Macro Enterprises Inc. Announces 2020 Second Quarter Results

August 17, 2020 4:45 PM EDT | Source: Macro Enterprises Inc.

Fort St. John, British Columbia--(Newsfile Corp. - August 17, 2020) - Macro Enterprises Inc. (TSXV: MCR) (the "Company" or "Macro") is pleased to announce its second quarter results for 2020.


Summary of financial results

(thousands of dollars except per share amounts)

Three months ended
June 30
Six months ended
June 30

2020201920202019

(unaudited)





Revenue$45,669$96,782$90,120$218,408





EBITDA14,01319,4399,78132,847





Net earnings (loss)(1,632)7,854(232)14,693





Net earnings (loss) per share ($0.05)$0.26($0.01)$0.48





Weighted average common shares outstanding (thousands)

31,10330,603

 

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

  • Total working capital as at June 30, 2020 was $51.9 million after considering $15.4 million in current portions of long-term debt and right of use lease obligations. The Company remains undrawn on its $65 million revolving credit facility.
  • The Company is reporting shareholders' equity of $115.0 million or $3.70 per share based on weighted average common shares outstanding as at June 30, 2020.
  • The Company expects revenue to approach $250.0 million in fiscal 2020. This estimate does not provide for any amounts for Trans Mountain Pipeline under its notice to proceed, core maintenance and integrity business beyond 90 days after period end, outstanding bid work for prospective pipelines and facilities projects or any anticipated changes to scope for construction on existing work.

Second Quarter Results

Three months ended June 30, 2020 vs. three months ended June 30, 2019

Macro Enterprises Inc. posted consolidated revenue of $45.7 million compared to $96.8 million reported second quarter last year. The decrease in revenues during the quarter was anticipated given the conclusion of a number of significant projects in fiscal 2019 and a general decrease in core business due to the global COVID-19 health pandemic and market uncertainty. Approximately 94% or $43.1 million of the revenue earned related to pipeline and facilities construction with the balance or $2.5 million relating to maintenance and integrity services being performed under existing master service agreements. Revenue recognized for the quarter ended June 30, 2020 included revenue from its joint operations on the Coastal GasLink Pipeline project and to a limited extent the Trans Mountain Expansion project. Prior year revenue relating to pipeline and facilities construction was approximately 94% or $91.2 million while the balance related to maintenance and integrity.

Operating expenses were $38.9 million or 85% of revenue compared to $74.6 million or 77% of revenue in the second quarter last year. As discussed in previous quarters, the Company continued to incur additional costs and overheads while maintaining its current scale of operations which resulted in compressed margins. With the ongoing global Covid-19 health pandemic and market uncertainty, margins are expected to fluctuate while the Company stabilizes its operations to meet the changing needs of its clients. All aspects of operations will be actively monitored and streamlined to ensure savings are realized while maintaining the highest degree of health, safety and environmental standards possible.

General and administrative expenses were $1.7 million, down $0.1 million from the $1.8 million recorded prior year. Included in the Company's general and administrative expenditures are professional fees, corporate wages, burdens and other overheads, including rents, insurance, travel and administrative supplies that are not charged directly to projects. The Company is currently considering applying for the Canadian Emergency Wage Subsidy. Based on its review of the government assistance program, the Company believes it may be eligible to claim for the period from March 15, 2020 to the end of the second quarter in an amount that likely exceeds $1.3 million. The Company has decided not to book this amount until received and, when received, this amount would be applied to against its employee salaries and wage expense. Going forward, the Company believes it should qualify for the wage subsidies in the third and fourth quarters if the program continues as presently structured.

Depreciation of property, plant and equipment was $5.3 million compared to $4.2 million reported in the previous year. The increase in depreciation directly correlated to the added property, plant and equipment acquired in prior years along with the recognition of right to use assets under lease during the period. 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. Based on the substantial value associated with its Right to Use Assets the Company anticipates higher depreciation costs going forward.

During the second quarter the Company recognized a non-cash loss of $924,000 on the mark-to-market re-measurement of its preferred shares at period end. The loss adjustment is indicative of a 27.7% increase to the Company's share value over the prior reported period.

During the second quarter the Company recognized non-cash stock-based compensation charges of $172,000. The Company anticipates recognizing an additional $0.1 million in stock-based compensation charges for the options granted in August 2019.

Finance costs of $0.6 million were lower than prior year due to the adjustments the Company recognized under IFRS 16 right of use asset lease obligations and the associated implicit interest charges, the amortization of deferred finance costs recorded on its credit facilities and the issuance of its letters of credit relating to contract financial assurances. In addition to the non-cash deferred transaction costs, interest charges, standby and admin fees associated with the Company's credit facility, other finance costs included $41,000 of effective interest rate payments made on its preferred shares. Prior year the finance costs included substantial charges for the right of use obligations which at the time exceeded $33 million and along with $76 million of outstanding letters of credit being carried.

