ADF Group Inc. announces the results of its third quarter ended October 31, 2007



    
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    THIRD QUARTER HIGHLIGHTS:

    - 19% increase in revenues compared with the same quarter in 2006.
    - 70% increase in gross margin, before exchange rate fluctuation,
      compared with the same quarter in 2006.
    - 104% increase in earnings before interest, taxes, depreciation and
      amortization ("EBITDA"), excluding the loss on foreign exchange
      compared with the third quarter ended October 31, 2006.
    - Net income of $27.6 million, including the recording of net tax assets
      of $25.2 million related to previous fiscal years.
    - Long-term debt reduced by $2.7 million.
    - Backlog reaching $166 million on December 11, 2007, representing an
      annual growth of 315%.
    -------------------------------------------------------------------------
    

    TERREBONNE, QC, Dec. 11 /CNW Telbec/ - ADF GROUP INC. ("ADF" or the
"Company") (TSX: DRX) posted revenues of 15.5 million dollars in the third
quarter compared with 13.0 million dollars for the same quarter last year,
representing a 19 percent increase. The revenues for the nine-month period
reached 40.2 million dollars compared with 38.0 million dollars for the same
period in 2006.
    Gross margin, before exchange rate fluctuation, rose from 3.1 million
dollars or 24 percent of sales on October 31, 2006 to 5.4 million dollars or
34 percent of sales on October 31, 2007, representing a 70 percent growth.
Gross margin, before exchange rate fluctuation, reached 14.6 million dollars
for the nine-month period compared with 9.7 million dollars for the same
period in 2006, representing a 51 percent increase.
    For the third quarter ended October 31, 2007, earnings from continuing
operations before interest, taxes, depreciation and amortization ("EBITDA"),
excluding loss on foreign exchange, grew 104 percent from a year ago to
4.4 million dollars or 28 percent of sales, compared with 2.1 million dollars
or 16 percent of sales for the same period in 2006. For the first nine months
ended October 31, 2007, EBITDA rose 75 percent to 11.2 million dollars or
28 percent of sales, compared with 6.4 million dollars or 17 percent of sales
for the same period in 2006.
    In accordance with the Canadian Institute of Chartered Accountants
Handbook Section 3465, "Income Taxes", the Corporation recorded, in the third
quarter, additional net tax assets of 25.2 million dollars related to previous
fiscal years. Consequently, ADF posted net earnings of 27.6 million dollars
($0.80 basic per share and $0.77 diluted per share) in the third quarter ended
October 31, 2007 and 31.2 million dollars ($0.96 basic per share and $0.92
diluted per share) for the nine-month period ended October 31, 2007.
    The Corporation further reduced its long-term debt by 2.7 million dollars
in the third quarter. The long-term debt stood at 15.3 million dollars on
October 31, 2007.
    On November 23, 2007, the Corporation completed a bought deal of an
aggregate 1,500,000 subordinate voting shares at the price of $6.50 per share
and an option to purchase up to an additional 150,000 subordinate voting
shares at the same price. There are 21,437,283 subordinate voting shares
outstanding as at December 11, 2007. The Corporation will use the net proceeds
of 9 million dollars (9.9 million dollars if the underwriters exercise in full
the option expiring on December 23, 2007) to acquire additional automated
fabrication equipment using the latest technology, which will be used, among
other things, for the fabrication of heavy components.

    The Backlog

    Today, the backlog reaches 166 million dollars, representing a
315 percent annual growth. Since the beginning of the current fiscal year, ADF
Group was awarded 174 million dollars in new contracts. ADF Group added three
major contracts to its portfolio of projects in the third quarter, together
totalling more than 94 million dollars.
    They are: an additional contract for the fabrication of the structural
steel components for various industrial buildings at Holcim's new cement plant
in the State of Missouri; a contract for, among other things, the fabrication
and installation of the complex steel structures and heavy built-ups for the
new building of the New World Symphony to be built in Miami Beach, Florida;
and the largest of these contracts calls for the fabrication and delivery of
the steel superstructure and heavy steel components of an important portion of
the Freedom Tower, and the 393-foot high (120 meters) antenna that will top
this skyscraper to be built in the future World Trade Centre site in New York
City. Noteworthy, some of the individual heavy components will reach up to
70 tons. The tower will stand 1,776 feet high (541 metres) in memory of the
year of the United-States Declaration of Independence (1776).
    Mr. Jean Paschini, Chairman of the board and Chief Executive Officer says
"the third quarter was another good quarter. ADF Group recorded, in the third
quarter, growth in revenues, EBITDA and net income, despite the effect of the
exchange rate between the Canadian and US dollars. Moreover, the new 4,650 m2
(50,000 ft2) fabrication bay was inaugurated at the end of October 2007, as
planned. With the recent investments, ADF's fabrication capacity increased
from 65,000 tons to 100,000 tons per year, under one roof".
    Mr. Paschini added "ADF Group began the fourth quarter ending January 31,
2008 with a good backlog consisting of profitable contracts, a debt further
reduced and an overall good financial health".

