ADF Group Inc. annonces the results for the fiscal year ended January 31, 2019

HIGHLIGHTS

  • Revenues of $135.1 million, down compared with the previous year as a results of the uncertainty surrounding customs tariffs.
  • Cash flow from operations up by $8.0 million, reaching $11.7 million.
  • Net loss of $0.4 million, compared with a net loss of $7.2 million a year ago
  • The Corporation’s order backlog totalled $219.5 million as at January 31, 2019, up by $134 million compared with January 31, 2018.

TERREBONNE, QC, April 11, 2019 /CNW Telbec/ – ADF GROUP INC. ("ADF" or the "Corporation") (TSX: DRX) recorded revenues of $135.1 million during the fiscal year ended January 31, 2019, compared with $180.5 million the previous fiscal year. This decrease in revenues results for the most part from the loss of three major contracts at the beginning of the fiscal year following the implementation of new U.S. tariffs on steel imports. Although the Corporation was able to secure new contracts since the tariffs took effect, the impact from the loss of these contracts on fabrication activities could not be recovered.

Gross margin, as a percentage of revenues went from 8.9% in the fiscal year ended January 31, 2018, to 7.1% during the fiscal year ended January 31, 2019. This drop in gross margin is largely explained by the impact of above-mentioned fabrication volume decrease on the absorption of fixed costs.

ADF recorded a net loss of $0.4 million (-$0.01 basic and diluted per share) during the fiscal year ended January 31, 2019, compared with a net loss of $7.2 million (-$0.22 basic and diluted per share) a year ago. It is important to highlight that during the fourth quarter of the fiscal year ended January 31, 2018, the Corporation recorded a $9.2 million non-recurrent and non-cash income tax expense, following the change made to the U.S. federal tax rates for the Corporation’s U.S. subsidiaries, and the non-recognition of deferred U.S. subsidiaries income tax assets following a tax settlement.

On January 31, 2019, the Corporation had $31.8 million in working capital, whilst its cash and cash equivalents position, net of the credit facilities, increased by $4.7 million from the same date a year ago.

The Corporation remains in a sound position to support its ongoing operations and pursue its development projects.

During the fiscal year ended January 31, 2019, the Corporation was able to secure new contracts valued at close to $200 million, bringing its order backlog to $219.5 million on that date, and that is excluding the new contracts worth $73 million announced on February 12, 2019, compared with a backlog of $85.5 million as at January 31, 2018. Most contracts will be progressively completed by the end of the fiscal year ending January 31, 2021.

 

Financial Highlights

Fiscal Years Ended January 31,

2019

2018

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

$

$

Revenues

135,073

180,474

EBITDA

1,945

8,436

Income (loss) before income tax expense

(2,393)

2,172

Net loss for the year

(374)

(7,213)

—  Basic per share

(0.01)

(0.22)

—  Diluted per share

(0.01)

(0.22)

Average number of outstanding shares (basic, in thousands)

32,635

32,633

Average number of outstanding shares (diluted, in thousands)

32,635

32,633

 

Outlook

"We can draw some still positive conclusions from this past fiscal year, even though it started with uncertainties about the free-trade treaty negotiations and the introduction of new tariffs on steel imports" indicated Mr. Jean Paschini, Co-Chairman of the Board of Directors and Chief Executive Officer.

"We have announced close to $200 million worth in new contract during the fiscal year ended January 31, 2019, and we have secured an additional $73 million in new contracts since that date. We have also improved our liquidities, which in turn improved our cash position, net of credit facilities, by almost $5.0 million", concluded Mr. Paschini.

Dividend

On April 10, 2019, 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 15, 2019 to shareholders of record as at April 30, 2019.

Conference Call with Investors

A conference call with investors is scheduled for April 11, 2019 at 10 a.m. (Eastern time) to discuss the results of Corporation fiscal year ended January 31, 2019.

To take part in the conference call, dial 1-888-390-0549, a few minutes prior to the conference call scheduled start time. A replay of this conference call will be available from Thursday, April 11, 2019 at 1:00 p.m. until 11:59 p.m., Thursday, April 18, 2019, by dialing 1-888-259-6562, followed by the access code 158733 #.

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 12, 2019

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, 2019, 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,

2019

2018

(In thousands of Canadian dollars)

$

$

ASSETS

Current assets

Cash and cash equivalents

4,164

4,905

Accounts receivable

29,919

33,099

Holdbacks on contracts

6,227

4,933

Current income tax assets

859

927

Contract assets

17,952

Work in progress

30,314

Inventories

8,349

5,150

Derivative financial instruments

300

Prepaid expenses and other current assets

1,638

2,428

Total current assets

69,108

82,056

Non-current assets

Property, plant and equipment

89,375

88,378

Intangible assets

3,312

3,197

Other non-current assets

1,417

1,627

Total assets

163,212

175,258

LIABILITIES

Current liabilities

Bank overdraft

1,907

Credit facilities

6,605

10,150

Accounts payable and other current liabilities

16,857

29,308

Current income tax liability

422

422

Contract liabilities

10,920

Deferred revenues

3,435

Derivative financial instruments

184

Current portion of long-term debt

2,272

2,066

Total current liabilities

37,260

47,288

Non-current liabilities

Long-term debt

24,939

26,135

Deferred income tax liabilities

3,921

6,053

Other non-current liabilities

197

Total liabilities

66,317

79,476

SHAREHOLDERS’ EQUITY

Capital stock

68,120

68,120

Contributed surplus

6,432

6,423

Accumulated other comprehensive income (loss)

