Finning International Inc. (TSX: FTT) (“Finning” or the “Company”
or “we”, “our” or “us”) today announced the acquisition of
Hydraquip Hose & Hydraulics Ltd. and Hoses Direct Ltd.
(“Hydraquip”) for approximately £65 million, net of cash acquired,
subject to normal post-closing adjustments and before deferred
contingent consideration.
Hydraquip is the UK’s second largest hydraulic hose replacement
and repair company with a strong industry brand and track-record of
profitable growth. Hydraquip has 270 employees nation-wide serving
more than 4,000 customers across a diverse range of industries,
including construction, power systems, transportation, waste
management, utilities, manufacturing, and materials handling.
In 2021, Hydraquip generated over £26 million in revenue (1) and
£7.2 million in Adjusted EBITDA (2). Approximately 60% of
Hydraquip’s revenue comes from on-site mobile hose services,
including hose replacement, assembly and fitting, oil
replenishment, and general hydraulic servicing. Hydraquip operates
130 mobile service vans with trained technicians providing 24/7
coverage across the UK. The remaining 40% of Hydraquip’s business
is focused on selling hydraulic and fluid power products and parts
via a network of 27 branches and online.
“This acquisition is closely aligned with our strategy to drive
product support growth, providing complementary products and
services that help customers maximize uptime and reduce operating
costs. Hydraquip expands our service capabilities across multiple
industries and equipment types to both new and existing customers.
We see a very strong customer focus and cultural match with the
Hydraquip team and are excited to welcome them to Finning,” said
Scott Thomson, president and CEO of Finning.
The transaction is being funded from cash on hand and existing
credit facilities and will be immediately accretive to our UK &
Ireland operation’s EBIT as a percentage of net revenue, as well as
our overall earnings per share and free cash flow.
About FinningFinning is the world’s largest
Caterpillar dealer, delivering unrivalled service to customers for
nearly 90 years. Headquartered in Surrey, British Columbia, we
provide Caterpillar equipment, parts, services, and performance
solutions in Western Canada, Chile, Argentina, Bolivia, the United
Kingdom, and Ireland.
Contact InformationAmanda HobsonSenior Vice
President, Investor Relations and Treasury(604)
331-4865amanda.hobson@finning.com www.finning.com
(1) This financial measure is unaudited and prepared in
accordance with Financial Reporting Standard 102 “The Financial
Reporting Standard applicable in the UK and Republic of Ireland”
(GAAP).
(2) This financial measure is unaudited and a non-GAAP financial
measure. We believe that certain non-GAAP financial measures
provide users with important information regarding the operational
performance and related trends of the business. This non-GAAP
financial measure does not have any standardized meaning prescribed
by GAAP and therefore may not be comparable to similar measures
presented by other issuers. Accordingly, non-GAAP financial
measures should not be considered as a substitute or alternative
for financial measures determined in accordance with GAAP (GAAP
financial measures).
EBITDA is defined as earnings before finance costs, income
taxes, depreciation, and amortization. We use EBITDA to assess and
evaluate the financial performance of our reportable segments. We
believe that EBITDA improves comparability between periods by
eliminating the impact of finance costs, income taxes,
depreciation, and amortization.
There were significant items that we do not consider indicative
of Hydraquip’s operational and financial trends, either by nature
or amount. We exclude these items when evaluating Hydraquip’s
operating financial performance. These items may not be
non-recurring, but we believe that excluding these significant
items from GAAP financial measures provides a better understanding
of their financial performance when considered in conjunction with
the GAAP financial measures. Financial measures that have been
adjusted to take into account these significant items are referred
to as “Adjusted measures”.
Forward-Looking InformationThis news release
contains information that is forward-looking. Information is
forward-looking when we use what we know and expect today to give
information about the future. All forward-looking information in
this news release is subject to this disclaimer, including the
assumptions and material risk factors referred to below.
Forward-looking information in this news release includes, but is
not limited to, the following: deferred contingent consideration in
this transaction, which may result in the purchase price being up
to £11.2 million more, with any further amounts being payable over
the next three years, depending on performance of the acquired
business; the source of funding of the acquisition, which will
depend on the timing of deferred consideration payments and the
availability of cash on hand at that time, and our expectation that
the transaction will be immediately accretive to our UK &
Ireland operation’s EBIT as a percentage of net revenue, as well as
to our overall earnings per share and free cash flow. All such
forward-looking information is given pursuant to the ‘safe harbour’
provisions of applicable Canadian securities laws.
Unless we otherwise indicate, forward-looking information in
this news release reflects our expectations at the date of this
news release. Except as may be required by Canadian securities
laws, we do not undertake any obligation to update or revise any
forward-looking information, whether as a result of new
information, future events, or otherwise.
Forward-looking information, by its very nature, is subject to
numerous risks and uncertainties and is based on assumptions. This
gives rise to the possibility that actual results could differ
materially from the expectations expressed in or implied by such
forward-looking information and that our business outlook,
objectives, plans, strategic priorities and other information that
is not historical fact may not be achieved. As a result, we cannot
guarantee that any forward-looking information will
materialize.
