Mullen Group Ltd. Reports 2024 First Quarter Financial Results
"Using our first quarter results as a barometer for the state of the general economy, one could conclude that the economy is definitely slowing. Across each of our operating segments we witnessed a softening in demand, accompanied by competitive market conditions. Consumer demand continued to decline, capital investment in
"Fortunately, we have a diversified business model that helps mitigate rapid changes in the market and we have the capacity to pursue acquisitions, a core competency and competitive advantage of the
Financial Highlights |
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||
(unaudited) ($ millions, except per share amounts) |
Three month periods ended
|
||
2024 |
2023 |
Change |
|
|
$ |
$ |
% |
Revenue |
462.6 |
497.8 |
(7.1) |
|
|
|
|
Operating income before depreciation and amortization |
66.2 |
77.0 |
(14.0) |
Net foreign exchange loss (gain) |
0.2 |
(1.5) |
(113.3) |
Decrease (increase) in fair value of investments |
(0.1) |
0.3 |
(133.3) |
Net income |
22.2 |
31.7 |
(30.0) |
Net Income - adjusted1 |
22.4 |
31.3 |
(28.4) |
Earnings per share - basic |
0.25 |
0.34 |
(26.5) |
Earnings per share - diluted |
0.25 |
0.33 |
(24.2) |
Earnings per share - adjusted1 |
0.25 |
0.34 |
(26.5) |
Net cash from operating activities |
38.6 |
34.2 |
12.9 |
Net cash from operating activities per share |
0.44 |
0.37 |
18.9 |
Cash dividends declared per Common Share |
0.18 |
0.18 |
- |
1 Refer to the section entitled "Non-IFRS Financial Measures". |
First Quarter Highlights
- Generated revenue of
$462.6 million - down 7.1 percent on slowing economic activity levels inCanada due to a lack of capital investment in the private sector, from lower demand for major construction projects including pipelines, a softening in freight and logistics demand and lower fuel surcharge revenue. - Operating income before depreciation and amortization ("OIBDA") of
$66.2 million - down 14.0 percent from prior year due to lower consolidated revenues being somewhat offset by$3.0 million of incremental OIBDA from acquisitions. - Operating margin1 declined to 14.3 percent from 15.5 percent due to higher selling and administrative ("S&A") expenses as a percentage of consolidated revenues, resulting from the relatively fixed nature of S&A expenses. Direct operating expenses ("
DOE "), as a percentage of consolidated revenues, remained consistent year over year despite more competitive pricing conditions in certain markets and a reduction in higher margin specialized business.
First Quarter Commentary
(unaudited) ($ millions) |
Three month periods ended
|
||
2024 |
2023 |
Change |
|
|
$ |
$ |
% |
Revenue |
|
|
|
Less-Than-Truckload |
182.5 |
192.8 |
(5.3) |
Logistics & Warehousing |
126.3 |
144.1 |
(12.4) |
Specialized & Industrial Services |
111.9 |
112.8 |
(0.8) |
|
44.4 |
51.0 |
(12.9) |
Corporate and intersegment eliminations |
(2.5) |
(2.9) |
- |
Total Revenue |
462.6 |
497.8 |
(7.1) |
Operating income before depreciation and amortization |
|
|
|
Less-Than-Truckload |
30.8 |
31.8 |
(3.1) |
Logistics & Warehousing |
22.5 |
26.1 |
(13.8) |
Specialized & Industrial Services |
16.7 |
20.4 |
(18.1) |
U.S. & International Logistics |
0.5 |
1.2 |
(58.3) |
Corporate |
(4.3) |
(2.5) |
- |
Total Operating income before depreciation and amortization |
66.2 |
77.0 |
(14.0) |
|
|
|
|
Revenue: A decrease of
- LTL segment down
$10.3 million , or 5.3 percent, to$182.5 million - this decline is mainly attributable to$9.4 million of lower revenue from Business Units (excluding fuel surcharge and acquisitions) due to a change in working days compared to last year, a slight decline in revenue per working day on lower freight demand, and a$6.4 million decrease in fuel surcharge revenue being offset by$5.5 million of incremental revenue from acquisitions. - L&W segment down
$17.8 million , or 12.4 percent, to$126.3 million - lower freight volumes and logistics demand, a lack of capital investment and competitive pricing in certain markets led to a$13.8 million reduction in revenue while fuel surcharge revenue decreased by$4.0 million due to lower diesel fuel prices. - S&I segment down
$0.9 million , or 0.8 percent, to$111.9 million - lower demand for pipeline hauling and stringing services atPremay Pipeline Hauling L.P. ("Premay Pipeline") accounted for an$8.1 million reduction in revenue whileSmook Contractors Ltd. ("Smook ") experienced a$4.6 million decline in revenue on lower demand for civil construction projects in northernManitoba . The production services Business Units experienced a decline in revenue due to inclement weather delaying the commencement of certain projects and fuel surcharge revenue decreased by$1.6 million . Somewhat offsetting these declines was$15.0 million of incremental revenue from acquisitions and greater activity levels in theWestern Canadian Sedimentary Basin , which resulted in higher revenue by the drilling related services Business Units whileCanadian Dewatering L.P. ("Canadian Dewatering ") also experienced greater demand for the sale of water management equipment. - US 3PL segment down
$6.6 million , or 12.9 percent, to$44.4 million - the 3PL industry in theU.S. continues to experience a notable decline in activity levels due to slowing freight volumes and excess trucking capacity. This trend was evident atHAUListic LLC , which experienced lower freight demand for full truckload shipments and lower pricing per shipment.
