Tervita Corporation Announces Strong Fourth Quarter & Year End 2020 Results
Press Release
March 4, 2021
- Q4 2020 Adjusted EBITDA of $54 million represented a decrease of only 8% from last year. The Company’s cost savings initiatives, commercial customer strategies, contributions from growth capital investments and the Canadian Emergency Wage Subsidy (“CEWS”) moderated the impact of reduced activity and oil prices.
- Adjusted EBITDA excluding CEWS increased 9% sequentially compared to Q3 2020 as Tervita continued to strengthen from the abrupt slowdown in the first half of the year.
- Adjusted EBITDA Margin excluding CEWS increased to 37%, compared to 34% in Q4 2019.
- Industrial Services Divisional EBITDA grew 38% in the second half of 2020 compared to the first half, driven by rapid market recovery from the impacts of the COVID-19 pandemic, increased ferrous prices and the benefit of business optimization and cost savings initiatives.
- 2020 Adjusted EBITDA of $208 million was a decrease of only 11% from the prior year, continuing to demonstrate the strength and resiliency of our business model.
- Generated Discretionary Free Cash Flow (“DFCF”) of $79 million in 2020, down just $11 million compared to 2019, resulting in a DFCF yield(1) of 19%.
- Successfully refinanced our existing senior secured notes with a combination of new senior secured notes and a draw on our amended and extended credit facility, enhancing Tervita’s ability to reduce debt with free cash flow.
- Released Tervita’s inaugural Sustainability Report highlighting our 2019 accomplishments and targets developed towards our commitment to Environment, Social and Governance (“ESG”) & sustainability.
- Acquired Main Line Industries Ltd. (“Main Line”), a specialty contractor primarily servicing the rail services, excavation and pipe jacking industries near Winnipeg, Manitoba, complementing our metals recycling and rail services business and expanding our footprint in Manitoba.
- 2020 growth and expansion capital additions of $33 million primarily focused on completing our Montney water disposal facility, increasing water disposal capacity and blending capabilities, landfill expansion and purchasing industrial equipment for long-term customer backed contracts. We prudently managed our 2020 capital in response to the market environment with capital additions of $60 million for the year, in line with our expectations and a 56% reduction from 2019 additions.
- Non-binding mediation occurred as scheduled in late 2020 with respect to the Secure litigation. The trial is scheduled to commence on January 10, 2022.
CALGARY, AB, March 4, 2021 – Tervita Corporation (“Tervita” or the “Company”) (TSX: TEV) announced today the results for the three months and year ended December 31, 2020. All financial figures are in millions of Canadian dollars unless otherwise noted.
“Tervita’s results in 2020 reflected the strength of our resilient business model, and with positive momentum exiting the year we are well positioned to capture upside in an energy sector recovery while continuing to grow our Industrial Services business. Our disciplined focus on managing costs, optimizing our locations and achieving business efficiencies drove strong Adjusted EBITDA Margins excluding CEWS of 37% in Q4 2020,” said John Cooper, President and CEO. “Both the Industrial Services and Energy Services business lines contributed to these results, delivering a sequential improvement in overall Divisional EBITDA compared to Q3 2020.
“We successfully completed our debt refinancing in the fourth quarter, which will allow us to execute on our strategic initiatives while providing flexibility to use free cash flow towards de-levering our balance sheet. We also advanced growth in our Industrial Services business with the acquisition of Main Line, providing a platform to expand our market share and geographic reach.
“Over the past year, we proved our agility to respond to the market and adapt our business to keep our people safe, reduce costs, capture market value, and protect liquidity. I am incredibly proud of the many significant milestones we achieved in 2020, including advancing our strategic priorities while strengthening our balance sheet, increasing profitability and generating meaningful Discretionary Free Cash Flow despite the challenging environment. Looking forward to 2021, we remain focused on operational excellence, progressing our ESG initiatives, de-levering our balance sheet, and disciplined cost management while leveraging opportunities to grow our business and provide value for our shareholders and customers.”
