Results for the first quarter ended april 30, 2011 - Adf Group Inc. maintains good profit margins and an excellent financial position

Jun. 15, 2011 (Canada NewsWire Group) --

FINANCIAL HIGHLIGHTS FOR THE FIRST QUARTER ENDED APRIL 30, 2011

The results are disclosed in accordance with the new International Financial Reporting Standards ("IFRS").

• Revenues amounted to $13.2 million compared with $13.6 million for the same quarter of fiscal 2011.
• The Corporation closed the quarter with a net income of $1.1 million or $0.03 per share (basic and diluted), compared with a net income of $2.0 million or $0.06 per share (basic and diluted) in the same period of fiscal 2011.
• As at April 30, 2011, ADF's posted a cash surplus of more than $17 million over its total debt of, representing a significant increase of 35% compared with January 31, 2011.
• Operating cash flows improved considerably, compared with the quarter ended on April 30, 2010, reaching $5.0 million during the first quarter of fiscal 2012.

TERREBONNE, QC, June 15, 2011 /CNW Telbec/ - For the three-month period ended April 30, 2011, ADF GROUP INC. ("ADF" or the "Corporation") (TSX: DRX) revenues were comparable to those for the same period of the previous year, and even posted a slight increase notwithstanding the increase in relative value of more than 5% of the Canadian dollar against the U.S. dollar between the two reporting periods. Revenues thus amounted to $13.2 million for the first quarter of the current fiscal year, compared with $13.6 million for the same quarter of last year.

The gross margin as a percentage of revenues stood at 24%, versus the high of 29% achieved in the first quarter of the previous year. This change is primarily explained by the fact that the supply of steel accounted for a larger proportion of the revenue mix this year. However, it should be noted that the gross margin achieved during the first quarter of the 2012 fiscal year corresponds to the average margin posted by ADF over the last eight quarters.

Income before interest, income taxes, depreciation and amortization (or EBITDA) amounted to $2.1 million, compared with $3.2 million the previous year.

Net income totalled $1.1 million or $0.03 per share, compared with a net income of $2.0 million or $0.06 per share in the same period last year. Notwithstanding the reversal of provisions and a gain on disposal of property, plant and equipment recognized in the first quarter of fiscal 2011, the results for the first quarter ended April 30, 2011 would have been similar to those for the corresponding period a year ago. In addition, a lesser exchange gain than in the previous year and a slightly higher tax rate, have also reduced the first quarter's net income.

ADF closed the first quarter of the 2012 fiscal year with working capital of $38.4 million, of which $29.4 million in short-term available liquidities (cash, cash equivalents and short-term investments), provided notably by the cash flows from operating activities of $5.0 million. Consequently as at April 30, 2011, ADF Group's short-term available liquidities exceeded its total interest-bearing debt by $17.3 million.

Jean Paschini, Chairman of the Board and Chief Executive Officer indicated that "these results reflect the added value of our contracts in progress, our rigorous operating practices and the positive impact of our recent investments on the overall efficiency of our fabrication activities. They also reflect efficient cost control and a profit margin that remains above the industry average."

Implementation of a Dividend Policy

As announced in April 2011, the Corporation's Board of Directors approved the payment of a semi-annual dividend policy. Consequently, on May 16, 2011, ADF Group paid a first semi-annual dividend of $0.01 per share to shareholders of record as at April 29, 2011.

Order Backlog

As at April 30, 2011, the Corporation's order backlog stood at $62 million, extending over an execution period of 12 months. However, the order backlog at that date does not reflect all the revenues likely to be recognized in upcoming quarters as it only includes a portion of the contractual changes requested by clients over the past months in connection with its current mandates.

Outlook

In regard to business development, the Corporation expects Western Canada to offer the greatest opportunities within the short term, considering the increase in bidding activity it is currently witnessing in this region. It is therefore carrying on its plans to establish its local presence through a joint venture with a Manitoba-based partner. The goal of the new entity will be to build and operate an ultramodern fabrication plant that will enable the Corporation to serve all of Western Canada, in particular the energy and potash sectors and the public infrastructures segment, where significant investments are expected in the coming years. Furthermore, it will provide ADF with greater access to the large American Midwest market.

Over the longer term, the regions in the Eastern and Midwest U.S., and especially New York City, remain natural and high-potential markets for ADF Group, where it is strongly positioned and enjoys an excellent reputation.

Based on its current order backlog and considering its development targets as well as a certain stability of the Canadian dollar, management expects ADF Group's revenues within the next few quarters to be comparable to, or up slightly over previous quarters.

"Today, with an enhanced fabrication capacity, very healthy financial position and development projects well on their way, ADF Group is embarking on a new profitable growth phase, having all the resources in hand to achieve a solid performance once the economy is back on track" concluded Mr. Jean Paschini.

Annual Meeting of Shareholders

ADF Group's Annual Meeting of Shareholders will take place this morning, June 15, 2011 at 11:00 am at the Omni Mount-Royal Hotel in Montreal.

About ADF Group Inc.

ADF Group Inc. is a North American leader in the design and engineering of connections, fabrication and installation of complex steel structures, heavy steel built-ups, as well as in miscellaneous and architectural metals for the non-residential construction industry. 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.

Transition to International Financial Reporting Standards (IFRS)

All financial information, including comparative figures pertaining to ADF Group's 2011 results, has been prepared in accordance with International Financial Reporting Standards (IFRS). In previous periods, the Corporation prepared its consolidated financial statements and interim financial statements in accordance with Canadian generally accepted accounting principles ("Previous GAAP"), in effect prior to February 1, 2011. Comparative figures presented pertaining to ADF's results have been restated to be in accordance with IFRS. A reconciliation of net income, gross margin and EBITDA reported under the previous GAAP and the IFRS is provided in the table below:

Non-IFRS Measures

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.

All amounts are in Canadian dollars, unless otherwise indicated.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)

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

Financing and investing activities without impact on cash were nil as at April 30, 2011, and $139,000 as at April 30, 2010, relating to the disposal of property, plant and equipment given in exchange for new ones.

2. For the purpose of the Consolidated Statements of Cash Flows, cash and cash equivalents are disclosed as follows:

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 installation of complex steel structures, heavy steel built-ups, as well as miscellaneous and architectural metalwork.

All intangible assets and investment tax credits included under "Other non-current assets" at February 1, 2010, January 31, 2011 and April 30, 2011, originated from Canada.

During the three-month period ended April 30, 2011, one client accounted for 94% of the Corporation's revenues (one client accounted for 90% of the revenues during the three-month period ended April 30, 2010), and therefore accounted for more than 10% of revenues.