CALGARY, — Cervus Equipment Corp. (CSQPF) ("Cervus" or the "Company") (TSX: CERV) today announced its financial results and operational highlights for the year ended Dec. 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 expense of $36.5 million, a $8.8 million increase compared to $27.7 million of adjusted income before income tax expense 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 expense 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.
2018 Financial Highlights
Adjusted income before income tax expense increased by $8.8 million in 2018, compared to 2017. The principal factor in this performance was the substantial increase in the Ontario transportation dealership profitability compared to 2017, increasing $8.2 million. The results of the agriculture segment also improved, achieving record new equipment sales partially offset by a 2% reduction in used equipment gross margin percentage. The Industrial segment also generated $0.6 million of additional adjusted income before income tax on a same store basis.
Within the agriculture segment, adjusted income before income tax expense 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.
The transportation segment delivered a $9.4 million increase in adjusted income before income tax expense, 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 the industrial segment, same store adjusted income before income tax expense 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.