VAL-D'OR, QC, Sept. 28, 2020 /CNW/ - Orbit Garant Drilling
Inc. (TSX: OGD) ("Orbit Garant" or the "Company") today announced
its financial results for the three-month period ("Q4 FY2020") and
year ended June 30, 2020. All dollar
amounts are in Canadian dollars unless otherwise stated. Percentage
calculations are based on numbers in the financial statements and
may not correspond to rounded figures presented in this news
release.
On March 11, 2020, the World
Health Organization declared the COVID-19 outbreak to be a global
pandemic. Governments responded by implementing emergency measures
to minimize the spread of the virus, including the temporary
shutdown of businesses deemed to be non-essential. Orbit Garant's
operations were significantly impacted by these measures beginning
in mid-March 2020, as a number of its
drilling projects were put on hold or postponed. In Quebec, as a result of the provincial
government's order to minimize non-essential business activity, the
Company's operations were suspended from March 24, 2020 until April
20, 2020, at which time they were permitted to resume in a
gradual manner. In addition, drilling activity on certain projects
in Nunavut Territory and Ontario
was temporarily reduced or suspended. Orbit Garant's international
drilling operations were also affected, either as a result of
government restrictions on certain business activities, or customer
decisions to reduce or delay certain projects in this challenging
environment.
Financial Results Summary
($ amounts in
millions,
except per share
amounts)
|
Three months
ended
June 30, 2020
|
Three months
ended
June 30, 2019
|
Year
ended
June 30,
2020
|
Year
ended
June 30,
2019
|
Revenue
|
$20.2
|
$44.4
|
$137.8
|
$152.8
|
Gross
Profit
|
$2.3
|
$4.7
|
$12.9
|
$16.3
|
Gross Margin
(%)
|
11.5
|
10.6
|
9.4
|
10.7
|
Adjusted Gross Margin
(%)1
|
23.3
|
15.8
|
16.3
|
16.4
|
EBITDA2
|
$0.3
|
$2.6
|
$6.8
|
$8.3
|
Net earnings
(loss)
|
$(2.7)
|
$(0.8)
|
$(7.4)
|
($3.5)
|
Net earnings (loss)
per share
|
|
|
|
|
- Basic and
diluted
|
$(0.08)
|
$(0.02)
|
$(0.20)
|
($0.09)
|
Total metres
drilled
|
186,138
|
438,582
|
1,297,838
|
1,427,587
|
1 Adjusted Gross Margin is a non-IFRS financial
measure and is defined as Gross Profit excluding
depreciation expenses. See "Reconciliation of Non-IFRS financial
measures".
|
2 EBITDA is a non-IFRS financial measure
and is defined as earnings before interest, taxes,
depreciation, and amortization. See "Reconciliation of Non-IFRS
financial measures".
|
"We had strong momentum in our domestic drilling business in
fiscal 2020 up until we were impacted by the COVID- 19
pandemic beginning in mid-March," said Eric
Alexandre, President and CEO of Orbit Garant. "We
implemented multiple initiatives to lower our costs and manage our
liquidity position during this period of reduced drilling
activities, including a reduction in capital expenditures and
reduced investment in working capital. Importantly, we implemented
these measures without impacting our ability to ramp up our
business as market conditions improve. Further, effective
April 1, 2020, our senior management team and directors
have taken a temporary 15 percent reduction in their remuneration
to further support the Company. We recorded $3.6 million in financial support from the
Canada Emergency Wage Subsidy
program in our fourth quarter that helped to mitigate the impact of
COVID-19 on our business. We also modified our existing financing
agreements with our lenders and we secured financing in
Chile through our Chilean
subsidiary that have provided us with additional financial
flexibility. As governments have now eased COVID-19 related
business restrictions, we are gradually ramping our operations back
up, and look forward to resuming our momentum from prior to the
pandemic."
"As we continue to ramp up our operations, we will maintain our
focus on prioritizing the health and safety of our employees and
the communities in which we operate," continued Mr. Alexandre.