    Outlook

    Management believes that demand for complex steel structures and heavy
steel components, which spearheads the strategy of ADF Group, will remain
solid at least during the next two years in North America, in the three market
segments of the non-residential construction industry served by the
Corporation. ADF Group is confident that it will announce other contracts
before the end of the current fiscal year.

    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 superstructures, as well as in architectural metal
work. 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.

    

    CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
    (In thousands of $, except for per-share amounts) (Unaudited)

    -------------------------------------------------------------------------
                               Three (3) Months             Nine (9) Months
    Periods Ended
     October 31,              2007         2006          2007          2006
                            -------------------------------------------------
                                 $            $             $             $

    Revenues                15,535       13,034        40,221        38,023
    Cost of goods sold      10,180        9,892        25,655        28,348
    -------------------------------------------------------------------------
    Gross margin before
     exchange rate
     fluctuation             5,355        3,142        14,566         9,675
    Loss on foreign
     exchange                1,160           47         2,196           165
    -------------------------------------------------------------------------
    Gross margin             4,195        3,095        12,370         9,510
    Selling and
     administrative
     expenses                  983          999         3,410         3,298
    -------------------------------------------------------------------------
    Income from continuing
     operations before
     the undernoted items    3,212        2,096         8,960         6,212
    Amortization
      Amortization of
       intangible assets        12          197           224           601
      Amortization of
       property, plant
       and equipment           555          565         1,679         1,664
    -------------------------------------------------------------------------
                               567          762         1,903         2,265
    -------------------------------------------------------------------------
    Income from continuing
     operations before
     financial charges,
     unusual items
     and income taxes        2,645        1,334         7,057         3,947
    -------------------------------------------------------------------------
    Financial charges
      Interest on
       long-term debt          333          392         1,317         1,009
      Interest income          (73)          (6)         (179)          (31)
      Other interest             8          186            54           434
    -------------------------------------------------------------------------
                               268          572         1,192         1,412
    -------------------------------------------------------------------------
    Income from continuing
     operations
     before unusual
     items and income taxes  2,377          762         5,865         2,535
    -------------------------------------------------------------------------
    Unusual items
      Gain on forgiveness
       of interest               -            -             -        (2,500)
      Investment
       tax credits          (2,514)           -        (2,514)            -
    -------------------------------------------------------------------------
                            (2,514)           -        (2,514)       (2,500)
    -------------------------------------------------------------------------
    Income from
     continuing operations,
     before income taxes     4,891          762         8,379         5,035
    -------------------------------------------------------------------------
    Income taxes
      Current                1,352            1         2,127           (30)
      Future               (24,037)           -       (24,938)            -
    -------------------------------------------------------------------------
                           (22,685)           1       (22,811)          (30)
    -------------------------------------------------------------------------
    Net income from
     continuing operations  27,576          761        31,190         5,065
    Income from
     discontinued
     operations                  -            -             -           858
    -------------------------------------------------------------------------
    Net income and
     comprehensive income   27,576          761        31,190         5,923
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings
     per share
      From continuing
       operations             0.80         0.03          0.96          0.18
      From discontinued
       operations                -            -             -          0.03
    -------------------------------------------------------------------------
                              0.80         0.03          0.96          0.21
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted earnings
     per share
      From continuing
       operations             0.77         0.02          0.92          0.18
      From discontinued
       operations                -            -             -          0.03
    -------------------------------------------------------------------------
                              0.77         0.02          0.92          0.21
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average number of
     outstanding shares
     (In thousands)         34,269       29,846        32,530        28,234
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF DEFICIT
    (In thousands of $) (Unaudited)

    -------------------------------------------------------------------------
                               Three (3) Months             Nine (9) Months
    Periods Ended
     October 31,              2007         2006          2007          2006
                            -------------------------------------------------
                                 $            $             $             $

