ADF GROUP INC. ANNOUNCE THE RESULTS FOR THE FISCAL YEAR ENDED JANUARY 31, 2023

HIGHLIGHTS

  • Revenues of $250.9 million.
  • Net income of $14.9 million, representing a 56% increase over the fiscal year ended January 31, 2022.
  • The Corporation's order backlog (1) stood at $376.5 million on January 31, 2023.

TERREBONNE, QC, April 13, 2023 /CNW/ -

ADF GROUP INC. ("ADF" or the "Corporation") (TSX: DRX) recorded revenues of $250.9 million during the fiscal year ended January 31, 2023, compared with $280.7 million the previous fiscal year. This decrease in revenues is mainly attributable to the inclusion of high-volume projects with accelerated production schedules that increased the revenues of the previous fiscal year ended January 31, 2022, but with much lower margins than normally generated by our Corporation.

Gross margin, as a percentage of revenues (2), went from 8.8% for the fiscal year ended January 31, 2022, to 14.2% for the fiscal year ended January 31, 2023. This increase, as a percentage of revenues, is mainly due to the projects mentioned above, as well as by internal efficiency improvement generated by the investments to automate fabrication processes at our plant in Terrebonne, Quebec.

Adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) (3) for the fiscal year ended January 31, 2023, totalled $26.1 million, which is $8.4 million or 47% higher than at the same date a year earlier.

For the fiscal year ended January 31, 2023, ADF posted net income of $14.9 million (or $0.46 per share, basic and diluted) compared with a net income of $9.6 million (or $0.29 per share, basic and diluted) a year earlier.

As at January 31, 2023, the Corporation had a working capital of $65.6 million, 69% more than at the same date a year ago. The Corporation remains in a sound position to continue its ongoing operations and pursue its development projects.

As at January 31, 2023, the Corporation's order backlog (1) stood at $376.5 million, compared with $373.1 million as at January 31, 2022. The majority of projects in hand will be completed progressively by the middle of the fiscal year ending January 31, 2025.

Financial Highlights




Fiscal Years Ended January 31,


2022

(In thousands of Canadian dollars, and dollars per share)

$

$

Revenues

250,890

280,740

Adjusted EBITDA (3)

26,119

17,759

Income before income tax expense

16,854

11,059

Net income for the year

14,935

9,563

Basic and diluted per share

0.46

0.29

Cash flows from operating activities

(2,612)

2,669




(In thousands)

Number

Number

Average number of outstanding shares (basic and diluted, in thousands)

32,640

32,635




__________________________________

1

The order backlog is an additional financial measure. Refer to the "Non-GAAP Financial Measures and Other Financial Measures" section of this press release for the definition of this indicator.



2

Gross margin, as a percentage of revenues is an additional financial measure. Refer to the "Non-GAAP Financial Measures and Other Financial Measures" section of this press release for the definition of this indicator.



3

Adjusted EBITDA is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Other Financial Measures" section of this press release for the definition of this indicator.


New Financing Agreement

On February 10, 2023, the Corporation reached an agreement with its Canadian financial institution on the terms and conditions amending its Canadian operating credit facility. Once finalized, within the next few weeks, the credit facility will increase from $30.0 million to $40.0 million ; this amount remaining subject to a margination calculation but only when the Corporation draws an amount greater than $20.0 million. The other conditions will remain similar to the current ones.

Outlook

"ADF closed its fiscal year ended January 31, 2023 with encouraging results, an increase in the order backlog, better margins and a net income 56% higher than that of the previous fiscal year" said Mr. Jean Paschini, Chairman of the Board and Chief Executive Officer. He concluded by pointing out that, "Our major investments in automation over the past two fiscal years have now been completed and allow us to face economic challenges with confidence".

Dividend

On April 12, 2023, ADF Group announced the payment of a semi-annual dividend of $0.01 per subordinate voting share and per multiple voting shares, which will be paid on May 17, 2023, to Shareholders of Record as at April 28, 2023.

Conference Call with Investors

A conference call with investors is scheduled for Thursday, April 13, 2023, at 10 a.m. (Montreal time) to discuss the results of Corporation's fiscal year ended January 31, 2023.

To join the conference call without operator assistance, you can register with your phone number on https://emportal.ink/3l04Il2 to receive an instant automatic reminder.

You can also join the conference call with operator assistance by dialing 1-888-390-0620 a few minutes prior to the conference call scheduled start time.

A replay of this conference call will be available from 1:00 p.m. on Thursday, April 13, 2023, until 11:59 p.m. Thursday, April 20, 2023, by dialing 1-888-259-6562, followed by access code 047645 #.

The conference call (audio) will also be available at the www.adfgroup.com. Members of the media are invited to join in listening mode.

ANNUAL GENERAL MEETING OF SHAREHOLDERS FOR THE FISCAL YEAR ENDED JANUARY 31, 2023

ADF Group Inc. will hold its Annual General Meeting of Shareholders via webcast, on Wednesday, June 7, 2023, at 11 a.m. (EST). 

Shareholders' meeting details and webcasting connection instructions will be made available in the weeks preceding the meeting.

