Calgary, Alta. — Cervus Equipment Corp.("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, 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, 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.
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. 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.
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.