Cervus Equipment Corp. announces second quarter 2016 results

CALGARY, Aug. 10, 2016 /CNW/ - Cervus Equipment Corp. ("Cervus" or the "Company") (TSX: CVL) today announced its financial results and operational highlights for the quarter ended June 30, 2016.

"This quarter, Cervus realized the benefits of cost reductions initiated in 2015, as reduced expenses mitigated the impact of the challenging markets on our Western Canadian Commercial and Industrial and Saskatchewan transportation operations.  Further, we remain disciplined in our inventory management, achieving a $52.3 million reduction in inventory year over year," said Graham Drake, President and CEO of Cervus. "In Ontario, improved efficiencies in our parts and service departments continue to drive performance, while favorable crop conditions and record 2015 net cash farm income suggest a positive outlook for our Agriculture segment leading into the second half of the growing season."

Highlights for the Quarter

  • The Company generated $2.5 million of net income for the second quarter of 2016 compared to a net loss of $32.2 million for the comparable period in 2015.
  • Adjusted income1 for the second quarter of 2016 was $2.3 million with adjusted basic earnings per share1 of $0.15. For the comparable period in 2015, the Company generated adjusted income of $2.9 million and adjusted basic earnings per share of $0.19.
  • Earnings before interest, taxes, depreciation, and amortization ("EBITDA")1 was $11.0 million compared to $12.3 million in 2015, a decrease of $1.3 million, primarily due to lower EBITDA realized within the Commercial and Industrial ("C&I") segment.
  • Cost reduction initiatives resulted in a $5.8 million reduction in selling, general, and administrative ("SG&A") expenses quarter over quarter, decreasing SG&A as a percentage of revenue to 14.2% in the second quarter of 2016 from 15.7% in 2015.
  • Income from operating activities2 increased $0.5 million within the Transportation segment, primarily as a result of a $0.4 million increase in Ontario.
  • Overall income from operating activities was $6.6 million, a decrease of $1.0 million from the second quarter in 2015.
  • The Company achieved inventory reductions of $52.3 million (14%) compared to June 30, 2015, primarily due to a 42% reduction in Commercial and Industrial inventories despite lower equipment demand in this segment.
  • Dividends of $0.07 per share were declared to shareholders of record as at June 30, 2016.

Financial Highlights

Total EBITDA decreased $1.3 million in the three months ended June 30, 2016, comprised of a $0.8 million increase in EBITDA from the Transportation segment, while continued economic pressures reduced EBITDA by $1.6 million in the C&I segment. EBITDA in the Agriculture segment decreased by $0.5 million, primarily due to a $0.3 million decrease in income from equity investments.

Total Agriculture income from operating activities for the three month period ended June 30, 2016 decreased slightly by $0.1 million compared to the second quarter of 2015. Revenues increased slightly with a significant shift in equipment demand from new to used, while targeted expense control achieved a $3.2 million reduction in SG&A compared to the second quarter of 2015.

Total Transportation income from operating activities increased $0.5 million in the second quarter, primarily due to improved efficiencies in Ontario's parts and service departments. The Saskatchewan dealerships' income from operating activities improved slightly as SG&A cost reductions more than offset a decrease in gross profit2.

Total C&I segment income from operating activities decreased $1.4 million, as overall industry activity remains muted due to the impact of resource prices within the broader Western Canadian economy. Expense reductions generated a 30% decrease in SG&A compared to the second quarter of 2015, partly offsetting the 45% decrease in gross profit2.

