The global financial crisis seems to have spurred steadier growth for B.C.’s biggest publicly traded companies.
Revenues from the top 100 public companies in B.C. are nearly double what they were a decade ago, rising to $75.3 billion in 2012 from $39 billion in 2003.
While total revenues dipped 5.7% in 2009 as a result of the Great Recession, the rate of top-line growth has been relatively consistent by historical standards since then. Revenue rose 11.1% in 2010, another 11.1% in 2011 and 5.8% in 2012. That compares with a 2% increase in 2002, a 6% increase in 2003 and a 21% increase in 2004 following the dot-com bust and the impact of September 11 at the turn of the millennium.
Many of the top 10 public companies in B.C. have retained their titan status for much of the past decade. Aside from a seemingly temporary revenue bump for Teck Resources Ltd. (TSX:TCK.B) in 2011 that put it as the largest company by revenue, Telus (TSX:T) has remained the largest public company in B.C. for nine of the past 10 years.
But a third of the companies on the list have grown tremendously since 2003. Many are B.C. mining companies that have benefited from the latest “commodity super-cycle” that created a mining sector boom for much of the 2000s. Companies like First Quantum Minerals (TSX:FM) and Eldorado Gold (TSX:ELD) have been the biggest beneficiaries with annual revenues jumping more than 3,300% and 2,041% respectively since 2003.
But a quarter of the companies on the list have grown to become Top 100 companies, including firms like Energold Drilling (TSX-V:EGD), Absolute Software (TSX:ABT), Tio Networks (TSX:TNC) and Glacier Media (TSX:GVC), which have seen revenues jump by more than 500% since 2003 through a mix of acquisitions, market expansion and organic growth.
Another quarter of the companies on the list today didn’t even exist 10 years ago. Among the youngest is Sandstorm Gold (TSX:SSL). The company was founded four years ago by BIV Forty under 40 recipient Nolan Watson and helps to provide financing for mining companies by purchasing royalties and streams of gold production from operating mines or advanced-stage projects.
The company has seen its flow of gold production nearly double in the past year to 35,000 ounces from its 10 gold streams in its portfolio. It expects its production to grow by at least another 85% in the next few years with more production coming online and with further investments.
The company benefited from the record gold price last year with annual revenue rising to $55.9 million from $29.6 million. But even with the gold price retreating so far this year, Watson isn’t too worried over the longer- term prospects for gold given the uncertainty that still exists around the impact of monetary measures being implemented by central banks around the world.
“One of the benefits of the streaming business model is that our cost per ounce is about $400 so even with today’s lower gold prices, we’re making around $1,000 of free cash flow for every ounce.”
The company recently acquired a majority stake in Ontario-based Premier Royalty (TSX:NSR), which will further add to the company’s production and revenue for the remainder of the year. And with $60 million still in hand from the $150 million in capital it raised last year, further investments in future gold production is a certainty, especially given challenging financing environment for development-stage mining companies.
“It’s absolutely astounding how dramatically all other financing alternatives have completely vanished for junior companies,” said Watson. “Competitively, that puts us in a good position, but at the same time, we also do want healthy, functioning capital markets as that’s in the best interests of our partners for them to be able to invest in their existing assets. I’m rooting for the capital markets to come back.”
Shaky capital markets in Canada have taken their toll on the public mergers and acquisitions market. According to PwC’s capital markets report, there were 570 deals in the first quarter, which was one of the quietest quarters for M&A deals since the first quarter of 2010.
The proportion of deals involving mining companies has remained lower than average with only 42% of deals in B.C. so far in the metals and mining sector.
“It hasn’t been an overly robust start to the year, historically,” said Jim Crooks, managing director at PwC. “But a lot of good companies are still hunting for good deals, especially in light of low interest rates right now and the abundance of financing available.”
One sector seeing steady M&A activity has been in the real estate income trust (REIT) sector. Many of B.C.’s REITs have continued to find investors for new shares to fund property acquisitions. Vancouver’s Pure Industrial Real Estate Income Trust (TSX:AAR.UN) and Victoria’s Partners REIT (TSX:PAR.UN) combined have made a dozen acquisitions so far this year.
Crooks suggests this sector is likely to see continued growth with new entrants launching their own initial public offerings in B.C. similar to what Loblaws and Canadian Tire are planning. “From a B.C. perspective, you may see that. There are a lot of private companies with significant land holdings and commercial and industrial real estate that may choose to bring a portfolio like that to market,” said Crooks. “It’s driven by a retail investor that’s looking for yield and some capital appreciation. If you have something that offers those types of benefits, it will have some merit going public.”