FINANCIAL HIGHLIGHTS FOR THE SECOND QUARTER ENDED JULY 31, 2011
All results are disclosed in accordance with the new International Financial Reporting Standards ("IFRS").
- Revenues amounted to $13.1 million, posting a slight increase over the same quarter of the 2011 fiscal year.
- ADF Group closed the quarter with net earnings comparable to those for the second quarter of the 2011 fiscal year, being $0.8 million or $0.02 per share (basic and diluted).
- The Corporation declares the payment of a second semi-annual dividend for the 2012 fiscal year.
TERREBONNE, QC, Sept. 7, 2011 /CNW Telbec/ - ADF GROUP INC. ("ADF" or the "Corporation") (TSX: DRX) closed the second quarter of the 2012 fiscal year with revenues of $13.1 million, posting a slight increase over the same quarter of the 2011 fiscal year, despite an appreciation of approximately 7% in the Canadian dollar against the U.S. dollar between the two reporting periods. For the six-month period ended July 31, 2011, ADF Group recorded year-to-date revenues of $26.3 million, compared with $26.6 million the previous year.
The second-quarter gross profit margin as a percentage of revenues was 24%, being the same level as in the corresponding quarter of the previous year, whereas the gross margin for the six-month period ended July 31, 2011 also stood at 24% compared with 26% a year earlier.
ADF posted second-quarter net earnings of $0.8 million or $0.02 per share (basic and diluted), which compares to those for the second-quarter of the previous year. For the first six month period, net earnings amounted to $1.9 million or $0.06 per share (basic and diluted), compared with $2.8 million or $0.08 per share (basic and diluted) for the first half of the previous year. Besides the negative impact of currency fluctuations and a different revenue mix, this decline is attributable to the non-recurrence of certain favourable items recognized last year, the realization of lower exchange gains than the previous year and a higher tax rate.
The Corporation's operating activities provided cash flows of $4.2 million in the second quarter and $9.3 million for the first six months ended July 31, 2011. As at July 31, 2011, the Corporation had working capital of $42.2 million, including short-term available liquidities (cash, cash equivalents and short-term investments) of $27.8 million. Therefore, available liquidities exceeded ADF Group's total debt by $20.7 million, placing the Corporation in a solid position to support its ongoing operations, pursue its development projects and remunerate its shareholders in accordance with the dividend payment policy implemented at the beginning of fiscal 2012.
Dividend
The Corporation announces today the payment of a second semi-annual dividend of $0.01 per subordinate and multiple voting shares, which will be paid on October 17, 2011 to shareholders of record as at September 22, 2011.
Outlook
As at July 31, 2011, ADF Group's order backlog stood at $53 million, the execution schedule of which should extend until the end of the second quarter of the Corporation's 2013 fiscal year.
Jean Paschini, Chairman of the Board and Chief Executive Officer indicated that "although current economic conditions are still a concern in the United States, the major mandates on which we are presently working as part of the restoration of the World Trade Center, in New York City, will provide a stream of profits for ADF Group over the next quarters".
In the near term, in order to replenish its order backlog, the Corporation will be mostly focusing its development efforts on the Canadian market where the economic outlook is more favourable. The joint venture to set up a fabrication plant in Manitoba is proceeding as planned and the Corporation is confident that this facility will be operational in 2012. The Corporation also remains on the lookout for business opportunities in the public and industrial infrastructures segments in Eastern Canada, including in Quebec.
About ADF Group Inc.
ADF Group Inc. is a North American leader in the design and engineering of connections, fabrication and installation of complex steel structures, heavy steel built-ups, as well as miscellaneous and architectural metals for the non-residential construction industry. ADF is one of the few players in the industry capable of handling highly technically complex mega projects on fast-track schedules in the commercial, institutional, industrial and public sectors.
