SOURCE: WesternOne Inc.

August 11, 2016 19:28 ET

WesternOne Inc. Announces 2016 Q2 Results and Appoints New Director

VANCOUVER, BC--(Marketwired - August 11, 2016) - WesternOne Inc. ("WesternOne") (TSX: WEQ) (TSX: WEQ.DB) today announced the release of its financial results for the three and six months ended June 30, 2016.

The results, consisting of WesternOne's unaudited financial statements for the three and six months ended June 30, 2016 and Management's Discussion and Analysis ("MD&A") dated August 11, 2016, are available on SEDAR (www.sedar.com).

2016 Q2 financial summary:

  • Consolidated revenue of $25.2 million, gross profit of $4.7 million and adjusted EBITDA (as defined below) of negative $1.1 million, compared to the respective amounts of $62.0 million, $9.9 million and positive $3.0 million in Q2 of 2015. The decline in the operating results reflected ongoing impact from the persistent economic challenges in WesternOne's markets, in particular the construction sector in Alberta.
  • Net change in cash position was a reduction of $9.6 million including cash outflows related to principal payments towards indebtedness, interest payments and capital expenditures. As at June 30, 2016, WesternOne had total liquidity of $31.9 million, comprising net cash on hand and available capacity under the credit facility.
  • Continued to execute on strengthening balance sheet through debt reduction. Outstanding senior bank loan balance was $36.5 million as at June 30, 2016, down from $46.4 million as at December 31, 2015. Factoring in the redemption of the series 2 extendible convertible unsecured subordinated debentures on August 5, 2016, WesternOne's total liabilities as at June 30, 2016 on a "pro-forma" basis would have been $88.5 million and debt-to-equity ratio would have been 0.94, compared to those reported at June 30, 2016 of $130.1 million and 2.38.
  • Continued to streamline expenses to better align with revenue levels. General and administration expenses declined 10.5% or $1.4 million as compared to Q2 of 2015 as a result of cost rationalization measures implemented.
  • Wrote off all remaining intangible assets relating to Britco's Canadian modular manufacturing division, totaling $6.2 million, excluding software. The write-off was based on management's observation of continued economic uncertainties in the industrial sectors that persisted in the first six months of 2016 and limited visibility of a recovery in the near term.
  • Net loss from continuing operations attributable to shareholders was $26.2 million ($0.66 per share), compared with $6.4 million ($0.16 per share) in Q2 of 2015. Excluding non-cash effects relating to asset write-offs and quarter-end revaluation of debentures as required under IFRS, adjusted net loss was $8.1 million ($0.20 per share) in Q2 of 2016, compared to $5.5 million ($0.14 per share) in Q2 of 2015.

WIS, WesternOne's infrastructure services division, recorded Q2 revenue of $12.7 million and adjusted EBITDA of $0.6 million, compared to the respective amounts of $17.1 million and $3.2 million in the prior year. Decreased rental fleet utilization, driven by lower rental volume and rate compression, continued to weigh on the operating results in light of increased competition and excess supply of fleet primarily in the Alberta markets. The decline was also attributable to lower fuel sale prices and margins due to lower commodity prices and price competition. The decline in the southern BC markets was more muted due to the relatively stronger construction, film and TV production and shipyard sectors in the region.

Britco, WesternOne's modular construction and modular space rental division, recorded Q2 revenue of $12.5 million and adjusted EBITDA of negative $0.9 million, compared to the respective amounts of $44.9 million and positive $1.4 million in the prior year. The decline was primarily due to Britco's reduced manufacturing output and on-site work in light of the continued low demand for temporary modular buildings from the industrial sector in Canada and the United States. Included in these results were Britco's modular space rental revenue of $3.4 million and adjusted EBITDA of $1.6 million, up from $3.0 million and $1.5 million in the prior year. The year-over-year growth from the modular rental division reflects the relatively strong construction activity levels in BC, increasing demand for temporary modular rental products and related services.

Corporate overhead before amortization and share-based compensation for Q2 was $0.8 million, down from $1.6 million in the prior year primarily due to reduced payroll-related expenses and professional fees.

          
Summary Financial Overview  Three months ended June 30,
  Six months ended June 30,
 
($ millions except per share amounts)  
2016   2015   2016   2015  
Revenue  $25.2   $62.0   $57.2   $150.2  
Gross Profit   4.7    9.9    17.9    36.5  
                      
Adjusted EBITDA(1) (2)   (1.1 )  3.0    5.1    19.3  
                      
Net Loss from Continuing Operations(2)   (26.2 )  (6.4 )  (27.0 )  (2.2 )
Net Income (Loss) from Discontinued Operations (2)   -    -    0.4    (0.1 )
Net Loss (2)   (26.2 )  (6.4 )  (26.6 )  (2.3 )
                      
Loss per Share from Continuing Operations (2)   (0.66 )  (0.16 )  (0.68 )  (0.06 )
Loss per Share (2)   (0.66 )  (0.16 )  (0.67 )  (0.07 )
                 
(1) "Adjusted EBITDA" is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS. "Adjusted EBITDA" refers to net income (loss) from continuing operations before interest, income and commodity taxes, depreciation, amortization, non-controlling interest, gain/loss on financial derivatives relating to changes in the fair market value of the fixed interest rate swap, business acquisition costs, debenture issuance costs, gain/loss on debentures relating to changes in their fair market values, share based compensation, severance costs, foreign exchange gains/losses, and write-down of fleet assets, intangible assets and goodwill. For a full description of adjusted EBITDA, refer to "Non-IFRS Measures" in the MD&A dated August 11, 2016.
   
