TSX Symbol: HNL
CALGARY, March 11, 2020 /PRNewswire/ - Horizon North Logistics Inc. ("Horizon North" or the "Corporation") reported its financial and operating results for the three and twelve months ended December 31, 2019 and 2018.
Fourth Quarter and Annual Highlights
Fourth Quarter Financial Summary
Three months ended December 31,
Twelve months ended December 31,
(000's except per share amounts)
EBITDAS as a % of revenue(1)
Operating (loss) income before impairment, including equity investment
Operating loss as a % of revenue
Net income (loss) before impairment
Tax recovery from impairment loss
Net income (loss)
Net comprehensive income (loss)
Loss per share
Total loans and borrowings
Net Capital spending (proceeds)
Total Debt to Adjusted EBITDAS(1)
Debt to total capitalization ratio(1)
Dividends declared per share
See Non-GAAP financial measures definitions within the press release for details.
Fourth Quarter Overview
Revenue for the three months ended December 31, 2019 ("Q4 2019") decreased by 8% compared to the three months ended December 31, 2018 ("Q4 2018"), mainly due to a decrease in Modular Solutions revenue from decreased activity in Western Canada.
Revenues from Industrial Services for Q4 2019 decreased by 2% compared to Q4 2018 primarily due to decreased camp rental and catering revenue. This was partially offset by a 34% increase in catering only activity in Q4 2019 compared to Q4 2018, with revenue per catering only day lower by 8% as a result of different contract mix. Rentals & Logistics revenues increased by 36% in Q4 2019 compared to Q4 2018 primarily due to an increase in installation and transportation revenue.
The operating profit before impairment of $0.6 million for Q4 2019 was 52% lower than the $1.3 million profit in Q4 2018. An $85.2 million impairment loss was recorded as at December 31, 2019. The impairment loss related to the Camp & Catering CGU and $17.2 million was attributed to the carrying amount of the goodwill, with the remaining $68.0 million allocated to camp facilities assets.
Modular Solutions revenues for Q4 2019 were 10% lower than Q4 2018 primarily as a result of the decreased activity and backlog in Western Canada, partially offset by the NRB Acquisition.
Other Financial Measures
Horizon North's Q4 2019 EBITDAS decreased by $5.5 million, or 40%, compared to Q4 2018. As a percentage of revenue, EBITDAS were 8% compared to 12% in Q4 2018. The decrease in EBITDAS compared to Q4 2018 was primarily driven by the decrease in Modular Solutions EBITDAS which was due to decreased activity in Western Canada.
In 2020, Horizon North will continue to diversify both its portfolio of offerings and customer base through its two operating divisions: Industrial Services and Modular Solutions.
On March 9, 2020, Horizon North and Dexterra, a wholly-owned subsidiary of Fairfax Financial Holdings Limited, announced the Proposed Transaction. Completion of the Proposed Transaction will require shareholder approval for the issuance of Horizon North shares, receipt of certain stock exchange and regulatory approvals, and satisfaction of other conditions as more particularly set out in the Share Purchase Agreement that will be available on Horizon North's profile on SEDAR at www.sedar.com. The Proposed Transaction will combine Horizon North's strong western Canadian focused workforce accommodation and national modular solutions businesses with Dexterra's asset light facilities management platform and central Canadian focused workforce accommodations businesses. This highly complementary platform is expected to better serve current and future customers. The new company will be a leader in support services with over 6,800 employees across Canada. The combined entity expects significant cross-selling opportunities across its combined platform as well as annual cost synergies of $5.0 million.
Horizon North is a leading provider of turn-key workforce accommodation, hospitality, access and maintenance services with continued focus on the following four key areas:
The Corporation anticipates a balance between government sponsored housing and both industrial and commercial projects in its Modular Solutions segment in 2020. Results for 2019 included the effects of several project delays and deferrals from earlier in the year, which impacted backlog and activity in Western Canada and resulted in decreased activity and margins which were only partially offset by the addition of NRB. Horizon North's focus will remain on growing backlog and on optimizing execution of modular construction projects while developing and expanding its product offerings to serve a variety of customers and end markets. In addition, a portion of manufacturing capacity in 2020 will be utilized for modular units and large complexes associated with the Corporation's contract with a client supporting LNG development in British Columbia and the development of the Fairfield by Marriott.
April 1, 2019 marked the successful completion of the NRB Acquisition, a significant step in the Corporation's pan-Canadian growth strategy which provides manufacturing capacity in southern Ontario. The integration of NRB into the Horizon North business was completed in 2019 with focus now on opportunities to expand NRB's historical product and service offering, particularly in the social and affordable housing space.
The Modular Solutions division is well positioned to benefit from the increased Federal support for affordable and social housing following the Federal election on October 21, 2019 through the demonstrated success of the affordable and social housing strategy and execution in Western Canada combined with the addition of southern Ontario manufacturing capacity from the NRB Acquisition. Horizon North will continue to explore opportunities across Canada to grow the affordable and social housing backlog and increase the number of projects.
Statement of Financial Position
In 2019, Horizon North took several capital-intensive steps in the development of its unique, pan-Canadian service model. These steps included the mobilization of the first phase of the Kitimat Crossroads Lodge, beginning development of a 120-room Fairfield by Marriott hotel in Kitimat, British Columbia, the NRB Acquisition and a robust capital program, which together increased the Corporation's leverage position exiting 2019.
