Black Diamond Group Limited ("Black Diamond", the "Company" or
"we"), (TSX:BDI), a leading provider of workforce accommodation and
space rental solutions, today announced its operating and financial
results for the three months (the "Quarter") and twelve months
("2018" or the "Year") ended December 31, 2018 compared with
the three and twelve months ended December 31, 2017 (the
"Comparative Quarter"). All financial figures are expressed in
Canadian dollars.
Black Diamond’s consolidated revenue in the
Quarter rose 9%, but Adjusted EBITDA decreased to $6.6 million from
$9.5 million in the Comparative Quarter. These results are due
primarily to a weaker than expected operating environment in the
western Canadian resource sector.
- Revenue for the Quarter was $45.4 million, up 9% or $3.8
million from the Comparative Quarter mainly due to increased used
fleet sales which was partially offset by a decrease in rental
revenue in WFS.
- MSS revenue for the Quarter of $22.5 million accounted for 50%
of consolidated revenue.
- Adjusted EBITDA (see "Non-GAAP Measures") for the Quarter was
$6.6 million, down 31% or $2.9 million from the Comparative Quarter
primarily due to lower rental revenue in WFS.
- The Company's leverage position was significantly improved
during the last twelve months as a result of a reduction in Net
Debt from $112.6 million as at December 31, 2017 to $86.9
million as at December 31, 2018. The Company exited the year
with a Funded Debt to EBITDA ratio of 2.95 (December 31, 2017 -
3.30) and a Funded Debt to Tangible Book Value ratio of 0.44
(December 31, 2017 - 0.55).
Financial Highlights:
|
Three months
ended December 31, |
Twelve
months ended December 31, |
(in millions, except as noted) |
2018 |
2017 |
Change |
2018 |
2017 |
Change |
|
$ |
$ |
|
$ |
$ |
|
Revenue |
|
|
|
|
|
|
Modular Space Solutions |
22.5 |
|
20.0 |
|
13 |
% |
73.1 |
|
65.0 |
|
12 |
% |
Workforce Solutions |
22.9 |
|
21.5 |
|
7 |
% |
92.8 |
|
88.3 |
|
5 |
% |
Total Revenue |
45.4 |
|
41.6 |
|
9 |
% |
165.9 |
|
153.4 |
|
8 |
% |
|
|
|
|
|
|
|
Adjusted EBITDA |
6.6 |
|
9.5 |
|
(31 |
)% |
29.3 |
|
28.5 |
|
3 |
% |
|
|
|
|
|
|
|
Funds from Operations |
10.0 |
|
13.9 |
|
(28 |
)% |
42.7 |
|
47.3 |
|
(10 |
)% |
Per share ($) |
0.18 |
|
0.25 |
|
(28 |
)% |
0.78 |
|
0.89 |
|
(12 |
)% |
|
|
|
|
|
|
|
Loss |
(3.8 |
) |
(78.8 |
) |
(95 |
)% |
(11.4 |
) |
(95.4 |
) |
(88 |
)% |
Loss per share - Basic and diluted
($) |
(0.07 |
) |
(1.43 |
) |
(95 |
)% |
(0.21 |
) |
(1.81 |
) |
(88 |
)% |
|
|
|
|
|
|
|
Capital expenditures |
8.4 |
|
9.1 |
|
(8 |
)% |
17.4 |
|
23.6 |
|
(26 |
)% |
|
|
|
|
|
|
|
Property & equipment
(NBV) |
339.9 |
|
369.3 |
|
(8 |
)% |
339.9 |
|
369.3 |
|
(8 |
)% |
Total assets |
403.3 |
|
430.9 |
|
(6 |
)% |
403.3 |
|
430.9 |
|
(6 |
)% |
Long-term
debt |
90.1 |
|
115.1 |
|
(22 |
)% |
90.1 |
|
115.1 |
|
(22 |
)% |
Revenue from sources outside of the western
Canadian resource sector was approximately 70% of consolidated
revenue for the Quarter (60% for the Year). Accordingly, management
is encouraged by the continued traction shown in diversifying our
overall platform.
