"Results for the fourth quarter were consistent with our previously released
"
"We enter 2024 with a greater sense of optimism than at this time last year for a couple of reasons. The first is that the North American economy continues to show a resiliency that supports a strong job market, one of the most important factors influencing end consumer demand. Furthermore, if inflationary pressures continue to moderate and interest rates start declining, consumers will have more disposable income, a precursor to increased freight demand. We also believe the inventory rebalancing cycle is basically over, implying that shippers will need to replenish, or at the very least rebuild, inventory levels if they want to capture the ever demanding needs and wants of consumers. And, even though the current over capacity issue in the logistics and trucking industry is limiting growth and profitability, this will change. Many competitors are struggling with high debt levels and shrinking profitability, an unsustainable situation in our view. This leads to the other reason we are optimistic, acquisitions. We believe there will be consolidation opportunities and business failures in 2024, events that will not only drive revenue growth but also lead to tomorrow's pricing discipline. We will look to add strong brands to our network and will continue to pursue tuck-in acquisitions that drive scale and enhance operating margins," added
Financial Highlights | |||||||
(unaudited) ($ millions, except per share amounts) | Three month periods ended | Twelve month periods ended | |||||
2023 | 2022 | Change | 2023 | 2022 | Change | ||
$ | $ | % | $ | $ | % | ||
Revenue | 498.6 | 502.7 | (0.8) | 1,994.7 | 1,999.5 | (0.2) | |
Operating income before depreciation and | 79.2 | 77.6 | 2.1 | 328.2 | 329.9 | (0.5) | |
Net foreign exchange (gain) loss | (0.8) | (2.1) | (61.9) | (4.2) | 10.8 | (138.9) | |
Decrease (increase) in fair value of investments | (0.3) | (0.4) | (25.0) | (0.3) | (0.1) | 200.0 | |
Net income | 29.4 | 61.5 | (52.2) | 136.7 | 158.6 | (13.8) | |
Net Income – adjusted(1) | 30.4 | 53.6 | (43.3) | 134.4 | 164.2 | (18.1) | |
Earnings per share – basic | 0.33 | 0.66 | (50.0) | 1.52 | 1.70 | (10.6) | |
Earnings per share – diluted | 0.32 | 0.62 | (48.4) | 1.45 | 1.62 | (10.5) | |
Earnings per share – adjusted(1) | 0.34 | 0.58 | (41.4) | 1.49 | 1.76 | (15.3) | |
Net cash from operating activities | 105.0 | 100.5 | 4.5 | 276.8 | 263.0 | 5.2 | |
Net cash from operating activities per share | 1.18 | 1.08 | 9.3 | 3.08 | 2.82 | 9.2 | |
Cash dividends declared per Common Share | 0.18 | 0.18 | - | 0.72 | 0.68 | 5.9 | |
(1) Refer to the section entitled "Non-IFRS Financial Measures". |
Fourth Quarter Highlights
- Generated revenue of
$498.6 million - seventh consecutive quarter of generating revenues of approximately$500.0 million . - Operating income before depreciation and amortization ("OIBDA") of
$79.2 million - up 2.1 percent from prior year despite one-time integration costs related toB. & R. Eckel's Transport Ltd. ("B&R") and a more competitive operating environment. - Operating margin1 improved to 15.9 percent from 15.4 percent reflecting the variable cost structure of our business model resulting in lower direct operating expenses ("
DOE ") as a percentage of revenue, which was somewhat offset by a rise in selling and administrative ("S&A") expenses.