Forward-Looking Information
This press release contains forward-looking statements reflecting ADF objectives and expectations. These statements are identified by the use of verbs such as "expect" as well as by the use of future or conditional tenses. By their very nature these types of statements involve risks and uncertainty. Consequently, reality may differ from ADF's expectations.
Transition to International Financial Reporting Standards (IFRS)
All financial information, including comparative figures pertaining to ADF Group's 2011 results, has been prepared in accordance with IFRS. In previous periods, the Corporation prepared its consolidated financial statements and interim financial statements in accordance with Canadian generally accepted accounting principles ("Previous GAAP"), in effect prior to February 1, 2011. Comparative figures presented pertaining to ADF's results have been restated to be in accordance with IFRS. A reconciliation of net income, gross margin and EBITDA reported under the previous GAAP and the IFRS is provided in the table below:
| 2011 Fiscal Year | ||||||||
| Annual | Q4 | Q3 | Q2 | Q1 | ||||
| 12 months ended 2011.01.31 | 3 months ended 2011.01.31 | 3 months ended 2010.10.31 | 3 months ended 2010.07.31 | 3 months ended 2010.04.30 | ||||
| (In thousands of CA$) | $ | $ | $ | $ | $ | |||
| Net Income | ||||||||
| Previous GAAP | 3,743 | 1,037 | 630 | 878 | 1,198 | |||
| Impact of IFRS standards, after income taxes | ||||||||
| - | Exchange differences on translation of foreign operations | 1,623 | 639 | 308 | (70) | 746 | ||
| - | Share-based compensation | 51 | 4 | (28) | 31 | 44 | ||
| - | Amortization of property, plant and equipment and intangible assets | (26) | (6) | (7) | (6) | (7) | ||
| 1,648 | 637 | 273 | (45) | 783 | ||||
| IFRS | 5,391 | 1,674 | 903 | 833 | 1,981 | |||
| Gross Margin | ||||||||
| Previous GAAP | 17,072 | 5,146 | 3,495 | 3,850 | 4,581 | |||
| Impact of IFRS standards : | ||||||||
| - | Reclassification of amortization of property, plant and equipment and intangible assets | (2,936) | (735) | (739) | (782) | (680) | ||
| IFRS | 14,136 | 4,411 | 2,756 | 3,068 | 3,901 | |||
| Gross Margin (as a % of revenues) | ||||||||
| Previous GAAP | 31% | 34% | 26% | 30% | 34% | |||
| IFRS | 26% | 29% | 20% | 24% | 29% | |||
| EBITDA1 | ||||||||
| Previous GAAP | 10,871 | 3,122 | 2,069 | 2,525 | 3,155 | |||
| Impact of IFRS standards : | ||||||||
| - | Share-based compensation | 51 | 4 | (28) | 31 | 44 | ||
| IFRS | 10,922 | 3,126 | 2,041 | 2,556 | 3,199 | |||
Non-IFRS Measures
EBITDA is not a performance measure recognized by IFRS standards, and is not likely to be comparable to similar measures presented by other issuers. Management, as well as investors, consider this to be useful information to assist them in assessing the Corporation's profitability and ability to generate funds to finance its operations.
All amounts are in Canadian dollars, unless otherwise indicated.
