- Record $23.5M revenue, $3.4M EBITDA, record U.S. revenue
- Results in line with expectations for record year
- Increased order visibility into fiscal 2008
- Active acquisition program
OTTAWA, le 11 mai /CNW Telbec/ - Allen-Vanguard Corporation (the "Company" or "Allen-Vanguard") (TSX: VRS) of Ottawa, Canada reported today its financial results for the second quarter ended March 31, 2007. All figures are in Canadian dollars.
Revenue was $23.5 million in Q2 2007, an increase of 75% over $13.4 million in Q2 2006. EBITDA(1) was $3.4 million in Q2 2007, compared to $1.1 million in Q2 2006. The net loss for Q2 2007, after a stock-based management bonus payment, was $1.1 million or $0.02 per share, compared to net earnings of $0.2 million or $0.01 per share in Q2 2006.
The Company noted that revenue more than doubled compared to the first quarter of 2007. The improved performance reflects a strong contribution from the electronic counter measures ("ECM") business, which represented 51% of revenue, primarily from its technology license and supply agreement with Lockheed Martin Corporation ("LM"). Also, sales of Explosive Ordnance Disposal ("EOD") product categories increased three-fold year over year. The result was record U.S. revenue in the quarter of $10.4 million, up from $1.6 million last year and up from $4.3 million in the first quarter of fiscal 2007. Gross profit of $9.9 million was also more than twice as high as last quarter, and increased by 80% year over year.
Expenses in the quarter included a management bonus payment, which is estimated at $3.5 million, of which $3.1 million was recognized in the quarter. This payment is tied to share price performance and is being accrued almost entirely in the second quarter as stock-based compensation expense. As previously disclosed, this performance bonus is not payable until June 1, 2007. Since EBITDA is defined as earnings before stock-based compensation, all EBITDA figures presented are exclusive of this bonus payment. Selling and administration expenses were $5.0 million (21.2% of revenue), an increase of $1.7 million over $3.4 million (25.0% of revenue) for the same period last year. Increases in financial, administrative and service support have been put in place to accommodate the ramp-up of the ECM and bomb disposal robot business at facilities in the UK and Ireland.
For the six month period ended March 31, 2006, revenue was $33.7 million, an increase of 51% over $22.3 million last year. Gross profit was $14.7 million (43.6% of revenue) compared to $9.1 million (40.8% of revenue) last year. EBITDA(1) for the six months was $3.0 million compared to an EBITDA(1) loss of $0.6 million in the first six months of fiscal 2006. Net loss for the six months to March 31, 2007 was $1.6 million or $0.04 per share, compared to a net loss of $2.3 million or $0.06 per share, in the same period last year.
"The Company achieved significant new levels of revenue and EBITDA performance in this quarter," said David E. Luxton, President and CEO of Allen-Vanguard. "We also achieved important milestones including scaled up production and manufacturing quality control for ECM orders to Lockheed. As well, our balance sheet improved with $53 million in a bought deal equity offering, including the over-allotment exercise, as well as $12 million from warrant conversions, and we ended the quarter with record capital resources."
The Company's financial position is exceptionally strong. As at March 31st, 2007, total assets were $139.0 million, compared to $57.9 million at September 30, 2006, or the beginning of the fiscal year. Shareholders' equity was $111.3 million, and cash and short-term investments totaled $67.0 million.
After the quarter-end, the Company announced an all-cash offer to purchase Hazard Management Solutions Ltd. and its wholly owned U.S. subsidiary (HMS) in an all-cash transaction valued at up to $40 million. The transaction price includes $20 million at closing, plus up to $20 million over the next three years, $12 million of which is in the form of vendor loan notes contingent on continued employment of the three HMS principals, and $8 million of which is tied to EBITDA performance. Closing is expected on or around June 13, 2007. The Company also confirmed contract pre-notification for up to 1,000 additional Symphony ECM units to Lockheed Martin.
"Order visibility for the balance of fiscal 2007 and into fiscal 2008 has strengthened considerably," said Mr. Luxton. "Revenue and EBITDA performance is expected to build after the third quarter to a significant new record high in the fourth quarter with the contribution of HMS and the anticipated delivery of new ECM orders to Lockheed."
The Company's announced plan to evolve two strong divisions, Defence Electronics and Protective Products & Services, is proceeding in conjunction with its acquisition program. "We continue to evaluate growth opportunities that fit our stated strategy of a larger, more diversified and balanced business platform, and we look forward to updating our shareholders on progress," concluded David Luxton.
Financial highlights for the second quarter ("Q2") and six months ("YTD")
ended March 31, 2007:
Revenue
- Allen-Vanguard's revenue was $23.5 million in Q2 2007 and $33.7 million
in YTD 2007, compared to $13.4 million in Q2 2006 and $22.3 million in
YTD 2006.
- Revenue from ECM products represented 51% of Q2 2007 revenue, compared
to 53% in Q2 2006. Revenue from the LM Agreement accounted for the
majority of the Q2 2007 tally, with a relatively minor portion
attributed to international contracts. Allen-Vanguard completed
production of the balance of the initial $8 million LM component order
during Q2 2007, and has stepped up the pace of work on technology
enhancements. The U.S. Department of Defense recently issued a pre-
solicitation notice of intent to contract on a sole source basis with
LM for up to 1000 Symphony units, which the Company expects will
trigger additional order flow for the Symphony components that Allen-
Vanguard supplies. ECM revenue in Q2 2006 was derived primarily from
international contracts.
- Revenue from EOD products was up more than three-fold year over year in
Q2 2007, and up 41% in YTD 2007. While sales of robotics equipment were
particularly brisk, revenue from all EOD product categories exceeded
their prior year comparatives in Q2 2007, and only search and disposal
equipment revenue is lagging behind on a year to date basis.
