Ovivo talks water operations, no 2015 P&L in NR
2015-06-04 16:14 ET - News Release
Mr. Marc Barbeau reports
OVIVO RELEASES ITS RESULTS FOR THE FOURTH QUARTER AND FISCAL 2015
Ovivo Inc. has released its results for the fourth quarter and fiscal year 2015. (All amounts are in Canadian dollars.)
Highlights -- fiscal 2015 Q4:
- Revenues of $80.2-million, down 4 per cent compared with the same quarter of the previous fiscal year; sharp increase in parts and services revenues, offset by a decline in new equipment revenues;
- Adjusted earnings before interest, taxes, depreciation and amortization (1) of $4.2-million, up $5.6-million compared with the same quarter of the previous fiscal year;
- Net loss from continuing operations attributable to shareholders of Ovivo of $700,000, owing primarily to financial expenses including $1.1-million in relation to the unfavourable remeasurement of the total return swap which is based on the corporation's share price;
- Backlog of $254.8-million as at March 31, 2015, up more than 10 per cent or $23.5-million from Dec. 31, 2014;
- Total net indebtedness of $24.1-million as at March 31, 2015, marking a slight increase of $1.9-million compared with Dec. 31, 2014.
During fiscal 2015, the management of Ovivo focused on transforming the corporation into a pure-play water treatment company in its key markets. As a result, following the third-quarter disposal of its pulp and paper, and Van der Molen divisions, the corporation divested its United Kingdom municipal division during the fourth quarter of fiscal 2015. The corporation is also moving ahead with the divestment of its other non-core businesses, and management is confident it will enter into definitive agreements over the coming months.
For the fourth quarter of fiscal 2015, a number of favourable indicators bear witness to the company's strategic decisions over the past few quarters in terms of selecting the projects it bids on and their proper execution. While total revenues for the fourth quarter of fiscal 2015 are down 4 per cent year over year, parts and services revenues are up nearly 30 per cent. Adjusted EBITDA (1) amounted to $4.2-million, an increase of $5.6-million compared with the same period of the previous fiscal year. The corporation recorded a net loss from continuing operations of $700,000 or two cents per share, basic and diluted, owing primarily to the recognition of financial expenses, including $1.1-million related to the unrealized loss on the total return swap, which is based on the corporation's share price. Lastly, backlog increased over 10 per cent, mainly on sustained business volume in the municipal North America and energy segments.
"During the fourth quarter, we pursued our strategic initiatives to simplify our operating structure and build on Ovivo's core businesses to become a pure-play water treatment company. We're satisfied with the progress we've achieved over the past two quarters on that front and will continue executing our strategic plan throughout fiscal 2016," stated Marc Barbeau, president and chief executive officer of Ovivo.
The 4-per-cent decline in revenues from the same period of the previous fiscal year (marking an organic change at constant exchange rates of negative 11 per cent (1)) was largely due to lower new equipment sales in the electronics market, as revenues in that market were particularly high in the fourth quarter of the previous fiscal year, following major contract wins early in fiscal 2014. The drop in revenues was partially offset by growth in the municipal North America market which has been supported by a high backlog since the end of the third quarter of fiscal 2014, and by revenues from the upgrading, parts and services segment, which posted organic growth of 23.5 per cent from the fourth quarter of the previous fiscal year.
The corporation generated revenues and adjusted EBITDA (1) for the year ended March 31, 2015, of $318.7-million and $12.1-million, respectively. While revenues were relatively unchanged from the previous fiscal year, adjusted EBITDA (1) for the year was up $7.3-million, over double the figure from fiscal 2014. This increase was partly driven by reduced expenses at head office, resulting from reorganization during the year.
The corporation recorded a net loss from continuing operations attributable to shareholders of Ovivo of $33.5-million or 76 cents per share, basic and diluted, compared with a net loss of $26.8-million or 61 cents per share, basic and diluted, for the previous fiscal year. This net loss resulted primarily from the $16.9-million impairment charge recorded during the third quarter of fiscal 2015, as well as a foreign exchange loss, and realized and unrealized losses related to derivative financial instruments, mainly attributable to the remeasurement of the total return swap.
(1) A non-IFRS (international financial reporting standards) financial measure; see Section 14, reconciliation of non-IFRS financial measures, of the management's discussion and analysis of the corporation for the year ended March 31, 2015.