| CONFERENCE CALL WITH INVESTORS TO DISCUSS ADF GROUP'S RESULTS FOR THE SECOND QUARTER ENDED JULY 31, 2011 September 7, 2011 at 10:00 a.m. (Montreal Time) To participate in the conference call, please dial 1-877-974-0445 a few minutes before the start of the call. For those unable to participate, a taped rebroadcast will be available from September 7, 2011 at 1:00 p.m. until midnight September 14, 2011, by dialing 1-877-289-8525; access code 4466244#. The conference call (audio) will also be available at www.adfgroup.com Members of the media are invited to listen in. |
| CONSOLIDATED STATEMENTS OF INCOME | ||||||
| (Unaudited) | ||||||
| 3 Months | 6 Months | |||||
| Periods Ended July 31, | 2011 | 2010 | 2011 | 2010 | ||
| (In thousands of CA$, except for per-share amounts) | $ | $ | $ | $ | ||
Revenues | 13,118 | 12,967 | 26,347 | 26,608 | ||
Cost of goods sold | 9,995 | 9,899 | 20,118 | 19,639 | ||
Gross margin | 3,123 | 3,068 | 6,229 | 6,969 | ||
Selling and administrative expenses | 1,447 | 1,420 | 3,339 | 2,898 | ||
Financial revenues | (113) | (160) | (208) | (182) | ||
Finance charges | 59 | 124 | 119 | 196 | ||
Foreign exchange loss (gain) | 17 | 172 | (738) | (995) | ||
| 1,410 | 1,556 | 2,512 | 1,917 | |||
| Income before income tax expense | 1,713 | 1,512 | 3,717 | 5,052 | ||
| Income tax expense | 939 | 679 | 1,862 | 2,238 | ||
| Net income for the period | 774 | 833 | 1,855 | 2,814 | ||
| Earnings per share | ||||||
| Basic and diluted per share | 0.02 | 0.02 | 0.06 | 0.08 | ||
| Average number of outstanding shares (in thousands) | 32,787 | 34,335 | 32,781 | 34,413 | ||
| Average number of outstanding diluted shares (in thousands) | 33,376 | 34,984 | 33,365 | 35,165 | ||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||
| (Unaudited) | ||||||
| 3 Months | 6 Months | |||||
| Periods Ended July 31, | 2011 | 2010 | 2011 | 2010 | ||
| (In thousands of CA$) | $ | $ | $ | $ | ||
Net income for the period | 774 | 833 | 1,855 | 2,814 | ||
Other comprehensive income | ||||||
| Exchange differences on translation of foreign operations | 229 | 76 | (1,266) | (673) | ||
Comprehensive income for the period | 1,003 | 909 | 589 | 2,141 | ||
| CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY | |||||
| (Unaudited) | |||||
| Capital stock | Contributed surplus | Accumulated other comprehensive income | Retained income | Total | |
| (In thousands of CA$) | $ | $ | $ | $ | $ |
| Balance, February 1, 2010 | 75,436 | 3,659 | 144 | 13,348 | 92,587 |
Net income for the period | — | — | — | 2,814 | 2,814 |
| Other comprehensive income for the period | — | — | (673) | — | (673) |
| Comprehensive income for the period | — | — | (673) | 2,814 | 2,141 |
| Share-base compensation | — | 113 | — | — | 113 |
| Options exercised | 257 | (93) | — | — | 164 |
| Subordinate voting share redemption | (4,224) | 1,438 | — | — | (2,786) |
| Balance, July 31, 2010 | 71,469 | 5,117 | (529) | 16,162 | 92,219 |
| Capital stock | Contributed surplus | Accumulated other comprehensive income | Retained income | Total | |
| (In thousands of CA$) | $ | $ | $ | $ | $ |
| Balance, February 1, 2011 | 70,032 | 5,740 | (1,477) | 18,739 | 93,034 |
Net income for the period | — | — | — | 1,855 | 1,855 |
| Other comprehensive income for the period | — | — | (1,266) | — | (1,266) |
| Comprehensive income for the period | — | — | (1,266) | 1,855 | 589 |
| Share-base compensation | — | 71 | — | — | 71 |
| Options exercised | 20 | (7) | — | — | 13 |
| Dividends | — | — | — | (328) | (328) |
