ADF Group Inc. announces the results for the fiscal year ended January 31, 2018

HIGHLIGHTS

• Revenues up by 75% compared with the previous year, reaching $180.5 million.
• Revenues before income tax expense of $2.2 million, down by $0.3 million compared with a year ago.
• Negative net result of $7.2 million, including a non-recurring non cash income tax expense totalling $9.2 million.
• The Corporation's backlog stood at $85.5 million on January 31, 2018.

TERREBONNE, QC, April 12, 2018 /CNW Telbec/ - ADF GROUP INC. ("ADF" or the "Corporation") (TSX: DRX) recorded revenues of $180.5 million during the fiscal year ended January 31, 2018, compared with $102.8 million the previous fiscal year. This increase in revenues results from the rise in fabrication activities across both of the Corporation's plants.

The gross margin as a percentage of revenues went from 16.7% during the fiscal year ended January 31, 2017, to 8.9% during the fiscal year ended January 31, 2018. This drop in gross margin was mainly lead by the current pressure on price in the markets served by ADF.

The Corporation recorded a $9.2 million non-recurrent non-cash income tax expense, resulting almost entirely from the decrease of deferred U.S. subsidiaries income tax assets. This decrease had to be taken because of the change to the U.S. federal tax rates for the Corporation's U.S. subsidiaries which had an impact of $1.7 million, and the non-recognition of deferred U.S. subsidiaries income tax assets following a tax settlement, resulting in an additional impact of $7.5 million. However, it is important to point out that once the Corporation has a better outlook on its U.S. subsidiaries' future profitability, the written off assets may be recognized when it becomes more likely than not that these assets will be realized.

In light of this one-time charge, ADF recorded a negative net income of $7.2 million (-$0.22 basic and diluted per share) during the fiscal year ended January 31, 2018, compared with a net income of $1.5 million ($0.05 basic and diluted per share) a year ago. It is also important to underline that had it not been for the change to the U.S. federal tax rates and the write-off of deferred income tax assets, the Corporation's net income for the fiscal year ended January 31, 2018, would have amounted to $2.0 million or $0.06 basic and diluted per share.

On January 31, 2018, the Corporation had $34.8 million in working capital, up from January 31, 2017. On January 31, 2018, cash and cash equivalents totalled $4.9 million, up by $4.6 million compared with January 31, 2017.

The Corporation remains in a solid position to support its ongoing operations and pursue its development projects and remunerate its shareholders in accordance with the dividend payment policy.

As at January 31, 2018, the Corporation order backlog totalled $85.5 million, compared with $194.5 million as at January 31, 2017. These contracts will be progressively completed by the end of the fiscal year ending January 31, 2020.

Financial Highlights
Fiscal Years Ended January 31,	2018	2017
(In thousands of CA$, and dollars per share)	$	$
Revenues	180,474	102,846
EBITDA	8,436	8,462
Income before income tax expense	2,172	2,513
Net income for the year	(7,213)	1,499
—      Basic per share	(0,22)	0,05
—      Diluted per share	(0,22)	0,05
Average number of outstanding shares (basic, in thousands)	32,633	32,624
Average number of outstanding shares (diluted, in thousands)	32,633	32,686

Outlook

"Despite the negative net income which was driven by this one-time non-cash tax adjustment and the uncertainties in our markets, our revenues for fiscal 2018 increased by about $80 million compared with fiscal 2017, and when we exclude this tax adjustment, the net income also improved " indicated Mr. Jean Paschini, Co-Chairman of the Board of Directors and Chief Executive Officer.

"Despite this uncertain environment, we continue focusing on our growth objectives" concluded Mr. Paschini.

Dividend

On April 11, 2018, ADF Group's Board of Directors approved the payment of a semi-annual dividend of $0.01 per share, which will be paid on May 16, 2018 to shareholders of record as at April 30, 2018.

Conference Call with Investors

A conference call with investors is scheduled for April 12, 2018 at 10 a.m. (Eastern time) to discuss the results of Corporation fiscal year ended January 31, 2018.

To take part in the conference call, dial 1 [phone], a few minutes prior to the conference call scheduled start time. A replay of this conference call will be available from Thursday, April 12, 2018 at 1:00 p.m. until 11:59 p.m., Thursday, April 19, 2018, by dialing 1 [phone], followed by the access code 5199297.

