Pure Technologies Announces 2014 Year End Results

CALGARY, March 12, 2015 /CNW/ - Pure Technologies Ltd. ("Pure" or the "Company") (TSX: PUR) announces its financial performance for the year ended December 31, 2014.

2014 Year Highlights:

  • Revenue: $77.8 million, up 28%
  • Loss: $3.9 million which includes a $12.7 million provision taken against Libyan receivables
  • Adjusted Profit3: $5.7 million compared to $2.5 million last year
  • Adjusted EBITDA1: $15.6 million, up 21%
  • Cash on hand: $33.6 million with no debt

"2014 was an exciting year of continuing growth and significant change for Pure," said Jack Elliott, President and CEO of Pure. "Focusing on our core business of providing services for the condition assessment and management of pipelines, we grew revenue by 28% over 2013 despite weak macroeconomic growth around the world. Excluding the impact of the Hunter McDonnell ("HM") acquisition, made in the fourth quarter, organic revenue growth was 23% year-over-year. We continued to invest prudently in our business and people to capitalize on this growth and to set the foundation for the future. We implemented a succession plan, strengthened our executive management team, made a major acquisition in the oil & gas pipeline integrity space, and delivered the Company's first ever quarterly dividend. 2015 is proving to be no less exciting as we recently announced another major acquisition which will add complementary services, resources, and new customers in the water pipeline asset management sector.

"As a result of increased conflict and instability in Libya, the Company recorded a provision against the full amount of outstanding receivables from our Libyan customers, totalling $12.7 million.  This provision has no impact on our current cash position or on our current or future business, and we had not anticipated any revenue from Libya in our 2015 projections.  Until the region stabilizes, no further activity is planned in that region and the Company continues to actively work with the customer to provide payment of outstanding amounts during such challenging conditions."

Table of Selected Financial Results:
For further details on the results, please refer to Pure's Management Discussion and Analysis (MD&A) and Consolidated Financial Statements which are available on the Company's website (www.puretechltd.com).

($000s Canadian dollars,
 unless otherwise indicated and per share amounts)

Three months ended Dec. 31, 2014

Three months ended Dec. 31, 2013

$ Change

% Change

Twelve months ended Dec. 31, 2014

Twelve months ended Dec. 31, 2013

$ Change

% Change

Revenue

27,614

17,238

10,376

60

77,806

60,865

16,941

28

Cost of sales

5,841

3,730

2,111

57

17,506

13,387

4,119

31

Gross profit

21,773

13,508

8,265

61

60,300

47,478

12,822

27

Gross margin (%)

79

78



78

78



Operating Expenses2

15,682

11,073

4,609

42

54,780

42,599

12,181

29

Adjusted EBITDA1

8,716

4,266

4,450

104

15,629

12,889

2,740

21

Profit (loss) for the period

(4,729)

1,812

(6,541)

(361)

(3,886)

2,080

(5,966)

(287)


Per share – basic

(0.09)

0.04



(0.07)

0.04




Per share – diluted

(0.09)

0.03



(0.07)

0.04



Total assets

130,989

128,406

2,583

2

130,989

128,406

2,583

2

1.

Adjusted EBITDA is EBITDA before gains or losses on foreign exchange, earn-out provisions related to acquisitions, costs directly attributable to acquisitions, stock-based compensation transactions, management restructuring costs, and other significant one-time expenses. See Non-GAAP Measures. 

2.

Excludes Libya accounts receivable and other provisions.

