------------------------------------------------------------------------- Highlights of the Second Quarter: - Order backlog totalling $151 million as at July 31,2009, up 21% over the corresponding period in 2008. - New contract of $77 million in July 2009 and new investments of $6 million pursuant to this major contract. - Available liquidities of $21.5 million at July 31, 2009 (comprised of cash, cash equivalents and short-term investments), exceeding by $14.1 million its long-term debt including the current portion. - Revenues of $18.7 million compared with $24 million for the second quarter of the previous fiscal year. - Gross margin of 24% of revenues (compared with 29% last year), EBITDA(1) margin of 19.1% (compared with 25.3% last year) and net earnings of 10% of revenues (17% last year). - Net earnings of $1.8 million or $0.05 per share (basic and diluted), compared with $4.1 million or $0.11 per share (basic and diluted) for the same period last year. -------------------------------------------------------------------------
TERREBONNE, QC, Sept. 9 /CNW Telbec/ - ADF GROUP INC. ("ADF" or the "Corporation") (TSX: DRX) closed its second quarter with net earnings of $1.8 million or $0.05 per share (basic and diluted) on revenues of $18.7 million compared with net earnings of $4.1 million or $0.11 per share (basic and diluted) on revenues of $24.0 million for the same period in 2008. For the first six months ended July 31, 2009, net earnings reached $4.1 million or $0.11 per share (basic and diluted) on revenues of $ 35.5 million, compared with net earnings of $7.3 million or $0.20 per share (basic and diluted) on revenues of $49.2 million for the same period in 2008.
"These results reflect declines from the corresponding periods of the previous year. However, the decrease in revenues is in line with our forecasts considering the different mix of the contracts from one period to another, and the decrease in the margin is due to the time lag between the recognition of costs and revenues with regard to a contract. We expect that this downward trend will be reversed during the second half of the current fiscal year due to the recent contract awards for which the Corporation supplies the raw material (steel) as well as the connection design and engineering services, in addition to the fabrication hours", indicated Mr. Jean Paschini, Chairman of the Board and Chief Executive Officer.
The second-quarter gross profit margin and EBITDA(1) margin were down from the quarter ended July 31, 2008, standing at 24% and 19% respectively, compared with 29% and 25%. For the first six months of the fiscal year, these same margins were also down from the first half of the previous year, declining to 28.1% and 22% respectively, compared with 28.6% and 24%.
As at July 31, 2009, ADF Group continued to benefit from a healthy and solid financial position, with liquidity (consisting of cash, cash equivalents and short-term investments) of $21.5 million - exceeding by $14.1 million its long-term debt including the current portion - and shareholders' equity of $87.6 million.
Major New Contract Award and Increase in Backlog
On July 13, 2009, the Corporation announced the award of a major contract of $77 million in North America's public infrastructure sector. Under the terms of the contract, ADF Group will fabricate the oversized steel components with complex geometry and which will weigh close to 100 tons each, as well as highly complex architectural elements, and will also supply the design and engineering of connections and the steel.
As at July 31, 2009, ADF Group's order backlog reached $151 million, up 21% over the same date last year. These orders are scheduled to be executed over a period of 24 months.
Investment Program
Further to $77 million contract award in July 2009, the Corporation announced investments of $6 million to acquire additional fabrication equipment and to retrofit one of the plant's fabrication bays, including, among others, the addition of two (2) 50-ton overhead cranes. These investments could be financed by the Corporation's working capital.
Subordinate Voting Shares Redemption
During the second quarter ended July 31, 2009, the Corporation redeemed 446,400 subordinate voting shares for a net consideration of $1.1 million, representing an average price of $2.44 per share. As at July 31, 2009, since the implementation of the normal course issuer bid program, the Corporation has redeemed 618,300 subordinate voting shares for a net consideration of $1.4 million, representing an average price of $2.35 per share.
Outlook
"With an increased order backlog and additional contracts for which we supply the raw material and connection engineering services, along with fabrication hours, we are confident we will achieve a satisfactory performance in the second half of the fiscal year. We also remain focused on our long-term value creation strategy, based on our positioning in market niches that are highly specialized and less subject to cyclical fluctuations - our focus on value-added fabrication activities - our targeted and sustained investments in the upgrading and capacity of our infrastructures and the quality of our personnel - our disciplined management of our activities, resources and capital structure", added Mr. Jean Paschini.
