FORT ST. JOHN, British Columbia, Aug. 28, 2018 (GLOBE NEWSWIRE) -- Macro Enterprises Inc. (TSX-V: MCR) -
| Summary of financial results | |||||||||||
| (thousands of dollars except per share amounts) | |||||||||||
| Three months ended June 30 | Six months ended June 30 | ||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||
| (unaudited) | |||||||||||
| Revenue | $ | 3,074 | $ | 25,244 | $ | 11,873 | $ | 37,985 | |||
| EBITDA1 | (5,020 | ) | 1,860 | (6,335 | ) | 118 | |||||
| Net earnings (loss) | (4,642 | ) | 297 | (6,896 | ) | (2,315 | ) | ||||
| Net earnings (loss) per share | $ | (0.15 | ) | $ | 0.01 | $ | (0.23 | ) | $ | (0.08 | ) |
| Weighted average common shares outstanding (thousands) | 30,253 | 30,299 | |||||||||
Note 1 - References to EBITDA are to net income from continuing operations before interest, taxes, amortization and impairment charge. EBITDA is not an earnings measure recognized by International Financial Reporting Standards (“IFRS”) and does not have a standardized meaning prescribed by IFRS. Management believes that EBITDA is an appropriate measure in evaluating the Company’s performance. Readers are cautioned that EBITDA should not be construed as an alternative to net income (as determined under IFRS) as an indicator of financial performance or to cash flow from operating activities (as determined under IFRS) as a measure of liquidity and cash flow. The Company’s method of calculating EBITDA may differ from the methods used by other issuers and, accordingly, the Company’s EBITDA may not be comparable to similar measures used by other issuers.
Highlights
- The Company continues to materially exceed industry standard safety averages. As at June 30, 2018 Macro Enterprises has now exceeded 20 quarters and 3.6 million man hours worked without a single lost time injury.
- Total working capital as at June 30, 2018 was $38.4 million of which $37.1 million was held in cash. The Company continues to remain unleveraged and undrawn on its credit facilities.
- The Company is reporting shareholders’ equity of $71.7 million or $2.36 per share based on weighted average common shares outstanding as at June 30, 2018.
- During the period ended June 30, 2018, along with its joint venture partner, the Company announced the successful signing of a pipeline construction contract with Coastal GasLink Pipeline Partnership Ltd.
- Subsequent to period end, the Company announced construction commenced on the North Montney Mainline Pipeline project – a 100% Macro contract valued at $200.0 million with substantial completion by Q1’19.
- Subsequent to period end, the Company signed an indicative term sheet with its lenders extending the current senior secured credit facility 12 months from close under revised terms and conditions.
- The Company expects revenues to exceed $150.0 million and to be cash flow positive for the fiscal year ended December 31, 2018.
Second Quarter Results
Three months ended June 30, 2018 vs. three months ended June 30, 2017
Consolidated revenue was $3.1 million and significantly less than the $25.2 million reported in the second quarter last year. The material decrease was anticipated as a result of market uncertainty and an overall decline in business activity, particularly large scheduled project work that was delayed until further notice. Approximately 36% of the revenue earned during the quarter related to maintenance and integrity work being performed under existing master service agreements with the balance relating to pipeline and facilities construction projects. Prior year revenue relating to maintenance and integrity work was approximately $9.7 million or 38% of total revenues recognized with the balance or $15.5 million relating to pipeline and facilities construction projects.
Operating expenses were $6.7 million or 217% of revenue compared to $22.0 million or 87% of revenue in the second quarter last year. Included in the operating expenses were $1.2 million in final bidding costs and pre-job spending on the Company’s three large scale projects along with $2.1 million of added overhead expenditures incurred that were not directly associated with specific jobs as the Company begins ramping up for the near term increased activity. Otherwise, the Company’s operating margins still remained lower than historical averages due to the mix of variable and necessary fixed costs being incurred compounded by competitive market conditions and reduced activity levels.
General and administrative expenses were $1.4 million, down $712,000 and representing a 34% decrease from the $2.1 million incurred prior year. The decline was a result of reduced spending commensurate with a slowdown in business activities experienced during the quarter. Included in the Company’s general and administrative expenditures are professional fees, corporate wages, burdens and various other overheads, including rents, insurance, travel and administrative supplies that are not charged directly to projects.
Depreciation of property, plant and equipment was $1.4 million and consistent with prior years’ depreciation. Depreciation is calculated at various declining balance methods across the Company’s multiple categories of property, plant and equipment and is used in guiding the annual capital expenditure estimates. Residual values, methods of amortization and useful lives of the assets are reviewed annually and adjusted if appropriate.
