Enterprise Group, Inc
Enterprise Group, Inc. (TSX - E) is a growing consolidator of profitable businesses providing services to the utility, energy and construction sectors of Canada's robust economy. With office headquarters in St. Albert, Alberta, Canada, and construction offices in Slave Lake, Innisfail, Morinville and Sherwood Park, Alberta, Enterprise is strategically located near our customers.
With a growing cost asset base of approximately $17.5 million including a fleet of over 300 units inclusive of trucks and heavy equipment, Enterprise installs underground utilities, pipelines and rents heavy equipment and flameless heating units all over the three Western Canadian Provinces. The Company's strategy is to acquire profitable businesses in Western Canadian Sedimentary Basin, consolidating capital, management and human resources to support continued growth. Enterprise has completed four acquisitions since 2005. http://www.enterprisegrp.ca/s/Home.asp
E One Limited is a heavy equipment rental company located in Edmonton. With a large fleet of rental equipment for the Oil and Gas Industry. http://www.eoneequipment.com/awpcp/about/
ARCTIC THERM INTERNATIONAL LTD.
Providing an efficient Flameless Heat and Green Air technology for multiple applications using portable equipment to remote locations for the extreme climate challenges.
T.C. Backhoe & Directional Drilling LP is an industry leader in utility and pipeline construction working throughout Alberta. Our services include directional drilling, hydrovacing, trenching and plowing, backhoe and dozer work, as well as complete site clean-up.
T.C. Backhoe was recently presented with the Bruce Wilson Contractor Safety Award by the Edmonton Area Pipeline and Utility Operators’ Committee (EAPUOC) in recognition of over 30 years of safety excellence working around buried pipelines and cables.
THE FOLLOWING IS FROM A RECENT CORPORATE UPDATE:
Enterprise Group, Inc. Announces Third Quarter Results and Corporate Update
ST. ALBERT, ALBERTA--(Marketwire - Nov. 14, 2012) - Enterprise Group, Inc. (the "Company") (TSX:E) is pleased to announce the Company's third quarter results, and its fifth consecutive quarter of profitability. The Company recorded a consolidated net income from operations of $70,000 for the three months ended September 30, 2012, which resulted in a year to date net income from operations of $656,000. This amounted to a decrease of $673,000 or 90.5% for the quarter and an increase of $1,500,000 or 181.2% year to date compared to the same periods in the prior year. Revenue for the Company was $4,300,000, for the three months ended September 30, 2012, a decrease of $478,000 or 9.9%. For the nine months ended September 30, 2012, revenue grew to $11,900,000, an increase of $198,000 or 1.7%. EBITDAS was $631,000, a decrease of 54.8% for the third quarter of 2012. However, for the nine months ended September 30, 2012, EBITDAS grew to $2,000,000, an increase of $785,000 or 62.7% compared to the same period last year. For the trailing twelve months ended September 30, 2012, the Company recorded net income from operations of $1,500,000 and EBITDAS of $3,300,000.
During the quarter, the Company incurred onetime expenses relating to the corporate refinancing through PNC Bank Canada Branch, the acquisition of Artic Therm International Ltd, and expenses relating to the pending acquisition announced August 9, 2012. These costs, recorded in this quarter, impacted the net income by approximately $400,000. The decrease in revenue is mainly due to the Company continuing its strategy of focusing on smaller, cost plus projects in the oilfield services industry which results in higher field margins but at revenue levels lower than historical amounts.
Leonard D. Jaroszuk, President and CEO of the Company, is also pleased to provide the following update on other corporate matters:
- Artic Therm International has recently secured significant project work for its larger flameless heating units. Two pipeline thermal expansion projects and a refining facility turn-around. Two of the customers include Canada's largest oil producer and Canada's largest natural gas producer
- Further to a news release dated August 9, 2012, announcing the signing of a letter of intent to purchase a utility services company; the target is currently completing a corporate reorganization to prepare itself for the impending sale. Enterprise expects this acquisition to close as soon as the reorganization is confirmed.