| Balance, July 31, 2011 | 70,052 | 5,804 | (2,743) | 20,266 | 93,379 |
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
AS AT | July 31, 2011 | January 31, 2011 | ||
| (In thousands of CA$) | $ | $ | ||
ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | 22,203 | 18,677 | ||
| Short-term investments | 5,580 | 2,787 | ||
| Accounts receivable | 14,053 | 22,215 | ||
| Holdbacks on contracts | 4,562 | 167 | ||
| Work in progress | 1,436 | 403 | ||
| Inventories | 3,778 | 3,865 | ||
| Prepaid expenses and other current assets | 1,298 | 985 | ||
| Derivative financial instruments | 201 | 741 | ||
| Total current assets | 53,111 | 49,840 | ||
Non-current assets | ||||
| Holdbacks on contracts | — | 3,562 | ||
| Property, plant and equipment | 45,935 | 46,871 | ||
| Intangible assets | 2,586 | 2,601 | ||
| Other non-current assets | 2,850 | 2,852 | ||
| Deferred income tax assets | 4,771 | 6,960 | ||
Total assets | 109,253 | 112,686 | ||
LIABILITIES | ||||
| Current liabilities | ||||
| Accounts payable and other current liabilities | 6,138 | 5,365 | ||
| Income tax liabilities | 194 | 159 | ||
| Deferred revenues | 2,022 | 4,994 | ||
| Derivative financial instruments | 136 | 45 | ||
| Current portion of long-term debt | 2,400 | 2,513 | ||
| Total current liabilities | 10,890 | 13,076 | ||
| Non-current liabilities | ||||
| Long-term debt | 4,682 | 6,151 | ||
| Deferred income tax liabilities | 302 | 425 | ||
| Total liabilities | 15,874 | 19,652 | ||
SHAREHOLDERS' EQUITY | ||||
| Retained income | 20,266 | 18,739 | ||
| Accumulated other comprehensive income | (2,743) | (1,477) | ||
| 17,523 | 17,262 | |||
| Capital stock | 70,052 | 70,032 | ||
| Contributed surplus | 5,804 | 5,740 | ||
| Total shareholders' equity | 93,379 | 93,034 | ||
| Total liabilities and shareholders' equity | 109,253 | 112,686 | ||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
| (Unaudited) | |||||||
| 3 Months | 6 Months | ||||||
| Periods Ended July 31, | 2011 | 2010 | 2011 | 2010 | |||
| (In thousands of CA$) | $ | $ | $ | $ | |||
| OPERATING ACTIVITIES | |||||||
| Net income | 774 | 833 | 1,855 | 2,814 | |||
| Non-cash items: | |||||||
| Amortization of property, plant and equipment | 762 | 827 | 1,554 | 1,519 | |||
| Amortization of intangible assets | 89 | 81 | 178 | 165 | |||
| Gain on disposal of property, plant and equipment | ― | ― | ― | (52) | |||
| Unrealized gain on derivative financial instruments | 857 | 701 | 631 | 322 | |||
| Non-cash exchange (gain) loss | (41) | 117 | (230) | (343) | |||
| Share-based compensation | 12 | 57 | 71 | 113 | |||
| Income tax expense | 939 | 679 | 1,862 | 2,238 | |||
| Financial revenues | (113) | (160) | (208) | (182) | |||
| Finance charges | 59 | 124 | 119 | 196 | |||
| Net income adjusted for non-cash items | 3,338 | 3,259 | 5,832 | 6,790 | |||
| Changes in non-cash working capital items | 670 | (3,474) | 3,631 | (6,575) | |||
| Income tax expense received (paid) | 194 | ― | (174) | (191) | |||
Cash flows from (used in) operating activities | 4,202 | (215) | 9,289 | 24 | |||
| INVESTING ACTIVITIES | |||||||
| (Acquisition) disposal of short-term investments | (23) | 4,065 | (2,928) | 3,934 | |||
| Acquisition of property, plant and equipment | (609) | (504) | (638) | (2,153) | |||
| Acquisition of intangible assets | (75) | (80) | (163) | (200) | |||
| Reduction in other non-current assets | ― | 1 | 1 | 4 | |||
| Interest received | 133 | 64 | 210 | 158 | |||
| Cash flows from (used in) investing activities | (574) | 3,546 | (3,518) | 1,743 | |||
