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BMTC Group Inc. — Interim / Quarterly Report 2024
Sep 8, 2023
43306_rns_2023-09-07_fc8e589d-ca27-40d9-836f-35f8f7f152b7.pdf
Interim / Quarterly Report
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QUARTERLY MANAGEMENT REPORT AS AT JULY 31st, 2023
Notice related to the review of interim financial statements
The consolidated interim financial statements for the period ended July 31st, 2023 and 2022 have not been reviewed by the auditors of the Company.
BOARD OF DIRECTORS
GENERAL INFORMATION
YVES DES GROSEILLERS Chairman of the Board
AUDITORS
PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l.
MARIE-BERTHE DES GROSEILLERS
President and Chief Executive Officer of the Company
CORPORATE SECRETARY
Michèle Des Groseillers [email protected]
ANDRÉ BÉRARD/*
Lead Director of the Company and Director of companies
LEGAL ADVISORS
Fasken Martineau DuMoulin LLP ("Fasken") Norton Rose Fulbright LLP (("Norton") Davis Ward Phillips & Vineberg LLP (''Davies'')
LUCIEN BOUCHARD/*
Partner Davies Ward Phillips & Vineberg LLP (Law firm)
CHARLES DES GROSEILLERS
Director
ANNE-MARIE LECLAIR**
Partner and Vice President LG2 (Advertising agency)
BANKERS
National Bank of Canada and Desjardins
REGISTRAR AND TRANSFER AGENT
Computershare Investor Services Inc. The Direct Registration System (DRS) allows your securities to be held in "book-entry" form without having a physical security certificate issued as evidence of ownership. Instead, your securities are held in your name and registered electronically in our records, which are maintained by our transfer agent Computershare. If you are a registered holder of units and wish to convert physical securities to DRS, go to: www.computershare.com/investorcentrecanada.
GABRIEL CASTIGLIO/**
Executive Vice President Chief Legal Officer and Corporate Secretary Fiera Capital (Investment management company)
STOCK LISTING
Common shares are listed on the Toronto Stock Exchange under the symbol GBT.TO and CUSIP number 05561N208.
TONY FIONDA/**
Senior Vice President Remcorp Inc. (Investment company)
HEAD OFFICE
8500 Place Marien Montréal-Est (Quebec) H1B 5W8 Tel: (514) 648-5757
-
Member of the Audit Committee
-
** Member of the Human Resources and Corporate Governance Committee
-
*** Member of the Investment Committee
BMTC Group Inc.
BMTC Group Inc. (the "Company"), is a Company incorporated in accordance with Article 140 of the Business Corporations Act (Quebec). Its Common Shares are listed on the Toronto Stock Exchange.
Through its subsidiary, Le Corbusier-Concorde S.E.C. and its division, Tanguay, the Company manages and operates one of the largest furniture and household and electronic appliance retail sales networks in Quebec.
FINANCIAL HIGHLIGHTS
For the six month periods ended July 31, 2023 and 2022
(Unaudited and in thousands of dollars, except per share amounts)
| Operations | July 31, 2023 July31,2022 $ $ |
|---|---|
| Revenue Net earnings Financialposition |
304 177 394 598 41 380 15 053 |
| Cash, bank overdraft and investments Total assets Equity Per-share information |
284 207 244 385 603 426 564 152 473 311 393 855 |
| Net earnings Carrying amount Stock market value Period high Period low Number of shares outstanding Common shares |
1,25 0,45 14,41 11,86 16,10 15,78 13,41 13,28 32 839 950 33 212 474 |
2
**Annual Management Report ***
Caution regarding forward-looking statements
This Quarterly Management Report contains certain forward-looking statements with respect to the Company. These forward-looking statements are identified by the use of terms and phrases such as "anticipate", "believe", "estimate", expect", "intend", "may", "plan", "predict", "project", "will", "would", as well as the opposites of these terms and similar terminology, including references to assumptions.
Forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by these forward-looking statements. Results indicated in forward-looking statements may differ materially from actual results for a number of reasons, which the Company has identified in the 2023 Annual Information Form under "Narrative Description of the Business - Risk Factors", and other risks detailed from time to time in the Company's continuous disclosure documents.
The reader is cautioned that the factors we refer to above are not exhaustive of the factors that may affect any of the Company's forward-looking statements. The reader is also cautioned to consider these and other factors carefully and not to put undue reliance on forward-looking statements.
The Company made a number of assumptions in making forward-looking statements in this Quarterly Management Report. The Company considers the assumptions on which these forward-looking statements are based to be reasonable.
These statements reflect current expectations regarding future events and operating performance and speak only as of the date of release of this Quarterly Management Report, and represent the Company's expectations as of that date. 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, other than as required by law.
Non-International Financial Reporting Standards (IFRS) financial measures
The Company discloses adjusted net earnings, which includes or excludes certain amounts that are not considered representative of the performance measures and financial recurrence of the Company. Management believes that this measure is useful in understanding and analyzing the operational performance of the Company and that it can provide additional information.
Adjusted net earnings as well as same store revenues are not an earnings measure recognized by IFRS and do not have a standardized meanings prescribed by IFRS. Therefore, adjusted net earnings and same store revenues as discussed in this Quarterly Management Report may not be compared to similar measures presented by other issuers. These measures of performance should not be considered as alternatives to indicators of performance calculated according to IFRS, but rather as a source of additional information.
The Company discloses in this Annual Management Report under the section "Results" a reconciliation between net earnings and adjusted net earnings.
* The financial information, unless otherwise indicated, is in Canadian dollars and has been prepared in accordance with the International Financial Reporting Standards (IFRS).
3
Results
For the second quarter ended July 31, 2023, the Company's revenues decreased by $90,41,000 to $304,177,000 compared to $394,598,000 recorded for the period ended July 31, 2022, a 23% decrease. Net earnings for the second quarter ended July 31, 2023, amounted to $41,380,000 compared to $15,053,000 recorded for the period ended July 31, 2022. Basic net earnings per share amounted to $1.25 compared to $0.45 recorded for the second quarter ended July 31, 2022.
For the second quarter ended July 31, 2023, as well as the corresponding period of 2022, the share repurchase program had no impact on basic net earnings per share.
During the period ended April 30, 2023, the Company proceeded with the sale of its Montreal distribution center for an amount of $66,500,000 resulting in an after-tax gain of $50,962,000 or $1.54 per basic share.
The variation in adjusted net results would be ($24,635,000) or ($0.74) per basic share for second quarter ended July 31, 2023, as well as the comparable period ended July 31, 2022, are explained as follows:
(Unaudited and $ in thousands)
| Net earnings 41 380 Gain on disposal of fixed assets (after-tax) (50 962) Adjusted net earnings (9 582) Minus: Adjusted net earnings for the previous period 15 053 Variation (24 635) July 31, 2023 |
July31, 2022 |
|---|---|
| 15 053 - |
|
| 15 053 | |
The variations in net adjusted earnings is allocated as follows :
| (Unaudited and $ in thousands) | (Unaudited and $ in thousands) | (Unaudited and $ in thousands) | (Unaudited and $ in thousands) |
|---|---|---|---|
| Increase | |||
| Increase (decrease) in retail operations |
Increase (decrease) in investment |
(decrease) in adjusted net earnings |
|
| (15 637) (16 237) (31 874) |
|||
| As at April 30, 2023 | 1 885 | (13 752) | |
| As at July 31, 2022 Total |
5 354 **7 239 ** |
(10 883) | |
| (24 635) | |||
| ($ in thousands, except for per share amounts) Annual financial information |
|||
| Revenue Net earnings Total assets Net earnings per share basic and diluted Dividends per share |
January 31, 2023 January31,2022 |
||
| 717 972 819 445 40 838 81 931 581 964 549 926 1,23 2,43 0,36 0,34 |
|||
| 4 |
| January 31, 2023 | January31,2022 | |
|---|---|---|
| Revenue | **717 972 ** | 819 445 |
| Net earnings | **40 838 ** | 81 931 |
| Total assets | **581 964 ** | 549 926 |
| Net earnings per share basic and diluted | **1,23 ** | 2,43 |
| Dividends per share | **0,36 ** | 0,34 |
| 4 |
Financial position and dividends
Cash and investments, net of bank overdraft, increased by $64,577,000 during the second quarter ended July 31, 2023. Investments consist of treasuries bearing interest, government and corporate bonds, common and preferred shares, which at the close of the quarter had a market value of $284,207,000 (including cash).
