RESULTS FOR THE FIRST QUARTER ENDED APRIL 30, 2011 - ADF GROUP INC. MAINTAINS GOOD PROFIT MARGINS AND AN EXCELLENT FINANCIAL POSITION

FINANCIAL HIGHLIGHTS FOR THE FIRST QUARTER ENDED APRIL 30, 2011

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

  • Revenues amounted to $13.2 million compared with $13.6 million for the same quarter of fiscal 2011.
  • The Corporation closed the quarter with a net income of $1.1 million or $0.03 per share (basic and diluted), compared with a net income of $2.0 million or $0.06 per share (basic and diluted) in the same period of fiscal 2011.
  • As at April 30, 2011, ADF's posted a cash surplus of more than $17 million over its total debt of, representing a significant increase of 35% compared with January 31, 2011.
  • Operating cash flows improved considerably, compared with the quarter ended on April 30, 2010, reaching $5.0 million during the first quarter of fiscal 2012.

TERREBONNE, QC, June 15, 2011 /CNW Telbec/ - For the three-month period ended April 30, 2011, ADF GROUP INC. ("ADF" or the "Corporation") (TSX: DRX) revenues were comparable to those for the same period of the previous year, and even posted a slight increase notwithstanding the increase in relative value of more than 5% of the Canadian dollar against the U.S. dollar between the two reporting periods. Revenues thus amounted to $13.2 million for the first quarter of the current fiscal year, compared with $13.6 million for the same quarter of last year.

The gross margin as a percentage of revenues stood at 24%, versus the high of 29% achieved in the first quarter of the previous year. This change is primarily explained by the fact that the supply of steel accounted for a larger proportion of the revenue mix this year. However, it should be noted that the gross margin achieved during the first quarter of the 2012 fiscal year corresponds to the average margin posted by ADF over the last eight quarters.

Income before interest, income taxes, depreciation and amortization (or EBITDA) amounted to $2.1 million, compared with $3.2 million the previous year.

Net income totalled $1.1 million or $0.03 per share, compared with a net income of $2.0 million or $0.06 per share in the same period last year. Notwithstanding the reversal of provisions and a gain on disposal of property, plant and equipment recognized in the first quarter of fiscal 2011, the results for the first quarter ended April 30, 2011 would have been similar to those for the corresponding period a year ago. In addition, a lesser exchange gain than in the previous year and a slightly higher tax rate, have also reduced the first quarter's net income.

ADF closed the first quarter of the 2012 fiscal year with working capital of $38.4 million, of which $29.4 million in short-term available liquidities (cash, cash equivalents and short-term investments), provided notably by the cash flows from operating activities of $5.0 million. Consequently as at April 30, 2011, ADF Group's short-term available liquidities exceeded its total interest-bearing debt by $17.3 million.

Jean Paschini, Chairman of the Board and Chief Executive Officer indicated that "these results reflect the added value of our contracts in progress, our rigorous operating practices and the positive impact of our recent investments on the overall efficiency of our fabrication activities. They also reflect efficient cost control and a profit margin that remains above the industry average."

Implementation of a Dividend Policy

As announced in April 2011, the Corporation's Board of Directors approved the payment of a semi-annual dividend policy. Consequently, on May 16, 2011, ADF Group paid a first semi-annual dividend of $0.01 per share to shareholders of record as at April 29, 2011.

Order Backlog

As at April 30, 2011, the Corporation's order backlog stood at $62 million, extending over an execution period of 12 months. However, the order backlog at that date does not reflect all the revenues likely to be recognized in upcoming quarters as it only includes a portion of the contractual changes requested by clients over the past months in connection with its current mandates.

Outlook

In regard to business development, the Corporation expects Western Canada to offer the greatest opportunities within the short term, considering the increase in bidding activity it is currently witnessing in this region. It is therefore carrying on its plans to establish its local presence through a joint venture with a Manitoba-based partner. The goal of the new entity will be to build and operate an ultramodern fabrication plant that will enable the Corporation to serve all of Western Canada, in particular the energy and potash sectors and the public infrastructures segment, where significant investments are expected in the coming years. Furthermore, it will provide ADF with greater access to the large American Midwest market.

Over the longer term, the regions in the Eastern and Midwest U.S., and especially New York City, remain natural and high-potential markets for ADF Group, where it is strongly positioned and enjoys an excellent reputation.

Based on its current order backlog and considering its development targets as well as a certain stability of the Canadian dollar, management expects ADF Group's revenues within the next few quarters to be comparable to, or up slightly over previous quarters.

