NEW YORK, Nov. 14, 2017 /PRNewswire/ -- MFC Bancorp
Ltd. (the "Company" or "MFC") (NYSE: MFCB) announces its results
for the three and nine months ended September 30, 2017 and provides an update on its
recent corporate developments. The Company's financial statements
are prepared in accordance with International Financial Reporting
Standards ("IFRS"). (All references to dollar amounts are in
Canadian dollars unless otherwise stated.)
For almost two years, we have focused our efforts on
rationalizing unprofitable and marginally profitable businesses and
geographies, reducing our structural cost profile, and reallocating
capital to merchant banking projects.
We have made significant progress on this strategy, reducing our
inventories since September 2015 by
approximately $268 million, selling
numerous non-core subsidiaries, and closing offices and business
lines which were not generating a sufficient return. In addition,
we have reduced our structural cost profile, though we continue to
make incremental improvements to reduce expenses.
As part of this process, we have restructured our balance sheet
and repositioned the group with the following actions:
- We expanded our merchant banking active in Europe by hiring highly qualified senior
individuals in the finance and banking sector.
- Deleveraged through reducing short-term bank borrowings by 27%
from $95.4 million at December 31, 2016 to $69.2
million at September 30, 2017,
and reducing total debt by 36% from $116.8
million at December 31, 2016
to $75.2 million at September 30, 2017.
- We are relocating our commercial operations to Dublin, Ireland. Ireland is a progressive financial center with
many attractive attributes, and Dublin will be MFC Bancorp's footprint to our
European business going forward. With Dublin as the center of our commercial
operations, we plan to expand our international footprint.
MFC now operates as an international merchant bank providing
financial services and committing proprietary capital to promising
enterprises and investing to capture opportunities for our own
account. We seek businesses or assets with intrinsic values not
properly reflected in pricing. Our activities are not passive, as
we seek projects where our financial expertise and management can
add or unlock value.
FINANCIAL RESULTS FOR THE FIRST NINE MONTHS OF 2017
Total revenues for the nine months ended
September 30, 2017 decreased to
$235.7 million from $944.9 million in the same period of 2016. Total
revenues for the three months ended September 30, 2017 decreased to $57.3 million from $257.4
million in the same period of 2016. The decline in revenue
was primarily due to the sale of non-core subsidiaries in the
fourth quarter of 2016 and the first quarter of 2017, the reduction
of inventories and our decision to exit certain product lines and
geographies, partially offset by revenues from prior claims made by
us for royalty underpayments.
Selling, General and Administrative Expenses for
the nine months ended September 30,
2017 decreased by more than 40% from $62.9 million in the same period of 2016 to
$37.3 million as a result of the sale
of non-core subsidiaries, exiting business lines, office closures,
and structural cost reductions. For the three months ended
September 30, 2017, selling, general
and administrative expenses declined by 54% to $9.4 million from $20.2
million in the same period of 2016.
Income tax expense (other than resource property
revenue taxes) for the nine months ended September 30, 2017 was $2.4 million compared to $2.7 million in the prior year period. Our income
tax paid in cash, excluding resource property revenue taxes, during
the nine months ended September 30,
2017 was $1.9 million,
compared to $2.2 million in the same
period of 2016. We had income tax expense (other than resource
property revenue taxes) for the three months ended September 30, 2017 of $1.9
million, compared to a recovery of $0.2 million in the prior year period. Our income
tax paid in cash, excluding resource property revenue taxes, during
the three months ended September 30,
2017 was $0.3 million,
compared to $0.1 million in the same
period of 2016.
Net loss (attributable to our shareholders) for
the first nine months of 2017 was $14.0
million, or $1.11 per share on
a diluted basis, compared to $8.7
million, or $0.69 per share on
a diluted basis for the same period of 2016. Net loss for the
current nine month period was primarily due to lower margins on our
commodities runoff businesses and inventories, and other expenses
related to office closures, personnel reduction, litigation and the
costs related to the plan of arrangement completed in the third
quarter of 2017 (the "Arrangement"). Per share amounts for prior
periods in this press release have been restated to reflect the
share consolidation and split under the Arrangement.