Results for the first quarter ending April 30, 2023, will also be disclosed during the Shareholders' meeting.

About ADF Group Inc. | ADF Group Inc. is a North American leader in the design and engineering of connections, fabrication, including the application of industrial coatings, and installation of complex steel structures, heavy steel built-ups, as well as in miscellaneous and architectural metals for the non-residential infrastructure sector. ADF Group Inc. 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. The Corporation operates two fabrication plants and two paint shops, in Canada and in the United States, and a Construction Division in the United States, which specializes in the installation of steel structures and other related products.

Forward-Looking Information | This press release contains forward-looking statements reflecting ADF's 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.

Non-GAAP Financial Measures and Other Financial Measures | Are measures derived primarily from the consolidated financial statements but are not a standardized financial measure under the financial reporting framework used to prepare the Corporation's financial statements. Therefore, readers should be careful not to confuse or substitute them with performance measures prepared in accordance with GAAP. In addition, readers should avoid comparing these non-GAAP financial measures to similarly titled measures provided or used by other issuers. The definition of these indicators and their reconciliation with comparable International Financial Reporting Standards measures is as follows:

Adjusted EBITDA

Adjusted EBITDA shows the extent to which the Corporation generates profits from operations, without considering the following items:

  • Net financial expenses;
  • Income tax expense ;
  • Foreign exchange losses, and
  • Depreciation and amortization of property, plant and equipment, intangible assets, and right-of-use assets.

Net income is reconciled with adjusted EBITDA in the table below:




Fiscal Years Ended January 31,

2023

2022

(In thousands of Canadian dollars)

$

$

Net income

14,935

9,563

Income tax expense

1,919

1,496

Net financial expenses

1,999

1,174

Amortization

5,323

5,054

Foreign exchange loss

1,943

472

Adjusted EBITDA

26,119

17,759




 

Gross Margin as a Percentage of Revenues

Gross margin as a percentage of revenue indicator is used by the Corporation to assess the level of profitability for a given period based on the project mix for that same period. This indicator is subject to fluctuations in project prices and also in the operational efficiency of the Corporation. The indicator of gross margin as a percentage of revenues results from dividing gross margin by revenues.

Order Backlog

The order backlog is a measure used by the Corporation to assess future revenue levels. The order backlog includes firm orders obtained by the Corporation, either through a firm contract or a formal notice to proceed confirmed by the client. The order backlog disclosed by the Corporation therefore includes the portion of confirmed contracts that have not been put into production.

All amounts are in Canadian dollars unless otherwise specified.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION




As at January 31,

2023

2022

(In thousands of Canadian dollars)

$

$

ASSETS



Current assets



Cash and cash equivalents

7,193

7,130

Accounts receivable

90,921

40,424

Current income tax assets

714

1,548

Contract assets

42,541

29,998

Inventories

10,679

9,690

Prepaid expenses and other current assets

2,332

2,312

Total current assets

154,380

91,102

Non-current assets



Property, plant and equipment

90,378

83,629

Right-of-use assets

21,848

21,587

Intangible assets

3,640

3,357

Other non-current assets

1,371

1,375

Total assets

271,617

201,050

LIABILITIES



Current liabilities



Accounts payable and other current liabilities

39,985

34,421

Current income tax liabilities

235

Contract liabilities

44,533

13,770

Other current liabilities

964

Current portion of lease liabilities

806

841

Current portion of long-term debt

2,258

3,357

Total current liabilities

88,781

52,389

Non-current liabilities



Long-term debt

44,927

28,702

Lease liabilities

3,528

3,772

Deferred income tax liabilities

9,240

7,571

Other non-current liabilities

156

166

Total liabilities

146,632

92,600

SHAREHOLDERS' EQUITY



Capital stock

68,127

68,120

Contributed surplus

6,435

6,435

Accumulated other comprehensive income

8,107

5,861

Retained income

42,316

28,034

Total shareholders' equity

124,985

108,450

Total liabilities and shareholders' equity

271,617

201,050




 

CONSOLIDATED STATEMENTS OF INCOME




Fiscal Years Ended January 31,

2023

2022

(In thousands of Canadian dollars, except the number of shares and the amounts per share)

$

$

Revenues

250,890

280,740

Cost of goods sold

215,321

256,046

Gross Margin

35,569

24,694

Selling and administrative expenses

14,773

11,989

Net financial expenses

1,999

1,174

Foreign exchange loss

1,943

472


18,715

13,635

Income before income tax expense

16,854

11,059

Income tax expense

1,919

1,496

Net income for the fiscal year

14,935

9,563

Earnings per share



—  Basic and diluted per share

0.46

0.29

Average number of outstanding basic and diluted shares (in thousands)

32,640

32,635




 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME




Fiscal Years Ended January 31,

2023

2022

(In thousands of Canadian dollars)

$

$

Net income for the fiscal year

14,935

9,563

Other comprehensive income (loss):



Exchange differences on translation of foreign operations (a)

2,246

(25)

Comprehensive income for the fiscal year

17,181

9,538




a)  Will subsequently be reclassified to net income.


