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Cervus Equipment Corp. Announces First Quarter 2018 Results, $0.11 Increase in Adjusted Earnings per Share Driven by Ontario Transportation Performance

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Cervus Equipment Corp. Announces First Quarter 2018 Results, $0.11 Increase in Adjusted Earnings per Share Driven by Ontario Transportation Performance

Canada NewsWire

CALGARY, May 9, 2018 /CNW/ - Cervus Equipment Corporation ("Cervus" or the "Company") (TSX:CERV) today announced its financial results and operational highlights for the quarter ended March 31, 2018.

"I am pleased that the focused efforts of our dealership teams are reflected in the improved financial result for the quarter. Actions taken last year accelerated first quarter profitability in the Transportation segment, and our Agricultural segment set a first quarter record for equipment delivered to customers.  In addition, we completed the disposition of our construction dealerships," said Graham Drake, President and CEO of Cervus. "Looking forward, weather factors have shifted seeding activity into the second quarter of 2018, increasing second quarter parts and service opportunities in our Agriculture segment. Further, service optimization and process discipline continues to be a focus across the Company, and is a key factor in efficiently and profitably delivering on our customers' expectations."

Highlights of the Quarter:

  • The Company generated $0.3 million in adjusted loss before income tax expense,(1) a $1.5 million improvement compared to $1.8 million of adjusted loss before income tax expense in the first quarter of 2017.

  • The Company generated a loss of $0.1 million in the first quarter of 2018, a $1.5 million improvement compared to a loss of $1.6 million for the same period of 2017.

  • The Company reported a loss per basic share of $(0.01) in the first quarter of 2018, a $0.09 per share improvement compared to a loss of $(0.10) per basic share in the first quarter of 2017.

  • The Transportation segment achieved a $1.6 million improvement in adjusted income before income tax expense,(1) due to a $1.6 million improvement in the Ontario Transportation dealerships.

  • The Company achieved record first quarter new equipment sales in the Agriculture segment, increasing 28% compared to the first quarter of 2017.

  • The Company successfully completed the sale of its four Alberta-based construction dealerships, increasing alignment with scalable dealership operations.

  • Selling, general, and administrative ("SG&A") as a percentage of revenue improved to 16.8% in the current quarter, compared to 17.8% in the first quarter of 2017.

  • Dividends of $0.10 per share were declared to shareholders of record as of March 30, 2018.

___________________________

(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 March 31, 2018 under the section "Non-IFRS Financial Measures", which is available electronically at www.sedar.com under Cervus' profile.

 

First Quarter 2018 Financial Highlights

Adjusted loss before income tax expense improved $1.5 million in the first quarter of 2018 compared to 2017. This was comprised of a $1.6 million increase in our Transportation segment, a $0.3 million increase in the Industrial segment, and a $0.5 million decrease in the Agricultural segment.(2) Loss before income tax expense improved $1.1 million in the first quarter of 2018 compared to the same period in 2017.

Within the Agricultural segment, loss before income tax expense increased $0.5 million compared to 2017. In our Agriculture segment, record farm profitability combined with focused sales efforts resulted in record first quarter equipment sales for Cervus, and is a positive indicator for the year. Weather conditions have shifted seeding activity into the second quarter of 2018, compared to 2017 when seeding was well underway within the first quarter. The shift in seeding activity has also shifted the revenue associated with parts and service support into the second quarter, with a corresponding impact on revenue and gross profit margin in the first quarter of 2018. At the time of writing, adequate seeding time remains in our geography, and the moisture which delayed seeding should ultimately be positive for producers.

Our Ontario transportation dealerships generated a $1.6 million improvement in adjusted loss before income tax expense in the quarter, the principal factor in Cervus' first quarter 2018 performance. Internal efficiency improvements combined with positive market demand facilitated the increase in segment performance quarter over quarter. The first quarter results for 2018 are positive, including increased gross profit percentage across all revenue streams in the Transportation segment, along with unchanged SG&A expenses despite a 11% increase in revenue.

Within our Industrial segment, service department revenue growth along with divisional expense control were the principal drivers of improved profitability, increasing adjusted income before income tax expense $0.3 million for the first quarter of 2018, compared to 2017. Reduced equipment sales in the quarter reflected the continued caution of customers, while efficiently maintaining and extending the service life of existing equipment contributed to the 23% increase in service revenue.

________________________________

(2) Difference is due to rounding

 

Selected Financial Information




Three month periods
ended March 31





($ thousands, except per share amounts)

2018

% Change
Compared
to 2017

2017

Revenue

248,706

8%

231,110

Cost of sales

(206,913)

8%

(190,723)

Gross profit

41,793

3%

40,387

Other income

1,238

130%

539

Unrealized foreign exchange (loss) gain

(635)

(434%)

190

Total other income

603

(17%)

729

Selling, general and administrative expense

(41,687)

1%

(41,177)

Income (loss) from operating activities

709

1262%

(61)

Finance income

136

45%

94

Finance costs

(1,343)

(19%)

(1,649)

Loss before income tax expense

(498)

(69%)

(1,616)

Income tax recovery (expense)

353

2176%

(17)

Loss for the year

(145)

(91%)

(1,633)

Loss attributable to shareholders

(145)

(91%)

(1,628)

EBITDA(1)

5,136

27%

4,052

EBITDA margin(1)

2.1%


1.8%

Ratios as a percentage of revenue:





Gross profit margin

16.8%


17.5%


Selling, general and administrative

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