- Revenue from CBRN products in Q2 2007 was approximately one-half of the
Q2 2006 figure, and down 17% in YTD 2007. Decontaminant and personal
protective wear revenue was particularly strong in Q2 2006, and the
Company also benefited from approximately $0.7 M of contract R&D work
under the CRTI program. The Company expects additional CRTI work to be
tendered in the summer of 2007.
- Revenue generated in North America totaled $11.9 million in Q2 2007 and
$16.9 million in YTD 2007, compared to $3.4 million in Q2 2006 and
$5.4 million in YTD 2006. Deliveries of ECM equipment under the LM
Agreement accounted for the majority of the increase in Q2 2007,
although stronger EOD equipment purchases in the U.S. also contributed
to the improved results. Revenue generated outside of North America
totaled $11.6 million in Q2 2007 and $16.8 million in YTD 2007,
compared to $10.0 million in Q2 2006 and $16.9 million in YTD 2006.
Higher revenue from EOD equipment offset the decline in international
ECM revenue.
Gross Margin
- Gross margin was 42% in Q2 2007 and 44% in YTD 2007, compared to 41% in
both Q2 2006 and YTD 2006.
Overheads
- Selling and administration expenses were $5.0 million in Q2 2007 and
$9.2 million in YTD 2007, compared to $3.4 million in Q2 2006 and
$7.8 million in YTD 2006. Spending levels have increased over the past
six months as Allen-Vanguard put the necessary infrastructure in place
to accommodate the ramp up of its ECM business
- Research and development expenses, net of grants received and
investment tax credits, were $1.6 million in Q2 2007 and $2.5 million
in YTD 2007, compared to $1.0 million in Q2 2006 and $1.9 million in
YTD 2006. Allen-Vanguard has stepped up work on technology enhancements
related to the Symphony components supplied to LM, and on next
generation technology in connection with the anticipated U.S. Army
Crew3 tender.
- Stock-based compensation was $3.2 million in Q2 2007 and $3.4 million
in YTD 2007, compared to $0.1 million in Q2 2006 and $0.2 million in
YTD 2006. The Company recognized stock-based compensation of
$3.1 million in Q2 2007 in respect of the bonuses payable to its CEO
and CFO pursuant to their employment agreements.
Earnings Measures
- Earnings before interest, taxes, amortization, stock-based
compensation, foreign exchange, and goodwill impairment ("EBITDA") were
$3.4 million in Q2 2007 and $3.0 million in YTD 2007, compared to an
EBITDA of $1.1 million in Q2 2006 and an EBITDA loss of $0.6 million in
YTD 2006.
- The net provision for income taxes was $0.7 million and $0.3 million in
Q2 2007 and YTD 2007 respectively, compared to income tax provisions of
$0.1 million in Q2 2006 and YTD 2006.
- The net loss for Q2 2007 was $1.1 million or $0.02 per share, compared
to net earnings of $0.2 million or $0.01 per share in Q2 2006. The net
loss for YTD 2007 was $1.6 million or $0.04 per share, compared to a
net loss of $2.3 million or $0.06 per share in YTD 2006.
Liquidity and Capital Resources
- Allen-Vanguard's cash, restricted cash and short-term investments, net
of bank indebtedness, at the end of Q2 2007 amounted to $67.0 million,
an increase of $47.9 million from the beginning of the quarter. Working
capital totaled $85.6 million at the end of Q2 2007, an increase of
$55.6 million from the beginning of the quarter.
- Net cash proceeds from the November 2, 2006 and March 9, 2007 equity
financings were $14.6 million and $46.7 million respectively.
- The exercise of warrants and employee stock options provided cash of
$12.0 million in YTD 2007, most of which related to the exercise in Q2
2007 of warrants issued in connection with the September 15, 2005
equity financing.
- Allen-Vanguard had common shares outstanding of 57.8 million and fully
diluted shares outstanding of 61.1 million at 31-Mar-07.
Financial Statements and the Management Discussion and Analysis for the second quarter ended March 31, 2007 will be filed on www.sedar.com by May 11, 2007.
(1) Earnings before interest, taxes, amortization, stock-based
compensation, foreign exchange and integration costs.
About Allen-Vanguard
Allen-Vanguard Corporation and its subsidiaries worldwide operate under the brand "Allen-Vanguard". The Company develops and markets technologies, tools and training for defeating and minimizing the effects of hazardous devices and materials, whether Chemical, Biological, Radiological, Nuclear or Explosive (CBRNE). The Company's equipment is in service with leading security and military forces in more than 120 countries. Products include Electronic Counter-Measures ("ECM") equipment for jamming remote detonation of terrorist devices, specialty security equipment for Explosive Ordnance Disposal ("EOD"), remote intervention robots for hazardous applications, vehicle barrier systems, and personal protective wear for use in dealing with bio-chemical agents. Allen-Vanguard is the sole, worldwide licensee and/or developer of patented technologies such as the Universal Containment System and CASCAD Foam for blast mitigation and decontamination of bio-chemical warfare agents. Head office operations are located in Ottawa, Ontario, Canada, with manufacturing operations in Stoney Creek, Ontario; Tewkesbury, U.K.; and Cork, Ireland, and sales offices in Canada, the U.S., the U.K. and Asia. The Company's shares are listed on The Toronto Stock Exchange (TSX: VRS).
This press release contains forward-looking statements, which reflect Allen-Vanguard's current expectations regarding future events. These forward-looking statements are neither promises nor guarantees, but involve risks and uncertainties that may cause actual results to differ materially from those in the forward-looking statements. Allen-Vanguard disclaims any obligation to publicly update or revise any such statements.
To find out more about Allen-Vanguard Corporation (TSX: VRS), visit our website at www.allen-vanguard.com.
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