Company Overview and 2011 Annual & Fourth Quarter Highlights …€¦ · Franchise Agreements. IndustrySuccession There are currently 3,464 auto dealerships in Canada Results of 2011

Company Overview and 2011 Annual & Fourth Quarter HighlightsApril 2, 2012

Senior Management Team

J.J.S. (Jeff) Christie

Vice President, Finance

S.R.E. (Steve) Rose

Executive Vice President, Corporate Services

T.L. (Tom) Orysiuk

President

P.J. (Pat) Priestner

Chief Executive Officer

1 INDUSTRY OVERVIEW

BUSINESS OVERVIEW

FINANCIAL REVIEW

STRATEGY

2

3

4

Presentation Agenda

Certain of the information presented today looks forward in time

and deals with other than historical or current facts for the

AutoCanada Inc. (the “Company”). Such statements are qualified

in their entirety by the inherent risks and uncertainties

surrounding future expectations, including, but not limited to, the

risks associated with: the retail automotive industry; our business;

our acquisition strategy; our dependence on automobile

manufacturers; and our structure. For additional information with

respect to these factors, please refer to the prospectus and other

information filed by the Company with Canadian provincial

securities commissions.

The Company disclaims any intention or obligation to update or

revise any forward-looking statements, whether as a result of

new information, future events or otherwise.

Forward-Looking Statements

(Information as at March 29, 2012)

Closing share price $10.18

Market capitalization $205M

52 Week High $10.38

52 Week Low $3.80

Dividend (annualized) $0.56

Yield 5.5%

Average Volume 27,400

AutoCanada Inc. (ACQ.UN)

Annual consumer spending more than any

other Canadian retail segment

Franchised Auto Dealerships Operate

Four Complementary Business Segments

Used vehicle

sales

Finance and

insurance Parts, service and

repair

New vehicle

sales

Dealership Business Model

Automobile dealerships can generate

relatively stable cash flows

• Historically stable and profitable business

(profitable during wars, recessions, etc.)

• Variable cost structure – most of fixed costs

offset by parts and service business

• New and used vehicle sales counter-cyclical

and drive higher margin business such as

finance and insurance and parts and

service

Total Canadian New Vehicle

Sales 1960 – 2012F

Source: Scotia Economics - Global Auto Report, March 29, 2012

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012F

To

tal V

eh

icle

Sale

s (

Th

ou

san

ds)

Calendar Year

TrendlineTrendlineTrendlineTrendline

ActualActualActualActual

Earnings Stability

Source: DesRosiers Automotive Consultants/CAW

Exclusive Sales

Territories

Brand

Marketing

Warranty Repair Work

No Cost

Consumer Sales

Incentives

Substantial Value Attributed to Franchise Rights

Benefits of Dealership

Franchise Agreements

Industry Succession

There are currently 3,464 auto dealerships in Canada

Results of 2011 PwC Trendsetter Survey:

• PwC identifies a succession crisis amongst

Canadian auto retailers

• 22% of dealers would like to exit in one year

• 58% of dealers would like to exit in five years

• 100% of independent dealers would like to exit in

within the next 10 years

Industry succession issues presents an

opportunity for dealer groups

• Economies of scale

• Geographic and brand diversification

• Ability to attract management talent and

advancement opportunities within group

• Best practice sales, parts and service process

training and implementation

• Expert marketing and online marketing team

• Centralized administrative and strategic

functions

Benefits of Multi-Location

Dealership Model

• 24 franchised dealerships

• Approximately 28,000 new and used

vehicles sold in 2011

• Approximately 1 in every 82 new vehicles

sold in Canada from an AutoCanada

dealership

• More than 300,000 service and collision

orders completed at 333 service bays in

2011

Our Business

Experienced and Aligned

Management Team

• Experienced and incentivized dealer

principals and general managers

• Members of senior management own

42.8% of AutoCanada shares

• Corporate head office team provides

management, marketing, financial and

operational expertise

24 Dealerships in 6 Provinces

B.C.

Alberta

Saskatchewan

ManitobaOntario

Quebec

Newfoundland

N.B.

Nova Scotia

P.E.I.