Q4 2020 Financial Highlights(2)
|
Three Months Ended December 31 |
Twelve Months Ended December 31 |
|||||||||
|
2020 |
2019 |
Increase |
% Change |
2020 |
2019 |
Increase |
% Change |
|||
|
Facilities revenue |
80 |
115 |
(35) |
(30) % |
329 |
465 |
(136) |
(29) % |
||
|
Energy marketing revenue |
250 |
416 |
(166) |
(40) % |
875 |
1,607 |
(732) |
(46) % |
||
|
Energy Services revenue |
330 |
531 |
(201) |
(38) % |
1,204 |
2,072 |
(868) |
(42) % |
||
|
Industrial Services revenue |
56 |
62 |
(6) |
(10) % |
220 |
256 |
(36) |
(14) % |
||
|
Intersegment eliminations |
(5) |
(2) |
(3) |
(150) % |
(7) |
(5) |
(2) |
(40) % |
||
|
Revenue |
381 |
591 |
(210) |
(36) % |
1,417 |
2,323 |
(906) |
(39) % |
||
|
Revenue excluding energy marketing |
131 |
175 |
(44) |
(25) % |
542 |
716 |
(174) |
(24) % |
||
|
Energy Services Divisional EBITDA(2) |
47 |
60 |
(13) |
(22) % |
179 |
238 |
(59) |
(25) % |
||
|
Industrial Services Divisional EBITDA(2) |
11 |
10 |
1 |
10 % |
38 |
41 |
(3) |
(7) % |
||
|
Divisional EBITDA(2) |
58 |
70 |
(12) |
(17) % |
217 |
279 |
(62) |
(22) % |
||
|
G&A expenses |
(9) |
(11) |
(2) |
(18) % |
(39) |
(46) |
(7) |
(15) % |
||
|
G&A as a % of revenue (excl. energy marketing) |
7 % |
6 % |
1 % |
7 % |
6 % |
1 % |
||||
|
Canada Emergency Wage Subsidy(3) |
5 |
— |
5 |
100 % |
30 |
— |
30 |
100 % |
||
|
Net profit (loss) |
(22) |
(123) |
101 |
82 % |
(43) |
(116) |
73 |
63 % |
||
|
– per share ($), basic and diluted |
(0.19) |
(1.07) |
0.88 |
82 % |
(0.38) |
(0.99) |
0.61 |
62 % |
||
|
Adjusted EBITDA(2) |
54 |
59 |
(5) |
(8) % |
208 |
233 |
(25) |
(11) % |
||
|
– per share ($), basic and diluted |
0.47 |
0.51 |
(0.04) |
(8) % |
1.83 |
2.00 |
(0.17) |
(9) % |
||
|
Adjusted EBITDA Margin(2) |
41 % |
34 % |
7 % |
38 % |
33 % |
5 % |
||||
|
Maintenance capital additions |
9 |
11 |
(2) |
(18) % |
27 |
33 |
(6) |
(18) % |
||
|
Growth and expansion capital additions |
7 |
41 |
(34) |
(83) % |
33 |
106 |
(73) |
(69) % |
||
|
Capital additions |
16 |
52 |
(36) |
(69) % |
60 |
139 |
(79) |
(57) % |
||
|
Acquisitions (4) |
16 |
— |
16 |
100 % |
16 |
— |
16 |
100 % |
||
|
Discretionary Free Cash Flow(2) |
8 |
9 |
(1) |
(11) % |
79 |
90 |
(11) |
(12) % |
||
|
– per share ($), basic and diluted |
0.07 |
0.08 |
(0.01) |
(13) % |
0.69 |
0.77 |
(0.08) |
(10) % |
||
|
Net Debt to Adjusted EBITDA (LTM)(2)(5) |
3.54 |
3.17 |
0.37 |
12 % |
3.54 |
3.17 |
0.37 |
12 % |
||
|
Shares as at December 31 (000’s of shares)(6) |
||||||||||
|
Shares outstanding |
115,655 |
114,355 |
1,300 |
1 % |
115,655 |
114,355 |
1,300 |
1 % |
||
|
Weighted average shares – basic and diluted |
114,202 |
115,260 |
(1,058) |
(1) % |
113,688 |
116,732 |
(3,044) |
(3) % |
||
|
1. |
DFCF yield is calculated by dividing 2020 DFCF by Tervita’s market capitalization of $422 million as at March 4, 2021. |
|
2. |
Refer to Tervita’s Q4 2020 Management’s Discussion and Analysis (“MD&A”) and audited annual Consolidated Financial Statements (“Financial Statements”) for further information. These financial measures are Non-GAAP measures and are, therefore, unlikely to be comparable to similar measures presented by other issuers. These Non-GAAP financial measures are defined and reconciled in Tervita’s Q4 2020 MD&A. |
|
3. |
Q4 2020 included $2 million related to employees in Energy Services, $2 million in Industrial Services, and $1 million in Corporate. 2020 included $14 million related to employees in Energy Services, $11 million in Industrial Services, and $5 million in Corporate. Refer to Tervita’s Q4 2020 MD&A for further information on CEWS. |
|
4. |
Refer to note 3 of the Annual Financial Statements for details regarding acquisitions. |
|
5. |
Net Debt to Adjusted EBITDA (LTM) is at December 31, 2020 and 2019 and is based on the Last Twelve Months at that date. See Tervita’s Q4 2020 MD&A for further definition and reconciliation. |
|
6. |
As at March 4, 2021, the Company had 115,654,851 common shares and 2,696,236 stock options outstanding. Each option outstanding is exercisable for one common share. |
Tervita’s results for the three and twelve months ended December 31 excluding CEWS(1) were as follows:
|
Three Months Ended December 31 |
Twelve Months Ended December 31 |
|||||||||
|
2020 |
2019 |
Increase |
% Change |
2020 |
2019 |
Increase |
% Change |
|||
|
Adjusted EBITDA(1)(2) |
49 |
59 |
(10) |
(17)% |
178 |
233 |
(55) |
(24)% |
||
|
