NEW YORK, May 15, 2017 /PRNewswire/ -- MFC Bancorp Ltd.
(the "Company" or "MFC") (NYSE: MFCB) announces its results for the
three months ended March 31, 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.)
In the first quarter of 2017, we continued to progress our
strategy to exit product lines and geographies with unsatisfactory
margins, deleverage, and reallocate capital to our merchant banking
business.
To this end, since the beginning of 2017, we have:
- rationalized our inventories by reducing them by 37% from
$32.0 million at December 31, 2016 to $20.2
million at March 31,
2017;
- deleveraged through repayment of short-term bank
borrowings, reducing them by 29% from $95.4
million at December 31, 2016
to $67.4 million at March 31, 2017;
- completed the sale of a non-core commodities trading
business;
- reduced our total debt by 31% from $116.8 million at December
31, 2016 to $80.3 million at
March 31, 2017; and
- allocated resources for the expansion of our merchant
banking business.
Inventory Reduction
In the first quarter of 2017, we reduced our inventories by
$11.7 million, from $32.0 million as at December 31, 2016 to $20.2
million as at March 31, 2017.
This was a result of exiting certain product lines and geographical
markets.
The following table sets forth our inventories as at
March 31, June
30, September 30, and
December 31, 2016 and March 31, 2017:
INVENTORIES (In
thousands)
|
|
March 31,
2016
|
|
June 30,
2016
|
|
September
30, 2016
|
|
December
31, 2016
|
|
March 31,
2017
|
Inventories
|
|
$
197,406
|
|
$
154,703
|
|
$
129,454
|
|
$
31,954
|
|
$
20,229
|
Debt Reduction
We strive 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.
As we streamlined our operations and rationalized underperforming
subsidiaries, we have reduced our debt accordingly. In the first
quarter of 2017, we reduced our total long-term debt to
$80.3 million from $116.8 million as at December 31, 2016 and $282.2 million as of September 30, 2016 by repaying debts that became
due and paying down loans which had financed assets which were
rationalized.
Financial Highlights
The following table highlights selected figures on our financial
position as at March 31, 2017 and
December 31, 2016:
FINANCIAL
POSITION (In thousands, except
ratios and per share amount)
|
March 31,
|
|
December
31,
|
2017
|
|
2016
|
Cash and cash
equivalents
|
$
61,257
|
|
$
120,676
|
Short-term
securities
|
4,990
|
|
5,018
|
Trade
receivables
|
145,025
|
|
135,962
|
Tax
receivables
|
11,711
|
|
11,743
|
Other
receivables
|
29,297
|
|
35,251
|
Inventories
|
20,229
|
|
31,954
|
Total current
assets
|
287,392
|
|
400,954
|
Total current
liabilities
|
124,365
|
|
214,676
|
Working
capital
|
163,027
|
|
186,278
|
Current
ratio(1)
|
2.31
|
|
1.87
|
Acid-test
ratio(2)
|
2.04
|
|
1.68
|
Total
assets
|
536,241
|
|
650,338
|
Short-term bank
borrowings
|
67,432
|
|
95,416
|
Total long-term
debt
|
80,279
|
|
116,813
|
Long-term
debt-to-equity(1)
|
0.20
|
|
0.25
|
Total
liabilities
|
214,291
|
|
320,908
|
Shareholders'
equity
|
319,695
|
|
327,520
|
Net book value per
share
|
5.10
|
|
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.
For the three months ended March 31,
2017, our Operating EBITDA was $5.7
million compared to $9.4 for
the same period of 2016.