Fourth Quarter Commentary
(unaudited) ($ millions) | Three month periods ended | ||
2023 | 2022 | Change | |
$ | $ | % | |
Revenue | |||
Less-Than-Truckload | 190.0 | 190.8 | (0.4) |
Logistics & Warehousing | 140.8 | 153.8 | (8.5) |
Specialized & Industrial Services | 122.5 | 108.0 | 13.4 |
47.7 | 52.6 | (9.3) | |
Corporate and intersegment eliminations | (2.4) | (2.5) | - |
Total Revenue | 498.6 | 502.7 | (0.8) |
Operating income before depreciation and amortization | |||
Less-Than-Truckload | 29.9 | 31.8 | (6.0) |
Logistics & Warehousing | 29.1 | 30.4 | (4.3) |
Specialized & Industrial Services | 24.6 | 19.1 | 28.8 |
0.4 | 0.9 | (55.6) | |
Corporate | (4.8) | (4.6) | - |
Total operating income before depreciation and amortization | 79.2 | 77.6 | 2.1 |
1 Refer to the section entitled "Other Financial Measures". |
Revenue: A slight decrease of 0.8 percent to
- LTL segment down
$0.8 million , or 0.4 percent, to$190.0 million - the slight decline in revenue is attributable to a$7.1 million decrease in fuel surcharge revenue being offset by$7.4 million of incremental revenue from acquisitions. Revenue from Business Units (excluding fuel surcharge and acquisitions) declined slightly due to lower freight volumes in easternCanada being somewhat offset by steady freight volumes in westernCanada . - L&W segment down
$13.0 million , or 8.5 percent, to$140.8 million - lower freight volumes and competitive pricing resulting from the freight recession led to a$9.7 million reduction in revenue while the sale of our hydrovac business inDecember 2022 resulted in a$0.7 million decrease in revenue. Fuel surcharge revenue decreased by$2.5 million due to lower diesel fuel prices. - S&I segment up
$14.5 million , or 13.4 percent, to$122.5 million - acquisitions added$14.4 million of incremental revenue. Greater activity levels in theWestern Canadian Sedimentary Basin resulted in higher revenue by the drilling related services Business Units whileSmook Contractors Ltd. andCanadian Dewatering L.P. also experienced greater demand for their services. Fuel surcharge revenue decreased by$1.5 million , lower demand for pipeline hauling and stringing services accounted for a$1.4 million reduction in revenue while the sale of our hydrovac assets and business resulted in a$0 .7 million reduction in revenue. - US 3PL segment down
$4.9 million , or 9.3 percent, to$47.7 million - the 3PL industry in theU.S. experienced a notable decline in activity in the fourth quarter as compared to the same period last year because of slowing freight volumes and excess trucking capacity. This trend was evident atHAUListic LLC , who also experienced lower freight demand for full truckload shipments and lower pricing per shipment.
OIBDA: Generated
- LTL segment down
$1.9 million , or 6.0 percent, to$29.9 million - the decrease was due to recognizing one-time costs associated with the B&R integration, a more normalized pricing environment in 2023 and from lower freight volumes predominately in easternCanada . Operating margin1 declined by 1.0 percent to 15.7 percent as compared to 16.7 percent in the prior year period, primarily due to one-time integration costs associated with B&R and higher S&A expenses. Excluding the financial results of B&R, the LTL segment would have generated operating margins of 18.0 percent. - L&W segment down
$1.3 million , or 4.3 percent, to$29.1 million - the decrease was mainly due to the impact of the freight recession resulting in lower freight volumes and competitive pricing. Operating margin1 increased to 20.7 percent as compared to 19.8 percent in 2022, primarily due to lowerDOE as a percentage of segment revenue and the strong performance atKleysen Group Ltd. - S&I segment up
$5.5 million , or 28.8 percent, to$24.6 million - acquisitions added$3.4 million of incremental OIBDA while greater demand for drilling related services and the transportation of fluids and servicing of wells contributed to the increase. These increases were somewhat offset by the sale of the Corporation's hydrovac assets and lower OIBDA at Premay Pipeline Hauling L.P. Operating margin1 improved to 20.1 percent as compared to 17.7 percent on lowerDOE as greater activity levels resulted in more efficient operations along with rate increases being implemented at several Business Units. - US 3PL segment down
$0.5 million to$0.4 million as compared to$0.9 million - the decrease was mainly due to a combination of lower segment revenue and the relatively fixed nature of S&A expenses.DOE as a percentage of segment revenue remained fairly consistent compared to the prior year period. Operating margin1 decreased to 0.8 percent as compared to 1.7 percent last year due to higher S&A expenses as a percentage of segment revenue. Operating margin1 as a percentage of net revenue1 was 9.8 percent as compared to 19.6 percent in 2022.
1 Refer to sections entitled "Non-IFRS Financial Measures" and "Other Financial Measures". |
Net income: Net income decreased by
- A
$29.3 million decrease in gain on sale of property, plant and equipment, which mainly resulted from a significant gain on sale of non-core real estate inSurrey, British Columbia in the fourth quarter of 2022. Other factors contributing to the decrease in net income include a$2.8 million decrease in gain on fair value of equity investments, a$1.7 million increase in depreciation of right-of-use assets and a$1.3 million negative variance in net foreign exchange. - These decreases were somewhat offset by a
$2.8 million decrease in income tax expense and a$1.6 million increase in OIBDA.
