Horizon North Logistics Inc. Announces Results for the Quarter Ended December 31, 2018
Press Release
CALGARY, ALBERTA, March 12, 2019 – TSX Symbol: HNL
Horizon North Logistics Inc. (“Horizon North” or the “Corporation”) reported its financial and operating results for the three and twelve months ended December 31, 2018 and 2017.
Fourth Quarter Highlights
- Q4 2018 financial results were the strongest since Q1 2017 driven primarily by improved Modular Solutions performance;
- The Modular Solutions business improved significantly in 2018 achieving positive EBITDAS and increasing by $25.1 million compared to 2017. Backlog exiting the year was $88.8 million compared to $43.9 million in 2017 with the funnel of high-quality, high probability opportunities also increasing, closing 2018 approximately $290.0 million compared to $148.0 million exiting 2017; and
- The Industrial Services business announced several camp service contracts:
- a hospitality services contract south of Fort McMurray, Alberta through its Aboriginal partnership with Chipewyan Prairie Dene First Nations;
- a contract extension in the Grande Prairie, Alberta area; and
- a 150-bed facility for an LPG project located in Prince Rupert, British Columbia.
Fourth Quarter Financial Summary
Quarterly Operational Overview
Results for the three months ended December 31, 2018 (“Q4 2018”) improved across all financial measures, compared to the three months ended December 31, 2017 (“Q4 2017”). The revenue increase compared to 2017 was driven by the Modular Solutions and Camp & Catering segments, partially offset by the Rentals & Logistics segment.
Industrial Services
Revenues from Industrial Services for Q4 2018 increased compared to Q4 2017 mainly due to higher camp installation activity in the northeast region of British Columbia and stronger access mat rentals. This was offset by softer mat sales and lower related installation and transportation services. Camp rental and catering activity levels increased compared to Q4 2017 with utilization of 54% or up 4% and revenue per bed rental day at $107, an increase of 39%, due to camp installation activity with no associated bed rental days. Catering only activity remained consistent compared to Q4 2017 with stronger revenue per catering only day, higher by 9%, as a result of different contract mix. Rentals & Logistics revenues decreased compared to Q4 2017 primarily due to a decrease in equipment sales and a reduction in related installation and transportation services. These were somewhat offset by increased demand and stronger pricing for mat rental activity along the northern British Columbia and Alberta border.
Modular Solutions
Modular Solutions revenues for Q4 2018 were significantly higher than Q4 2017 as a result of increased capacity to execute the growing backlog of projects. Compared to Q4 2017, capacity increased significantly as a result of ramping up direct headcount at the Kamloops, British Columbia plant and the acquisition of the Aldergrove, British Columbia facility. In addition, the acquisition of the Rocky View County, Alberta facility in November 2018 allowed for a further ramp up of production exiting 2018. The increase of throughput capacity facilitated the execution of higher volumes of backlog and generated much stronger revenues. The volume of government sponsored affordable housing projects in Q4 2018 was considerably higher compared to Q4 2017.
Other Financial Measures
Horizon North’s Q4 2018 EBITDAS increased by $6.9 million or 101% compared to Q4 2017. As a percentage of revenue, EBITDAS were 12% compared to 8% in Q4 2017. The increase in EBITDAS was primarily driven by significantly improved operating results in the Modular Solutions segment compared to Q4 2017.
Horizon North continued to maintain a strong focus on managing its Statement of Financial Position through minimizing working capital and closely managing the capital program. Total loans and borrowings were $31.7 million at December 31, 2018 compared to $74.6 million at December 31, 2017. The decrease was mainly due to completion of the bought deal equity financing in Q2 2018 with net proceeds of $47.5 million used to reduce debt and improve EBITDAS. As a result of the decreased debt and stronger EBITDAS, the total Debt to EBITDAS ratio was 0.84:1.00 at December 31, 2018 compared to 2.48:1.00 at December 31, 2017.
Outlook
In 2019, Horizon North will continue to diversify both its portfolio of offerings and customer base through a focus on its two operating divisions: Industrial Services and Modular Solutions.
Industrial Services
In 2019, Horizon North will continue to leverage its reputation as a leading provider of turn-key camp, hospitality, access and maintenance solutions with focus on the following four key areas:
- Oil Sands – Horizon North expects to leverage its operational footprint and history, along with two prominent relationships with Aboriginal communities north and south of Fort McMurray, to pursue full turn-key opportunities as well as catering and hospitality opportunities in customer-owned facilities;
- Montney/Duvernay – Horizon North is the largest provider of open camp services in this area and is a market leader in providing catering and hospitality services in customer-owned facilities. Horizon North will continue to leverage existing assets and relationships while looking to develop additional areas of opportunity to support ongoing activity in this area;
- Northern Canada – Horizon North has a long history and expertise in providing hospitality, management and maintenance services across Canada’s northern regions. In 2019, Horizon North will continue to focus on developing and expanding its capabilities and footprint across Canada’s highly variable and remote northern regions; and
- West Coast – Horizon North initiated the first phase of development on its 57-acre parcel of land located at the entrance to Kitimat, British Columbia in late 2018. In 2019, Horizon North expects to open the first phase of its world-class Crossroads open lodge with 260 beds ready in the spring and plans to expand to a potential 1,000 beds as activity in the region grows.
Modular Solutions
For 2019, Horizon North’s focus is to continue to grow its backlog of modular construction projects and drive economies of scale in our facilities and project execution capabilities. Horizon North will continue to focus on hotel development, multi-family residential development and social, student and senior infrastructure development. Horizon North completed two acquisitions in 2018 to provide additional capacity in western Canada and is actively investigating opportunities to expand its geographic footprint to service other areas of Canada with strong demand profiles for our unique construction model.
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