ADF Group Inc. Announces the Results for Fiscal Year Ended January 31, 2020

HIGHLIGHTS

  • Revenues of $179.7 million, up 33% from the previous year.
  • The outcome of an out of court settlement in commercial litigation in the USA resulted in the recording of a net loss of $2.1 million, compared with a net loss of $0.4 million a year earlier.
  • The Corporation closed the 2020 fiscal year with an order backlog of $328.7 million, nearly $110.0 million more than as at January 31, 2019.
  • $65.0 million worth in new contracts added to the Corporation’s backlog since the end of the 2020 fiscal year.
  • At the date hereof, there is no significant impact from COVID-19 on the Corporation’s operations.

TERREBONNE, QC, April 9, 2020 /CNW Telbec/ – ADF GROUP INC. ("ADF" or the "Corporation") (TSX: DRX) recorded revenues of $179.7 million during the fiscal year ended January 31, 2020, compared with $135.1 million the previous fiscal year. This increase in revenues is attributable to the start of recently awarded projects, in line with the growth of the order backlog. However, had it not been for the $7.7 million write-off recorded in the third quarter of the 2020 fiscal year resulting from a out of court settlement in a commercial dispute in Florida, the 2020 fiscal year revenues would have been $187.4 million, an increase of 38.7% from the previous year.

Gross margin, as a percentage of revenues, increased from 7.1% for the fiscal year ended January 31, 2019, to 9.2% for the fiscal year ended January 31, 2020. This increase, as the percentage of revenues, is mainly due to improved margins on projects in the backlog, and an improvement in internal efficiency, in line with the increase in fabrication hours.

For the fiscal year ended January 31, 2020, ADF posted a net loss of $2.1 million (-$0.07 basic and diluted per share) resulting from the out of court settlement previously mentioned, compared with a net loss of $0.4 million (-$0.01 basic and diluted per share) a year ago. Had it not been for the out of court settlement previously mentioned, net income for fiscal 2020 would have been $5.5 million or $0.17 basic and diluted per share.

On January 31, 2020, the Corporation had $29.3 million in working capital. The Corporation remains in a sound position to support its ongoing operations and pursue its development projects.

During the fiscal year ended January 31, 2020, the Corporation was able to secure new contracts valued at approximately $300 million, bringing its order backlog to $328.7 million on that date, compared with a backlog of $219.5 million as at January 31, 2019, and that is excluding the new contracts worth $65.0 million announced on March 23, 2020. Most contracts will be progressively completed by the end of the fiscal year ending January 31, 2022.

 

Financial Highlights

Fiscal Years Ended January 31,

2020

2019

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

$

$

Revenues

179,710

135,073

EBITDA

5,225

1,945

Loss before income tax expense

(1,986)

(2,393)

Net loss for the year

(2,132)

(374)

— Basic and diluted per share

(0.07)

(0.01)

Average number of outstanding shares (basic and diluted, in thousands)

32,635

32,635

 

COVID-19

At the date hereof, the impact of COVID-19 on ADF’s operations is limited. We have taken all necessary steps to protect our employees and business partners, and we will continue to follow the advice and recommendations of local authorities wherever we conduct business. This situation is changing rapidly and we will continue to monitor and mitigate development affecting our staff, suppliers, customers and the general public to the extent we can.

Outlook

"Although we were able to collect more than $13 million from the out-of-court settlement mentioned above, which allowed us to have the liquidities needed to continue the growth of our order backlog, our 2020 fiscal year results were adversely affected by a write-off of $7.7 million, as part of this settlement" added Mr. Jean Paschini, Co-Chair of the Board of Directors and Chief Executive Officer.

"Renewing our backlog remains one of our top priorities, and our sustained efforts continue to pay off. We have signed $300 million worth in new contracts during the 2020 fiscal year, and more recently we have secured additional contracts for an estimated total value of $65 million, including, among others, a major industrial building in Montreal. Alongside this objective, we remain determined and work tirelessly and collaboratively to achieve another common goal, which is to continue to find ways to improve and enhance operational efficiency and excellence" added Mr. Jean Paschini.