Within our geographically diverse MSS segment,
revenue in the Quarter of $22.5 million grew 13% from $20.0 million
in the Comparative Quarter. MSS adjusted EBITDA of $5.2 million was
slightly lower than EBITDA in the Comparative Quarter of $5.5
million due to modestly lower rental revenue, partially offset by
higher sales and non-rental revenue. Lower year-over-year rental
revenue in MSS was driven primarily by a decline in rates and
utilization in the Alberta market due to a lack of resource sector
infrastructure projects, slightly offset by continued strength in
utilization throughout the Company’s other operating
regions. MSS rental revenue has increased steadily since its
low point in Q1 2018.
The Company’s WFS segment generated revenue in
the Quarter of $22.9 million, up 7% from $21.5 million in the
Comparative Quarter. WFS adjusted EBITDA in the Quarter declined to
$4.8 million from $6.9 million in the Comparative Quarter due to
lower contribution from higher-margin rental revenue in the
Quarter.
Subsequent to the Quarter, the Company extended
its revolving operating facility, with a new maturity date of April
30, 2021. All other terms of the $100 million facility are
unchanged, along with the $75 million accordion feature.
Outlook
Management's outlook into 2019 is
constructive. The MSS business is planning for continued
organic expansion which is expected to be supported by roughly $25
to $30 million of capital investment throughout the year. Fleet
growth will be focused primarily in regions where the Company is
seeing ongoing strength in rates and utilization. This includes our
British Columbia, Ontario, and United States MSS markets which are
by and large being driven by strong economies and robust general
construction activity. While rates in our Alberta market remain
well below peak, utilization has strengthened considerably and
management expects continued improvement in this market in 2019. As
Black Diamond continues to grow the MSS fleet, management
anticipates that growth in bottom line performance in this business
should outpace fleet growth due to increased scale and the expected
continued growth of Value-Added Products and Services ("VAPS"). The
Company’s longer term vision for its MSS business is to double the
fleet count over the next five years, while maintaining discipline
on achieving strong returns on investment.
Our WFS business is benefiting from continued
strength in the United States and Australian markets. The Company’s
WFS assets in these regions are nearly fully utilized and are
experiencing continued momentum against a backdrop of supportive
rental rates. Management expects to invest $5 to $10 million of
growth capital in the United States and Australia in 2019. The WFS
segment in Canada has been challenging and ongoing weakness
throughout the back half of 2018 has carried into the first quarter
of 2019. However, management expects an improvement in this
business moving forward as recently awarded contracts related to
LNG development in western Canada are expected to provide a
base-line of activity with little-to-no requirements for additional
capital spending. The Company announced in late January that it had
received formal notice to proceed on a $42.5 million, 908-bed
turnkey project, and announced a separate award of a 304-bed rental
project in Kitimat. Both projects are expected to begin generating
revenue throughout the first half of 2019. While visibility into Q2
2019 is somewhat limited, management anticipates that certain
lodges will benefit from maintenance and turn-around activity,
which will help offset an expected seasonal slow-down in lodges
geared towards drilling and completion activity.
The Company’s digital marketplace for workforce
accommodation, LodgeLink, continued to gain traction with customers
and suppliers during the Quarter. LodgeLink now has over 430
properties listed, representing over 53,000 rooms of capacity
within workforce lodges and hotels across Canada. The Company has
begun to sign up properties in the United States onto the platform,
which management believes will result in continued adoption from
our nearly 250 unique corporate customers who booked over 83,000
room nights in 2018. Modest capital investment has been allocated
to further development throughout 2018 and into 2019 to continue
building on the rapid growth this business has displayed.
Given continued growth and capital investment in
our MSS business, combined with improving WFS performance driven by
contracts in hand and active Australian and U.S. markets,
management expects 2019 to show improved EBITDA generation compared
to 2018.
Black Diamond’s balance sheet ended the year
with net debt of $86.9 million, down from $112.6 million at the end
of 2017. Management anticipates that the 2019 capital budget will
be funded through internally generated funds, and that any excess
cash flows, either from asset sales or continued improvement in the
Company’s business, will go towards further debt repayment.
Capital Plan
The Company is generating increasing cash flows
from operations, which management anticipates will lead to
increasing growth capital expenditures. The disciplined capital
plan will support management's overarching strategy of diversifying
the Company's asset base and cash flows.
Capital expenditures were $8.4 million for the
Quarter and $17.4 million for the Year. Capital commitments were
$10.9 million as at December 31, 2018. This is compared with
capital expenditures of $9.1 million and capital commitments of
$2.5 million in the Comparative Quarter. Capital expenditures for
the Quarter included maintenance capital of $0.2 million, compared
to $0.3 million in the Comparative Quarter.
