Winnipeg-based acquisition player Exchange Income Corporation (
TSX:T.EIF,
Stock Forum) took a beating on the market today on news that one of their subsidiaries, WesTower Communications, faced weakening margins on the back of heavy growth and infrastructure upgrades, which should lead the EIF EBITDA to come in low.
The company expects EBITDA to amount to half of the 2012 third quarter results,
according to a news release, which led to a continuation of the stock sell-off that has been happening over the past few weeks, and a 17.48% drop on the day.
According to a company news release, “WesTower has experienced rapid growth in the last 18 months which has put considerable pressure on its resources and systems. To address these challenges WesTower has put tremendous effort into reengineering its processes and systems. While the challenges attributable to rapid growth remain, improvements in WesTower's processes and more recent information obtained have led to changes in certain estimates.”
“Due to reduced profitability for certain contracts completed in July and August, 2013 management determined that certain forecasted estimates of projected contract costs should be increased and related margins reduced.”
The combined impact of the changes is estimated by the company to increase expenses to the tune of approximately $10 million. The reengineering of WesTower systems is expected to continue into 2014.
Shares in Exchange Income Corporation, which deals in specialty manufacturing acquisitions and aviation, dropped 17.48% on the news, down $3.81 to $17.99.
This share price drop is just the latest from several weeks of plummeting prices from $26+ in mid-September to sub-$18 today, leading some on our bullboards to
wonder if inside information was leaking over the days prior to the news release.
T.EIF operates Perimeter Aviation, Keewatin Air, Calm Air International, Bearskin Lake Services, Custom Helicopters, Regional One, Jasper Tank, Overlanders Manufacturing, Water Blast Manufacturing, Stainless Fabrication and WesTower Communications.