August 3, 2018 - 7:51 PM EDT
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Hyduke Announces Second Quarter 2018 Financial Results

Canada NewsWire

NISKU, AB, Aug. 3, 2018 /CNW/ - Hyduke Energy Services Inc. ("Hyduke" or the "Company") (HYD – TSX) announced operating results for the three and six months ended June 30, 2018 and 2017. Hyduke's Financial Statements and Management Discussion & Analysis have been filed with regulators and are available at www.sedar.com.

Unless otherwise stated, tabular amounts presented are expressed in thousands of Canadian dollars and per-share figures in dollars per weighted average common share.

SELECTED FINANCIAL INFORMATION









Three
months
ended
June 30,
2018

Year-
over-year
change
(%)

Three
months
ended
June 30,
2017

Six months
ended
June 30,
2018

Year-
over-year
change
(%)

Six
months
ended
June 30,
2017

Revenue

5,213

-57.5%

12,253

17,419

-5%

18,287

Cost of goods sold

4,595

-58.7%

11,114

14,430

-14%

16,443

Gross profit(2)

618

-45.7%

1,139

2,989

38%

1,844

Gross profit %

11.9%

2.6%

9.3%

17.2%

41.2%

10.1%

Selling, general & administrative

2,285

-7.0%

2,456

5,265

25%

3,930








Net loss from continuing operations

(1,926)

-11.8%

(1,722)

(2,831)

-6%

(2,659)

Net loss

(1,929)

-12.2%

(1,720)

(2,842)

-7%

(2,655)

Per share – basic    (continuing operations)

(0.03)


(0.02)

(0.04)


(0.05)

Per shares – diluted (continuing operations)

(0.03)


(0.02)

(0.04)


(0.05)

EBITDA(1) – continuing operations

(1,548)

-34.9%

(1,143)

(1,576)

9%

(1,725)


June 30, 2018


December 31, 2017

Total assets

23,866



26,563

Total liabilities

18,118


17,883

(1) See "Non-IFRS Measures"

 

Revenue



Three Months Ended June 30

Six Months Ended June 30

$000's

2018

2017

Change (%)

2018

2017

Change (%)

Manufacturing & Fabrication

5,823

10,201

 

-43%

16,471

13,041

 

26%

Supply & Service

912

2,329

 

-61%

3,133

5,593

 

-44%

Elimination Entries

(1,522)

(277)


(2,185)

(348)


Total Revenue

5,213

12,253

-57%

17,419

18,286

-5%

 

For the three months ended June 30, 2018, the Manufacturing & Fabrication segment showed a 43% decrease in total revenues to $5,823.  Majority of the decrease reflects winding down of an acquisition, with the remainder decrease due to completion of AltaGas project. For the six months ended June 30, 2018 the Manufacturing & Fabrication segment generated $16,471 of revenue, a 26% increase over the same period in the prior year. The growth reflects increased revenues related to a recovery in legacy businesses, oil sands projects, and the diversification of its products and services to include the manufacture and repair of storage tanks in Company facilities and remote locations and custom steel fabrication.

Supply & Service revenue decreased 61% to $912 in the second quarter of 2018 compared to the second quarter of 2017. Year to date, Supply & Service revenue decreased by 44% to $3,133 compared the same period in the prior year.

On a consolidated basis, contribution margin for Q2/18 decreased by 58% to $1,161 (22.3% of revenue) compared to $2,764 (22.6% of revenue) in Q2/17. The decrease reflects the decrease in revenues discussed above. Indirect costs of $543 decreased 67% compared to $1,625 in 2017 as a result of discontinuing Western. The resulting consolidated gross margin was $618 (11.9 % of revenue) in Q2/18 compared to a margin of $1,139 (9.3% of revenue) in Q2/17.

SG&A expenses for the three months ended June 30, 2018 was $2,285, which is a 7.0% decrease compared to $2,456 for the same period in 2017. The SG&A expenses to total revenue is 43.8% in 2018 compared to 20.0% in 2017. 

Negative EBITDA (Refer to page 13 of the Company's MD&A for definition of EBITDA) for continuing operations was $1,548 for the second quarter of 2018 compared to a negative EBITDA of $1,185 in 2017.

Depreciation and amortization of $245 decreased from $355 for the same period in 2017 mainly due to the Q2 2018 dispositions and amortization of intangible assets and increased property, plant and equipment.

Stock based compensation was $19 compared to $10 for the same period in 2017.

The Company recorded $175 in interest charges during the second quarter of 2018, compared to $174 for the same period in 2017.