About ADF
ADF Group Inc. is a North American leader in the design, engineering, fabrication and selective installation in the non-residential construction industry of complex steel structures, heavy built-ups, as well as in miscellaneous and architectural metals. 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.
All amounts are in Canadian dollars.
(1) Earnings before interest, taxes, depreciation and amortization
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CONFERENCE CALL WITH INVESTORS:
TO DISCUSS ADF GROUP'S RESULTS
FOR THE SECOND QUARTER AND FIRST SIX MONTHS ENDED JULY 31, 2009
Wednesday, September 9, 2009 at 10:00 am (Montreal time)
To participate in the conference call, please dial 1-888-231-8191
To ensure you can participate, please dial a few minutes before the
start of call.
For those unable to participate, a taped rebroadcast will be
available from Wednesday, September 9, 2009 at noon until 11:59 p.m.
September 16, 2009, by dialing 1-800-865-8354;
access code 28579182(number sign).
The conference call will be simultaneously webcast at
www.adfgroup.com and archived for 90 days.
Members of the media are invited to listen in.
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CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
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Three (3) Months Six (6) Months
--------- ----------
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Periods ended July 31, 2009 2008 2009 2008
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(In thousands of $, except
per-share amounts) $ $ $ $
Revenues 18,748 23,994 35,500 49,153
Cost of goods sold 14,162 17,051 25,530 35,095
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Gross margin 4,586 6,943 9,970 14,058
Selling and administrative
expenses 1,005 862 2,309 2,077
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Earnings before undernoted items: 3,581 6,081 7,661 11,981
Amortization
Property, plant and equipment 667 600 1,331 1,183
Intangible assets 81 13 154 26
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748 613 1,485 1,209
(Gain) loss on foreign exchange (765) (701) (1,326) (641)
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(17) (88) 159 568
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Earnings before financial charges
and income taxes 3,598 6,169 7,502 11,413
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Financial charges
Interest on long-term debt 50 113 110 239
Interest income (166) (46) (325) (132)
Other interest (18) 17 - 72
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(134) 84 (215) 179
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Earnings before income taxes 3,732 6,085 7,717 11,234
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Income taxes
Current 7 3 175 171
Future 1,880 2,032 3,457 3,779
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1,887 2,035 3,632 3,950
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Net earnings and comprehensive
income 1,845 4,050 4,085 7,284
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Basic earnings per share 0.05 0.11 0.11 0.20
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Diluted earnings per share 0.05 0.11 0.11 0.20
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Average number of outstanding
shares (in thousands) 36,013 36,145 36,002 36,126
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Average number of outstanding
diluted shares (in thousands) 36,868 37,258 36,801 37,290
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CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
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Three (3) Months Six (6) Months
--------- ----------
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Periods ended July 31, 2009 2008 2009 2008
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(In thousands of $) $ $ $ $
Retained earnings (deficit),
beginning of the period 4 012 (72 304) 1 772 (75 538)
Net earnings 1 845 4 050 4 085 7 284
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Retained earnings (deficit),
end of the period 5 857 (68 254) 5 857 (68 254)
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CONSOLIDATED STATEMENTS OF CONTRIBUTED SURPLUS
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Three (3) Months Six (6) Months
--------- ----------
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Periods ended July 31, 2009 2008 2009 2008
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(In thousands of $) $ $ $ $
Contributed surplus, beginning of
the period 2,373 2,014 2,175 1,965
Stock-based compensation 66 62 127 111
Exercise of options and warrants (17) (17) (24) (17)
Excess of the book value over the
acquisition cost of redeemed
subordinate voting shares 231 - 375 -
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Contributed surplus, end of the
period 2,653 2,059 2,653 2,059
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CONSOLIDATED BALANCE SHEETS
---------
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At At
July 31, January
2009 31, 2009
(Audited)
--------------------
(In thousands of $) $ $
ASSETS
Current
Cash and cash equivalents 9,103 22,490
Short-term Investments 12,400 6,000
Accounts receivable 16,190 11,165
Holdbacks on contracts 3,128 3,462
Work in progress 1,409 628
Inventories 3,225 3,271
Prepaid expenses 933 660
Derivative financial instruments 2,470 -
Income tax receivables 20 -
Future income tax assets 6,667 6,666
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55,545 54,342
Holdbacks on long-term contracts 649 1,129
Property, plant and equipment 39,751 40,360
Intangible assets 2,713 2,402