Backlog
Ovivo reported a backlog as at March 31, 2015, of $254.8-million, up from $231.3-million as at Dec. 31, 2014. This growth in backlog was driven primarily by the energy market in Europe and North America which, after a slowdown in the first three quarters of fiscal 2015, experienced a good level of order taking in the fourth quarter. The increase was also driven by the municipal North America market, which maintained a high pace of order taking.
Outlook
Ovivo underwent a major transformation during the fiscal year ended March 31, 2015, and is now a simplified company exclusively dedicated to water treatment.
The objectives the company set for the quarter ended March 31, 2015, have largely been met:
- Step up the pace of disposals of non-core businesses: The company completed the sale of its municipal United Kingdom division in late February, as well as the sale of certain trademarks and client references in the desalination turnkey project market in the Middle East. Given the significant progress achieved, the company expects to complete the sale of the remaining non-core businesses in the coming months;
- Adjust to more challenging conditions in the energy market: The company completed the rightsizing of its operating structure with the layoffs announced in the third quarter, and experienced solid order taking over the quarter, both for new equipment, and parts and services, by focusing its efforts on the most promising projects;
- Complete the reorganization of the company's head office team: This was completed as of March 31, 2015.
With the company's transformation nearly completed, all efforts can now be focused on driving business growth.
The company is very well positioned in the municipal North America segment, an expanding market supported by growing infrastructure replacement or modernization needs, the real estate recovery, the challenges faced in water-stressed regions and increasingly stringent legislation governing waste water disposal. These conditions are also conducive to the use of modern and advanced technologies to treat waste water, such as membrane bioreactor (MBR) systems. What's more, Ovivo holds a dominant position in MBR systems in North America, a growing market.
The company has also developed globally recognized water treatment expertise in the electronics sector. The manufacturing of semiconductor devices requires large volumes of ultrapure water. To meet stringent industry requirements, the company offers a range of state-of-the-art technology solutions. Ovivo is part of a select group of companies that are collaborating to develop the next generation of silicon wafers: the F450C. With its expertise and global platform, the company is well positioned to benefit from growth opportunities in this market. Over the past two fiscal years, revenues from North America have been significant, but the company anticipates a certain shift in demand toward Asia for fiscal 2016.
While the fall in oil prices did affect the company over the past fiscal year, it is currently seeing a turnaround in the energy market, as evidenced by the level of order taking in the fourth quarter of fiscal 2015. Whether for power stations or the oil and gas markets, the company's water treatment systems meet the highest international standards. In addition, its international platform allows it to support its clients anywhere in the world, regardless of where their projects are located. The company sees a positive outlook for business volumes in the coming months across all of its geographic regions.
Given the impressive pool of Ovivo equipment in operation, opportunities are also on the rise in the upgrading, parts and services sector. This market segment is a key development focus, as it perfectly complements the company's technology solutions offering. Driven by the company's development initiatives in recent years, revenues in this segment are up sharply, currently accounting for a quarter of the company's overall sales. As a result, Ovivo will pursue the development of this market this year, leveraging its products' total-life-cycle approach and the recognition of Ovivo's heritage brands. It will also expand efforts in the Middle East and Southeast Asia to better capitalize on opportunities arising from its sizable pool of equipment in operation in those markets.
Lastly, the company will increasingly invest in innovation to add to its line of state-of-the-art products and services in order to better differentiate Ovivo and generate recurring revenue streams.
Based on the company's current outlook and backlog, assuming exchange rates remain stable at current levels, revenues from continuing operations should range from $300-million to $325-million for the fiscal year ending March 31, 2016. The quality of the company's backlog arising from strategic decisions following Ovivo's refocusing, and the growth of its upgrading, parts and services segment are expected to favourably impact its operating performance for the fiscal year ending March 31, 2016. Given the weak order taking in the energy segment in the first nine months of fiscal 2015 and to a lesser extent in the electronics segment, the company expects more modest operating performance in the first and second quarters, with business picking up in the second half of fiscal 2016.
Ovivo's objectives for the coming quarters are as follows:
- Grow its electronics and energy backlogs;
- Improve its operating performance;
- Complete the divestment of its non-core businesses;
- Continue growing revenues in the upgrading, parts and services segment;
- Reduce its net debt.