Income tax recovery in the quarter of $0.3 million was at an effective rate of 26.5% which approaches the enacted tax rates of 27% after reversing non-cash charges and timing differences, namely the collections of prior year holdbacks.

Net loss was $1.6 million (($0.05) per share) compared to a net income of $7.9 million ($0.26 per share) recognized during the three months ended June 30, 2019. EBITDA was $4.0 million compared to $19.4 million recognized during the three months ended June 30, 2019. As a result of decreased activity and compressed margins, significant non-cash adjustments including mark-to-market losses and depreciation, the Company's net income and EBITDA were adversely impacted compared to prior years.

OUTLOOK

Assuming the COVID-19 pandemic does not shut down the construction industry and the projects under contract continue as anticipated, then, based on its current committed back log of business which includes pipeline maintenance and integrity work underway, ongoing facilities construction and its proportionate share of the Coastal GasLink Pipeline project, the Company would expect revenue to approach $250 million in fiscal 2020. This amount does not include any amounts for the commencement of the Trans Mountain pipeline expansion under notice to proceed nor does it include any additional large project bid work for prospective pipeline construction and facilities jobs nor anticipated increases to the scope of construction on existing projects.

Joint Venture Update:

The Company and its joint venture with Spiecapag Canada Corp. are currently undertaking construction activities for pipeline construction services on the Coastal GasLink Pipeline Project. Construction commenced in Q1 2019.

On June 18, 2019, the Government of Canada announced its approval of the Trans Mountain pipeline expansion project for the much-delayed pipeline project designed to carry oil from Alberta to British Columbia. The Company and its 50% joint venture partner have not yet received its formal notice to proceed with construction but has been granted successive monthly budgeted amounts for preliminary work while the client concludes with its internal processes to grant the final notice. The Trans Mountain Expansion Project is well under way and the Company believes it will now be commencing construction in the early part of the fourth quarter.

Company Activities:

  • The Company secured new facility construction projects with an aggregate value in excess of $50 million for new work which is currently underway and should conclude by year end.
  • The Company remains actively bidding and estimating costs on projects for its larger clients and anticipates both construction and core maintenance work continuing in the near to mid-term.

The continuation of these activities is subject to successfully resolving any near term and long term economic or market effects of the global pandemic outbreak of COVID-19 and the significant geo-political events impacting current commodity prices.

Forward Looking Statements

Certain statements in the Company's Press Release for its quarter ended June 30, 2020, other than statements of historical fact, may include statements of forward-looking information. The Company cautions that such forward-looking statements are based on the beliefs, estimates and opinions of the Company's management on the date the statements are made, and they involve a number of risks and uncertainties. Although the Company believes that such statements are reasonable, it can give no assurance that such expectations will prove to be correct; and, consequently, all such statements are expressly qualified by this cautionary statement.

Forward-looking information includes, without limitation, statements regarding the adverse impacts on the Company's business due to the current COVID-19 pandemic and collapse of oil and gas prices, statements regarding expected revenues, anticipated project margins, expected general and administrative expenses, anticipated amounts of property and equipment purchases, the sufficiency of working capital, expectations regarding debt and equity financing and anticipated industry trends.

The associated risks and uncertainties include, but are not restricted to, economic and geopolitical disruptions caused by epidemics and other public health crises (such as the current COVID-19 pandemic), geopolitical instability causing significant volatility in oil and gas prices, government regulation of energy and resource companies and related infrastructure, construction disruptions caused by adverse weather, inability to maintain and increase market share due to competitive pressures, terrorist activity, the price and availability of alternative fuels leading to a reduction in demand for oil and gas, the demand for relative to the availability of pipeline capacity, adverse impacts on the supply and prices of oil and gas product due to potential instability or armed conflict in oil producing regions and the overall economic environment.

More specifically with respect to epidemics and other public health crises, such as the current COVID-19 pandemic, the risks and uncertainties faced by the Company include risks to supply chains, key project partners, and employee health and safety. The Company's business could also experience a slowdown or temporary suspension in operations in geographic locations impacted by an outbreak of a contagious disease such as COVID-19. Any prolonged restrictive measures put in place by governmental authorities in order to contain such an outbreak (e.g. international travel restrictions) or other adverse public health development, in Canada, or in any other jurisdictions upon which the Company is reliant for supplies of construction materials, equipment or professional services, may have a material and adverse effect on the Company's financial and/or operating performance. Any delay in the completion of the Company's construction projects may require the Company to incur non-compensable costs such as standby time and for overtime work necessary to meet contracted project timelines.

All of the above-described risks and uncertainties may cause actual results and future events to differ materially from the information contained herein. Consequently, there can be no assurances that the Company's forward-looking statements will prove to be accurate. Except as required by the laws and stock exchange policies to which the Company is subject, the Company assumes no obligation to update its forward-looking statements should circumstances or management's estimates or opinions change. Readers are urged to refer to the Company's reports, publicly available through the Canadian Securities Administrators' System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com for additional information regarding the risks and uncertainties associated with the Company's business.

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

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/61986

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