UGE Reports First Quarter 2019 Financial Results
Toronto, Ontario--(Newsfile Corp. - May 28, 2019) - UGE International Ltd. (TSXV: UGE) (OTCQB: UGEIF) (the "Company" or "UGE"), a leader in solar energy solutions for the commercial and industrial sector, reported its financial results for the three months ended March 31, 2019. UGE reports all amounts in US dollars.
The first quarter of 2019 saw UGE continue to reposition itself for future success. The Company has been shifting its focus from engineering, procurement and construction ("EPC") work in the Canadian market, where there have been dramatic policy reversals away from solar, to the US and Philippines markets, where UGE plays the role of both developer and EPC, earning higher margins as a result. In the first quarter, this saw Canadian revenue decline, which other markets were not yet able to offset, seeing overall Company revenue decline from $6.1 million to $2.1 million. This led to a loss of $0.5 million in the quarter.
However, there are clear signs the US/Philippines-focused strategy is starting to take hold. Backlog grew 10% to $28.7 million, virtually all of which is in these two markets, leading management to believe the Company will return to revenue growth in the latter half of 2019. In addition, as backlog projects include both development and deployment (EPC), gross margins are expected to continue to increase; the estimated gross margin on current backlog is 23%. Finally, the Company has reduced overhead expenses significantly, with SG&A expenses falling 31% versus the comparative quarter, to $0.8 million.
Select Financial Information
|Three months ended March 31,|
|Cost of sales||(1,486,080||)||(4,977,509||)|
|Gross profit margin||28%||18%|
|Selling, general, and administrative||(803,574||)||(1,169,600||)|
|Project-related gain (loss)||24,208||(354,982||)|
|Expected credit loss||(137,970||)||-|
|Net finance expense||(52,834||)||(241,593||)|
|Loss from operating activities||$||(511,503||)||$||(683,751||)|
|Income (loss) before income taxes||$||(511,503||)||$||(683,751||)|
|Income tax recovery (expense)||(36,361||)||(104,032||)|
|Net income (loss) for the period||$||(547,864||)||$||(787,783||)|
Analysis of Financial Results
Revenue for the three months ended March 31, 2019 was $2.1 million, a 66% decrease from the same period of the prior year, as the Company wrapped up past EPC projects from our Canadian entities and worked through the planning stage of a significant number of new projects in the US and Philippines. In particular, while revenue from the US and Philippines accounted for only $0.2 million during the first quarter, over 90% of the Company's current backlog is in these markets.
The gross profit margin for the three months ended March 31, 2019 increased to 28%, compared to 18% in the comparable quarter from the prior year and 10% in the 2018 calendar year, as revenue quality showed significant improvements, both in terms of the results of closing out past EPC projects, and in the higher margins expected from new projects in our growth markets.
Backlog grew 10% from the beginning of the quarter, to $28.7 million, and is now nearly entirely made up of projects for which UGE has played the developer role, which is expected to generate stronger gross margins going forward. The current estimate of gross margin on Committed Backlog is approximately 23% as the Company benefits from its refined focus; these projects will become revenue throughout 2019 and beyond.
Meanwhile, SG&A expenses of $0.8 million are in line with our goals to reach near term profitability.
The Company recorded a project-related gain of $24,208, as past EPC projects were closed out successfully. The Expected Credit Loss of $137,970 relates to the Company's implementation of IFRS-9 and not to any one specific project or receivable.
"The first quarter was another positive step forward in our plans to return to profitable growth in 2019," said UGE's CEO, Nick Blitterswyk. "While the first half of 2019 sees our revenue pass through a valley between past EPC projects and new self-developed projects, all signs point to near-term revenue growth, while benefiting from higher margins and lower expenses in our drive towards profitable growth."
Full financial results and Management's Discussion and Analysis are posted to SEDAR (www.sedar.com) and are available through the Company's website.
UGE delivers immediate savings to businesses through the low cost of solar energy. We help commercial and industrial clients become more competitive by providing low cost distributed renewable energy solutions at no upfront cost and maximum long-term benefit. With over 375 MW of global experience, we work daily to power a more sustainable world. Visit us at www.ugei.com.
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