Other assets 181 185
Future income tax assets 8,504 13,444
Investment tax credits 2,505 2,505
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109,848 114,367
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LIABILITIES
Current
Accounts payable 3,785 5,170
Accrued charges 3,039 4,716
Salaries and fringe benefits payable 1,906 3,762
Deferred revenues 5,647 4,767
Income taxes - 226
Derivative financial instruments - 1,058
Current portion of long-term debt 2,729 3,018
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17,106 22,717
Long-term debt 4,632 6,827
Future income tax liabilities 528 47
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22,266 29,591
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Shareholders' equity
Retained earnings 5,857 1,772
Accumulated other comprehensive income 144 144
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6,001 1,916
Capital stock 78,928 80,685
Contributed surplus 2,653 2,175
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87,582 84,776
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109,848 114,367
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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Three (3) Months Six (6) Months
--------- ----------
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Periods ended July 31, 2009 2008 2009 2008
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(In thousands of $) $ $ $ $
OPERATING ACTIVITIES
Net earnings 1,845 4,050 4,085 7,284
Adjustments for:
Amortization of property,
plant and equipment 667 600 1,331 1,183
Amortization of intangible
assets 81 13 154 26
Gain on disposal of property,
plant and equipment - (764) - (975)
Unrealized gain on derivative
financial instruments (2,345) - (3,528) -
Non-cash exchange loss (gain) 973 (198) 1,911 (178)
Future income taxes 1,880 2,032 3,457 3,779
Interest capitalized on
interest-free long-term debt 5 4 10 9
Stock-based compensation 66 62 127 111
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Net earnings adjusted 3,172 5,799 7,547 11,239
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Changes in non-cash operating
working capital items
Accounts receivable 299 256 (5,025) (4,968)
Short-term and long-term
holdbacks on contracts 181 (647) 814 (1,093)
Work in progress 161 (292) (781) 502
Inventories 23 (229) 46 (298)
Income taxes (213) 64 (246) 24
Prepaid expenses (613) (582) (273) (645)
Accounts payable, accrued
charges, salaries and fringe
benefits payable (1,508) 2,428 (4,918) 4,426
Deferred revenues (281) 2,186 880 2,746
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(1,951) 3,184 (9,503) 694
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Cash flows from operating
activities 1,221 8,983 (1,956) 11,933
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INVESTING ACTIVITIES
Acquisition of property, plant
and equipment (332) (5,476) (722) (7,476)
Acquisition of intangible
assets (127) (372) (465) (639)
Investment purchase (7,000) - (6,400) -
Decrease (increase) in
other items 4 (1) 4 (1)
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Cash flows applied to investing
activities (7,455) (5,849) (7,583) (8,116)
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FINANCING ACTIVITIES
Redemption of shares (1,087) - (1,453) -
Repayment of long-term debt (703) (606) (1,467) (1,013)
Issuance of subordinate voting
shares 30 38 47 47
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Cash flows applied to financing
activities (1,760) (568) (2,873) (966)
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Impact of fluctuations in
foreign exchange rate on cash (255) 62 (975) 15
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Net cash (outflows) inflows (8,249) 2,628 (13,387) 2,866
Cash and cash equivalents,
beginning of the period 17,352 7,924 22,490 7,686
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Cash and cash equivalents, end
of the period (1) 9,103 10,552 9,103 10,552
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Supplemental cash flow
information
Income taxes paid - - 204 162
(Received) interest paid (95) 146 (113) 204
Non-cash financing and
investing activities:
Property, plant and
equipment given in
exchange for new
equipment - 1,524 - 2,261
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(1) At July 31, 2009, cash and cash equivalents were composed of
$9,032,000 in cash and $71,000 in cash equivalents ($5,052,000 in
cash and $5,500,000 in cash equivalents as at July 31, 2008.)
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 selective installation of
complex steel structures, heavy built-ups as well as miscellaneous and
architectural metal work.
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Three (3) Months Six (6) Months
--------- ----------
----------------------------------------
Periods ended July 31, 2009 2008 2009 2008
----------------------------------------
$ $ $ $
Revenues
- Canada 3,752 2,181 7,693 3,054
- United States 14,996 21,813 27,807 46,099
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18,748 23,994 35,500 49,153
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---------
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At
At January
July 31, 31 2009
2009 (Audited)
--------------------
$ $
Property, Plant and Equipment
- Canada 39,555 40,148
- United States 196 212
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39,751 40,360
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During the first semester ended July 31, 2009, 76% of the Corporation's revenues were recorded with four clients (67% with two clients during the same period in 2008), each of which accounted for more than 10% of revenues.