| FINANCING ACTIVITIES | |||||||
| Issuance of long-term debt | ― | ― | ― | 4,370 | |||
| Repayment of long-term debt | (619) | (656) | (1,219) | (1,067) | |||
| Issuance of subordinate voting shares | 13 | 2 | 13 | 164 | |||
| Redemption of subordinate voting shares | ― | (2,636) | ― | (2,786) | |||
| Dividends paid | (328) | ― | (328) | ― | |||
| Interest paid on the interest rate swap | (8) | ― | (17) | ― | |||
| Interest paid | (49) | (60) | (102) | (121) | |||
| Cash flows from (used in) financing activities | (991) | (3,350) | (1,653) | 560 | |||
| Impact of fluctuations in foreign exchange rate on cash | 172 | 77 | (592) | (137) | |||
| Net increase in cash and cash equivalents | 2,809 | 58 | 3,526 | 2,190 | |||
| Cash and cash equivalents, beginning of period | 19,394 | 7,902 | 18,677 | 5,770 | |||
| Cash and cash equivalents, end of period | 22,203 | 7,960 | 22,203 | 7,960 | |||
The following table sets out in detail the components of the "Changes in non-cash working capital items":
| 3 Months | 6 Months | ||||
| Periods ended July 31, | 2011 | 2010 | 2011 | 2010 | |
| (In thousands of CA$) | $ | $ | $ | $ | |
| Accounts receivable | 8,102 | (6,047) | 7,353 | (11,098) | |
| Holdbacks on contracts | (1,036) | (299) | (1,031) | 1,174 | |
| Income tax | 140 | (81) | 128 | 334 | |
| Work in progress | (910) | 887 | (1,076) | 675 | |
| Inventories | 145 | (191) | 87 | (586) | |
| Prepaid expenses and other current assets | (589) | 111 | (316) | (475) | |
| Accounts payable and other current liabilities | 1,034 | 130 | 1,267 | 1,852 | |
| Deferred revenues | (6,216) | 2,016 | (2,781) | 1,549 | |
| Changes in non-cash working capital items | 670 | (3,474) | 3,631 | (6,575) | |
Financing and investing activities without impact on cash were nil as at July 31, 2011, and $139,000 as at July 31, 2010, relating to the disposal of property, plant and equipment given in exchange for new ones.
For the purpose of the Consolidated Statements of Cash Flows, cash and cash equivalents are disclosed as follows:
As at | July 31, 2011 | January 31, 2011 | |||
| (In thousands of CA$) | $ | $ | |||
| Cash | 22,203 | 15,918 | |||
| Cash equivalents - term deposits | ― | 2,759 | |||
| 22,203 | 18,677 | ||||
Segmented Information
The Corporation operates in the non-residential construction sector, primarily in the United States and Canada. Its operations include the connections design and engineering, fabrication and installation of complex steel structures, heavy steel built-ups, as well as miscellaneous and architectural metalwork.
| 3 Months | 6 Months | |||||
| Periods ended July 31, | 2011 | 2010 | 2011 | 2010 | ||
| (In thousands of CA$) | $ | $ | $ | $ | ||
| Revenues | ||||||
| Canada | 250 | 123 | 475 | 563 | ||
| United States | 12,868 | 12,844 | 25,872 | 26,045 | ||
| 13,118 | 12,967 | 26,347 | 26,608 | |||
As at | July 31, 2011 | January 31, 2011 | ||
| (In thousands of CA$) | $ | $ | ||
| Property, Plant and Equipment | ||||
| Canada | 45,297 | 46,767 | ||
| United States | 638 | 104 | ||
| 45,935 | 46,871 | |||
All intangible assets and investment tax credits included under "Other non-current assets" at, January 31, 2011 and July 31, 2011, originated from Canada.
During the six-month period ended July 31, 2011, one client accounted for 94% of the Corporation's revenues (one client accounted for 90% of the revenues during the six-month period ended July 31, 2010), and therefore accounted for more than 10% of revenues.