OTTAWA, May 3, 2019 /CNW/ - Clearford Water Systems
Inc. ("Clearford" or the "Company"), (TSXV: CLI), today announced
it has entered into a purchase agreement to purchase the water and
wastewater assets (ASI Water) of ASI Group Ltd, an Ontario-based water and wastewater management
business. The Company also announced its consolidated audited
results for the fiscal year ended December
31, 2018. The audited consolidated results are presented in
accordance with IFRS (all figures in Canadian dollars).
Clearford announced today that it has entered into a definitive
agreement with ASI Group Limited to acquire its ASI Water business
subject to meeting final conditions of the Asset Purchase Agreement
and completion of the necessary regulatory filings with the TSX-V.
Clearford will pay $5 million in cash
and issue $1 million in
non-convertible preferred shares in a new wholly-owned subsidiary
(Clearford ASI Inc.) redeemable over a 5-year period for the ASI
Water assets. Clearford ASI is expected to contribute $5 million in annual revenues and $750,000 in earnings before interest, taxes and
depreciation and amortization ("EBITDA") annually following the
close. The transactions will be financed through a new long-term
loan which will be secured by the new asset. The terms and
conditions of the new long-term loan are still to be finalized.
"The acquisition of ASI Water is a major step forward for
Clearford in delivering on our long-term strategy of becoming a
water utility," said Kevin Loiselle,
President and CEO of Clearford. "In addition to boosting our
in-house expertise, revenues, and business footprint, this
expansion of Clearford sends a clear message to our industry
partners and prospective clients that we are committed to driving
growth and innovation in the decentralized water and wastewater
management sector. Our aim is to provide comprehensive solutions
for communities, companies, and other stakeholders to access safe
drinking water and reliable wastewater servicing, and the ASI Water
team strengthens our ability to deliver."
ASI Water has a well-established client base spread across
Ontario. The combined Clearford
Waterworks Inc. and new Clearford ASI Inc. entities will be one of
the largest operators of private water and wastewater treatment
facilities in Ontario and together
have considerable potential for synergy. Going forward, the
combined operations and maintenance team will be able to provide
enhanced geographic coverage and faster response times,
contributing to expanded capacity for additional operations
contracts and new site services for the companies'
clients.
"These developments are all part of our strategic plan to
strengthen Clearford's robust capabilities in the decentralized
water and wastewater treatment sector while driving sustainable
business growth," noted Mr. Loiselle. "We see considerable
potential for further expansion of our integrated water-related
services spanning the entire project lifecycle – from design-build
contracts to operation and maintenance – as we offer professional
services, end-to-end engineered solutions, and project-based
financing."
Clearford today released results for the financial year ended
December 31, 2018. The audited
consolidated financial statements are presented in accordance with
IFRS (all figures in Canadian dollars).
Revenue for the quarter was $1,519,399, up from $1,174,064 in the same quarter last year. The
operating loss before net financing costs for the quarter was
$2,457,841, compared with
$873,412 for the same quarter last
year. Net financing costs for the quarter were $1,426,074, compared with $970,229 for the same quarter last year. Overall,
the net loss for the quarter was $3,894,721 ($0.04
per share), compared with $1,845,454
($0.02 per share) for the same
quarter last year.
For the fiscal year ended December
31, revenue was $6,430,333
(compared with $3,894,260 for the
same period last year). Revenues for the year were below the
forecast estimate of $7.2 -
$7.5 million as a result of the
adverse weather conditions which impacted the delivery of design
build projects at the end of the year. The Company reported an
operating loss was $6,967,504
(compared with $2,343,884 for the
same period last year). The operating loss included an impairment
on its financial operating asset for a design, build, operate and
financing project due to a change in assumptions to reduce the
number of users attached to the system over the remaining life of
the contract and a foreign exchange loss on long-term borrowings in
the amount of $1,289,913. Net
financing costs were $3,639,520,
compared with $2,372,321 for the same
period last year. The net loss for the fiscal year ended
December 31, 2018 was $12,048,705 ($0.12
per share), compared with $5,687,047
($0.06 per share) for the same period
last year. The weighted average number of shares outstanding during
the year was 102,027,729 (88,812,338 in previous fiscal year).
UV Pure Technologies Inc. (UV Pure) segmented revenues for the
three-month period and fiscal year ended December 31, 2018 were $552,808 and $2,732,359, respectively, compared with
$758,942 and $3,352,306 for the corresponding periods last
year. The decrease relates primarily due to the delay in the launch
of its next-generation product until 2019 as opposed to the spring
of 2018 as communicated to customers by the former president and
CEO of UV Pure. The new generation products are in final testing
stage and are expected to be released for sale during the middle of
the 2nd quarter of fiscal 2019.