Operating EBITDA
Operating EBITDA is defined as earnings before interest, taxes,
depreciation, depletion, amortization and impairment. Operating
EBITDA is a non-IFRS financial measure and should not be considered
in isolation or as a substitute for performance measures under
IFRS. Management uses Operating EBITDA as a measure of our
operating results and considers it to be a meaningful supplement to
net income as a performance measure, primarily because we incur
depreciation and depletion from time to time.
The following is a reconciliation of our net loss to Operating
(loss) EBITDA for the three months ended September 30, 2017 and 2016:
OPERATING
EBITDA
|
Three months
Ended September 30,
|
(In
thousands)
|
2017
|
2016
|
Net
loss(1)
|
$
(6,986)
|
$
(7,452)
|
Income tax expense
(recovery)
|
3,179
|
(85)
|
Finance
costs
|
2,044
|
5,319
|
Amortization,
depreciation and depletion
|
1,468
|
4,980
|
Operating (loss) EBITDA
|
$
(295)
|
$
2,762
|
______________
|
|
|
Note:
|
|
|
(1) Includes net income
attributable to non-controlling interests.
|
Trade Receivables
Our balance sheet continues to reflect trade receivables of
$93.1 million due from our former
customer that filed for insolvency in 2016. As with any legal
process, there is uncertainty as to the timing and amounts of
proceeds, but we continue to diligently exercise our rights in
connection with such receivables in order to maximize recoveries,
and we are also pursuing other alternatives to rationalize these
interests.
Financial Highlights
The following table highlights selected figures on our financial
position as at September 30, 2017 and
December 31, 2016:
FINANCIAL
POSITION
(In thousands,
except ratios and per share amount)
|
September
30,
2017
|
December
31,
2017
|
Cash and cash
equivalents
|
$
63,090
|
$
120,676
|
Short-term
securities
|
5,075
|
5,018
|
Trade
receivables
|
127,917
|
135,962
|
Tax
receivables
|
11,709
|
11,743
|
Other
receivables
|
37,820
|
35,251
|
Inventories
|
8,633
|
31,954
|
Total current
assets
|
260,928
|
400,954
|
Total current
liabilities
|
121,945
|
214,676
|
Working
capital
|
138,983
|
186,278
|
Current
ratio(1)
|
2.14
|
1.87
|
Acid-test
ratio(2)
|
2.02
|
1.68
|
Total
assets
|
504,616
|
650,338
|
Short-term bank
borrowings
|
69,248
|
95,416
|
Total long-term
debt
|
75,150
|
116,813
|
Long-term
debt-to-equity(1)
|
0.17
|
0.25
|
Total
liabilities
|
198,627
|
320,908
|
Shareholders'
equity
|
303,902
|
327,520
|
Net book value per
share
|
24.24
|
25.94
|
______________
|
|
|
Notes:
|
|
|
(1) The current ratio is
calculated as current assets divided by current liabilities and the
long-term debt-to-equity ratio is calculated as long-term debt,
less current portion, divided by shareholders' equity.
|
(2) The acid-test ratio is
calculated as cash plus account receivables plus short-term
securities, divided by current liabilities (excluding liabilities
related to assets held for sale).
|
Appointment of New Auditors
We are pleased to announce the appointment of Moore Stephens LLP
as MFC's new independent auditors. Moore Stephens is a global
accountancy and consultancy network with its headquarters in
London, England. Since Moore
Stephens was founded a century ago, Moore Stephens has grown to be
one of the largest international accounting and consulting groups
worldwide.