Dividend

On April 8, 2020, 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, 2020 to shareholders of record as at April 30, 2020.

Conference Call with Investors

A conference call with investors is scheduled for Thursday, April 9, 2020 at 10 a.m. (Montreal time) to discuss the results of Corporation fiscal year ended January 31, 2020.

To take part in the conference call, dial 1-888-390-0620, a few minutes prior to the conference call scheduled start time. A replay of this conference call will be available from Thursday, April 9, 2020 at 1:00 p.m. until 11:59 p.m., Thursday, April 16, 2020, by dialing 1-888-390-0541, followed by the access code 113212 #.

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

ANNUAL GENERAL MEETING OF SHAREHOLDERS

In these exceptional circumstances, and amongst the several preventative health measures adopted by the Provincial and Federal Governments and by the Corporation to slow the spread of COVID-19, ADF Group Inc. will hold its Annual Meeting of Shareholders via webcasting, on Wednesday, June 10, 2020 at 11 :00 a.m.

Financial results for the first quarter ending April 30, 2020, will also be disclosed during this Shareholders’ Meeting.

Shareholders’ meeting details and webcasting connection instructions will be made available in the coming weeks.

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’s 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 IFRS measures.

All amounts are in Canadian dollars, unless otherwise indicated.

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at January 31,

2020

2019

(In thousands of Canadian dollars)

$

$

ASSETS

Current assets

Cash and cash equivalents

3,983

4,164

Accounts receivable

39,555

29,919

Holdbacks on contracts

11,628

6,227

Current income tax assets

882

859

Contract assets

14,435

17,952

Inventories

7,898

8,349

Prepaid expenses and other current assets

1,581

1,638

Total current assets

79,962

69,108

Non-current assets

Property, plant and equipment

64,967

89,375

Right-of-use assets

23,818

Intangible assets

3,354

3,312

Other non-current assets

1,443

1,417

Total assets

173,544

163,212

LIABILITIES

Current liabilities

Credit facilities

13,105

6,605

Accounts payable and other current liabilities

30,788

16,857

Current income tax liabilities

216

422

Contract liabilities

3,444

10,920

Derivative financial instruments

123

184

Current portion of lease liabilities

1,070

Current portion of long-term debt

1,903

2,272

Total current liabilities

50,649

37,260

Non-current liabilities

Long-term debt

19,156

24,939

Lease liabilities

4,930

Deferred income tax liabilities

4,215

3,921

Other non-current liabilities

187

197

Total liabilities

79,137

66,317

SHAREHOLDERS’ EQUITY

Capital stock

68,120

68,120

Contributed surplus

6,435

6,432

Accumulated other comprehensive income (loss)

6,942

6,648

Retained income

12,910

15,695

Total shareholders’ equity

94,407

96,895

Total liabilities and shareholders’ equity

173,544

163,212

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Fiscal Years Ended January 31,

2020

2019

(In thousands of Canadian dollars, except the number of shares and the amounts per share)

$

$

Revenues

179,710

135,073

Cost of goods sold

163,203

125,520

Gross Margin

16,507

9,553

Selling and administrative expenses

16,005

12,181

Net financial expenses

2,082

1,784

Foreign exchange loss (gain)

406

(2,019)

18,493

11,946

Loss before income tax expense (recovery)

(1,986)

(2,393)

Income tax expense (recovery)

146

(2,019)

Net loss for the year

(2,132)

(374)

Earnings per share

— Basic and diluted per share

(0.07)

(0.01)

Average number of outstanding basic and diluted shares (in thousands)

32,635

32,635

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Fiscal Years Ended January 31,

2020

2019

(In thousands of Canadian dollars)

$

$

Net loss for the year

(2,132)

(374)

Other comprehensive income (loss) (a) :

Exchange differences on translation of foreign operations

294

2,131

Comprehensive income (loss) for the year

(1,838)

1,757

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, 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 (1)

(189)

189

Share-based compensation

9

9

Dividends

(653)

(653)

Balance, January 31, 2019

68,120

6,432

6,648

15,695

96,895

(1)    Impact of the adoption of IFRS 9 on February 1, 2018.

