NEW YORK, Aug. 14, 2017 /PRNewswire/ -- MFC Bancorp
Ltd. (the "Company" or "MFC") (NYSE: MFCB) announces its results
for the three and six months ended June 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 and believe that we have completed the
majority of the steps necessary to reposition the Company for the
future. However, our balance sheet continues to reflect trade
receivables of $101.8 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.
As part of our strategy, we have repositioned the group with the
following actions:
- In July 2017, the former parent
of our group of companies ("Old MFC"), MFC Bancorp Ltd.
(British Columbia), completed its
previously announced plan of arrangement (the "Arrangement"),
pursuant to which, among other things, the following transactions
were completed effective July 14,
2017:
-
- Share Consolidation/Split. The common shares of
Old MFC (the "Old MFC Shares") were consolidated on a 100 for 1
basis, with any resulting fractional shares being eliminated and
the registered holders of the same being paid therefor in cash
based upon the weighted average price of the Old MFC Shares over
the ten trading days immediately prior to the effective date of the
Arrangement and, thereafter, such Old MFC Shares were split on a 1
for 20 basis;
- Share Capital. Old MFC's stated shareholders'
capital was reduced by an amount equal to its retained deficit;
and
- Share Exchange. Each Old MFC Share outstanding
after the completion of the above consolidation and split was
exchanged for: (i) one of our common shares of US$0.001 par value each; and (ii) US$0.0001 per share in cash.
As a result of the completion of
the Arrangement, MFC Bancorp Ltd., a Cayman Islands corporation, became the
new parent company of our group. Its shares commenced trading on
the New York Stock Exchange on July 14,
2017 under the symbol "MFCB".
- We have expanded our merchant banking activities in
Europe by hiring qualified senior
individuals in the finance and merchant banking sector.
- We have rationalized our inventories, reducing them by 68% from
$32.0 million at December 31, 2016 to $10.1
million at June 30, 2017;
- In the first quarter of 2017, we completed the sale of a
non-core commodities trading business;
- We have deleveraged by reducing our short-term bank borrowings
by 27% from $95.4 million at
December 31, 2016 to $70.1 million at June 30,
2017 and by reducing total debt by 35% from $116.8 million at December
31, 2016 to $76.0 million at
June 30, 2017; and
- We established a presence in Dublin,
Ireland, a progressive financial center with many attractive
attributes.
FIRST HALF 2017 FINANCIAL RESULTS
The first half of 2017 reflects our continued repositioning,
with losses from the rationalization of certain businesses
overshadowing the 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.
Revenues and losses
Total revenues for the first half of 2017
decreased to $178.4 million from
$687.5 million in the same period of
2016 primarily as a result of the sale of non-core
subsidiaries, the reduction of inventories, our decision to exit
certain product lines and, to a lesser extent, the strengthening of
the Canadian dollar during the period.
Net loss for the first six months of 2017 was
$6.7 million, or $0.11 per share on a diluted basis, compared to a
net loss of $0.7 million, or
$0.01 per share on a diluted basis
for the same period last year. Net loss for the current six month
period was primarily due to losses from the rationalization and
runoff of product lines and other expenses related to office
closures.
Inventory Reduction
In the first six months of 2017, we further reduced our
inventories by $21.9 million, from
$32.0 million as at December 31, 2016 to $10.1
million as at June 30, 2017.
This was primarily a result of exiting certain product lines and
geographical markets. From almost $300
million 21 months ago, we have almost entirely rationalized
our inventories and from this level we do not expect any further
material reductions.
The following table sets forth our inventories as at
June 30, September 30, and December
31, 2016 and March 31, and
June 30, 2017:
INVENTORIES
(In
thousands)
|
June
30, 2016
|
|
September
30, 2016
|
|
December
31, 2016
|
|
March
31, 2017
|
|
June
30, 2017
|
Inventories
|
$
154,703
|
|
$
129,454
|
|
$
31,954
|
|
$
20,229
|
|
$
10,083
|
Debt Reduction
Our continued proactive balance sheet initiatives have led to a
significant reduction in our net debt levels. Our goal has been to
match our assets and liabilities so that our long-term assets are
financed with long-term debt and equity and our short-term assets
are financed with short-term debt and equity.
In the first six months of 2017, we reduced our total long-term
debt to $76.0 million from
$116.8 million as at December 31, 2016 by repaying debts that became
due and paying down loans which had financed assets that we have
rationalized.
