Pure Technologies Announces Second Quarter 2012 Financial Results

CALGARY, Aug. 9, 2012 /CNW/ - Pure Technologies Ltd. ("Pure" or the "Company") (TSX: PUR), a world leader in the development and application of technologies for inspection, monitoring and management of physical infrastructure, today reported its financial results for the three and six-month periods ended June 30, 2012 and provided a business update. All figures are in Canadian dollars unless otherwise stated. For further details on the results, please refer to Pure's Management Discussion and Analysis (MD&A) and Consolidated Financial Statements which are available on the Company's website (www.puretechltd.com).

Table of Selected Financial Results:
($000's CAD, unless otherwise indicated and per share amounts)		Three months ended June 30, 2012	Three months ended June 30, 2011	$ Chg	% Chg	Six months ended June 30, 2012	Six months ended June 30, 2011	$ Chg	% Chg
Revenue		9,673	12,249	(2,576)	(21)	29,751	20,015	9,736	49
Cost of sales		2,485	2,722	(237)	(9)	7,359	5,899	1,460	25
Gross profit		7,188	9,527	(2,339)	(25)	22,392	14,116	8,276	59
Gross margin (%)		74.3%	77.8%			75.3%	70.5%
Operating Expenses		9,684	10,218	(534)	(5)	20,001	21,338	(1,337)	(6)
EBITDA		(1,509)	1,310	(2,819)	(215)	5,386	(3,230)	8,616	267
Profit (loss) for the period		(1,959)	(819)	(1,140)	(139)	1,242	(5,817)	7,059	121
	Per share - basic	(0.04)	(0.02)			0.03	(0.12)
	Per share - diluted	(0.04)	(0.02)			0.02	(0.12)
Total assets		117,686	119,046	(1,360)	(1)	117,686	119,046	(1,360)	(1)

"Pure's unique value proposition continues to position us well in the present and for the future," said Jamie Paulson, Pure's Chairman. "In North America, our main growth area, we continue to generate healthy annual revenues, growing at an average of 40% since 2008. For the second quarter, contract timing issues - the timing of contract award versus planning and execution - have led to a decline in quarterly revenue compared to last year; however, this will simply add to the revenues in subsequent quarters. Based on work performed so far and from on-going contracts with new and existing clients, the latter half of 2012 is gearing up to be very active. We expect to see a smoothing out in quarterly revenue with our continued growth in the Americas and internationally. Current back log sits at over $45 million, and recurring revenues from monitoring and technical support is approximately $6 million for the year. The major issues facing today's water industry continue to pose enormous challenges. As a trusted client partner, offering the most comprehensive, cost-effective, technology driven pipeline asset management program available, Pure is helping owners of these critical assets do much more with less." 

Q2 2012 Financial Highlights

Three months ended June 30, 2012

For the quarter, the Company recorded revenue of $9.7 million, negative EBITDA of $1.5 million and a loss of $2.0 million. This compares to revenue of $12.2 million, EBITDA of $1.3 million and a loss of $0.8 million in the comparable period last year. The results of the second quarter significantly reflect the timing of contract awards versus planning and execution.

• Total revenues were $9.7 million compared to $12.2 million in the prior period, a decrease of 21%.
• Inspection services (48% of total revenue) were largely responsible for the overall decrease.
• Consulting revenues (18% of total revenue) grew by 90% quarter-over-quarter, reflecting an increase in Pure Engineering Services business.
• Total operating expenses for the second quarter were $9.7 million compared to $10.2 million in same period last year, down 5%.
• The overall decrease is related to the decline in general and administrative expenses (28% of total expenses) which are down 34% quarter-over-quarter. The majority of the variance relates to economies of scale achieved from the integration of prior acquisitions combined with a foreign exchange gain.
• Engineering and operations (37% of total expenses) decreased by 4% due to a reclassification of personnel to R&D and operational efficiencies. Marketing expenses (23% of total expenses) increased 27% due to increased business development activities in international regions.
• Gross margin decreased to 74.3% compared to 77.8% in the previous period.
• The decline reflects the overall decrease in inspection services revenue in the quarter.

Six months ended June 30, 2012

For the half year, the Company recorded revenue of $29.8 million, EBITDA of $5.4 million and profit of $1.2 million. This compares to revenue of $20.0 million, negative EBITDA of $3.2 million and a loss of $5.8 million in the comparable period last year. The six month period has been positively impacted by an equipment shipment worth $10.7 million made to the Man-Made River Authority ("MRA") in Libya under an existing 2010 contract.

• Total revenues were $29.8 million compared to $20.0 million last year, an increase of 49%.
• The increase in equipment sales (44% of total revenue) was largely responsible for the overall increase.
• Total operating expenses for the period were $20.0 million compared to $21.3 million in same period last year, down 6%.
• The overall decrease is principally related to the decline in general and administrative expenses (32% of total expenses) which are down 32% compared to the prior period. As in the three-month period, the majority of the variance relates to economies of scale achieved from the integration of prior acquisitions and a foreign exchange gain. Additionally, the prior period included restructuring costs associated with the temporary halt in Libya operations.
• Engineering and operations (37% of total expenses) increased by 4%. The increase relates to an acquisition made late in the second quarter of 2011 partially offset by operational efficiencies. Marketing expenses (20% of total expenses) increased 24% due to increased business development activities in international regions.
• Gross margin increased to 75.3% compared to 70.5% in the previous period.
• The first half of 2011 had a lower margin due to an inventory write off for Libya and termination costs for contract personnel associated with the Libyan contracts.
• Working capital at June 30, 2012 was $64.1 million compared to $61.4 million at December 31, 2011.
• Current assets include $29.8 million in cash and $35.0 million in accounts receivable. At June 30, 2012, a total of $16.0 million was outstanding from the MRA, which includes new receivables of $8.1 million.

