Colabor Group Inc.

Fourth-quarter consolidated sales from continuing operations increased 12.9% to $150.5 million. Distribution segment sales rose 19.8% to $103 million, and wholesale sales increased 5.6% to $62.1 million. Consolidated adjusted EBITDA from continuing operations was $7.1 million, or 4.7% of sales, versus $7.5 million, or 5.6%, in Q4 of the prior year; excluding subsidies, management said the margin improved to 4.6% from 4.3%. Net earnings from continuing operations were $5.3 million, up from $0.8 million, and net earnings were $5.1 million, or $0.05 per share, versus $0.8 million, or $0.01 per share. Full-year 2021 consolidated revenues increased 3.1% to $476 million. Cash flow from operating activities was $9 million versus $13 million last year. Net debt was $48.4 million at December 25, 2021, down from $52.1 million at the start of fiscal 2021 and $53.2 million at the end of Q3; leverage was 1.9x. For 2022, management expects some continuing impact from the pandemic, labor shortages and supply-chain disruptions, and said CapEx should not exceed normal levels, likely increasing slightly if conditions support it.

Louis Frenette said the company ended 2021 on a strong note despite tight COVID restrictions, labor constraints and inflation. He emphasized that diversification across the HRI market, a revamped private label with over 500 products and 70% locally sourced items, and improved internal processes are driving growth and margin gains. He framed 2022 priorities as improving profitability, expanding specialty distribution in fish and meat, developing Western Quebec and pursuing accretive M&A, while also modernizing distribution centers and finalizing integration of certain business functions.

Pierre Blanchette highlighted Q4 revenue growth, the segment mix, and the pressure on adjusted EBITDA from a $1.6 million reduction in subsidies, pandemic-related labor costs and a one-week strike at the Lévis distribution center. He noted cash flow from operations was $9 million in Q4, and net debt improved to $48.4 million, with leverage at 1.9x versus 2.1x at the end of Q3. He also said the Ontario tax assessment matter was only a partial recovery, with the cash received last week, and that 2022 CapEx should stay around normal levels, with spending focused on specialty divisions and efficiency improvements.

Analysts focused on the drivers behind Q4 revenue growth, asking how much came from pricing versus reopening. Management said inflation was estimated at 3.5% for fiscal 2021 and described pricing as a pass-through business, while also noting early gains from its strategic plan. Questions also centered on the Western Quebec expansion, with Louis Frenette saying the initiative is on track but still not material, though additional sales headcount will be added as thresholds are reached. On the January restaurant closures, management said dining rooms were closed from December 31 to January 31 and reopened on February 1, with customers gradually returning; they also confirmed the Ontario tax recovery was a partial amount and that the cash was received last week.