Financial Highlights - Three months ended December 31, 2014

  • Total revenues increased 60% quarter-over-quarter to $27.6 million. Revenues increased due to: a significant South Africa contract executed in the quarter; a significant equipment sale in Canada; a general increase in inspection services performed in the Americas; and, revenues provided from the newly acquired HM business.
  • Operating expenses grew 42% in the quarter compared to the prior year as a result of: an increase in headcount since the beginning of 2014 to execute on the Company's growth; the acquisition of HM; and, the increase in depreciation related to prior period capital investment undertaken to support growth.
  • Adjusted EBITDA of $8.7 million compared to $4.3 million last year, up 104%, and a loss for the period of $4.7 million compared to profit of $1.8 million last year.
    • The loss for the period reflects a $12.7 million provision being made against accounts receivable from customers located in Libya. While the customers have reaffirmed their intent to pay outstanding amounts and continue working with Pure, the customers have been unable to make payments on the outstanding invoices due to the escalating conflict in the country. Pure has recorded a full allowance against this account receivable until there is greater assurance of collection. The Company has no personnel working in Libya.
  • Working capital at December 31, 2014 was $58.7 million compared to $75.2 million last year.
    • Includes $33.6 million in cash
    • The decline in working capital mostly reflects the Libya provision, acquisition of HM and quarterly dividend payments

 

Financial Highlights - Twelve months ended December 31, 2014

  • Total revenues increased 28% over the prior period to $77.8 million due to the same reasons stated for the three-month period and below.
    • Equipment sales (22% of total) grew 46% reflecting a number of significant equipment supply contracts, mainly in Canada and Mexico.
    • Inspection services (51% of total) increased 14%.
    • Consulting services (16% of total) increased by 57% due to an increased number of consulting and engineering contracts in Australia and in the Americas.
    • Monitoring, licensing and technical support (11% of total) increased by 35% related to SmartBallTM technology licensing agreements with oil and gas pipeline operators in North America and monitoring contracts from newly installed AFO equipment.
  • Consistent with revenue growth, total operating expenses increased 29% over the prior period to $54.8 million due to the same reasons stated in the three-month period above and below.
    • Marketing expenses (21% of total) up 11% due to ongoing marketing efforts during the year in all regions.
    • Engineering and operations expenses (45% of total) up 40%.
    • General and administrative expenses (32% of total) up 27% due to the reasons stated for the three-month period and increased consulting and one-time management restructuring costs. Management expects prior restructuring activities will result in increased efficiencies, including a reduction in reliance on external consultants, and profitability and will establish a strong foundation to capitalize on future growth opportunities.
  • Gross margin remained at 78% compared to the same period last year.
  • Adjusted EBITDA of $15.6 million, adjusted profit of $5.7 million, and a loss of $3.9 million, compared to adjusted EBITDA of $12.9 million, adjusted profit of $2.5 million, and profit of $2.1 million last year3. The loss in the period reflects the reasons stated for the three-month period.

3.        Refer to Management Discussion and Analysis for definitions and calculations of all non-GAAP measures.

Business, Operations & Outlook

During the year, Pure announced that it had been selected to lead multi-year contracts worth over $50 million which does not include single, short-term projects or those captured through recent acquisitions. In addition, in the fourth quarter, Pure was selected by The City of Baltimore to lead a multi-year program to provide services related to the management of large-diameter water transmission pipelines. The program contract is expected to be for a period of five years for an amount up to US$20 million with the option to extend for an additional five years. Pure expects contract signing and work to begin in 2015. The Company believes that the continued adoption of its underground asset management services by the major utilities will drive future growth in 2015, complemented by the increased exposure to the small and medium utility space provided by the Wachs Water acquisition and the added technologies and oil and gas customer base provided by the HM acquisition, both of which are described in further detail below.

Internationally, Pure continues to build upon its core base in Europe, South Africa, Australia and Southeast Asia and is experiencing increased adoption of its technologies, including strong growth in South Africa, improved visibility of large potential contracts in Europe and Asia and Pure's first ever contract for installation of AFO monitoring equipment in China.  

During 2014, Pure completed the acquisition of HM, a leading provider of technology-driven integrity services to the oil and gas pipeline industry. By combining the technologies and services of HM and Pure ("PureHMTM"), the Company believes it has an unparalleled solution set for oil and gas pipeline owners. Pure expects the acquisition will be a catalyst for rapid expansion into the oil and gas pipeline inspection industry through an expanded customer base, contributing to overall growth moving ahead.  PureHM's business will reflect a full year's operations in 2015 results, compared to 3 months' results in 2014.

