Cervus Equipment Corp. announces third quarter 2015 results

CALGARY, Nov. 4, 2015 /CNW/ - Cervus Equipment Corp. ("Cervus" or the "Company") (TSX: CVL) today announced its financial results and operational highlights for the quarter ended September 30, 2015.

"Agricultural sentiment varied during the quarter as mid-season concerns gave way to optimism with late season rains resulting in an average harvest across most of our geography.   Against this backdrop, our Agriculture segment generated strong used equipment sales, while an earlier harvest benefitted parts and service in the quarter," said Graham Drake, President and CEO of Cervus.  "Outside of agriculture, persistent uncertainty in oil prices continues to be a drag on western Canadian equipment demand, particularly in our Construction and Saskatchewan transportation operations.  Our Ontario transportation stores were profitable for a second consecutive quarter, and we continue to focus on the operational structure required to achieve expected earnings potential.   Further, a focus on operational efficiencies across the Company achieved a $4.3 million reduction in same store selling, general, and administrative expenses (SG&A) in the quarter."

Highlights for the Quarter

  • The Company generated adjusted earnings1 of $6.6 million for the three months ended September 30, 2015, and adjusted basic earnings per share of $0.43.2 For the comparable period in 2014, the Company generated adjusted earnings of $8.7 million and adjusted basic earnings per share of $0.57;
  • Total revenues increased $48.6 million and gross profit dollars increased $2.9 million compared to the three months ended September 30, 2014. Same store revenues and gross profit decreased $14.3 million and $6.3 million, respectively;
  • Cost saving initiatives within same store operations resulted in a $4.3 million reduction in SG&A expenses quarter over quarter, decreasing same store SG&A as a percentage of revenue to 13.6% in the third quarter of 2015 from 14.5% in 2014;
  • Acquisitions contributed $2.1 million of incremental earnings before interest, taxes, depreciation, and amortization ("EBITDA"). Same store EBITDA was $12.7 million during the three months ended September 30, 2015 compared to $17.6 million for the similar period in 2014;
  • Dividends of $0.2125 per share were declared to shareholders of record as at September 30, 2015; and
  • The Company climbed to #66 from #72 on the Alberta Venture's 2015 Venture 250 ranking.

_________________________________

 

The Company calculates adjusted earnings as income attributed to shareholders adjusted to exclude the impact of: settlements with the Canada Revenue Agency, unrealized foreign currency gains and losses, acquisition and integration costs, and gains and losses on the sale of real estate.

2

Adjusted basic earnings per share is calculated as adjusted earnings divided by the weighted average shares outstanding during the period.

Financial Highlights

Total EBITDA decreased $2.7 million in the three months ended September 30, 2015, primarily due to reduced demand in our Commercial & Industrial (C&I) segment as a result of extended uncertainty in oil prices. Acquisitions contributed $2.1 million of incremental EBITDA for the quarter, while SG&A reductions generated $4.3 million of efficiencies on a same store basis.

Total Agriculture EBITDA for the three month period ended September 30, 2015 was within 2% of the comparable period in 2014. Acquisitions generated incremental EBITDA of $1.6 million offset by a decrease in same store EBITDA of $2.0 million.  Early indicators of a poor crop ultimately improved on late season rainfall, however farmers' initial expectations impacted demand for new equipment.  This was compounded by the increased Canadian dollar cost of new equipment due to appreciation in the US dollar.  Demand for used equipment accelerated as crop outlook improved later in the third quarter,  while increases in both parts and service revenue reflects the earlier start to the 2015 harvest season and increased parts prices due to the higher US dollar, compared to 2014.  

For our Transportation segment in the third quarter, total EBITDA decreased $0.4 million, comprised of $0.8 million of incremental EBITDA from Ontario, and a $1.2 million decrease in EBITDA from our Saskatchewan operations.  Resource prices and related uncertainty have been the primary factor behind our Saskatchewan results.  Total operating loss for the quarter was $0.2 million, comprised of $0.1 million of operating income from Ontario, and a $0.3 million operating loss in our Saskatchewan stores.  

