VANCOUVER, British Columbia, March 22, 2022 (GLOBE NEWSWIRE) — 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.
Finning 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.
Senior Vice President, Investor Relations and Treasury
(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”.
This 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.