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

Annual Meeting of Shareholders

ADF Group Inc. Annual Meeting of Shareholders will be held on:

Date:	Wednesday, June 13, 2018
Time:	11:00 a.m.
Place:	Imperia Hotel & Suites
	2935 de la Pinière Boulevard, Terrebonne, Québec, Canada

Financial results for the first quarter ending April 30, 2018, will also be disclosed at the Corporation's 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 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-IFRS Measures

Earnings before interest, taxes, depreciation and amortization ("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. Refer to the section "Non-GAAP Measures" of the Corporation's Management's Discussion and Analysis for the definition of this metric and reconciliation to the most comparable IRFS measures.

All amounts are in Canadian dollars, unless otherwise indicated.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at January 31,		2018	2017
(In thousands of Canadian dollars)		$	$
ASSETS
Current assets
	Cash and cash equivalents	4,905	334
	Accounts receivable	33,099	22,326
	Holdbacks on contracts	4,933	3,613
	Income tax assets	927	842
	Work in progress	30,314	21,077
	Inventories	5,150	6,957
	Derivative financial instruments	300	696
	Prepaid expenses and other current assets	2,428	1,137
	Total current assets	82,056	56,982
Non-current assets
	Property, plant and equipment	88,378	90,060
	Intangible assets	3,197	2,920
	Other non-current assets	1,627	3,406
	Deferred income tax assets	―	5,316
Total assets		175,258	158,684
LIABILITIES
Current liabilities
	Bank overdraft	1,907	―
	Credit facilities	10,150	13,336
	Accounts payable and other current liabilities	29,308	16,585
	Income tax liability	422	184
	Deferred revenues	3,435	1,264
	Current portion of long-term debt	2,066	844
	Total current liabilities	47,288	32,213
Non-current liabilities
	Long-term debt	26,135	17,870
	Deferred income tax liabilities	6,053	2,951
Total liabilities		79,476	53,034
SHAREHOLDERS' EQUITY
	Capital stock	68,120	68,088
	Contributed surplus	6,423	6,422
	Accumulated other comprehensive income (loss)	4,706	6,741
	Retained income	16,533	24,399
Total shareholders' equity		95,782	105,650
Total liabilities and shareholders' equity		175,258	158,684

CONSOLIDATED STATEMENTS OF INCOME
Fiscal Years Ended January 31,		2018	2017
(In thousands of Canadian dollars and in dollars per share)		$	$
Revenues		180,474	102,846
Cost of goods sold		164,352	85,635
Gross Margin		16,122	17,211
Selling and administrative expenses		12,109	13,436
Financial revenues		(30)	(49)
Financial expenses		1,638	1,057
Foreign exchange loss		233	254
		13,950	14,698
Income before income tax expense		2,172	2,513
Income tax expense		9,385	1,014
Net income for the year		(7,213)	1,499
Income per share
	Basic and diluted per share	(0.22)	0.05
Average number of outstanding shares (in thousands)		32,633	32,624
Average number of outstanding diluted shares (in thousands)		32,633	32,686

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Fiscal Years Ended January 31,		2018	2017
(In thousands of Canadian dollars)		$	$
Net income for the year		(7,213)	1,499
Other comprehensive income (loss) ^(a):
	Exchange differences on translation of foreign operations	(2,035)	(2,816)
	Change in value of available-for-sale financial assets ^(b)	―	50
		(2,035)	(2,766)
Comprehensive income (loss) for the year		(9,248)	(1,267)

a)	Will subsequently be reclassified to net income.
b)	Net of an immaterial amount related income tax expense for the fiscal year ended January 31, 2017.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
		Capital Stock	Contributed Surplus	Accumulated Other Comprehensive Income (Loss)	Retained Income	Total
(In thousands of Canadian dollars)		$	$	$	$	$
Balance, February 1, 2016		68,077	6,397	9,507	23,552	107,533
	Net income for the year	―	―	―	1,499	1,499
	Other comprehensive income (loss)	―	―	(2,766)	―	(2,766)
	Comprehensive income (loss) for the year	―	―	(2,766)	1,499	(1,267)
	Share-based compensation	―	30	―	―	30
	Options exercised	11	(5)	―	―	6
	Dividends	―	―	―	(652)	(652)
Balance, January 31, 2017		68,088	6,422	6,741	24,399	105,650

