Ladies and gentlemen, thank you for standing by, and welcome to Colabor's fourth quarter 2020 results conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question- and- answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would like to remind listeners that this conference call contains forward-looking information within the meaning of applicable Canadian securities laws, and I refer the audience to the forward-looking statement as detailed in the presentation supporting this conference call.
Furthermore, risks and uncertainties are discussed throughout the December 26, 2020, MD & A under the heading Risk Factors. I would now like to hand the conference over to your speaker today, Louis Frenette, President and CEO. Thank you. Please go ahead, sir.
Thank you, Takane. Good morning, everyone, and welcome to Colabor Group's 2020 fourth quarter and year-end results conference call. This is Louis Frenette, President, Chief Executive Officer. Last Friday evening, we released our earnings results for the 16 and 52-week period ended December 26, 2020. The press release and disclosure documents can be found on our website and at www.sedar.com. I'm joined today by Marie-France Laberge, our Corporate Controller and Interim Chief Financial Officer. Given the current context, we are very pleased with our financial results for fiscal 2020. We successfully managed the effect of the pandemic on our operating profitability and cash flow generation. We de-risked our balance sheet, ending the year with a comfortable leverage ratio of 1.8x .
We also recently concluded an important milestone with the announcement on February 18 of the refinancing of our lending facility and of our intention to redeem all of the outstanding convertible unsecured subordinated debentures. We replaced our previous CAD 90 million ABL facility with a new CAD 80 million secured credit facility that is comprised of a revolving credit of CAD 50 million and a term loan of CAD 30 million with an accordion of CAD 20 million. This new facility is more suited to our needs because it's no longer tied to the level of inventory and receivables. We also entered into a new five-year, CAD 20 million subordinated loan with Investissement Québec, of which CAD 15 million has been disbursed. We concurrently reimbursed the balance of CAD 12 million remaining on our previous subordinated debt with FSTQ, which was due in February 2022.
In addition, we'll be redeeming all of the 6% outstanding convertible debenture, which have a principal amount of CAD 50 million. All information documents pertaining to this transaction are available on SEDAR. This refinancing demonstrates the support of existing financial partners and of new lenders. It strengthens our balance sheet, provides additional financial flexibility, and reduces our overall financial expenses. We now have the financial resources to focus on growing our core distribution activities in Quebec . Before I review our operational results for the period ended December 26, 2020, I would once again take this moment to thank our team members for their dedication and contribution to this landmark year. Together, we successfully navigated 2020 as the COVID-19 pandemic brought the hospitality industry to a virtual standstill for the majority of the year.
Together, we demonstrated the resiliency of our business model and the benefits of the transformation plan that our entire group has been working on in the past two years. Because of everyone's contribution, we were able to end the year in a very good position financially, all while safeguarding the health of our [employees' LP] and our customers' well supply. When we entered 2020, we were in the last inning of our transformation plan. In January, we first announced the consolidation of our broad line distribution activities in Ontario, and later in May, we concluded the sales of most of our remaining activities in that province. This transaction provides us with the financial support and additional bandwidth to concentrate on our Quebec platform and manage the effects of the COVID-19 pandemic.
Our diversified customer base and wide geographical reach within the province of Quebec also served us well during this unprecedented year. With the restaurant industry brought to a virtual standstill during a good portion of 2020, our consolidated sales were only down 30.7%. The majority of the revenue loss came for a historical contract loss in the specialty distribution agreement, followed by lower revenue from our hospitality customers who were affected by the COVID-19 pandemic, and our decision to stop serving less profitable contracts in our broad line distribution business. During the fourth quarter, as we were facing the threat of a second wave, the government of Quebec issued a decree requiring the closure of all dine-in operations of bars and restaurants located in red zones. As we predicted on this call in November, the second wave did not hit as hard as the first.
We further improved our customer mix with the conclusion of the three new institutional supply agreements and continued serving all of our new retail customers that were onboarded during the pandemic. On the profitability front, the transformation initiative that we started deploying over the last two years and the cost mitigation measures quickly implemented at the start of the pandemic, including the support of the Canada Emergency Wage Subsidy, supported higher operating profitability in 2020. Our adjusted EBITDA margin grew to 4.4% compared to 4.2% last year. This is net of IFRS 16. To summarize 2020, I would say that the right sizing of our operations, which includes the sale of our non-profitable activities in Ontario, our diversified customer base, and the quick implementation of various cost preservation measures, provided us with the necessary liquidity and borrowing capacity to weather the pandemic.
