeg-based collision repair chain Boyd Group announced a remarkable 39 percent jump in revenue as the rapidly expanding company registered more than $1 billion in annual sales for the first time.
The good financial news suggests the company's consolidation plans are paying off and large institutional investors are said to be taking new notice of the company as a result.
The publicly traded company—Boyd is structured as an income fund—posted a record $1.2 billion in revenue for the full year 2015. The company did post a loss on the quarter of $0.161 per unit, which is inline with the performance over the past several quarters, but investors are looking beyond the losses and understand that the company is spending money to grow into one of the premier collision repair chains in North America.
The consolidation and growth story is clearly appealing to investors. Units in the Boyd income fund closed Tuesday on the TSX a bit above $62 a unit. The company announced its 2015 annual results after the bell, and when the TSX opened Wednesday units continued to climb through the morning to hit $68 a unit by midday, a solid 10 percent gain over just a couple hours.
The jump in unit price is not a surprise. Looking into the numbers sales for the company increased by 39.1 percent to $1.2 billion from $844.1 million in 2014. All-important same-store sales increased a remarkable 5.6 percent, suggesting the company's roll out of its so-called “Wow Operating Way” (WOW) program to improve service and operations is having an effect. Investors appreciate the strong increase in same-store sales, as it suggests Boyd isn't growing only through acquisition, but is actually improving business in each store.
Boyd reported that EBITDA earnings climbed by 47.4 percent to $101.7 million, an improvement on the $69.0 million recorded in 2014. The strong improvement in earnings and revenue confirms that Boyd continues to be one of the major consolidators in the industry.
The company reported that it has added 29 locations, including Craftmaster Auto Body with six locations in Florida and 23 single locations in 11 states. Subsequent to the end of the latest quarter, the fund added another eleven locations, including a five-store MSO and two locations in British Columbia. The company also added the glass repair assets of Ryan's Auto Glass in Cincinnati, Ohio. Boyd also made it clear that it can continue to add stores and announced that the fund's credit facility was increased to US $150 million with an “accordion feature” that can expand the facility to US $250 million. A media report suggests the company now has access to some $400 million to make new acquisitions.
The Toronto Stock Exchange added Boyd to the widely-followed S&P/TSX Composite Index in September. That gives the company new visibility among big institutional investors like pension, mutual and index funds.
"We are very pleased with 2015 as we achieved milestones on many fronts. In addition to the accomplishments noted above, the Fund also surpassed 300 locations in the United States and expanded its U.S. presence to 19 states, exceeded $1 billion in revenue and crossed $1 billion in market capitalization," said Brock Bulbuck, President and Chief Executive Officer of Boyd Group. "We believe that these accomplishments and milestones are a testament to our disciplined approach to growth, conservative financial management and value creation for our unitholders.”
All-in, investors in Boyd have done well over the past year. Not only do investors enjoy today's pop in value, but in November Boyd increased monthly distributions by 2.4 percent to 0.042 per unit. Over the full course of 2015 the price of a Boyd unit increased 38.9 percent, rising from $47.60 to more than $60 a share over the reporting period. According to the press release this represents total shareholder return of 40 percent if dividends were reinvested. It is fair to say that the fund is becoming a bit of a stock market darling.
Legendary Bay Street investor Veronika Hirsch named Boyd as one of her top picks on Business New Network. Hirsch mentioned the WOW program as a reason for optimism about future results at the company. Hirsch has stated that, “The next stage of earnings growth will be supplemented by the roll-out of an efficiency and cost improvement program, which should be able to grow margins over the next several years.”
A solid majority of analysts covering Boyd Group Income Fund rate it a buy. Scotia Capital upped its target on units to $72.00. National Bank has a target price of $75.00 on Boyd.
A recent story in the company's hometown paper, the Winnipeg Free Press noted the consolidation story at Boyd and suggested the growth-by-acquisition strategy will continue to play out for some time yet. The article quotes Trevor Johnson, a National Bank Financial analyst as saying “there is still a long growth runway ahead” in terms of room for Boyd to grow. "It is still such a fragmented industry and they are the biggest player but still have only a small market share," Johnson said. "It is outlandish how many mom and pop shops are out there. They will be able to continue to consolidate."
The Free Press article pointed that in 1990 the company consisted of one “lonely” Boyd Autobody outlet in Winnipeg. Now the company is the “newest billion-dollar Winnipeg company”, with 342 locations across North America, making it the “largest operator of non-franchised collision-repair centres in North America” (in terms of number of locations) and “one of the largest in terms of sales,” according to the Free Press. That is, the Boyd story is an impressive one by any measure.
For more information, please visit boydgroup.com.