The gain on assets disposal in quarter 2 was $37, and was mainly due to an asset disposal in Western Manufacturing.

Continuing operations net loss for the second quarter of 2018 was $1,926 in 2018 compared to a loss of $1,722 in 2017.

The Company has been advised by the bank that provides the $1,500 operating line of credit that it will not renew the agreement and repayment is required on or before August 31, 2018.  The amount outstanding at June 30, 2018 was $400,000.  The Company cannot operate without additional credit.  For that reason management is reaching out to stakeholders and new lenders to replace this operating line of credit.

MANAGEMENT REVIEW AND OUTLOOK

Six months ended June 30, 2018 showed a slight dip in revenue compared with the same period in 2017, but a significant improvement in financial performance in terms of gross profit and EBITDA compared to the same period in the three prior fiscal years. Revenue of $18.3 million in 2017 decreased to $17.4 million in 2018, however gross profit of $3.0 million based on an operating margin of 17.2% for this six-month period was the highest compared to the same period in the last three years. While EBITDA was negative at $1.6 million, for the same period in 2017 it was negative $1.8 million and negative $2.4 million in 2016.

The Company is adjusting to the economic reality and is right sizing its operations accordingly but haven't reached where we need to be.

In the quarter Hyduke finished up at the AltaGas Ridley Island Propane Export Terminal (RIPET). The Company began this project in May of last year. It completed the fabrication and air raise of a 1.5 million pound roof on January 27, 2018.  The completion on the RIPET site will allow the accelerated release of a 10% construction holdback.

Business in other Company segments have slowed down and the limited working capital has had a direct impact on our gross margins.  Hyduke is continuously reviewing the fixed cost side of its business. Shutting down Western's Hythe facility and exiting the RIPET project has permanently reduced fixed property and labor costs. The objective is to continually improve operating efficiency, increasing revenue, increasing margins and reducing fixed costs.

The Company has projects underway in areas of oil sands tailing pond reclamation, utilities, agrifoods and transportation. Other drilling and well servicing contractors are making inquiries about new equipment, modifications and repairs. Some companies are looking at reworking their rigs in anticipation of putting them to work in the significantly more active market in the United States.

The conventional upstream oil and gas industry has not been strong for Hyduke in the past three years. The Company's survival has been in diversification into new products, new markets and new industries.

Higher oil prices are having a positive impact on Canada's upstream oil and gas industry despite all the well-publicized challenges regarding pipelines, market access and competitiveness.

Research by Industrial Reports, Inc. shows combined U.S. and Canadian planned capital spending increased 13 percent in June compared to May with $49.44 billion in spending for the two nations.  May's planned investment showed $43.65 billion.  The research organization reported 241 planned U.S. and Canadian projects in June.

Canadian planned investment also rose from $7.59 billion in May to $8.90 billion in June.  Projects in both nations ranged in value from $1 million to $13 billion.

In Canada, process projects led all markets with $7.63 billion in planned spending.  Power and energy projects accounted for $815 million and manufacturing projects showed $458.5 million.

Additional information relating to Hyduke is available under the Company's profile on SEDAR website at www.sedar.com and www.hyduke.com

Forward looking information

This news release contains forward-looking information relating to the expectations of management that the integration process will lead to improvements in operations and efficiency for Hyduke. Such forward-looking information is subject to important risks, uncertainties and assumptions. The results or events predicated in this forward-looking information may differ materially from actual results or events. As a result, you are cautioned not to place undue reliance on this forward-looking information.

Forward-looking information is based on certain factors and assumptions regarding, among other things, general assumptions respecting the business and operations of Hyduke and economic factors. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

Forward looking-information is subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what is currently expected. These factors include but are not limited to risks associated with the failure of the Company to obtain the benefits of integration; volatility in market prices for oil and natural gas; and the general economic conditions in Canada.

You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While the Company may elect to, the Company is under no obligation and does not undertake to update this information at any particular time, except as required by law.

About Hyduke

Trading on the TSX under the symbol "HYD," Hyduke Energy Services Inc. is a supplier of equipment and services to the oil and gas drilling and well servicing industry. 

SOURCE Hyduke Energy Services Inc.

View original content: http://www.newswire.ca/en/releases/archive/August2018/03/c3768.html

Patrick Ross, President & Chief Executive Officer, (780) 955-0355; Nick Cristiano CPA, CA, Chief Financial Officer, (780) 955-0355Copyright CNW Group 2018


Source: Canada Newswire (August 3, 2018 - 7:51 PM EDT)

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