Decisive Dividend Corporation Reports Financial Results for the Three Months Ended March 31, 2019

Tickers: XTSX:DE, XTSX:DE.P
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May 30, 2019 / TheNewswire / Kelowna, British Columbia: Decisive Dividend Corporation (TSX-V: DE) (the "Company" or "Decisive") reported its financial results for the three months ended March 31, 2019. All amounts are expressed in Canadian dollars. The Company's unaudited interim condensed consolidated financial statements as well as its management's discussion and analysis ("MD&A") are posted on SEDAR and on Decisive's website.

James Paterson, Chief Executive Officer of Decisive, noted:

"Overall sales in Decisive's first quarter increased significantly and Adjusted EBITDA more than doubled relative to Q1 of last year, despite the continuing negative impact of steel tariffs on Unicast's results and the effect of muted oil and gas activity on Hawk's revenue. The additions of Slimline and Hawk around this time last year drove much of the increases and positioned the Group to withstand the challenges that the organization faced in the quarter. We remain excited about the overall progress and direction of Decisive as a whole, we are confident in the long-term business prospects of each of our subsidiaries, and we continue to actively pursue further acquisitions that fit with our long-term strategy."

Q1 2019 Financial and Operating highlights:

  • Sales for the quarter ended March 31, 2019 were $9.9 million, up $4.4 million, or 81%, over the quarter ended March 31, 2018.

    Gross profit for the quarter ended March 31, 2019 was $3.8 million, up $1.5 million, or 66%, over the quarter ended March 31, 2018. Gross profit percent declined to 38% for the quarter ended March 31, 2019, compared to 41% for the quarter ended March 31, 2018.

    Adjusted EBITDA* for the quarter ended March 31, 2019, as defined in the Company's MD&A, was $0.8 million, a $0.4 million increase over the quarter ended March 31, 2018.

    The loss for the quarter ended March 31, 2019 was $0.2 million, or $0.02 per share, compared to profit of $0.3 million, or $0.05 per share for quarter ended March 31, 2018.

    During the quarter, Decisive declared $1.0 million in dividends, compared to $0.6 million for the quarter ended March 31, 2018.

    Decisive ended the quarter with a strong cash position of $2.3 million.

* Adjusted EBITDA is defined as earnings before finance costs, income taxes, depreciation, amortization, foreign exchange gains or losses, other non-cash items such as gains or losses recognized on the fair value of contingent consideration items, asset impairment and restructuring costs, and any unusual non-operating one-time items such as acquisition costs. Adjusted EBITDA is not a defined performance measure under International Financial Reporting Standards (IFRS) and therefore may not be comparable to similar measures presented by other issuers, but it is used by Management to assess the performance of the Company and its segments. See the MD&A for a reconciliation of applicable IFRS measures to non-IFRS measures.

Discussion of First Quarter 2019 Performance

Sales for the three months ended March 31, 2019 for the Group increased to $9.9 million, 81% over Q1 2018. The primary drivers of the increase were the contributions of Slimline Manufacturing Ltd. ("Slimline") and Hawk Machine Works Ltd. ("Hawk"), which were acquired on May 30, 2018 and June 28, 2018 respectively.

Overall gross profit for the Group increased by $1.5 million, or 66%, in Q1 2019 relative to Q1 2018. Gross profit percentage for the Group over the same period declined to 38% from 41%, driven by the change in overall product mix in the period related to the acquisitions of Slimline and Hawk, the negative impact of tariffs on Chinese steel products on Unicast's gross profit, and the negative effect of the slowdown in oil and gas activity in Western Canada on Hawk's results.

In each subsidiary, there are substantial fixed costs that do not meaningfully fluctuate with product demand in the short-term. Such costs are included in both manufacturing costs and operating expenses. Overall operating expenses increased from $2.5 million in Q1 2018 to $3.9 million in Q1 2019. The primary drivers of the year-over-year increase were: amortization and depreciation which increased by $0.2 million; financing costs which increased by $0.1 million; salaries, wages and benefits which increased by $0.7 million; and selling, general and administration costs which increased by $0.4 million. Specifically, the increase in financing costs is a result of the additional debt issued in 2018 in connection with the acquisitions completed last year. The increases in salaries, wages and benefits, and selling, general and administration costs were based primarily on increased scale with the acquisitions of Slimline and Hawk, and some increases were also experienced in Blaze King and Head Office.