6,648

4,706

Retained income

15,695

16,533

Total shareholders’ equity

96,895

95,782

Total liabilities and shareholders’ equity

163,212

175,258

 

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Fiscal Years Ended January 31,

2019

2018

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

$

$

Revenues

135,073

180,474

Cost of goods sold

125,520

164,352

Gross Margin

9,553

16,122

Selling and administrative expenses

12,181

12,109

Net financial expenses

1,784

1,608

Foreign exchange (gain) loss

(2,019)

233

11,946

13,950

Income (loss) before income tax (recovery) expense

(2,393)

2,172

Income tax (recovery) expense

(2,019)

9,385

Net loss for the year

(374)

(7,213)

Earnings per share

Basic and diluted per share

(0.01)

(0.22)

Average number of outstanding shares (in thousands)

32,635

32,633

Average number of outstanding diluted shares (in thousands)

32,635

32,633

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Fiscal Years Ended January 31,

2019

2018

(In thousands of Canadian dollars)

$

$

Net loss for the year

(374)

(7,213)

Other comprehensive income (loss) (a) :

Exchange differences on translation of foreign operations

2,131

(2,035)

Comprehensive income (loss) for the year

1,757

(9,248)

a)

Will subsequently be reclassified to net income (loss).

 

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, 2017

68,088

6,422

6,741

24,399

105,650

Net loss 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

Capital Stock

Contributed
Surplus

Accumulated Other
Comprehensive
Income (Loss)

Retained
Income

Total

(In thousands of Canadian dollars)

$

$

$

$

$

Balance, February 1, 2018

68,120

6,423

4,706

16,533

95,782

Net loss for the year

(374)

(374)

Other comprehensive income (loss)

2,131

2,131

Comprehensive income (loss) for the year

2,131

(374)

1,757

New IFRS 9 adoption

(189)

189

Share-based compensation

9

9

Dividends

(653)

(653)

Balance, January 31, 2019

68,120

6,432

6,648

15,695

96,895

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Fiscal Years Ended January 31,

2019

2018

(In thousands of Canadian dollars)

$

$

OPERATING ACTIVITIES

Net loss for the year

(374)

(7,213)

Non-cash items:

Amortization of property, plant and equipment

4,206

4,029

Amortization of intangible assets

367

394

Unrealized loss on derivative financial instruments

484

396

Non-cash exchange (gain) loss

(2,781)

1,744

Share-based compensation

(533)

Income tax (recovery) expense

(2,019)

9,385

Inventories depreciation allowance

352

(55)

Net financial expenses

1,784

1,608

Others

7

(39)

Net income adjusted for non-cash items

1,493

10,249

Change in non-cash working capital items (1)

10,182

(7,243)

Income tax recovery

656

Cash flows from operating activities

11,675

3,662

INVESTING ACTIVITIES

Acquisition of property, plant and equipment

(3,273)

(4,831)

Acquisition of intangible assets

(482)

(671)

Revenues from disposals of property, plant and equipment

35

175

Disposal of equity investments

217

Government grants

210

Others

13

9

Cash flows used in investing activities

(3,280)

(5,318)

FINANCING ACTIVITIES

Variation in credit facilities

(3,545)

(3,159)

Issuance of long-term debt

10,702

Repayment of long-term debt

(1,544)

(945)

Issuance of subordinate voting shares

17

Dividends paid

(653)

(653)

Interest paid

(1,774)

(1,603)

Cash flows (used in) from financing activities

(7,516)

4,359

Impact of fluctuations in foreign exchange rate on cash flow

287

(39)

Net change in cash and cash equivalents during the year

1,166

2,664

Cash, and cash equivalents, beginning of year

2,998

334

Cash and cash equivalents, end of year

4,164

2,998

(1)

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

 

Fiscal Years Ended January 31,

2019

2018

(In thousands of CA$)

$

$

Accounts receivable

5,601

(11,514)

Holdbacks on contracts

(936)

(1,516)

Contract assets/ Work in progress

13,477

(10,121)

Inventories

(3,413)

1,760

Prepaid expenses and other current assets

851

(1,330)

Accounts payable and other current liabilities

(12,553)

13,203

Contract liabilities/Deferred revenues

6,955

2,275

Other non-current liabilities

200

Change in non-cash working capital items

10,182

(7,243)

 

SEGMENTED INFORMATION

The Corporation operates one operational sector, being, the non-residential construction industry, primarily in the United States and Canada. This sector includes the following areas of expertise: 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,

2019

2018

(In thousands of CA$)

$

$

Revenues

Canada

3,518

16,027

United States

131,555

164,447

135,073

180,474

As at January 31,

2019

2018

(In thousands of CA$)

$

$

Non-current assets (1)

Canada

48,750

49,508

United States

45,355

43,694

94,105

93,202

(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, 2019, 79% of the Corporation’s revenues were realized with three (3) clients, each representing 10% and more of its revenues (85% with three (3) clients during the fiscal year ended January 31, 2018).

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

 

Fiscal Years Ended January 31,

2019

2018

United States

United States

(In thousands of CA$)

$

$

Client A

60,503

81,120

Client B

43,106

Client C

32,480

Client D

29,375

Client E

13,168

106,151

153,601

 

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