Adf Group Inc

TSX:DRX

Earnings Call Transcript 2021-Q2

[Operator]

Good morning, ladies and gentlemen, and welcome to the ADF Group Second Quarter and First Semester Results Conference call. [Operator Instructions] Also note that this call is being recorded on Thursday, September 10, 2020. And I would like to turn the conference over to Jean-François Boursier, Chief Financial Officer. Please go ahead.

[Jean-François Boursier]

Thank you. Good morning. Welcome to ADF's conference call covering the second quarter and 6 months ended July 31, 2020. I will update you on our results, which were disclosed earlier this morning by press release and then update you on our operations. Please note that some of the issues discussed today may include forward-looking statements. These are documented in ADF Group's management report for the second quarter and 6 months ended July 31, 2020, which were filed with SEDAR this morning. Please also consider that, although for the moment, the impact of COVID-19 on ADF's operations is limited, the extent to which the virus can have an impact on our results will depend on future developments, which are very uncertain and cannot be predicted at this time, including new information that may emerge regarding the COVID-19 and the measures taken to contain it or address its impact among others. Revenues for the second quarter stood at $42.5 million compared with $54.1 million last year. Year-to-date, revenues at $88.3 million were $3 million lower than last year. Although our quarter-over-quarter fabrication hours have increased, the lower revenues can be explained by the lower installation hours based on project execution timing for both quarters ended July 31, 2020 and 2019. Gross margins for the second quarter at 17.4% was 6.8% higher than reported a year ago. Year-to-date, gross margin stood at 13.9% compared to 12.6% for the 6 months period ended July 31, 2019. Better pricing, better absorption and the finalization of some contractual changes explain the quarter-over-quarter margin improvement. At the close of the 3 months ended July 31, 2020, EBITDA stood at $4.6 million, $1.6 million better than for the corresponding quarter a year ago. Year-to-date, EBITDA stood at $7.5 million compared to $6 million a year ago. The increase in gross margins and the lower selling administrative expenses, the latter coming from the lower legal fees associated to last year third quarter out-of-court settlement explain these favorable variances. For the quarter ended July 31, 2020, net earnings stood at $2.1 million or $0.06 per share, basic and diluted, compared with net earnings $419,000 for the same period a year ago or $0.01 per share, basic and diluted. For the 6-month period ended July 31, 2020. Net earnings stood at $2.2 million or $0.07 per share, basic and diluted compared to $2 million for the 6 months ended July 31, 2019, $0.06 per share, basic and diluted. Besides the elements mentioned before, FX fluctuation at a $1.1 million favorable impact quarter-over-quarter while the impact was $0.7 million unfavorable when comparing the 6 months period ended July 31, 2020 and 2019. Along with our improved results and following our cash management responsible approach, our working capital, liquidities and balance sheet situation also improved. Working capital as of July 31, 2020, at $35.4 million was $6.1 million better than its January 31, 2020 level. Net liquidities at $14.7 million or $23.8 million higher than at January 31, 2020. Year-to-date, cash flow from operation generated $21.6 million. In light of the uncertainty surrounding the COVID-19, we are taking a cautious approach with our liquidities, and accordingly, are tailoring our CapEx program to the situation with only $0.4 million spent during the 6 months ended last July 31. These operating inflows enable us to reduce the drawn credit facility by $13.1 million and finished the quarter with no amount being drawn from our credit facilities. As mentioned in our first quarter reporting and our July 31, 2020, MD&A, ADF, like many others, is currently navigating into uncharted waters. As mentioned before and although the impact of the COVID-19 pandemic as of this date, had a limited impact on ADF's operations, we remain abreast of economic developments and trends. Our order backlog stood at $314.5 million as at July 31, 2020. Although the bidding pipeline is still very active. We are finding that finalizing new contracts is somewhat a bit more challenging with all parties involved taking more time to better understanding -- better understand the coming months. Even though we have said this before, we feel it is appropriate to reaffirm that risk management was, is and will always be of paramount importance for ADF. In these uncertain times, our approach offers us comfort and allows us to face these challenging times with determination. Ladies and gentlemen, thank you for your interest and confidence in ADF. I will now answer your questions.

[Operator]

[Operator Instructions] And at this time, Mr. Boursier, we have no questions registered. So please proceed.

[Jean-François Boursier]

Again, I wish to thank you for your interest in ADF Group. Have a nice day.

[Operator]

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.