ADF GROUP INC. maintains its profitability and further improves its financial position


FINANCIAL HIGHLIGHTS FOR THE SECOND QUARTER ENDED JULY 31, 2011

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

  • Revenues amounted to $13.1 million, posting a slight increase over the same quarter of the 2011 fiscal year.
  • ADF Group closed the quarter with net earnings comparable to those for the second quarter of the 2011 fiscal year, being $0.8 million or $0.02 per share (basic and diluted).
  • The Corporation declares the payment of a second semi-annual dividend for the 2012 fiscal year.


TERREBONNE, QC, Sept. 7, 2011 /CNW Telbec/ - ADF GROUP INC. ("ADF" or the "Corporation") (TSX: DRX) closed the second quarter of the 2012 fiscal year with revenues of $13.1 million, posting a slight increase over the same quarter of the 2011 fiscal year, despite an appreciation of approximately 7% in the Canadian dollar against the U.S. dollar between the two reporting periods. For the six-month period ended July 31, 2011, ADF Group recorded year-to-date revenues of $26.3 million, compared with $26.6 million the previous year.

The second-quarter gross profit margin as a percentage of revenues was 24%, being the same level as in the corresponding quarter of the previous year, whereas the gross margin for the six-month period ended July 31, 2011 also stood at 24% compared with 26% a year earlier.

ADF posted second-quarter net earnings of $0.8 million or $0.02 per share (basic and diluted), which compares to those for the second-quarter of the previous year. For the first six month period, net earnings amounted to $1.9 million or $0.06 per share (basic and diluted), compared with $2.8 million or $0.08 per share (basic and diluted) for the first half of the previous year. Besides the negative impact of currency fluctuations and a different revenue mix, this decline is attributable to the non-recurrence of certain favourable items recognized last year, the realization of lower exchange gains than the previous year and a higher tax rate.

The Corporation's operating activities provided cash flows of $4.2 million in the second quarter and $9.3 million for the first six months ended July 31, 2011. As at July 31, 2011, the Corporation had working capital of $42.2 million, including short-term available liquidities (cash, cash equivalents and short-term investments) of $27.8 million. Therefore, available liquidities exceeded ADF Group's total debt by $20.7 million, placing the Corporation in a solid position to support its ongoing operations, pursue its development projects and remunerate its shareholders in accordance with the dividend payment policy implemented at the beginning of fiscal 2012.

Dividend

The Corporation announces today the payment of a second semi-annual dividend of $0.01 per subordinate and multiple voting shares, which will be paid on October 17, 2011 to shareholders of record as at September 22, 2011.

Outlook

As at July 31, 2011, ADF Group's order backlog stood at $53 million, the execution schedule of which should extend until the end of the second quarter of the Corporation's 2013 fiscal year.

Jean Paschini, Chairman of the Board and Chief Executive Officer indicated that "although current economic conditions are still a concern in the United States, the major mandates on which we are presently working as part of the restoration of the World Trade Center, in New York City, will provide a stream of profits for ADF Group over the next quarters".

In the near term, in order to replenish its order backlog, the Corporation will be mostly focusing its development efforts on the Canadian market where the economic outlook is more favourable. The joint venture to set up a fabrication plant in Manitoba is proceeding as planned and the Corporation is confident that this facility will be operational in 2012. The Corporation also remains on the lookout for business opportunities in the public and industrial infrastructures segments in Eastern Canada, including in Quebec.

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 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 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:

   
  2011 Fiscal Year
Annual Q4 Q3 Q2 Q1
12 months
ended
2011.01.31
3 months
ended
2011.01.31
3 months
ended
2010.10.31
3 months
ended
2010.07.31
3 months
ended
2010.04.30
(In thousands of CA$) $ $ $ $ $
Net Income          
  Previous GAAP 3,743 1,037 630 878 1,198
    Impact of IFRS standards, after income taxes          
    - Exchange differences on translation of foreign operations 1,623 639 308 (70) 746
    - Share-based compensation 51 4 (28) 31 44
    - Amortization of property, plant and equipment and intangible assets (26) (6) (7) (6) (7)
  1,648 637 273 (45) 783
  IFRS 5,391 1,674 903 833 1,981
Gross Margin          
  Previous GAAP 17,072 5,146 3,495 3,850 4,581
    Impact of IFRS standards :          
    - Reclassification of amortization of property, plant and equipment and intangible assets (2,936) (735) (739) (782) (680)
  IFRS 14,136 4,411 2,756 3,068 3,901
Gross Margin (as a % of revenues)          
  Previous GAAP 31% 34% 26% 30% 34%
  IFRS 26% 29% 20% 24% 29%
EBITDA1          
  Previous GAAP 10,871 3,122 2,069 2,525 3,155
    Impact of IFRS standards :          
    - Share-based compensation 51 4 (28) 31 44
  IFRS 10,922 3,126 2,041 2,556 3,199

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.

