Black Diamond Group Limited ("Black Diamond", the "Company" or "we"), (TSX:BDI), a leading provider of workforce accommodation and space rental solutions, today announced its operating and financial results for the three months (the "Quarter") and twelve months ("2016" or the "Year") ended December 31, 2016. All financial figures are expressed in Canadian dollars.
In the Quarter, Black Diamond continued to generate positive cash flows which allowed the Company to further reduce its debt. The Quarter benefited from the $17.5 million sale and related service contract which was announced on December 16, 2016. The completion of this contract demonstrates the mutually beneficial arrangements that the Company continues to reach with its key customers. Favourable arrangements such as this one also lead to securing future work for Black Diamond. For 2016, the Company generated Adjusted EBITDA of $42.2 million and finished the year with $48.5 million less debt than at the beginning of the year.
While commodity prices showed improvement in the second half of 2016, the severity of the trough experienced in the first half of the year continued to impact Black Diamond's operations that directly service energy end markets through to the end of the year. This weakness in the base run rate of the business is expected to continue into the first half of 2017. This longer than anticipated lag between pricing recovery and increased field level activity impacting Black Diamond's operations resulted in the Company recording a $49.9 million non-cash impairment charge, which contributed to the 2016 net loss of $64.2 million.
In response to the operating environment throughout 2016, the Company continued to manage and preserve its balance sheet through a disciplined approach to capital expenditures, dividend reductions and the implementation of the Dividend Reinvestment Plan. In addition, the Company improved operating efficiencies, reduced administrative expenses by 15% and reduced working capital. This proactive management resulted in a decrease in net debt of $48.8 million to $104.9 million in the year.
In 2016, Black Diamond pursued a diversification strategy centered on increasing revenue driven by non-energy related end markets, which was focused on the BOXX Modular division through organic capital deployment and tuck-in acquisitions. During the year, the Company added 336 units to the BOXX Modular fleet, an increase of 9% (excluding fleet sales) and was able to maintain a relatively consistent level of utilization in its North American fleet despite unfavourable utilization in Northern Alberta. Subsequent to the Quarter, Black Diamond acquired the Britco space rentals business from WesternOne Inc. adding another 1,896 units to the BOXX Modular fleet. The Britco business carried a normalized trailing $6.5 million of Adjusted EBITDA which includes approximately $0.5 million of synergies. Black Diamond will continue to invest in this business unit to diversify and grow the Company.
In March 2017, the Company reached an agreement to amend its credit facilities with its Lenders. These amendments will result in resizing the credit limits to be consistent with the expected borrowing needs of the Company and will create the desired flexibility to operate and grow the business in the current market environment. The Company is confident in its ability to manage the business through the current low activity levels and be able to grow into the recovery through 2017 and into 2018. Management anticipates increased business activity in the second half of 2017 resulting from energy industry announcements made in late 2016 regarding increased capital spending. Black Diamond remains confident in the ability of its long-lived fleet of assets to generate significant future revenue and returns for the business as the recovery in the market continues.
The Board approved an adjustment to the previously announced $20.0 million capital spending plan for 2017. As a result of this adjustment, the revised gross capital spending plan will be $12 million. This includes maintenance capital which is estimated to be $1.5 million for the year. This does not include any proceeds of the normal course fleet sales that are projected to be $5 million. This plan will primarily support growth capital requirements for the BOXX Modular space rentals business outside of Alberta, which benefits from broad exposure to multiple industry segments. The 2017 capital plan will generally be non-speculative and support our overarching strategy to diversify our platform.
Capital expenditures for 2016 were $15.2 million and capital commitments were $3.1 million as at December 31, 2016, compared with capital expenditures of $49.6 million and capital commitments of $2.7 million as at December 31, 2015. The capital spending and capital commitments continue to be primarily for growth capital related to expanding the BOXX Modular fleet in the United States and Canada. Capital expenditures for the Quarter were $5.8 million, including $1.8 million of non-cash additions, and excluding the $4.2 million MPA acquisition, compared with $1.5 million for the Comparative Quarter.
The Payout Ratio (see "Non-GAAP Financial Measures") for the Quarter decreased to 28% from 43% in the Comparative Quarter as a result of lower distributable cash flow partially offset by a decrease in the monthly dividend.
A copy of the Company's audited consolidated financial statements for the years ended December 31, 2016 and 2015 and related management's discussion and analysis have been filed with the Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) and www.blackdiamondgroup.com.
As a result of the Offering, the Company will not host a Q4 2016 results conference call.
SOURCE: Black Diamond Group Limited
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