Ovivo Inc. announces its fiscal 2015 third quarter results

Highlights of the third quarter ended December 31, 2014 

• Revenues of $76.1 million, down 12% compared with the same quarter of the previous fiscal year
• Adjusted EBITDA⁽¹⁾ of $3.0 million, up $1.2 million compared with the same quarter of the previous fiscal year
• Goodwill and intangible asset impairment charge of $16.9 million
• Net loss from continuing operations of $24.6 million compared with a net loss of $19.8 million for the same quarter of the previous fiscal year
• Net loss from discontinued operations of $14.0 million following the reclassification to discontinued operations of the results of the Pulp and Paper and Van der Molen divisions as well as the Corporation's non-core businesses
• Backlog of $231.3 million, down $18.2 million from the September 30, 2014 level
• Net debt of $22.2 million, down $37.6 million from the September 30, 2014 level

MONTRÉAL, Feb. 12, 2015 /CNW Telbec/ -
(All amounts are in Canadian dollars)

During the third quarter of fiscal 2015, Ovivo Inc. (Ovivo or the Corporation) took significant steps to restructure its operations to focus exclusively on water treatment via its core businesses. The Corporation has divested its Pulp and Paper and Van der Molen divisions, and also continued its efforts to divest its other non-core businesses. Furthermore, the Corporation changed its name from GLV Inc. to Ovivo Inc. on December 18, 2014 to underscore the refocus on water treatment products and solutions.  

Following these important strategic changes, the results from continuing operations of the Corporation are now exclusively those of Ovivo in its core water treatment markets. For the third quarter of fiscal 2015, we are reporting revenues of $76.1 million, down 12% from the third quarter of the previous fiscal year, and adjusted EBITDA ⁽¹⁾ of $3.0 million, up $1.2 million. The Corporation recorded a net loss from continuing operations of $24.6 million or $0.56 per share, basic and diluted, compared with a net loss of $19.8 million or $0.45 per share, basic and diluted, for the same quarter of the previous fiscal year. The current quarter loss resulted primarily from an asset impairment charge of $16.9 million, owing to the slowdown in business and the decline in the backlog in the Energy market. 

"During the third quarter, we accomplished many strategic initiatives to restructure our operations and other initiatives should be completed in the coming months. The result will be a simpler organization totally dedicated to water treatment and having the resources to grow its core businesses," stated President and Chief Executive Officer of Ovivo Inc. Marc Barbeau.

Ovivo's revenues for the third quarter were down 12% from the same period of fiscal 2014 (16% organic ⁽¹⁾ decrease at constant exchange rates). This decline is largely due to the sales of new equipment in the Electronics market as the revenues in this market for the third quarter of the previous fiscal year were particularly high following the signing of large contracts in early fiscal 2014. The decline in revenues was partially offset by growth in the Municipal North America market which has been underpinned by a high backlog since the end of the third quarter of fiscal 2014. 

The Corporation generated revenues of $238.5 million and adjusted EBITDA ⁽¹⁾ of $7.8 million for the nine-month period ended December 31, 2014, up $2.2 million and $1.6 million, respectively, from the corresponding period of the previous fiscal year. The Corporation also recorded a net loss from continuing operations of $32.8 million or $0.74 per share, basic and diluted, compared with a net loss of $20.5 million or $0.46 per share, basic and diluted, for the same quarter of 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 from a foreign exchange loss and from realized and unrealized losses related to derivative financial instruments mainly attributable to the total return swap. 

Backlog

Ovivo's backlog as at December 31, 2014 amounted to $231.3 million, down from $249.5 million as at September 30, 2014 and $261.9 million as at March 31, 2014. The decline stemmed primarily from slower order taking in the Energy market over the past quarters.

The decline in the backlog was also due to the Electronics market which, after major contract wins in early fiscal 2014, recorded a decline in backlog owing to the percentage of completion of projects. However, as order taking in the segment remains satisfactory, the targets set by management for this market should be achieved.

The backlog of the Municipal North America market was maintained at a level comparable with
September 30, 2014 when it reached a historical level. The backlog in the Parts and Services market also remains comparable with the past quarter's level and should continue to generate a favourable volume of business in the coming quarters.

Outlook

Under our strategic plan, we are focusing on three core markets, namely Municipal North America, Electronics and Energy, while giving high priority to developing the Parts, Services and Upgrading segment within these three markets.

