Mosaic Capital Corporation Reports Annual 2016 Financial Results

CALGARY, April 3, 2017 /CNW/ - Mosaic Capital Corporation ("Mosaic" or the "Company") (TSX–V Symbols: M and M.DB) has released its audited annual consolidated financial statements for the year ended December 31, 2016.

Selected Annual Highlights
NOTE: During 2015, Mosaic divested two portfolio companies, Streamline Mechanical and Polar Geomatic.  Pursuant to IFRS, the results of these discontinued operations and gains (losses) on divestiture are reported separately in the Consolidated Statement of Income and Comprehensive Income as "(loss) income from discontinued operations".  

All amounts are in thousands except %

2016

2015

% Change

Revenue(2)

$197,184

$182,329

8%

Income from operations (2)

$19,736

$19,838

(0.5%)

Adjusted EBITDA (1)(2)

$20,477

$19,898

3%

Cash Flow Prior to Changes In Non-Cash Working Capital (3)

$17,803

$18,125

(2%)

Free Cash Flow (1)(2)

$12,507

$12,757

(2%)

Increase (Decrease) In Free Cash Flow Per Common Share (Fully Diluted) (2)

2%

(58%)


Net Income and Comprehensive Income Attributable to Shareholders (3)

$5,498

$3,918

40%

Preferred Distribution Payout Ratio (1)(2)

104%

99%


Combined Payout Ratio (2)

132%

126%




Notes:

1.

These non-IFRS financial measures do not have any standardized meaning under IFRS, may not be comparable to similar measures presented by other issuers and are defined and reconciled to their most directly comparable IFRS measure within our Management's Discussion and Analysis for the year ended December 31, 2016 under the sections "Non-IFRS Financial Measures" and "Reconciliation of Non-IFRS Financial Measures", which document is available electronically at www.sedar.com under Mosaic's profile.

2.

Excludes results from discontinued operations.

3.

Includes results from discontinued operations.           

 

2016 Financial and Operational Highlights

  • During 2016 and Q1 2017, Mosaic accomplished a number of key initiatives including:
     
    • The acquisitions of Mackow Industries and Bassi Construction which are the largest in Mosaic's history, will contribute to growth and further diversification of Mosaic's portfolio;

    • Execution of a new $35 million credit facility;

    • $150 million investment in Mosaic by Fairfax Financial Holdings Limited (FFH:TSX) which will positively impact Mosaic's cost of capital and cash flows;

    • Redemption of Mosaic's 10% Preferred Securities and series A preferred shares and retraction of Private Yield Securities;

    • Subscription Privilege offering closed March 2, 2017 which raised cash of $15.2 million;

    • Expansion of Mosaic's management team, including Mark Gardhouse joining as new CEO; and

    • Realignment and broadening of Mosaic's acquisition deal flow network.

  • Faced with the continuing difficult economy in western Canada, Mosaic successfully strengthened its portfolio, reduced exposure to western Canada, improved its capital structure and expanded its executive team.

  • The Diversified segment's growth of 105% in income from operations for 2016 was primarily due to strong operating results from Mackow Industries since its acquisition on August 1, 2016 and growth in Industrial Scaffold's business.

  • The Infrastructure and Energy segment results were negatively impacted by certain project challenges and the continuing difficult western Canadian business climate.

  • Mosaic's currently undrawn $35 million credit facility together with consolidated cash balances provides a strong capital position for growth.

 

Financial Performance By Segment*
For the Year Ended December 31, 2016

All amounts are in thousands except %

CONSOLIDATED

Diversified

Infrastructure

Energy

Revenue

% of Total

 

% increase (decrease) year over year

$197,184

100%

 

8%

$50,780

26%

 

49%

$137,949

70%

 

2%

$7,362

4%

 

(35%)

Income from Operations

 

% increase (decrease) year over year

$19,736

 

(0.5%)

$9,571

 

105%

$14,017

 

(16%)

$970

 

(59%)

*Revenue and income from operations attributable to the Real Estate segment are immaterial.

 

Outlook

Mosaic is well positioned to execute its strategic plan of diversified acquisitions in 2017 and beyond.

In 2016, it expanded its management and acquisition team and transitioned much of its focus to outside of western Canada and toward slightly larger enterprises. Accomplishing this transition is taking time and effort, but it believes it is the optimal strategy for Mosaic.

This move to greater portfolio economic diversity, size and quality may result in higher valuations for targeted acquisitions. However, with its internal resources and access to capital, the company feels it can complete attractive acquisitions, which will enhance Mosaic's value and strength.

The company continues to see solid deal flow from across Canada, spanning a wide range of industrial sectors. This diversity provides the company an excellent vantage point to assess which sectors it views as most attractive for investment.

The January 2017 Fairfax private placement financing together with the February 2017 redemptions of the 10% Preferred Securities and series A preferred shares, the retraction of the Private Yield Securities and the March 2017 Subscription Privilege offering are pivotal transactions for Mosaic as they serve to reduce Mosaic's overall cost of capital and positively impact annual cash flow of Mosaic due to the resulting reduction in annual distributions to securityholders on an equivalent capital amount basis by over $5.4 million as well as leave Mosaic with a strong capital position for growth. 