The cost of revenue for the quarter increased to $1,414,457 compared with $578,893 in the same quarter last year. The
increase was related primarily to the addition of Clearford Koester
Canada Inc. and Clearford Waterworks through the 2017 acquisition
and was exacerbated by issues in the Clearford Koester
manufacturing division where projects were delayed or additional
costs were incurred to make adjustments to treatment products
delivered by Koester Canada prior to
the close of the acquisition. These activities required the Company
to invest a significant amount of resources and funding to
implement corrective actions for the treatment plants.
Additionally, the cost of revenue increased at UV Pure based on
supply shortages and supply chain management as it begins to
transition from its second-generation product to its
third-generation product. For the full fiscal year, cost of revenue
increased to $4,463,174 from
$1,978,953 in the previous year. In
addition to the items discussed above, the additional increases
relate primarily to increased revenues on the Operations and
Maintenance portion of Clearford Waterworks following the
acquisition in November 2017.
Sales and marketing costs increased to $362,173 and $1,436,522 for the three-month period and fiscal
year ended December 31, 2018,
respectively. During the corresponding three-month period and prior
fiscal year, these costs were $406,979 and $1,366,209, respectively. This decrease in the
three months reflects lower travel costs during the period while
the year over year increase reflects additional resources and
travel costs required with the addition of Clearford Koester Canada
Inc.
Costs of engineering, research and development decreased to
$165,884 and $713,454 for the three-month period and fiscal
year ended December 31, 2018,
respectively. During the corresponding three-month and prior fiscal
year, these costs were $181,054 and
$799,403 respectively. This decrease
relates primarily to a reduction in R&D and engineering staff
at Clearford and UV Pure, which was partially offset by staff added
at Clearford Koester Canada Inc.
General and administration costs increased to $1,291,896 and $5,151,876 for the three-month period and fiscal
year ended December 31, 2018,
respectively. During the corresponding prior year three-month
period and fiscal year, these costs were $976,600 and $2,625,111 respectively. The increase relates
primarily to the addition of Clearford Koester Canada Inc. and
incremental resources required to continue to execute the Company's
long-term business plan.
Clearford ended the 2018 financial year with unrestricted cash
of $228,468 on December 31, 2018, compared with $1,217,373 on December 31,
2017.
The Company's year-end audited consolidated financial statements
and MD&A are available at www.SEDAR.com. Neither the 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.
About Clearford Water Systems Inc.
Clearford Water Systems Inc. is a provider of unified water
management solutions for the design, deployment, financing, and
operation of water infrastructure systems. The Company's
technology-based water solutions include Clearford One®
wastewater infrastructure systems, Clearford M-brane™ packaged
treatment solutions, and a full range of UV Pure® water
disinfection products. For more information, visit
www.clearford.com.
Forward-Looking Statements
This news release contains certain statements that constitute
forward-looking statements as they relate to the Company and its
management. Forward-looking statements are not historical facts but
represent management's current expectation of future events, and
can be identified by words such as "believe," "expects," "will,"
"intends," "plans," "projects," "anticipates," "estimates,"
"continues," and similar expressions. Although management believes
that the expectations represented in such forward-looking
statements are reasonable, there can be no assurance that they will
prove to be correct.
By their nature, forward-looking statements include assumptions
and are subject to inherent risks and uncertainties that could
cause actual future results, conditions, actions or events to
differ materially from those in the forward-looking statements. If
and when forward-looking statements are set out in this news
release, Clearford will also set out the material risk factors or
assumptions used to develop the forward-looking statements. Except
as expressly required by applicable securities law, the Company
assumes no obligation to update or revise any forward-looking
statements. The future outcomes that relate to forward-looking
statements may be influenced by many factors, including, but not
limited to: industry cyclicality; the ability to secure third-party
agreements; successful integration of Clearford's system with
third-party technology; competition; reduction in demand for
products; collection from customers; relationships with suppliers;
product liability; intellectual property; reliance on key
personnel; environmental factors; interest rates; uninsured and
underinsured losses; operating hazards; risks of future legal
proceedings; income tax matters; credit facilities; availability
and terms of financing; distribution of securities; restrictions on
potential growth; effect of market interest rates on price of
securities; and potential dilution.
SOURCE Clearford Water Systems Inc.