"With the price of gold currently near an all-time high, the
economics of gold mining have improved significantly, and with
approximately 66% of our revenues generated from gold related
operations, we expect demand for our services to strengthen as
global economic conditions stabilize."
Provision for litigation
In June 2020, a claim by a
financial institution (the "Claimant") for damages against a
subsidiary of the Company in the amount of 843.7 million West
African Francs ("XOF") ($1.97
million) was confirmed by a court in Burkina Faso. This claim relates to an amount
of XOF 8.6 million ($0.02 million) owed by the Company's subsidiary
to a supplier, which was indebted to the Claimant. The
Company vigorously disputes this claim and has filed an appeal.
Based on legal advice, management believes that the claim is
unfounded, and that the appeal will be successful. Nonetheless,
given the original claim was confirmed by the court, the Company
recorded a provision of XOF 871.5
million ($2.03 million)
in Q4 FY2020 for this claim and additional legal fees.
Fourth Quarter Results
Revenue for Q4 FY2020 totalled $20.2
million, compared to $44.4 million for the three-month period
ended June 30, 2019 ("Q4 FY2019").
Canada revenue totalled
$16.4 million in Q4 FY2020, compared
to $31.6 million in Q4 FY2019,
reflecting the negative impact of the COVID-19 pandemic on drilling
activities. International revenue decreased to $3.8 million in Q4 FY2020, from $12.8 million in Q4 FY2019. The decrease in
International revenue was primarily attributable to the impact of
the COVID-19 pandemic and the completion of a multi-year drilling
contract in Chile at the beginning
of Q4 FY2019.
Orbit Garant drilled a total of 186,138 metres in Q4 FY2020,
compared to 438,582 metres drilled in Q4 FY2019. The Company's
average revenue per metre drilled in Q4 FY2020 was $108.36, compared to $101.01 in Q4 FY2019.
Gross profit for Q4 FY2020 was $2.3
million, or 11.5% of revenue, compared to $4.7 million, or 10.6% of revenue, in Q4 FY2019.
Depreciation expenses totalling $2.4
million are included in the cost of contract revenue for Q4
FY2020, compared to $2.3 million in
Q4 FY2019. Adjusted gross margin, excluding depreciation expenses,
was 23.3% in Q4 FY2020, compared to 15.8% in Q4 FY2019. Lower
gross profit was primarily attributable to the impact of the
COVID-19 pandemic, which resulted in a reduction of drilling
activities. The cost of contract revenue was reduced by
$3.2 million in Q4 FY2020 as a result
of financial support from the Canada Emergency Wage Subsidy ("CEWS")
program, which positively impacted gross margin and adjusted gross
margin.
General and administrative ("G&A") expenses were
$2.9 million, or 14.1% of revenue, in
Q4 FY2020, compared to $4.4 million, or 9.8% of revenue, in
Q4 FY2019. G&A expenses in Q4 FY2019 included $0.2 million of acquisition and integration costs
related to the acquisition of the drilling business of Projet
Production International BF S.A. ("PPI") in Burkina Faso. There were no such costs in Q4
FY2020 and the Company implemented certain measures in the quarter
that reduced G&A expenses. The Company expects that some of
these measures will result in year-over-year G&A expense
reduction in future quarters. G&A expenses in Q4 FY2020 also
reflect a $0.4 million reduction
resulting from financial support received from the CEWS
program.
Earnings before interest, taxes, depreciation and amortization
("EBITDA") was $0.3 million in Q4
FY2020, compared to $2.6 million in
Q4 FY2019. The impact of the pandemic and the $2.03 million provision for litigation, as noted
above, contributed to the decline in EBITDA in Q4 FY2020.
EBITDA in Q4 FY2020 includes $3.6
million in financial support that the Company recorded from
the CEWS program. Net loss for Q4 FY2020 was $2.7
million, or $0.08 per share, compared
to net loss of $0.8 million, or
$0.02 per share, in Q4 FY2019.
The impact of the pandemic and the $2.03 million provision for
litigation were the principal reasons for the Company's net
loss in Q4 FY2020. These factors were partially offset by the
$3.6 million grant recorded from the
CEWS program.
