ADF Group Inc. Announces the Results for Fiscal Year Ended January 31, 2020

HIGHLIGHTS

• Revenues of $179.7 million, up 33% from the previous year.
• The outcome of an out of court settlement in commercial litigation in the USA resulted in the recording of a net loss of $2.1 million, compared with a net loss of $0.4 million a year earlier.
• The Corporation closed the 2020 fiscal year with an order backlog of $328.7 million, nearly $110.0 million more than as at January 31, 2019.
• $65.0 million worth in new contracts added to the Corporation's backlog since the end of the 2020 fiscal year.
• At the date hereof, there is no significant impact from COVID-19 on the Corporation's operations.

TERREBONNE, QC, April 9, 2020 /CNW Telbec/ - ADF GROUP INC. ("ADF" or the "Corporation") (TSX: DRX) recorded revenues of $179.7 million during the fiscal year ended January 31, 2020, compared with $135.1 million the previous fiscal year. This increase in revenues is attributable to the start of recently awarded projects, in line with the growth of the order backlog. However, had it not been for the $7.7 million write-off recorded in the third quarter of the 2020 fiscal year resulting from a out of court settlement in a commercial dispute in Florida, the 2020 fiscal year revenues would have been $187.4 million, an increase of 38.7% from the previous year.

Gross margin, as a percentage of revenues, increased from 7.1% for the fiscal year ended January 31, 2019, to 9.2% for the fiscal year ended January 31, 2020. This increase, as the percentage of revenues, is mainly due to improved margins on projects in the backlog, and an improvement in internal efficiency, in line with the increase in fabrication hours.

For the fiscal year ended January 31, 2020, ADF posted a net loss of $2.1 million (-$0.07 basic and diluted per share) resulting from the out of court settlement previously mentioned, compared with a net loss of $0.4 million (-$0.01 basic and diluted per share) a year ago. Had it not been for the out of court settlement previously mentioned, net income for fiscal 2020 would have been $5.5 million or $0.17 basic and diluted per share.

On January 31, 2020, the Corporation had $29.3 million in working capital. The Corporation remains in a sound position to support its ongoing operations and pursue its development projects.

During the fiscal year ended January 31, 2020, the Corporation was able to secure new contracts valued at approximately $300 million, bringing its order backlog to $328.7 million on that date, compared with a backlog of $219.5 million as at January 31, 2019, and that is excluding the new contracts worth $65.0 million announced on March 23, 2020. Most contracts will be progressively completed by the end of the fiscal year ending January 31, 2022.

Financial Highlights
Fiscal Years Ended January 31,	2020	2019
(In thousands of CA$, and dollars per share)	$	$
Revenues	179,710	135,073
EBITDA	5,225	1,945
Loss before income tax expense	(1,986)	(2,393)
Net loss for the year	(2,132)	(374)
— Basic and diluted per share	(0.07)	(0.01)
Average number of outstanding shares (basic and diluted, in thousands)	32,635	32,635

COVID-19

At the date hereof, the impact of COVID-19 on ADF's operations is limited. We have taken all necessary steps to protect our employees and business partners, and we will continue to follow the advice and recommendations of local authorities wherever we conduct business. This situation is changing rapidly and we will continue to monitor and mitigate development affecting our staff, suppliers, customers and the general public to the extent we can.

Outlook

"Although we were able to collect more than $13 million from the out-of-court settlement mentioned above, which allowed us to have the liquidities needed to continue the growth of our order backlog, our 2020 fiscal year results were adversely affected by a write-off of $7.7 million, as part of this settlement" added Mr. Jean Paschini, Co-Chair of the Board of Directors and Chief Executive Officer.

"Renewing our backlog remains one of our top priorities, and our sustained efforts continue to pay off. We have signed $300 million worth in new contracts during the 2020 fiscal year, and more recently we have secured additional contracts for an estimated total value of $65 million, including, among others, a major industrial building in Montreal. Alongside this objective, we remain determined and work tirelessly and collaboratively to achieve another common goal, which is to continue to find ways to improve and enhance operational efficiency and excellence" added Mr. Jean Paschini.

