Science & Technology
Science and Technology
Science and Technology 
Wed, August 10, 2011
Tue, August 9, 2011
Pure Technologies Ltd. Announces Second Quarter 2011 Results
CALGARY, Aug. 9, 2011 /CNW/ - Pure Technologies Ltd. ("Pure") (TSX: PUR) today announced its financial results for the three months ended June 30, 2011.
Financial highlights for the quarter include:
- Revenue of $12.2 million, a slight 4% decrease over $12.8 million for the second quarter of 2010. Revenue from inspection services increased by 930% over the second quarter of 2010.
- A decrease in net income from $3.0 million in the second quarter of 2010 to a loss of $0.8 million. A significant equipment shipment to the Great Man-Made River Project resulted in a direct increase to net income in 2010.
- EBITDA of $1.3 million for the quarter compared to $3.6 million during the second quarter of 2010 as a result of lower than expected revenues and higher operating expenses. The temporary discontinuance of operations in Libya during the first quarter is a major factor here.
- An increase in gross margin from 62.5% in 2010 to 77.8% reflecting higher inspection service revenue. This, of course, requires additional engineering and operations expense.
- Earnings per share of $(0.02), on a fully diluted basis, compared to $0.07 for the second quarter of 2010.
Other notable developments during the period include:
- The acquisition of Electromechanical Technologies Inc. ("EMTEK"), a Salt-Lake City-based developer of advanced pipeline inspection technologies. While the Company is currently focused on prestressed concrete cylinder pipelines (PCCP), this acquisition positions Pure in the larger market for condition assessment of metallic water and wastewater pipelines.
- Graduation from the TSX Venture Exchange to the Toronto Stock Exchange. This marked an important milestone for Pure, creating improved liquidity and visibility for the Company and its shareholders.
- The completion of a number of significant projects worldwide including: the first phase of a large scale project in Ecuador consisting of both robotic and SmartBall inspections; the first AFO installation for the City of Ottawa; an inspection of a critical cooling water pipeline for a power plant in Arizona, demonstrating the applicability of our services to the power industry; PipeDiver and SmartBall inspections as part of the multi-million dollar contract with Miami-Dade Water and Sewer Department.
- Increased work in Asia including the first P-Wave project in China; a SmartBall inspection in Macau; and the signing of an MOU with Maynilad Water Services Inc. to form a Joint Venture to deliver pipeline inspection services to the water sector in the Philippines and to other selected markets.
"While our second quarter results were impacted as a result of the Libyan situation and costs associated with employee terminations, acquisitions, and IFRS adjustments, we continue to rapidly grow our business in North America and internationally", said Jamie Paulson, Chairman. "We are pleased with our progress in growing our technical services business, which resulted in a quarterly gross margin of 78% compared to 63% for the corresponding period last year.
"Looking ahead to the remainder of 2011, our current confirmed backlog is in excess of $35 million, $10.7 million of which is attributable to the Libyan contract. We have also received verbal confirmation of projects in excess of $1 million which are subject to the normal contract review process and final documentation. Regarding 2011 earnings, we are expecting a weaker third quarter and a strong fourth quarter.
"We continue to follow developments in Libya, particularly as they relate to our work there with the Great Man-Made River Authority (GMRA). We have been granted exemptions from the economic sanctions imposed by the Canadian Government and the United Nations and have applied to the US Treasury's Office of Foreign Asset Control for similar exemptions since the letter of credit from GMRA is routed through a US bank.
"The impact of the turmoil in Libya on our business this year cannot be overstated. In 2010, Libya accounted for approximately 50% of our revenue; for 2011, we had budgeted a 30% contribution from Libya to our 2011 revenue expectation of $75 - $80 million. Furthermore, we have assumed additional engineering and operations expenses as a result of the EMTEK acquisition which is expected to be accretive to earnings next year. As a consequence of these factors and IFRS-related items, we expect to incur a loss in 2011. This will be mitigated should the final equipment shipment be made to the Great Man-Made River Project this year.
"Notwithstanding the Libyan setback, we have made significant strides in growing the business this year. Non-Libya revenue is expected to reach approximately $50 million, up from $29 million last year. Regionally, the bulk of the growth is coming from the Americas, with 2011 revenue expected to reach approximately $33 million, up from $24 million last year.
