www.appliedproductivity.com
On August11,2016 Algonquin Power gave it's second quarter results.It was a solid performance and an improvement over the first quarter.Almost all operational figures were improved over the same quarter in 2015.But the important story for this blog is that adjusted EBITDA was $99 million compared to $81 million in 2015 for Q2.And $247 million versus $196 million for the first half.Algonquin has given guidance of $475 to $525 million of adjusted EBITDA for 2016 and this blog sees no problem in hitting the mid-point or $500 million of adjusted EBITDA for the year.
Financial Data
Usually this section contains a ream of operational data but suffice it to say that revenues were ahead of 2015 by almost 15% and adjusted EBITDA was ahead by almost 20%.While adjusted EBITDA was almost $250 million for six months.There should be little trouble in achieving $500 million mentionned in guidance.This will be a 25% increase over the $400 million achieved in 2015.This has allowed AQN to increase the dividend by 10% in 2016.And this blog calls for a small dividend increase in 2016 if they meet earnings guidance.AQN'S yield is below most of it's peers.
New Projects
Algonquin Power spent a lot of time and money on meeting all regulatory requirements for Park Water Systems in the western USA. Now all requirements have been met and it is bringing in earnings.It also has finished construction of the O'dell wind park in Minnesota and it is fully commissioned.Lately it got a $10 million revenue increase for it's Calpeco Electric System and it has shareholder approval for the Empire Electric System.It is these new projects that are likely to push adjusted EBITDA beyond $500 million for 2016.But this blog expects almost no earnings from Empire in 2016; there will likely be further regulatory hurdles to meet.
Regulatory Risk
Algonquin Power has done tremenduously well based on the best measure of earnings and earnings per share,that is, adjusted EBITDA.Adjusted EBITDA has grown from $305 million in 2014 to $400 million for 2015 and now is on track to hit $500 to $525 million for 2016.The chief wild cards will be the amount of earnings from the O'dell wind farm and Empire Electric.This puts earnings per share at $5.10 to $5.25 per share (at a minimum) and the price/earnings ratio at slightly more than 2 times.Why does an utility with such solid growth only get a multiple of 2 when it's peers are getting 10 to 20? It is apparent that investors have sensed the risk to earnings from having too many of it's assets in the American regulatory basket.Is this a real or imagined risk?This blog is betting on the latter as I am a shareholder in this tremenduous growth stock. see recent analysis of AQN stock performance; see analysis of the underperformance of AQN
Chorus Aviation just released another quarterly report on August11.The title of my last blog on Chorus (CHR) was Chorus needs another Step click here for details.And they just took another step.Chorus says that they have acquired 5 new Bombardier Q400 aircraft and are now moving towards consolidation of Air Canada Express.The operating conditions are not yet clear but it seems like it will be run (almost completely) by Chorus and it's partner Georgian Air Lines.At the present time Chorus and Georgian own 140 out of a total 171 aircraft operated by Air Canada express and they serve 120 locations.There will certainly be a revenue split with Air Canada but CHR has given us no details here.
Second Quarter Earnings
Chorus had a big first quarter and showed investors $45 million of EBITDA and $55 million of net income.The latter was buoyed by a large foreign exchange gain but adjusted EBITDA was actual.It amounted to $.29 to $.30 per share and this is a good proxy for earnings per share.This quarter adjusted EBITDA was even bigger at $58 million.So adjusted EBITDA was $.54 to $.56 per share in Q2.This makes earnings per share of $.83 to $.86 per share for six months and on track to hit $1.75 to $1.85 per share for the year.
Operating revenue (under CPA) was down from 2015; it went from $400 million to $310 million.However aircraft leasing revenue ( under CPA) went up from $16 to $23 million.10 new aircraft were obtained for leasing under the CPA.And 3 more will be acquired in September.This will bring the total to 34 aircraft in this program.Surprisingly there was no information on the newly acquired Voyageur Airways nor on the Chorus maintenance operations.
Air Canada Express
The consolidation of Chorus and Air Canada Express is new information for this blog.It is clear that Georgian Air Lines and Chorus almost run this operation now as they own 140 of 171 air craft and Chorus just acquired 5 new aircraft for Air Canada Express.However it is not clear what relationship Georgian Air has with Chorus.This blog expects there is some relationship.It is also not clear what split on revenues Chorus will have with Air Canada here.The next quarter, especially with the new aircraft, should reveal more of what the amended CPA agreement is all about.This blog expects an increase of revenues and income in Q3.
