Vancouver-based specialty food products company Premium Brands Holdings Corp (TSX: PBH) has acquired four Canadian food businesses for a purchase price of $227 million, $155.9 million in cash. The companies are Concord Premium Meats Ltd, a Concord, Ontario maker of branded and customized protein solutions; The Meat Factory Ltd, a Stoney Creek, Ontario maker of branded cooked protein products; Country Prime Meats Ltd, a Lac La Hache, British Columbia maker of shelf-stable meat snacks, and; Frandon Seafood Inc, a Montréal distributor of fresh and frozen seafood. Premium Brands is backed by Pender West Capital Partners.
Premium Brands Holdings Corporation Announces Record Fourth Quarter and 2017 Sales and EBITDA, 13% Dividend Increase, Four Acquisitions and Guidance for 2018
VANCOUVER, March 15, 2018 /CNW/ – Premium Brands Holdings Corporation (TSX: PBH), a leading producer, marketer and distributor of branded specialty food products, announced today:
Its results for the fourth quarter of 2017 and for 2017, both of which included record sales and adjusted EBITDA
A 13.1% increase in its quarterly dividend to $0.475 per share ($1.90 per share annually) from $0.420 per share ($1.68 per share annually)
The signing of four separate definitive purchase agreements for the acquisitions of the following businesses:
(i) Concord Premium Meats Ltd., an Ontario based manufacturer of branded and customized protein solutions for retailers and foodservice customers across Canada. Its proprietary brands include MarcAngelo, Skoulakis, Central Park Deli, Black River Angus and Connie’s Kitchen;
(ii) The Meat Factory Ltd., an Ontario based manufacturer of branded cooked protein products for retailers and foodservice customers across Canada. Its core brand is Lou’s Barbeque, which is the number one brand in Canada in the fully cooked meals category and a leading brand in the fresh cooked ribs category;
(iii) Country Prime Meats Ltd., a BC based manufacturer of shelf stable meat snacks for primarily businesses owned by the Company; and
(iv) Frandon Seafood Inc., a Quebec based distributor of fresh and frozen seafood to foodservice and retail customers in the greater Montreal area. Frandon will play a key role in the Company’s C&C business’s expansion into the seafood product category.
The combined purchase price for these businesses, which have annual sales of approximately $266.5 million, is $227.0 million. All four transactions are expected to be on an individual basis accretive to the Company’s 2018 earnings.
Its revenue and adjusted EBITDA guidance for 2018. Not including the impact of the four transactions outlined above, the Company is projecting 2018 revenue of between $2.65 billion and $2.73 billion and adjusted EBITDA of between $244.0 million and $256.0 million.
FOURTH QUARTER HIGHLIGHTS
Record fourth quarter revenue of $585.4 million representing a 9.9% or $52.8 million increase as compared to the fourth quarter of 2016. Excluding the impact of an extra week of operations in the fourth quarter of 2016, the Company’s revenue was up 16.3% or $82.0 million.
Record fourth quarter adjusted EBITDA of $47.3 million representing a 3.7% or $1.7 million increase as compared to the fourth quarter of 2016. Excluding the impact of an extra week of operations in the fourth quarter of 2016, the Company’s adjusted EBITDA was up 12.1% or $5.1 million.
For the year, the Company generated new records for all of its key financial performance measurements: sales increased by 18.3% to $2.2 billion; adjusted EBITDA increased by 22.9% to $190.2 million; adjusted earnings per share increased by 16.3% to $2.86 per share and free cash flow per share increased by 4.5% to $4.41 per share.
SUMMARY FINANCIAL INFORMATION (see here)
“2017 was another successful year for us as we moved closer towards our goal of becoming North America’s leading specialty foods company. Our record sales and adjusted EBITDA of $2.2 billion and $190.2 million, respectively, is a testament to the progress we have made from back in 2001 when we first launched Premium Brands,” said Mr. George Paleologou, President and CEO.
“In terms of the fourth quarter, while we continued to generate record sales and adjusted EBITDA our results were below our potential due to certain unexpected headwinds. In particular, very tight labor markets across North America created unusual operating challenges for many of our businesses as well as those of our supply chain partners. These challenges included higher employee turnover rates and in some cases labor shortages. We are, however, confident that we are taking all of the necessary steps needed to adjust to this new environment and, correspondingly, remain excited about the long term prospects for our company. Consistent with this, we are projecting 2018 to be another record year with sales of approximately $2.7 billion and adjusted EBITDA of $244.0 million to $256.0 million.