"Today, with an enhanced fabrication capacity, very healthy financial position and development projects well on their way, ADF Group is embarking on a new profitable growth phase, having all the resources in hand to achieve a solid performance once the economy is back on track" concluded Mr. Jean Paschini.

Annual Meeting of Shareholders

ADF Group's Annual Meeting of Shareholders will take place this morning, June 15, 2011 at 11:00 am at the Omni Mount-Royal Hotel in Montreal.

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 in 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 International Financial Reporting Standards (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 $) $ $ $ $ $
Net Income          
  Previous GAAP 3,743 1,037 630 878 1,198
    Impact of IFRS standards, after income taxes          
    - Exchange differences on translation of the 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%
           
EBITDA          
  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 first quarter ended April 30, 2011,
Wednesday, June 15, 2011 at 09:30 a.m. (Montreal time)

To participate in the conference call, please dial 1-800-731-5319 a few minutes before the start of the call.

For those unable to participate, a taped rebroadcast will be available from June 15, 2011 at 12:30 p.m.
until midnight June 21, 2011, by dialing 1-877-289-8525; access code 4445591#.

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-Month Periods Ended April 30,   2011   2010
(In thousands of $, except per-share amounts)   $   $

Revenues

  13,229   13,641

Cost of goods sold

  10,123   9,740

Gross margin

  3,106   3,901

Selling and administrative expenses

  1,892   1,478

Financial revenues

  (95)   (22)

Finance charges

  60   72

Foreign exchange gain

  (755)   (1,167)
    1,102   361
Income before income tax expense   2,004   3,540

Income tax expense

  923   1,559
Net income for the period   1,081   1,981
Earnings per share        
  Basic per share   0.03   0.06
  Diluted per share   0.03   0.06
Average number of outstanding shares (in thousands)   32,775   34,494
Average number of outstanding diluted shares (in thousands)   33,390   35,341
         
         
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)        
         
         
3-Month Periods Ended April 30,   2011   2010
(In thousands of $)   $   $
Net income for the period   1,081   1,981
Other comprehensive income        
  Exchange differences on translation of foreign operations   (1,495)   (749)
Comprehensive income for the period   (414)   1,232
         

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

           
  Capital
stock
Contributed
surplus
Accumulated
other
comprehensive
income
Retained
income
Total
(In thousands of $) $ $ $ $ $
Balance, February 1, 2010 75,436   3,659   144   13,348   92,587

Net income for the period

      1,981   1,981
Other comprehensive income for the period     (749)     (749)
Comprehensive income for the period     (749)   1,981   1,232
Share-base compensation   56       56
Options exercised 255   (93)       162
Subordinate voting share redemption (182)   32       (150)
Balance, April 30, 2010 75,509   3,654   (605)   15,329   93,887
                   
  Capital
stock
Contributed
surplus
Accumulated
other
comprehensive
income
Retained
income
Total
(In thousands of $) $ $ $ $ $
Balance, February 1, 2011 70,032   5,740   (1,477)   18,739   93,034

Net income for the period

      1,081   1,081
Other comprehensive income for the period     (1,495)     (1,495)
Comprehensive income for the period     (1,495)   1,081   (414)
Share-based compensation   59       59
Dividends       (328)   (328)
Balance, April 30, 2011 70,032   5,799   (2,972)   19,492   92,351

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)

                 
             
As at April 30, 2011 January 31, 2011 February 1, 2010
(In thousands of $) $ $ $
ASSETS            
Current assets            
  Cash and cash equivalents 19,394   18,677   5,770  
  Short-term investments 5,547   2,787   11,652  
  Accounts receivable 21,725   22,215   13,421  
  Income tax assets 174     442  
  Holdbacks on contracts 1,128   167   2,692  
  Work in progress 539   403   1,574  
  Inventories 3,923   3,865   3,093  
  Prepaid expenses and other current assets 711   985   2,299  
  Derivative financial instruments 1,088   741   832  
  Total current assets 54,229   49,840   41,775  
Non-current assets            
  Holdbacks on contracts 2,391   3,562   1,297  
  Property, plant and equipment 46,103   46,871   47,438  
  Intangible assets 2,600   2,601   2,590  
  Other non-current assets 2,850   2,852   2,312  
  Deferred income tax assets 5,661   6,960   11,569  
Total assets 113,834   112,686   106,981  
LIABILITIES            
Current liabilities            
  Accounts payable and other current liabilities 5,336   5,365   5,649  
  Income tax liabilities   159    
  Deferred revenues 7,989   4,994   1,274  
  Derivative financial instruments 166   45    
  Current portion of long-term debt 2,379   2,513   2,422  
  Total current liabilities 15,870   13,076   9,345  
Non-current liabilities            
  Long-term debt 5,247   6,151   4,645  
  Deferred income tax liabilities 366   425   404  
Total liabilities 21,483   19,652   14,394  
SHAREHOLDERS' EQUITY            
  Retained income 19,492   18,739   13,348  
  Accumulated other comprehensive income (2,972)   (1,477)   144  
  16,520   17,262   13,492  
  Capital stock 70,032   70,032   75,436  
  Contributed surplus 5,799   5,740   3,659  
  Total shareholders' equity 92,351   93,034   92,587  
Total liabilities and shareholders' equity 113,834   112,686   106,981  
             