OIBDA
: Generated
- LTL segment down
$1.0 million , or 3.1 percent, to$30.8 million - this decrease was due to lower segment revenues being somewhat offset by$1.1 million of incremental OIBDA from acquisitions. Operating margin1 improved by 0.4 percent to 16.9 percent as compared to 16.5 percent in the prior year period, primarily due to lowerDOE resulting from more efficient operations. - L&W segment down
$3.6 million , or 13.8 percent, to$22.5 million - the decrease was mainly due to the impact of lower segment revenues. Operating margin1 declined slightly by 0.3 percent to 17.8 percent as compared to 18.1 percent in 2023, primarily due to higher S&A expenses as a percentage of segment revenue resulting from the fixed nature of S&A expenses. - S&I segment down
$3.7 million , or 18.1 percent, to$16.7 million - the decrease was due to lower OIBDA at Premay Pipeline and Smook Contractors on reduced activity levels.Canadian Dewatering experienced lower OIBDA due to a change in sales mix and from preparing equipment for upcoming projects to commence later this year. The production services Business Units experienced a decline in OIBDA, which was somewhat offset by$1.9 million of incremental OIBDA from acquisitions and improved OIBDA by our drilling related services Business Units. Operating margin1 decreased to 14.9 percent as compared to 18.1 percent on higherDOE and S&A expenses due to a greater proportion of lower margin business and from preparing equipment for project work to commence later in the year. - US 3PL segment down
$0.7 million to$0.5 million as compared to$1.2 million - the decrease was mainly due to lower segment revenues. Operating margin1 decreased to 1.1 percent as compared to 2.4 percent last year due to higherDOE as a percentage of segment revenue, which resulted from competitive market conditions and the timing of when contract freight rates were entered into with customers as compared to spot market pricing and the availability of contractors in the open market. Operating margin1 as a percentage of net revenue1 was 12.8 percent as compared to 25.0 percent in 2023. - Corporate costs up
$1.8 million to$4.3 million - the increase was mainly attributable to higher information technology costs and higher salaries due to cost of living increases.
1 Refer to the sections entitled "Non-IFRS Financial Measures" and "Other Financial Measures". |
Net income: Net income decreased by
- A
$10.8 million decrease in OIBDA, a$1.7 million negative variance in foreign exchange, a$1.0 million increase in depreciation of right-of-use assets, a$0.9 million decrease in earnings from equity investments and a$0.8 million increase in finance costs. - These decreases were somewhat offset by a
$3.1 million decrease in income tax expense, a$0.6 million increase in gain on sale of property, plant and equipment, a$0.6 million decrease in depreciation of property, plant and equipment, a$0.6 million loss on fair value of equity investment recognized in 2023, a$0.4 million positive variance in change in fair value of investments and a$0.4 million decrease in amortization of intangible assets.
Financial Position
The following summarizes our financial position as at
- Increased the borrowing capacity on the Bank Credit Facilities to
$375.0 million by entering into a new$125.0 million credit agreement with PNC Bank Canada Branch. - Borrowings on the Bank Credit Facilities increased by
$17.8 million in the quarter to$90.8 million . The borrowing availability on our Bank Credit Facilities was over$280.0 million as atMarch 31, 2024 . - Working capital deficit of
$111.7 million , which is mainly due to reclassifying$217.2 million of Private Placement Debt notes (net of Cross-Currency Swaps) maturing inOctober 2024 . We expect to be able to replace these notes with new long-term debt in 2024. - Total net debt1 (
$619.8 million ) to operating cash flow ($319.2 million ) of 1.94:1 as defined per our Private Placement Debt agreement (threshold of 3.50:1). - Private Placement Debt of
$481.0 million (average fixed rate of 3.93 percent per annum) with principal repayments (net of Cross-Currency Swaps) of$217.2 million and$207.9 million due inOctober 2024 andOctober 2026 , respectively. Private Placement Debt increased by$7.4 million due to the foreign exchange loss on ourU.S. $229.0 million debt recognized in the first quarter of 2024. - Book value of Derivative Financial Instruments up
$7.2 million to$50.6 million , which swaps the principal portion of our$229.0 million ofU.S. dollar debt at an average foreign exchange rate of$1.1096 . - Net book value of property, plant and equipment of
$1.0 billion , which includes$653.6 million of historical cost of owned real property. - Repurchased and cancelled 56,608 Common Shares at an average price of
$13.98 per share under our normal course issuer bid during the first quarter of 2024.
