Cervus Equipment Corp. (“Cervus” or the “Company”) (TSX: CVL) today announced its financial results and operational highlights for the quarter ended June 30, 2014.
“Parts and service sales generated significant growth in the second quarter of 2014, although new equipment sales decreased on a softer overall agricultural market. Gross profit was maintained with the growth in higher margin parts and service sales offsetting decreased new equipment sales, however, selling, general and administrative costs (“SG&A”) increased due to the SG&A-intensive nature of parts and service,” said Graham Drake, president and CEO of Cervus. “Despite the near-term softness in the agricultural segment, 2014 crop production forecasts suggest positive mid-term trends for farmers in our geography. Further, the agreement to acquire Peterbilt of Ontario entered into subsequent to quarter-end demonstrates how developing strong OEM relationships supports Cervus’ continued growth.”
Highlights for the Quarter:
- Parts and service sales in our agricultural equipment segment for the three months ended June 30, 2014 increased $6 million, or 30.6%, over the same period in 2013, and increased $4.2 million, or 21.5%, on a same store basis.
- An increase in same store revenues in the Construction, Industrial and Transportation (“CIT”) segment of $2.2 million.
- Overall gross profit percentage increased to 19.1% compared to 18.4%, and gross profit dollars increased $0.3 million to $45.3 million for the three months ended June 30, 2014, when compared to the period ended June 30, 2013.
- Net profit attributable to shareholders for the three months ended June 30, 2014 decreased $2.7 million to $5.6 million, compared to $8.3 million for same period in 2013.
- Dividends of $0.2050 per share were declared to shareholders of record as at June 30, 2014
For the quarter ended June 30, 2014, revenue decreased by $6.8 million, or 2.8% as a result of a $9.0 million or 5.2% decrease in agricultural equipment segment revenue, offset by a $2.2 million or 3.1% increase in CIT equipment segment revenue. Same store revenue decreased $21.5 million or 8.8% as a result of a $23.7 million decrease in agricultural segment revenue, offset by a $2.2 million increase in CIT equipment segment revenue.
Despite a reduction in new agricultural equipment sales, gross profit dollars increased $0.3 million in the second quarter of 2014 compared to the second quarter of 2013, primarily due to substantial increases in agricultural parts and service sales offsetting declines in new agricultural equipment sales. On this change in sales mix, overall gross margin percentage for the quarter ended June 30, 2014 increased to 19.1% from 18.4% in the same period in 2013.
Second quarter 2014 SG&A expenditures increased by $4.3 million compared to the same period in 2013, increasing to 15.7% of total revenue in the second quarter of 2014, compared to 13.5% for the same period in 2013. SG&A expenditures increased by $3.3 and $1.0 million in the agricultural and CIT equipment segments, respectively, compared to the same period in 2013.
During the quarter ended June 30, 2014, income from operating activities decreased by $3.3 million resulting in a profit before income tax decrease of $3.8 million compared to the same period in 2013. The decrease in income and profit is primarily a factor of reduced new equipment sales (and resulting decrease in contributed gross margin) in the agricultural equipment segment, combined with increased costs to facilitate parts and service revenue, and reduced earnings from equity accounted investments.
As at June 30, 2014, Cervus had working capital of $112.6 million, including $24.8 million in cash and cash equivalents, down $0.6 million compared to $113.2 million at December 31, 2013.