GRANDE PRAIRIE GRANDE PRAIRIE GRANDE PRAIRIE GRANDE PRAIRIE PLATFORMPLATFORMPLATFORMPLATFORM

Grande Prairie Chrysler JeepDodge Ram

Grande Prairie HyundaiGrande Prairie MitsubishiGrande Prairie NissanGrande Prairie Subaru

PRINCE GEORGEPRINCE GEORGEPRINCE GEORGEPRINCE GEORGEPLATFORMPLATFORMPLATFORMPLATFORM

Northland Chrysler Jeep Dodge Ram

Northland HyundaiNorthland Nissan

MAPLE RIDGEMAPLE RIDGEMAPLE RIDGEMAPLE RIDGEPLATFORMPLATFORMPLATFORMPLATFORM

Maple Ridge Chrysler JeepDodge Ram FIAT

Maple Ridge VolkswagenAbbotsford VolkswagenChilliwack Volkswagen

VICTORIAVICTORIAVICTORIAVICTORIAVictoria Hyundai

EDMONTON PLATFORMEDMONTON PLATFORMEDMONTON PLATFORMEDMONTON PLATFORMCrosstown Chrysler Jeep Dodge

Ram FIATCapital Chrysler Jeep Dodge

Ram FIATSherwood Park Hyundai

KELOWNAKELOWNAKELOWNAKELOWNAOkanagan Chrysler Jeep

Dodge Ram

PONOKAPonoka Chrysler Jeep

Dodge Ram

THOMPSONTHOMPSONTHOMPSONTHOMPSONThompson Chrysler Jeep

Dodge Ram

GTA PLATFORMGTA PLATFORMGTA PLATFORMGTA PLATFORM401 Dixie HyundaiCambridge Hyundai

Newmarket Infiniti/Nissan

DARTMOUTHDARTMOUTHDARTMOUTHDARTMOUTHDartmouth Chrysler Jeep

Dodge Ram

MONCTONMONCTONMONCTONMONCTONMoncton Chrysler Jeep

Dodge Ram

64%

20%

11%

5%

2011 2011 2011 2011 Revenue Revenue Revenue Revenue ($ ($ ($ ($ millions)millions)millions)millions)

New Vehicle Used Vehicle Parts, Service & Collision Repair FI & Other

New Vehicle Sales

28%

10%

34%

28%

2011 2011 2011 2011 Gross Profit Gross Profit Gross Profit Gross Profit ($ ($ ($ ($ millions)millions)millions)millions)

$640.7 $47.7

Lowest Profit Margin at 7.4%

Note: Results for the Company for the year ended December 31, 2011

• Resale of trade-ins

• Sale of third-party financing, service or

insurance products

• Recurring service and repair business

New Vehicle Sales

Drives high-margin related transactions

64%

20%

11%

5%



Used Vehicle Sales

28%

10%

34%

28%


Higher Profit Margin at 8.4%

$206.0 $17.4


• Service contracts

• Reconditioning opportunities for parts and

service

• Recurring parts and service business

• Financing commissions

Used Vehicle SalesDrives high-margin related transactions

64%

20%

11%

5%



Parts, Service and Collision

Repair

28%

10%

34%

28%


High Profit Margin at 52.1%

$110.3 $57.5


“Absorption Rate”

• Percentage of dealership’s

fixed expenses covered by

gross profit generated by

parts and service segment

• AutoCanada’s 2011

absorption rate = 88%


Repair


Repair

• High Margins and Excellent Growth

– Increasingly complex vehicles cost more to

maintain

– Highly specialized equipment and skilled

labour required

– Independent repair shops closing

– Number of vehicles on the road is growing,

creating more demand for available

service bays

64%

20%

11%

5%



Finance and Insurance

28%

10%

34%

28%

2011 2011 2011 2011 Gross Gross Gross Gross Profit Profit Profit Profit ($ ($ ($ ($ millions)millions)millions)millions)

