- Integrated organizational structure with three reporting segments: Electronic Systems, Personal Protection Systems, and Services - Record revenue expected for Q4 ended September 30, 2007 - Fiscal 2008 indicated revenue in excess of $500 million confirmed, reflecting strong order flows
OTTAWA, Oct. 25 /CNW Telbec/ - Allen-Vanguard Corporation ("Allen-Vanguard" or the "Company") (TSX:VRS) today provides a general update, including its integration plan, new senior management appointments, revenue for the fourth quarter of fiscal 2007, as well as an update to the outlook for the combined Med-Eng Systems Inc. ("Med-Eng") and Allen-Vanguard enterprise for fiscal 2008, which commenced October 1, 2007. All amounts are in Canadian dollars unless otherwise noted.
The Company announced an integrated organizational structure with three reporting business segments: Electronic Systems, Personal Protection Systems and Services, each of which has operations in North America servicing the U.S., Canada and Latin America, and in the U.K. servicing overseas international markets.
- Electronic Systems is comprised mainly of the Company's electronic counter measures (ECM) technology, commonly called "jammers", which prevent the detonation of remotely controlled improvised explosive devices ("RCIED"s). - Personal Protection Systems includes bomb disposal suit and chem-bio suit ensembles, body armour to protect against improvised explosive devices ("IED"s), bomb search and disposal tools and equipment, and blast mitigation and decontamination equipment. - Services entails counter-IED intelligence, training and advisory services, including the "Triton" intelligence report, and operates under the name Hazard Management Solutions ("HMS"). "Together, these products and services provide a unique platform for comprehensive mission support to military and homeland security forces for sustainable capability against the continuously evolving threat of IEDs, whether explosive, bio-chemical or radiological, including RCIEDs," said David E. Luxton, President and CEO. The Company plans to report revenue and gross margin for these segments commencing the fourth quarter of fiscal 2007 which ended September 30, 2007. In conjunction with its integration plan the Company announced the following new senior management appointments, all of which are effective November 1, 2007: - Mr. Paul Timmis, formerly Vice President, Electronic Systems, at Med-Eng, becomes Corporate Vice President, Electronic Systems. - Mr. Jon Earey, formerly Vice President of Personal Protection Systems at Med-Eng, becomes Corporate Vice President, Personal Protection Systems. - Mr. Roger Davies, Managing Director of Hazard Management Solutions Inc., takes on the additional role of Corporate Vice President, Services. - Mr. Guido Curridor, formerly Vice President, Operations, at Med-Eng, becomes Corporate Vice President, North American Operations - Mr. Bob Adams, incoming Managing Director of Allen-Vanguard U.K. Ltd., takes on the additional role of Corporate Vice President, International Operations. - Mr. Aris Makris, formerly Chief Technology Officer and Vice President at Med-Eng, becomes Corporate Vice President and Chief Technology Officer.
Financial update and outlook for fiscal 2008
On September 27, 2007, the Company announced the completion of a $300 million equity offering by way of prospectus, with use of net proceeds to eliminate $150 million in subordinated debt financing and to reduce long-term debt. The Company confirms that the subordinated debt has been eliminated, and that long-term debt has been reduced to approximately $263 million. "The reduction in debt substantially improves our operating flexibility and positions our balance sheet for both the scale and the strong growth outlook we foresee for the combined businesses," said Mr. Luxton.
This growth was evident in the fourth quarter ended September 30, 2007, when the Company achieved very strong revenue from the Allen-Vanguard and HMS businesses. In addition, Med-Eng contributed approximately $14 million to consolidated revenue, representing its revenue from the closing date of September 17 to September 30, 2007. Therefore, revenue for fiscal 2007 is expected to exceed $93 million. The Company noted that, in accordance with Canadian generally accepted accounting principals, the fourth quarter and fiscal year results will include substantial charges and amortization related to the acquisition and financing of Med-Eng and Hazard Management Solutions, which will be partially offset by a foreign exchange gain on the translation of U.S. dollar denominated debt. Allen-Vanguard expects to release audited financial results for fiscal 2007 in the week of December 10, 2007.
The Company reported that sales order flow and order size have increased with the acquisition of Med-Eng, with combined order intake of more than $60 million since the start of fiscal 2008, including approximately $40 million in ECM orders for U.S. customers, $12 million for Personal Protection Systems products, and approximately $8 million in Services contracts.
"The pipeline of sales opportunities remains very strong and we believe we are very well positioned to capture additional business globally, especially from existing and new ECM programs in the U.S., including the emerging Homeland Security market where we have a first mover advantage," said Mr. Luxton.