– per share ($), basic and diluted |
0.43 |
0.51 |
(0.08) |
(16)% |
1.57 |
2.00 |
(0.43) |
(22)% |
||
|
Adjusted EBITDA Margin(1)(2) |
37 % |
34 % |
3 % |
33 % |
33 % |
— % |
||||
|
1. |
Refer to Tervita’s Q4 2020 MD&A for further information on CEWS. |
|
2. |
These financial measures are Non-GAAP measures and are, therefore, unlikely to be comparable to similar measures presented by other issuers. These Non-GAAP financial measures are defined and reconciled in Tervita’s Q4 2020 MD&A. |
Outlook
Tervita demonstrated the strength of our resilient business model in 2020, delivering Adjusted EBITDA that declined only 11% despite the challenging environment, and we are well positioned for growth as the economy continues to recover. Tervita’s performance recovered significantly in the second half of the year from the sharp decline in activity levels and commodity pricing and the negative impact of COVID-19 experienced in the first half.
Looking forward to 2021, we expect our positive momentum from the second half of 2020 to continue. Assuming an environment which includes the ongoing stability of energy pricing combined with general economic and industrial activity improvements associated with a steady reopening following the pandemic-related shutdowns, the Company anticipates Adjusted EBITDA excluding CEWS in 2021 to exceed 2020, driven by contributions from:
- Stronger business performance in both our Energy Services and Industrial Services businesses in line with our expectations of economic recovery;
- The full year benefit from the $31 million annualized structural cost savings instituted in the first half of 2020 (savings realized in 2020 of $23 million);
- Continued benefit of the commercial, organizational and cost strategies implemented within our Industrial Services business;
- Contributions from investments including a full year of operations at our Montney water disposal facility and our Main Line acquisition; and,
- Actively working with customers through the early stages of the well abandonment and site rehabilitation program.
Capital Allocation
In 2021, we plan to take a disciplined approach to the allocation of Discretionary Free Cash Flow between our two main priorities of de-levering our balance sheet and delivering low-cost high-impact projects within our growth capital pipeline of opportunities that meet our return on capital hurdle rates, with a focus on growth projects in the Industrial Services business. Based on current market conditions we anticipate capital additions in 2021 to be in line with 2020 levels. We continue to look for and execute opportunities to reduce costs, improve efficiencies and ensure all open and operating facilities are generating positive cash flows. We remain responsive to opportunities and market changes and may revise our capital plans accordingly.
MD&A and Financial Statements
The Q4 2020 MD&A, Financial Statements, and Annual Information Form, which contain additional notes and disclosures, are available on SEDAR under Tervita Corporation at www.SEDAR.com or on our website at www.tervita.com on the Investor Relations page.
Fourth Quarter and Year End 2020 Conference Call
Tervita will host a conference call on Friday, March 5, 2021 at 7:00 a.m. MST to discuss the fourth quarter results. To participate in the conference call, dial 416-764-8650 or toll free 888-664-6383. To access the simultaneous webcast, please visit www.tervita.com. For those unable to listen to the live call, a taped broadcast will be available at www.tervita.com and, until midnight MST on Friday, March 12, 2021 by dialing 888-390-0541 and using the pass code 639605#.
About Tervita
Tervita is a leading environmentally-focused waste service provider in Canada, providing a broad and integrated array of services and environmental management solutions for customers in the energy, industrial, and natural resource sectors, predominantly in Western Canada.
For over 40 years, Tervita has been focused on delivering safe and efficient solutions through all phases of a project while minimizing impact, maximizing returns™. Our dedicated and experienced employees are trusted sustainability partners to our clients. Safety is our top priority: it influences our actions and shapes our culture. Tervita trades on the TSX as TEV. For more information, visit www.tervita.com.
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