ADF Group Inc. Announces the Results for the Three-Month and Nine-Month Periods Ended October 31, 2020

HIGHLIGHTS
(All amounts are in Canadian dollars, unless otherwise indicated.)

• Revenues, gross margin and net income for the 3-month and 9-month periods ended October 31, 2020, all up from the same periods in 2019.
• Order backlog at $282.5 million as at October 31, 2020, excluding new contracts totalling $101.0 million signed since October 31, 2020.
• Limited impact of COVID-19 on ADF's operations during the first nine months ended October 31, 2020.

TERREBONNE, QC, Dec. 9, 2020 /CNW Telbec/ - ADF GROUP INC. ("ADF" or the "Corporation") (TSX: DRX), recorded revenues of $47.2 million during the third quarter ended October 31, 2020, compared with $42.1 million for the same period in 2019. After the first nine months of the fiscal year, revenues totalled $135.5 million, which is $2.1 million more than during the same period a year earlier. It should be noted that results for the quarter and nine-month period ended October 31, 2019, were impacted by a downward adjustment of $7.7 million, with no impact on income tax, resulting from an out-of-court settlement related to a commercial dispute in Florida, U.S.A. This adjustment also impacted both the gross margin and net income (loss).

Gross margin, as a percentage of revenues, went from 2.4% for the three months ended October 31, 2019, to 15.9% for the same period ended October 31, 2020. Gross margin, as a percentage of revenues, increased from 9.4% in the nine months ended October 31, 2019, to 14.6% for the same period ended October 31, 2020. In addition to the impact of the aforementioned out-of-course settlement, these increases are for the most part attributable to the mix of projects carried out during the periods analyzed, and a better absorption of fixed costs resulting from the internal efficiencies gained at our production plants.

For the quarter ended October 31, 2020, ADF Group recorded net income of $2.6 million ($0.08 per basic and diluted share) compared with a negative net income of $4.1 million (-$0.12 per share, basic and diluted) a year earlier. After nine months, net income as at October 31, 2020, totalled $4.8 million ($0.15 per share, basic and diluted) compared with a negative net income of $2.0 million (-$0.06 per share, basic and diluted) for the same period a year ago.

The Corporation's backlog stood at $282.5 million as at October 31, 2020, compared with $328.7 million as at January 31, 2020, excluding the new contracts, worth a total of $101.0 million, announced on November 25, 2020. Projects currently included in the order backlog will extend until the end of the fiscal year ending January 31, 2023.

As of October 31, 2020, the Corporation's working capital stood at $37.5 million. Operating activities generated $27.8 million in cash during the first nine months ended October 31, 2020. Consequently, the Corporation's net cash position as at October 31, 2020 improved by $27.9 million compared with January 31, 2020. The Corporation remains in a good position to continue its current operations and carry out its development projects.

Financial Highlights

	3 Months		9 Months
Periods ended October 31,	2020	2019	2020	2019
(In thousands of dollars, and dollars per share)	$	$	$	$
Revenues	47,158	42,103	135,451	133,368
Earnings before interest, taxes, depreciation and amortization (EBITDA)	5,020	(2,424)	12,564	3,607
Net income (loss)	2,579	(4,059)	4,759	(2,022)
— Per share (basic and diluted)	0.08	(0.12)	0.15	(0.06)
Cash flows from operating activities	6,193	4,571	27,815	5,325
(In thousands)	Number	Number	Number	Number
Average number of outstanding shares (basic and diluted)	32,635	32,635	32,635	32,635

New Contracts

As previously mentioned, on November 25, 2020, the Corporation announced the award of two new contracts in the commercial building sector in the U.S.A., worth a total of $101.0 million.

The scope of the largest of these contracts, in terms of value and tonnage, relates to the design and engineering of connections, fabrication, which also includes industrial coating and the supply of raw material (steel), and the installation of the steel structure of a new building with a commercial vocation in the Northwestern U.S.A. This project is characterized not only by its high tonnage, but also by a fast-track construction schedule. Fabrication is expected to start in the first months of 2021 at ADF's plant located in Terrebonne, Quebec, and will run until the third quarter of the year 2021.

The other contract won by ADF is located in the Northeastern U.S.A. and consists in, among other things, the supply of raw material (steel) and shop drawings, and the fabrication of the steel structure used in the construction of a new government building. This new contract will take off in January 2021 with the design and engineering of connections and shop drawings. Fabrication is expected to begin later in 2021 and will run until mid-2022.

Outlook

"Despite the uncertainties associated with the pandemic, the Corporation's results are adequate. Results are up and we have announced new contracts totalling $101.0 million after the end of the quarter ended October 31, 2020. We have continued to improve our cash position and are well positioned to undertake the last stretch of our fiscal year ending January 31, 2021" said Jean Paschini, Co-Chairman of the Board of Directors and Chief Executive Officer.

COVID-19

Since the beginning of this Coronavirus pandemic and at the date hereof, all of our facilities, including all of our job sites, remained open and operational. However, in order for our fabrication plant in Terrebonne, Quebec, to remain in operation, and in addition to the required sanitary and physical distancing measures, the Corporation initially had to limit the number of employees per work shift. While this has resulted in some operational limitations, the Corporation has nevertheless been able to maintain a sufficient level of fabrication in order to adequately serve its customers. However, as at the date hereof, the number of employees per shift has virtually returned to the pre-pandemic levels. The Corporation introduced the telework program and implemented strategies to support appropriate physical distancing techniques for its staff who cannot work remotely. It should be noted that the various measures taken in response to the pandemic have also resulted in some additional costs. This situation is evolving rapidly and the Corporation continues to monitor and mitigate developments affecting its staff, suppliers, customers and the general public as much as it can.

Although the impact of COVID-19 on ADF's operations is limited for the time being, 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 severity of COVID-19 and the measures taken to contain it or address its impact, among others.

Conference Call with Investors

A conference call with investors is scheduled for this morning, December 9, 2020, at 10 a.m. (Montreal time) to discuss the results of periods ended October 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 call will be available from 1:00 p.m. today, until midnight, December 16, 2020, by dialing 1-888-390-0541 followed by the access code 296258 #.

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

About ADF

ADF Group Inc. is a North American leader in the design and engineering of connections, fabrication, including industrial coatings, 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 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.

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.

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.

SOURCE ADF Group Inc.

Mr. Jean Paschini, Co-Chair of the Board of Directors and Chief Executive Officer; Mr. Jean-François Boursier, CPA, CA, Chief Financial Officer, Telephone: [phone] (#2283), Website: www.adfgroup.com

Related Links

www.adfgroup.com