SPRUCE GROVE, ALBERTA--(Marketwired - May 14, 2013) -
- 2013 first quarter revenue increased by 121% to $51.7 million
- Adjusted EBITDA margin increased to 25.7% from 23.8% in 2012
- 2013 guidance reiterated: full-year revenue expected to exceed $215 million
- Conference call tomorrow, May 15, 2013
ENTREC Corporation (TSX VENTURE:ENT) ("ENTREC" or the "Company"), a leading provider of heavy lift and heavy haul services, today announced financial results for the three months ended March 31, 2013.
Three Months Ended
$ thousands, except per share amounts and margin percent |
March 31
2013 |
|
March 31
2012 |
|
|
|
|
|
|
| Revenue |
51,703 |
|
23,437 |
|
|
|
|
|
|
| Gross profit |
17,952 |
|
8,105 |
|
| Gross margin |
34.7 |
% |
34.6 |
% |
|
|
|
|
|
| Adjusted EBITDA(1) |
13,262 |
|
5,574 |
|
| Adjusted EBITDA margin(1) |
25.7 |
% |
23.8 |
% |
|
Per share(1) |
0.14 |
|
0.12 |
|
|
|
|
|
|
| Adjusted net income(1) |
5,485 |
|
2,669 |
|
|
Per share(1) |
0.06 |
|
0.06 |
|
|
|
|
|
|
| Net income |
5,400 |
|
2,530 |
|
|
Per share - basic |
0.06 |
|
0.06 |
|
|
Per share - diluted |
0.05 |
|
0.06 |
|
| Note: |
|
(1) |
|
See "Non-IFRS Financial Measures" section of the Company's Management Discussion & Analysis for the three months ended March 31, 2013. |
"Strong revenue growth combined with a higher adjusted EBITDA margin contributed to a strong first quarter for ENTREC," said John M. Stevens, ENTREC's President and COO.
For the three months ended March 31, 2013, revenue more than doubled to $51.7 million, from $23.4 million in the first quarter of 2012. The 121% revenue improvement reflects the positive impact of business acquisitions completed over the past year and continued strong demand from key markets.
"We experienced strong demand for both our crane and heavy haul transportation services in the Alberta oil sands region and across Northern B.C. during the first quarter," added Mr. Stevens. "Offsetting this performance was lower demand for our services in the conventional oil and natural gas markets we serve, which had a slower start in 2013."
From a seasonal perspective, several of ENTREC's heavy haul transportation projects also got off to a slower start than anticipated in January due to an extended Christmas season slow-down and poor weather conditions in January. However, as projects commenced and weather conditions improved, utilization rates significantly improved through the remainder of the first quarter.
Adjusted EBITDA increased to $13.3 million during the first quarter of 2013, up significantly from $5.6 million in Q1 2012. Higher revenue, combined with an increased adjusted EBITDA margin, were the key factors in the improvement. As a percentage of revenue, adjusted EBITDA margin increased to 25.7%, from 23.8% in the first quarter of 2012. ENTREC's 2012 expansion into higher-margin crane services, together with economies of scale in general and administrative expenses achieved as a result of ENTREC's recent growth, contributed to the higher adjusted EBITDA margin.
First quarter adjusted net income more than doubled to $5.5 million, from $2.7 million in Q1 2012 as a result of the increased revenue and higher adjusted EBITDA margin.
Adjusted earnings per share of $0.06 were consistent with Q1 2012 results, as higher adjusted net income was offset by a higher number of common shares outstanding as at March 31, 2013. This included the recent issuance of 18,672,000 common shares at a price of $1.75 per share, for gross proceeds of $32.7 million in February 2013. Net proceeds of the offering were temporarily utilized to reduce outstanding debt and strengthen ENTREC's balance sheet. The Company plans to utilize its additional financial capacity to complete future growth capital expenditures and accretive business acquisitions, which could in turn, grow earnings per share.
First quarter net income, reported in accordance with IFRS, grew to $5.4 million, from $2.5 million in the first quarter of last year. Net income includes the after-tax effect of acquisition-related intangible asset amortization, interest accretion on convertible debentures and gains (loss) on the revaluation of the embedded derivative component of convertible debentures; all of which are components excluded from the calculation of adjusted net income.
