TORONTO, Ontario, November 8, 2017 - Element Fleet Management Corp. (TSX:EFN) (“Element” or the “Company”), a leading global provider of fleet management and fleet-focused business services, today announced financial results for the three and nine month periods ended September 30, 2017. As disclosed in the second quarter of 2017, Element has adopted new segmentation of core fleet management and non-core assets. See the Company’s Management Discussion & Analysis (“MD&A”) for the three-month and nine-month periods ending September 30, 2017 for more information.
Summary Consolidated Results for the Third Quarter of 2017
“Over the last two years, we have developed and launched the industry’s most advanced fleet management and analytics platform to support our fleet customers and help them navigate the revolution currently underway in the transportation and mobility sector,” said Bradley Nullmeyer, Element’s Chief Executive Officer. “Connected vehicle, sharing economy and autonomous vehicle technology are combining to create significant opportunities. We are well positioned to capitalize on each of these trends as we help our customers to drive operational efficiencies, safety improvements, and lower their total cost of ownership.”
- Originations in the third quarter of 2017 were $1.44 billion, up 6% compared to $1.36 billion in Q3 2016, and Element continues to make significant advances providing fleet management services to the ride sharing/car sharing sector.
- Element acquired a 12.5% interest in Splend, an Australian based company that provides vehicles for on-demand rideshare and delivery services.
- Element initiated fleet management services for an OEM car sharing program with a fleet currently approximating 5,000 vehicles.
- Year to date, Element has returned $165 million in capital to shareholders through increased dividends and share buybacks, compared to $30 million for the same period in 2016. In the third quarter, Element repurchased 7.8 million common shares under its normal course issuer bid (NCIB) at an average price of $8.75.
- Element continues to maintain a strong financial position with approximately $4.6 billion of liquidity. Subsequent to quarter end, the Company completed the issuance of US$1 billion of rated term notes through its Chesapeake Funding II platform. The offering brought Element’s 2017 issuances to US$3.2 billion, the most in a year from any fleet asset-backed security (ABS) issuer. Element also extended the maturity of its senior credit facility by one year to November 2020.
- The Company received an initial issuer rating of BBB+ with stable outlook from Fitch Ratings, and its investment grade ratings from Kroll Bond Rating Agency and DBRS, Inc. were also recently affirmed at A- and BBB (high), respectively, each with a stable outlook.
- Element held its annual Fleet Roundtable forum, the Company’s largest-ever event of its kind, bringing together hundreds of fleet company executives, suppliers, business partners, automotive manufacturers and Element experts to share best practices and discuss the opportunities in fleet management.
Core Fleet Management Operations
The following summarizes results from the Company’s core Fleet management operations:
- Services and other revenue was $134.9 million for Q3 2017, a decline of 6% sequentially and compared to the same period in the prior year, respectively (1% and 3% on a constant currency basis, respectively). Results in Q3 2016 benefitted from one-time items, excluding which services and other revenue increased by 1% year-over-year, or 5% on a constant currency basis. The sequential decline was related to lower maintenance and fuel usage, consistent with the seasonal nature of these two revenue components.
- Net interest and rental revenue for Q3 2017 was $84.2 million, or 0.8% higher than Q3 2016 and 3.8% higher than Q2 2017. On a constant currency basis, Net interest and rental revenue increased by 4.0% and 9.1% compared to Q3 2016 and Q2 2017, respectively, due primarily to increased lease activations and decreased interim funding as post-IT migration backlogs continued to be cleared.
- Net interest and rental revenue margin (NIM) was 2.77%, up 0.17% sequentially and up 0.16% over the comparable period in 2016.
Element continues to execute on its strategy of optimizing value from non-core assets to enhance its capital structure and return capital to shareholders. Successfully completed non-core initiatives during Q3 2017 included the sale of approximately 60% of the heavy duty truck portfolio for $138 million, and the sale of US$23 million of Rail Notes, with both transactions yielding gross proceeds in excess of carrying book value. Net proceeds from asset sales were redeployed into capital return initiatives including share repurchases under the normal course issuer bid.