1 Refer to the section entitled "Other Financial Measures". |
Non-IFRS Financial Measures
Net Income – Adjusted and Earnings per Share – Adjusted
The following table illustrates net income and basic earnings per share before considering the impact of the net foreign exchange gains or losses, the change in fair value of investments, and the loss on fair value of equity investment. Management adjusts net income and earnings per share by excluding these specific factors to more clearly reflect earnings from an operating perspective.
(unaudited) ($ millions, except share and per share amounts) |
Three month periods ended |
||||
2024 |
2023 |
||||
Income before income taxes |
$ |
29.8 |
$ |
42.4 |
|
Add (deduct): |
|
|
|
|
|
|
Net foreign exchange loss (gain) |
|
0.2 |
|
(1.5) |
|
Change in fair value of investments |
|
(0.1) |
|
0.3 |
|
Loss on fair value of equity investment |
|
- |
|
0.6 |
Income before income taxes – adjusted |
|
29.9 |
|
41.8 |
|
Income tax rate |
|
25 % |
|
25 % |
|
Computed expected income tax expense |
|
(7.5) |
|
(10.5) |
|
Net income – adjusted |
|
22.4 |
|
31.3 |
|
Weighted average number of Common Shares outstanding – basic |
|
88,052,799 |
|
92,649,808 |
|
Earnings per share – adjusted |
$ |
0.25 |
$ |
0.34 |
Net Revenue
Net revenue is calculated by subtracting
(unaudited) ($ millions) |
Three month periods ended |
|||
|
2024 |
|
2023 |
|
Revenue |
$ |
44.4 |
$ |
51.0 |
Direct operating expenses |
|
40.5 |
|
46.2 |
Net Revenue |
$ |
3.9 |
$ |
4.8 |
Other Financial Measures
Other financial measures consist of supplementary financial measures and capital management measures.
Supplementary Financial Measures
Supplementary financial measures are financial measures disclosed by a company that (a) are, or are intended to be, disclosed on a periodic basis to depict the historical or expected future financial performance, financial position or cash flow of a company, (b) are not disclosed in the financial statements of a company, (c) are not non-IFRS financial measures, and (d) are not non-IFRS ratios. The Corporation has disclosed the following supplementary financial measure.
Operating Margin
Operating margin is a supplementary financial measure and is defined as OIBDA divided by revenue. Management relies on operating margin as a measurement since it provides an indication of our ability to generate an appropriate return as compared to the associated risk and the amount of assets employed within our principal business activities.
(unaudited) ($ millions) |
Three month periods ended |
|||
|
2024 |
|
2023 |
|
OIBDA |
$ |
66.2 |
$ |
77.0 |
Revenue |
$ |
462.6 |
$ |
497.8 |
Operating margin |
|
14.3 % |
|
15.5 % |
Capital Management Measures
Capital management measures are financial measures disclosed by a company that (a) are intended to enable users to evaluate a company's objectives, policies and processes for managing the entity's capital, (b) are not a component of a line item disclosed in the primary financial statements of the company, (c) are disclosed in the notes of the financial statements of the company, and (d) are not disclosed in the primary financial statements of the company. The Corporation has disclosed the following capital management measure.
Total Net Debt
The term "total net debt" means all debt excluding the Debentures but includes the Private Placement Debt, lease liabilities, the Bank Credit Facilities and letters of credit less any unrealized gain on Cross-Currency Swaps plus any unrealized loss on Cross-Currency Swaps, as disclosed within Derivatives on the condensed consolidated statement of financial position. Total net debt is defined within our Private Placement Debt agreement and is used to calculate our total net debt to operating cash flow covenant. Management calculates and discloses total net debt to provide users with an understanding of how our debt covenant is calculated.
(unaudited) ($ millions) |
|
|
||
Private Placement Debt (including the current portion) |
|
|
$ |
481.0 |
Lease liabilities (including the current portion) |
|
|
|
96.2 |
Bank indebtedness |
|
|
|
90.8 |
Letters of credit |
|
|
|
2.2 |
Long-term debt (including the current portion) |
|
|
|
0.2 |
Total debt |
|
|
|
670.4 |
Less: unrealized gain on Cross-Currency Swaps |
|
|
|
(50.6) |
Add: unrealized loss on Cross-Currency Swaps |
|
|
|
- |
Total net debt |
|
|
$ |
619.8 |
About Mullen Group Ltd.
Contact Information
Mr.
Mr.
Mr.
Ms.
121A
-
Telephone: 403-995-5200
Fax: 403-995-5296
Disclaimer
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