Factors that could cause actual results or events to differ
materially from those expressed in or implied by this
forward-looking information include: risks related to the
integration of the acquired companies; the actual performance of
the acquired business compared to our expectations; the impact and
duration of the COVID-19 pandemic and measures taken by government
and businesses in response; general economic and market conditions
in the regions where we operate; foreign exchange rates; commodity
prices; the impact of changes in the UK’s trade relationship with
the European Union as a result of Brexit; the level of customer
confidence and spending, and the demand for, and prices of, our
products and services and the products and services of the acquired
companies; our ability to maintain our relationship with
Caterpillar; our dependence on the continued market acceptance of
our products, including Caterpillar products, and services and the
products and services of the acquired companies, and the timely
supply of parts and equipment; our ability to continue to
sustainably reduce costs and improve productivity and operational
efficiencies while continuing to maintain customer service; our
ability to manage cost pressures as growth in revenue occurs; our
ability to negotiate satisfactory purchase or investment terms and
prices, obtain necessary regulatory or other approvals, and secure
financing on attractive terms or at all; our ability to manage our
growth strategy effectively; our ability to effectively price and
manage long-term product support contracts with our customers; our
ability to reduce costs in response to slowing activity levels; our
ability to drive continuous cost efficiency in a recovering market;
our ability to attract sufficient skilled labour resources as
market conditions, business strategy or technologies change; our
ability to negotiate and renew collective bargaining agreements
with satisfactory terms for our employees and us; the intensity of
competitive activity; our ability to maintain a safe and healthy
work environment across all regions; our ability to raise the
capital needed to implement our business plan; regulatory
initiatives or proceedings, litigation and changes in laws or
regulations; stock market volatility; changes in political and
economic environments in the regions where we carry on business;
our ability to respond to climate change-related risks; the
occurrence of natural disasters, pandemic outbreaks, geo-political
events, acts of terrorism, social unrest or similar disruptions;
fluctuations in defined benefit pension plan contributions and
related pension expenses; the availability of insurance at
commercially reasonable rates or whether the amount of insurance
coverage will be adequate to cover all liability or loss we incur;
the potential of warranty claims being greater than we anticipate;
the integrity, reliability and availability of, and benefits from,
information technology and the data processed by that technology;
our ability to protect our business from cybersecurity threats or
incidents; the actual impact of the COVID-19 pandemic; and, with
respect to our normal course issuer bid, our share price from time
to time and our decisions about use of capital. Forward-looking
information is provided in this news release for the purpose of
giving information about our current expectations and plans and
allowing investors and others to get a better understanding of our
operating environment. However, readers are cautioned that it may
not be appropriate to use such forward-looking information for any
other purpose.
Forward-looking information provided in this news release is
based on a number of assumptions that we believed were reasonable
on the day the information was given, including but not limited to
the specific assumptions stated above; that we will be able to
successfully manage our business through the current challenging
times involving the effects of the COVID-19 response, stretched
supply chains, competitive talent markets, and changing commodity
prices, and successfully implement our COVID-19 risk management
plans; an undisrupted market recovery, for example, undisrupted by
COVID-19 impacts, commodity price volatility or social unrest; the
successful execution of our profitability drivers; that increased
maintenance work by mining customers following the lessening of
COVID-19 restrictions and protocols will continue; that our cost
actions to drive earnings capacity in a recovery can be sustained;
that commodity prices will remain at constructive levels; that our
customers will not curtail their activities; that general economic
and market conditions will improve; that the level of customer
confidence and spending, and the demand for, and prices of, our
products and services will be maintained; that present supply chain
challenges will not materially impact large project deliveries in
our backlog; our ability to successfully execute our plans and
intentions; our ability to attract and retain skilled staff; market
competition will remain at similar levels; the products and
technology offered by our competitors will be as expected; that
identified opportunities for growth, including this transaction,
will result in revenue; that we have sufficient liquidity to meet
operational needs; consistent and stable legislation in the various
countries in which we operate; no disruptive changes in the
technology environment and that our current good relationships with
Caterpillar, our customers and our suppliers, service providers and
other third parties will be maintained; sustainment of strengthened
oil prices and the Alberta government will not re-impose production
curtailments; quoting activity for requests for proposals for
equipment and product support is reflective of opportunities; that
there will be a moderate increase in mining royalties in Chile; and
strong recoveries in our regions, particularly in Chile and the UK.
Some of the assumptions, risks, and other factors which could cause
results to differ materially from those expressed in the
forward-looking information contained in this news release are
discussed in our current Annual Information Form (AIF) and in our
annual and most recent quarterly management’s discussion and
analysis (MD&A) for the financial risks, including for updated
risks related to the COVID-19 pandemic.
We caution readers that the risks described in our AIF and in
our annual and most recent quarterly MD&A are not the only ones
that could impact us. We cannot accurately predict the full impact
that COVID-19 will have on our business, results of operations,
financial condition or the demand for our services, due in part to
the uncertainties relating to the development of variants, the
severity of the disease, the duration of the outbreak, the steps
our customers and suppliers may take in current circumstances,
including slowing or halting operations, the duration of travel and
quarantine restrictions imposed by governments and other steps that
may be taken by governments to respond to the pandemic. Additional
risks and uncertainties not currently known to us or that are
currently deemed to be immaterial may also have a material adverse
effect on our business, financial condition, or results of
operation.
Except as otherwise indicated, forward-looking information does
not reflect the potential impact of any non-recurring or other
unusual items or of any dispositions, mergers, acquisitions, other
business combinations or other transactions that may be announced
or that may occur after the date of this news release. The
financial impact of these transactions and non-recurring and other
unusual 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.
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