As at July 31, 2023, the working capital showed a surplus of $14,451,000, a decrease of $7,115,000 compared to the year ended January 31, 2023. The Company's shareholders' equity increased from $440,899,000 as at January 31, 2023, to $473,311,000 as at July 31, 2023. As at July 31, 2023, the book value per share stood at $14,41 compared to $13.34 as at January 31, 2023.
Pursuant to the normal course issuer-bid put in place on April 15, 2022, and renewed on April 15, 2023, accordingly, 200,450 common shares were repurchased and cancelled by the Company. As a result of this change, the Company had as at July 31, 2023, 32,839,950 common shares issued and outstanding.
During the period ended July 31, 2023, no options were granted. The Company may still grant pursuant to the Plan a total of 5,710,864 options, representing 17.39% of the issued and outstanding shares of the Company.
Company pension plans and treatment of future actuarial gains and losses
The pension expense for all plans for the three month and six month periods ended July 31, 2023, amounted to $1,610,000 and $3,162,000 (compared to $1,782,000 and $3,609,000 for corresponding periods ended July 31, 2022).
Contributions paid by the Company for all plans for the three month and six month periods ended July 31, 2023, amounted to $1,240,000 and $1,837,000 (compared to $1,277,000 and $2,600,000 for corresponding periods ended July 31, 2022).
Related party transactions
The Company is bound by leases expiring in December 2024, for which a lease liability of $820,000 is recorded as at July 31, 2023.
For the quarter ended July 31, 2023, depreciation of $264,000 relating to the right-of-use asset and a $20,000 interest expense were recognized in earnings in connection with these leases.
Lease liability
Payments due by period
(Unaudited and $ in thousands)
| (Unaudited and $ in thousands) | |
|---|---|
| Lease liability | Carrying Contractual amount cash flows Under 1 year 2-5 years After 5years |
6 931 7 419 3 087 4 027 **305 ** |
5
Accounting policies and accounting estimates
The accounting policies used in preparing the consolidated financial statements are described in Note 3 to the consolidated financial statements.
The main estimates discuss allowances on inventories and supplier rebates receivable. Inventory allowances are taken for obsolete and/or damaged products as well as for slow inventory turnover items. The allowances are based on many years of historic experience. As for supplier rebates, a reasonable estimate of accrued amounts receivable is determined based on existing agreements with the Company’s suppliers. Rebates for unsold merchandise are deducted from the value of the inventories at the date of the consolidated financial statements.
Financial instruments
The Company operates retail outlets in 25 locations across Quebec. A significant portion of the Company's sales are realized through the offering of financing solutions, by third-party credit providers, to the Company's customers. The cost of financing these sales is assumed by the Company, and is expensed, as the associated sales are realized. The Company assumes no credit risk in these transactions. The Company's working capital is composed primarily of accounts receivable, customer deposits, inventory and cash, while its short-term liabilities include bank overdraft, suppliers of goods and services, customer deposits, employee benefits liabilities and lease liability. The change in working capital reflects the associated fluctuations in all of the constituent accounts incurred during the normal course of the Company's activities. The Company has a positive cash position, which is invested in various financial instruments.
The Company records its investments at market value as indicated in Note 3 and Note 7 to the unaudited interim consolidated financial statements as at July 31, 2023. The Company has no hedges against its investments in US funds and assumes 100% of any fluctuations in the markets for these investments. Furthermore, the Company assumes the risks interest rate fluctuations have on its fixedincome investments, as well as the risks stock market fluctuations have on the value of investments in publicly traded companies.
The Company owns most of its stores and distribution centers, such that commitments regarding leasing contracts and lease liabilities are relatively insignificant with regard to its overall activities as detailed in Note 9 of the unaudited interim consolidated financial statements as of July 31, 2023. The Company holds no hedging contracts or any other type of derivative products.
Quarterly results
(Unaudited and $ in thousands, except for per share amounts)
| Revenue Net earnings Net basic earnings per share |
April 30, April 30, 2023 2022 $ $ 135 102 175 659 38 017 807 1,15 0,02 |
July 31, July 31, 2023 2022 |
|---|---|---|
| $ $ 169 075 218 939 3 363 14 246 0,10 0,43 |
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| Revenue Net earnings Net basic earnings per share |
October 31, October 31, 2022 2021 $ $ 175 559 213 955 13 847 20 189 0,42 0,60 |
January 31, January 31, 2023 2022 |
|---|---|---|
| $ $ 147 815 196 658 11 938 22 580 0,36 0.67 |
For the three month period ended July 31, 2023, the Company's revenues decreased by $49,864,000 to $169,075,000, compared to $218,939,000 recorded for the corresponding 2022 period, a 23% decrease. Net earnings for the three month period ended July 31, 2023, amounted to $3,363,000 compared to $14,246,000 recorded for the corresponding 2022 period. Basic net earnings per share decreased to $0.10 compared to $0.43 for the corresponding 2022 period.
For the three month period ended July 31, 2023, as well as the corresponding period of 2022, the share repurchase program had no impact on basic net earnings per share.
The variation in adjusted net earnings would be ($10,883,000) or ($0.33) per basic share for the three month period ended July 31, 2023, as well as the comparable 2022 period, are explained as follows:
(Unaudited and $ in thousands)
| Net earnings Adjusted net earnings Minus: Adjusted net earnings for the previous period Variation |
3 363 3 363 14 246 (10 883) July 31, 2023 |
July31,2022 | |
|---|---|---|---|
| 14 246 14 246 |
|||
Operations
BMTC Inc.
On May 16, 2023, the Company announced the deployment of its Tanguay division across Quebec, with management having identified Tanguay stores as those with the greatest potential for expansion. All Brault & Martineau stores and 3 EconoMax stores have been converted. Following these changes, the Tanguay banner now has 11 new stores in the western part of the province. In addition, the Liquida Meubles banner as well as 3 EconoMax were converted into Tanguay L'Entrepôt. In total, there are 5 Tanguay L’Entrepôt stores across the province to offer clearance furniture as well as new entry-level products. To ensure this deployment, the Company had to close five EconoMax stores, namely those in Kirkland, Sainte-Thérèse, Brossard, Ste-Eustache and LaSalle.
7
The Company has decided to make significant changes to transform its former Brault & Martineau and EconoMax stores into Tanguay store in order to provide a better product and service offering and a unique customer experience in its market. The renovations to our entire network are valued at $28,000,000. During the period ended July 31, 2023, $11,643,000 of these costs were incurred and the balance will be charged in subsequent periods of the fiscal year ending January 31, 2024.
This announcement is part of the transformation process that began in September 2022, with the migration to a single IT system, which was successfully completed last December. These IT changes have thus enabled the Company to carry out a complete reorganization of its operational and commercial structure as well as its administrative services. All these changes over the past few months have made it possible to create significant synergies, thus creating expanded and diversified teams allowing the success of this deployment. Management is confident that we can continue to improve our operational and commercial efficiency and continue to reduce our costs.
This decision comes at an opportune time for the Company. The difficulty of obtaining qualified labour, the retail trade which is in constant transformation and evolution, the competition which is now extended across Canada and the United States and the shift towards e-commerce, therefore this decision will allow the Company to be much more agile in its business decisions. We believe that these IT, organizational, structural and commercial changes will enable the Company to exercise leadership in its market, significantly improve its profitability and financial structure and maintain its objectives of increasing its market share in Quebec.
The Company entered into a partnership agreement with Urbania for the development of its property at 500 boulevard Le Corbusier in Laval into several residential rental towers. The Company created a new subsidiary, Le Corbusier-Concorde S.E.C. for this real estate project on January 31st, 2022. This real estate project will begin in the summer of 2024 and will span for a period of 8 to 10 years with the construction of 5 rental residential towers for a total of approximately 1,200 doors.
On February 1, 2023, the Company concluded the sale of its distribution centre in Montreal for an amount of $66,500,000, resulting in an after-tax gain of $50,962,000, or $1.54 per basic share. The Company will remain a tenant under a 2 year lease with renewal options.
