Revenue Declines due to Project Delays while Administrative Costs Reduced; Growth Markets Continue to Perform Well
Toronto, Ontario--(Newsfile Corp. - August 28, 2018) - UGE International Ltd. (TSXV: UGE) (the "Company" or "UGE"), a leader in renewable energy solutions for the commercial and industrial sector, reported its financial results for the three and six months ended June 30, 2018. UGE reports all amounts in United States dollars.
Second Quarter 2018 Highlights
Revenue for the quarter was $3.4 million, which was lower than the comparable period due to delays in certain North American projects. A bright spot was a 10-fold increase in revenue in the Philippines, which accounted for 28% of revenue for the six months ended June 30, as well as continued strength in winning new self-developed projects. After the close of the quarter, the Company announced its largest US project yet, worth approximately $8.4 million.
Selling, general, and administrative expenses were down 26% to $1.3 million, compared with $1.7 million in the prior year second quarter as the Company focuses on moving towards sustained profitability and shifts its resources away from less profitable business and towards developing higher margin projects in more promising growth areas.
The Company has made several changes to its executive team and organizational structure to strengthen execution capabilities and achieve its growth and profitability goals in the near term.
Selected Financial Information
| Three months ended June 30, | Six months ended June 30, | |||
| 2018 | 2017 | 2018 | 2017 | |
| Revenue | $ 3,428,225 | $ 6,312,272 | $ 9,488,158 | $ 11,810,366 |
| Cost of sales | (3,212,353) | (5,104,972) | (8,189,862) | (10,015,867) |
| Gross profit | 215,872 | 1,207,300 | 1,298,296 | 1,794,499 |
| Gross profit margin | 6% | 19% | 14% | 15% |
| Expenses | ||||
| Selling, general, and administrative | (1,281,452) | (1,731,401) | (2,463,904) | (2,523,887) |
| Project loss | (295,196) | - | (650,178) | - |
| Impairment loss | (2,981,198) | - | (2,981,198) | - |
| Net finance costs | (280,800) | (90,722) | (522,393) | (194,083) |
| Income tax expense | (11,500) | (45,675) | (115,532) | (97,053) |
| Net loss for the period | $ (4,634,274) | $ (660,498) | $ (5,434,909) | $ (1,020,524) |
| Adjusted EBITDA | $ (928,347) | $ 12,103 | $ (996,895) | $ (170,927) |
| Adjusted EBITDA margin | -27% | 0% | -11% | -1% |
| Loss per share - basic and diluted | $ (0.11) | $ 0.02 | $ (0.13) | $ (0.03) |
Analysis of Financial Results
During the three months ended June 30, 2018, UGE experienced delays in certain North American projects, which directly resulted in slower revenue recognition, impacting profitability results. In addition, as most revenue came from one lower-margin project, and because of a write-down that impacted cost of goods sold, gross margins were historically low. The Company was more conservative on recognizing margins on this portfolio in the second quarter, based on its experience during the first phase of the portfolio's deployment, but is hopeful to ease such conservatism on future sites within the portfolio.
Meanwhile, SG&A costs were reduced by 26% compared to the prior year comparative period as the Company shifted resources away from less profitable business areas and towards developing projects in higher growth regions.
With respect to project execution, the Company has since replaced its executive in charge of project deployment, as well as the Company's CFO, to ensure that UGE uses its extensive experience as a strength to reach its growth and profitability goals going forward. The delays were primarily due to management of project timelines and a sub-contractor error, two areas that the Company has added extra emphasis on starting in the period since the close of the quarter.
"The Company faced a challenging quarter due to weaker-than-anticipated project execution," said UGE's CEO, Nick Blitterswyk. "We remain focused on executing our strategic plan, including the phenomenal growth in our Philippines market and strong traction in the US, and look forward to sharing additional progress in the second half of the year."
Full financial results and Management's Discussion and Analysis are posted to SEDAR (www.sedar.com) and are available through the Company's website.
About UGE
UGE delivers immediate savings to businesses through the low cost of solar energy. We help commercial and industrial clients become more competitive by providing distributed renewable energy solutions at no upfront cost, generating long-term economic and environmental returns. With over 370 MW of global experience, we work daily to power a more sustainable world. Visit us at www.ugei.com.
For more information, contact:
917-720-5685
investors@ugei.com
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This press release and the Company's Management Discussion and Analysis for the three and six months ended June 30, 2018 (the "MD&A") contain forward-looking information that involves material assumptions and known and unknown risks and uncertainties, certain of which are beyond the Company's control. Such assumptions, risks and uncertainties include, without limitation, those associated with, loss of markets, expected sales, future revenue recognition, currency fluctuations, the effect of global and regional economic conditions, industry conditions, changes in laws and regulations, and changes in how they are interpreted and enforced, the lack of qualified personnel or management, fluctuations in foreign exchange or interest rates, demand for the Company's products, and availability of funding. The Company's performance could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if they do so, what benefits the Company will derive there from. The forward-looking information is made as of the date of this press release or the MD&A, as applicable, and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws. Actual events or results could differ materially from the Company's expectations and projections.
