OKOTOKS, Alta. – Mullen Group saw third quarter revenues drop 10.6% y-o-y to $290.9 million, but net income climbed by $5.7 million thanks to improved operating income before depreciation and amortization (OIBDA) boosted by government support.
OIBDA climbed 16.7% in its LTL segment, 16.4% in logistics and warehousing, and 16% in specialized and industrial services. Much of the gains were attributed to the Canada Emergency Wage Subside (CEWS) program, which has allowed Mullen Group to restore most of its workforce.
“The Government of Canada has kept all our business units whole from an economic impact,” Murray Mullen, chairman and CEO of Mullen Group said during a conference call with analysts Oct. 22. “Yes, our business was impacted, but the CEWS program mitigated negative implications.”
Mullen admitted the company didn’t need government support, but the funding allowed it to keep on employees who otherwise may have been laid off.
“It’s a government program. We will use proceeds to maintain employment levels and to invest in the future,” Mullen said.
The plus/minus $35M quarter
Revenues for the quarter were down 2.8% in LTL, 12.8% in logistics and warehousing, and 17.1% in the specialized and industrial services segment. Mullen referred to the quarter as the “plus/minus $35-million quarter,” since Q3 revenues were up about $35 million from the second quarter, but down about the same amount year-over-year.
“We continue to see a resurgence in economic activity driven thus far by a very resilient and ever demanding consumer. How they spend has changed but how much they spend has not. And since consumer spending is the primary demand source for the trucking and logistics industry, we witnessed a strong rebound from the lows earlier this year,” said Mullen.
“We see it in our LTL business and in our logistics and warehousing business. And we see it in our employment levels where most, but not all, of our workforce has returned to full time employment. Unfortunately, however, parts of the economy and certain geographic regions continue to be ravaged by changes in consumer trends and the economy.”
Mullen listed hospitality, air travel, and crude oil as industries still ravaged by the pandemic, but anticipates they will eventually fully recover. Mullen also expressed optimism the consumer will continue to drive the economy through the remainder of the year. Even Alberta’s oil and gas industry is showing signs of improvement, Mullen added.
Consumers driving economy
“No one knows with any certainty what happens next and with no clear evidence to suggest this health crisis can be resolved in the short term, we remain on high alert that our business could be negatively impacted, either from a financial or safety perspective,” Mullen said.
“Nevertheless, our current view is that consumer spending should remain strong entering the holiday season. Our optimism is based upon a very nice recovery in the employment statistics and job market as well as recent announcements by the federal government to provide fiscal support and stimulus to ensure Canadians have the means to manage through this pandemic-induced crisis.”
“We are inundated with acquisition opportunities, each of which needs to be vetted out.”
Murray Mullen, Mullen Group
Speaking to analysts, Mullen said he was amazed how the economy has adapted. “We see it real-time in our business,” he said, citing a resurgence in consumer spending.
Looking ahead to the fourth quarter, Mullen said the economy remains on solid footing, though “it’s difficult to see how it’s going to grow, at the moment.”
He anticipated fourth quarter performance should be on par with the same period last year.
The company remains well funded to pursue acquisitions, and Mullen said many opportunities are crossing his desk.
“We are inundated with acquisition opportunities, each of which needs to be vetted out,” he said. “Why are so many companies all of a sudden on the block? My instincts are telling me 2021 is going to be a great year of (M&A) opportunity, especially as government support programs start to run out and it’s back to basics – and you better have a good business model.”