The Company intends to proceed with the real estate development of several rental residential towers on its property located at 125 boul. Desjardins Est in Sainte-Thérèse. This real estate project is currently in the exploratory phase.
Risk factors and market tendencies
The Company operates a furniture, electronic and household appliance retail business, and is therefore subject to many risk factors such as:
-
Sensitivity to general economic conditions
-
Reliance on key personnel
-
Investment portfolio risks
-
Third-party credit providers for financing solutions to clients
-
Labour relations with employees, some of whom are unionized
-
Maintaining profitability and managing growth
-
Highly competitive nature of the retail industry
-
Effectiveness of its marketing programs
-
Capacity to anticipate changes in fashion trends and consumer tastes
-
Retention of senior management
8
The Company is also dependent on its management information systems, its distribution operations, and its suppliers.
For a number of years, we have seen an increasing presence of strong competitors operating on a national and international level. Furthermore, the Company has witnessed a deflationary trend in many products that it sells, forcing it to innovate by bringing new products to market.
The majority of sales are realized using financing solutions offered by third-party credit providers. A significant increase in interest rates or a tightening of credit conditions could have a significant impact on the Company's sales. There are no guarantees the Company will be able to continue procuring such advantageous financing solutions for its customers, which in the past has permitted the Company to maintain its growth.
It is impossible to isolate and measure the importance of each individual risk to which the Company is exposed. In the past, the Company has managed to adapt to these changes and maintain its market share notably by aggressive marketing campaigns and efficient management.
Management discussion and outlook for the future of the Company
The Company continues to focus on online sales by actively pursuing the improvement of its Tanguay digital platform, its live chat initiative with online customers as well as the improvement of our telephone sales department.
It is also Management’s opinion that the digital platform of our Tanguay banner is essential in order to allow the Company to increase its market shares as well as to allow customers to start their shopping experience online to then complete their purchases in one of our stores with the help of our sales representatives.
It is difficult to predict the future level of consumer spending, although we are now seeing that the Company's results in the last quarters are not reflecting the performance of the last two years. This downward trend continued in subsequent months. We can therefore expect a significant drop, if the trend continues. This is partly explained by the high rate of inflation in terms of the cost of food, the cost of gas and the rise in interest rates, which has a direct impact on consumer spending. Also, management is aware that the increase in the last two years was partly due to the fact that the Company benefited from a transfer of consumer spending related to the restrictions imposed by the various levels of government due to COVID-19 pandemic, more precisely the restrictions related to travel, the closure of restaurants and all other forms of entertainment in the cultural and sporting world. Since these restrictions are no longer in place, consumer spending has in part transfer back to these
Disclosure controls and procedures (DCPs) and internal controls over financial reporting (ICRF)
The Company's management evaluated, as at January 31, 2023, the effectiveness of the design and operation of its DCPs and ICFR, as defined under National Instrument 52-109 - Certification of Disclosure in Issuers' Annual and Interim Filings. The evaluation was performed under the supervision of the Company's President and Chief Executive Officer (CEO) as well as the Chief Financial Officer (CFO). Based on such evaluation of ICFR, the President and CEO and CFO have concluded that the Company's DCPs and ICFR were effective as at January 31, 2023.
No changes were made in the Company's ICFR during the period beginning on May 1, 2023 and ended July 31, 2023, which have materially affected, or are reasonably likely to materially affect, the Company's ICFR.
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Other information
This Quarterly Management Report ended July 31, 2023 provides an analysis of the unaudited consolidated results of operations, financial position, and cash flows of BMTC Group Inc. and its subsidiaries.
This Quarterly Management Report is intended to assist in the understanding and assessment of significant changes and trends, as well as risks and uncertainties, related to the results of operations and financial position of the Company.
(s) Marie-Berthe Des Groseillers
Marie-Berthe Des Groseillers President and Chief Executive Officer September 7, 2023
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BMTC Group Inc. Consolidated Statements of Earnings
For the three month and six month periods ended July 31, 2023 and 2022 (Unaudited and in thousands of Canadian dollars, except per share data)
| Revenue Cost of sales Gross profit Other (expenses) income Selling expenses Administrative expenses Operating earnings |
Notes | July 31, 2023 | July 31, 2023 | July31,2022 | July31,2022 |
|---|---|---|---|---|---|
| 3 month | 6 month | 3 month | 6 month | ||
| $ 169 075 (104 042) |
$ 304 177 (190 995) |
$ 218 939 (133 856) |
$ 394 598 (245 667) |
||
| 65 033 16 (57 700) (6 364) |
113 182 (1) (114 846) (15 311) |
85 083 52 (50 635) (11 453) |
148 931 56 (100 462) (22 190) |
||
| **985 ** | (16 976) | 23 047 | 26 335 | ||
| **6 ** | **60 388 ** | 7 | 17 | ||
| (4 775) 1 786 |
(7 928) 3 135 |
||||
| **804 ** | (691) | ||||
| **2 466 ** | **4 417 ** | ||||
| 4 261 (898) |
47 138 (5 758) |
20 065 (5 819) |
21 559 (6 506) |
||
| **3 363 ** | **41 380 ** | 14 246 | 15 053 | ||
| **0,10 ** | **1,25 ** | 0,43 | 0,45 |
The accompanying notes are an integral part of the consolidated financial statements.
11
BMTC Group Inc. Consolidated Statements of Changes in Shareholders' Equity For the six month periods ended July 31, 2023 and 2022
(Unaudited and in thousands of Canadian dollars)
| Balance as at February 1, 2023 Share redemption Share redemption premium Dividends Transactions with shareholders Net Earnings & Comprehensive income Balance as at July 31, 2023 |
**Notes ** | Capital stock | Retained earnings |
Total shareholders' equity |
|---|---|---|---|---|
| 11 11 17 |
$ 2 618 (17) - - (17) - **2 601 ** |
$ 438 281 - (3 020) (5 931) (8 951) 41 380 **470 710 ** |
$ **440 899 ** |
|
| (17) (3 020) (5 931) |
||||
| (8 968) | ||||
| **41 380 ** | ||||
| **473 311 ** |
| Balance as at February 1, 2022 Share redemption Share redemption premium Dividends Transactions with shareholders Net Earnings & Comprehensive income Balance as at July 31, 2022 |
Notes | Capital stock | Total Retained shareholders' earnings equity |
|---|---|---|---|
| 11 11 17 |
$ 2 647 (16) - - (16) - 2 631 |
$ $ 385 219 387 866 - (16) (3 050) (3 050) (5 998) (5 998) (9 048) (9 064) 15 053 15 053 391 224 393 855 |
The accompanying notes are an integral part of the consolidated financial statements.
12
BMTC Group Inc. Consolidated Statements of Cash Flows
For the three month and six month periods ended July 31, 2023 and 2022
(Unaudited and in thousands of Canadian dollars)
| Notes | July 31, 2023 | July 31, 2023 | July31,2022 | July31,2022 | ||
|---|---|---|---|---|---|---|
| 3 month | 6 month | 3 month | 6 month | |||
| $ | $ | $ | $ | |||
| OPERATING ACTIVITIES | ||||||
| Net earnings before income tax expense | **4 261 ** | **47 138 ** | **20 065 ** | 21 559 | ||
| Adjustments | 6 | (501) | (57 821) | **6 349 ** | 11 175 | |
| Net changes in working capital | 6 | (5 441) | **21 679 ** | (20 375) | 8 588 | |
| Income taxes paid | (1 880) | (3 933) | (5 930) | (16 469) | ||
| Cash flow from operating activities | (3 561) | **7 063 ** | **109 ** | 24 853 | ||
| INVESTING ACTIVITIES | ||||||
| Acquisition of other financial assets | (15 493) | (98 119) | (14 687) | (24 039) | ||
| Proceeds from disposal other financial assets | **13 305 ** | **45 970 ** | **12 925 ** | 21 056 | ||
| Purchase of property, plant and equipment | 8 | (1 263) | (1 687) | (403) | (1 452) | |
| Proceeds from disposal of property, | ||||||
| plant and equipment | 8 | **6 ** | **66 679 ** | **35 ** | 78 | |
| Interest received | 4 | **1 190 ** | **1 987 ** | **492 ** | 660 | |
| Dividends received | 4 | **1 276 ** | **2 430 ** | **1 294 ** | 2 475 | |
| Cash flow from investing activities | (979) | **17 260 ** | (344) | (1 222) | ||
| FINANCING ACTIVITIES | ||||||
| Payments for share redemption | 11 | (2 106) | (3 037) | (1 923) | (3 066) | |
| Interest paid | (71) | (153) | (109) | (227) | ||
| Payment of lease liabilities | 9 | (863) | (1 850) | (1 006) | (2 004) | |
| Dividends | 17 | (5 931) | (5 931) | (5 998) | (5 998) | |
| Cash flow from financing activities | (8 971) | (10 971) | (9 036) | (11 295) | ||
| Net change in cash | ||||||
| Cash (bank overdraft), beginning of period | (13 511) | **13 352 ** | (9 271) | 12 336 | ||
| Cash (bank overdraft), end of period | **18 879 ** | (7 984) | **40 590 ** | 18 983 | ||
| **5 368 ** | **5 368 ** | **31 319 ** | 31 319 |
The accompanying notes are an integral part of the consolidated financial statements.