CONFERENCE CALL WITH INVESTORS

TO DISCUSS ADF GROUP'S RESULTS
FOR THE SECOND QUARTER ENDED JULY 31, 2011

September 7, 2011 at 10:00 a.m. (Montreal Time)

To participate in the conference call, please dial 1-877-974-0445 a few minutes before the start of the call.

For those unable to participate, a taped rebroadcast will be available from September 7, 2011 at 1:00 p.m.
until midnight September 14, 2011, by dialing 1-877-289-8525; access code 4466244#.

The conference call (audio) will also be available at www.adfgroup.com

Members of the media are invited to listen in.

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)    
  3 Months 6 Months
         
Periods Ended July 31,   2011 2010 2011 2010
(In thousands of CA$, except for per-share amounts)   $ $ $ $

Revenues

13,118 12,967 26,347 26,608

Cost of goods sold

9,995 9,899 20,118 19,639

Gross margin

3,123 3,068 6,229 6,969

Selling and administrative expenses

1,447 1,420 3,339 2,898

Financial revenues

(113) (160) (208) (182)

Finance charges

59 124 119 196

Foreign exchange loss (gain)

17 172 (738) (995)
  1,410 1,556 2,512 1,917
Income before income tax expense 1,713 1,512 3,717 5,052
Income tax expense 939 679 1,862 2,238
Net income for the period 774 833 1,855 2,814
Earnings per share        
  Basic and diluted per share 0.02 0.02 0.06 0.08
Average number of outstanding shares (in thousands) 32,787 34,335 32,781 34,413
Average number of outstanding diluted shares (in thousands) 33,376 34,984 33,365 35,165

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME    
(Unaudited)    
  3 Months 6 Months
           
Periods Ended July 31,   2011 2010 2011 2010
(In thousands of CA$)   $ $ $ $

Net income for the period

774 833 1,855 2,814

Other comprehensive income

       
  Exchange differences on translation of foreign operations 229 76 (1,266) (673)

Comprehensive income for the period

1,003 909 589 2,141 

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)          
  Capital
stock
Contributed
surplus
Accumulated
other
comprehensive
income
Retained
income
Total
(In thousands of CA$) $ $ $ $ $
Balance, February 1, 2010 75,436 3,659 144 13,348 92,587

Net income for the period

2,814 2,814
Other comprehensive income for the period (673) (673)
Comprehensive income for the period (673) 2,814 2,141
Share-base compensation 113 113
Options exercised 257 (93) 164
Subordinate voting share redemption (4,224) 1,438 (2,786)
Balance, July 31, 2010 71,469 5,117 (529) 16,162 92,219

           
  Capital
stock
Contributed
surplus
Accumulated
other
comprehensive
income
Retained
income
Total
(In thousands of CA$) $ $ $ $ $
Balance, February 1, 2011 70,032 5,740 (1,477) 18,739 93,034

Net income for the period

1,855 1,855
Other comprehensive income for the period (1,266) (1,266)
Comprehensive income for the period (1,266) 1,855 589
Share-base compensation 71 71
Options exercised 20 (7) 13
Dividends (328) (328)
Balance, July 31, 2011 70,052 5,804 (2,743) 20,266 93,379

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)

     

AS AT

  July 31, 2011 January 31, 2011
(In thousands of CA$) $ $

ASSETS

   
Current assets    
  Cash and cash equivalents 22,203 18,677
  Short-term investments 5,580 2,787
  Accounts receivable 14,053 22,215
  Holdbacks on contracts 4,562 167
  Work in progress 1,436 403
  Inventories 3,778 3,865
  Prepaid expenses and other current assets 1,298 985
  Derivative financial instruments 201 741
  Total current assets 53,111 49,840

Non-current assets

   
  Holdbacks on contracts 3,562
  Property, plant and equipment 45,935 46,871
  Intangible assets 2,586 2,601
  Other non-current assets 2,850 2,852
  Deferred income tax assets 4,771 6,960

Total assets

109,253 112,686

LIABILITIES

   
Current liabilities    
  Accounts payable and other current liabilities 6,138 5,365
  Income tax liabilities 194 159
  Deferred revenues 2,022 4,994
  Derivative financial instruments 136 45
  Current portion of long-term debt 2,400 2,513
  Total current liabilities 10,890 13,076
Non-current liabilities    
  Long-term debt 4,682 6,151
  Deferred income tax liabilities 302 425
Total liabilities 15,874 19,652

SHAREHOLDERS' EQUITY

   
  Retained income 20,266 18,739
  Accumulated other comprehensive income (2,743) (1,477)
  17,523 17,262
  Capital stock 70,052 70,032
  Contributed surplus 5,804 5,740
  Total shareholders' equity 93,379 93,034
Total liabilities and shareholders' equity 109,253 112,686
     