Financial Position
- The following summarizes our financial position as at
December 31, 2023 , along with some key changes that occurred during the fourth quarter: - Reduced borrowings on the Credit Facilities by
$41.2 million in the quarter to$73.0 million at year end. - Working capital deficit of
$119.1 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 private placement notes in 2024. - Total net debt1 (
$604.8 million ) to operating cash flow ($330.0 million ) of 1.83:1 as defined per our Private Placement Debt agreement (threshold of 3.50:1). - Private Placement Debt of
$473.6 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 decreased by$6.7 million due to the foreign exchange gain on ourU.S. $229.0 million debt recognized in the fourth quarter of 2023. - Book value of Derivative Financial Instruments down
$5.9 million to$43.4 million , which swaps 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$651.8 million of historical cost of owned real property. - Repurchased 545,954 Common Shares at an average price of
$13.47 per share under our normal course issuer bid during the fourth quarter of 2023.
1 Refer to the section entitled "Other Financial Measures". |
Non-IFRS Financial Measures
Net Income – Adjusted and Earnings per Share – Adjusted
The following table illustrates net income and basic earnings per share before considering the impact of the net foreign exchange gains or losses, the change in fair value of investments, the gain or loss on fair value of equity investments and the loss on sale of non-core business. Management adjusts net income and earnings per share by excluding these specific factors to more clearly reflect earnings from an operating perspective.
(unaudited) ($ millions, except share and per share amounts) | Three month periods ended | Years ended | ||||||||
2023 | 2022 | 2023 |
2022 | |||||||
Income before income taxes | $ | 41.7 | $ | 76.6 | $ | 183.1 | $ | 210.9 | ||
Add (deduct): | ||||||||||
Net foreign exchange (gain) loss | (0.8) | (2.1) | (4.2) | 10.8 | ||||||
Change in fair value of investments | (0.3) | (0.4) | (0.3) | (0.1) | ||||||
Loss (gain) on fair value of equity investments | — | (2.8) | 0.6 | (2.8) | ||||||
Loss on sale of non-core business | — | 0.1 | — | 0.1 | ||||||
Income before income taxes – adjusted | 40.6 | 71.4 | 179.2 | 218.9 | ||||||
Income tax rate | 25 % | 25 % | 25 % | 25 % | ||||||
Computed expected income tax expense | (10.2) | (17.8) | (44.8) | (54.7) | ||||||
Net income – adjusted | 30.4 | 53.6 | 134.4 | 164.2 | ||||||
Weighted average number of Common Shares | 88,423,848 | 92,930,386 | 89,931,795 | 93,351,897 | ||||||
Earnings per share – adjusted | $ | 0.34 | $ | 0.58 | $ | 1.49 | $ | 1.76 |
Net Revenue
Net revenue is calculated by subtracting
(unaudited) ($ millions) | Three month periods ended | Years ended | |||||||
2023 | 2022 | 2023 | 2022 | ||||||
Revenue | $ | 47.7 | $ | 52.6 | $ | 198.3 | $ | 221.8 | |
Direct operating expenses | (43.6) | (48.0) | (180.2) | (202.2) | |||||
Net Revenue | $ | 4.1 | $ | 4.6 | $ | 18.1 | $ | 19.6 |
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 | Years ended | |||||||
2023 | 2022 | 2023 |
2022 | ||||||
OIBDA | $ | 79.2 | $ | 77.6 | $ | 328.2 | $ | 329.9 | |
Revenue | $ | 498.6 | $ | 502.7 | $ | 1,994.7 | $ | 1,999.5 | |
Operating margin | 15.9 % | 15.4 % | 16.5 % | 16.5 % |
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 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 of this MD&A with an understanding of how our debt covenant is calculated.
(unaudited) ($ millions) | | |||
Private Placement Debt (including the current portion) | $ | 473.6 | ||
Lease liabilities (including the current portion) | 98.4 | |||
Bank indebtedness | 73.0 | |||
Letters of credit | 2.2 | |||
Long-term debt (including the current portion) | 1.0 | |||
Total debt | 648.2 | |||
Less: unrealized gain on Cross-Currency Swaps | (43.4) | |||
Add: unrealized loss on Cross-Currency Swaps | — | |||
Total net debt | $ | 604.8 |
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Telephone: 403-995-5200
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