Capital Stock

Contributed
Surplus

Accumulated Other
Comprehensive Income
(Loss)

Retained
Income

Total

(In thousands of Canadian dollars)

$

$

$

$

$

Balance, February 1, 2019

68,120

6,432

6,648

15,695

96,895

Net loss for the year

(2,132)

(2,132)

Other comprehensive income (loss)

294

294

Comprehensive income (loss) for the year

294

(2,132)

(1,838)

Share-based compensation

3

3

Dividends

(653)

(653)

Balance, January 31, 2020

68,120

6,435

6,942

12,910

94,407

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Fiscal Years Ended January 31,

2020

2019

(In thousands of Canadian dollars)

$

$

OPERATING ACTIVITIES

Net loss for the year

(2,132)

(374)

Non-cash items:

Amortization of property, plant and equipment

3,387

4,206

Amortization of right-of-use assets

926

Amortization of intangible assets

410

367

Unrealized (gain) loss on derivative financial instruments

(61)

484

Unrealized foreign exchange gain

(134)

(2,781)

Share-based compensation

491

(533)

Income tax expense (recovery)

146

(2,019)

Inventories depreciation allowance

(78)

352

Net financial expenses

2,082

1,784

Others

(276)

7

Net income adjusted for non-cash items

4,761

1,493

Change in non-cash working capital items (1)

(5,655)

10,182

Cash flows (used in) from operating activities

(894)

11,675

INVESTING ACTIVITIES

Acquisition of property, plant and equipment

(1,186)

(3,273)

Acquisition of intangible assets

(452)

(482)

Revenues from disposals of property, plant and equipment

168

35

Disposal of equity investments

217

Government grants

826

210

Others

(26)

13

Cash flows used in investing activities

(670)

(3,280)

FINANCING ACTIVITIES

Variation in credit facilities

6,500

(3,545)

Repayment of long-term debt

(1,884)

(1,544)

Repayment of lease liabilities

(771)

Dividends paid

(653)

(653)

Interest paid

(1,827)

(1,774)

Cash flows from (used in) financing activities

1,365

(7,516)

Impact of fluctuations in foreign exchange rate on cash flow

18

287

Net change in cash and cash equivalents during the year

(181)

1,166

Cash, and cash equivalents, beginning of year

4,164

2,998

Cash and cash equivalents, end of year

3,983

4,164

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

Fiscal Years Ended January 31,  

2020

2019

(In thousands of CA$)  

$

$

Accounts receivable

(10,360)

5,601

Holdbacks on contracts

(5,491)

(936)

Contract assets

3,660

13,477

Inventories

554

(3,413)

Prepaid expenses and other current assets

74

851

Accounts payable and other current liabilities

13,597

(12,553)

Contract liabilities

(7,679)

6,955

Other non-current liabilities

(10)

200

Change in non-cash working capital items

(5,655)

10,182

 

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,

2020

2019

(In thousands of CA$)

$

$

Revenues

Canada

13,906

3,518

United States

165,804

131,555

179,710

135,073

As at January 31,

2020

2019

(In thousands of CA$)

$

$

Non-current assets (1)

Canada

48,281

48,750

United States

45,301

45,355

93,582

94,105

(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, 2020, 72% of the Corporation’s revenues were realized with four (4) clients, each representing 10% and more of its revenues (79% with three (3) clients during the fiscal year ended January 31, 2019).

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

 

Fiscal Years Ended January 31,

2020

2019

United States

United States

(In thousands of CA$)

$

$

Client A

20,518

60,503

Client B

32,812

Client C

43,415

32,480

Client D

31,894

Client E

13,168

128,639

106,151

 

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