The following is a reconciliation of our net income (loss) to
Operating EBITDA for the three months ended March 31, 2017 and 2016:
OPERATING
EBITDA
|
Three
months Ended March 31,
|
(In
thousands)
|
2017
|
|
2016
|
|
|
|
(Re-presented(1))
|
Net (loss) income
(2)
|
$ (1,739)
|
|
$
270
|
Income tax
expense
|
1,611
|
|
1,553
|
Finance
costs
|
3,627
|
|
5,502
|
Amortization,
depreciation and depletion
|
2,220
|
|
2,059
|
Operating
EBITDA
|
$
5,719
|
|
$
9,384
|
|
|
|
|
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.
|
Update on the Proposed Plan of Arrangement
On March 31, 2017, we announced
our intention to pursue a proposed plan of arrangement (the "Plan")
under British Columbia corporate
law, pursuant to which, among other things, we would reduce our
shareholders' capital by an amount equal to our retained
deficit, complete a consolidation, followed by a split, of our
common shares and our existing common shares would be exchanged for
the shares of a new parent company incorporated under the laws of
the Cayman Islands ("New MFC"),
which would become the new publicly traded parent company of our
group. The Plan is subject to, among other things, finalization and
requisite court, shareholder and board approvals. We currently
expect to complete the Plan in the late second quarter or early
third quarter of 2017.
The Company believes that the benefits of the Plan are, among
other things:
- Flexible Corporate Structure. The separation of
the public parent company from its operating businesses will
facilitate future strategic transactions, such as spin-offs and
corporate reorganizations as well as provide additional options for
future financing structures.
- Fiscal Flexibility. By being located in an
international financial center with advantageous tax laws, New MFC
will have enhanced flexibility with respect to fiscal and tax
planning. The Cayman Islands has no corporate income,
dividends or capital gains taxes and no withholding taxes on
distributions to shareholders.
- Reduced Expenses We have a large number of very small
shareholders, as such we believe that by eliminating odd lot
holders under the Plan, we will reduce our ongoing administrative
costs and allow fractional shareholders to receive cash for their
fractional shares without incurring brokerage commissions or
expenses.
- Enhanced Global Exposure. We are a global company, with
operations spanning internationally and New MFC's jurisdiction of
incorporation of the Cayman
Islands, a recognized international financial center, is
more reflective of the international nature of our
operations. New MFC would also consider a secondary listing
of its shares on a second stock exchange after completion of the
Plan to obtain additional global exposure and liquidity.
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 March 31, 2017, we had
credit facilities aggregating $345.5
million as follows: (i) we had unsecured revolving credit
facilities aggregating $69.1 million
from banks. The banks generally charge an interest rate at
inter-bank rates plus an interest margin; (ii) we also had
revolving credit facilities aggregating $52.2 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 $198.4 million for our merchant
banking activities. We factor certain of our trade receivables upon
invoicing, at the inter-bank rate plus a margin; and (iv) we had
foreign exchange credit facilities of $25.8
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: "Going forward, we intend to expand our
merchant banking activities. Our plan to exit unsatisfactory
product lines and geographies, significantly reducing our
inventories and receivables and reallocating the capital to more
profitable business units, is proceeding well."
Mr. Smith concluded: "We believe these actions and the
announcement of the Plan will help reduce expenses and ultimately
result in an adequate return on our equity."
Stakeholder Communications
Management welcomes any questions you may have and looks forward
to discussing our operations, results and plans with stakeholders
and:
- all stakeholders are encouraged to read our entire management's
discussion and analysis for the three months ended March 31, 2017 and our unaudited financial
statements for the three months ended March
31, 2017, which are available under the Company's profile at
www.sedar.com or at www.sec.gov, for a greater understanding of our
business and operations; and
- any stakeholders who have questions regarding the information
in our quarterly report for the three months ended March 31, 2017 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.
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, its strategy to reduce
trade receivables and inventories, the completion and anticipated
benefits of the Plan, future business prospects 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 realize the anticipated benefits of
our acquisitions; (vi) additional risks and uncertainties resulting
from strategic investments, acquisitions or joint ventures; (vi)
counterparty risks related to our trading and finance activities;
(vii) our ability to complete the Plan as contemplated, or at all,
and our ability to realize on the anticipated benefits of the plan;
(viii) operating hazards; and (ix) 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 are set forth in our management's discussion and
analysis for the three months ended March
31,2017 and our annual report on Form 20-F for the year
ended December 31, 2016, each filed
with the Securities and Exchange Commission and Canadian securities
regulators.
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SOURCE MFC Bancorp Ltd.