These improvements will help to reduce Mosaic's combined payout ratios in 2017, enable Mosaic to better compete for acquisitions of higher-quality and larger companies and retain more of its internally generated capital for reinvestment into acquisitions.

ABOUT MOSAIC CAPITAL CORPORATION

Mosaic is a Canadian investment company that owns a portfolio of established businesses which span a diverse range of industries and geographies. Mosaic's strategy is to create long-term value for its shareholders through accretive acquisitions, long-term portfolio ownership, sustained cash flows and organic portfolio growth.  Mosaic achieves its objectives by maintaining financial discipline, acquiring businesses at attractive valuations, performing extensive acquisition due diligence, utilizing creative transaction structuring and working closely with subsidiary businesses after acquisition.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward-Looking Information

This news release contains forward-looking information and statements within the meaning of applicable Canadian securities laws (herein referred to as "forward-looking statements") that involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  All information and statements in this press release which are not statements of historical fact may be forward-looking statements. The words "believe", "expect", "intend", "estimate", "anticipate", "project", "scheduled", and similar expressions, as well as future or conditional verbs such as "will", "should", "would", and "could" often identify forward-looking statements.

In particular, forward-looking statements in this news release include, but are not limited to: the anticipated impact of the acquisitions of Mackow Industries and the businesses previously carried on by Bassi Constructions Ltd. and Basscon Group Inc.; the anticipated reduction in annual distributions to securityholders; the anticipated reduction of Mosaic's combined payout ratios in 2017; the anticipated impacts of the investment by Fairfax Financial Holdings Limited and the redemption of the 10% Preferred Securities and Series A Shares and retraction of the Private Yield Securities; and Mosaic's belief that it is entering into an enhanced period of growth and financial performance. Such statements or information, if any, are only predictions and reflect the current beliefs of management with respect to future events and are based on information currently available to management.  Actual results and events may differ materially from those contemplated by these forward-looking statements due to these statements being subject to a number of risks and uncertainties.

Undue reliance should not be placed on these forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature forward-looking statements involve assumptions and known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other things contemplated by the forward-looking statements will not occur. Some of the assumptions made by Mosaic upon which forward-looking statements are typically based include:  the business operations of the operating businesses of Mosaic continuing on a basis consistent with prior years; the ability of Mosaic and its subsidiaries to access financing from time to time on favorable terms; the ability of Mosaic to realize anticipated benefits of acquisitions; the continuation of executive and operating management or the non-disruptive replacement of them on competitive terms; the ability of Mosaic to maintain reasonably stable operating and general administrative expenses; the current economic environment in western Canada (including commodity prices, such as oil prices) stabilizing and showing signs of strengthening over the coming year; and the economic environment in Canada not deteriorating due to the influence of international economic developments in the United States, Europe, Asia and elsewhere.

A number of factors could cause actual results to differ materially from the results stated in the forward-looking statements, including, but not limited to, risks related to: general economic and business conditions; the failure of Mosaic to identify acquisition targets or complete announced acquisitions; third parties honouring their contractual obligations with Mosaic and its subsidiaries; results of management's ongoing efforts to sell, re-lease, lease, develop and improve real estate owned and being acquired indirectly by Mosaic through its subsidiaries; the failure to realize the anticipated benefits of Mosaic's recent and future acquisitions; adverse fluctuations in commodity prices; competition for, among other things, capital, equipment and skilled personnel; the inability to generate sufficient cash flow from operations to meet current and future obligations; the inability to obtain required debt and/or equity capital on suitable terms; competition for acquisition targets; supply disruptions; adverse weather conditions; seasonality and fluctuations in results; and limited diversification of Mosaic's subsidiaries. Should any of the risks or uncertainties facing Mosaic and its subsidiaries materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance, activities or achievements could vary materially from those expressed or implied by any forward-looking statements contained in this news release.

Readers are cautioned that the foregoing list of risks is not exhaustive. Additional information on these and other factors that could affect the operations or financial results of Mosaic and its subsidiaries are included in Mosaic's annual information form for the year ended December 31, 2016 which has been filed under Mosaic's profile on SEDAR (www.sedar.com).

Although Mosaic believes that the expectations represented by any forward-looking-statements contained herein are reasonable based on the information available to them on the date of this news release, management cannot assure investors that actual results, performance or achievements will be consistent with these forward-looking statements. Any forward-looking statements herein contained are made as of the date of this press release and Mosaic does not assume any obligation to update or revise them to reflect new information, events or circumstances, except as required by law.

SOURCE MOSAIC CAPITAL CORPORATION

For further information: Mosaic Capital Corporation, 400, 2424 - 4th Street SW, Calgary, AB T2S 2T4, Attention: Allan Fowler, Chief Financial Officer, T: (403) 270-4663, E: afowler@mosaiccapitalcorp.com

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MOSAIC CAPITAL CORPORATION

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