Results for the Fiscal Year Ended January 31, 2012

TERREBONNE, QC, April 12, 2012 /CNW Telbec/ – ADF Group Inc. (“ADF” or the “Corporation”) (TSX: DRX) recorded revenues of $48.4 million for the 2012 fiscal year compared with $55.3 million the previous fiscal year. This decrease reflects the economic conditions prevailing in the Corporation’s markets. In addition, during the fourth quarter ended January 31, 2012, the Corporation recorded a backcharge from its client relating to a project at the World Trade Center in New York. U.S.A., which reduced the revenues previously recognized by about $3.5 million, thereby reducing the gross margin by the same amount.

The gross margin in dollar value declined during the 2012 fiscal year compared with the 2011 fiscal year, which is in line with the revenue decrease. As a percentage of revenues, the gross margin decreased from 25.6% during the fiscal year ended January 31, 2011 to 19.2% in fiscal 2012. This decrease is also explained by the new contracts awarded during the 2012 fiscal year, which generate lower profit margins than those posted by ADF in previous years.

Net income for the fiscal year ended January 31, 2012, amounted to $1.8 million or $0.06 basic per share ($0.05 diluted per share), compared with a net income of $5.4 million or $0.16 per share (basic and diluted) in 2011. In addition to the factors previously mentioned, this decline reflects the foreign exchange variations, which generated a lesser gain during the 2012 fiscal year than in 2011 year, whereas the profit mix generated mostly by the Corporation’s U.S. subsidiaries, was subject to a higher tax rate than in recent years.

As at January 31, 2012, the Corporation had $24.5 million in liquidities (consisting of cash, cash equivalents and short-term investments), up by 14% from the previous year, exceeding ADF Group’s total debt by $18.3 million.

Cash flows provided by operations allowed to further improve the financial position of the Corporation, which, as at January 31, 2012, had $42.6 million in working capital, up by 15.9% compared with 2011.

Outlook

During the 2012 fiscal year, ADF Group obtained various mandates in Canada. Although carrying lower profit margins than the major projects executed in previous years, these new contracts enabled the Corporation to increase its fabrication capacity utilization rate and make use of its qualified labour force. ADF Group’s order backlog was valued at $48 million as at January 31, 2012.

“We will be active on the Canadian market where the short-term outlook is brighter than in the United States. We are primarily targeting industrial facilities in Western Canada, and public infrastructures in Ontario and Quebec. To this end, we have recently invested in the acquisition of specialized equipment to enhance our competitiveness in the construction and rehabilitation of bridges” said Mr. Jean Paschini, Chairman of the Board and Chief Executive Officer.

Management foresees that the launch of new major projects in the commercial and industrial sectors in the United States will continue to incur some delays in the short-term. Prospects for the U.S. public infrastructures market are more encouraging. In fact, the current state of public infrastructures will require important investments in the near future.

“In light of this opportunity, we are analyzing the possibilities to set up a fabrication plant in the United States, which would give us access to this market, and provide us with a greater market access south of the border. Over the medium and long term, the American market will remain ADF’s target market” added Mr. Paschini.

“We are confident as we look to ADF Group’s future, considering the Corporation’s healthy financial position, its leading expertise and the quality of its assets” concluded Mr. Paschini.

Dividend

The Corporation’s Board of Directors approved a semi-annual dividend payment. Consequently, ADF Group announces the payment of a semi-annual dividend of $0.01 per share, payable on May 17, 2012 to shareholders of record as at April 30, 2012.

Annual Meeting of Shareholders

ADF Group Inc. Annual Meeting of Shareholders will be held on:

Date: Wednesday, June 13, 2012
Time: 11:00 a.m.
Place: Hilton Montreal-Laval Hotel
Laval, Quebec

Financial results for the first quarter ending April 30, 2012, will also be disclosed at the Corporation’s shareholders’ meeting.

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 nonresidential 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.

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 fiscal year ended January 31, 2012

Thursday April 12, 2012 at 10:00 a.m. (Montreal Time)

To participate in the conference call, please dial 1-888-231-8191 a few minutes before the start of the call.

