Mr. Robert Sawyer reports

RONA ANNOUNCES ITS SECOND QUARTER 2015 RESULTS

Rona Inc. has released the results for its operations for the 13- and 26-week periods ended June 28, 2015. All figures in this press release are in Canadian dollars.

Second quarter highlights

• Increase of 5.4 per cent in same-store sales in the retail segment;
• Increase of 8.8 per cent in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) compared with last year, to $96.9-million;
• Adjusted net income up by 19.1 per cent to $50.0-million compared with $42.0-million last year;
• Improvement of 31.4 per cent in adjusted net income per share, to 46 cents compared with 35 cents in the second quarter of 2014;
• Increase of 14.3 per cent to the dividend on common shares.

"For the second quarter of 2015, Rona has recorded a strong 5.4-per-cent increase in same-store sales throughout its retail network. We are satisfied with this fourth consecutive quarter of growth, which was achieved despite the ongoing decline in housing starts across the country and a stagnant economy. This performance underscores the success of the various merchandising and banner repositioning strategies we implemented just over a year ago. They have improved Rona's competitive position and enhanced customer satisfaction," said Robert Sawyer, president and chief executive officer of Rona.

"Continuously improving our product and service offerings to customers is the foundation of Rona's success. Building on the progress made, we have begun optimizing product selection in certain key categories in all our stores. These initiatives, combined with disciplined expansion of our network and integration of our Coupal banner into Marcil, with 17 stores, will give our banners an even higher profile, and stimulate internal growth," continued Mr. Sawyer.

                             FINANCIAL HIGHLIGHTS  
               (in millions of dollars, except per share data)

                                          Quarters ended    Six months ended
                                      June 28,  June 29,  June 28,  June 29,
                                          2015      2014      2015      2014

Revenues                              $1,263.5  $1,193.5  $2,042.2  $1,957.8
EBITDA                                    97.1      88.2     109.2      96.1
Adjusted EBITDA                           96.9      89.1     109.1      99.1
Net income attributable to                                                  
participating shares                      49.9      42.0      38.2      25.4
Per share -- basic and diluted ($)        0.46      0.35      0.35      0.21
Adjusted net income attributable to                                         
participating shares                      50.0      42.0      38.8      27.6
Per share -- basic and diluted ($)        0.46      0.35      0.35      0.23

"The increase in the return on invested capital still remains a financial priority for Rona. For a sixth consecutive quarter, this indicator has risen on the strength of our performance. Furthermore, completing the proposed acquisition of the 20 franchise stores in our network will simplify our business model, allowing Rona to rely more on its banners' proven success and the proposed optimization measures. By continually making the most of those elements which are under our control, we can continue to grow our return and further create value for shareholders," added Dominique Boies, Rona's executive vice-president and chief financial officer.

Second quarter 2015 results

Consolidated revenues for the second quarter of 2015 totalled $1.26-billion, up 5.9 per cent from $1.19-billion recorded in the second quarter of 2014. This increase mainly reflects 6.7-per-cent-higher revenues in the retail segment due to the success of merchandising strategies and a repositioned Reno-Depot banner in Quebec. These factors helped grow same-store sales in Rona's retail network by 5.4 per cent in the second quarter of 2015. Sales in the distribution segment rose 3.7 per cent due to the positive impact of new programs for affiliate stores as well as a shift in sales from the first quarter to the second quarter. Adjusted EBITDA rose to $96.9-million, or 7.7 per cent of revenues, compared with $89.1-million, or 7.5 per cent of revenues recorded in the second quarter of 2014. The increase reflects same-store sales growth in the retail segment and tight management of operating expenses in the stores. Retail segment's adjusted EBITDA margin was stable, while the distribution segment's margin increased by 72 basis points. Adjusted net income attributable to participating shares for the second quarter of 2015 amounted to $50.0-million, or 46 cents per share basic and diluted, compared with $42.0-million, or 35 cents per share basic and diluted, in the second quarter of 2014.

2015 first half highlights

• Increase of 5.2 per cent in same-store sales in the retail segment;
• Increase of 10.1 per cent in adjusted EBITDA compared with last year, to $109.1-million, and adjusted EBITDA margin up by 28 basis points;
• Adjusted net income up $11.2-million to $38.8-million, compared with $27.6-million last year;
• Improvement of 52.2 per cent in adjusted net income per share, to 35 cents compared with 23 cents in the first six months of 2014.

2015 first half results

Consolidated revenues for the first six months of 2015 totalled $2.04-billion, up 4.3 per cent compared with $1.96-billion in the same period of 2014. This change mainly reflects a 6.4-per-cent increase in the retail segment, including strong 5.2-per-cent growth in same-store sales.

Adjusted EBITDA increased 10.1 per cent to $109.1-million or 5.3 per cent of revenues, compared with $99.1-million or 5.1 per cent of revenues in 2014. The margin increased 42 basis points in the retail segment driven by growth in same-store sales, while the distribution segment's margin decreased 12 basis points.

Adjusted net income attributable to participating shares for the first six months of 2015 amounted to $38.8-million, or 35 cents per share basic and diluted, compared with $27.6-million, or 23 cents per share basic and diluted, in the first six months of 2014.

Solid financial position

As at June 28, 2015, Rona's financial position remained healthy, with net debt of $289.3-million including $177.3-million used on an authorized credit facility of $700.0-million. The ratio of net debt to adjusted EBITDA for the last 12 months was 1.18 times as at June 28, 2015, compared with 0.90 times as at June 29, 2014. The ratio of net debt to total capital was 0.16 times as at June 28, 2015, up from 0.09 times as at June 29, 2014.

The increase to ratios since the same period a year ago reflects use of the credit facility to repurchase 10.7 million common shares in the 12-month period, for a consideration of $145.4-million, following share repurchases under normal course issuer bids. Since November, 2014, Rona has been authorized to purchase a maximum of 9.2 million common shares in the period up to Nov. 17, 2015. Since the program has been in effect, Rona has bought back 8.1 million common shares for a cash consideration of $109.7-million.

Dividend on preferred shares

At its meeting on Aug. 10, 2015, Rona's board of directors declared a quarterly dividend of 32.81 cents per share on cumulative five-year rate-reset Series 6 Class A preferred shares. The dividend will be paid on Sept. 30, 2015, to shareholders of record on Sept. 15, 2015.

Dividend on common shares

At its meeting on Aug. 10, 2015, the board of directors authorized a 14.3-per-cent annualized increase in the dividend on common shares, which will rise from 14 cents to 16 cents per share annually, as well as a change in the frequency of payment, from a semi-annual to a quarterly payment. The board therefore declared a quarterly dividend of four cents per share on the corporation's common shares. The dividend will be paid on Sept. 25, 2015, to shareholders of record on Sept. 10, 2015.

Additional information

The management's discussion and analysis (MD&A), financial statements and related notes for the second quarter of 2015 can be found in the investor relations section of the corporation's website and on SEDAR. The corporation's annual information form, along with other information about Rona, can also be found on the Rona and SEDAR websites.

Conference call with the financial community

On Tuesday, Aug. 11, 2015, at 3 p.m. Eastern Daylight Time, Rona will hold a conference call for the financial community. To join the conference, please call 416-340-2217 or 1-866-696-5910. A replay will be available from 7 p.m. on Tuesday, Aug. 11, 2015, until Aug. 18, 2015. It can be heard by dialling 905-694-9451 or 1-800-408-3053 and entering the password 4782428 on the telephone keypad.

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