Adjusted EBITDA for the three months ended March 31, 2019 was $0.8 million, a $0.4 million increase compared to Q1 2018. Adjusted EBITDA increased due primarily to the acquisitions of Slimline and Hawk but was negatively affected by the tariffs and slowdown in oil and gas activity noted above.

Foreign exchange gains and losses also impacted overall profit differences between Q1 2019 and Q1 2018. The Q1 2019 foreign exchange losses of $0.2 million were a result of the $0.03 decrease in the value of the United States dollar, relative to the Canadian dollar, through the quarter. Conversely, in Q1 2018 the foreign exchange gains of $0.5 million were a result of the $0.04 increase in the value of the United States dollar through Q1 of last year.

Outlook

Decisive was established to acquire a growing stable of successful manufacturing companies for the long term. The acquisitions of Slimline and Hawk in May 2018 and June 2018, respectively, furthered Decisive's objective and are consistent with its long-term vision.

The increased scale and diversity that these two acquisitions brought to the Group was important in Q1 2019, where headwinds centered on tariffs related to Chinese steel products and oil and gas activity slowdowns in Western Canada negatively affected operations. Despite the challenges faced in Q1 2019, management is confident in the long-term business prospects of each of its subsidiaries. Although the second quarter is a seasonal slow period for Hawk and Blaze King, management is encouraged by the outlook for each of its businesses for the remainder of the year and expects higher overall Adjusted EBITDA in each of the remaining quarters of 2019 compared to Q1 2019.

Management remains confident in its long-term strategic and operational plans and its seasoned leadership believes that the Group is well positioned for future growth. Decisive is committed to enhancing customer service and growing the sales teams to accommodate a plan of steady growth of its current operating subsidiaries.

Management is also confident that its disciplined acquisition approach is the best path to generating shareholder value in the long term. Decisive continues to identify and evaluate potential acquisitions which, if completed, will bolster its diversity and add strength and resilience to operations. Decisive's acquisition pipeline includes target companies identified through an expanded network of referral sources that regularly present it with potential acquisitions and by Company management who independently assesses certain markets and regions to identify potential targets. While deal flow is considered strong, there can be no assurance that target companies identified from time to time will meet Decisive's acquisition criteria or that Decisive will successfully acquire identified target companies that meet such criteria.

About Decisive Dividend Corporation

Decisive Dividend Corporation is an acquisition-oriented company, focusing on the manufacturing sector. The Company uses a disciplined acquisition strategy to identify already profitable, established companies that have strong management teams, generate steady cash flow, operate in non-cyclical markets, and have opportunity for future growth.

FOR FURTHER INFORMATION PLEASE CONTACT:

David Redekop, Director and Chief Corporate Development Officer

or

Rick Torriero, Chief Financial Officer

#201, 1674 Bertram Street

Kelowna, BC V1Y 9G4

Telephone: (250) 870-9146

Sign up for email notifications of all Company press releases at www.decisivedividend.com.

Cautionary Statements

Forward-Looking Statements

Certain statements contained in this press release constitute forward-looking information. These statements relate to future events or future performance. The use of any of the words "could", "intend", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on management's current beliefs, assumptions and expectations as to the outcome and timing of such future events. Actual future results may differ materially. In particular, this press release contains forward-looking information relating to management's expectations with respect to the financial performance of the Company in each of the remaining quarters of 2019, the objectives of the Company with respect to its operating subsidiaries and potential future acquisitions. Risk factors that could cause actual results or outcomes to differ materially from the results expressed or implied by forward-looking information include, among other things: economic, industry, market and operational risks associated with the businesses carried on by operating subsidiaries of the Company, the failure to successfully identify and acquire target companies meeting the Company's standards and other risks, all as more particularly described in the management discussion and analysis of the Company available on the Company's profile at www.sedar.com. The Company cautions the reader that the risk factors referenced above are not exhaustive. The forward-looking information contained in this release is made as of the date hereof and the Company is not obligated to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Because of the risks, uncertainties and assumptions contained herein, investors should not place undue reliance on forward-looking information. The foregoing statements expressly qualify any forward-looking information contained herein.

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