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Vertex Resource Group Ltd. Reports Strong Second Quarter 2019 Results

SHERWOOD PARK, AB , Aug. 9, 2019 /CNW/ - (VTX.V) - Vertex Resource Group Ltd. ("Vertex" or the "Company") reports its financial and operational results for the three and six months ending June 30, 2019 , with comparisons to the same period in 2018. The following operational and financial highlights should be read in conjunction with the Management Discussion and Analysis ("MD&A") and the interim consolidated financial statements and notes thereon of Vertex for the three and six months ending June 30, 2019 , which are available on SEDAR at www.sedar.com.

Vertex Resource Group Ltd. Reports Strong Second Quarter 2019 Results (CNW Group/Vertex Resource Group Ltd.)

"We continue to perform well, as we aggressively improve the Company's financial performance while paying down our debt. Our second quarter results were strong, slightly exceeding expectations despite abnormally wet weather in the quarter. 70% of our revenue was derived from stable operating, maintenance and remediation expenditures of our customers. By tapping into these consistent spends of our customers, we have been able to deal with numerous headwinds this quarter. Vertex's diversification strategy continues to pay dividends as we position the Company to efficiently perform a diverse set of services that provides value to customers across all industries throughout the life cycle of their projects." commented Terry Stephenson , Chief Executive Officer. 

Vertex drove increases in both revenue and EBITDA by continuing to execute on a strong backlog throughout the quarter, focusing on controlling costs, streamlining processes through technology improvements and cross-selling service to customers. The Company's current financial position is the direct result of these efforts, prudently purchased acquisitions which are performing well and the continued implementation of Vertex's strategic cross-selling and customer diversity initiatives. As such, Vertex continues to grow its customer base, with 47% of revenues for the remainder of 2019 expected to come from outside of the oil and gas industry. Specifically, Vertex's customers continue to grow and provide stable and attractive opportunities in the utilities, agriculture, municipalities and telecommunications industries.

Key financial highlights of Vertex's results for the three and six month periods ended June 30, 2019 , and 2018 are as follows:








HIGHLIGHTS








 Three months ended

 Six months ended 

(in thousands of Canadian Dollars)

 June 30, 

 June 30, 

2019

2018

% Change

2019

2018

% Change

Revenue

41,123

27,692

48.5

83,751

62,378

34.3

Gross profit

10,087

8,727

15.6

20,710

17,528

18.2

EBITDA (1)

6,253

4,258

49.6

12,560

8,595

46.1

EBITDA per share, basic and diluted 

0.07

0.05

40.0

0.14

0.10

40.0

(1) See "Non-IFRS Financial Measures"








The results for the second quarter of 2019 improved over the second quarter of 2018 with the Company's efforts resulting in improved revenue, gross profit and EBITDA, while reducing general and administrative costs ("G&A") from the second quarter of 2018 to the second quarter of 2019.

HIGHLIGHTS FOR THE THREE MONTHS ENDING JUNE 30, 2019

Revenue for the second quarter of 2019 increased 48.5% to $41.1 million from the same quarter in 2018. This revenue increased due to continued growth from completed acquisitions and expansion into new markets and industries.

Gross profit for the second quarter of 2019 was $10.1 million , up 15.6% from the second quarter of 2018.

G&A decreased by 14.2% to $3.8 million in the second quarter of 2019, from the second quarter of 2018. As a percentage of revenue, G&A was down to 9.3% in the second quarter of 2019 versus 16.1% in the second quarter of 2018.

EBITDA for the second quarter of 2019 increased to $6.3 million , up 46.9% from the second quarter of 2018.  This increase occurred because of continued growth from completed acquisitions in Vertex's Environmental Services segment during the quarter.

Strong Cash Flow provided by operating activities of $12.0 million allowed Vertex to reduce total borrowings by $9.7 million in the first half of 2019.

OUTLOOK

For the remainder of the year, indicators point to a continuation of current trends with respect to client activity levels, pricing and margin pressures. Recent announcements regarding Canadian LNG, pipeline and oilsands projects are positive for both the oil and gas industry and Vertex's expected future results. With a change in the political landscape in Alberta , the new provincial government continues to create regulatory and economic reform that should bring investment confidence back to the oil and gas industry within western Canada , although this will take time to occur. Continued spending on planned maintenance programs, increased abandonments and the need for companies to focus on environmental liabilities to remain operational are expected to present Vertex with additional opportunities in the near future.

Vertex continues to focus on factors within its control and believes a more positive outlook is ahead for the remainder of 2019. The Company remains cautiously optimistic about future activity levels as it plans to focus on further integrating past acquisitions, consistent execution and active management of costs. Vertex offers a unique set of services that offers value to clients at each stage of a project from planning to execution of operations, to completion and reclamation which is unmatched by competitors. This integration of service offerings allows the Company to cross-sell complementary services between segments to clients within a variety of industries while lowering customer's costs and providing integrated solutions to address their environmental liabilities. This creates value for the Company's clients and is expected to present Vertex with additional opportunities both within and outside of the oil and gas industry. Vertex expects to continue growing organically by capitalizing on existing and emerging contracts and relationships within the upstream and midstream oil and gas, utilities, telecommunication, forestry, agriculture and government sectors.

Vertex remains committed to creating shareholder value for the longer term by continuing to focus on further improving its operational and financial performance. In addition to these commitments, Vertex continues to focus on reducing debt, reducing its cost of borrowing, actively managing working capital and evaluating its capital expenditure plans to match core and strategic opportunities. Accretive, complementary and opportunistic acquisitions remain an essential component of Vertex's long-term growth plans as it continues to integrate acquisitions and evaluate future opportunities when beneficial.