Dividend

On April 8, 2020, 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 15, 2020 to shareholders of record as at April 30, 2020.

Conference Call with Investors

A conference call with investors is scheduled for Thursday, April 9, 2020 at 10 a.m. (Montreal time) to discuss the results of Corporation fiscal year ended January 31, 2020.

To take part in the conference call, dial 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 Thursday, April 9, 2020 at 1:00 p.m. until 11:59 p.m., Thursday, April 16, 2020, by dialing 1-888-390-0541, followed by the access code 113212 #.

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

ANNUAL GENERAL MEETING OF SHAREHOLDERS

In these exceptional circumstances, and amongst the several preventative health measures adopted by the Provincial and Federal Governments and by the Corporation to slow the spread of COVID-19, ADF Group Inc. will hold its Annual Meeting of Shareholders via webcasting, on Wednesday, June 10, 2020 at 11 :00 a.m.

Financial results for the first quarter ending April 30, 2020, will also be disclosed during this Shareholders' Meeting.

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

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-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 IFRS measures.

All amounts are in Canadian dollars, unless otherwise indicated.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at January 31,	2020	2019
(In thousands of Canadian dollars)	$	$
ASSETS
Current assets
Cash and cash equivalents	3,983	4,164
Accounts receivable	39,555	29,919
Holdbacks on contracts	11,628	6,227
Current income tax assets	882	859
Contract assets	14,435	17,952
Inventories	7,898	8,349
Prepaid expenses and other current assets	1,581	1,638
Total current assets	79,962	69,108
Non-current assets
Property, plant and equipment	64,967	89,375
Right-of-use assets	23,818	―
Intangible assets	3,354	3,312
Other non-current assets	1,443	1,417
Total assets	173,544	163,212
LIABILITIES
Current liabilities
Credit facilities	13,105	6,605
Accounts payable and other current liabilities	30,788	16,857
Current income tax liabilities	216	422
Contract liabilities	3,444	10,920
Derivative financial instruments	123	184
Current portion of lease liabilities	1,070	―
Current portion of long-term debt	1,903	2,272
Total current liabilities	50,649	37,260
Non-current liabilities
Long-term debt	19,156	24,939
Lease liabilities	4,930	―
Deferred income tax liabilities	4,215	3,921
Other non-current liabilities	187	197
Total liabilities	79,137	66,317
SHAREHOLDERS' EQUITY
Capital stock	68,120	68,120
Contributed surplus	6,435	6,432
Accumulated other comprehensive income (loss)	6,942	6,648
Retained income	12,910	15,695
Total shareholders' equity	94,407	96,895
Total liabilities and shareholders' equity	173,544	163,212
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Fiscal Years Ended January 31,	2020	2019
(In thousands of Canadian dollars, except the number of shares and the amounts per share)	$	$
Revenues	179,710	135,073
Cost of goods sold	163,203	125,520
Gross Margin	16,507	9,553
Selling and administrative expenses	16,005	12,181
Net financial expenses	2,082	1,784
Foreign exchange loss (gain)	406	(2,019)
	18,493	11,946
Loss before income tax expense (recovery)	(1,986)	(2,393)
Income tax expense (recovery)	146	(2,019)
Net loss for the year	(2,132)	(374)
Earnings per share
— Basic and diluted per share	(0.07)	(0.01)
Average number of outstanding basic and diluted shares (in thousands)	32,635	32,635
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Fiscal Years Ended January 31,	2020	2019
(In thousands of Canadian dollars)	$	$
Net loss for the year	(2,132)	(374)
Other comprehensive income (loss) ^(a):
Exchange differences on translation of foreign operations	294	2,131
Comprehensive income (loss) for the year	(1,838)	1,757

a)    Will subsequently be reclassified to net income (loss).