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  3 Months 6 Months
           
Periods Ended July 31,   2011 2010 2011 2010
(In thousands of CA$)   $ $ $ $
OPERATING ACTIVITIES        
  Net income 774 833 1,855 2,814
  Non-cash items:        
    Amortization of property, plant and equipment 762 827 1,554 1,519
    Amortization of intangible assets 89 81 178 165
    Gain on disposal of property, plant and equipment (52)
    Unrealized gain on derivative financial instruments 857 701 631 322
    Non-cash exchange (gain) loss (41) 117 (230) (343)
    Share-based compensation 12 57 71 113
    Income tax expense 939 679 1,862 2,238
    Financial revenues (113) (160) (208) (182)
    Finance charges 59 124 119 196
  Net income adjusted for non-cash items 3,338 3,259 5,832 6,790
  Changes in non-cash working capital items 670 (3,474) 3,631 (6,575)
  Income tax expense received (paid) 194 (174) (191)

Cash flows from (used in) operating activities

4,202 (215) 9,289 24
INVESTING ACTIVITIES        
  (Acquisition) disposal of short-term investments (23) 4,065 (2,928) 3,934
  Acquisition of property, plant and equipment (609) (504) (638) (2,153)
  Acquisition of intangible assets (75) (80) (163) (200)
  Reduction in other non-current assets 1 1 4
  Interest received 133 64 210 158
Cash flows from (used in) investing activities (574) 3,546 (3,518) 1,743
FINANCING ACTIVITIES        
  Issuance of long-term debt 4,370
  Repayment of long-term debt (619) (656) (1,219) (1,067)
  Issuance of subordinate voting shares 13 2 13 164
  Redemption of subordinate voting shares (2,636) (2,786)
  Dividends paid (328) (328)
  Interest paid on the interest rate swap (8) (17)
  Interest paid (49) (60) (102) (121)
Cash flows from (used in) financing activities (991) (3,350) (1,653) 560
Impact of fluctuations in foreign exchange rate on cash 172 77 (592) (137)
Net increase in cash and cash equivalents 2,809 58 3,526 2,190
Cash and cash equivalents, beginning of period 19,394 7,902 18,677 5,770
Cash and cash equivalents, end of period 22,203 7,960 22,203 7,960
         

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

  3 Months 6 Months
           
Periods ended July 31,   2011 2010 2011 2010
(In thousands of CA$)   $ $ $ $
  Accounts receivable   8,102 (6,047) 7,353 (11,098)
  Holdbacks on contracts   (1,036) (299) (1,031) 1,174
  Income tax   140 (81) 128 334
  Work in progress   (910) 887 (1,076) 675
  Inventories   145 (191) 87 (586)
  Prepaid expenses and other current assets   (589) 111 (316) (475)
  Accounts payable and other current liabilities   1,034 130 1,267 1,852
  Deferred revenues   (6,216) 2,016 (2,781) 1,549
Changes in non-cash working capital items   670 (3,474) 3,631 (6,575)
           

Financing and investing activities without impact on cash were nil as at July 31, 2011, and $139,000 as at July 31, 2010, relating to the disposal of property, plant and equipment given in exchange for new ones.

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

     

As at

  July 31, 2011 January 31, 2011
(In thousands of CA$) $   $  
Cash 22,203   15,918  
Cash equivalents - term deposits   2,759  
  22,203   18,677  
         

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.

  3 Months 6 Months
           
Periods ended July 31,   2011 2010 2011 2010
(In thousands of CA$)   $ $ $ $
Revenues        
  Canada 250 123 475 563
  United States 12,868 12,844 25,872 26,045
  13,118 12,967 26,347 26,608

     

As at

July 31, 2011 January 31, 2011
(In thousands of CA$) $ $
Property, Plant and Equipment    
  Canada 45,297 46,767
  United States 638 104
  45,935 46,871

All intangible assets and investment tax credits included under "Other non-current assets" at, January 31, 2011 and July 31, 2011, originated from Canada.

During the six-month period ended July 31, 2011, one client accounted for 94% of the Corporation's revenues (one client accounted for 90% of the revenues during the six-month period ended July 31, 2010), and therefore accounted for more than 10% of revenues.

 

SOURCE ADF GROUP INC.

For further information:

Source:  ADF Group Inc.

Contact: 
Jean Paschini, Chairman of the Board of Directors and Chief Executive Officer
Jean-François Boursier, CA, Chief Financial Officer
Telephone:  
Web Site:  
(450) 965-1911 / 1 (800) 263-7560
www.adfgroup.com

Medias: 

Caroline Couillard
Morin Public Relations
(514) 289-8688, ext. 233

Organization Profile

ADF GROUP INC.

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