ADF Group Inc. annonces the results for the fiscal year ended January 31, 2018

HIGHLIGHTS

  • Revenues up by 75% compared with the previous year, reaching $180.5 million.
  • Revenues before income tax expense of $2.2 million, down by $0.3 million compared with a year ago.
  • Negative net result of $7.2 million, including a non-recurring non cash income tax expense totalling $9.2 million.
  • The Corporation’s backlog stood at $85.5 million on January 31, 2018.

TERREBONNE, QC, April 12, 2018 /CNW Telbec/ – ADF GROUP INC. ("ADF" or the "Corporation") (TSX: DRX) recorded revenues of $180.5 million during the fiscal year ended January 31, 2018, compared with $102.8 million the previous fiscal year. This increase in revenues results from the rise in fabrication activities across both of the Corporation’s plants.

The gross margin as a percentage of revenues went from 16.7% during the fiscal year ended January 31, 2017, to 8.9% during the fiscal year ended January 31, 2018. This drop in gross margin was mainly lead by the current pressure on price in the markets served by ADF.

The Corporation recorded a $9.2 million non-recurrent non-cash income tax expense, resulting almost entirely from the decrease of deferred U.S. subsidiaries income tax assets. This decrease had to be taken because of the change to the U.S. federal tax rates for the Corporation’s U.S. subsidiaries which had an impact of $1.7 million, and the non-recognition of deferred U.S. subsidiaries income tax assets following a tax settlement, resulting in an additional impact of $7.5 million. However, it is important to point out that once the Corporation has a better outlook on its U.S. subsidiaries’ future profitability, the written off assets may be recognized when it becomes more likely than not that these assets will be realized.

In light of this one-time charge, ADF recorded a negative net income of $7.2 million (-$0.22 basic and diluted per share) during the fiscal year ended January 31, 2018, compared with a net income of $1.5 million ($0.05 basic and diluted per share) a year ago. It is also important to underline that had it not been for the change to the U.S. federal tax rates and the write-off of deferred income tax assets, the Corporation’s net income for the fiscal year ended January 31, 2018, would have amounted to $2.0 million or $0.06 basic and diluted per share.

On January 31, 2018, the Corporation had $34.8 million in working capital, up from January 31, 2017. On January 31, 2018, cash and cash equivalents totalled $4.9 million, up by $4.6 million compared with January 31, 2017.

The Corporation remains in a solid position to support its ongoing operations and pursue its development projects and remunerate its shareholders in accordance with the dividend payment policy.

As at January 31, 2018, the Corporation order backlog totalled $85.5 million, compared with $194.5 million as at January 31, 2017. These contracts will be progressively completed by the end of the fiscal year ending January 31, 2020.

 

Financial Highlights

Fiscal Years Ended January 31,

2018

2017

(In thousands of CA$, and dollars per share)

$

$

Revenues

180,474

102,846

EBITDA

8,436

8,462

Income before income tax expense

2,172

2,513

Net income for the year

(7,213)

1,499

—      Basic per share

(0,22)

0,05

—      Diluted per share

(0,22)

0,05

Average number of outstanding shares (basic, in thousands)

32,633

32,624

Average number of outstanding shares (diluted, in thousands)

32,633

32,686

 

Outlook

"Despite the negative net income which was driven by this one-time non-cash tax adjustment and the uncertainties in our markets, our revenues for fiscal 2018 increased by about $80 million compared with fiscal 2017, and when we exclude this tax adjustment, the net income also improved " indicated Mr. Jean Paschini, Co-Chairman of the Board of Directors and Chief Executive Officer.

"Despite this uncertain environment, we continue focusing on our growth objectives" concluded Mr. Paschini.

Dividend

On April 11, 2018, ADF Group’s Board of Directors approved the payment of a semi-annual dividend of $0.01 per share, which will be paid on May 16, 2018 to shareholders of record as at April 30, 2018.

Conference Call with Investors

A conference call with investors is scheduled for April 12, 2018 at 10 a.m. (Eastern time) to discuss the results of Corporation fiscal year ended January 31, 2018.

To take part in the conference call, dial 1 (866) 865-3087, a few minutes prior to the conference call scheduled start time. A replay of this conference call will be available from Thursday, April 12, 2018 at 1:00 p.m. until 11:59 p.m., Thursday, April 19, 2018, by dialing 1 (855) 859-2056, followed by the access code 5199297.

The conference call (audio) will also be available at www.adfgroup.com. Members of the media are invited to listen in.

Annual Meeting of Shareholders

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

 

Date:

Wednesday, June 13, 2018

Time:

11:00 a.m.