“Our optimism about 2018 is based in part on realizing on the investments we have made over the last couple of years. These include our new state-of-the-art sandwich plant that came online last June, our new custom portioning and distribution center in the greater Toronto area that is scheduled to be completed next quarter, and synergies expected from acquisitions made over the last two years. We are also expecting continued solid growth in our legacy businesses driven by a robust innovation pipeline and leveraging their leadership in several niche areas of the food space that are benefiting from a variety of consumer trends. These trends include choosing higher quality foods made with simpler more wholesome ingredients, increasing reliance on convenience oriented foods both for on-the-go snacking as well as easy home meal preparation, and healthier eating including reduced sugar consumption and increased emphasis on protein.
“In terms of our four most recent acquisitions, we are very excited about all of these businesses both on a stand-alone basis as well as the potential synergies between them and our legacy businesses. All four companies have best-in-class management teams, modern well run facilities, entrepreneurial cultures and, in the cases of Concord and The Meat Factory, leading iconic brands.
“Looking forward, we continue to pursue a wide variety of acquisition opportunities and expect 2018 to be our busiest year yet for transactions,” added Mr. Paleologou.
The dividend increase will commence for the dividend period ending March 31, 2018 with the first dividend under the new rate being payable on April 16, 2018. Unless indicated otherwise in writing at or before the time the dividend is paid, each dividend paid by the Company in 2018 or a subsequent year is an eligible dividend for the purposes of the Enhanced Dividend Tax Credit System.
The combined purchase price for the four acquisitions of $227.0 million consists of $155.9 million in cash, $45.4 million in the Company’s common shares, $23.7 million in promissory notes and $2.0 million in contingent consideration.
The Meat Factory, Country Prime Meats and Frandon Seafood transactions are all expected to close within the next two weeks while the Concord Premium Meats transaction, which is subject to approval by the Competition Bureau, is expected to close in the second quarter of 2018.
KPMG Corporate Finance Inc. acted as financial advisor to the shareholders of Concord Premium Meats Ltd. while Fort Capital Partners acted as financial advisor to the shareholders of Country Prime Meats Ltd.
For fiscal 2018 the Company is projecting revenues of between $2.65 billion and $2.73 billion and adjusted EBITDA of between $244 million and $256 million, representing an adjusted EBITDA margin range of 8.9% to 9.7%. These projections reflect: (i) the impact of acquisitions that were completed in 2017; and (ii) organic sales volume growth of approximately 13%, which is above the Company’s long-term targeted range of 4% to 6% mainly due to its investment in additional sandwich production capacity in 2017 and the expected completion of a new custom portioning and distribution center in the greater Toronto area in the second quarter of 2018.
The Company’s 2018 projections do not include: (i) the impact of the four acquisitions outlined above; and (ii) any provision for possible future acquisitions even though the Company continues to pursue a variety of opportunities and expects to complete several more transactions (in addition to those outlined above) in 2018. A business acquisition will only be reflected in the Company’s guidance after the transaction has been closed.
ABOUT PREMIUM BRANDS
Premium Brands owns a broad range of leading specialty food manufacturing and differentiated food distribution businesses with operations in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia, Nevada, Ohio, Arizona, Minnesota, Mississippi, California and Washington State. The Company services a diverse base of customers located across North America and its family of brands and businesses include Grimm’s, Harvest, McSweeney’s, Piller’s, Freybe, SJ Fine Foods, Expresco, Belmont Meats, Leadbetter, Skilcor, Hempler’s, Isernio’s, Fletcher’s U.S., Direct Plus, Audrey’s, SK Food Group, OvenPride, Bread Garden Go, Hygaard, Quality Fast Foods, Deli Chef, Buddy’s Kitchen, Raybern’s, Creekside Bakehouse, Stuyver’s Bakestudio, Island City Baking, Shaw Bakers, Partners Crackers, Conte Foods, Larosa Foods, Gourmet Chef, Duso’s, Centennial Foodservice, B&C Food Distributors, Shahir, Wescadia, Harlan Fairbanks, Maximum Seafood, Ocean Miracle, Hub City Fisheries, Diana’s Seafood, C&C Packing, Premier Meats and Interprovincial Meat Sales.
(See additional financial information here.)
For further information: George Paleologou, President and CEO or Will Kalutycz, CFO at (604) 656-3100.
Photo courtesy of Frandon Seafood Inc