"As agencies worldwide look for cost-effective solutions to address excessive water loss, deteriorating infrastructure and shrinking budgets, we are well-positioned to take advantage of these opportunities through our dominant technology platform and geographic diversity. We remain committed to growing shareholder value in the long-term through investments such as the EMTEK and STS acquisitions, which will expand our services and geographic reach. Nevertheless, we are heavily focused on consolidating the acquisitions we have made over the past year, and optimizing operational efficiency. We expect that this will result in enhanced gross and net margins as our revenues increase," Mr. Paulson said.
Subsequent events included the award of a $2.7 million contract to supply pipeline leak detection and condition assessment technology to a major Asian water agency. The Company also announced a significant contract with the San Diego County Water Authority to supply monitoring and technical support, building on the work that was initially started in 2005. The Company has recently experienced a significant increase in high-value opportunities in the United Arab Emirates which is expected to result in strong revenue growth in the future.
| 2011 Q2 Financial Highlights | |||||
| Condensed Consolidated Statement of Comprehensive Income | |||||
| (unaudited) | |||||
| Three months ended | Six months ended | ||||
| June 30, 2011 | June 30, 2010 | June 30, 2011 | June 30, 2010 | ||
| Revenue | |||||
| Equipment sales | 2,405,000 | 9,490,000 | 3,141,000 | 11,210,000 | |
| Inspection services | 7,800,000 | 757,000 | 12,394,000 | 1,670,000 | |
| Consulting services | 907,000 | 1,649,000 | 2,592,000 | 3,335,000 | |
| Monitoring and technical support | 1,137,000 | 901,000 | 1,888,000 | 2,307,000 | |
| Total Revenue | 12,249,000 | 12,797,000 | 20,015,000 | 18,522,000 | |
| Cost of sales | 2,722,000 | 4,799,000 | 5,899,000 | 7,119,000 | |
| Marketing | 1,722,000 | 1,345,000 | 3,294,000 | 2,646,000 | |
| Engineering and operations | 3,767,000 | 1,554,000 | 7,052,000 | 2,953,000 | |
| General and administration | 4,105,000 | 1,436,000 | 9,530,000 | 3,434,000 | |
| Research and development | 624,000 | 647,000 | 1,462,000 | 1,272,000 | |
| Results from operating activities | (691,000) | 3,016,000 | (7,222,000) | 1,098,000 | |
| Interest income | 53,000 | 25,000 | 79,000 | 41,000 | |
| Loss before income taxes | (638,000) | 3,041,000 | (7,143,000) | 1,139,000 | |
| Income taxes | 181,000 | 70,000 | (1,327,000) | 78,000 | |
| Net loss for the period | (819,000) | 2,971,000 | (5,816,000) | 1,061,000 | |
| Other comprehensive income (loss) | |||||
| Foreign currency translation difference - foreign operations | 3,000 | 7,000 | 108,000 | (154,000) | |
| Other comprehensive income (loss) for the period | 3,000 | 7,000 | 108,000 | (154,000) | |
| Net loss and comprehensive income (loss) for the period | (816,000) | 2,978,000 | (5,708,000) | 907,000 | |
| Net loss per share | |||||
| - basic | $ (0.02) | $ 0.07 | $ (0.12) | $ 0.03 | |
| - diluted | $ (0.02) | $ 0.07 | $ (0.12) | $ 0.03 | |
| Condensed Consolidated Statement of Financial Position | |||
| (unaudited) | |||
| | | June 30 2011 | December 31 2010 |
| Assets | |||
| Current assets: | |||
| Cash and cash equivalents | 21,892,000 | 14,173,000 | |
| Accounts receivable | 40,880,000 | 41,394,000 | |
| Inventory | 7,067,000 | 4,313,000 | |
| Prepaid expenses | 826,000 | 1,203,000 | |
| Net investment in lease | - | 36,000 | |
| 70,665,000 | 61,119,000 | ||
| Property and equipment | 7,806,000 | 5,675,000 | |
| Goodwill | 23,379,000 | 22,125,000 | |
| Intangible assets | 13,925,000 | 11,466,000 | |
| Deferred tax asset | 3,271,000 | 1,251,000 | |
| 119,046,000 | 101,636,000 | ||
| Liabilities and Shareholders' Equity | |||
| Current liabilities: | |||
| Accounts payable and accrued liabilities | 4,321,000 | 6,180,000 | |
| Acquisition holdback payable | 4,250,000 | 4,250,000 | |
| Contingent consideration | 2,146,000 | 146,000 | |
| Deposits on sales contracts | 3,399,000 | 3,546,000 | |
| 14,116,000 | 14,122,000 | ||