Place:

Imperia Hotel & Suites

2935 de la Pinière Boulevard, Terrebonne, Québec, Canada

 

Financial results for the first quarter ending April 30, 2018, 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, including the application of industrial coatings, and installation of complex steel structures, heavy steel built-ups, as well as in miscellaneous and architectural metals for the non-residential infrastructure sector. ADF Group Inc. 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. The Corporation operates two fabrication plants and two paint shops, in Canada and in the United States, and a Construction Division in the United States, which specializes in the installation of steel structures and other related products.

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

Earnings before interest, taxes, depreciation and amortization ("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. Refer to the section "Non-GAAP Measures" of the Corporation’s Management’s Discussion and Analysis for the definition of this metric and reconciliation to the most comparable IRFS measures.

All amounts are in Canadian dollars, unless otherwise indicated.

 


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at January 31,

2018

2017

(In thousands of Canadian dollars)

$

$

ASSETS

Current assets

Cash and cash equivalents

4,905

334

Accounts receivable

33,099

22,326

Holdbacks on contracts

4,933

3,613

Income tax assets

927

842

Work in progress

30,314

21,077

Inventories

5,150

6,957

Derivative financial instruments

300

696

Prepaid expenses and other current assets

2,428

1,137

Total current assets

82,056

56,982

Non-current assets

Property, plant and equipment

88,378

90,060

Intangible assets

3,197

2,920

Other non-current assets

1,627

3,406

Deferred income tax assets

5,316

Total assets

175,258

158,684

LIABILITIES

Current liabilities

Bank overdraft

1,907

Credit facilities

10,150

13,336

Accounts payable and other current liabilities

29,308

16,585

Income tax liability

422

184

Deferred revenues

3,435

1,264

Current portion of long-term debt

2,066

844

Total current liabilities

47,288

32,213

Non-current liabilities

Long-term debt

26,135

17,870

Deferred income tax liabilities

6,053

2,951

Total liabilities

79,476

53,034

SHAREHOLDERS’ EQUITY

Capital stock

68,120

68,088

Contributed surplus

6,423

6,422

Accumulated other comprehensive income (loss)

4,706

6,741

Retained income

16,533

24,399

Total shareholders’ equity

95,782

105,650

Total liabilities and shareholders’ equity

175,258

158,684

 

CONSOLIDATED STATEMENTS OF INCOME

Fiscal Years Ended January 31,

2018

2017

(In thousands of Canadian dollars and in dollars per share)

$

$

Revenues

180,474

102,846

Cost of goods sold

164,352

85,635

Gross Margin

16,122

17,211

Selling and administrative expenses

12,109

13,436

Financial revenues

(30)

(49)

Financial expenses

1,638

1,057

Foreign exchange loss

233

254

13,950

14,698

Income before income tax expense

2,172

2,513

Income tax expense

9,385

1,014

Net income for the year

(7,213)

1,499

Income per share

Basic and diluted per share

(0.22)

0.05

Average number of outstanding shares (in thousands)

32,633

32,624

Average number of outstanding diluted shares (in thousands)

32,633

32,686

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Fiscal Years Ended January 31,

2018

2017

(In thousands of Canadian dollars)

$

$

Net income for the year

(7,213)

1,499

Other comprehensive income (loss) (a) :

Exchange differences on translation of foreign operations

(2,035)

(2,816)

Change in value of available-for-sale financial assets (b)

50

(2,035)

(2,766)

Comprehensive income (loss) for the year

(9,248)

(1,267)

a)

Will subsequently be reclassified to net income.

b) 

Net of an immaterial amount related income tax expense for the fiscal year ended January 31, 2017.

 

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Capital Stock

Contributed
Surplus

Accumulated Other
Comprehensive
Income (Loss)

Retained
Income

Total

(In thousands of Canadian dollars)

$

$

$

$

$

Balance, February 1, 2016

68,077

6,397

9,507

23,552

107,533

Net income for the year

1,499

1,499

Other comprehensive income (loss)

(2,766)

(2,766)

Comprehensive income (loss) for the year

(2,766)

1,499

(1,267)

Share-based compensation

30

30

Options exercised

11

(5)

6

Dividends

(652)

(652)

Balance, January 31, 2017

68,088

6,422

6,741

24,399

105,650

 


Capital Stock

Contributed
Surplus

Accumulated Other
Comprehensive
Income (Loss)

Retained
Income

Total

(In thousands of Canadian dollars)

$

$

$

$

$

Balance, February 1, 2017

68,088

6,422

6,741

24,399

105,650

Net income for the year

(7,213)

(7,213)