13
BMTC Group Inc.
Consolidated Statements of Financial Position
(Unaudited and in thousands of Canadian dollars)
| ASSETS Current Cash Trade and other receivables Current tax assets Inventory Prepaid expenses Total current assets Non-current Other financial assets Other assets Property, plant and equipment Defined benefit plan Total non-current assets Total assets LIABILITIES Current Bank overdraft Trade and other payables Lease liability Total current liabilities Non-current Lease liability Deferred tax liabilities Total non-current liabilities Total liabilities SHAREHOLDERS' EQUITY Capital stock Retained earnings Total shareholders' equity Total liabilities and shareholders' equity |
Notes | July 31, 2023 | January31,2023 |
|---|---|---|---|
| 7 8 10 12 9 9 5 11 |
$ 5 368 6 909 7 815 88 511 5 916 114 519 278 839 1 749 133 027 75 292 488 907 603 426 - 97 194 2 874 100 068 4 057 25 990 30 047 130 115 2 601 470 710 473 311 603 426 |
$ 3 050 8 760 7 023 113 627 1 366 |
|
| 133 826 | |||
| 227 614 1 749 142 158 76 617 |
|||
| 448 138 | |||
| 581 964 | |||
| 11 034 97 932 3 294 |
|||
| 112 260 | |||
| 5 432 23 373 |
|||
| 28 805 | |||
| 141 065 | |||
| 2 618 438 281 |
|||
| 440 899 | |||
| 581 964 |
The accompanying notes are an integral part of the consolidated financial statements.
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BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of dollars, except per share amounts)
1. GOVERNING STATUTES AND NATURE OF OPERATIONS
BMTC Group Inc. (hereinafter "Company") is a company governed the Business Companies Act (Quebec) . Its registered office and principal place of business is located at 8500 Place Marien, Montréal East, Quebec, H1B 5W8. Its common shares are listed on the Toronto Stock Exchange. The structure of BMTC Group Inc. is now formed of the Tanguay division and its subsidiary Le Corbusier-Concorde S.E.C. (collectively designated as the "Company"), manages and operates a retail network of furniture, household appliances and electronic products, in Quebec.
2. GENERAL INFORMATION AND STATEMENT OF COMPLIANCE WITH IFRS
These unaudited interim consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) as published by the International Accounting Standards Board (IASB).
The unaudited interim consolidate financial statements have been prepared on the historical cost basis, except for certain financial instruments and the liability relating to share-based payments, which are established at fair value, and post-employment benefit assets or liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets, less an adjustment to reflect
3. SUMMARY OF ACCOUNTING POLICIES
The accounting policies specified below have been applied consistently throughout all periods presented in the unaudited interim consolidated financial statements.
3.1 Basis of consolidation
The unaudited interim consolidated financial statements include the accounts of BMTC, the ultimate and the wholly-owned subsidiary Le Corbusier-Concorde S.E.C. The accounting policies of the parent company, subsidiary are consistent with those adopted by BMTC.
Asset and liability balances and revenues and expenses from transactions between group companies, including unrealized gains and losses on transactions between consolidated entities, are eliminated in preparing the unaudited interim consolidated financial statements.
3.2 Foreign currency translation
The unaudited interim consolidated statement of financial position is presented in Canadian dollars, which is also the functional currency of the Company.
Foreign currency transactions are translated into the Company’s functional currency, using the exchange rates prevailing at the dates of the transactions. Foreign currency monetary assets and liabilities are translated into the functional currency using the exchange rates in effect at the reporting date. Other foreign currency non-monetary financial assets that are measured at fair value are translated into the functional currency using the exchange rate in effect on the date of determination of fair value. Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items at the reporting date are recognized in earnings.
The realized and unrealized appreciation of other financial assets classified at fair value through profit or loss recognized directly in profit or loss includes the related exchange component.
Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction.
15
BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of dollars, except per share amounts)
3. SUMMARY OF ACCOUNTING POLICIES (Continued)
3.3 Segment reporting
In accordance with IFRS 8, Operating Segments , the Company presents and discloses information that is regularly reviewed by the President and the Board of Directors in assessing performance. The Company considers its retail activities as a single operating segment.
3.4 Revenue recognition
Revenue from merchandise sales is measured at the amount of the consideration for which the Company expects to receive in exchange for the merchandise and is presented in earnings net of estimated returns and rebates, and excluding sales taxes. Revenue is recognized when the control of the goods has been transferred to the customer, i.e. upon delivery.
Revenue from extended service contracts is recognized at the time of the sale at the net amount of costs incurred by the Company with the service suppliers, who will provide the services required by the Company's customers.
Investment income is recognized using the accrual basis of accounting, as follows:
-
Interest is recognized based on the number of days the investment was held during the year and is calculated using the effective interest method;
-
Dividends on listed share investments are recognized when the right to receive the payment is established.
3.5 Income taxes
Income tax expense comprises the sum of deferred tax and current tax. Income tax is recognized in earnings except to the extent it relates to items recognized in other comprehensive income or directly in shareholders' equity.
Current income tax assets or liabilities comprise those obligations to, or claims from, tax authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable income, which differs from earnings in the consolidated financial statements. The calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill or of an asset or liability unless the related transaction is a business combination or affects tax or accounting income.
Deferred tax assets and liabilities are calculated, without discounting, based on tax rates and tax laws that have been enacted or substantively enacted at the end of the reporting period, and which are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred tax assets are recognized to the extent that it is probable that they will be able to be utilized against future taxable income. Deferred tax liabilities are always provided for in full.
Deferred tax assets and liabilities are offset only when the Company has a right and intention to set off current tax assets and liabilities levied by the same taxation authority.
16
BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of dollars, except per share amounts)
3. SUMMARY OF ACCOUNTING POLICIES (Continued)
Changes in deferred tax assets or liabilities are recognized as a component of tax income or expense, except where they relate to items that are recognized in other comprehensive income or directly in shareholders' equity, in which case the related deferred tax is also recognized in other comprehensive income or shareholders' equity, respectively.
3.6 Inventory
Inventory, which is composed almost exclusively of finished goods for retail sale, is valued at the lower of cost and net realizable value. Cost is determined by the weighted average method.
The cost of inventories comprises all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. The net realizable value is estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.
3.7 Vendor rebates
Cash considerations received from vendors are a reduction of the price of the vendors’ products and are accounted for as a reduction of cost of sales and related inventory, respectively, in the Company’s consolidated statement of earnings and comprehensive income and consolidated statements of financial position.
Rebates are recognized when they are considered probable and can be reasonably estimated.
3.8 Property, plant and equipment
Property, plant and equipment are carried at acquisition cost less any accumulated depreciation and any accumulated impairment losses. Items of property, plant and equipment with different useful lives are depreciated separately. Depreciation commences when an item of property, plant and equipment is available for use using the straight-line method over the following periods, in order to depreciate its cost less the residual value over its estimated useful life.
| Land Parking lots Buildings Signs Leasehold improvements Automotive equipment Computer equipment Furniture and equipment Leased property Leased automotive equipment |
Periods |
|---|---|
| Not depreciated 20 years 2 to 50 years 5 years 2 to 5 years 7 to 15 years 2 to 5 years 5 years 1 to 10 years 5 years |
The depreciation method, useful lives and residual values are reviewed annually.
