Cervus Reports Third Quarter Profitability Growth Driven by Transportation Performance and Solid Agricultural Results
CALGARY, Alberta (November 7, 2018)
-- Cervus Equipment Corporation (“Cervus” or the “Company”) (TSX: CERV) today announced its financial results and operational highlights for the quarter ended September 30, 2018.
“Ongoing process improvements and cost containment, led by our disciplined and focused employee teams, delivered a $2.9 million adjusted earnings increase in our Transportation operations in the quarter. In our Agriculture segment, Western Canadian producers experienced difficult harvest conditions in the third quarter, increasing demand for our reliable, well-conditioned used equipment,” said Graham Drake, President and CEO. “With favourable weather returning in October, harvest has resumed along with our parts and service support for producers in their critical window. Looking ahead, we will continue to leverage opportunities to market used agricultural equipment and parts in the fourth quarter, and meet ongoing strong demand for new class 8 trucks in Ontario.”
Highlights of the Quarter:
• Income in the third quarter of 2018 was $12.2 million, a $2.7 million increase compared to income of $9.5 million for the same period of 2017.
• For the three months ended September 30, 2018, adjusted income before income tax expense (1)
was $15.1 million, a $2.0 million increase compared to $13.1 million of adjusted income before income tax expense (1)
in the third quarter of 2017.
• The Company reported income per basic share of $0.78 in the third quarter of 2018, a $0.18 per share increase compared to income of $0.60 per basic share in the third quarter of 2017.
• The Transportation segment achieved a $2.9 million increase in adjusted income before income tax expense,(1)
where gross profit increased $2.2 million while SG&A expense decreased by $1.2 million, largely due to performance in our Ontario Transportation dealerships.
• Cervus achieved record third quarter equipment sales in our Agriculture segment, increasing 9% compared to the third quarter of 2017, while equipment gross profit margins contracted.
• Total service gross profit margin percentage increased by 3.6% in the third quarter of 2018, compared to the same period in 2017, due to continued service optimization progress.
• Selling, general, and administrative (“SG&A”) expenses as a percentage of revenue improved to 11.3% in the current quarter, compared to 12.5% in the third quarter of 2017.
• Dividends of $0.10 per share were declared to shareholders of record as of September 28, 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 September 30, 2018 under the section “Non-IFRS Financial Measures”, which is available electronically at www.sedar.com under Cervus’ profile.
Third Quarter 2018 Financial Highlights
Adjusted income before income tax expense (2) improved $2.0 million in the third quarter of 2018 compared to 2017. This was comprised of a $2.9 million increase in the Transportation segment, partially offset by a $0.8 million decrease in the Industrial segment and a $0.1 million decrease in the Agriculture segment. Income before income tax expense increased $2.5 million in the third quarter of 2018 compared to the same period in 2017.
Within our Agriculture segment, income before income tax expense decreased $0.1 million compared to the third quarter of 2017. The Company achieved a significant increase in third quarter used equipment sales due to focused sales efforts, while delayed harvest activity compared to 2017 shifted associated parts and service activity into the fourth quarter. Gross profit increased $1.7 million, while SG&A expenses increased $2.0 million, resulting in income before income tax expense decreasing $0.1 million.
Within our Transportation segment, adjusted income before income tax expense(2) increased $2.9 million, due to increased performance in both our Ontario and Saskatchewan dealership locations including a $2.2 million increase in gross profit while SG&A expense decreased $1.2 million. Income before income tax expense mirrored these trends, increasing $3.4 million compared to the third quarter of 2017, including a $0.5 million increase in unrealized foreign exchange gains in the period.
Within our Industrial segment, adjusted income before income tax expense (2) decreased $0.8 million, of which, $0.3 million relates to the non-continuance of the Construction dealerships in the current period. Income before income tax expense also decreased $0.8 million, of which $0.5 million relates to the non-continuance of the four construction dealerships.
(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 September 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 third quarter 2018 results conference call on November 8, 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, November 17, 2018 at midnight. To access the archived conference call, dial (416) 849-0833 or 1-855-859-2056 and enter the reservation number 4282744 followed by the number sign.
A live audio webcast of the conference call will be available at:
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".
For more information please contact:
Graham Drake – President & CEO
Adam Lowther – Chief Financial Officer
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 First Quarter 2018 Management Discussion & Analysis of Cervus Equipment Corporation dated May 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.