Considering the economic recovery in the U.S., municipal infrastructure upgrading needs and investment projects in the Electronics segment, we can expect a favourable level of order taking in the coming months. Despite the current slowdown in investments in the Energy segment caused by the decline in oil prices, we remain confident that economic growth in the U.S. will prompt businesses to implement investment projects related to electricity generation and petrochemicals, two of our key markets where we offer technological solutions.

The fall in oil prices has a significant impact on investment projects in the Energy segment, including in the Middle East and for oil platforms, two traditionally large markets for us. As a result, during the third quarter, we reorganized our teams to adjust our cost structure and we had to recognize an impairment of our intangible assets. Our strategy in the coming quarters is to intensify our business development activities in regions where clients are more likely to launch investment projects to capitalize on current oil prices. In addition, we will accelerate the development of the Parts, Services and Upgrading segment in a more globally coordinated manner by investing more resources and by focusing on regions where we have a large pool of operating equipment.

Given the weak economy in Europe, our teams in this region are focused on supporting market development in North America as well as in Southeast Asia where the outlook for our three markets is the more attractive. 

Based on current outlook and our backlog, assuming exchange rates remain stable at current levels, revenues from continuing operations should range from $300 million to $325 million for the year ending March 31, 2015. Our profitability is expected to increase steadily, driven by organic growth, improvement in our gross margin as well as control of our selling and administrative expenses.

Under our strategic plan, management priorities for the period up to March 31, 2015 are to: (i) accelerate the divestment of non-core businesses; (ii) continue to track trends in the Energy market and adapt our business development strategies as well as our cost structure; and (iii) complete the reorganization of our head office team to achieve a structure of services and costs that is appropriate for our size.

Organizational changes

François Dufresne, Chief Financial Officer, informed us that he will be leaving the Corporation on March 31, 2015. "François has played a key role in the different strategic steps Ovivo has taken in the past 18 months to transform itself and reshape and focus its portfolio on water treatment equipment and products. I respect his decision and thank him for his significant contribution," stated Marc Barbeau.

Following this departure, France De Blois, Vice-President, Finance Ovivo, will continue to assume this role while contributing to the deployment of the Corporation's strategy and the monitoring of its financial performance. She will now be also responsible for the Corporation's financial reporting and tax processes.  

Pierre-Marc Sarrazin, currently Director, Corporate Finance and Treasury, will support the management team in the Corporation's future corporate development projects. In addition to his current responsibilities related to financing and treasury management, he will also be responsible for investor relations and external communications.

Supplementary information

This press release discusses the highlights for the third quarter ended December 31, 2014. For a detailed analysis, see the interim management's discussion and analysis and unaudited interim condensed consolidated financial statements, filed today on the websites of SEDAR (www.sedar.com) and the Corporation (www.ovivowater.com). Note that non-IFRS financial measures were used to analyze performance, as management considers that they provide useful information for investors seeking to assess the Corporation's performance and financial position.

About Ovivo Inc.

Ovivo Inc. is a global company dedicated to water and wastewater treatment. It offers comprehensive technological solutions, as well as services and equipment tailored to specific client needs. Ovivo operates in over 15 countries with approximately 900 employees. Ovivo is a public company whose shares trade on the Toronto Stock Exchange under the ticker symbols OVI.A and OVI.B.

Notice regarding forward-looking statements

Certain statements in this press release regarding management's objectives, projections, estimates, expectations or forecasts may constitute forward-looking statements within the meaning of applicable securities legislation.  Forward-looking statements are recognized by the use of terms such as "forecast," "project," "could," "plan," "aim," "estimate" and other similar terms, possibly used in the future or conditional, particularly with regard to certain assumptions. The management of Ovivo would like to point out that forward-looking statements involve a number of uncertainties and known and unknown risks such that the actual and future results of Ovivo could differ considerably from those stated. There can be no assurance as to the materialization of the results, performance or achievements as expressed in or underlying the forward-looking statements. The forward-looking statements included in this press release were made as at the date hereof, and unless required to do so pursuant to applicable securities legislation, management of Ovivo assumes no obligation to update them.

Additional information about the risk factors to which Ovivo Inc. is exposed is provided under section 11, "Risks and uncertainties," of the management discussion and analysis for the fiscal year ended March 31, 2014 available on SEDAR (www.sedar.com) and the Corporation's website (www.ovivowater.com).

(1) This is a non-IFRS measure. See Section 12, "Reconciliation of non-IFRS financial measures" in the Corporation's management's discussion and analysis for the quarter ended December 31, 2014.

SOURCE Ovivo Inc.