Proceeds from used fleet asset sales in the
Quarter were $6.2 million compared with $2.9 million in the
Comparative Quarter.
Additional Information
A copy of the Company's audited consolidated
financial statements for the years ended December 31, 2018 and
2017 and related management's discussion and analysis have been
filed with the Canadian securities regulatory authorities and may
be accessed through the SEDAR website (www.sedar.com) and
www.blackdiamondgroup.com.
About Black Diamond Group
Black Diamond Group rents and sells space rental
solutions and modular workforce accommodations to business
customers in Canada, the United States and Australia. The Company
also provides specialized field rentals to the oil and gas
industries of Canada and the United States. In addition, Black
Diamond Group provides turnkey lodging services, as well as a host
of related services that include transportation, installation,
dismantling, repairs, maintenance and ancillary field equipment
rentals. From twenty-two locations, the Company serves multiple
sectors including oil and gas, mining, power, construction,
engineering, military, government and education.
Black Diamond Group has two core business units:
Modular Space Solutions and Workforce Solutions. Learn more at
www.blackdiamondgroup.com.
For investor inquiries please contact Jason
Zhang at 403-206-4739 or investor@blackdiamondgroup.com
Reader Advisory
Forward-Looking
StatementsCertain information set forth in this news
release contains forward-looking statements including, but not
limited to, the amount of funds that will be expended on the 2019
capital plan, how such capital will be expended, management's
assessment of Black Diamond's future operations and what may have
an impact on them, growth in MSS fleet, financial performance,
business prospects and opportunities, changing operating
environment including increased activity levels, amount of revenue
anticipated to be derived from current contracts or asset sales,
anticipated debt levels, and future growth and profitability of the
Company. With respect to the forward-looking statements in the news
release, Black Diamond has made assumptions regarding, among other
things: future commodity prices, that Black Diamond will continue
to conduct its operations in a manner consistent with past
operations, that counter-parties to contracts will perform the
contracts as written and that there will be no unforeseen material
delays in contracted projects. Although Black Diamond believes that
the expectations reflected in the forward-looking statements
contained in this news release, and the assumptions on which such
forward-looking statements are made, are reasonable, there can be
no assurances that such expectations or assumptions will prove to
be correct. Readers are cautioned that assumptions used in the
preparation of such statements may prove to be incorrect. Events or
circumstances may cause actual results to differ materially from
those predicted, as a result of numerous known and unknown risks,
uncertainties and other factors, many of which are beyond the
control of Black Diamond. These risks include, but are not limited
to: the impact of general economic conditions, industry conditions,
fluctuation of commodity prices, the Company's ability to attract
new customers, failure of counterparties to perform on contracts,
industry competition, availability of qualified personnel and
management, timely and cost effective access to sufficient capital
from internal and external sources, political conditions,
dependence on suppliers and stock market volatility. The risks
outlined above should not be construed as exhaustive. Additional
information on these and other factors that could affect Black
Diamond's operations and financial results are included in Black
Diamond's annual information form for the year ended December 31,
2018 and other reports on file with the Canadian Securities
Regulatory Authorities which can be accessed on SEDAR. Readers are
cautioned not to place undue reliance on these forward-looking
statements. Furthermore, the forward-looking statements contained
in this news release are made as at the date of this news release
and Black Diamond does not undertake any obligation to update or
revise any of the forward-looking statements, except as may be
required by applicable securities laws.
Non-GAAP MeasuresIn this news
release, the following terms have been referenced: Adjusted EBITDA,
Net Debt, Funded Debt, Tangible Book Value and Funds from
Operations. Readers are cautioned that these measures are not
defined under International Financial Reporting Standards ("IFRS").
Readers are cautioned that these non-GAAP measures are not
alternatives to measures under IFRS and should not, on their own,
be construed as an indicator of the Company's performance or cash
flows, a measure of liquidity or as a measure of actual return on
the common shares of the Company. These Non-GAAP measures should
only be used in conjunction with the consolidated financial
statements of the Company. A reconciliation between these measures
and measures defined under IFRS is included in management's
discussion and analysis for the three and twelve month periods
ended December 31, 2018 filed on SEDAR.
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