BRP soars while Bombardier struggles
Ski-Doo maker unveils first dividend
While Bombardier Inc. has been plagued by financial issues over the last several years, the recreational vehicle company that split from the aerospace giant in 2003 has been thriving.
On Thursday, Bombardier Recreational Products Inc. reached another milestone, announcing the first quarterly dividend in the company’s history, a decision that helped send shares soaring to an all-time high.
In results from the first quarter ending April 30, BRP — which makes recreational vehicles including snowmobiles, ATVs, personal watercraft and three-wheeled motorcycles — posted record revenues of $ 956 million, a three per cent increase from the same time last year.
BRP’s board of directors approved a quarterly divi- dend of eight cents per subordinate voting and multiple voting share, to be paid out on July 13 to all shareholders of record as of June 30. The company also announced that the board approved the launch of a substantial issuer bid, where the company will offer to buy back up to $350-million of its shares.
The dividend payout would see the Beaudoin-Bombardier family, which owns 41.2 million multiplevoting shares of BRP, receive $3.3 million.
“We decided to launch this dividend with a yield of approximately one per cent, and as the business will be growing and as our profitability will be growing, our objective is going to be to continue to provide returns to our shareholders,” said the company’s chief financial officer, Sébastien Martel, in a conference call with analysts on Thursday.
“We will be adjusting the dividend payout in line with the results we will be delivering. For now, there is no clear guidance as to how we’re going to be creeping up the dividend on a quarterly or annual basis.”
When BRP went public on the Toronto Stock Exchange in 2013, 10 years after splitting from Bombardier, president and chief executive José Boisjoli said in an interview with the Financial Post that the company decided against offering its shareholders a dividend, despite the fact that many of BRP’s competitors offered them.
“We felt it was a bit premature to start Day 1 with a dividend, but every year with the board we’ve been discuss- ing capital allocation, whether to do a dividend, and how to manage cash to maximize return for shareholders, ” Boisjoli said.
“We’ve having a good start to the year, our planning for this year is looking quite good, and we have good orders from dealers for our products, so we felt this year we needed to do more.”
National Bank analyst Cameron Doerksen upgraded the company from perform to outperform, raising the target price from $42 to $45, because of the strong results, increased guidance, and the fact that the company is performing well in what is far from a booming market.
Doerksen also said the decision to launch a substantial issuer bid reduces the risk of a substantial amount of BRP stock entering the market.
Earlier this year, Bain Capital — the second-largest shareholder with about 31.7 million BRP shares — was reported to be considering selling at least part of its stake in the company.
But both Bain Capital and the Beaudoin- Bombardier family — which together own 65.3 per cent of BRP shares — intend to sell some of the stock to maintain their proportionate holdings.
“The fact that two major shareholders are participating in the substantial issuer bid means that it’s less likely that Bain Capital, which had been reportedly looking to sell down their stake in BRP, is going to do that,” Doerksen said.
“I think it’s a good use of capital for them.”
Financial guidance targets were adjusted thanks to the positive earnings results, with expected diluted earnings per share up 12 to 18 per cent — from $ 2.20 to $ 2.32 — a boost from previously expected increase of between 10 and 16 per cent.
The Quebec- based company posted gross profits of $207.2 million, a 6.7 per cent boost from 2016. It also announced a net loss of $19-million due primarily to an unfavourable foreign exchange rate, which resulted in a diluted loss of 17 cents per share.
BRP’s stock reached an alltime high of $37.87 before settling at $37.03, an increase of 12.7 per cent.