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Decisive Dividend Corporation Reports Financial Results for the Three and Six Months Ended June 30, 2019

Tickers: XTSX:DE, XTSX:DE.P
Tags: #Finance



Kelowna, British Columbia - TheNewswire - August 22, 2019: Decisive Dividend Corporation (TSXV:DE) (the "Company" or "Decisive") reported its financial results for the three and six months ended June 30, 2019. All amounts are expressed in Canadian dollars. The Company's unaudited interim condensed consolidated financial statements as well as its management's discussion and analysis ("MD&A") are posted on SEDAR and on Decisive's website.

James Paterson, Chief Executive Officer of Decisive, noted:

"The second quarter and year-to-date increases in sales, gross profit and adjusted EBITDA, relative to last year, demonstrates the increased scale and diversity of the Group after the additions of Slimline and Hawk just over a year ago. Having just closed our fifth acquisition, we are excited about the added strength and diversity bringing another solid manufacturing company into the Group will provide. Equally exciting is the refinancing that was undertaken in conjunction with the Northside Industries acquisition. We believe that our new financing package will significantly increase Decisive's financial flexibility as we continue with our long-term strategy of acquiring successful manufacturing companies that provide steady and growing dividend payments to its shareholders."

Q2 2019 Financial and Operating highlights:

- Sales for the quarter ended June 30, 2019 were $11.1 million, up $5.8 million, or 109%, over the quarter ended June 30, 2018.

- Gross profit for the quarter ended June 30, 2019 was $4.2 million, up $1.9 million, or 83%, over the quarter ended June 30, 2018. Gross profit percent declined to 37% for the quarter ended June 30, 2019, compared to 43% for the quarter ended June 30, 2018.

- Adjusted EBITDA* for the quarter ended June 30, 2019, as defined in the Company's MD&A, was $1.6 million, a $1.1 million, or 237%, increase over the quarter ended June 30, 2018.

- Profit for the quarter ended June 30, 2019 was $0.3 million, or $0.03 per share, compared to a loss of $0.3 million, or $0.04 per share for quarter ended June 30, 2018.

- During the quarter, Decisive declared $1.0 million in dividends, compared to $0.7 million for the quarter ended June 30, 2018.

Year-to-Date 2019 Financial and Operating highlights:

- Sales for the six months ended June 30, 2019 were $21.0 million, up $10.2 million, or 94%, over the six months ended June 30, 2018.

- Gross profit for the six months ended June 30, 2019 was $7.9 million, up $3.3 million, or 72%, over the six months ended June 30, 2018. Gross profit percent declined to 38% for the six months ended June 30, 2019, compared to 42% for the six months ended June 30, 2018.

- Adjusted EBITDA* for the six months ended June 30, 2019, as defined in the Company's MD&A, was $2.3 million, a $1.5 million, or 191%, increase over the six months ended June 30, 2018.

- Profit for the six months ended June 30, 2019 remained consistent with the six months ended June 30, 2018.

- During the six months ended June 30, 2019, Decisive declared $2.0 million in dividends, compared to $1.3 million for the six months ended June 30, 2018.

* Adjusted EBITDA is defined as earnings before finance costs, income taxes, depreciation, amortization, foreign exchange gains or losses, other non-cash items such as gains or losses recognized on the fair value of contingent consideration items, asset impairment and restructuring costs, and any unusual non-operating one-time items such as acquisition costs. Adjusted EBITDA is not a defined performance measure under International Financial Reporting Standards (IFRS) and therefore may not be comparable to similar measures presented by other issuers, but it is used by Management to assess the performance of the Company and its segments. See the MD&A for a reconciliation of applicable IFRS measures to non-IFRS measures.

Discussion of Overall Performance

Q2 Consolidated Financial Highlights

Sales for the three months ended June 30, 2019 for the Group increased to $11.1 million, 110% over Q2 2018. The primary drivers of the increase were the contributions of Slimline and Hawk, which were acquired on May 30, 2018 and June 28, 2018 respectively. Blaze King and Unicast also achieved sales increases relative to Q2 2018, of 27% and 48% respectively.