		Capital Stock	Contributed Surplus	Accumulated Other Comprehensive Income (Loss)	Retained Income	Total
(In thousands of Canadian dollars)		$	$	$	$	$
Balance, February 1, 2017		68,088	6,422	6,741	24,399	105,650
	Net income for the year	―	―	―	(7,213)	(7,213)
	Other comprehensive income (loss)	―	―	(2,035)	―	(2,035)
	Comprehensive income (loss) for the year	―	―	(2,035)	(7,213)	(9,248)
	Share-based compensation	―	16	―	―	16
	Options exercised	32	(15)	―	―	17
	Dividends	―	―	―	(653)	(653)
Balance, January 31, 2018		68,120	6,423	4,706	16,533	95,782

CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Years Ended January 31,			2018	2017
(In thousands of Canadian dollars)			$	$
OPERATING ACTIVITIES
	Net income for the year		(7,213)	1,499
	Non-cash items:
		Amortization of property, plant and equipment	4,029	4,326
		Amortization of intangible asset	394	361
		Gain on disposal of property, plant and equipment	(39)	―
		Unrealized loss (gain) on derivative financial instruments	396	(1,099)
		Non-cash exchange loss	1,744	683
		Share-based compensation	―	951
		Income tax expense	9,385	1,014
		Inventories depreciation allowance	(55)	209
		Financial revenues	(30)	(49)
		Financial expenses	1,638	1,057
	Net income adjusted for non-cash items		10,249	8,952
	Change in non-cash working capital items ^(1)		(7,243)	(18,686)
	Income tax recovery (paid)		656	(901)
Cash flows from (used in) operating activities			3,662	(10,635)
INVESTING ACTIVITIES
	Net acquisition of property, plant and equipment		(4,831)	(6,809)
	Revenues from disposals of property, plant and equipment		175	―
	Acquisition of intangible assets		(671)	(410)
	Increase in other non-current assets		(21)	(12)
	Interest received		30	49
Cash flows used in investing activities			(5,318)	(7,182)
FINANCING ACTIVITIES
	Variation in credit facilities		(3,159)	13,329
	Issuance of long-term debt		10,702	5,000
	Repayment of long-term debt		(945)	(816)
	Issuance of subordinate voting shares		17	6
	Dividends paid		(653)	(652)
	Interest paid		(1,603)	(1,040)
Cash flows from financing activities			4,359	15,827
Impact of fluctuations in foreign exchange rate on cash flow			(39)	(53)
Net change in cash and cash equivalents during the year			2,664	(2,043)
Cash, and cash equivalents, beginning of year ^(2)			334	2,377
Cash and cash equivalents, end of year ^(2)			2,998	334

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

	Fiscal Years Ended January 31,		2018	2017
	(In thousands of Canadian dollars)		$	$
		Accounts receivable	(11,514)	13
		Holdbacks on contracts	(1,516)	(1,895)
		Work in progress	(10,121)	(13,688)
		Inventories	1,760	(1,057)
		Prepaid expenses and other current assets	(1,330)	688
		Accounts payable and other current liabilities	13,203	(1,310)
		Deferred revenues	2,275	(1,437)
	Changes in non-cash working capital items		(7,243)	(18,686)

(2)	Net of the $1.9 million bank overdraft as at January 31, 2018 (none as at January 31, 2017).

SEGMENTED INFORMATION

The Corporation operates in the non-residential construction industry, primarily in the United States and Canada. Its operations include 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,		2018	2017
(In thousands of Canadian dollars)		$	$
Revenues
	Canada	16,027	17,957
	United States	164,447	84,889
		180,474	102,846

As at January 31,		2018	2017
(In thousands of Canadian dollars)		$	$
Non-current assets ^(1)
	Canada	49,508	50,110
	United States	43,694	46,276
		93,202	96,386

(1)	The non-current assets mainly include property, plant and equipment, intangible 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, 2018, 85% of the Corporation's revenues were realized with three (3) clients, each representing 10 % and more of its revenues (60% with two (2) clients during the fiscal year ended January 31, 2017).

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

Fiscal Years Ended	January 31, 2018			January 31, 2017
	Canada	United States	Total	Canada	United States	Total
(In thousands of Canadian dollars)	$	$	$	$	$	$
Client A	―	―	―	8,412	15,892	24,304
Client B	―	29,375	29,375	―	36,825	36,825
Client C	―	81,120	81,120	―	―	―
Client D	―	43,106	43,106	―	―	―
	―	153,601	153,601	8,412	52,717	61,129

SOURCE ADF Group Inc.

Jean Paschini, Co-Chairman of the Board of Directors and Chief Executive Officer; Jean-François Boursier, CPA, CA, Chief Financial Officer, Telephone: [phone]

Related Links

http://www.adfgroup.com