Third quarter EBITDA in the Commercial and Industrial (C&I) segment decreased by $1.9 million due to regional economic uncertainty surrounding oil prices, which primarily impacted new equipment demand in the Alberta construction market.  The resulting $3.2 million decrease in gross profit was partially offset by a 20% reduction in SG&A.

Selected Quarterly Information






Three months
 period ended September 30


Nine months
period ended September 30


Total 2015

2015 Same Store



Total 2015

2015 Same Store


($ thousands, except per
share amounts)

2015


%
Change

2015
Same
Store1


%
Change

2014


2015

%
Change

2015
Same
Store1

%
Change

2014

Revenue

334,742

17%

271,854

(5%)

286,192


876,152

27%

637,705

(8%)

690,569

Cost of sales

(279,464)

20%

(225,837)

(3%)

(233,847)


(721,306)

29%

(519,680)

(7%)

(559,850)

Gross profit

55,278

6%

46,017

(12%)

52,345


154,846

18%

118,025

(10%)

130,719

Other income

1,169


573


1,426


946


1,601


3,269

Unrealized foreign exchange
gain (loss)

(676)


(326)


(179)


(1,727)


(743)


40

Total other income (loss)

493

(60%)

247

(80%)

1,247


(781)

(124%)

858

(74%)

3,309

Selling, general and administrative expense

(45,314)

10%

(37,063)

(10%)

(41,372)


(137,097)

23%

(103,576)

(7%)

(111,712)

Income from operating activities

10,457

(14%)

9,201

(25%)

12,220


16,968

(24%)

15,307

(31%)

22,316

Finance income

58

(28%)

58

(28%)

80


147

(28%)

146

(28%)

203

Finance costs

(3,172)

39%

(2,605)

14%

(2,290)


(8,605)

53%

(6,469)

15%

(5,628)

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

(68)

(109%)

(68)

(109%)

766


296

(63%)

296

(63%)

803

Income before income tax expense

7,275

(32%)

6,586

(39%)

10,776


8,806

(50%)

9,280

(48%)

17,694

Income tax expense

(3,365)

10%



(3,069)


(40,060)

682%



(5,126)

Income (loss) for the period

3,910




7,707


(31,254)




12,568

Income (loss) attributable to shareholders

3,910




7,707


(31,189)




12,492

EBITDA1

14,863

(16%)

12,715

(28%)

17,599


31,296

(10%)

25,730

(26%)

34,902

EBITDA margin1

4.4%


4.7%


6.1%


3.6%


4.0%


5.1%

Ratios as a percentage of revenue:












Gross profit margin

16.5%


16.9%


18.3%


17.7%


18.5%


18.9%

Selling, general and administrative

13.5%


13.6%


14.5%


15.6%


16.2%


16.2%

Earnings (loss) per share












Adjusted - Basic1

0.43




0.57


0.54




0.84

Basic

0.25




0.51


(2.02)




0.83

Diluted

0.24




0.49


(2.02)




0.79

Notes: 

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

Conference Call Information

Cervus will host its third quarter 2015 results conference call on November 5, 2015 at 10:30 a.m. Eastern Time. Interested parties may access the conference call by dialling (416) 764-8688 or 1-888-390-0546. Please connect approximately 10 minutes prior to the beginning of the call. The conference call will be archived for replay until Thursday, November 12, 2015 at midnight. To access the archived conference call, dial (416) 764-8677 or 1-888-390-0541 and enter the reservation number 639312 followed by the number sign.

A live audio webcast of the conference call will be available at: 
http://event.on24.com/r.htm?e=1082079&s=1&k=3D7926F32FC5975097819EB31879E194.

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 71 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 2014 Annual Information Form of Cervus Equipment Corporation dated March 10, 2015 available electronically at www.sedar.com under Cervus' profile including but not limited to Cervus' reliance on key manufacturers for the delivery of products, their respective dependence on the strength of sales to the agricultural sector, the seasonal and cyclical nature of the business, workforce availability and acquisition related risks such as effective and timely integration into Cervus' business operations. Cervus believes the expectations reflected in such forwardlooking information are reasonable but no assurance can be given that these expectations will prove to be correct and such forwardlooking information should not be unduly relied upon. You are cautioned that the preceding list of assumptions and risks is not exhaustive. Any forwardlooking 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.

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) 567-0392, rmuth@cervusequipment.com


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