TORONTO, May 16, 2024 (GLOBE NEWSWIRE) — Unisync Corp. (“Unisync”) (TSX:”UNI”) (OTC:“USYNF”) announces its unaudited financial results for the second quarter ended March 31, 2024 (“Q2 2024”). Unisync operates through two business units: Unisync Group Limited (“UGL”) with operations throughout Canada and the USA and 90% owned Peerless Garments LP (“Peerless”), a domestic manufacturing operation based in Winnipeg, Manitoba. UGL is a leading customer-focused provider of corporate apparel, serving many leading Canadian and American iconic brands. Peerless specializes in the production and distribution of highly technical protective garments, including military operational clothing and accessories for a broad spectrum of Federal, Provincial and Municipal government departments and agencies.
Results for Q2 2024 versus Q2 2023
Consolidated Revenues for Q2 2024 were $25.7 million, 10.4% lower than revenues experienced in the corresponding quarter last year as its airline business returned to more normal volumes following the 2023 post pandemic rebound. Peerless generated revenues of $ 2.6 million in the current quarter down marginally from the $2.7 million reported for Q2 2023.
Despite the lower level of revenues, the UGL segment experienced a $0.8 million increase in gross profit to $4.4 million or 18.6% of segment revenue compared to $3.6 million or 13.8% of segment revenue in the same three-month period in the prior year. The improved margins were related to customer price increases combined with the impact of lower offshore container delivery costs on the weighted average cost of product sold. In addition, the consolidation of the Carleton Place, Ontario and the Saint-Laurent, Quebec facilities into the more efficient Guelph and Mississauga, Ontario facilities along with the discontinued use of 3PL locations, reduced fixed overhead costs.
The Peerless segment recorded gross profit of $0.9 million or 35.1% of segment revenue against $0.7 million or 24.3% of segment revenue in the same quarter of the prior fiscal year on a higher margin mix of product sales while discontinuing the cost of using subcontractors to perform a portion of manufacturing output.
At $3.7 million, consolidated general and administrative expenses were down $0.6 million or 14.0% from the three months ended March 31, 2023 due to overhead reductions associated with the aforementioned consolidation of operations at UGL. Second quarter general and administrative expenses included employee severances of $0.2 million related to the consolidation efforts.
Interest expense of $0.9 million in the current quarter was unchanged from the same quarter of fiscal 2023 as an increase in average debt outstanding was offset by lower cost borrowing replacing previously availed high interest rate shareholder loans.
The Company reported income before tax of $0.6 million in the quarter compared to a loss of $1.1 million in the same quarter last year. Adjusted EBITDA in the current quarter was $3.0 million before the aforenoted one-time severance costs, versus $1.1 million for the corresponding three month period last year.
Operating Performance Outlook
With the last phase of staff reductions associated with the centralization of operations at UGL completed in February 2024, the full extent of the related estimated annual savings of $2.5 million will continue to be positively reflected in the Company’s financial results moving forward.
In addition, UGL continued to negotiate positive pricing agreements with its offshore subcontractors and to relocate certain offshore production to factories in other jurisdictions that offer lower labour costs and/or are duty-free.
The cost of container shipments has stabilized relative to the unprecedented levels reached during the pandemic, although some increases are being experienced due to geopolitical disruptions in the Middle East. UGL continues to reduce its order delivery backlog and expects to continue to right-size the quantity of uniform products held in its distribution centres for various clients over the balance of the fiscal year.
We continue to also aggressively pursue a tenant to lease out the resulting 40,000+ square feet of vacated space at its Saint-Laurent facility or an outright sale of the 60,000 square foot facility which, in either case, will further reduce UGL’s direct overhead costs.
Business Outlook
There are a large number of managed uniform programs totalling over $35 million in annual recurring business scheduled to come to market in Canada during the balance of 2024 which UGL is actively pursuing. The Company also continues to place an expanded emphasis on the US market where it continues to be in advanced discussions with several major corporations with respect to their image wear programs.
Although UGL is experiencing a slow start to Q3 orders in hand which will likely get reflected in lower revenues during the first two months of the quarter, we expect the effects on net income to be offset to a great extent by improved margins, reduced headcount and operational efficiencies. UGL’s North American airline accounts continue to experience steady demand, having returned to pre-pandemic employee levels.
With $38.5 million in firm contracts and options on hand as at March 31, 2024, the Peerless business segment has sufficient firm orders on hand to maintain its current level of revenues and profitability into fiscal 2025. Notwithstanding a strong performance in Q2, some fabric delays are having an effect on Peerless’ current production levels in the first half of the current quarter pushing forecasted revenues to later in the fiscal year.
More detailed information is contained in the Company’s Consolidated Financial statements for the quarter ended March 31, 2024 and Management Discussion and Analysis dated March 13, 2024 which may be accessed at www.sedarplus.com.
On Behalf of the Board of Directors
Douglas F Good
CEO
Investor relations contact:
Douglas F Good, Director & CEO Email: [email protected]
Adjusted EBITDA.
Adjusted EBITDA does not have a standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other issuers and should not be considered in isolation nor as a substitute for financial information reported under IFRS. Unisync uses non-IFRS measures, including Adjusted EBITDA, to provide shareholders with supplemental measures of its operating performance. Unisync believes adjusted EBITDA is a widely accepted indicator of an entity’s ability to incur and service debt and commonly used by the investing community to value businesses.
Forward Looking Statements
This news release may contain forward-looking statements that involve known and unknown risk and uncertainties that may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied in these forward-looking statements. Any forward-looking statements contained herein are made as of the date of this news release and are expressly qualified in their entirety by this cautionary statement. Except as required by law, the Company undertakes no obligation to publicly update or revise any such forward-looking statements to reflect any change in its expectations or in events, conditions or circumstances on which any such forward-looking statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements. Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.
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