3.9 Leases, lease liability and right-of-use asset
The company records a right-of-use asset and a lease liability on the date when a leased asset becomes available.
17
(Unaudited and in thousands of dollars, except per share amounts)
BMTC Group Inc. Notes to the Consolidated Financial Statements
3. SUMMARY OF ACCOUNTING POLICIES (Continued)
Right-of-use asset is equal to the cost of the initial lease liability, rent payments paid on or before the commencement date, initial direct costs incurred and restoration costs, less any incentive received. The Company includes its right-of-use assets with its property, plant and equipment in Note 8.
The lease liability corresponds to the present value of lease payments discounted at the implicit interest rate in the lease or the Company incremental borrowing rate. The Company’s incremental borrowing rate is based on its credit rating, allowing it to obtain an asset of a similar value with similar security.
The Company has elected to apply the exemption provision relating to short-term leases and leases of lowvalue, and associated costs, such as maintenance and insurance, are expensed as incurred.
3.10 Impairment of property, plant and equipment
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at a cash-generating-unit level.
Individual assets or assets combined into cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
3.11 Shareholders' equity
Capital stock is the amount received on issuance and is presented net of the initial share issue income on redeemed shares.
Retained earnings include all current and prior period retained profits, net of share redemption premiums, dividends paid and the costs of share issuances.
Dividends payable to shareholders are included in other payables when they have been declared before the reporting date.
3.12 Share-based remuneration
The Company has a share-based remuneration plan for certain directors and officers. According to the plan, an option holder can choose, at any time at the holder’s sole discretion, to receive, from the Company, a cash payment equal to the number of shares for which the option is exercised, multiplied by the amount for which the market value of the share exceeds the exercise price, or to subscribe to a number of shares for which the option is exercised. The rights relating to the options are vested at the date of grant, and their maximum life is 10 years.
At the time of the award, these options are compound financial instruments; accordingly, the fair value is the total fair values of the debt and equity components. The Company first measures the fair value of the debt component and then the fair value of the equity component.
The Company recognizes the debt component, i.e. the stock appreciation rights, at fair value, determined using the Black-Scholes model, and the fair value is measured on each reporting date. A corresponding remuneration cost is recognized in net earnings under administrative expenses.
At the time of the award, the fair value of the equity component is measured at zero. Accordingly, the fair value of the compound financial instrument is the same as the fair value of the debt component.
18
BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of dollars, except per share amounts)
3. SUMMARY OF ACCOUNTING POLICIES (Continued)
At the date of settlement, the Company must remeasure the liability to its fair value. If the Company issues equity instruments on settlement rather than paying cash, the liability is transferred directly to equity, as consideration for the equity instruments issued. If, on settlement, the Company pays in cash rather than by issuing equity instruments, that payment is applied to settle the liability in full.
3.13 Post-employment benefits
The Company provides post-employment benefits through defined benefit pension plans as well as defined contribution pension plans.
Contributions to the defined contribution plans are recognized as an expense in the period that relevant employee services are rendered.
The Company accrues its obligations under its defined benefit pension plans and the related costs, net of plan assets, as the services are rendered. The Company has adopted the following accounting policies:
-
The Company’s defined benefit plan obligations are measured individually, estimating the amount of future benefits earned by employees for services provided in the current and prior periods. The actuarial valuation of defined benefit obligations uses the projected unit credit method. This determination incorporates management's best estimate of future salary levels, retirement ages of employees, mortality rates and other actuarial assumptions.
-
The discount rate for defined benefit obligations is determined by reference to the market yield, at yearend, on high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability.
-
Remeasurements, which include actuarial gains and losses on benefit obligations, the return on plan assets in excess of interest income, the effect of the asset ceiling, and the impact of minimum funding requirements, are recognized in other comprehensive income and retained earnings immediately without any reclassification to net earnings.
-
p p p
-
difference between the present value of the defined benefit plan obligations and the fair value of the plan assets at the reporting date. The economic benefit available is calculated as the difference between the present value of the accounting value of the current service cost of the employer and the current services cost of the employer on a funded basis. This value cannot, however, be negative. When there is a defined benefit plan asset, the amount of the asset recognized cannot be greater than the present value of any future economic benefit available as a future plan reimbursement or decrease in future plan contributions. Any minimum funding requirements applicable to the Company’s plans are taken into account to calculate the present value of economic benefits.
-
An additional liability is recognized in the amount of the minimum funding requirement for defined benefit plans when the Company does not have an unconditional right to the surplus.
19
BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of dollars, except per share amounts)
3. SUMMARY OF ACCOUNTING POLICIES (Continued)
3.14 Provisions and contingent liabilities
Provisions are recognized when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Company and when amounts can be estimated reliably. The timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events, for example, product warranties granted, legal disputes or onerous contracts.
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation.
All provisions are reviewed at each reporting date and are adjusted to reflect the current best estimate.
In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognized.
3.15 Financial instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the financial instrument.
Financial assets and financial liabilities are measured initially at fair value plus transactions costs, except for financial assets and financial liabilities carried at fair value through profit or loss, which are measured initially at fair value.
Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or expires.
For the purpose of subsequent measurement, financial assets of the Company are classified into the following categories upon initial recognition:
-
Amortized cost;
-
Financial assets at fair value through profit or loss.
The following table summarizes the financial instrument classification and valuation methods.
| Item | Classification method |
|---|---|
| Cash | Amortized cost |
| Trade and other receivables | Amortized cost |
| Other financial assets | Fair value through profit or loss |
| Bank overdraft | Amortized cost |
| Trade and other payables* | Amortized cost |
- Excluding employee benefits payable, which are not financial instruments.
20
BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of dollars, except per share amounts)
3. SUMMARY OF ACCOUNTING POLICIES (Continued)
The category determines subsequent measurement and whether any resulting income and expense is recognized in net earnings or in other comprehensive income.
All financial assets except for those at fair value through profit or loss are tested for impairment at least at each reporting date. Financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired.
All income and expenses relating to financial assets that are recognized in net earnings are presented within realized and unrealized gains on financial assets at fair value or finance income, except for any impairment of trade and other receivables which is presented within administrative expenses.
Financial assets at amortized cost
A financial asset must be measured at amortized cost if the two following conditions are met: the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
The Company recognizes a loss allowance for expected credit losses on financial assets measured at amortized cost. The amount of expected credit losses is updated on each reporting date to take into account changes in credit risk since the initial recognition of the respective financial instrument.
The Company recognizes lifetime expected credit losses on the financial assets measured at amortized cost. Lifetime expected credit losses correspond to expected credit losses that result from all possible default events over the expected life of a financial instrument. The measurement of expected credit losses reflects reasonable and supportable information on past events, current conditions and forecasts of events and economic conditions and takes into account factors specific to receivables, general economic conditions and an assessment of the current and forecast direction of the conditions at the reporting date, including the time value of money, as applicable.
Financial assets at fair value through profit or loss
Investments presented as other financial assets have been classified at fair value through profit or loss because they are part of a portfolio included in management reports and are measured at fair value by management. Consequently, realized and unrealized gains and losses on these assets are recognized through profit or loss. Transaction costs related to held-for-trading financial assets are expensed as incurred.
Financial liabilities
Financial liabilities are subsequently measured at amortized cost using the effective interest method.
3.16 Government grants
Government grants are recognized when there is reasonable assurance that the eligibility requirements are met and that the grant will be received. The Company recognizes grants, as a reduction of expenses, in the same period in witch the expenses are incurred unless the conditions for obtaining them are met after the expenses have been recognized. In these cases, the grant is recognized when it becomes receivable.
21
BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of dollars, except per share amounts)
3. SUMMARY OF ACCOUNTING POLICIES (Continued)
3.17 Judgment, estimates and assumptions
When preparing the consolidated financial statements, management undertakes a number of judgments, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results are likely to differ from the judgments, estimates and assumptions made by management, and will seldom equal the estimated results. Information about the significant judgments, estimates and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses is provided below.
