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How big has ESG investing become?

A 2021 Bloomberg article forecast that “ESG assets” may reach $53 trillion by 2025, and account for roughly 1/3rd of global market cap.

For public companies, however, posing as being ESG can be a very risky strategy. One fund manager specializing in ESG investing estimated that “ESG-related controversies during 2014 to 20i9 wiped USD534 billion off of the value of the large US companies among the S&P 500.”

Vertex Resource Group (TSXV:VTX) lives-and-breathes the ESG mantra.

No controversy here. This is an environmental services company, and it has just reported record revenues and adjusted EBITDA.

On August 10, 2022, Vertex announced its second quarter results (in Canadian dollars):

  • Q2 revenues of $54.0 million were a new quarterly record.
  • Adjusted EBITDA of $8.6 million was a new quarterly record.
  • Net quarterly income rose from $0.2 million to $1.6 million y-o-y.
  • Free cash flow rose from $6.5 million to $7.0 million y-o-y.

Vertex also reported very strong results for H1 of 2022.

  • Record six-month revenues of $99.4 million, up from $71.1 million y-o-y.
  • “Historically high” EBITDA for H1 of $14.2 million
  • Net income of $0.9 million for the first half of 2022, versus a loss of $0.4 million in H1 2021.

The numbers are very strong. For investors looking for a dynamic ESG candidate to add to their portfolios, the “outlook” the Company offered in this release is even more encouraging.

Current strong results reflect “the recent acquisition of Cordy during this quarter, robust commodity prices, as well as the gradual return to pre-COVID activity levels across other industries.”

Looking ahead to the second half of 2022, the Company expects “that North American economies will continue to benefit from favourable commodity prices in energy, utilities, agriculture and forestry.”

Further bolstering operations, Vertex has “major capital projects across a diverse sector of industries including midstream, utilities/telecommunications, municipal infrastructure and energy transition in 2022 and 2023.”

Putting this altogether, the Big Picture for Vertex looks very robust.

“With secured backlog reaching record levels, Vertex is well positioned for strong earnings growth for 2022 and 2023. The current trend towards less carbon-intensive energy sources is presenting new opportunities for Vertex.  We are working closely with several of our Indigenous Partners and customers to advance projects that reduce atmospheric carbon emissions, enhance biodiversity and carbon sequestering, utilize or convert to wind and solar as well as renewable natural gas (RNG), biofuels, helium and emerging hydrogen opportunities.” [emphasis mine]

Vertex’s environmental services for its wide array of industrial clients puts the “E” in ESG. What does the Company do?

Vertex is a “unique combination” of environmental consulting, environmental field services and equipment. It provides asset development, operations, decommissioning and restoration for five sectors: industrial, utilities, agriculture & forestry, and government.

This is no new arrival in providing ‘greener’ and more responsible industrial management and clean-up. Established in 1962, Vertex has been providing environmental solutions long before “ESG” itself even existed.

That’s 60 years of experience, combined with the Company’s “innovative, modern approach” to the needs of today’s major industrial clients.

Investors new to the Company may not have understood the reference to “Cordy” in the second quarter results. On April 25, 2022, Vertex completed its acquisition of Cordy Oilfield Services Ltd.

Based in Calgary, Alberta, Cordy is well-positioned to serve the heavy oil operators of the Alberta oil patch. A natural fit for Alberta-based Vertex.

Terry Stepheson, President and CEO of Vertex framed the acquisition for investors when it was originally announced.

“This strategic acquisition allows Vertex to compliment multiple offerings within our group. We are excited to bring Cordy under our umbrella, providing customers and employees with a next level experience. Congratulations to the Cordy team on their successes over the years, and we look forward to supporting that continued success.”

ESG is such a large and important trend in investing that investors can’t afford not to climb onto the bandwagon. At the same time, they need to be wary of missteps with an “ESG controversy”.

Vertex Resource Group provides investors with more than an impeccable environmental pedigree. It is equally impressive in “governance”.

An award-winner, Vertex has racked up the following achievements:

2017 – named Gold Shovel Standard Certified contractor (safety management)

2016 – a finalist in “Best Workplaces For Diversity” (Alberta), Gold Standard Winner of Canada’s Best Managed Companies

2015 – Gold Standard Winner of Canada’s Best Managed Companies

2014 – finalist in Best Workplaces for Aboriginal Employees (Alberta)

2013 – Contractor of the Year (Alberta)

Vertex offers investors a company that epitomizes ESG investing. But it’s a strong investment candidate, period.

Well-managed, with excellent operating results and very robust growth opportunities, Vertex checks all the boxes.

FULL DISCLOSURE: This is a paid article for The Market Herald.


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