Fiscal 2020 Results
Revenue in Fiscal 2020 totalled $137.8
million, compared to $152.8
million in Fiscal 2019. The decrease in revenue was
primarily attributable to a decline in drilling activities in
Canada and internationally due to
the impact of the COVID- 19 pandemic starting in mid-March
2020. Prior to the pandemic, revenue was higher in Fiscal
2020 compared to Fiscal 2019, due to increased drilling activity in
Canada, partially offset by a
slight decline in international drilling activity.
Canada revenue was $109.0 million in Fiscal 2020, compared to
$109.5 million in Fiscal 2019. The
decrease was primarily attributable to a significant decline in
metres drilled starting in mid-March
2020 due to the pandemic. International revenue totalled
$28.8 million in Fiscal 2020,
compared to $43.3 million in Fiscal
2019. The decrease in international revenue is attributable to the
impact of the pandemic and the conclusion of a multi-year drilling
contract in Chile at the beginning
of the Q4 FY2019.
Gross profit for Fiscal 2020 was $12.9
million, or 9.4% of revenue, compared to $16.3 million, or 10.7% of revenue, in Fiscal
2019. Depreciation expenses totalling $9.5
million are included in cost of contract revenue for Fiscal
2020, compared to $8.8 million in
Fiscal 2019. Adjusted gross margin, excluding depreciation
expenses, was 16.3% in Fiscal 2020, compared to 16.4% in
Fiscal 2019. The decrease in gross profit and gross margin was
primarily attributable to the impact of the COVID-19 pandemic and a
decline in international specialized drilling activity. The cost of
contract revenue was reduced by $3.2
million in Q4 FY2020 as a result of the financial support
received from the CEWS program, which had a positive impact on
gross margin and adjusted gross margin for Fiscal 2020.
G&A expenses in Fiscal 2020 were $15.4 million, representing 11.2% of revenue,
compared to G&A expenses of $17.3 million, representing 11.3% of
revenue, in Fiscal 2019. The decrease in G&A expenses reflects
the $1.1 million of acquisition and
integration costs related the acquisition of the drilling business
of PPI in Fiscal 2019, a $0.4 million
reduction in G&A expense in Q4 FY2020 resulting from financial
support from the CEWS program, and cost saving measures implemented
in the second half of 2020.
EBITDA totalled $6.8 million in
Fiscal 2020, compared to $8.3 million
in Fiscal 2019. The decline in EBITDA in Fiscal 2020 reflects
the impact of the pandemic and the $2.03
million provision for litigation in Burkina Faso, as noted above, partially offset
by the Company's year-over-year increase in revenue prior to the
pandemic, cost saving measures implemented in the second half of
Fiscal 2020 and the $3.6 million
grant recorded from the CEWS program in
Q4 FY2020. EBITDA in Fiscal 2019 also reflects
$1.1 million of acquisition and
integration costs related to the acquisition of the drilling
business of PPI in Fiscal 2019.
Net loss for Fiscal 2020 was $7.4
million, or $0.20 per share,
compared to net loss of $3.5 million,
or $0.09 per share, in Fiscal 2019.
The decline in drilling activities due to the impact of the
COVID-19 pandemic starting in mid-March
2020 and the $2.03 million
provision for litigation, as noted above, contributed to the
Company's net loss for Fiscal 2020. These factors were partially
offset by the $3.6 million recorded
from the CEWS program in Q4 FY2020. The Company's net loss for
Fiscal 2019 includes $1.1 million of
acquisition and integration costs, before income taxes, related to
the acquisition of the drilling business of PPI (or $0.8 million of acquisition and integration
costs, net of income taxes).
Liquidity and Capital Resources
Orbit Garant's primary sources of liquidity are cash flows from
operations and borrowings under a credit facility (the "Credit
Facility") with National Bank of Canada. The Credit Facility consists of a
$35.0 million revolving credit
facility and a US$5.0 million
revolving credit facility. The current term of the Credit Facility
expires on November 2, 2021.