For those unable to participate, a taped rebroadcast will be available from
April 12, 2012 at 1:00 p.m. until midnight April 19, 2012,
by dialing 1-855-859-2056 ; access code 66290573

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

     
Fiscal Years Ended January 31, 2012 2011
(In thousands of Canadian dollars and in dollars per share) $ $
Revenues 48,431 55,268
Cost of goods sold 39,128 41,132
Gross Margin 9,303 14,136
Selling and administrative expenses 6,690 6,598
Financial revenue (345) (293)
Financial expenses 233 392
Foreign exchange gain (1,043) (2,486)
  5,535 4,211
Income before income tax expense 3,768 9,925
Income tax expense 1,956 4,534
Net income for the year 1,812 5,391
Earnings per share    
  Basic per share 0.06 0.16
  Diluted per share 0.05 0.16
Average number of outstanding shares (in thousands) 32,771 33,642
Average number of outstanding diluted shares (in thousands) 33,309 34,301

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

       
Fiscal Years Ended January 31, 2012 2011
(In thousands of Canadian dollars) $ $
Net income for the year 1,812 5,391
Other comprehensive income:    
  Exchange differences on translation of foreign operations (a) (53) (1,621)
  Changes in value of available-for-sale financial assets (b) (56)
  (109) (1,621)
Comprehensive income for the year 1,703 3,770
(a) Net of hedging activities and of $24,000 in related income taxes for the fiscal year ended January 31, 2012 (nil for the fiscal year ended January 31, 2011).
(b) Net of $9,000 in related income taxes.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

           
  Capital Stock Contributed
Surplus
Accumulated
Other
Comprehensive
Income
Retained
Income
Total
(In thousands of Canadian dollars) $ $ $ $ $
           
Balance, February 1, 2010 75,436 3,659 144 13,348 92,587
  Net income for the year 5,391 5,391
  Other comprehensive income (1,621) (1,621)
  Comprehensive income for the year (1,621) 5,391 3,770
  Share-based compensation 237 237
  Options exercised 277 (101) 176
  Subordinate voting share redemption (5,681) 1,945 (3,736)
Balance, January 31, 2011 70,032 5,740 (1,477) 18,739 93,034
           
           
  Capital Stock Contributed
Surplus
Accumulated
Other
Comprehensive
Income
Retained
Income
Total
(In thousands of Canadian dollars) $ $ $ $ $
           
Balance, February 1, 2011 70,032 5,740 (1,477) 18,739 93,034
  Net income for the year 1,812 1,812
  Other comprehensive income (109) (109)
  Comprehensive income for the year (109) 1,812 1,703
  Share-based compensation 107 107
  Options exercised 20 (7) 13
  Subordinate voting share redemption (966) 528 (438)
  Dividends (656) (656)
Balance, January 31, 2012 69,086 6,368 (1,586) 19,895 93,763
           

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

       
As at January 31, 2012 January 31, 2011 February 1, 2010
(In thousands of Canadian dollars) $ $ $
       
ASSETS      
Current assets      
  Cash and cash equivalents 18,976 18,677 5,770
  Short-term investments 5,562 2,787 11,652
  Accounts receivable 14,189 22,215 13,421
  Holdbacks on contracts 5,082 167 2,692
  Work in progress 5,263 403 1,574
  Inventories 3,613 3,865 3,093
  Income tax assets 442
  Prepaid expenses and other current assets 782 985 2,299
  Derivative financial instruments 741 832
  Total current assets 53,467 49,840 41,775
       
Non-current assets      
  Holdbacks on contracts 3,562 1,297
  Property, plant and equipment 45,089 46,871 47,438
  Intangible assets 2,618 2,601 2,590
  Other non-current assets 2,796 2,852 2,312
  Deferred income tax assets 4,549 6,960 11,569
Total assets 108,519 112,686 106,981
       
LIABILITIES      
Current liabilities      
  Accounts payable and other current liabilities 5,551 5,365 5,649
  Income tax liabilities 77 159
  Deferred revenues 2,618 4,994 1,274
  Derivative financial instruments 75 45
  Current portion of long-term debt 2,526 2,513 2,422
  Total current liabilities 10,847 13,076 9,345
       
Non-current liabilities      
  Long-term debt 3,676 6,151 4,645
  Deferred income tax liabilities 233 425 404
Total liabilities 14,756 19,652 14,394
       
SHAREHOLDERS’ EQUITY      
  Retained income 19,895 18,739 13,348
  Accumulated other comprehensive income (1,586) (1,477) 144
  18,309 17,262 13,492
       