As we stand today, the province of Quebec remains in lockdown. However, restaurants located in less affected regions have been allowed to reopen their dine-in operations starting on February 8th, 2021. Since we have a wide geographical reach within the province, we should be well-positioned to benefit from the elevation of certain restrictive measures. The situation is constantly evolving, but what remains certain is that we are ready to help our customers resume their operations gradually as restrictive measures are allowed to ease throughout the province. With this, Marie-France, I turn the call over to you for a review of our financial results.
Thank you, Louis, and good morning, everyone. I'm pleased to be here with you today to review our financial results for the fourth quarter and fiscal 2020. Fourth quarter consolidated sales from continued activities were down 30.9% to CAD 133.3 million. Sales in the distribution segment decreased by 35.5% to CAD 86.5 million, mainly from the end of the specialty distribution contract, which represented CAD 20.5 million in the equivalent quarter of last year. Our decision to stop serving less profitable clients starting in the fourth quarter of 2019, which represented CAD 3.5 million in the equivalent quarter of last year, and from a lower volume related to the COVID-19 pandemic during the quarter. This was mitigated by an increase in retail and institutional sales from existing and new customers onboarded in the second, third, and fourth quarters of 2020.
Sales in the wholesale segment decreased by 22.5% to CAD 58.8 million, mainly from the effect of the pandemic and from lower inter-segment sales resulting from the sale of our Ontario division, and mitigated by growth in certain customer accounts and new wholesale customers. The adjusted EBITDA from continuing operations reached CAD 7.5 million or 5.6% of sales, compared with CAD 8.2 million or 4.2% in the fourth quarter of last year. The improvement in margin stems from the decision to stop serving less profitable contracts, efficiency measures, the adoption of IFRS 16, which reduced rent expenses by CAD 2.6 million, a reduction of salary expenses, and CAD 1.8 million in subsidies. Fiscal 2020 consolidated sales from continued activities were down 3.7% to CAD 461.3 million. Sales in the distribution segment decreased by 37.1% to CAD 309.3 million.
Distribution activities were down by CAD 182.1 million from the end of the specialty distribution contract, which represented CAD 84 million in 2019. Our decision to stop serving less profitable clients starting in the fourth quarter of 2019, which represented CAD 27.1 million in fiscal 2019, and from lower volume related to the COVID-19 pandemic starting in the second quarter of 2020. This was mitigated by an increase in retail sales from existing and new customers onboarded in 2020.
Sales in the Wholesale segment decreased by 16.3% to CAD 192.4 million, mainly from the effect of the pandemic and from lower inter-segment sales resulting from the sale of our Ontario division, and mitigated by growth in certain customer accounts and new wholesale customers. The adjusted EBITDA from continuing operations reached CAD 28.9 million or 6.3% of sales, compared with CAD 27.6 million or 4.2% last year.
This comes from the improvement in gross margin from the adoption of IFRS 16, CAD 7.1 million received in subsidies, efficiency measures, and mitigated by the effect of the COVID-19 pandemic on sales. Net earnings from continuing operation was CAD 3.8 million, down from CAD 7.5 million last year. Net loss for fiscal 2020 stood at CAD 8.6 million compared to net earnings of CAD 7.7 million in 2019. Cash flows from operating activities amounted to CAD 37.3 million in 2020, up from CAD 31.5 million in 2019. This increase is mainly due to a lower use of working capital, the effect of IFRS 16, and an increase in adjusted EBITDA. As of December 26th, 2020, our net debt, including the convertible debentures and net of cash, amounted to CAD 52.1 million, compared to CAD 72.1 million at the end of fiscal 2019.
Our year cash flow since the start of the year from operating activities and the sale of the Ontario division were used to reimburse a portion of debt, specifically CAD 3 million towards the subordinated debt and CAD 2 million to the credit facility. Pursuant to the new credit arrangement that we discussed in the opening remarks, our financial leverage ratio does not materially change from year-end and currently stands at 8.8x versus 2.6x in fiscal 2019. By excluding the effect of IFRS 16, our leverage ratio stands at 2.6x, which includes the convertible debentures. The pandemic will continue to have an impact on our sales and short-term adjusted EBITDA. Because of the quick implementation of cost preservation measures and the support of the subsidies, we do not expect this situation to have a material impact on our available liquidity.
I will now like to turn the call over to the operator for a Q&A period.
As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we compile the Q&A roster. Your first question comes from Kyle McPhee of Cormark Securities. Your line is open.
Hi, everyone. Louis, the first question on your Distribution segment. The revenue for the segment was down 36% year-over-year in Q4. Based on your disclosures, we know about 18% of that was the on-purpose contract terminations and ceasing serving some clients. That stuff wasn't yet lapped. My question is specific to the remainder of that year-over-year decline for the Distribution segment, that implied 18% hit. Can you shed some light on the moving parts feeding that? I know there would be a net negative from COVID in there, but also wondering if there's any permanent gains in there from new clients, market share gains, things that will persist even when COVID is over.