Impact of Rental Equipment and Non-Recurring Fees on Adjusted EBITDA
To help meet demand for its services, ENTREC continues to use short-term rental equipment to complement its owned fleet of cranes and trailers. While these rentals provide greater financial flexibility, they generate lower economic returns due to the rental costs involved. If equipment rental costs were excluded from the Company's first quarter results, adjusted EBITDA would have increased by a further $1.2 million to $14.5 million during the first quarter of 2013 (an increase of $0.4 million to $6.0 million during the same period in 2012).
Most of the equipment ENTREC rents come with purchase options, including a provision that allows the Company to apply much of its previous rental payments against the purchase price. During the first quarter of 2013, ENTREC bought-out $4.0 million of rental equipment as part of its capital expenditure program. When warranted in the future, the Company will continue to access rental equipment to meet short-term customer demand, while taking advantage of the flexibility to acquire the equipment should long-term demand justify doing so.
ENTREC's first quarter results also include $0.2 million in non-recurring professional fees and other integration and rebranding costs (three months ended March 31, 2012 - $0.1 million), which, if excluded, would have further increased adjusted EBITDA during each of the periods reported.
Outlook Strong for 2013 and 2014
"Our outlook for 2013 and 2014 continues to be very positive," said Mr. Stevens. "With the tremendous expansion in our business over the past year, we are well positioned to capture a large share of the growing industrial development occurring throughout Western Canada; most notably in Alberta's oil sands region and throughout Northern B.C. Quoting activity continues to increase on a year-over-year basis as customers become more aware of our enhanced scale and operating capabilities. During the first quarter, we were granted heavy haul transportation contracts extending into 2014 and 2015 that we would not have had the scale of operations to execute even 12 months ago. We are also being awarded integrated crane and heavy haul services projects as we cross-sell our crane and heavy haul transportation services to both existing and new customers. Several of our key customers have also expanded their existing master service agreements with us to include crane services."
Capital spending on projects in the Alberta oil sands region and across Western Canada remains steady, resulting in high demand for crane and heavy haul transportation services. ENTREC is also benefiting from the growing industrial development occurring in Northern B.C., which includes ongoing mining, hydro-electric, pipeline, and oil and natural gas projects as well as the anticipated development of liquefied natural gas (LNG) facilities in Northwest B.C. The Company is also currently providing crane services to support a multi-billion-dollar revitalization of an aluminum smelter in Kitimat, B.C.
"Based on expected schedules for future projects, we believe demand for our crane and heavy haul transportation services will continue to grow sequentially through 2014 and 2015, and exceed the demand we are anticipating in 2013," added Mr. Stevens.
ENTREC expects demand from conventional oil and natural gas markets will continue to fluctuate with industry exploration and production levels. Approximately 20% of the Company's consolidated revenue is derived from the conventional oil and natural gas sector, with the greatest exposure in ENTREC's operations in Northwest Alberta, Northeast B.C. and North Dakota. During periods of slower activity, ENTREC relocates equipment to support activity and customer demand in other regions.
Moving into the second quarter of 2013, activity levels in some geographic regions have been negatively affected by a wet spring and associated road restrictions that limit access to certain sites. These access restrictions have begun to subside and activity levels are beginning to return to normal levels.
ENTREC today reiterated its previous revenue guidance for 2013. Based on current expectations and assuming no further business acquisitions are completed, ENTREC estimates revenue for the year ending December 31, 2013 could exceed $215 million. Future business acquisitions completed in fiscal 2013 could further increase this revenue estimate.
2013 Capital Expenditure Program
In January 2013, ENTREC approved a 2013 capital expenditure program of $50 million. The program consists of $41 million in growth capital expenditures to expand the Company's equipment fleet, as well as $9 million in maintenance capital expenditures. A large portion of the 2013 capital expenditure program will focus on continued expansion of ENTREC's capability and market share in crane services. As part of this strategy, ENTREC exercised the purchase option on $4.0 million of its rental crane units during the first quarter of 2013. Crane services are highly complementary to heavy haul transportation as they allow customers to meet both their heavy haul and lifting needs through one vendor. Crane services also increase access to recurring onsite maintenance, repair and operations (MRO) support work in the Alberta oil sands region, as well as to the significant industrial construction work occurring in the oil sands and in Northwest B.C.
During the three months ended March 31, 2013, ENTREC made capital expenditures of $15.6 million, consisting of $14.3 million in growth capital expenditures and $1.3 million in maintenance capital expenditures. Approximately $10 million of the capital expenditures in the first quarter were invested in crane equipment, with the remainder directed to tractors and heavy haul trailers, as well as support equipment.