The rest of 2016
Chorus had a good first quarter in terms of net income and adjusted EBITDA.And the second quarter was also a strong one but with a smaller foreign exchange gain.Operating revenue was down but leasing revenues were up.This blog expects that EBITDA from Voyageur and their maintenance operations will continue to grow.Now Air Canada Express should start to be a source of income for Chorus. Adjusted EBITDA should be $.85 per share for the first half and about $1.75 to $1.95 for the year.At $6.00 per share this makes Chorus a cheap purchase at a little more than 3 times earnings.But investors still need to see how the Air Canada Express arrangement will unfurl. use Workathon for analysis of small caps; see recent analysis of amended CPA agreement
The Huronia series was intended to give some assistance(although not asked for) to the small towns in the Lake Simcoe and southern Georgian Bay area.Most of these towns can use all the help they can get.And some only want new jobs if they fit into the existing structure of the town.No smokestack industry for twons with beaches.For example, I have suggested milk processing (and given a preferred location) to Wasaga Beach and they prefer to stick to their booming tourist industry, Who can blame them?This changed when I did a piece on Peterboro which is semi-industrial and not in the Huronia area.This, Huronia XII is along those lines as it is not in the Huronia area either.
Cobourg- a former thriving Industrial Centre
Cobourg was established in 1898; as the caption shows it has a good beach on Lake Ontario. It started later than Peterboro which is just north of it but began to build up quickly.By the 1900s it had several small industries and was more advanced than many other small towns along Lake Ontario.But times changed and left Cobourg behind other locations like Bowmanville, Oshawa and Peterboro.It tried but failed to catch up.
Cobourg - then and now
Cobourg has a population of 18,500 but it has grown slowly.Yet it is well connected in a transportation sense;it is on the main CN and CP rail line and on the 401 which connects to Toronto and Kingston. Also it is only 7 kilometeres away from Port Hope which has a population of about 15,000 and can be entered by an extension of a main street in Cobourg.The two towns are closely bonded in a number of ways. It did have a small chemical business and the chemicals were used in the pulp and paper business.But this business has closed now.The biggest employer in town would be the food industry with producers like Weetabix, Weston Bakeries,Brandneu foods and Curtis Chicks in Port Hope.Cobourg also has an Agricultural Food Venture Centre which is a non-profit operation which does small batch food processing and packaging.But there is no connection nor attempt at consolidation between these businesses.
Let's start with the Food Venture Centre
I think that there is a place for government funding in Cobourg.The connection between all these separate food businesses in Cobourg is the Agricultural Food Venture Centre.At the present time it only has packaging and processing in small batches.If more investment(government money) was put into it then it could become a centre for processing and packaging for a number of foods, including chicken and agricultural products.For example, wheat and flour for baking could be processed and packaged here.The finished products could be moved to market.In the case of chicken it would be moved to retail grocers and in the case of wheat and flour to Weetabix and Weston Bakeries.This would likely mean that the number of jobs in the Food Venture Centre would triple and the number in the three suppliers would increase by some percentage.However this does not prove that the beach fixes everything. use Workathon for blogs on economic development; read Workathon for blogs on economic development;use Workathon for ideas on economic development
This author has several blogs,including one on Tumblr,one on LinkedIn, and three on Wordpress and these two on Blogger.Those on Blogger and Wordpress are quite similar;the other two vary somewhat.But basically all offer online consultancy.Although my advice and information is unsolicited by a customer.I am ,in effect,offering my advice and special information without an offer of payment.I have to hope that the customer will find some indirect way to show it's appreciation or compensation.
Defining Consultancy
Ordinarily, consultancy begins with a customer finding a problem or a bottleneck in it's operations.A search begins to find a consultant in that field that can help speed up their operation or remove the bottleneck.Once a suitable consultant is found a Mission Statement is drawn up and agreed upon by both parties.Then the project begins with a definite deadline for finishing.
If the process begins online then a Mission Statement can be sent to a customer without an offer being made.Or an inquiry can be made to a consultant without a specific need required.Communication can be continued online through the internet and a project becomes defined.Sometimes there was a need but it wasn't urgent.Either way the project becomes defined and the terms of payment and the time frame agreed upon.
A consultant advises clients on how to improve their operation or make it more efficient or more profitable.That is, a consultant is paid because he reduces costs or increases revenues.A good consultant can earn up to $250,000 a year but he should have at least one very profitable project a year.
Online consultancy is a form of ecommerce;communication and the terms are set through the internet.Much of the project can be done on a secure website and even research can be done online and kept on PDF file.Payment can be done on the internet as well using a service like Paypal which is quite secure or electronic bill payment.
My Consultancy
Most of the posts done on Workathon are a form of consultancy.There is no defined Mission Statement nor terms of payment nor time frame set out.These are problems or opportunities that I see and respond to.No offer has been made by a customer nor did I make a proposal request.On the other hand no payment is made either; any appreciation or lack of it is done indirectly. I look at problems like the increase in the value of a stock because a gold deposit has been underestimated,or information being misunderstood leading to an underestimate of daily oil production and even my take on the amount of annual government spending.It must be said that not all my consulting projects get the same amount of readership nor appreciation.But all are carried out with a high degree of thoroughness.