Thanks, and good morning, Kyle. Yes, the COVID part, I think it's important to isolate the COVID part and our results for the distribution. For Q4, the impact on distribution was -21% due to COVID for the distribution part. For the year, that impacted our sales by 19% on that part. For Colabor Group, we made the calculation of what did the COVID did specifically, was a decline of 17%. The rest of the shortfall comes from what we stopped in last year at the end of 2019, contracts that were not as profitable, and also in February of this year, a contract that was stopped with a big customer with one of our divisions. This is the fourth quarter of 2020, and as we said, the impact of COVID, as I said earlier in Q4, was not as drastic as in Q2.
To give you a bit of color for the future, the reopening of the restaurants is to come shortly, I guess. It just restarted in the north of Quebec, and we're expecting that it may start back in orange zones in other regions, probably on March 8th. We don't have a crystal ball, but this is how it looks for now. The one major thing that affected the Q4 results for the wholesale business was that there were no Christmas parties, hospitality business was down. We expect that this should come back this year, hopefully. To finish on that, we did gain some institutional customers during that last quarter, and we did gain, during the pandemic, new retail customers where we're doing backdoor business.
Overall, we'll keep some of it for ongoing, and we'll lose some of them, such as food banks, Breakfast Club of Canada. We're not expecting that once the pandemic is gone, that we'll continue serving them. For retail and new retail backdoor customers, we're happy because they like our service and quality, and we expect to keep some. Same for the new customers that we won.
Got it. Okay. That's helpful, Louis. Just to clarify, the institutional customers you're adding would that land in the Distribution segment?
Both. A bit in the wholesale business and in the Distribution segment.
Got it. Okay. Based on the numbers you gave me about isolating COVID, it sounds like these institutional and retail customers that should prove permanent is actually a material, low single-digit year-over-year growth contribution. Does that math sound right?
Sounds right. Yep.
Okay. Got it. Okay. Moving on to your gross margin line. You continue to show year-over-year gains in your gross margin percentage. I know some of the contracts and clients you cut out help that mix, but wondering if COVID is also helping that mix. For example, maybe parts of your business that are hit by COVID just happen to be lower- margin business. Can you help me understand if we should expect any material gross margin shifts as COVID fades?
I don't expect on the gross margin, absolutely not. That's a result of the price we're selling and the cost of the acquisition of the products. I don't see any big swings on that, because it's fairly stable. In terms of the contracts we have with the institutions, are long-term contracts, and with our distributors. I don't see any swing on the margin.
Got it. Okay. On your balance sheet, these new debt facilities, you press released the senior and subordinated facilities. It looks like you have more than enough to repay and replace all your existing debt, including the converts, plus you'd still have a lot of excess liquidity. Can you help us understand some of your priorities for this excess liquidity? Are there any major organic growth or acquisition plans that you intend on pursuing to utilize all this liquidity?
Yes, sure. It was well summarized. Of course, we're looking at organic growth. Colabor is more developed in eastern Quebec, and the opportunity is in western Quebec, so we'll work on that. We're looking at it, and there's lots of room to grow out there. As May alluded to acquisition, well, we're looking for good, small, accretive opportunities that are very synergetic. The context of COVID may slow down the process, but we're looking at opportunities. Yes.
Got it. Okay, thanks for that, Louis. Just one last one from me, just on your CapEx, can you offer the latest update on what your CapEx should look like in 2021?
In 2020, it was about CAD 2 million, so in 2021, it should be higher from another CAD 2 million, I would say. A total of maybe CAD 4 million, around CAD 4 million for next year.
Got it. Okay. Thanks for all the updates. That's it from me.
There are no further questions at this time. I return the call back over to Louis Frenette for closing remarks.
Thank you, Catherine and Kyle, for your question. As I said in my opening remarks, we are very happy with our performance this year. We are starting 2021 on a more solid footing with the resources concentrate on profitability, growing our operation. Because of the cost mitigation measures that we quickly implemented for the onset of the pandemic and the right-sizing of our operations, we are in a good financial situation and are ready to serve our restaurant customers as they start reopening their dining rooms.
Looking ahead, we remain committed to pursuing the transformation of Colabor by focusing on broadline distribution activities in Quebec, delivering efficiencies, and improving our employers' brand. We are grateful to be able to continue to count on the dedication and hard work of our employees and the support from the labor union, our financial partners, shareholders, our customers, and our suppliers.
This concludes our call for the fourth quarter of 2021. I look forward to speaking with you in May at our next conference call and AGM, which will be held virtually again this year. Thank you for joining us. Stay safe and healthy.
This concludes today's conference call. Thank you for participating. You may now disconnect.