Overall gross profit for the Group increased by $1.9 million, or 82%, in Q2 2019 relative to Q2 2018. Gross profit percentage for the Group over the same period declined to 37% from 43%, driven by the change in overall product mix in the period related to the acquisitions of Slimline and Hawk, as well as product mix changes in Blaze King, and the negative impact of tariffs on Chinese steel products on Unicast's gross profit.

In each subsidiary, there are substantial fixed costs that do not meaningfully fluctuate with product demand in the short-term. Such costs are included in both manufacturing costs and operating expenses. Overall operating expenses increased from $2.7 million in Q2 2018 to $3.5 million in Q2 2019. The primary drivers of the year-over-year quarterly increase were: amortization and depreciation which increased by $0.3 million; salaries, wages and benefits which increased by $0.5 million; and selling, general and administration costs which increased by $0.3 million. The increases in salaries, wages and benefits, and selling, general and administration costs were based primarily on increased scale with the acquisitions of Slimline and Hawk, and some increases were also experienced in Blaze King and Head Office. These increases were partially offset by a $0.3 million decrease in professional fees related to lower acquisition costs in Q2 2019 relative to Q2 2018.

Adjusted EBITDA for the three months ended June 30, 2019 was $1.6 million, a $1.1 million increase compared to Q2 2018. Adjusted EBITDA increased in both the Finished Product and Component Manufacturing segments, due primarily to the acquisitions of Slimline and Hawk and despite the negative affect of the steel tariffs noted above.

Foreign exchange gains and losses also impacted overall profit differences between Q2 2019 and Q2 2018. The Q2 2019 foreign exchange losses of $0.1 million were a result of the $0.03 decrease in the value of the United States dollar, relative to the Canadian dollar, through the quarter. Conversely, in Q2 2018 the foreign exchange gains of $0.1 million were a result of the $0.03 increase in the value of the United States dollar through Q2 of last year.

The overall profit for Q2 2019 was $0.3 million, or $0.03 per share, compared to a loss of $0.3 million, or $0.04 per share in Q2 2018.

Year-to-Date Consolidated Financial Highlights

Sales for the six months ended June 30, 2019 for the Group increased to $21.0 million, 95% over the same period in 2018. The primary drivers of the increase were the contributions of Slimline and Hawk, which were acquired on May 30, 2018 and June 28, 2018 respectively, although both Blaze King and Unicast realized higher sales as well.

Overall gross profit for the Group increased by $3.4 million, or 74%, in the first half of 2019 relative to the first half of 2018. Gross profit percentage for the Group over the same period declined to 38% from 42%, driven by the change in overall product mix in the period related to the acquisitions of Slimline and Hawk, the negative impact of tariffs on Chinese steel products on Unicast's gross profit, and the negative effect of the slowdown in oil and gas activity in Western Canada on Hawk's results, particularly in Q1 2019.

In each subsidiary, there are substantial fixed costs that do not meaningfully fluctuate with product demand in the short-term. Such costs are included in both manufacturing costs and operating expenses. Overall operating expenses increased from $5.2 million in the first half of 2018 to $7.4 million in the first half of 2019. The primary drivers of the year-over-year increase were: amortization and depreciation which increased by $0.5 million; salaries, wages and benefits which increased by $1.2 million; and selling, general and administration costs which increased by $0.6 million. The increases in salaries, wages and benefits, and selling, general and administration costs were based primarily on increased scale with the acquisitions of Slimline and Hawk, and some increases were also experienced in Blaze King and Head Office. These increases were partially offset by a $0.3 million decrease in professional fees related to lower acquisition costs in the respective periods.

Adjusted EBITDA for the six months ended June 30, 2019 was $2.3 million, a $1.5 million increase compared to the first half of 2018. Adjusted EBITDA increased due primarily to the acquisitions of Slimline and Hawk but was negatively affected by the tariffs and slowdown in oil and gas activity noted above.