Inventory valuation
The Company uses a high degree of judgment when estimating the effect of certain factors on the net realizable value of inventory, such as obsolescence and damages. The quantity, age and condition of inventory is measured and evaluated regularly during the period.
Estimated returns and vendor rebates
In determining the probability and estimation of returns and vendor rebates receivable, the Company uses actual purchases during the period, the degree of achievement of sales forecasts and contractual terms and conditions.
Useful lives of property, plant and equipment
Management reviews the useful lives of property, plant and equipment at each reporting date based on the expected utility of the assets. Actual results may, however, vary due to technical obsolescence, particularly for software and IT equipment.
Fair value of financial instruments
Management uses valuation techniques in measuring the fair value of financial instruments, where active market quotes are not available, that is for banker’s acceptances and discount notes.
The carrying amounts of these instruments and a price sensitivity analysis of other financial instruments are presented in Note 15. In applying the valuation techniques, management makes maximum use of observable data, and uses estimates and assumptions that are, as far as possible, consistent with data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses the best information available. These estimates may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.
Provisions and contingent liabilities
Judgment is required to determine whether a past event has led to a liability that should be recognized in the consolidated financial statements or presented as a contingent liability. Judgment and estimates are applied to quantify such liabilities and are based on a variety of factors, such as the nature of the claim or conflict, legal proceedings, the potential amount payable, the advice of legal counsel, prior experience and the likelihood of a loss. Refer to Note 13 for details on the carrying amount and other information on provisions and contingent liabilities.
22
(Unaudited and in thousands of dollars, except per share amounts)
BMTC Group Inc. Notes to the Consolidated Financial Statements
3. SUMMARY OF ACCOUNTING POLICIES (Continued)
Defined benefit pension plan cost and obligations
Management estimates the defined benefit obligations annually with the assistance of independent actuaries; however, the actual outcome may vary due to estimation uncertainties. The defined benefit obligations estimate is based on standard rates of inflation, mortality rates and the Company’s specific anticipation of future salary increases. Estimation uncertainties exist particularly with regard to the assumptions, which may vary significantly in future valuations of the Company's defined benefit obligations. Refer to Note 13 for details on the carrying amount and other information on defined benefit pension plan cost and obligations.
4. ADDITIONAL INFORMATION ON CONSOLIDATED STATEMENTS OF EARNINGS
| Employee benefits expense Salaries Defined benefit pension plans expenses Defined contribution pension plan expense Total employee benefits expense |
**July ** | 31, 2023 | July31,2022 | July31,2022 |
|---|---|---|---|---|
| 3 month | 6 month | 3 month | 6 month | |
| $ 23 648 1 268 **638 ** |
$ 47 943 2 524 **638 ** |
$ 29 016 1 400 382 |
$ 55 567 2 859 750 |
|
| **25 554 ** | **51 105 ** | 30 798 | 59 176 |
| Other elements of revenues and expenses Depreciation of property, plant and equipment Losses (gains) on disposals of financial assets Investment income On financial assets at fair value through profit or loss Interest Dividends On financial assets at amortized cost Interest |
**July ** | 31, 2023 | July31,2022 | July31,2022 |
|---|---|---|---|---|
| 3 month | 6 month | 3 month 6 month |
||
| $ 2 260 (74) **July ** |
$ 4 582 (233) 31, 2023 |
$ $ 2 421 4 831 (332) (332) July31,2022 |
||
| 3 month | 6 month | 3 month | 6 month | |
| $ 975 1 276 **215 ** |
$ | $ 241 1 294 251 |
$ | |
| **1 710 ** | 338 | |||
| **2 430 ** | 2 475 | |||
| **277 ** | 322 | |||
| **2 466 ** | **4 417 ** | 1 786 | 3 135 |
23
BMTC Group Inc.
Notes to the Consolidated Financial Statements
(Unaudited and in thousands of dollars, except per share amounts)
5. INCOME TAXES
| 5. INCOME TAXES |
||||||
|---|---|---|---|---|---|---|
| The income tax expense is detailed as follows: | **July ** | 31, 2023 | July31,2022 | |||
| 3 month | 6 month | 3 month | 6 month | |||
| $ | $ | $ | $ | |||
| Total current tax expense (recovery) for the period | **820 ** | 3 | **141 ** | 6 487 | 7 | 592 |
| Total deferred tax expense (recovery)* | **78 ** | 2 | **617 ** | (668) | (1 | 086) |
| **898 ** | 5 | **758 ** | 5 819 | 6 | 506 |
- In 2023 and 2022, the deferred tax liability includes only the impact of changes in temporary differences.
The Company's effective income tax rate differs from the combined statutory income tax rate. This difference arises from the following items:
| Income tax expense (recovery) for the period based on combined tax rate (federal and provincial of 26.50% in 2023 and 2022) Non-taxable dividends Non-taxable capital gains Non-deductible expenses Other (2) |
**July ** | 31, 2023 | July31,2022 | July31,2022 |
|---|---|---|---|---|
| 3 month | 6 month | 3 month | 6 month | |
| $ 1 130 (147) (106) 23 (2) **898 ** |
$ 12 492 (278) (6 506) 58 (8) |
$ 5 317 (132) 632 - 2 |
$ 5 712 (258) 1 050 - 2 |
|
| **5 758 ** | 5 819 | 6 506 |
The tax effects of significant components of temporary differences that give rise to the Company's deferred tax assets are as follows:
| Balance as at February 1, 2023 Recognized amounts $ Net unrealized gain (loss) on other financial assets (3 741) Asset defined benefit plans (20 076) Property, plant and equipment 444 (23 373) |
Balance as at February 1, 2023 |
Recognized in earnings |
in other comprehensive income |
Balance as at July 31, 2023 |
|---|---|---|---|---|
| $ 171 - (2 788) |
$ - - **- ** |
$ (3 570) (20 076) (2 344) |
||
| (23 373) | (2 617) | **- ** | (25 990) |
| Balance as at February 1, 2022 Recognized amounts $ Net unrealized gain (loss) on other financial assets (3 369) Liability (asset) defined benefit plans (11 018) Property, plant and equipment 580 (13 807) |
Balance as at February 1, 2022 |
Recognized in earnings |
in other comprehensive income |
Balance as at January 31, 2023 |
|---|---|---|---|---|
| $ (372) 178 (136) |
$ - (9 236) - |
$ (3 741) (20 076) 444 |
||
| (13 807) | (330) | (9236) | (23 373) |
24
BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of dollars, except per share amounts)
6. CASH FLOW ADJUSTMENTS AND CHANGES IN WORKING CAPITAL
| July 31, 2023 | July 31, 2023 | July31,2022 | July31,2022 | ||||
|---|---|---|---|---|---|---|---|
| 3 month | 6 month | 3 month | 6 month | ||||
| Adjustments are detailed as follows: | $ | $ | $ | $ | |||
| Depreciation of property, plant and equipment | **2 260 ** | 4 | **582 ** | 2 421 | 4 | 831 | |
| Deficit (excess) of contributions over | |||||||
| defined benefit plan expense | **370 ** | 1 | **325 ** | 505 | 1 | 009 | |
| Investment income | (2 466) | (4 | 417) | (1 786) | (3 | 135) | |
| Unrealized depreciation (appreciation) | |||||||
| of financial assets at fair value | (730) | **924 ** | 5 107 | 8 | 260 | ||
| Losses (gains) on disposal of non-financial assets | (6) | (60 | 388) | (7) | (17) | ||
| Interest on lease liability | **71 ** | **153 ** | 109 | 227 | |||
| (501) | (57 | 821) | 6 349 | 11 | 175 | ||
| The net change in working capital detailed as follows: |
| 3 month Adjustments are detailed as follows: $ Depreciation of property, plant and equipment 2 260 Deficit (excess) of contributions over defined benefit plan expense 370 Investment income (2 466) Unrealized depreciation (appreciation) of financial assets at fair value (730) Losses (gains) on disposal of non-financial assets (6) Interest on lease liability 71 (501) July The net change in working capital detailed as follows: |
**July ** | 31, 2023 | July31,2022 | July31,2022 |
|---|---|---|---|---|
