Boyd Group grows into Winnipeg’s newest billion-dollar company

Hey there, time traveller!
This article was published 09/01/2016 (3535 days ago), so information in it may no longer be current.

From the most modest of beginnings — one lonely Boyd Autobody outlet in Winnipeg in 1990 — Boyd Group Income Fund has become the newest billion-dollar Winnipeg company.

By 1995, there were 12 locations across Western Canada. By 2000, it was up to $100 million in annual revenue with 52 stores including a number of U.S. locations.

Now there are 342 locations in Canada and the U.S. and Boyd is the largest operator of non-franchised collision-repair centres in North America in terms of number of locations and one of the largest in terms of sales.

And there is no reason to think Boyd will not be able to continue the same growth trajectory other than one: there are fewer multi-shop collision-repair operators out there for Boyd to buy.

Trevor Johnson, an analyst for National Bank Financial who has covered Boyd for many years, said there is still a long growth runway ahead.

“It is still such a fragmented industry and they are the biggest player but still have only a small market share,” Johnson said. “It is outlandish how many mom and pop shops are out there. They will be able to continue to consolidate.”

The company has virtually no debt and has access to about $400 million in credit to do new deals.

This week, Boyd redeemed and converted a $24-million, three-year convertible bond offering.

With slightly more than one million additional units added to the pool of Boyd units, the company is now a full $100 million over the $1-billion mark in market capitalization.

Brock Bulbuck, Boyd’s CEO, said the company also hit $1 billion in sales for a 12-month period for the first time and will also report $1 billion-plus in revenue for the first time when its fourth quarter and year-end results are released next month.

Passing $1 billion in market cap can be fleeting. Markets are fickle and prices can swing wildly regardless of the company’s operational performance, which Johnson points out is top notch.

“You have to be firing on all cylinders,” he said. “Profitability is the best we have ever seen.”

But its sheer size in the market becomes one more reason for Bay Street to pay attention to the decidedly non-sexy business.

Last month, RBC Capital Markets commenced coverage of Boyd.

“We are starting to see interest in others picking up coverage,” Bulbuck said. “They have institutional clients that want to know about the company.”

Another reason more institutional investors will want to know about the company is that in the fall it was added to the S&P/TSX Composite Index.

Many institutional investors and investment funds have mandates that preclude investments from companies that are not on the list of the 240 companies that make up the composite index.

As well, index mutual funds need to own weighted amounts of every company on the index. So inclusion on the index almost certainly brings additional interest from institutional investors.

(Another Winnipeg company, New Flyer Industries Inc., was added to the list in December.)

Boyd Group is widely held with no single shareholder owning more than 10 per cent of the units, although there are a few in the high single digits.

It’s not hard to imagine that regardless of its new status on the S&P/TSX Composite Index, investors will want to keep their eye on Boyd.

The convertible debenture issue that was just converted to units this week did so when the units were trading at almost three times the conversion price.

When the unsecured debt offering was placed back in the fall of 2012, Boyd units were trading around the $16 mark. The conversion price on the issue was $23.40 — a full 46 per cent premium.

Friday, Boyd units closed at $62.16.

Johnson said Bulbuck and his team have done a great job.

“We were bullish but we didn’t expect it to do what it did,” which was effectively triple the returns of the offering over three years

Even if the company does not do any large deals in the next while, Johnson said the company can still generate 20 per cent annual growth.

“That implies doubling in size every five to six years,” he said.

Johnson noted both Bulbuck and the company’s longtime head of U.S. operations, Tim O’Day, recently sold about 100,000 units each.

“If you put yourself in their shoes, if you’ve run a stock that has gone from $7 to $60 you’re probably going to want to take some money off the table on the way up,” Johnson said.

Since the company’s operations are spread out over five provinces and 19 states, Boyd doesn’t necessarily wield the same kind of presence in Winnipeg, as say, New Flyer Industries, which has about 1,400 employees in Winnipeg (and a market cap of $1.5 billion).

But Boyd does have more than 100 employees in Winnipeg, including a lean head office of about 25 people and about 90 people doing back-office payroll, accounts receivable and other financial functions.

And with 304 of its 342 locations in the U.S. those Winnipeg jobs are all supporting what are effectively export sales supporting operations in the U.S.

“We think it’s a good story relative to Manitoba employment,” Bulbuck said. “We’re creating opportunities here in Manitoba for a business that is growing in the U.S.”

martin.cash@freepress.mb.ca