WOODBRIDGE, Ont. — Titanium Transportation Group spent its first year as a publicly traded company demonstrating the type of growth investors like to see.
The company made two acquisitions in 2015 – Muskoka Transport and ProNorth Transportation – and effectively doubled its size. Titanium reported its 2015 earnings this week, which showed strong increases in revenue and EBITDA. On a conference call with analysts, Titanium CEO Ted Daniel offered some insights into where the company is heading as Canada’s newest publicly traded trucking company.
Ready to grow
Daniel said Titanium aims to make two acquisitions per year, likely in Ontario. These will be asset-based trucking companies, Daniel revealed, indicating he’s not a fan of buying third-party logistics companies. That division will rely on organic growth.
Titanium’s preference is to purchase underperforming companies and to turn them around. There is no shortage of candidates, Daniel said.
“We’ve seen an increasing number of acquisition opportunities,” Daniel said, noting the company is looking primarily for fleets that bring in $30-$50 million in annual revenue. The company has a $27-million undrawn credit line it can use to fund such acquisitions.
“Our balance sheet right now is very, very strong,” Daniel said. Ontario will remain the company’s focus for now, he added.
“Our plan is to continue to execute on our strategy…to buy companies that are underperforming and to execute on extracting synergies and value,” he said. “We see a lot of companies that are struggling.”
Typically, Daniel explained, Titanium will shrink a company it has acquired before growing it into a healthier entity. It did this at Muskoka, growing its margins from about 4% to 12%. Daniel likened the process to revitalizing a forest – the brush and dead wood has to be removed so the underlying plants can flourish.
“You’re first shrinking it then regrowing it, but regrowing it with the right ingredients,” he said. This process involves getting rid of bad employees, unprofitable customers and unsafe drivers.
Daniel got excited when an analyst asked about the company’s impressively low 9% driver turnover rate. Much of that, Daniel said, is forced turnover, where drivers are let go due to safety issues or retiring from the industry altogether. Daniel said the company has instilled a positive corporate culture that drivers appreciate.
He also indicated many drivers are shareholders, so they share in the company’s success.
“I love talking about what an amazing culture we have,” Daniel said. “Our turnover is absolutely consistent with our corporate culture.”
Low turnover, Daniel explained, results in safer operations, which in turn produces better customer service and improved profitability.
“Safety is not just a moral obligation, it translates to every level,” he said.
Titanium Group this year will be taking delivery of about 100 new power units, but Daniel did not reveal whether they’ll be used to add capacity, replace existing equipment or replace acquired equipment when the next purchase is made.
Company officials indicated all new equipment is fitted with electronic driver logs and about a quarter of the fleet has been converted. Marilyn Daniel, vice-president of operations, said electronic logs are proving to be a cost savings for the company, as it reduces the time spent auditing paper logs.
When adding capacity, Ted Daniel said it’s tempting to place more trucks on the flatbed division. While the segment suffers a rut in January/February, Daniel said the volumes have been strong overall and he’s anticipating a bright future for the flatdeck sector as US building activity is expected to remain strong.
“We feel the construction industry in the US is going to continue to grow for the next five to 10 years, so we definitely see that being a growth product line,” he said of Titanium’s flatbed division.
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