Subject: ERN
Cervus Equipment Corp. Announces Record Agriculture Equipment Sales, and Ontario Improvements in the Second Quarter of 2018
CALGARY, Aug. 9, 2018 /CNW/ - Cervus Equipment Corporation ("Cervus" or the "Company") (TSX: CERV) today announced its financial results and operational highlights for the quarter ended June 30, 2018.
"The strength of the Canadian Agriculture segment has once again generated a record sales quarter with the highest new equipment deliveries to customers for a single quarter in Cervus' history. In Ontario, our transportation dealership performance is continuing the positive trend from the first quarter of 2018, a result of efficiency improvements, cost management efforts and positive market demand," said Graham Drake, President and CEO of Cervus. "Looking ahead, weather factors throughout the growing months and into harvest season will impact used equipment demand, as well as parts and service opportunities in our Agriculture segment, while we reaffirm our commitment to profitability in the Transportation segment for 2018."
Highlights of the Quarter:
- Income in the second quarter of 2018 was $9.5 million, a $1.1 million improvement compared to income of $8.4 million for the same period of 2017.
- For the three months ended June 30, 2018, adjusted income before income tax expense(1) was $13.6 million, a $3.2 million improvement compared to $10.4 million of adjusted income before income tax expense in the second quarter of 2017.
- The Company reported income per basic share of $0.61 in the second quarter of 2018, a $0.08 per share improvement compared to income of $0.53 per basic share in the second quarter of 2017.
- The Transportation segment achieved a $1.1 million improvement in adjusted income before income tax expense(1), due to a $1.3 million improvement in the Ontario Transportation dealerships.
- Cervus achieved record second quarter new equipment sales in our Agriculture segment, increasing 24% compared to the second quarter of 2017.
- Selling, general, and administrative ("SG&A") as a percentage of revenue improved to 10.7% in the current quarter, compared to 12.6% in the second quarter of 2017.
- Dividends of $0.10 per share were declared to shareholders of record as of June 29, 2018.
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(1) These non-IFRS financial measures do not have any standardized meaning under IFRS, may not be comparable to similar measures presented by other issuers and are defined and reconciled to their most directly comparable IFRS measure within Cervus' Management's Discussion and Analysis for the quarter ended June 30, 2018 under the section "Non-IFRS Financial Measures", which is available electronically at www.sedar.com under Cervus' profile. |
Second Quarter 2018 Financial Highlights
Adjusted income before income tax expense(2) improved $3.2 million in the second quarter of 2018 compared to 2017. This was comprised of a $3.1 million increase in the Agriculture segment, a $1.1 million increase in the Transportation segment, partially offset by a $1.0 million decrease in the Industrial segment. The results of the Industrial segment reflect non-continuance of the four construction dealerships in the quarter, along with inventory valuation adjustments related to inventory retained from the construction sale. Income before income tax expense increased $2.1 million in the second quarter of 2018 compared to the same period in 2017.
In our Agriculture segment, the $3.1 million increase in adjusted income before income tax reflected a $3.7 million increase in parts and service revenue compared to the second quarter of 2017, combined with record second quarter equipment sales. Equipment sales continue to reflect the financial strength of Canadian farmers combined with our focused sales efforts, while parts and service revenues initially delayed by a late seeding were ultimately realized as seeding activity shifted to the second quarter.
The $1.1 million increase in adjusted income before income tax in our Transportation segment was achieved through quarter over quarter stability in our Saskatchewan operations, combined with a $1.3 million increase in our Ontario dealerships. A strong Ontario transportation market accelerated equipment sales 34%, while efficiencies reduced SG&A expenses as a percent of revenue from 13.4% in the second quarter of 2017 to 11.8% in the current quarter.
Within our Industrial segment, service and parts department revenue stability along with increased material handling equipment sales were the principal drivers of sound financial results for the eight continuing Industrial dealerships, following the sale of four construction dealerships in the first quarter. The primary cause of the $1.0 million decrease in adjusted income before income tax expense for the segment in the second quarter of 2018 compared to 2017, is the non-continuance of the four construction dealerships combined with $0.3 million of allowances on inventory withheld from the construction sale.