The Corporation's elevated leverage position is expected to continue through the majority of 2020 as the Corporation completes two major projects: First is the completion and sale of the Fairfield by Marriott hotel which is anticipated in the second half of 2020; Second is the capital commitments associated with the contract for temporary construction modular units and large complexes for a client supporting LNG developments with construction expected to be substantially complete by the end of the third quarter of 2020. Completion of these two projects will significantly reduce the temporary strain on liquidity and help reduce the elevated leverage position as the cash generated from the hotel sale combined with rental revenues of the modular units and large complexes being constructed will be used to pay down existing debt. 2020 capital spending will be focused on these specific projects and required maintenance capital needed to maintain operations. In the interim, the Corporation has increased its available liquidity by negotiating a $15.0 million temporary increase to its credit facility and additional covenant flexibility. In addition, the Corporation has improved its financial flexibility and applied fiscal prudence in light of increased market uncertainty by pausing the dividend.
As a result, the Corporation expects that the current credit facility, the temporary facility and cash flows from operating activities will be adequate to fund its future plans. The Corporation expects to allocate future net cash flows in order to appropriately balance the objectives of reducing its overall level of indebtedness, completing previously committed capital projects and minimal maintenance capital requirements.
A copy of the Corporation's Consolidated Financial Statements for the year ended December 31, 2019 and 2018 and related Management's Discussion and Analysis have been filed with the Canadian securities regulatory authorities and is available on SEDAR at www.sedar.com and www.horizonnorth.ca. Unless otherwise indicated, the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and the reporting currency is in Canadian dollars.
Non-GAAP Financial Measures
Certain measures in this press release do not have any standardized meaning as prescribed by generally accepted accounting principles ("GAAP") and, therefore, are considered non-GAAP measures. These measures are regularly reviewed by the Chief Operating Decision Maker and provide investors with an alternative method for assessing the Corporation's operating results in a manner that is focused on the performance of the Corporation's ongoing operations and to provide a more consistent basis for comparison between periods. These measures should not be construed as alternatives to total profit and total comprehensive income determined in accordance with GAAP as an indicator of the Corporation's performance. The method of calculating these measures may differ from other entities and accordingly, may not be comparable to measures used by other entities. The following non-GAAP measures are used to monitor the Corporation's performance:
EBITDAS: Earnings before interest, taxes, depreciation, amortization, share based compensation, gain/loss on investments, and gain/loss on disposal of property, plant and equipment ("EBITDAS"). Management believes that in addition to net profit (loss) and comprehensive net income (loss), EBITDAS is a useful supplemental earnings measure as it provides an indication of the Corporation's operating performance and it is regularly provided to and reviewed by the Chief Operating Decision Maker.
Debt to total capitalization: Calculated as the ratio of debt to total capitalization. Debt is defined as the sum of current and long-term portions of loans and borrowings. Total capitalization is calculated as the sum of debt and shareholders' equity.
Caution Regarding Forward-Looking Statements and Information
Certain statements contained in this press release constitute forward-looking information within the meaning of applicable Canadian securities laws (collectively, "forward-looking statements"). These statements relate to future events or future performance of Horizon North. All statements other than statements of historical fact are forward-looking statements. The use of any of the words "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "should", "believe" and similar expressions are intended to identify forward-looking statements.
In particular, such forward-looking statements include but are not limited to, statements with respect to:
The forward-looking statements are based on certain factors and assumptions made by Horizon North which include, but are not limited to, assumptions relating to:
Although Horizon North believes that the factors and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Horizon North cannot give any assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of known and unknown risks and uncertainties. Such risks and uncertainties include, but are not limited to, the following:
Readers are cautioned that the foregoing list of risks and uncertainties is not exhaustive. Additional information on these and other risk factors that could affect Horizon North's operations and financial results are included in Horizon North's annual information form which may be accessed through the SEDAR website at www.sedar.com. In addition, the reader is cautioned that historical results are not indicative of future performance. The forward-looking statements contained in this MD&A are made as of the date hereof and Horizon North does not undertake any obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Certain information set out herein may be considered "financial outlook" within the meaning of applicable securities laws. The purpose of this financial outlook is to provide readers with disclosure regarding Horizon North's reasonable expectations as to the anticipated results of its proposed business activities for the periods indicated. Readers are cautioned that the financial outlook may not be appropriate for other purposes.
About Horizon North
Horizon North is a publicly listed corporation (TSX: HNL.TO) providing a full range of industrial, commercial, and residential products and services under its two operating divisions: Industrial Services and Modular Solutions. The Industrial Services business includes workforce accommodations, camp management services, access solutions, maintenance and utilities. The Modular Solutions business integrates modern design concepts and technology with state of the art, off-site manufacturing processes; producing high quality building solutions for commercial, industrial and residential offerings including offices, hotels, and retail buildings, as well as distinctive single detached dwellings and multi-family residential structures. As a result of our diverse product and service offerings, Horizon North is uniquely positioned to meet the needs of our customers in numerous sectors, anywhere in Canada.
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