Q2 2012 Business and Operations Highlights

• Current backlog is more than $45 million, providing Pure with significant revenue and growth visibility; backlog largely relates to new contracts in Canada and the United States. Recurring revenues from monitoring and technical support is approximately $6 million for the year.
• Expansion of Pure Engineering Services to capture demand by water agencies.
• Plans to establish up to five new regional offices in the United States, including San Diego, CA and St. Louis, MO, to complement an existing presence throughout North America.
• Announces new work worth approximately $4.1 million
• Awarded new work in Australia involving two water agencies and a mining organization.
• Contracted by an Ontario-based water agency to provide services on a water supply system that delivers drinking water to over 350,000 residents.
• Received additional equipment orders from the MRA, Libya following the Company's resumption of activities in the region in the first quarter.
• Awarded new work in Mexico for services on sections of two parallel water pipelines which provide treated drinking water to roughly 30 percent of Mexico City's population.
• International business development efforts continue in Africa and throughout Asia; opening a liaison office in Turkey to take advantage of a number of new opportunities.
• Completed the first oil & gas pipeline inspections in Libya and Abu Dhabi utilizing SmartBall; opens up additional markets in the oil & gas sector.

Outlook

Pure announced plans to expand its engineering services business in the second quarter. This includes the opening of up to five additional regional offices in the U.S. to support its existing presence in North America. The expansion plans are related to the high degree of interest expressed, as well as new business generated, from water and wastewater infrastructure owners for solutions offered through Pure's value and technology driven asset management platform. Historically, Pure's direct presence in a given region has resulted in additional business from the immediate and surrounding areas. Pure expects this trend to continue with a direct presence in key markets.

Much of the new work announced in the second quarter relates to previous, successful projects with existing customers whom the Company has built a long-term relationship. Recent purchase orders from Libya for replacement parts that were damaged or stolen in 2011 have been received and will allow for the installation of pipeline monitoring equipment to resume. In addition, Pure's continued business development efforts in international regions, including pilot programs performed using Pure's SmartBall for oil and gas pipelines, are expected to result in new contracts.

Q2 2012 Conference Call

A teleconference will be held to discuss these results on August 10, 2012, at 10:30 am ET. Presentation slides will be made available on the Company's website prior to the call.

Teleconference: The telephone numbers for the conference are toll-free 1-888-231-8191 (within North America) and 647-427-7450 (Local / International). Please provide the operator with the Conference Call ID or Topic when dialing in to the call.

• Conference ID: 13863496
• Topic: Pure Technologies Ltd., Second Quarter 2012 Results.
• A replay will be available approximately two hours after the call and will be available for one week. Access the replay by calling 1-855-859-2056 (toll-free within North America) or 416-849-0833 (Local / International). Use the following Passcode followed by the number sign: 13863496.

Webcast & Presentation Slides: Investors will be able to listen to the conference over the Internet as well as access presentation slides (in pdf format) to follow along during the call.

• Links to the webcast and presentation slides will be available approximately 30 minutes prior to the call at: http://puretechltd.com/investors/presentations.shtml
• The webcast will be archived for 90 days.

About Pure Technologies Ltd.

Pure Technologies Ltd. is an international asset management technology and services company which has developed patented technologies for inspection, monitoring and management of critical infrastructure around the world. Pure's business model incorporates four distinct but complementary business streams:

• Sales of proprietary monitoring technologies for pipelines, bridges and structures (SoundPrint®, SoundPrint® AFO);
• Recurring revenue from data analysis and site maintenance for these technologies, and from technology licensing;
• Premium technical services including pipeline inspection, leak detection and condition assessment (P-Wave®, SmartBall®, Sahara®, PipeDiver®, PureRobotics™);
• Specialized engineering services in areas related to asset management, primarily in the area of pipeline condition assessment for water and wastewater infrastructure (Openaka Corp., Price Brothers UK Ltd, and Jason Consultants).

Forward-Looking Statements

This release contains forward-looking statements. Forward-looking statements, without limitation, may contain the words "believes", "expects", "anticipates", "estimates", "intends", "plans", or similar expressions. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions and the Company's actual results could differ materially from those anticipated. Forward-looking statements are based on the opinions and estimates of Management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. In the context of any forward-looking information please refer to risk factors detailed in, as well as other information contained in, the Company's filings with Securities Regulators (www.sedar.com).

To find out more about Pure Technologies Ltd. (TSX: PUR), visit our website at www.puretechltd.com.

® Registered Trademarks, property of Pure Technologies Ltd.

"The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this release"

 

 

 

 

SOURCE: Pure Technologies Ltd.

James E. Paulson, Chairman, Karen Keebler, Chief Financial Officer or Paul Moon, Investor Relations at [phone] or e-mail to [email protected].