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(2) These non-IFRS financial measures do not have any standardized meaning under IFRS, may not be comparable to similar measures presented by other issuers and are defined and reconciled to their most directly comparable IFRS measure within Cervus' Management's Discussion and Analysis for the quarter ended June 30, 2018 under the section "Non-IFRS Financial Measures", which is available electronically at www.sedar.com under Cervus' profile. |
Selected Financial Information
|
Three month |
Six month | ||||||
|
($ thousands, except per share amounts) |
2018 |
|
2017 |
2018 |
|
2017 | |
|
Revenue |
408,584 |
14% |
357,361 |
657,290 |
12% |
588,471 | |
|
Cost of sales |
(350,738) |
17% |
(300,602) |
(557,651) |
13% |
(491,325) | |
|
Gross profit |
57,846 |
2% |
56,759 |
99,639 |
3% |
97,146 | |
|
Other income |
789 |
57% |
504 |
2,027 |
94% |
1,043 | |
|
Unrealized foreign exchange (loss) gain |
(38) |
(106%) |
633 |
(673) |
(182%) |
823 | |
|
Total other income |
751 |
(34%) |
1,137 |
1,354 |
(27%) |
1,866 | |
|
Selling, general and administrative expense |
(43,655) |
(3%) |
(44,856) |
(85,342) |
(1%) |
(86,033) | |
|
Income from operating activities |
14,942 |
15% |
13,040 |
15,651 |
21% |
12,979 | |
|
Finance income |
144 |
5% |
137 |
280 |
21% |
231 | |
|
Finance costs |
(1,629) |
(3%) |
(1,680) |
(2,972) |
(11%) |
(3,329) | |
|
Share of income of equity accounted investees, net of tax |
124 |
100% |
- |
124 |
100% |
- | |
|
Income before income tax expense |
13,581 |
18% |
11,497 |
13,083 |
32% |
9,881 | |
|
Income tax expense |
(4,067) |
30% |
(3,132) |
(3,714) |
18% |
(3,149) | |
|
Income for the period |
9,514 |
14% |
8,365 |
9,369 |
39% |
6,732 | |
|
Income attributable to shareholders |
9,514 |
14% |
8,365 |
9,369 |
39% |
6,737 | |
|
EBITDA(1) |
19,383 |
11% |
17,478 |
24,519 |
14% |
21,530 | |
|
EBITDA margin(1) |
4.7% |
4.9% |
3.7% |
3.7% | |||
|
Ratios as a percentage of revenue: |
|||||||
|
Gross profit margin |
14.2% |
15.9% |
15.2% |
16.5% | |||
|
Selling, general and administrative |
10.7% |
12.6% |
13.0% |
14.6% | |||
|
Income per share |
|||||||
|
Adjusted - Basic(1) |
0.61 |
33% |
0.46 |
0.61 |
74% |
0.35 | |
|
Basic |
0.61 |
15% |
0.53 |
0.60 |
40% |
0.43 | |
|
Diluted |
0.58 |
16% |
0.50 |
0.57 |
39% |
0.41 | |
|
Reconciliation of adjusted loss before income tax expense: |
|||||||
|
Income before income tax expense |
13,581 |
18% |
11,497 |
13,083 |
32% |
9,881 | |
|
Adjustments: |
|||||||
|
Unrealized foreign currency loss (gain) |
38 |
(106%) |
(633) |
673 |
(182%) |
(823) | |
|
(Gain) on sale of Commercial operations |
- |
0% |
- |
(480) |
100% |
- | |
|
(Gain) on sale of land and building |
- |
(100%) |
(423) |
- |
(100%) |
(423) | |
|
Adjusted income before income tax expense(1) |
13,619 |
30% |
10,441 |
13,276 |
54% |
8,635 | |
|
[1] These non-IFRS financial measures do not have any standardized meaning under IFRS, may not be comparable to similar measures presented by other issuers and are defined and reconciled to their most directly comparable IFRS measure within Cervus' Management's Discussion and Analysis for the quarter ended June 30, 2018 under the section "Non-IFRS Financial Measures", which is available electronically at www.sedar.com under Cervus' profile. |
Conference Call Information
Cervus will host its second quarter 2018 results conference call on August 10, 2018 at 11:00 a.m. Eastern Time.
Interested parties may access the conference call by dialling (647) 427-7450 or 1-888-231-8191. Please connect approximately 10 minutes prior to the beginning of the call. The conference call will be archived for replay until Friday, August 17, 2018 at midnight. To access the archived conference call, dial (416) 849-0833 or 1-855-859-2056 and enter the reservation number 1877716 followed by the number sign.
A live audio webcast of the conference call will be available at:
https://event.on24.com/wcc/r/1789154/57FDD06445F64CC4397E734BE884ABD8
Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above website for 90 days.
About Cervus Equipment Corporation
Cervus acquires and operates authorized agricultural, transportation and materials handling equipment dealerships. The Company has interests in 62 dealerships in Canada, New Zealand, and Australia, employing more than 1,500 people. The primary equipment brands represented by Cervus include John Deere agricultural equipment; Peterbilt transportation equipment; and Clark, Sellick, Doosan and JLG material handling equipment. The common shares of Cervus are listed on the Toronto Stock Exchange and trade under the symbol "CERV".
Forward Looking Information
This press release contains certain forward?looking information ("forward?looking information") within the meaning of applicable Canadian securities laws. Forward?looking information is often, but not always, identified by the use of words such as "anticipate", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "expect", "may", "will", "project", "should" or similar words suggesting future outcomes. Forward?looking information is not a guarantee of future performance and involves a number of assumptions and a number of risks and uncertainties some of which are described herein. These risks and uncertainties include the risks identified under the heading "Business Risks and Uncertainties" in the Second Quarter 2018 Management Discussion & Analysis of Cervus Equipment Corporation dated August 8, 2018, available electronically at www.sedar.com under Cervus' profile. Cervus believes the expectations reflected in such forward?looking information are reasonable but no assurance can be given that these expectations will prove to be correct and such forward?looking information should not be unduly relied upon. You are cautioned that the preceding list of assumptions and risks is not exhaustive. Any forward?looking information is made as of the date hereof and, except as required by law, Cervus assumes no obligation to publicly update or revise such information to reflect new information, subsequent or otherwise
The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this release.
SOURCE Cervus Equipment Corp.
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