Mr. Douglas Good reports

UNISYNC REPORTS Q1 FISCAL 2024 FINANCIAL RESULTS

Unisync Corp. has released its financial results for the first quarter ended Dec. 31, 2023. Unisync operates through two business units: Unisync Group Ltd. (UGL) with operations throughout Canada and the United States; and 90-per-cent-owned Peerless Garments LP, a domestic manufacturing operation based in Winnipeg, Man. 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, military operational clothing and accessories for a broad spectrum of federal, provincial and municipal government departments and agencies.

Results for the quarter ended Dec. 31, 2023, versus the quarter ended Dec. 31, 2022

Consolidated revenue for the three months ended Dec. 31, 2023, of $23-million was within $600,000 of the normalized comparable revenue of $23.6-million for the three months ended Dec. 31, 2022. UGL segment revenue of $20.6-million in the current quarter was below last year's comparable quarter revenue of $26.4-million, mainly due to the December, 2022, sale of the non-core New Jersey division that contributed revenue of $5.3-million ($1.3-million of which was from the bulk sale of inventory to the purchaser) in the corresponding quarter last year.

As a result of the loss of revenues from the sale of the New Jersey division, the UGL segment experienced a decrease in gross profit to $3.1-million, or 15.0 per cent of segment revenue, compared with $5.1-million, or 19.2 per cent of segment revenue in the same quarter in the prior year.

Peerless maintained revenues consistent with the same quarter last year, recording gross profit of $500,000, or 20.9 per cent of segment revenue, against $400,000, or 14.5 per cent of segment revenue, in the same quarter of the prior fiscal year on a higher-margin mix of product sales.

At $3.7-million, consolidated general and administrative expenses were down $700,000, or 15.6 per cent, from the three months ended Dec. 31, 2022, due to the sale of the New Jersey division last year and the overhead reductions associated with the relocation of the Carleton Place, Ont., and the Saint-Laurent, Que., operations that began in September, 2023.

Interest expense of $900,000 in the current quarter was up $200,000 from the same quarter of fiscal 2023 due to greater borrowings required to finance operating losses coming out of the pandemic years, restructuring costs and the addition of imputed lease interest on the new Guelph distribution facility.

The company reported a net loss before tax of $1.1-million in the quarter compared with net income of $700,000 in the same quarter last year. Net income in the first quarter last year included a $400,000 gain on the sale of the New Jersey division. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) in the current quarter was $1.2-million versus $2.1-million for the corresponding three-month period last year.

Business outlook

During the first quarter, UGL successfully negotiated several positive contract pricing agreements and relocated its offshore production from many factories with higher labour costs and that were import duty subject to those that offer lower labour costs and/or are duty-free. In addition, UGL completed the relocation and consolidation of a major portion of its operations in Carleton Place, Ont., and the Saint-Laurent, Que., into its more efficient facilities in Guelph and Mississauga, Ont. The consolidation of distribution operations at its main Guelph distribution facilities will yield UGL an estimated annual savings of $2.5-million in direct and administrative labour costs on a net reduction of about 20 per cent in head count. This restructuring took place over the last six months, and, since the last phase of staff reductions was not completed until February, 2024, the full extent of the related cost saving will not get reflected in the company's financial results until the latter half of this fiscal year. The company is also in the process of sourcing a tenant to lease out the resulting 40,000-plus square feet of vacated space at its Saint-Laurent facility, which will further reduce its direct and administrative overhead. The company believes these measures will significantly improve UGL profitability in fiscal 2024. UGL management continues to place strong focus on the U.S. market and is in advanced discussions with a number of U.S. major corporations with respect to their image wear programs totalling over $100-million (U.S.) annually in potential new business. As well, UGL has been invited to bid on an extensive list of other Canadian-based and U.S.-based major customers that are scheduled to come to market during the 2024 calendar year.

With $38.5-million in firm contracts and options on hand as at Dec. 31, 2023, the Peerless business segment is positioned to maintain its current level of revenues and profitability over the balance of fiscal 2024.

More detailed information is contained in the company's consolidated financial statements for the quarter ended Dec. 31, 2023, and management discussion and analysis dated Feb. 13, 2024, which may be accessed on SEDAR+.

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