    Deficit, beginning
     of the period        (105,373)    (113,547)     (108,365)     (118,709)
    Net income              27,576          761        31,190         5,923
    Treasury issue
     expense, net of
     taxes of $286              14         (103)         (608)         (103)
    -------------------------------------------------------------------------
    Deficit, end
     of the period         (77,783)    (112,889)      (77,783)     (112,889)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF CONTRIBUTED SURPLUS
    (In thousands of $) (Unaudited)

    -------------------------------------------------------------------------
                               Three (3) Months             Nine (9) Months
    Periods Ended
     October 31,              2007         2006          2007          2006
                            -------------------------------------------------
                                 $            $             $             $
    Contributed surplus,
     beginning of
     the period              2,076        2,223         1,988           273
    Stock-based
     compensation               46           36           134           106
    Options exercised          (23)           -           (23)            -
    Maturity of warrants         -            -             -         1,880
    -------------------------------------------------------------------------
    Contributed surplus,
     end of the period       2,099        2,259         2,099         2,259
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED BALANCE SHEETS
    (In thousands of $)

    -------------------------------------------------------------------------
                                                   At October    At January
                                                          31,           31,
                                                         2007          2007
                                                  (Unaudited)     (Audited)
                                                  ---------------------------

                                                            $             $
    ASSETS
    Current assets
      Cash and cash equivalents                         3,951         6,016
      Accounts receivable                              13,022         7,908
      Holdbacks on contracts                            2,088         3,519
      Revenues in progress                                349         2,178
      Inventories                                       2,308         3,278
      Prepaid expenses                                    608           874
      Income tax receivable                                29             -
      Future income tax assets                          6,875         1,000
    -------------------------------------------------------------------------
                                                       29,230        24,773
    Holdbacks on long-term contracts                      208           880
    Property, plant and equipment                      32,638        30,521
    Intangible assets                                     780           382
    Other assets                                           21           168
    Investment tax credits                              2,514             -
    Future income tax assets                           20,777             -
    -------------------------------------------------------------------------
                                                       86,168        56,724
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES
    Current liabilities
      Bank indebtedness                                     -           263
      Accounts payable and accrued charges              6,887         8,043
      Deferred revenues                                 4,335         8,154
      Income taxes                                          -           104
      Future income tax liabilities                     2,225             -
      Current portion of long-term debt                 2,607         2,606
    -------------------------------------------------------------------------
                                                       16,054        19,170
    Long-term debt                                     12,716        23,612
    Future income tax liabilities                       1,107             -
    -------------------------------------------------------------------------
                                                       29,877        42,782
    -------------------------------------------------------------------------
    SHAREHOLDERS' EQUITY
      Capital stock                                   131,975       120,319
      Contributed surplus                               2,099         1,988
      Deficit                                         (77,783)     (108,365)
    -------------------------------------------------------------------------
                                                       56,291        13,942
    -------------------------------------------------------------------------
                                                       86,168        56,724
    -------------------------------------------------------------------------
    ------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In thousands of $) (Unaudited)