Selected Quarterly Information




Three months period ended June 30

($ thousands, except per share amounts)

2016

% Change
Compared
to 2015

2015

Revenue

294,772

(3%)

302,988

Cost of sales

(246,984)

(0%)

(247,732)

Gross profit 2

47,788

(14%)

55,256

Other income

432

215%

(376)

Unrealized foreign exchange gain (loss)

154

(44%)

275

Total other income (loss)

586

680%

(101)

Selling, general and administrative expense

(41,758)

(12%)

(47,512)

Income from operating activities2

6,616

(13%)

7,643

Finance income

23

(28%)

32

Finance costs

(2,749)

(1%)

(2,790)

Share of (loss) profit of equity accounted investees, net of tax

(252)

(686%)

43

Income before income tax expense

3,638

(26%)

4,928

Income tax expense

(1,153)

(97%)

(37,117)

Income (loss) for the period

2,485

108%

(32,189)

Income (loss) attributable to shareholders

2,485

108%

(32,203)

EBITDA1

10,997

(11%)

12,305

EBITDA margin1

3.7%


4.1%

Ratios as a percentage of revenue:





Gross profit margin

16.2%


18.2%


Selling, general and administrative

14.2%


15.7%

Earnings (loss) per share





Adjusted - Basic1

0.15


0.19


Basic

0.16


(2.08)


Diluted

0.15


(2.08)


Notes: 

[1] These financial measures are identified and defined within Cervus' second quarter Management's Discussion and Analysis under the section "Non-IFRS Financial Measures".

[2] These financial measures are identified and defined within Cervus' second quarter Management's Discussion and Analysis under the section "Additional IFRS Financial Measures".

 

Conference Call Information

Cervus will host its second quarter 2016 results conference call on August 11, 2016 at 11:00 a.m. Eastern Time. Interested parties may access the conference call by dialling (647) 427-7450 or 1-888-231-8191. The conference call will be archived for replay until Thursday, August 18, 2016 at midnight. To access the archived conference call, dial (416) 849-0833 or 1-855-859-2056 and enter the reservation number 53975057 followed by the number sign.

A live audio webcast of the conference call will be available at: 
http://event.on24.com/r.htm?e=1230503&s=1&k=3521AFD68B81C9485FCDB641E1819AD3

Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above website for 90 days.

About Cervus Equipment Corporation

Cervus acquires and operates authorized agricultural, construction, materials handling and transportation equipment dealerships. The Company has interests in 72 dealerships in Canada, New Zealand, and Australia. The primary equipment brands represented by Cervus include John Deere agricultural equipment; Bobcat and JCB construction equipment; Clark, Sellick and Doosan material handling equipment; and Peterbilt transportation equipment. The common shares of Cervus are listed on the Toronto Stock Exchange and trade under the symbol "CVL".

Forward Looking Information

This press release contains certain forward‐looking information ("forward‐looking information") within the meaning of applicable Canadian securities laws. Forward‐looking information is often, but not always, identified by the use of words such as "anticipate", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "expect", "may", "will", "project", "should" or similar words suggesting future outcomes.  Forward‐looking information is not a guarantee of future performance and involves a number of assumptions and a number of risks and uncertainties some of which are described herein. These risks and uncertainties include the risks identified under the heading "Risk Factors – Risks Related to the Business" in the 2015 Annual Information Form of Cervus Equipment Corporation dated March 15, 2016, available electronically at www.sedar.com under Cervus' profile. Cervus believes the expectations reflected in such forward‐looking information are reasonable but no assurance can be given that these expectations will prove to be correct and such forward‐looking information should not be unduly relied upon. You are cautioned that the preceding list of assumptions and risks is not exhaustive. Any forward‐looking information is made as of the date hereof and, except as required by law, Cervus assumes no obligation to publicly update or revise such information to reflect new information, subsequent or otherwise.

The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this release.

______________________

1 These financial measures are identified and defined within Cervus' second quarter Management's Discussion and Analysis under the section "Non-IFRS Financial Measures".

2 These financial measures are identified and defined within Cervus' second quarter Management's Discussion and Analysis under the section "Additional IFRS Financial Measures".

 

SOURCE Cervus Equipment Corporation

For further information: Investor inquiries: Graham Drake - President & CEO, (403) 567-2095, gdrake@cervusequipment.com; Randy Muth - Chief Financial Officer, (403) 567-2097, rmuth@cervusequipment.com


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