             
             
CONSOLIDATED STATEMENTS OF CASH FLOWS            
(Unaudited)            
             
             
3-Month Periods Ended April 30,     2011 2010
(In thousands of $)     $ $
OPERATING ACTIVITIES            
  Net income     1,081   1,981  
  Non-cash items:            
    Amortization of property, plant and equipment     792   692  
    Amortization of intangible assets     89   84  
    Gain on disposal of property, plant and equipment       (52)  
    Unrealized gain on derivative financial instruments     (226)   (379)  
    Non-cash exchange gain     (244)   (496)  
    Share-based compensation     59   56  
    Income tax expense     923   1,559  
    Financial revenues     (95)   (22)  
    Finance charges     60   72  
  Net income adjusted for non-cash items     2,439   3,495  
  Changes in non-cash working capital items 1     2,961   (3,101)  
  Income tax expense paid     (368)   (191)  
Cash flows from (used in) operating activities     5,032   203  
INVESTING ACTIVITIES            
  Acquisition of short-term investments     (2,905)   (131)  
  Acquisition of property, plant and equipment     (29)   (1,649)  
  Acquisition of intangible assets     (88)   (120)  
  Reduction in other non-current assets     1   3  
  Interest received     77   94  
Cash flows from (used in) investing activities     (2,944)   (1,803)  
FINANCING ACTIVITIES            
Issuance of long-term debt       4,370  
Repayment of long-term debt     (600)   (411)  
Issuance of subordinate voting shares       162  
Redemption of subordinate voting shares       (150)  
Interest paid on the interest rate swap     (9)    
Interest paid     (53)   (61)  
Cash flows from (used in) financing activities     (662)   3,910  
Impact of fluctuations in foreign exchange rate on cash     (709)   (178)  
Net increase in cash and cash equivalents     717   2,132  
Cash and cash equivalents, beginning of period     18,677   5,770  
Cash and cash equivalents, end of period 2     19,394   7,902  
           
           

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

       
3-Month Periods Ended April 30,   2011 2010
(In thousands of $)   $ $
  Accounts receivable   (749)   (5,051)  
  Holdbacks on contracts   5   1,473  
  Current tax   (12)   415  
  Work in progress   (166)   (212)  
  Inventories   (58)   (395)  
  Prepaid expenses and other current assets   273   (586)  
  Accounts payable and other current liabilities   233   754  
  Deferred revenues   3,435   501  
Changes in non-cash working capital items   2,961   (3,101)

Financing and investing activities without impact on cash were nil as at April 30, 2011, and $139,000 as at April 30, 2010, relating to the disposal of property, plant and equipment given in exchange for new ones.

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

       
  April 30, 2011 January 31, 2011 February 1, 2010
(In thousands of $) $ $ $
Cash 19,394   15,918   5,770  
Cash equivalents - term deposits   2,759    
  19,394   18,677   5,770

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-Month Periods Ended April 30,   2011 2010  
(In thousands of CA$)   $ $    
Revenues              
  Canada   225   440      
  United States   13,004   13,201      
    13,229   13,641      
                 
               
               
As at   April 30, 2011 January 31, 2011 February 1, 2010
(In thousands of CA$)   $ $   $
Property, Plant and Equipment              
  Canada   46,010   46,767   47,293  
  United States   93   104   145  
    46,103   46,871   47,438  
                 

All intangible assets and investment tax credits included under "Other non-current assets" at February 1, 2010, January 31, 2011 and April 30, 2011, originated from Canada.

During the three-month period ended April 30, 2011, one client accounted for 94% of the Corporation's revenues (one client accounted for 90% of the revenues during the three-month period ended April 30, 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:   (450) 965-1911 / 1 (800) 263-7560
   
Web Site:   www.adfgroup.com
   
Medias: 

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

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ADF GROUP INC.

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