During Fiscal 2020, Orbit Garant generated $3.7 million from financing activities, compared
to $10.7 million in Fiscal 2019.
The Company withdrew a net amount of $3.2
million during Fiscal 2020 on its Credit Facility, compared
to a withdrawal of $7.2 million
in Fiscal 2019. The Company's long-term debt under the Credit
Facility, including US$1.0
million ($1.4 million) drawn
from the US$5.0 million revolving
credit facility and the current portion, was $28.7 million as at June 30, 2020, compared to $25.3 million as at June
30, 2019. The increase was incurred to support working
capital requirements and the acquisition of capital assets,
property, plant and equipment. Further amendments to the Credit
Agreement were executed in March and June
2020 to modify certain of the financial covenants applicable
to Q4 FY2020 and future quarters.
On December 20, 2018 Orbit Garant
entered into an additional loan agreement with Export Development
Canada ("EDC") for a term loan in the principal amount of up to
US$5.15 million. Orbit Garant is
required to repay this loan in 57 consecutive monthly installments
commencing May 2019, and maturing
January 2024. On April 23, 2020, the Company and EDC made
arrangements whereby, among other things, all payments of principal
and accrued interest under EDC loans were deferred until
October 16, 2020 and therefore the
terms of these loans were extended by six months.
In May 2020, Orbit Garant Chile
S.A., a wholly-owned subsidiary of the Company, obtained two loans
totaling CLP$1,000 million (approximately $1.7 million) from Banco Scotiabank. The loans
bear interest at a rate of 3.5% per annum, have a term of 36 months
and are 70% guaranteed by the Chilean government as part of a
government program in response to COVID-19. The loans have no
capital repayments for the first six months and the interest over
such period will be payable on the first instalment.
As at June 30, 2020, the Company's
working capital was $52.1 million
($55.1 million as at June 30, 2019) and 37,021,756 common shares were
issued and outstanding.
Orbit Garant's audited consolidated financial statements and
management's discussion and analysis for the fourth quarter and
year ended June 30, 2020 are
available via the Company's website at www.orbitgarant.com or SEDAR
at www.sedar.com.
Conference call
Eric Alexandre, President and
CEO, and Alain Laplante, Vice
President and CFO, will host a conference call for analysts and
investors on Tuesday, September 29, 2020 at 10:00 a.m. (ET). The dial-in numbers for the
conference call are 416-764-8688 or 1-888-390-0546. A live
webcast of the call will be available on Orbit Garant's website at:
http://www.orbitgarant.com/en/sites/fog/investors.aspx.
To access a replay of the conference call, dial
416-764-8677 or 1-888-390-0541, passcode: 961966 #. The replay
will be available until October 6,
2020. The webcast will be archived following conclusion of
the call.
RECONCILIATION OF NON - IFRS FINANCIAL MEASURES
Financial data has been prepared in conformity with IFRS.
However, certain measures used in this discussion and analysis do
not have any standardized meaning under IFRS and could be
calculated differently by other companies. The Company believes
that certain non-IFRS financial measures, when presented in
conjunction with comparable IFRS financial measures, are useful to
investors and other readers because the information is an
appropriate measure to evaluate the Company's operating
performance. Internally, the Company uses this non-IFRS financial
information as an indicator of business performance. These measures
are provided for information purposes, in addition to, and not as a
substitute for, measures of financial performance prepared in
accordance with IFRS.
EBITDA:
Net earnings (loss) before interest, taxes, depreciation and
amortization.
Adjusted gross profit:
Contract revenue excluding operating expenses. Operating expenses
comprise material and service expenses, personnel expenses, other
operating expenses, excluding depreciation.
EBITDA
Management believes that EBITDA is an important measure when
analyzing its operating profitability, as it removes the impact of
financing costs, certain non-cash items and income taxes. As a
result, Management considers it a useful and comparable benchmark
for evaluating the Company's performance, as companies rarely have
the same capital and financing structure.