Financial Highlights
The following table highlights selected figures on our financial
position as at June 30, 2017 and
December 31, 2016:
FINANCIAL
POSITION
(In thousands,
except ratios and per share amount)
|
June
30,
|
|
December
31,
|
2017
|
|
2016
|
Cash and cash
equivalents
|
$
54,535
|
|
$
120,676
|
Short-term
securities
|
5,129
|
|
5,018
|
Trade
receivables
|
132,383
|
|
135,962
|
Tax
receivables
|
11,820
|
|
11,743
|
Other
receivables
|
33,253
|
|
35,251
|
Inventories
|
10,083
|
|
31,954
|
Total current
assets
|
262,823
|
|
400,954
|
Total current
liabilities
|
115,060
|
|
214,676
|
Working
capital
|
147,763
|
|
186,278
|
Current
ratio(1)
|
2.28
|
|
1.87
|
Acid-test
ratio(2)
|
2.08
|
|
1.68
|
Total
assets
|
516,070
|
|
650,338
|
Short-term bank
borrowings
|
70,089
|
|
95,416
|
Total long-term
debt
|
76,029
|
|
116,813
|
Long-term
debt-to-equity(1)
|
0.19
|
|
0.25
|
Total
liabilities
|
199,876
|
|
320,908
|
Shareholders'
equity
|
315,330
|
|
327,520
|
Net book value per
share
|
5.03
|
|
5.19
|
_____________
|
|
|
|
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).
|
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 June 30, 2017 and 2016:
OPERATING
EBITDA
|
Three months Ended
June 30,
|
(In
thousands)
|
2017
|
|
2016
|
|
|
|
(Re-presented(1))
|
Net
loss(2)
|
$
(4,371)
|
|
$
(396)
|
Income tax expense
(recovery)
|
(822)
|
|
2,049
|
Finance
costs
|
1,902
|
|
4,566
|
Amortization,
depreciation and depletion
|
1,726
|
|
1,727
|
Operating (loss) EBITDA
|
$
(1,565)
|
|
$
7,946
|
___________
|
|
|
|
Notes:
|
(1) In
connection with the reclassification of our mining interest and
hydrocarbon properties to continuing operations in 2016, costs of
sales and services have been re-presented for this
period.
|
(2) Includes
net income attributable to non-controlling interests.
|
Credit Lines and Facilities
We established, utilized and maintain various kinds of credit
lines and facilities with banks and insurers. Most of these
facilities are short-term. These facilities are used in our
day-to-day merchant banking business. The amounts drawn under such
facilities fluctuate with the type and level of transactions being
undertaken.
As at June 30, 2017, we had credit
facilities aggregating $146.8
million, as follows: (i) we had unsecured revolving credit
facilities aggregating $70.2 million,
from banks. The banks generally charge an interest rate at
inter-bank rate plus an interest margin; (ii) we had revolving
credit facilities aggregating $27.4
million, from banks for structured solutions, a special
trade financing. The margin is negotiable when the facility is
used; (iii) we had a specially structured non-recourse factoring
arrangement with a bank up to a credit limit of $42.3 million, for our finance and supply chain
activities. We factor certain of our trade receivable accounts upon
invoicing, at inter-bank rate plus a margin; and (iv) we had
foreign exchange credit facilities of $6.9
million with banks.
All of these facilities are either renewable on a yearly basis
or usable until further notice. Many of our credit facilities are
denominated in Euros and, accordingly, such amounts may fluctuate
when reported in Canadian dollars.
We continue to evaluate the benefits of certain facilities that
may not have strategic long-term relevance to our business and
priorities going forward and may modify or eliminate additional
facilities in the future. We do not anticipate that this will
have a material impact on our overall liquidity.
President's Comments
Michael Smith, President and CEO
of the Company, commented: "We believe we have made progress
towards repositioning our Company to create long-term value, having
significantly reduced inventories, rationalized non-core businesses
and reduced our cost structure. Our balance sheet continues to be
impacted by trade receivables, which we are working diligently to
recover. We look forward to updating stakeholders as we make
further progress."
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 six months ended June 30,
2017 (the "Quarterly Report"), copies of which are available
under the Company's profile at www.sedar.com or www.sec.gov 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 to book a conference call with our
management. Questions may also be emailed to Rene Randall at rrandall@bmgmt.com.
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
through existing collateral, guarantees, mortgages and other
mitigation securities; (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.
View original
content:http://www.prnewswire.com/news-releases/mfc-bancorp-ltd-reports-results-for-the-three-and-six-months-ended-june-30-2017-300503511.html
SOURCE MFC Bancorp Ltd.