BRP’s fiscal 2019 results show ‘incredible year’
BRP Inc. has reported its financial results for the three- and twelve-month periods ended January 31, 2019. All financial information is in Canadian dollars unless otherwise noted. The complete financial results are available at www.sedar.com, as well as in the Quarterly Reports section of BRP’s website.
“Fiscal year 2019 was an incredible year for us, with annual sales of CA$5.2 billion and 37% growth of Normalized EPS. I’m extremely proud of the team and how well our people executed and delivered on our business plan, achieving record results. We have demonstrated quarter after quarter that our capacity to innovate allows us to outpace the industry and we intend to continue to do so”, declared José Boisjoli, BRP’s president and CEO.
“BRP has established itself as a leader in the powersports industry with renowned brands and market-shaping products. With this strong performance and market position, we are confident to be able to deliver our guidance of $3.50 to $3.70 of Normalized EPS, a growth rate of 13% to 19%”, concluded Boisjoli.
Highlights for the Three- and Twelve-Month Periods Ended January 31, 2019
Revenues increased by $279.9 million, or 22.8%, to $1,505.9 million for the three-month period ended January 31, 2019, compared with $1,226.0 million for the corresponding period ended January 31, 2018. The revenue increase was mainly due to higher wholesale in Seasonal Products and Year-Round Products and a favourable foreign exchange rate variation of $38 million.
The Company’s North American retail sales for powersports vehicles and outboard engines increased by 7% for the three-month period ended January 31, 2019 compared with the three-month period ended January 31, 2018. The increase was driven by Year-Round Products.
Gross profit increased by $52.8 million, or 18.7%, to $334.9 million for the three-month period ended January 31, 2019, compared with $282.1 million for the corresponding period ended January 31, 2018. Gross profit margin percentage decreased by 80 basis points to 22.2% from 23.0% for the three-month period ended January 31, 2018. This decrease was primarily due to higher commodity, production and distribution costs, partially offset by a higher volume of 3WV, snowmobiles and PAC sold.
Operating expenses increased by $44.0 million, or 26.8%, to $208.4 million for the three-month period ended January 31, 2019, compared with $164.4 million for the three-month period ended January 31, 2018. This increase was mainly attributable to support for the launch of various products, continued product investments and costs related to the modernization of information systems.
Revenues increased by $791.3 million, or 17.8%, to $5,243.8 million for the twelve-month period ended January 31, 2019, compared with $4,452.5 million for the corresponding period ended January 31, 2018. The revenue increase was primarily attributable to higher wholesale of Year-Round Products and Seasonal Products and a favourable foreign exchange rate variation of $50 million.
The Company’s North American retail sales for powersports vehicles and outboard engines increased by 9% for the twelve-month period ended January 31, 2019 compared with the twelve-month period ended January 31, 2018, mainly due to an increase in SSV and PWC.
Gross profit increased by $208.3 million, or 19.9%, to $1,253.4 million for the twelve-month period ended January 31, 2019, compared with $1,045.1 million for the corresponding period ended January 31, 2018. The gross profit increase includes a favourable foreign exchange rate variation of $7 million. Gross profit margin percentage increased by 40 basis points to 23.9% from 23.5% for the twelve-month period ended January 31, 2018. The increase was primarily due to a higher volume of Year-Round Products, Seasonal Products and PAC sold and favourable pricing, partially offset by higher commodity, production and distribution costs.
Operating expenses increased by $113.4 million, or 17.0%, to $780.8 million for the twelve-month period ended January 31, 2019, compared with $667.4 million for the twelve-month period ended January 31, 2018. The increase was mainly attributable to support for the launch of various products, continued product investments, costs related to the modernization of information systems and higher variable employee compensation expenses.