(2) Represents amount attributable to shareholders.
   

"WesternOne's operating environment remains very challenging in light of reduced demand for rental equipment and increased competition in the construction-related market place, primarily in Alberta. We are also experiencing very low production levels at our modular building production facilities, based in part on reduced capital being deployed by industrial participants in Western Canadian markets," said Peter Blake, CEO of WesternOne. "To address this persistently difficult environment, WIS will continue to focus on reducing or redeploying fleet equipment to targeted markets including new locations, enhancing our heat service offerings beyond our current branch locations, and refining aerial equipment pricing strategies. Britco will continue to focus on diversifying our revenue base through expanding our commercial permanent modular construction line of the business, and on reducing our operating costs to better align with expected revenue levels."

"We have made a significant step to enhance financial flexibility through the redemption of the series 2 extendible convertible unsecured subordinated debentures on August 5, 2016. The redemption significantly reduces debt leveraging on our balance sheet and we expect to generate estimated annual cash savings of $5.7 million of interest expense. We continue to focus on managing capital returns and liquidity as we navigate through the current economic environment," said Mr. Blake.

Appointment of New Director

WesternOne is also pleased to announce that Lee Matheson has been appointed to WesternOne's Board of Directors.

Mr. Matheson is a co-founder of Broadview Capital Management Inc., an investment management firm that invests in inefficiently-priced North American securities. Prior to founding Broadview, Mr. Matheson was a securities analyst with KJ Harrison & Partners from 2006 to 2008 and a securities analyst with AIC Investment Services from 2003 to 2006. Mr. Matheson holds the Canadian Investment Manager (CIM) and Chartered Financial Analyst designations. He is currently a director of RDM Corp. (TSX: RC) and was a director of Medworxx Solutions Inc. (TSX VENTURE: MWX) until its sale in October 2015.

Conference Call

Peter Blake, CEO, and the management team will host a conference call at 9:00am (Eastern time) or 6:00am (Pacific time), on Friday, August 12, 2016 to review the financial results and corporate developments for the three and six months ended June 30, 2016.

To participate in this conference call, please dial one of the following numbers approximately 10 minutes prior to the commencement of the call, and ask to join the WesternOne conference call.

Dial in numbers:

Toll Free.......................................................... 1-888-390-0546

International or Local Toronto........................ 1-416-764-8688

Conference Call Replay

If you cannot participate on August 12, 2016, a replay of the conference call will be available by dialing one of the following replay numbers. You will be able to dial in and listen to the conference two hours after the meeting end time, and the replay will be available until August 19, 2016. Please enter the Replay ID number 212429 followed by the # key.

Replay Dial-In:

Toll Free.......................................................... 1-888-390-0541

International or Local Toronto........................ 1-416-764-8677

Forward-looking Information

Certain statements in this news release may constitute "forward-looking" information that involves known and unknown risks, uncertainties and other factors, and it may cause actual results, performance or achievements or industry results, to be materially different from any future results, performance or achievements or industry results expressed or implied by such forward-looking information. Forward-looking information is identified by the use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "will", "would", and similar terms and phrases, including references to assumptions. Such information includes, without limitation, statements with respect to: WesternOne's intention to continue to focus on: (i) reducing or redeploying fleet equipment to targeted markets including new locations, enhancing heat service offerings beyond current branch locations, and refining aerial equipment pricing strategies for WIS; (ii) diversifying the revenue base through expanding the commercial permanent modular construction line of the business and reducing operating costs to better align with expected revenue levels for Britco; and (iii) managing capital returns and liquidity in the current economic environment; and expected annual cash savings relating to interest expense. Actual events or results may differ materially.

Forward-looking information contained in this news release is based on certain key expectations and assumptions made by WesternOne, including, without limitation: the stability of the economy in Western Canada and the United States, the impact of the current economic climate in Western Canada and the United States on WesternOne's operations will remain consistent with WesternOne's current expectations, the supply and demand for WesternOne's products and services and the related impact on the pricing on such products and services will remain consistent with WesternOne's current expectations and management's assessment of future plans and operations. Although the forward-looking information contained in this news release is based upon what WesternOne's management believes to be reasonable assumptions, WesternOne cannot assure investors that actual results will be consistent with such information. Forward-looking information reflects current expectations of management regarding future events and operating performance as of the date of this news release. Such information involves significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking information, and a description of these factors can be found under "Risk Factors" in WesternOne's Annual Information Form dated March 30, 2016 and MD&A dated August 11, 2016, which are both available on SEDAR (www.sedar.com).

The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. Forward-looking information reflects management's current beliefs and is based on information currently available to WesternOne. The forward-looking information is made as of the date of this news release and WesternOne assumes no obligation to update or revise such information to reflect new events or circumstances, except as may be required by applicable law.

About WesternOne

WesternOne seeks to acquire and grow businesses in the construction and infrastructure services sectors in order to generate value for its shareholders.

Additional Information

Additional information relating to WesternOne and other public filings, is available on SEDAR at www.sedar.com or on WesternOne's website at www.weq.ca.

Trading Symbols

Toronto Stock Exchange: WEQ and WEQ.DB

THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR THE ACCURACY OF THIS RELEASE.

Contact Information

  • For investor relations information, please contact:

    Andrew Greig
    Manager of Investor Relations
    WesternOne Inc.
    Suite 910, 925 West Georgia Street
    Vancouver, BC V6C 3L2
    Phone: (604) 678-4042
    E-mail: agreig@weq.ca