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Cervus Equipment Corp. Announces 2018 Year End Results

Cervus Equipment Corp. Announces 40% Increase in Adjusted Earnings Per Share1 for 2018, Increases Quarterly Dividend to $0.11 Per Share

CALGARY, Alberta (March 18, 2019) -- Cervus Equipment Corporation (“Cervus” or the “Company”) (TSX: CERV) today announced its financial results and operational highlights for the year ended December 31, 2018.

“I am pleased with the accelerated financial results of 2018, reflecting significant objectives achieved in the year. Our Ontario transportation dealerships delivered outstanding performance. Leveraging our scale and consistency was fundamental in marketing a record volume of pre-owned agricultural equipment, in addition to achieving record new agricultural equipment sales. Further, service optimization continues to elevate our customers’ experience, while increasing the efficiency of our service departments,” said Graham Drake, President and CEO of Cervus. “Based on this performance, we have increased the quarterly dividend to $0.11 per share. I believe our success and accomplishments in 2018 have enhanced our capabilities as we enter 2019, and I look forward to what the year will bring for our customers, shareholders, OEMs, and employees.”

2018 YEAR END RESULTS

Highlights for the Year:
  • The Company generated adjusted income before income tax expense1 of $36.5 million, a $8.8 million increase compared to $27.7 million of adjusted income before income tax expense1 in 2017.
  • The Company generated income of $26.6 million in 2018, a $6.7 million increase compared to income of $19.9 million in 2017.
  • The Company reported income per basic share of $1.70 in 2018, a $0.43 per share increase compared to income of $1.27 per basic share in 2017.
  • The Transportation segment achieved a $9.4 million increase in adjusted income before income tax expense1 compared to 2017, largely due to the performance of our Ontario dealerships.
  • Cervus achieved record new equipment revenue in our Agriculture segment, increasing 10% over the prior year, while marketing associated used equipment trades in season decreased used equipment margins by 2% in the year.
  • Total service gross profit margin percentage increased by 3.4% compared to 2017, due to continued service optimization improvement.
  • Selling, general, and administrative (“SG&A”) expenses decreased $3.2 million in the year, despite a $128.8 million increase in revenue, decreasing to 12.8% as a percentage of revenue compared to 14.4% in 2017.
  • Dividends of $0.40 per share were declared to shareholders of record during 2018.
  • Cervus completed the acquisition of an adjacent John Deere dealership located in Red Deer, Alberta.
  • Cervus’ Saskatchewan John Deere dealerships were awarded John Deere’s Leaders Club status, an award recognizing the top John Deere dealers in Canada.

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 year ended December 31, 2018 under the section “Non-IFRS Financial Measures”, which is available electronically at www.sedar.com under Cervus’ profile.
 

2018 Financial Highlights

Adjusted income before income tax expense1 increased by $8.8 million in 2018, compared to 2017. The principal factor in this performance was the substantial increase in our Ontario transportation dealership profitability compared to 2017, increasing $8.2 million. The results of our Agriculture segment also improved, achieving record new equipment sales partially offset by a 2% reduction in used equipment gross margin percentage. Our Industrial segment also generated $0.6 million of additional adjusted income before income tax on a same store basis.

Within our Agriculture segment, adjusted income before income tax expense1 increased $1.4 million. This performance reflects the record agricultural equipment sales achieved in 2018, with new and used equipment increasing 13% overall compared to 2017. The overall results were comprised of a 10% increase in new equipment sales which accelerated the amount of used equipment taken on trade. In turn, focused sales efforts achieved a 19% increase in used equipment sales, compared to 2017, while marketing this increased used inventory in-season reduced used gross profit margin compared to 2017. Organic growth in parts and service revenue, along with improved gross profit, also positively contributed to the financial performance of the year. Income before income tax expense increased $1.7 million for the segment compared to 2017.

Our Transportation segment delivered a $9.4 million increase in adjusted income before income tax expense1, with our Ontario dealerships generating $8.2 million of the increase. The Ontario reorganization undertaken in 2017 provided the framework to support a 23% increase in overall revenue, while growing gross margin and reducing SG&A expenses. Income before income tax expense mirrored these trends, increasing $7.6 million compared to 2017, of which $3.5 million related to non- recurring reorganization costs incurred in 2017, and includes a $1.8 million decrease in unrealized foreign exchange gains compared to 2017.

Within our Industrial segment, same store adjusted income before income tax expense1 improved $0.6 million, while overall segment results decreased $2.0 million, due to the non-continuance of the Construction dealerships, which had generated $2.6 million of adjusted income in 2017. On a same store basis, a 15% increase in revenue reflected improving market sentiment, while internal efficiencies delivered increased gross profit. Same store income before income tax expense also increased $0.4 million, while overall segment results decreased $1.7 million, of which $2.1 million related to prior year income from the Construction dealerships.
 

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 year ended December 31, 2018 under the section “Non-IFRS Financial Measures”, which is available electronically at www.sedar.com under Cervus’ profile.


Selected Financial Information​


Quarterly Dividend Increase

Cervus’ Board of Directors has approved a cash dividend to Cervus shareholders of $0.11 per share for the first quarter of 2019. Payment will be made on or about April 15, 2019 to shareholders of record as of the close of business on March 29, 2019.

This is an increase from the previous quarterly dividend of $0.10 per share. Investors are cautioned that quarterly dividends are always subject to approval from the board of directors of Cervus, and may be increased, decreased or suspended by the board at anytime.

Conference Call Information

Cervus will host its 2018 year end results conference call on March 18, 2019 at 11:00 a.m. Eastern Time. Interested parties may access the conference call by dialing (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 March 25, 2019 at midnight. To access the archived conference call, dial (416) 849-0833 or 1-855-859-2056 and enter the reservation number 2349199 followed by the number sign.

A live audio webcast of the conference call will be available. The call will conclude with an overview of the impacts of IFRS 16, a lease accounting standard which will be adopted in 2019. There will be slides shown during the IFRS 16 - Leases portion of the call. Please connect at least 10 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 63 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, JLG and Baumann 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                             
(403) 567-2095                                                                        
[email protected]

Adam Lowther – Chief Financial Officer
(403) 567-2104
[email protected] 

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 2018 Management Discussion & Analysis of Cervus Equipment Corporation dated March 14, 2019, 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.