CALGARY, Alberta, Aug. 16, 2017 (GLOBE NEWSWIRE) — Tornado Global Hydrovacs Ltd. (“Tornado” or the “Company”) (TSX-V:TGH) today reported its unaudited consolidated financial results for the Three and Six Months ended June 30, 2017. The unaudited consolidated financial statements and MD&A have been filed on SEDAR and can be reviewed at www.sedar.com.
Financial and Operating Highlights (in CAD $000’s except per share data)
|Three Months ended June 30||Six Months ended June 30|
|Cost of sales||5,842||5,488||10,951||8,781|
|Selling and general administrative expenses||1,181||561||2,154||1,085|
|Depreciation of property and equipment||116||69||232||138|
|Amortization of intangible assets||123||29||246||58|
|Change in fair value of derivative financial instruments||(12||)||–||(39||)||–|
|Loss before tax||(537||)||(487||)||(859||)||(1,125||)|
|Income tax recovery||–||132||–||303|
|Net loss per share – basic and diluted||–||(0.01||)|
Segmented information (in CAD $000’s)
|Three months ended June 30, 2017||North America||China||Total|
|Cost of sales||5,842||–||5,842|
|Selling and administrative expenses||917||264||1,181|
|Six months ended June 30, 2017||North America||China||Total|
|Cost of sales||10,951||–||10,951|
|Selling and administrative expenses||1,667||487||2,154|
Three months ended June 30, 2017
- Revenue of $6,733 increased 12.5 % compared to $5,989 in Q1/2017 and increased 16.8 % compared to $5,764 in the comparable period in 2016. The increase in revenue was attributed to the recent improvement in the hydrovac market equipment purchase demand with increased interest coming out of the municipal sector in both Canada and United States.
- Despite the increased revenue, Gross Profit of $891 was similar to $880 in Q1/2017. This reduction in profitability reflects price competition as well the liquidation during the quarter of aged inventory at no margin. Gross Profit increased 222.9 % compared to $276 in the comparable period in 2016.
- Negative EBITDA of ($291), comprising North America ($27) and China ($264), increased 212.9% compared to ($93) in Q1/2017, due principally to an increase in SG&A in North America as a result of increased legal, professional and directors’ fees, and marketing and travel in the US. For China, Negative EBITDA during the quarter of ($264) increased 18.4% compared to Q1, and is expected to stay at this level until there is an increase in the scope of operations.
- Negative EBITDA was similar to the comparable period in 2016, despite the increase in Gross Profit. This is due to expenses in 2017 relating to the China business, for which there were no costs in 2016, and increased SG&A in North America.
- The Net loss of $537 increased 66.8% compared to $322 in Q1/2017 and increased 51.3% compared to $355 in the comparable period in 2016. This is due to the factors discussed above.
1 Earnings (loss) before interest, tax, depreciation and amortization (EBITDA) and Earnings (loss) before interest and tax (EBIT) are not defined by IFRS. The definition of EBITDA does not consider gains and losses on the disposal of assets, fair value changes in foreign currency forward contracts and non-cash components of stock based compensation. While not an IFRS measure, EBITDA is used by management, creditors, analysts, investors and other financial stakeholders to assess the Group’s performance and management from a financial and operational perspective.
In North America, the market demand from the municipal sector in both Canada and United States contributed to a financial performance improvement in the Company’s North America segment. Management believes that the Company is positioned to improve its performance in North America throughout the rest of the year for the following reasons:
- The indications of increased spending in infrastructure from both the Canadian and US governments and increased spending as a result of pipeline approvals are expected to further increase the market demand of hydrovac trucks.
- The Company introduced a newly designed hydrovac truck this year with a lighter weight and more debris capacity. This newly designed truck has compelling advantages over hydrovac trucks currently offered in the market.
- Working on sourcing qualified materials and parts to further reduce production costs.
- The weaker Canadian dollar will continue to positively impact profit margins because more than half of the Company’s hydrovac trucks are sold predominantly in US dollars while manufactured in Canada.
In China, the Company continues to develop this significant market. The Company is pursuing a two pronged strategy of manufacturing and selling its industry leading, patents pending, Hydrovac truck in North America and also leveraging its unique and proprietary Chinese Hydrovac truck design by deploying a sales and service strategy customized to the Chinese excavation and utilities markets. The Company has carefully studied the Chinese Hydrovac market opportunity and determined that its Hydrovac design and features are not present. The opening of the office in Beijing has confirmed that there is an untapped market opportunity in China, which is one of the largest excavation markets in the world. This office is staffed with local market experts in procurement and Chinese supply chain management, who are being trained and mentored by the Company’s Hydrovac excavation experts. The Company has developed a business plan to introduce its Hydrovac truck to the Chinese excavation market and recruited the officers and directors and employees to help execute this plan. The business plan has been enhanced to provide for exporting selected commercial parts from its Chinese supply chain at a much lower cost back to Canada to improve the profitability and competitiveness of its North American manufactured hydrovac truck. The proposed Financing Arrangement will help strengthen the Company’s capitalization to deploy the Hydrovac trucks in China as a highly specialized, excavation equipment provider
With the increasing demand in North America and expansion into China, management believes medium and long-term outlook is positive and improving. The Company will focus on marketing its newly designed trucks in North America and developing its business in China in the rest of 2017.
About Tornado Global Hydrovacs Ltd.
The Company designs and manufactures hydrovac trucks in Canada and sells hydrovac trucks for excavation service providers to the oil and gas industry and the municipal markets in Canada and the USA. Hydrovac trucks use high pressure water to pulverize soil and turn it into mud, and then vacuum up the resulting mud into its tank. Tornado currently operates in North America. The Company intends to expand its hydrovac business into China and has established a wholly owned operation in China with a head office in Beijing.
The Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.
Neither the Exchange nor its Regulation Service Provider (as that term is defined in policies of the Exchange) accepts responsibility for the adequacy or accuracy of this news release
Certain statements contained in this news release constitute forward-looking statements. These statements relate to future events. All statements other than statements of historical fact are forward-looking statements. The use of the words ‘‘may”, “expected”, “believes”, “anticipates” and other words of a similar nature are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Although the Company believes these statements to be reasonable, no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. Such statements include statements regarding the Company’s outlook for the rest of the year and expectations on reducing production costs and anticipated effect of the Company’s newly designed hydrovac truck. Actual results could differ materially from those anticipated in these forward-looking statements as a result of prevailing economic conditions, receipt of requisite regulatory approvals, and other factors, many of which are beyond the control of the Company. The forward-looking statements contained in this news release represent the Company’s expectations as of the date hereof, and are subject to change after such date. The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by applicable securities regulations.
CONTACT: For more information about Tornado Global Hydrovacs Ltd., visit www.tornadotrucks.com or contact: Bill Rollins Chief Executive Officer Phone: (403) 204-6333 Email: email@example.com Al Robertson Chief Financial Officer Phone: (403) 204 -6363 Email: firstname.lastname@example.org