    -------------------------------------------------------------------------
                               Three (3) Months             Nine (9) Months
    Periods Ended
    October 31,               2007         2006          2007          2006
                            -------------------------------------------------
                                 $            $             $             $
    OPERATING ACTIVITIES
    Net income from
     continuing operations  27,576          761        31,190         5,065
      Adjustments for:
        Amortization of
         property, plant
         and equipment         555          565         1,679         1,664
        Amortization of
         intangible assets      12          197           224           601
        Amortization of
         other assets            -           10           143            37
        Gain on forgiveness
         of interest             -            -             -        (2,500)
        Gain on disposal of
         property, plant
         and equipment         (68)          (6)          (89)           (6)
        Non-cash exchange
         loss (gain)          (121)           6            37             1
        Future income
         taxes             (24,037)           -       (24,938)            -
        Investment
         tax credits        (2,514)           -        (2,514)            -
        Use of loss
         carry-overs to
         reduce current
         income taxes        1,352            -         2,089             -
        Capitalized
         interest on the
         interest-free
         long-term debt          5            -            12             -
        Royalty on the
         long-term debt          -           85             -           189
        Stock option-based
         compensation           46           36           134           106
    -------------------------------------------------------------------------
                             2,806         1,654        7,967         5,157
    -------------------------------------------------------------------------
    Changes in non-cash
     operating working
     capital items from
     continuing operations
        Accounts
         receivable         (2,027)      (1,834)       (5,114)          399
        Short-term and
         long-term
         holdbacks
         on contracts          318         (418)        2,103        (1,730)
        Revenues in
         progress               70           76         1,829            91
        Inventories             49          (10)          970         1,766
        Income taxes          (162)        (491)         (133)         (303)
        Prepaid expenses       463           45           266             2
        Accounts payable
         and accrued
         charges             2,244       (3,552)       (1,156)       (1,800)
        Deferred revenues      605       (1,747)       (3,819)       (5,392)
    -------------------------------------------------------------------------
                             1,560       (7,931)       (5,054)       (6,967)
    -------------------------------------------------------------------------
    Cash flows applied to
     operating activities
     of continuing
     operations              4,366       (6,277)        2,913        (1,810)
    Cash flows applied to
     operating activities
     of discontinued
     operations                  -            -             -        (1,002)
    ------------------------------------------------------------------------
                             4,366       (6,277)        2,913        (2,812)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
      Acquisition of
       property, plant
       and equipment        (2,708)         (95)       (3,972)         (822)
      Acquisition of
       intangible assets      (253)         (22)         (622)          (27)
      Disposal of property,
       plant and equipment     143            6           172             6
      Decrease in other
       assets                    2           (6)            4            63
    -------------------------------------------------------------------------
    Cash flows applied to
     investing activities
     of continuing
     operations             (2,816)        (117)       (4,418)         (780)
    Cash flows applied to
     investing activities
     of discontinued
     operations                  -            -             -         1,538
    -------------------------------------------------------------------------
                            (2,816)        (117)       (4,418)          758
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
      Repayment of bank
       indebtedness              -            -          (263)         (371)
      Repayment of
       credit facility           -        2,850             -           (50)
      Repayment of
       long-term debt       (2,687)         (13)      (11,397)          (53)
      Increase in
       long-term debt           94           50           583           122
      Subordinate Voting
       Share issue              32        3,123        10,739         3,123
    -------------------------------------------------------------------------
    Cash flows applied to
     financing activities   (2,561)       6,010          (338)        2,771
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Effect of change in
     foreign exchange
     rate on cash              (63)          (7)         (222)           (3)
    -------------------------------------------------------------------------
    Net cash (outflows)
     inflows                (1,074)        (391)       (2,065)          714
    Cash and cash
     equivalents,
     at the beginning
     of the period           5,025        1,275         6,016           170
    -------------------------------------------------------------------------
    Cash and cash
     equivalents,
     at the end
     of the period           3,951          884         3,951           884
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Supplemental cash
     flow information
      Income taxes paid
       on continuing
       operations                -            -            23             -
      Interest paid
       on continuing
       operations              264          461         1,190           834
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Segmented Reporting

    The Corporation operates in the non-residential construction sector,
primarily in Canada and the United States. 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 works.
    During the nine-month period ended October 31, 2007, 86% of the
Corporation's revenues was achieved with three clients, each of which
accounted for more than 10% of revenues.


    -------------------------------------------------------------------------
                                 Revenues                   Property, Plant
                                                              and Equipment
    Periods ended
    October 31,

                  Threes (3) Months     Nine (9) Months        At        At
                                                          October   January
                                                               31,       31,
                                                                       2007
                     2007      2006      2007      2006      2007  (Audited)
                   ----------------------------------------------------------
                        $         $         $         $         $         $
    Continuing
     operations
      Canada          419       496     3,059     1,220    32,489    30,331
      United
       States      15,116    11,767    37,162    33,595       149       190
      Trinidad          -       771         -     2,970         -         -
      Other
       countries        -         -         -       238         -         -
    -------------------------------------------------------------------------
                   15,535    13,034    40,221    38,023    32,638    30,521
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Discontinued
     operations
      Canada            -         -         -     2,748         -         -
      United
       States           -         -         -         -         -         -
      Trinidad          -         -         -         -         -         -
      Other
       countries        -         -         -         -         -         -
    -------------------------------------------------------------------------
                        -         -         -     2,748         -         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




For further information:

For further information: Jean Paschini, Chairman of the Board and Chief
Executive Officer; Louis Potvin, Chief Financial Officer, (450) 965-1911, 1
(800) 263-7560; www.adfgroup.com; Source: ADF Group Inc.


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