  Capital stock 69,086 70,032 75,436
  Contributed surplus 6,368 5,740 3,659
Total shareholders’ equity 93,763 93,034 92,587
Total liabilities and shareholders’ equity 108,519 112,686 106,981
       

CONSOLIDATED STATEMENTS OF CASH FLOWS

     
Fiscal Years Ended January 31, 2012 2011
(In thousands of Canadian dollars) $ $
     
OPERATING ACTIVITIES    
  Net income for the year 1,812 5,391
  Non-cash items:    
    Amortization of property, plant and equipment 3,063 3,045
    Amortization of intangible assets 356 339
    Loss (gain) on disposal of property, plant and equipment 8 (52)
    Unrealized loss on derivative financial instruments 771 136
    Non-cash exchange gain (63) (600)
    Share-based compensation 107 237
    Income tax expense 1,956 4,534
    Financial revenue (345) (293)
    Financial expenses 233 392
  Net income adjusted for non-cash items 7,898 13,129
  Changes in non-cash working capital items (1) 243 (4,324)
  Income tax expense paid (15) (393)
Cash flows from (used in) operating activities 8,126 8,412
INVESTING ACTIVITIES    
  (Acquisition) disposal of short-term investments (2,807) 8,596
  Net acquisition of property, plant and equipment (1,230) (2,302)
  Acquisition of intangible assets (373) (350)
  Reduction in other non-current assets (9) (4)
  Interest received 380 629
Cash flows from (used in) investing activities (4,039) 6,569
FINANCING ACTIVITIES    
  Issuance of long-term debt 4,370
  Repayment of long-term debt (2,491) (2,333)
  Issuance of subordinate voting shares 13 176
  Redemption of subordinate voting shares (438) (3,736)
  Dividends paid (656)
  Interest paid on the interest rate swap (33) (35)
  Interest paid (199) (290)
Cash flows from (used in) financing activities (3,804) (1,848)
Impact of fluctuations in foreign exchange rate on cash 16 (226)
Net increase in cash and cash equivalents 299 12,907
Cash and cash equivalents, beginning of year 18,677 5,770
Cash and cash equivalents, end of year (2) 18,976 18,677
Non-cash financing and investing activities were as follows:    
  Obligation under a capital lease 37 134
  Property, plant and equipment given in exchange for new property, plant and equipment 56 139
     

(1) Details on the components of the “Changes in non-cash working capital items”:

     
Fiscal Years Ended January 31, 2012 2011
(In thousands of Canadian dollars) $ $
  Accounts receivable 7,825 (10,236)
  Holdbacks on contracts (1,324) 23
  Income tax 144 476
  Work in progress (4,764) 1,114
  Inventories 252 (772)
  Prepaid expenses and other current assets 203 774
  Accounts payable and other current liabilities 240 1,295
  Deferred revenues (2,333) 3,002
Changes in non-cash working capital items 243 (4,324)

(2) For the purpose of the consolidated statements of cash flows, cash and cash equivalents are disclosed as follows:

       
As at January 31, 2012 January 31, 2011 February 1, 2010
(In thousands of Canadian dollars) $ $ $
Cash 18,976 15,918 5,770
Cash equivalents – term deposits 2,759
  18,976 18,677 5,770

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.

     
Fiscal years ended January 31, 2012 2011
(In thousands of Canadian dollars) $ $
Revenues    
  Canada 6,371 698
  United States 42,060 54,570
  48,431 55,268
       
As at January 31, 2012 January 31, 2011 February 1, 2010
(In thousands of Canadian dollars) $ $  $
Property, Plant and Equipment      
  Canada 44,410 46,767 47,293
  United States 679 104 145
  45,089 46,871 47,438

All intangible assets and investment tax credits included in “Other non-current assets” at February 1, 2010, January 31, 2011 and January 31, 2012, originated from Canada.

During the fiscal year ended January 31, 2012, one client accounted for 83% of the Corporation’s revenues (one client accounted for 90% of the revenues during the fiscal year ended January 31, 2011), and was therefore the only one that accounted for more than 10% of revenues. 

 

Source:
ADF Group Inc.

Contact:
Jean Paschini, Chairman of the Board of Directors and Chief Executive Officer
Jean-François Boursier, CA, Chief Financial Officer

Telephone: (450) 965-1911 / 1 (800) 263-7560
Web Site:  www.adfgroup.com