During the second quarter the Company recognized a non-cash loss of $473,000 on the mark-to-market re-measurement of its preferred shares at period end. The loss was a result of a 12.0% increase in the weighted average share price of its common shares since March 31, 2018.
Finance costs of $188,000 were lower than prior year but remained in-line with its prior quarters’ fees. Along with interest charges, standby and admin fees associated with the current credit facility, other fees included in the finance costs were $72,000 of amortized non-cash deferred transaction costs relating to the establishment of the credit facility and $42,000 of effective interest rate payments made on its preferred shares.
Income tax recovery in the quarter of $2.0 million was at an effective rate of 29.8% which approaches the enacted tax rates of 27% after appropriate deductions.
Net loss was $4.7 million (($0.15) per share) compared to a net income of $0.3 million ($0.01 per share) recognized during the three months ended June 30, 2017. The net loss was a result of significantly reduced levels of core business activity, significant bidding costs, pre-job spending and increased overheads being incurred in advance of major large-scale construction work commencing later in fiscal 2018.
Outlook
The Company expects to see a significant increase in activity during the remainder of 2018 and beyond as a result of its joint venture activity with Spiecapag Canada Corp. and the Company’s continued focus on its blue chip pipeline owners and operators with their construction and maintenance programs across Canada.
In May 2018, the Federal Government of Canada announced it would be acquiring the Trans Mountain Expansion Project with commitments to see construction recommence in due course. The Company is in contact with the key stakeholders of the Trans Mountain Expansion project and continues to await its notice to proceed with Spread 5B, that was awarded in 2017 and consists of approximately 85 kilometers of 36 inch pipeline along the Coquihalla-Hope corridor in British Columbia. Construction is expected to last two years, with field construction to commence once the regulatory requirements for construction of the project have been satisfied. The reimbursable type contract will be phased and has an initial estimated contract value of approximately $375 million. The exact timing on this project is not determinable at this time.
In June 2018, the Company announced that its joint venture with Spiecapag Canada Corp. successfully negotiated and executed a construction contract with Coastal GasLink Pipeline Limited Partnership for pipeline construction services on the Coastal GasLink Pipeline Project that consists of approximately 166 kilometers of a 48 inch pipeline. The initial estimated contract value is in excess of $900 million with a Joint Venture split of 40/60 between Macro and Spiecapag. In general, the civil work will be performed under a reimbursable type contract model while the mechanical scope will be performed under unit rates. A Final Investment Decision (“FID”) is expected to be received by Q4 2018, with a full notice to proceed issued shortly thereafter. Current in-service date of for Coastal GasLink pipeline is scheduled for Q4 2021.
In August 2018, the Company announced that it has commenced construction of the Aitken Creek Section – Spread 2 of the North Montney Mainline Project that consists of approximately 67 km of NPS 42-inch pipeline and related facilities. The contract, with NOVA Gas Transmission Ltd., a subsidiary of TransCanada Pipelines Limited, is valued at approximately CAD$200.0 million. The contract is a unit rate type contract with upfront milestone payments to fund initial working capital requirements. Substantial completion is planned for Q1 2019.
The Company remains very active bidding and estimating costs on projects for its larger clients and anticipates an increase in its general construction activities and a return to providing core maintenance and integrity work for its core customers during the balance of 2018. The Company expects revenues to exceed $150 million and to be cash flow positive for the fiscal year ended December 31, 2018.
Forward Looking Statements
Certain statements in this news release may include forward-looking information that involves various risks and uncertainties. These may include, without limitation, statements regarding expected revenues, expenses and industry trends and the pursuit of strategic acquisitions. These risks and uncertainties include, but are not restricted to, global economic conditions, government regulation of energy and resource companies, seasonal weather patterns, maintaining and increasing market share, terrorist activity, the price and availability of alternative fuels, the availability of pipeline capacity, and potential instability or armed conflict in oil producing regions. These risks and uncertainties may cause actual results to differ from information contained herein. There can be no assurance that such forward-looking statements will prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements. These statements are based on the estimates and opinions of management on the dates they are made and are expressly qualified in their entirety by this notice. Except as required by law, the Company assumes no obligation to update forward-looking statements should circumstances or management’s estimates or opinions change.
| For further information please contact: Frank Miles President & C.E.O. Phone: (250) 785-0033 | Jeff Redmond C.F.O. & Corporate Secretary (250) 785-0033 | |