| Net Income data | |||||
| Three-month periods ended |
Twelve-month periods ended |
||||
| (in millions of Canadian dollars) | January 31, 2019 |
January 31, 2018 |
January 31, 2019 |
January 31, 2018 |
January 31, 2017 |
| Restated [1] | Restated [1] | ||||
| Revenues by category [2] | |||||
| Powersports | |||||
| Year-Round Products | $597.6 | $509.1 | $2,240.6 | $1,810.0 | $1,637.7 |
| Seasonal Products | 577.6 | 437.2 | 1,803.5 | 1,553.9 | 1,473.9 |
| Powersports PAC and OEM Engines | 202.7 | 187.3 | 707.5 | 659.7 | 621.7 |
| Marine | 128.0 | 92.4 | 492.2 | 428.9 | 438.2 |
| Total Revenues | 1,505.9 | 1,226.0 | 5,243.8 | 4,452.5 | 4,171.5 |
| Cost of sales | 1,171.0 | 943.9 | 3,990.4 | 3,407.4 | 3,162.6 |
| Gross profit | 334.9 | 282.1 | 1,253.4 | 1,045.1 | 1,008.9 |
| As a percentage of revenues | 22.2% | 23.0% | 23.9% | 23.5% | 24.2% |
| Operating expenses | |||||
| Selling and marketing | 88.1 | 68.8 | 336.9 | 288.6 | 281.5 |
| Research and development | 63.5 | 52.6 | 221.7 | 198.6 | 184.1 |
| General and administrative | 58.9 | 40.3 | 214.7 | 166.3 | 163.9 |
| Other operating expenses (income) | (2.1) | 2.7 | 7.5 | 13.9 | 73.1 |
| Total operating expenses | 208.4 | 164.4 | 780.8 | 667.4 | 702.6 |
| Operating income | 126.5 | 117.7 | 472.6 | 377.7 | 306.3 |
| Net financing costs | 19.2 | 14.5 | 73.9 | 54.4 | 61.2 |
| Foreign exchange (gain) loss on long-term debt | 0.8 | (47.4) | 69.8 | (53.3) | (82.0) |
| Income before income taxes | 106.5 | 150.6 | 328.9 | 376.6 | 327.1 |
| Income tax expense | 23.8 | 80.6 | 101.6 | 137.5 | 70.1 |
| Net income | $82.7 | $70.0 | $227.3 | $239.1 | $257.0 |
| Attributable to shareholders | $82.7 | $70.2 | $227.0 | $238.9 | $257.2 |
| Attributable to non-controlling interest | $— | $(0.2) | $0.3 | $0.2 | $(0.2) |
| Normalized EBITDA [3] | $181.9 | $162.2 | $655.9 | $536.2 | $502.7 |
| Normalized net income [3] | $85.8 | $76.2 | $308.6 | $245.5 | $222.0 |
| [1] | Restated to reflect the adoption of IFRS 15 “Revenue from contracts with customers” and IFRS 9 “Financial instruments” standards as explained in Note 31 of the audited consolidated financial statements for the year ended January 31, 2019. |
| [2] | Comparative figures have been modified to reflect the new categories of revenues following the acquisition of Alumacraft and Triton and the creation of the Marine Group. |
| [3] | See “Non-IFRS Measures” section. |
QUARTERLY REVIEW BY SEGMENT
Powersports
Year-Round Products
Revenues from Year-Round Products increased by $88.5 million, or 17.4%, to $597.6 million for the three-month period ended January 31, 2019, compared with $509.1 million for the corresponding period ended January 31, 2018. The increase resulted mainly from a higher volume and a favourable product mix of SSV sold, the introduction of the Can-Am Ryker and a favourable foreign exchange rate variation of $20 million.
North American Year-Round Products retail sales increased on a percentage basis in the low-twenties range compared with the three-month period ended January 31, 2018.
Seasonal Products
Revenues from Seasonal Products increased by $140.4 million, or 32.1%, to $577.6 million for the three-month period ended January 31, 2019, compared with $437.2 million for the corresponding period ended January 31, 2018. The increase was driven by a higher volume and a favourable product mix of snowmobiles sold and a favourable foreign exchange rate variation of $10 million.
North American Seasonal Products retail sales increased by low-single digits compared with the three-month period ended January 31, 2018.
Powersports PAC and OEM Engines
Revenues from Powersports PAC and OEM Engines increased by $15.5 million, or 8.2%, to $204.2 million for the three-month period ended January 31, 2019, compared with $188.7 million for the corresponding period ended January 31, 2018. The increase was mainly attributable to a higher volume of snowmobile parts and clothing, a higher volume of 3WV accessories due to the Can-Am Ryker introduction and a favourable foreign exchange rate variation of $6 million.