Reconciliation of EBITDA
(unaudited)
(in millions
of
dollars)
|
3 months
ended
June 30,
2020
|
3 months
ended
June 30,
2019
|
12 months
ended
June 30,
2020
|
12 months
ended
June 30,
2019
|
Net earnings
(loss)
for the period
|
(2.7)
|
(0.8)
|
(7.4)
|
(3.5)
|
Add:
|
|
|
|
|
Finance
costs
|
0.6
|
0.6
|
2.7
|
2.1
|
Income tax expense
(recovery)
|
(0.4)
|
0.2
|
0.2
|
(0.3)
|
Depreciation and
amortization
|
2.8
|
2.6
|
11.3
|
10.0
|
EBITDA
|
0.3
|
2.6
|
6.8
|
8.3
|
Adjusted Gross Profit and Margin
Although adjusted gross profit and margin are not recognized
financial measures defined by IFRS, Management considers them to be
important measures as they represent the Company's core
profitability, without the impact of depreciation expense. As a
result, Management believes they provide a useful and comparable
benchmark for evaluating the Company's performance.
Reconciliation of Adjusted Gross Profit and
Margin
(unaudited)
(in millions of
dollars)
|
3
months
ended
June 30,
2020
|
3 months
ended
June 30,
2019
|
12 months
ended
June 30,
2020
|
12 months
ended
June 30,
2019
|
Contract
revenue
|
20.2
|
44.4
|
137.8
|
152.8
|
Cost of contract
revenue
(including depreciation)
|
17.9
|
39.7
|
124.9
|
136.5
|
Less depreciation
|
(2.4)
|
(2.3)
|
(9.5)
|
(8.8)
|
Direct
costs
|
15.5
|
37.4
|
115.4
|
127.7
|
Adjusted gross
profit
|
4.7
|
7.0
|
22.4
|
25.1
|
Adjusted gross margin
(%) (1)
|
23.3
|
15.8
|
16.3
|
16.4
|
(1)
|
Adjusted gross
profit, divided by contract revenue X 100
|
About Orbit Garant
Headquartered in Val-d'Or,
Quebec, Orbit Garant is one of the largest Canadian-based
mineral drilling companies, providing both underground and surface
drilling services in Canada and
internationally through its 231 drill rigs and more than 1,100
employees. Orbit Garant provides services to major, intermediate
and junior mining companies, through each stage of mining
exploration, development and production. The Company also provides
geotechnical drilling services to mining or mineral exploration
companies, engineering and environmental consultant firms, and
government agencies. For more information, please visit the
Company's website at www.orbitgarant.com.
Forward-looking information
This news release may contain forward-looking statements
(within the meaning of applicable securities laws) relating to
business of Orbit Garant Drilling Inc. (the "Company") and the
environment in which it operates. Forward-looking statements are
identified by words such as "believe", "anticipate", "expect",
"intend", "plan", "will", "may" and other similar expressions.
These statements are based on the Company's expectations,
estimates, forecasts and projections. They are not guarantees of
future performance and involve risks and uncertainties that are
difficult to control or predict. Risks and uncertainties that could
cause actual results, performance or achievements to differ
materially include the ability of the jurisdictions in which the
Company operates to manage and cope with the implications of
COVID-19, the impact of measures taken by such jurisdictions to
control the spread of COVID-19 on the Company's operations, the
economic and financial implications of COVID-19 to the Company,
including its impact on cash flows, liquidity and the Company's
compliance with its obligations under its borrowing agreements as
well as the risks and uncertainties are discussed in the Company's
regulatory filings available at www.sedar.com. There can be no
assurance that forward-looking statements will prove to be accurate
as actual outcomes and results may differ materially from those
expressed in these forward-looking statements. Readers, therefore,
should not place undue reliance on any such forward-looking
statements. Further, a forward-looking statement speaks only as of
the date on which such statement is made. The Company undertakes no
obligation to publicly update any such statement or to reflect new
information or the occurrence of future events or circumstances
except as required by applicable securities laws.
SOURCE Orbit Garant Drilling Inc.