| Contingent consideration | 3,300,000 | - | |
| Total liabilities | 17,416,000 | 14,122,000 | |
| Shareholders' equity: | |||
| Share capital | 110,683,000 | 91,360,000 | |
| Contributed surplus | 3,253,000 | 2,752,000 | |
| Share Purchase Warrants | 993,000 | 993,000 | |
| Accumulated other comprehensive loss | 811,000 | 703,000 | |
| Deficit | (14,110,000) | (8,294,000) | |
| 101,630,000 | 87,514,000 | ||
| 119,046,000 | 101,636,000 | ||
| 2011 Q2 Financial Highlights | ||||
| Condensed Consolidated Statement of Cash Flows | ||||
| (unaudited) | ||||
| June 30, 2011 | June 30, 2010 | |||
| Cash provided by (used for): | ||||
| Operating activities | ||||
| Loss for the period | (5,816,000) | 1,061,000 | ||
| Items not affecting cash: | ||||
| Depreciation and amortization | 3,731,000 | 897,000 | ||
| Share-based payments | 569,000 | 462,000 | ||
| Loss on disposal of assets | 87,000 | - | ||
| Unrealized foreign exchange (gain) loss | 201,000 | (62,000) | ||
| Deferred income taxes (recovery) | (1,957,000) | (40,000) | ||
| (3,185,000) | 2,318,000 | |||
| Change in non-cash working capital | ||||
| Accounts receivable | 459,000 | (5,071,000) | ||
| Inventory | (2,754,000) | (1,607,000) | ||
| Prepaid expenses | 374,000 | 56,000 | ||
| Accounts payable, accrued liabilities | (1,253,000) | (1,404,000) | ||
| Deposits on sales contracts | (149,000) | (50,000) | ||
| Net cash used in operating activities | (6,508,000) | (5,758,000) | ||
| Financing activities | ||||
| Issuance of share capital, net of costs | 18,947,000 | 28,154,000 | ||
| Net cash from financing activities | 18,947,000 | 28,154,000 | ||
| Cash flows from investing activities | ||||
| Additions to property and equipment | (863,000) | (670,000) | ||
| Acquisition of STS | (1,135,000) | - | ||
| Acquisition of Aqua | 20,000 | - | ||
| Acquisition of EMTEK | (2,930,000) | - | ||
| Patent and trade expenditure | (59,000) | (15,000) | ||
| Change in net investment in lease | 36,000 | 37,000 | ||
| Other non-cash expenses | 262,000 | - | ||
| Net cash used in investing activities | (4,669,000) | (648,000) | ||
| Net increase (decrease) in cash and cash equivalents | 7,770,000 | 21,748,000 | ||
| Cash and cash equivalents at December 31 | 14,173,000 | 15,565,000 | ||
| Effects of exchange rate fluctuations on cash and cash equivalents | (51,000) | (53,000) | ||
| Cash and cash equivalents at June 30 | 21,892,000 | 37,260,000 | ||
About Pure Technologies Ltd.
Pure Technologies Ltd. is an international asset management technology and services company which has developed patented technologies for inspection, monitoring and management of critical infrastructure around the world. Pure's business model incorporates four distinct but complementary business streams:
- Sales of proprietary monitoring technologies for pipelines, bridges and structures (SoundPrint®, SoundPrint® AFO);
- Recurring revenue from data analysis and site maintenance for these technologies, and from technology licensing;
- Premium technical services including inspection, leak detection and condition assessment (P-Wave®, SmartBall®, Sahara®, PipeDiver™, PureRobotics™);
- Specialized engineering services in areas related to asset management, primarily in the area of pipeline condition assessment for water and wastewater infrastructure (Openaka Corp., Price Brothers (UK) Ltd, and Jason Consultants).
Forward-Looking Statements
This release contains forward-looking statements. Forward-looking statements, without limitation, may contain the words "believes", "expects", "anticipates", "estimates", "intends", "plans", or similar expressions. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions and the Company's actual results could differ materially from those anticipated. Forward-looking statements are based on the opinions and estimates of Management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. In the context of any forward-looking information please refer to risk factors detailed in, as well as other information contained in, the Company's filings with Securities Regulators ([ www.sedar.com ]).
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