Foreign exchange gains and losses also impacted overall profit differences between the first half of 2019 and the first half of 2018. The first half 2019 foreign exchange losses of $0.3 million were a result of the $0.06 decrease in the value of the United States dollar, relative to the Canadian dollar, through the first half of the year. Conversely, in the first half of 2018 the foreign exchange gains of $0.6 million were a result of the $0.06 increase in the value of the United States dollar through the first half of last year.

Outlook

The Company has continued to advance its growth strategy in 2019. As previously announced, in August 2019, the Company acquired Northside. This is the third acquisition completed in the last fifteen months, further diversifying the Group and its customer base, and strategically strengthening its mix of product offerings and industry exposure. Moreover, the expanded scale of the Group will better position Decisive to withstand near-term fluctuations in demand driven by weather, seasonality or other macro-economic factors and therefore sustain a base level of cash flow for servicing the Company's debt obligations and its monthly dividend.

In conjunction with the acquisition of Northside, the Company also entered into a credit agreement to refinance its existing debt structure. The new debt arrangement doubled the size of the Company's available operating line to $10 million and replaced the current amortizing term loan with an interest only term loan. Moving to interest only financing better aligns with Decisive's objectives as it provides flexibility to manage through short-term fluctuations in demand driven by weather, seasonality or other macro-economic factors.

Management remains confident in its long-term strategic and operational plans. The Company's seasoned leadership is encouraged about the long-term business prospects of each of its subsidiaries and believes that Group is well positioned for future growth. Decisive is committed to enhancing customer service and growing the sales teams to accommodate a plan of steady growth of its current operating subsidiaries.

Management is also confident that its disciplined acquisition approach is the best path to generating shareholder value in the long term. Decisive continues to identify and evaluate potential acquisitions which, if completed, will bolster its diversity and add strength and resilience to operations. Decisive's acquisition pipeline includes target companies identified through an expanded network of referral sources that regularly present it with potential acquisitions and by Company management who independently assesses certain markets and regions to identify potential targets. While deal flow is considered strong, there can be no assurance that target companies identified from time to time will meet Decisive's acquisition criteria or that Decisive will successfully acquire identified target companies that meet such criteria.

About Decisive Dividend Corporation

Decisive Dividend Corporation is an acquisition-oriented company, focusing on the manufacturing sector. The Company uses a disciplined acquisition strategy to identify already profitable, established companies that have strong management teams, generate steady cash flow, operate in non-cyclical markets, and have opportunity for future growth.

FOR FURTHER INFORMATION PLEASE CONTACT:

David Redekop, Director and Chief Corporate Development Officer

or

Rick Torriero, Chief Financial Officer

#201, 1674 Bertram Street

Kelowna, BC V1Y 9G4

Telephone: (250) 870-9146

Sign up for email notifications of all Company press releases at www.decisivedividend.com.

Cautionary Statements

Forward-Looking Statements

Certain statements contained in this press release constitute forward-looking information. These statements relate to future events or future performance. The use of any of the words "could", "intend", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on management's current beliefs, assumptions and expectations as to the outcome and timing of such future events. Actual future results may differ materially. In particular, this press release contains forward-looking information relating to the objectives of the Company with respect to its operating subsidiaries and potential future acquisitions, as well as forward-looking information relating to the flexibility to manage through short-term fluctuations in demand afforded by moving to interest only financing. Risk factors that could cause actual results or outcomes to differ materially from the results expressed or implied by forward-looking information include, among other things: economic, industry, market and operational risks associated with the businesses carried on by operating subsidiaries of the Company, the failure to successfully identify and acquire target companies meeting the Company's standards and other risks, all as more particularly described in the management discussion and analysis of the Company available on the Company's profile at www.sedar.com. The Company cautions the reader that the risk factors referenced above are not exhaustive. The forward-looking information contained in this release is made as of the date hereof and the Company is not obligated to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Because of the risks, uncertainties and assumptions contained herein, investors should not place undue reliance on forward-looking information. The foregoing statements expressly qualify any forward-looking information contained herein.

Not for distribution in the United States

This press release is not for distribution to U.S. Newswire Services or for dissemination in the United States.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Copyright (c) 2019 TheNewswire - All rights reserved.

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