Other comprehensive income (loss)

(2,035)

(2,035)

Comprehensive income (loss) for the year

(2,035)

(7,213)

(9,248)

Share-based compensation

16

16

Options exercised

32

(15)

17

Dividends

(653)

(653)

Balance, January 31, 2018

68,120

6,423

4,706

16,533

95,782

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Fiscal Years Ended January 31,

2018

2017

(In thousands of Canadian dollars)

$

$

OPERATING ACTIVITIES

Net income for the year

(7,213)

1,499

Non-cash items:

Amortization of property, plant and equipment

4,029

4,326

Amortization of intangible asset

394

361

Gain on disposal of property, plant and equipment

(39)

Unrealized loss (gain) on derivative financial instruments

396

(1,099)

Non-cash exchange loss

1,744

683

Share-based compensation

951

Income tax expense

9,385

1,014

Inventories depreciation allowance

(55)

209

Financial revenues

(30)

(49)

Financial expenses

1,638

1,057

Net income adjusted for non-cash items

10,249

8,952

Change in non-cash working capital items (1)

(7,243)

(18,686)

Income tax recovery (paid)

656

(901)

Cash flows from (used in) operating activities

3,662

(10,635)

INVESTING ACTIVITIES

Net acquisition of property, plant and equipment

(4,831)

(6,809)

Revenues from disposals of property, plant and equipment

175

Acquisition of intangible assets

(671)

(410)

Increase in other non-current assets

(21)

(12)

Interest received

30

49

Cash flows used in investing activities

(5,318)

(7,182)

FINANCING ACTIVITIES

Variation in credit facilities

(3,159)

13,329

Issuance of long-term debt

10,702

5,000

Repayment of long-term debt

(945)

(816)

Issuance of subordinate voting shares

17

6

Dividends paid

(653)

(652)

Interest paid

(1,603)

(1,040)

Cash flows from financing activities

4,359

15,827

Impact of fluctuations in foreign exchange rate on cash flow

(39)

(53)

Net change in cash and cash equivalents during the year

2,664

(2,043)

Cash, and cash equivalents, beginning of year (2)

334

2,377

Cash and cash equivalents, end of year (2)

2,998

334

(1)

 The following table sets out in detail the components of the "Changes in non-cash working capital items":

Fiscal Years Ended January 31,

2018

2017

(In thousands of Canadian dollars)

$

$

Accounts receivable

(11,514)

13

Holdbacks on contracts

(1,516)

(1,895)

Work in progress

(10,121)

(13,688)

Inventories

1,760

(1,057)

Prepaid expenses and other current assets

(1,330)

688

Accounts payable and other current liabilities

13,203

(1,310)

Deferred revenues

2,275

(1,437)

Changes in non-cash working capital items

(7,243)

(18,686)

(2)

Net of the $1.9 million bank overdraft as at January 31, 2018 (none as at January 31, 2017).

 

SEGMENTED INFORMATION

The Corporation operates in the non-residential construction industry, primarily in the United States and Canada. Its operations include the design and engineering of connections, fabrication, including industrial coating, and installation of complex steel structures, heavy steel built-ups, as well as miscellaneous and architectural metalwork.

 

Fiscal Years Ended January 31,

2018

2017

(In thousands of Canadian dollars)

$

$

Revenues

Canada

16,027

17,957

United States

164,447

84,889

180,474

102,846

 

As at January 31,

2018

2017

(In thousands of Canadian dollars)

$

$

Non-current assets (1)

Canada

49,508

50,110

United States

43,694

46,276

93,202

96,386

(1)

The non-current assets mainly include property, plant and equipment, intangible assets, investment tax credits and others non-current assets.

 

Revenues from external clients were allocated to each country on the basis of the project’s location.

During the fiscal year ended January 31, 2018, 85% of the Corporation’s revenues were realized with three (3) clients, each representing 10 % and more of its revenues (60% with two (2) clients during the fiscal year ended January 31, 2017).

The following table, presents the breakdown of revenues for each these clients:

 

Fiscal Years Ended

January 31, 2018

January 31, 2017

Canada

United States

Total

Canada

United States

Total

(In thousands of Canadian dollars)

$

$

$

$

$

$

Client A

8,412

15,892

24,304

Client B

29,375

29,375

36,825

36,825

Client C

81,120

81,120

Client D

43,106

43,106

153,601

153,601

8,412

52,717

61,129

 

SOURCE ADF Group Inc.

Jean Paschini, Co-Chairman of the Board of Directors and Chief Executive Officer; Jean-François Boursier, CPA, CA, Chief Financial Officer, Telephone: (450) 965-1911