Marine
Revenues from Marine segment increased by $31.8 million, or 31.2%, to $133.6 million for the three-month period ended January 31, 2019, compared with $101.8 million for the corresponding period ended January 31, 2018. The increase was mainly due to the acquisition of Alumacraft and Triton, partially offset by a lower volume of outboard engines sold.
North American outboard engine retail sales decreased on a percentage basis in the low-twenties range compared with the three-month period ended January 31, 2018.
Declaration of dividend
The Board of Directors approved a quarterly dividend of $0.10 per share for holders of its multiple voting shares and subordinate voting shares. The dividend will be paid on April 12, 2019 to shareholders of record at the close of business on March 29, 2019. The payment of each quarterly dividend remains subject to the declaration of that dividend by the Board of Directors. The actual amount, the declaration date, the record date and the payment date of each quarterly dividend are subject to the discretion of the Board of Directors.
Fiscal Year 2020 Guidance
The table below sets forth BRP’s financial guidance for Fiscal Year 2020 which reflects the adoption of IFRS-16 Leases (“IFRS 16”) standard effective as of February 1, 2019. Under IFRS 16, operating leases expenses are recorded as depreciation and interest expense rather than operating costs within Normalized EBITDA[1]. No restatement of prior periods will be made.
| Financial Metric | FY19 | FY20 Guidance[3] vs FY19 |
| Revenues | ||
| Year-Round Products | $2,240.6 | Up 12% to 17% |
| Seasonal Products | $1,803.5 | Flat to up 3% |
| Powersports PAC and OEM Engines | $707.5 | Up 2% to 7% |
| Marine | $492.2 | Up 15% to 20% |
| Total Company Revenues | $5,243.8 | Up 7% to 11% |
| Normalized EBITDA[1] | $655.9 | Up 19% to 23% (would have been “Up to 14% to 18%” excluding the impact of IFRS 16) |
| Effective Tax Rate[1][2] | 25.5% | 26.5% to 27.0% |
| Normalized Earnings per Share – Diluted[1] | $3.10 | Up 13% to 19% ($3.50 to $3.70) |
| Net Income | 227.3 | $340M to $365M (assuming no impact from Fx gain/(loss) on long-term debt) |
Other guidance:
- Expecting ~$227M Depreciation Expense compared to $176M in FY19, ~$85M of Net Financing Costs Adjusted and ~98.2M shares.
- Expecting Capital Expenditures of ~$360M to $370M in FY20 compared to $299M in FY19.
| [1] | Please refer “Non-IFRS Measures” section. |
| [2] | Effective tax rate based on Normalized Earnings before Normalized Income Tax |
| [3] | Please refer to “Forward-Looking Statements” and “Key assumptions” sections for a summary of important risk factors underlying the FY20 guidance. |
The above targets are based on a number of economic and market assumptions the Company has made in preparing its Fiscal Year 2020 financial guidance, including assumptions regarding the performance of the economies in which it operates, foreign exchange currency fluctuations, market competition and tax laws applicable to its operations. The Company made a number of economic and market assumptions in preparing and making forward-looking statements. The Company is assuming reasonable industry growth ranging from flat to high-single digits, moderate market share gains in Year-Round Products and Seasonal Products and constant market share for the Marine segment. The Company is also assuming interest rates increase modestly, currencies remain at near current levels and inflation remains in line with central bank expectations in countries where the Company is doing business. The Company cautions that the assumptions used to prepare the forecasts for Fiscal Year 2020, although believed to be reasonable at the time they were made, may prove to be incorrect or inaccurate. In addition, the above forecasts do not reflect the potential impact of any non-recurring or other special items or of any new material commercial agreements, dispositions, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after March 21, 2019. The financial impact of such transactions and non-recurring and other special items can be complex and depends on the facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way or in the same way we present known risks affecting our business. Accordingly, our actual results could differ materially from our expectations as set forth in this news release. The outlook provided constitutes forward-looking statements within the meaning of applicable securities laws and should be read in conjunction with the “Caution Concerning Forward-Looking Statements” section.