The Company's former auditors, PricewaterhouseCoopers LLP,
resigned voluntarily and there were no unresolved disagreements
between the Company and PricewaterhouseCoopers LLP on any matter of
accounting principles or practices, financial statement disclosure
or auditing scope or procedures. We thank PricewaterhouseCoopers
LLP for their service over the previous three years.
Stakeholder Communications
Management welcomes any questions you may have and looks forward
to discussing our operations, results and plans with stakeholders.
Further:
- all stakeholders are encouraged to read our entire management's
discussion and analysis and our unaudited financial statements for
the three and nine months ended September
30, 2017 (the "Quarterly Report"), which are included in the
Company's Form 6-K of today's date, for a greater understanding of
our business and operations; and
- any stakeholders who have questions regarding the information
in the Quarterly Report may call our North American toll free line:
1 (844) 331 3343 (International callers: +1 (604) 662
8873) to book a conference call with our senior management.
Questions may also be emailed to Rene
Randall at rrandall@bmgmt.com.
President's Comments
Michael Smith, President and CEO
of the Company, commented: "The first nine months of 2017 reflect
our continued repositioning, with losses from the rationalization
of certain businesses and geographies overshadowing progress we
have made growing our merchant banking operations. While we
are disappointed that this restructuring has taken so much time, we
continue to make progress towards our goal of ultimately returning
to an adequate return profile for the entire group."
About MFC
MFC is a merchant bank that provides financial services and
facilitates structured trade for corporations and institutions. We
specialize in markets that are not adequately addressed by
traditional sources of supply and finance, with an emphasis on
providing solutions for small and medium sized enterprises. We
operate in multiple geographies and industries. As a supplement to
our operating business, we commit proprietary capital to assets and
projects where intrinsic values are not properly reflected. These
investments can take many forms, and our activities are generally
not passive. The structure of each of these opportunities is
tailored to each individual transaction.
Disclaimer for
Forward‐Looking Information
This news release contains statements which are, or may be
deemed to be, "forward‐looking statements" which are
prospective in nature, including, without limitation, statements
regarding the Company's business plans and strategies, future
business prospects, the exercise of our rights to recover trade
receivables and any statements regarding beliefs, expectations or
intentions regarding the future. Forward-looking statements
are not based on historical facts, but rather on current
expectations and projections about future events, and are therefore
subject to risks and uncertainties which could cause actual results
to differ materially from the future results expressed or implied
by the forward-looking statements. Often, but not always,
forward-looking statements can be identified by the use of
forward-looking words such as "plans", "expects" or "does not
expect", "is expected", "scheduled", "estimates", "forecasts",
"projects", "intends", "anticipates" or "does not anticipate", or
"believes", or variations of such words and phrases or statements
that certain actions, events or results "may", "could", "should",
"would", "might" or "will" be taken, occur or be achieved. Such
statements are qualified in their entirety by the inherent risks
and uncertainties surrounding future expectations. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results,
revenues, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by the forward-looking statements. Important factors that
could cause our actual results, revenues, performance or
achievements to differ materially from our expectations include,
among other things:(i) periodic fluctuations in financial results
as a result of the nature of our business; (ii) commodities price
volatility; (iii) economic and market conditions; (iv) competition
in our business segments; (v) our ability to enforce our rights,
and recover expected amounts related to our insolvent customer;
(vi) our ability to realize the anticipated benefits of our
acquisitions; (vii) additional risks and uncertainties resulting
from strategic investments, acquisitions or joint ventures; (viii)
counterparty risks related to our trading and finance activities;
(ix) operating hazards; and (x) other factors beyond our
control. Such forward-looking statements should therefore be
construed in light of such factors. Other than in accordance with
its legal or regulatory obligations, the Company is not under any
obligation and the Company expressly disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise. Additional information about these and other
assumptions, risks and uncertainties is set out in the "Risk
Factors" section of our Quarterly Report and in our 2016 annual
report on Form 20-F filed with the Securities and Exchange
Commission and Canadian securities regulators.
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SOURCE MFC Bancorp Ltd.