The Company continues to implement its strategic plan to improve operations in the 19th Capital joint venture. This plan includes moving vehicles to corporate fleets, expediting the sale or trade-in of certain units, and optimizing the composition of the fleet to improve overall efficiency. The Company expects these actions to right-size the operating fleet, increase utilization rates, and improve cash flows over time through the operation of newer and more efficient vehicles.
Net revenue for Non-Core operations was $17.2 million in Q3 2017 as compared with $19.4 million in Q3 2016 and $23.1 million in the preceding quarter. Results primarily reflected the sale of non-core assets and the run-off nature of the equipment finance portfolio in New Zealand.
Non-core assets now represent approximately 6% of Element’s assets, down from 8% last quarter.
The Company’s Board of Directors has authorized and declared a quarterly dividend of $0.075 per outstanding common share of Element for the fourth quarter of 2017. The dividend will be paid on January 15, 2018 to shareholders of record as at the close of business on December 29, 2017. These dividends are designated to be eligible dividends for purposes of section 89(1) of the Income Tax Act (Canada).
The Company’s Board of Directors also declared the following dividends on Element’s preferred shares:
|Series||TSX Ticker||Amount||Record Date||Payment Date|
|Series A||EFN.PR A||$0.412500||Dec. 15, 2017||Dec. 29, 2017|
|Series C||EFN.PR C||$0.406250||Dec. 15, 2017||Dec. 29, 2017|
|Series E||EFN.PR E||$0.400000||Dec. 15, 2017||Dec. 29, 2017|
|Series G||EFN.PR G||$0.406250||Dec. 15, 2017||Dec. 29, 2017|
|Series I||ENF.PR I||$0.359375||Dec. 15, 2017||Jan. 2, 2018|
These dividends are designated to be eligible dividends for purposes of section 89(1) of the Income Tax Act (Canada).
A conference call to discuss these results will be held on Wednesday, November 8, 2017 at 9:00 a.m. Eastern Time. The conference call may be accessed by dialing the following numbers:
- North America Toll-Free: 1-800-806-5484
- Local: 416-641-6104
- International dial-in numbers: https://www.confsolutions.ca/ILT?oss=7P1R8008065484
- Passcode 1069901#
A series of presentation slides will be referenced by management during the conference call. These slides will be available on the Company’s website in advance of the call and may be accessed at https://www.elementfleet.com/about-us/investor-relations/presentations.
The call will be recorded and may be accessed until December 29, 2017 by dialing 1-800-408-3053 or 905-694-9451 and entering the pass code 1046782#.
The Company’s unaudited interim condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and the accounting policies we adopted in accordance with IFRS.
The Company believes that certain Non-IFRS Measures can be useful to investors because they provide a means by which investors can evaluate the Company’s underlying key drivers and operating performance of the business, exclusive of certain adjustments and activities that investors may consider to be unrelated to the underlying economic performance of the business of a given period. Throughout this Press Release, management used a number of terms and ratios which do not have a standardized meaning under IFRS and are unlikely to be comparable to similar measures presented by other organizations. A full description of these measures can be found in the Management Discussion & Analysis that accompanies the financial statements for the quarter ended September 30, 2017.
Element’s unaudited interim condensed financial statements and related management discussion and analysis as at and for the three-month period ended September 30, 2017 have been filed on SEDAR (www.sedar.com).
About Element Fleet Management Corp.
Element Fleet Management (TSX: EFN) is a leading global fleet management company, providing world-class management services and financing for commercial vehicle and equipment fleets. Element's suite of fleet management services span the total fleet lifecycle, from acquisition and financing to program management and remarketing – helping customers optimize performance and improve productivity. For more information, visit www.elementfleet.com.
SVP Investor Relations