$51.8 $46.6


Highest Profit Margin at 89.8%

10.810.810.810.8

13.713.713.713.7 13.813.813.813.8 13.413.413.413.4

15.515.515.515.5

19.319.319.319.3

0000

5555

10101010

15151515

20202020

25252525

2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2011201120112011

Units 000’s

New Vehicle Sales

8.58.58.58.5

9.69.69.69.6 9.99.99.99.9 9.79.79.79.7

8.88.88.88.8 8.78.78.78.7

0000

2222

4444

6666

8888

10101010

12121212

2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2011201120112011

Units 000’s

Used Vehicle Sales

Revenue By Business Operation

0000

200200200200

400400400400

600600600600

800800800800

1,0001,0001,0001,000

2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2011201120112011

$ millions


Gross Profit by Business Operation

0000

20202020

40404040

60606060

80808080

100100100100

120120120120

140140140140

160160160160

2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2011201120112011

$ millions


Adjusted EBITDA

21.021.021.021.0

25.125.125.125.1 24.524.524.524.5

18.418.418.418.416.716.716.716.7

29.129.129.129.1

0000

5555

10101010

15151515

20202020

25252525

30303030

35353535

2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2011201120112011

$ millions

2011 Annual Results

Revenue $ 1,008.9 16.0%

Gross Profit $ 169.1 12.7%

EBITDA* $ 29.1 74.0%

Adjusted EPS** $ 0.89 107.0%

Adjusted Free Cash Flow $ 27.7 97.9%

$ millions (except EPS)

* EBITDA does not include interest on floorplan financing**Adjusted EPS is calculated using net earnings before other items (reversal of impairment of intangible assets and its related tax effect).

Record performance in 2011

2011 Q4 Results

Revenue $ 238.3 20.4%

Gross Profit $ 42.2 18.2%

EBITDA* $ 7.5 117.6%

Adjusted EPS** $ 0.23 206.0%

Adjusted Free Cash Flow $ 7.4 174.1%

$ millions (except EPS)

* EBITDA does not include interest on floorplan financing**Adjusted EPS is calculated using net earnings before other items (reversal of impairment of intangible assets and its related tax effect).

Record performance in Q4 2011

Strong Balance Sheet

Current Assets $234.1

Current Liabilities $189.1

Net Working Capital $ 45.0

Long-term Debt $ 20.1

$ millions

New and Used Vehicle Inventory Turned

6.5 Times in 2011

Floorplan debt of $150.8 million included in current liabilities and netted against inventory which is included in current assets

Very liquid inventory

Dividend Growth

Increase to Dividend in Four Consecutive Quarters

DividendPolicy

Organic Growth

AcquisitionPolicy

SustainableReturns

Contributes toEnhanced Shareholder

Value

Strategy

Factors contributing to change in strategy:

• OEM resistance to public ownership model

• Limited growth opportunities

• Low trading multiple compared to US peers

New Strategy Announced June 22, 2011

Strategy

• Focus on same store growth

• Target dividend between 70% and 80% of fully

diluted EPS

• Pursue accretive acquisitions

• Allow private purchases to build relationships

with new manufacturers

ACQ Share Performance Since June 22, 2011:

Strategy

• Improvement in share price of 124%

• Average daily trading volume of approximately

27,000 since strategy change versus 13,500

over same period prior to change

Impact of strategy on business landscape:

• Potential to add more dealerships

• Improvement in trading multiple allows future

acquisition opportunities to be more accretive

• Continued improvement in liquidity of shares

Management update since June 22, 2011:

Strategy

• Management continues to seek acquisition and

open point opportunities with both new and

current Manufacturers

• Potential growth opportunities exceeding

Management’s expectations since June of 2011

Investment Highlights

Auto Dealership Business Historically Stable

and Profitable

Industry Succession Issue to Provide

Opportunity for Dealer Groups

AutoCanada Posts Record Annual and Record

Fourth Quarter Results in 2011

Current Strategy to Provide Attractive Yield

with Potential for Growth

Question and Answer

Analyst Coverage

Clarus Securities Inc.

Kelvin Cheung, CFA – (416) 343-2773

Latest Report: March 26, 2012

Stock Rating: BUY

12 – Month Target: $12.70

Documents

Company Overview and 2011 Annual & Fourth Quarter Highlights …€¦ · Franchise Agreements. IndustrySuccession There are currently 3,464 auto dealerships in Canada Results of 2011