| 3 month | 6 month | 3 month | 6 month | |
| $ | $ | $ 2 421 505 (1 786) 5 107 (7) 109 |
$ 4 831 1 009 (3 135) 8 260 (17) 227 |
|
| 4 582 1 325 (4 417) 924 (60 388) **153 ** |
||||
| (501) | (57 821) | 6 349 | 11 175 | |
| Trade and other receivables Inventory Prepaid expenses Trade and other payables excluding accrued charges of construction in progress 7. OTHER FINANCIAL ASSETS At fair value through profit or loss |
**July ** | 31, 2023 | July31,2022 | |
| 3 month | 6 month | 3 month | 6 month | |
| $ (3 083) 20 479 (1 516) (21 321) |
$ 1 851 25 116 (4 550) (738) |
$ 586 2 907 (253) (23 615) |
$ 3 303 (7 016) (4 119) 16 420 |
|
| (5 441) | **21 679 ** | (20 375) | 8 588 | |
| July 31, 2023 | ||||
| Fair value | Cost | |||
| $ 85 513 52 790 500 45 730 66 598 |
||||
| 278 839 | 251 131 | |||
| 278 839 | 251 131 | |||
| January31,2023 | ||||
| $ 58 771 30 382 - 43 857 65 604 |
||||
| 227 614 | 198 614 | |||
| 227 614 | 198 614 |
BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of Canadian dollars)
8. PROPERTY, PLANT AND EQUIPMENT
| Gross carrying amount Balance as at February 1, 2023 Additions Disposals Balance as at July 31, 2023 Depreciation and impairment Balance as at February 1, 2023 Disposals Depreciation Balance as at July 31, 2023 Carrying amount as at July 31, 2023 Gross carrying amount Balance as at February 1, 2022 Additions Disposals Balance as at January 31, 2023 Balance as at February 1, 2022 Disposals Depreciation Balance as at January 31, 2023 Carrying amount as at January 31, 2023 |
Parking lots Leasehold Automotive Computer Furniture and Leased Leased Land and buildings Signs improvements equipment equipment equipment property automotive Total equipment |
|---|---|
| $ $ $ $ $ $ $ $ $ $ 55 691 152 715 539 9 719 5 328 9 370 8 648 22 432 1 525 265 967 - - 739 - 657 83 208 - 55 1 742 (3 122) (13 579) - - (216) - - (3 545) (285) (20 747) |
|
| 52 569 139 136 1 278 9 719 5 769 9 453 8 856 18 887 1 295 **246 962 ** |
|
| - 79 596 486 9 673 2 898 8 652 6 570 14 660 1 274 123 809 - (10 561) - - (65) - - (3 545) (285) (14 456) - 2 076 56 23 214 201 222 1 658 132 **4 582 ** |
|
| - 71 111 542 9 696 3 047 8 853 6 792 12 773 1 121 **113 935 ** |
|
| 52 569 68 025 736 23 2 722 600 2 064 6 114 174 **133 027 ** |
|
| 55 691 152 715 539 9 719 3 976 9 055 7 123 22 432 1 525 262 775 - - - - 1 499 315 1 525 - - 3 339 - - - - (147) - - - - (147) |
|
| 55 691 152 715 539 9719 5 328 9 370 8 648 22 432 1525 265 967 |
|
| - 74 862 461 9 628 2 502 8 313 6 032 11 097 965 113 860 - - - - (56) - - - - (56) - 4 734 25 45 452 339 538 3 563 309 10 005 - 79 596 486 9 673 2898 8 652 6 570 14660 1 274 123 809 |
|
| 55 691 73 119 53 46 2 430 718 2 078 7 772 251 142 158 |
During the six month period ended July 31, 2023, the Company disposed of financial assets in the amount of $66,679, which resulted in a gain of $60,388.
During the year ended January 31, 2023, the Company disposed of financial assets in the amount of $135, which resulted in a gain of $44.
26
BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of dollars, except per share amounts)
9. LEASE LIABILITY
The Company is committed under long-term leases for stores, warehouses and leased automotive equipment, for which a lease liability is recorded. The reconciliation of the lease liability is detailed as follows:
| Opening balance Additions Interest Payments Closing balance |
July 31, 2023 | January31,2023 | |
|---|---|---|---|
| $ 8 726 55 153 (2 003) 6 931 |
$ 12 733 - 412 (4 419) |
||
| 8 726 |
The principal payments to be made are detailed as follows:
| July 31, 2023 January 31, 2023 |
Less than one year $ |
From 1 to 5 years $ |
More than 5 years |
Total |
|---|---|---|---|---|
| $ | $ | |||
| 2 874 | 3 755 | 302 | 6 931 | |
| 3 294 | 4 834 | 598 | 8 726 |
The Company is committed under long-term leases, for which additional payments for taxes and maintenance, not taken into account in the lease liability obligation, are required. During the six month period ended July 31, 2023, a rental charge of $8,948 was recognized in earnings ($624 for the corresponding period of 2022) in connection with these additional payments.
For the six month period ended July 31, 2023 and 2022, there were no low value or short-term contracts recorded in earnings.
10. BANK BORROWINGS
The Company has an unsecured line of credit in the amount of $30,000, repayable on demand, bearing interest at the prime rate. The company is subject to certain restrictive covenants, for the periods ended July 31, 2023 and 2022, the company was not in default.
27
BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of dollars, except per share amounts)
11. CAPITAL STOCK
Authorized
Unlimited number of shares without par value First preferred shares, issuable in series. Second preferred shares, issuable in series.
| July 31, 2023 | January31,2023 | |
|---|---|---|
| $ | $ | |
| Issued and fully paid | ||
| 32,839,950 common shares | ||
| (33,004,400 as at January 31, 2023) | 2 601 | 2 618 |
| July 31, 2023 | January31,2023 | |
| Issued and fully paid | ||
| Beginning of period | 33 040 400 | 33 423 000 |
| Share redemption | (200 450) | (382 600) |
| Issued and fully paid, end of period | 32 839 950 | 33 040 400 |
| Shares authorized for the share option plan | 5 710 864 | 5 710 864 |
| Total shares authorized | 38 550 814 | 38 751 264 |
During the six month period ended July 31, 2023, the Company redeemed 200,450 common shares for a total cash consideration of $3,037. The redemption premium of $3,020 for the shares was recognized in retained earnings.
During the year ended January 31, 2023, the Company redeemed 382,600 common shares for a total cash consideration of $5,402. The redemption premium of $5,373 for the shares was recognized in retained earnings.
None of the parent's shares were held by any of the Company’s subsidiaries.
Share option plan
The Company has a share option plan for certain directors and employees, which provides for the purchase of common shares under certain circumstances up to a maximum number of 10,729,106 issuable common shares. As at July 31, 2023, a total of 5,710,864 common shares (5,710,864 common shares as at January 31, 2023) remained authorized for issuance under the Company’s share option plan.
28
BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of dollars, except per share amounts)
12. TRADE AND OTHER PAYABLES
The following table analyzes trade and other payables recognized in the consolidated statements of financial position:
| Trade accounts payable Accrued expenses Employee benefits Customer deposits |
$ 32 451 10 528 9 895 45 058 97 932 July 31, 2023 January 31, 2023 97 194 $ 23 929 13 225 11 529 48 511 |
|
|---|---|---|
13. PROVISIONS AND CONTINGENT LIABILITIES
The Company is party to claims and lawsuits in the normal course of business. Management believes that the resolution of these claims and lawsuits will not have a materially adverse effect on the Company’s financial position.
14. FINANCIAL INSTRUMENTS
The carrying amounts presented in the consolidated statement of financial position relate to the following categories of financial assets and liabilities:
| Financial assets Financial assets at fair value through profit and loss Other financial assets Financial assets at amortized cost Cash Trade and other receivables Financial liabilities Financial liabilities at amortized cost Bank overdraft Trade (excluding employee benefits) and other payables |
July 31, 2023 | Jan. 31,2023 |
|---|---|---|
| $ 278 839 5 368 6 909 12 277 - 85 665 85 665 |
$ 227 614 | |
| 3 050 8 760 |
||
| 11810 | ||
| 11 034 88 037 |
||
| 99 071 |
29
BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of Canadian dollars, except per share data)
14. FINANCIAL INSTRUMENTS (Continued)
The following table presents financial assets and financial liabilities measured at fair value in the consolidated statement of financial position in accordance with the fair value hierarchy. This hierarchy groups financial assets and financial liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and financial liabilities.