- Early in November 2012, the Company received a zero percent (0%) interest loan for $1.1 million with AFSC. Proceeds were used to increase Artic Therm's flameless heating unit fleet to a new Slave Lake, Alberta location.
- The Company is currently negotiating and performing due diligence on an additional acquisition target that management expects to complete in Q1 of 2013.
Share Volume last 12 months: >20,000,000
Basic: 56.7 MM
Options 4.3 MM (Exp: 2013-14)
F/D: 61.0 MM
Management & Directors
Ownership of O/S:
Artic Therm's heaviest equipment, which can generate a heat output of up to 3 million (BTUs), was recently used to complete a pipeline thermal expansion project near Fort McMurray.
It looks like Enterprise Group is well on its way for a strong fourth quarter. In the previous quarter, the Company acquired Artic Therm and incurred most of the costs associated with the takeover. Now, Enterprise Group is enjoying the fruits of that acquisition.
Artic Therm is an industry leader in renting flameless heaters to the construction and oil & gas industries in Western Canada. It just finished a pipeline thermal expansion project near Fort McMurray, commissioned by the world’s largest producer of bitumen, for which it used the largest units of its fleet. These same units are now being used for another pipeline thermal expansion project near Swan Hills, Alberta. Moreover, Artic Therm’s equipment has already been contracted for early 2013 by Canada’s largest natural gas producer for another significant pipeline thermal expansion project in British Columbia.
Enterprise’s strategy to grow Artic Therm is similar to what it has done with previous acquisitions: inject capital to expand manpower and equipment where needed in order to service a larger customer base. The Company has already successfully done this when it bought A.G. Grant in 2005, growing its revenues from $7 million to $22 million in just one year. And repeated this feat in 2007 after it bought T.C. Backhoe & Directional Drilling Inc.
During the twelve consecutive months ending March 31, 2012, Artic Therm generated sales of $4.7 million resulting in an EBITDA in excess of $2.7 million and a net profit of over $2.0 million. Enterprise paid $6.5 million for the company. Without adding any growth, those results would add more than 3 cents per share to Enterprise’s bottom line.
E One Limited
More good news came from Enterprise’s heavy equipment rental division, E One Limited. It was able to rent out a significant portion of its fleet to a major Canadian pipeline contractor. The equipment will most likely be utilized for the entire winter construction season. As a result, also this division should make a positive contribution to the Company’s financials in the fourth quarter.
Construction contractors typically operate a core fleet and will rent when activity surpasses full utilization of their fleet. Enterprise Group’s management noticed this trend, and launched E One Limited early 2012.
Enterprise is also in the process of finalizing the acquisition of a utility services & maintenance company out of Edmonton, Alberta. Most costs associated with the takeover have already been recorded in the third quarter. Because the target company is completing a corporate reorganization to prepare itself for the impending sale, the deal hasn’t been closed yet. The acquisition target is profitable and complimentary with Enterprise’s T.C. Backhoe & Directional Drilling subsidiary.
Finally, Enterprise Group is currently negotiating and performing due diligence on an additional acquisition target that management expects to complete in the first quarter of 2013.
Artic Therm is now fully integrated in Enterprise Group. Management foresees the acquisition to start contributing significantly to the earnings of the Company. With the E One Limited and T.C. Backhoe divisions operating near capacity, this year’s fourth quarter and 2013 look very robust for Enterprise. Moreover, the expected acquisitions may give an additional boost to the Company’s earnings. The Company has been profitable for five consecutive quarters and we expect many more to follow. Overhead and other costs are reduced where possible and the Company has about $9.5 million of non capital losses to offset any income taxes payable.
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Disclosure: I do not currently own shares in Enterprise Group, Inc. (TSX - E), however I may take a position at any time within the next 30 days depending on market conditions.