ABOUT VERTEX
Since 1962, Vertex has been a leading North American provider of environmental services. Headquartered in Sherwood Park, Alberta , Vertex employs a staff of approximately 600 employees and lease operators that provide services to help clients achieve their development goals. From initial site selection, consultation and regulatory approval, through construction, operation and maintenance, to conclusion and environmental cleanup, Vertex provides a wide array of services to customers operating in industries such as upstream and midstream oil and gas, utilities, telecommunication, forestry, agriculture and government.

Vertex principally operates in western Canada and in select locations in the United States .

NON-IFRS FINANCIAL MEASURES
This news release includes certain terms or performance measures that are not defined under International Financial Reporting Standards ("IFRS"), including "EBITDA". The data presented is intended to provide additional information that should not be considered in isolation or as a substitute measure of performance prepared in accordance with IFRS. The non-IFRS measures should be read in conjunction with the Company's financial statements and accompanying notes.

"EBITDA" is defined as net loss before interest, income taxes, depreciation and amortization. EBITDA is a non-IFRS measure, calculated by adding back to net income (loss) the sum of income taxes, finance costs, amortization of property and equipment, intangible assets, right of use assets, and share-based compensation. The Company uses EBITDA as an indicator of its principal business activities prior to consideration of how its activities are financed and the impact of taxation and non-cash depreciation and amortization. EBITDA does not have a standardized meaning prescribed by IFRS and is not necessarily comparable to similar measures provided by other companies. EBITDA is used by many analysts as one of several important analytical tools and management of Vertex believes it is useful for providing readers with additional clarity on Vertex's operational performance prior to consideration of how its activities are financed, taxed, amortized or depreciated. This measure is also considered important by the Company's lenders and is adjusted in determining compliance by the Company with the financial covenants under its lending arrangements. Please refer to the MD&A under the heading "Financial Highlights – EBITDA" for a reconciliation of EBITDA to net income for the three months and six months ended June 30, 2019 and 2018.

FORWARD-LOOKING INFORMATION
Any "financial outlook" or "future oriented financial information" in this press release, as defined by applicable securities laws, has been approved by management of Vertex. Such financial outlook or future oriented financial information is provided for the purpose of providing information about management's current expectations and plans relating to the future.  Readers are cautioned that reliance on such information may not be appropriate for other circumstances.

Certain statements contained in this document constitute "forward-looking information". When used in this document or by any of the Company's management, the words "may", "would", "will", "intend", "plan", "propose", "anticipate" and "believe" are intended to identify forward-looking information. In particular, but without limiting the foregoing, this document contains forward-looking information and statements pertaining to the following: the Company's key strategies, objectives and competitive strengths; anticipated expenses; pricing and margin pressures; anticipated customer spending; supply and demand for the Company's services (including the impact of weather and the political landscape therein); availability of profitable projects in the Industrial Services segment; activity levels in the oil and gas industry and other industries in which the Company operates; improved confidence in the oil and gas industry within western Canada as a result of the Alberta election results; future development activities; and the Company's ability to retain existing clients and attract new business, particularly business outside of the oil and gas industry. Such statements reflect the Company's forecasts, estimates and expectations, as they relate to the Company's current views based on its experience and expertise with respect to future events, and are subject to certain risks, uncertainties and assumptions.

The forward-looking information and statements contained in this document reflect several material factors and expectations and assumptions of the Company, including, without limitation: that the Company will continue to conduct its operations in a manner consistent with past operations; positive future trends in revenue, gross profit margin, EBITDA and net income; the general continuance of current or, where applicable, assumed industry conditions; the mix of revenue from non-oil and gas customers in 2019; pricing of the Company's services; the Company's ability to market successfully to current and new clients; the Company's ability to obtain qualified personnel and equipment in a timely and cost-effective manner; the Company's future debt levels; the impact of competition on the Company; the Company's ability to obtain financing on acceptable terms; the general continuance of current or, where applicable, assumed industry conditions; the continuance of existing tax, royalty and regulatory regimes; the impact of seasonal weather conditions; client activity levels; the impact of recent announcements regarding Canadian LNG pipeline and oilsands projects; anticipated market recovery; the Company's anticipated business strategies and expected success; the Company's ability to utilize its equipment; levels of deployable equipment; and future sources of funding for the Company's capital program.

The forward-looking information and statements included in this document are not guarantees of future performance and should not be unduly relied upon. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements, including, without limitation: volatility of the oil and natural gas industry; dependence on customer contracts and market acceptance; the Company's growth strategy may not achieve anticipated results; potential litigation claims; difficulty in attracting and retaining skilled personnel; adverse litigation judgments, settlements and exposure to liability resulting from legal proceedings could reduce profits or limit Vertex's ability to operate; the market for Vertex's products and services is subject to extensive government and regulatory approvals; health, safety and environment laws and regulations may require the Company to make substantial expenditures or cause it to incur substantial liabilities; the Company may fail to realize anticipated benefits of future acquisitions; Vertex's indebtedness may adversely affect its financial flexibility and competitive position; competition in the industries in which Vertex operates; downturns in general economic and market conditions; operational hazards and unforeseen interruptions for which Vertex may not be adequately insured; positive covenants in Vertex's material contracts could limit its ability to operate; third party credit risk; conservation measures and technological advances may reduce demand for hydrocarbons; loss of the Company's information and computer systems or cyber-attacks; director and officer conflicts of interest; a reassessment by tax authorities of Vertex's income calculations; volatility in the price of the Common Shares; and the risk factors set forth under the heading "Risk Factors" in the Annual Information Form.

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

SOURCE Vertex Resource Group Ltd.


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