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, 2018	68,120	6,423	4,706	16,533	95,782
Net loss for the year	―	―	―	(374)	(374)
Other comprehensive income (loss)	―	―	2,131	―	2,131
Comprehensive income (loss) for the year	―	―	2,131	(374)	1,757
New IFRS 9 adoption ^(1)	―	―	(189)	189	―
Share-based compensation	―	9	―	―	9
Dividends	―	―	―	(653)	(653)
Balance, January 31, 2019	68,120	6,432	6,648	15,695	96,895
(1)    Impact of the adoption of IFRS 9 on February 1, 2018.
	Capital Stock	Contributed Surplus	Accumulated Other Comprehensive Income (Loss)	Retained Income	Total
(In thousands of Canadian dollars)	$	$	$	$	$
Balance, February 1, 2019	68,120	6,432	6,648	15,695	96,895
Net loss for the year	―	―	―	(2,132)	(2,132)
Other comprehensive income (loss)	―	―	294	―	294
Comprehensive income (loss) for the year	―	―	294	(2,132)	(1,838)
Share-based compensation	―	3	―	―	3
Dividends	―	―	―	(653)	(653)
Balance, January 31, 2020	68,120	6,435	6,942	12,910	94,407

CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Years Ended January 31,		2020	2019
(In thousands of Canadian dollars)		$	$
OPERATING ACTIVITIES
Net loss for the year		(2,132)	(374)
Non-cash items:
Amortization of property, plant and equipment		3,387	4,206
Amortization of right-of-use assets		926	―
Amortization of intangible assets		410	367
Unrealized (gain) loss on derivative financial instruments		(61)	484
Unrealized foreign exchange gain		(134)	(2,781)
Share-based compensation		491	(533)
Income tax expense (recovery)		146	(2,019)
Inventories depreciation allowance		(78)	352
Net financial expenses		2,082	1,784
Others		(276)	7
Net income adjusted for non-cash items		4,761	1,493
Change in non-cash working capital items ^(1)		(5,655)	10,182
Cash flows (used in) from operating activities		(894)	11,675
INVESTING ACTIVITIES
Acquisition of property, plant and equipment		(1,186)	(3,273)
Acquisition of intangible assets		(452)	(482)
Revenues from disposals of property, plant and equipment		168	35
Disposal of equity investments		―	217
Government grants		826	210
Others		(26)	13
Cash flows used in investing activities		(670)	(3,280)
FINANCING ACTIVITIES
Variation in credit facilities		6,500	(3,545)
Repayment of long-term debt		(1,884)	(1,544)
Repayment of lease liabilities		(771)	―
Dividends paid		(653)	(653)
Interest paid		(1,827)	(1,774)
Cash flows from (used in) financing activities		1,365	(7,516)
Impact of fluctuations in foreign exchange rate on cash flow		18	287
Net change in cash and cash equivalents during the year		(181)	1,166
Cash, and cash equivalents, beginning of year		4,164	2,998
Cash and cash equivalents, end of year		3,983	4,164
(1)    The following table sets out in detail the components of the "Change in non-cash working capital items":
Fiscal Years Ended January 31,		2020	2019
(In thousands of CA$)		$	$
Accounts receivable		(10,360)	5,601
Holdbacks on contracts		(5,491)	(936)
Contract assets		3,660	13,477
Inventories		554	(3,413)
Prepaid expenses and other current assets		74	851
Accounts payable and other current liabilities		13,597	(12,553)
Contract liabilities		(7,679)	6,955
Other non-current liabilities		(10)	200
Change in non-cash working capital items		(5,655)	10,182

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,	2020	2019
(In thousands of CA$)	$	$
Revenues
Canada	13,906	3,518
United States	165,804	131,555
	179,710	135,073
As at January 31,	2020	2019
(In thousands of CA$)	$	$
Non-current assets ^(1)
Canada	48,281	48,750
United States	45,301	45,355
	93,582	94,105

(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, 2020, 72% of the Corporation's revenues were realized with four (4) clients, each representing 10% and more of its revenues (79% with three (3) clients during the fiscal year ended January 31, 2019).

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

Fiscal Years Ended January 31,	2020	2019
	United States	United States
(In thousands of CA$)	$	$
Client A	20,518	60,503
Client B	32,812	―
Client C	43,415	32,480
Client D	31,894	―
Client E	―	13,168
	128,639	106,151

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

www.adfgroup.com