The fair value hierarchy has the following levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level within which the financial asset or financial liability is classified is determined based on the lowest level of significant input to the fair value measurement. The financial assets and financial liabilities measured at fair value in the consolidated statements of financial position and financial instruments measured at amortized cost for which fair value is presented are grouped according to the fair value hierarchy is as follows:
| fair value hierarchy is as follows: | ||
|---|---|---|
| Financial assets at fair value Liquidities bearing interest Government and corporate bonds Preferred shares Shares of Canadian companies Shares of U.S. companies |
July 31, 2023 | |
| Level 1 $ 85 639 54 409 498 55 637 82 656 |
Level 2 Level 3 $ $ |
| Financial assets at fair value Liquidities bearing interest Government and corporate bonds Preferred shares Shares of Canadian companies Shares of U.S. companies |
January 31, 2023 | |
|---|---|---|
| Level 1 $ 58 791 31 368 - 55 872 81 583 |
Level 2 Level 3 $ $ |
30
BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of Canadian dollars, except per share data)
14. FINANCIAL INSTRUMENTS (Continued)
Fair value measurement
The methods and valuation techniques used for the purpose of measuring fair value are unchanged compared to the previous reporting period.
The fair value of a financial instrument is generally the consideration for with the instrument would be exchanged in an arm's length transaction, between knowledgeable, willing parties who are under no compulsion to act.
The existence of published price quotations in an active market is the best evidence of fair value. The fair value of shares and bonds is established based on the most recent closing date market price, based on the bid price at the period-end. If a security is not actively traded, the fair value is determined by a valuation technique using observable market date to the extent possible.
| Gains (losses) on assets held at the close of the reporting period Gains (losses) on assets not held at the close of the reporting period Gains (losses) realized and unrealized on financial assets, fair value |
July 31, 2023 | July 31, 2023 | July31,2022 | July31,2022 |
|---|---|---|---|---|
| 3 month | 6 month | 3 month | 6 month | |
| $ 730 74 804 |
$ (924) 233 (691) |
$ (5 107) 332 (4 775) |
$ (8 260) 332 |
|
| (7 928) |
Financial instrument risks
The Company's manages the risks arising from financial instruments, in close cooperation with the Board of Directors. The objectives are to ensure the availability of sufficient amounts of cash flow in the short and medium term of the company by reducing the exposure to financial markets. Long-term financial instruments are managed to generate lasting returns.
The Company does not actively engage in the trading of financial assets for speculative purposes nor does it write options.
Market risk
Market risk encompasses many types of risk. The variation of the types of risk, such as interest rate risk and other factors impacting all similar publicly traded financial instruments, has an impact on the fair value of the financial assets classified at fair value through profit or loss. To minimize market risk, the Company ensures that the type of investments and individual investments in its investment portfolio are diversified. Additionally, a significant portion of its investments is in financial instruments with short maturity dates, in particular banker’s acceptances and discount notes.
31
BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of Canadian dollars, except per share data)
14. FINANCIAL INSTRUMENTS (Continued)
Price risk sensitivity
The following table illustrates the sensitivity of income and equity in regards to changes in the market price all other things being equal. It assumes a ± 5 % change of the market price for the six month periods ended July 31, 2023 and 2022.
| Variation Income for the period and equity |
July31,2022 July 31, 2023 |
|---|---|
| $ $ 8 380 6 644 |
Exchange risk and foreign currency sensitivity
The Company is exposed to exchange risk, because a part of its purchases of inventory is made in currencies other than Canadian dollars. The Company also owns U.S. dollar equity investments in U.S. companies.
The Company does not enter into foreign exchange forward contracts to mitigate the exposure to foreign currency risk.
Foreign currency denominated financial assets and financial liabilities which expose the Company to currency risk are disclosed below. The amounts are translated into Canadian dollars at the closing rate:
| Shares of U.S. companies Trade and other payables in U.S. dollars Total exposure |
July 31, 2023 | July31,2022 |
|---|---|---|
| $ 82 656 (876) 81 780 |
$ 68 918 (1 571) |
|
| 67 347 |
The following table illustrates the sensitivity of income and equity in regards to changes in the market price all other things being equal. It assumes a ± 5 % change of the market price for the six month periods ended July 31, 2023 and 2022.
| Variation Income for the period and equity |
July31,2022 July 31, 2023 |
|---|---|
| $ $ 3 553 2 932 |
32
BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of Canadian dollars, except per share data)
14. FINANCIAL INSTRUMENTS (Continued)
Credit risk
Credit risk is the risk that a party to a financial instrument will fail to discharge an obligation towards the Company. The Company is exposed to this risk as a result of various financial instruments, for example, its deposits, investments in bonds, etc. The Company’s maximum credit risk exposure is limited to the carrying amount of certain financial assets recognized on the reporting date, as summarized in the following table:
| Financial asset categories – carrying amounts Cash Trade and other receivables |
January31,2023 July 31, 2023 |
|
|---|---|---|
| $ $ 5 368 3 050 6 909 8 760 12 277 11810 |
The Company’s management considers that the credit quality of the above financial assets that are not impaired or in default at the reporting date is good. As of July 31, 2023, none of the significant customers and other debtors, unimpared, are in default.
Credit risk in respect of cash, banker’s acceptances and discount notes, amounts receivable on credit and debit cards is considered negligible because the counterparties are reputable banks with quality external credit ratings.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations. The Company manages its liquidities by monitoring forecasted cash receipts and disbursements in the course of daily activities. Net cash requirements are compared with available cash, investments and credit facility to ascertain if they are sufficient for the period in question. The Company also considers expected cash resources from sales and its financial assets in managing the liquidity risk.
33
BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of Canadian dollars, except per share data)
14. FINANCIAL INSTRUMENTS (Continued)
Future payments to be made under its contractual obligations are allocated as follows:
| Carrying Contractual amount cash flows |
July 31, 2023 | |
|---|---|---|
| More than Under 1year 2 - 5 ans 5years |
||
| $ $ |
$ $ $ |
|
| Trade and other payables excluding customer deposits Lease liability |
||
| 48 683 48 683 |
48 683 - **- ** |
|
| 6 931 7 419 |
3 087 4 027 305 |
|
| 55 614 56 102 |
51 770 4 027 305 |
| Valeur Contractual comptable cash flows |
January 31, 2023 | |
|---|---|---|
| More than Under 1year 2 - 5 ans 5years |
||
| $ $ | $ $ $ | |
| Trade and other payables excluding customer deposits Lease liability |
||
| 52 874 52 874 |
52 874 - - |
|
| 8 726 9 350 |
3 560 5 181 609 |
|
| 61600 62 224 |
56434 5181 609 |
Capital management
The Company's capital management objectives are to safeguard its assets, while maximizing the Company's growth and providing an adequate return to its shareholders. In addition to a conservative approach with respect to safeguarding the financial position, the Company achieves its objective through sound management of internally generated capital and through using capital when necessary to finance its growth initiatives. The Company's capital corresponds to equity.
34
BMTC Group Inc. Notes to the Consolidated Financial Statements
(Unaudited and in thousands of Canadian dollars, except per share data)
15. EARNINGS PER SHARE AND DIVIDENDS
The following table presents the calculation of basic net earnings per share:
| 3 month 6 month $ $ Net earnings 3 363 41 380 Weighted average number of shares to calculate basic and diluted net earnings per share 33 077 070 Net earnings per share Basic and diluted 0,10 1,25 July 31, 2023 |
July 31, 2023 | July 31, 2023 | July31,2022 | July31,2022 |
|---|---|---|---|---|
| 3 month | 6 month | 3month | 6month | |
| $ 41 380 33 077 070 **1,25 ** |
$ 14 246 0,43 |
$ 15 053 | ||
| 33 482 756 | ||||
| 0,45 |
16. SUBSEQUENT EVENT
No adjusting or significant non-adjusting event occurred between the reporting date and the date of authorization of the unaudited interim consolidated financial
35