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


Capital Stock

Contributed
Surplus

Accumulated Other
Comprehensive Income

Retained
Income

Total

(In thousands of Canadian dollars)

$

$

$

$

$

Balance, February 1, 2021

68,120

6,435

5,886

19,124

99,565

Net income for the fiscal year

9,563

9,563

Other comprehensive income (loss)

(25)

(25)

Comprehensive income (loss) for
the fiscal year

(25)

9,563

9,538

Dividends

(653)

(653)

Balance, January 31, 2022

68,120

6,435

5,861

28,034

108,450

 


Capital Stock

Contributed
Surplus

Accumulated Other
Comprehensive Income

Retained
Income

Total

(In thousands of Canadian dollars)

$

$

$

$

$

Balance, February 1, 2022

68,120

6,435

5,861

28,034

108,450

Net income for the fiscal year

14,935

14,935

Other comprehensive income

2,246

2,246

Comprehensive income for the fiscal year

2,246

14,935

17,181

Dividends

(653)

(653)

Shares Issuance

7

7

Balance, January 31, 2023

68,127

6,435

8,107

42,316

124,985

 

CONSOLIDATED STATEMENTS OF CASH FLOWS




Fiscal Years Ended January 31,

2023

2022

(In thousands of Canadian dollars)

$

$

OPERATING ACTIVITIES



Net income for the fiscal year

14,935

9,563

Non-cash items:



Amortization of property, plant and equipment

4,118

3,543

Amortization of right-of-use assets

835

1,013

Amortization of intangible assets

370

498

Gain on disposal of property, plant and equipment

(802)

(2,111)

Unrealized loss on derivative financial instruments

968

513

Unrealized foreign exchange (gain) loss

(1,158)

705

Share-based compensation

724

361

Income tax expense

1,919

1,496

Government grants

(1,280)

Net financial expenses

1,999

1,174

Others

(250)

(148)

Net income adjusted for non-cash items

22,378

16,607

Change in non-cash working capital items (1)

(25,850)

(12,511)

Income tax recovery (paid)

860

(1,427)

Cash flows (used in) from operating activities

(2,612)

2,669

INVESTING ACTIVITIES



Acquisition of property, plant and equipment

(11,463)

(21,477)

Acquisition of intangible assets

(698)

(589)

Others

80

77

Cash flows used in investing activities

(12,081)

(21,989)

FINANCING ACTIVITIES



Issuance of long-term debt

20,000

30,000

Repayment of long-term debt

(2,216)

(17,878)

Payment of lease liabilities

(804)

(963)

Dividends paid

(653)

(653)

Interest paid

(2,177)

(988)

Others

7

(316)

Cash flows from financing activities

14,157

9,202

Impact of fluctuations in foreign exchange rate on cash flow

599

(558)

Net change in cash and cash equivalents during the fiscal year

63

(10,676)

Cash, and cash equivalents, beginning of fiscal year

7,130

17,806

Cash and cash equivalents, end of fiscal year

7,193

7,130





(1) The following table sets out in detail the components of the "Change in non-cash working capital items":




Fiscal Years Ended January 31,

2023

2022

(In thousands of Canadian dollars)

$

$

Accounts receivable

(48,647)

20,342

Contract assets

(12,011)

(21,099)

Inventories

(550)

(2,714)

Prepaid expenses and other current assets

103

2,382

Accounts payable and other current liabilities

5,478

(2,041)

Contract liabilities

29,787

(9,366)

Others

(10)

(15)

Change in non-cash working capital items

(25,850)

(12,511)




 

Segmented Information

The Corporation operates one operational sector, being, the non-residential construction industry, primarily in the United States and Canada. This sector includes the following areas of expertise: the design and engineering of connections, fabrication, including industrial coating, and installation of complex steel structures, heavy steel built-ups, as well as miscellaneous and architectural metalwork.




Fiscal Years Ended January 31,

2023

2022

(In thousands of Canadian dollars)

$

$

Revenues



Canada

36,913

39,810

United States

213,977

240,930


250,890

280,740




 




As at January 31,

2023

2022

(In thousands of Canadian dollars)

$

$

Non-current assets (1)



Canada

74,424

68,907

United States

42,813

41,041


117,237

109,948




(1)

The non-current assets mainly include property, plant and equipment, intangible assets, right-of-use assets, investment tax credits and others non-current assets.


Revenues from external clients were allocated to each country on the basis of the project's location.

During the fiscal year ended January 31, 2023, 62% of the Corporation's revenues was realized with three (3) clients, each representing 10% and more of its revenues (86% with three (3) clients during the fiscal year ended January 31, 2022).

The following table presents the breakdown of revenues for each of these clients:




Fiscal Years Ended January 31,

2023

2022

(In thousands of Canadian dollars)

$

$

Client A (1)

168,950

Client B (1)

57,386

40,610

Client C (2)

31,381

Client D (1)

46,069

Client E (1)

52,886


156,341

240,941




(1)

From the United States

(2)

From Canada

 

SOURCE ADF Group Inc.

Jean Paschini, Chairman of the Board of Directors and Chief Executive Officer; Jean-François Boursier, CPA, Chief Financial Officer, Telephone: (450) 965-1911, Website: www.adfgroup.com