On February 17, 2015, Pure announced it had entered into a definitive agreement to acquire the business of Wachs Valve and Hydrant Services, LLC ("Wachs Water") for US$18.5 million with closing expected early in the second quarter of 2015. In business for 15 years and headquartered in Buffalo Grove, Illinois, Wachs Water is a leading provider of flow control maintenance and support, leak detection, and related asset management services to the water sector in the United States.   The acquisition adds to Pure's underground asset management service offering, allowing for comprehensive asset management solutions to clients as well as increasing Pure's exposure to the currently underserved small and medium sized utilities markets.  At December 31, 2014, Wachs Water reported revenue of approximately US$19.3 million and EBITDA of US$2.9 million (unaudited). 

Pure made investments during the year in personnel and improvements to its internal processes. The investments will allow the Company to manage existing contracts, maximize internal efficiencies and promote rapid growth in its key markets.  The Company expects further investment in 2015 with an ongoing focus on process improvement and on its information systems and related infrastructure. 

Conference Call and Webcast

A teleconference will be held Friday, March 13, 2015 to discuss these results at 10:30 am ET. Presentation slides will be made available on the Company's website prior to the call.

Teleconference:  The telephone numbers for the conference are toll-free 1-888-231-8191 (within North America) and 647-427-7450 (Local / International).

  • Conference ID: 84989710
  • A replay will be available approximately two hours after the call and will be available for two weeks. Access the replay by calling 1-855-859-2056 (toll-free within North America) or 416-849-0833 (Local / International). Use the following Passcode followed by the number sign: 84989710

Webcast & Presentation Slides:  Investors will be able to listen to the conference over the Internet as well as access presentation slides (in pdf format) to follow along during the call.

  • Links to the webcast and presentation slides will be available approximately 30 minutes prior to the call on Pure's website. Under the "Investors" main menu tab, select "Presentations and Webcasts".
  • The webcast will be archived for 90 days.

About Pure Technologies Ltd.

Pure Technologies Ltd. is an international asset management, technology and services company which has developed patented technologies for inspection, monitoring and management of critical infrastructure around the world. Pure's business model incorporates four distinct but complementary business streams:

  • Sales of proprietary monitoring technologies for pipelines, bridges and structures;
  • Recurring revenue from data analysis, site maintenance, and from technology licensing;
  • Premium technical services including pipeline inspection, leak detection and condition assessment;
  • Specialized engineering services in asset management, non-revenue water and condition assessment for water and wastewater infrastructure.

 

Forward-Looking Statements

This News Release contains forward-looking statements, including, without limitation, statements containing the words "should", "believe", "anticipate", "may", "plan", "will", "continue",  "intend", "expect",  "estimate"  and other similar expressions.  These statements constitute "forward-looking information" within the meaning of applicable Canadian securities laws.  These statements are based on the Company's current expectations, estimates, forecasts and assumptions.  Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other important factors that could cause the Company's actual performance to be materially different from that projected. Examples of these statements would include those relating to the benefits expected to be realized from the acquisition of the Wachs Water business, the timing of closing of the acquisition, where the Company forecasts the timing of new and existing projects, the success of the Company's new technologies and entering new markets, the Company's ability to generate future cash flows and the timing and amount of future dividend payments.  The assumptions, risks and uncertainties that could cause actual results to differ materially from the forward-looking information, include, but are not limited to, delays in the satisfaction of the conditions to the Closing of the Wachs Water acquisition, the Company's ability to successfully integrate the Wachs Water business into its existing operations, market changes, the Company's ability to deliver services in a timely and cost effective manner, technological change, changes in general economic conditions and other risks detailed from time to time in our ongoing filings with the Canadian securities regulatory authorities, including those in the Company's Annual Information Form, which filings can be found at www.sedar.com. Given these assumptions, risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Unless otherwise required by applicable securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements either as a result of new information, future events or otherwise.

® Registered Trademarks, property of Pure Technologies Ltd.

"The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this release"

SOURCE Pure Technologies Ltd.

For further information: To find out more about Pure Technologies Ltd. (TSX: PUR), visit our website at www.puretechltd.com or contact Paul Moon, Investor Relations; (403) 266-6794 or investor.relations@puretechltd.com.

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http://www.puretechnologiesltd.com

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