In the initial Med-Eng acquisition announcement, Allen-Vanguard noted the scale of the combined business and gave an indication that on a pro forma basis fiscal 2008 combined revenue would be in the range of $500 million, with EBITDA of approximately $160 million. "Based on backlog and expected orders, largely from existing programs, we remain confident that the business is tracking to this level for fiscal 2008," said Mr. Luxton. "And, as noted in our September 28, 2007 order announcement for $12.2 million in ECM spares, we are now beginning to see more recurring revenue in the sales mix as our installed base of ECM equipment expands." The Company stated that its installed base of ECM units currently numbers several thousand and is expected to more than double in fiscal 2008, including vehicle-mounted ECM systems for existing and new vehicles such as the Mine Resistant Ambush Protected (MRAP) vehicle. For clarity, the Company added that its ECM systems for MRAP vehicles are procured as Government Furnished (GFE) equipment, and these ECM sales are therefore not dependent on which vehicle manufacturer produces the MRAP.
The Company added that it expects the Electronic Systems division will be the largest contributor to revenue and EBITDA, driven by a combination of continued government commitment to ECM spiral programs for sustained force protection capability, the Company's ability to exploit its strong partnerships in the U.S. with Lockheed Martin and General Dynamics, the mission-proven reputation of its technology, and the advanced new versions and enhancements it is bringing to market. This division will also likely report the highest margins. Given that most of the manufacturing for the ECM components is taking place in the U.S., the Company has a natural hedge against most of the recent strong rise in the Canadian dollar vis a vis the U.S. dollar. Personal Protection Systems is expected to be the next largest division, contributing about 20% of revenue. The Services division is expected to contribute just under 10% of revenue, and to sustain its high growth momentum with consistent and predictable financial results.
Potential partnerships and teaming arrangements
The Company stated that as part of its long-term business development plan it foresees partnerships with prime defence contractors and systems integrators on major programs in North America and overseas. "Major military and Homeland Security programs have been outsourced to these firms, and in many cases Allen-Vanguard has products and services that fill important capability gaps," commented David Luxton. "As part of our overall corporate business development strategy we have been engaged in discussions with prime contractors on a number of opportunities and we are optimistic that this will result in new partnership or teaming announcements."
U.S. public listing under consideration
The Company stated that, while it has made no formal decision yet regarding a U.S. stock exchange listing, it is actively evaluating requirements and strategies. "We recognize the potential to increase the following and liquidity in our stock through a U.S. listing of our shares," said David Luxton. "At the same time, the logistics and costs of such a decision need to be carefully assessed. We will be updating investors as we conclude on this."
Allen-Vanguard Corporation supports the mission of military and homeland security forces around the world with leading proprietary solutions for protection and counter-measures against hazardous devices of all kinds, whether chemical, biological, radiological or explosive ("CBRNE"), including improvised explosive devices ("IED"s) and remotely controlled IEDs ("RCIED"s). Allen-Vanguard equipment is in service in more than 120 countries. Products include Electronic Counter-Measures ("ECM") equipment for jamming remote detonation of terrorist devices, specialty security equipment for Explosive Ordnance Disposal ("EOD"), remote intervention robots for hazardous applications, and personal protective wear for use in dealing with explosive and bio-chemical agents. Allen-Vanguard is the developer and/or sole, worldwide licensee of proprietary technologies such as the Med-Eng EOD9(TM) bomb suit, the Defender(TM) and Vanguard (TM) Mk2 bomb disposal robots, and the Universal Containment System and CASCAD Foam system for blast mitigation and decontamination of bio-chemical warfare agents. Professional services encompass counter-IED intelligence, training and advisory services, including the Triton(TM) Report on terrorist incidents around the world. The Company operates globally through its wholly owned subsidiaries under the names "Allen-Vanguard", "Med-Eng" and "Hazard Management Solutions". Head office operations are located in Ottawa, Ontario, Canada, with manufacturing operations in Stoney Creek and Pembroke, Ontario; Ogdensburg, New York; Tewkesbury, U.K.; and Cork, Ireland; The Company has professional services operations in Shrivenham, U.K., aand in the U.S. in Arlington, Virginia. Sales offices are located in Canada, the U.S., the U.K. and Asia. Allen-Vanguard's shares are listed on The Toronto Stock Exchange (TSX) under the symbol "VRS".
This press release may contain forward-looking statements, which reflect Allen-Vanguard's current expectations regarding future events, its strategy, expected performance and condition. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects," "anticipates," "plans," "believes," "estimates" or negative versions thereof and similar expressions. In addition, any statement that may be made concerning future performance, strategies or prospects, and possible future acquisitions or dispositions, is also a forward-looking statement. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risks, uncertainties and assumptions about the Company and economic factors. Forward-looking statements are not promises or guarantees of future performance, and actual events and results could differ materially from those expressed or implied in any forward-looking statements made about the Company. Any number of important factors could contribute to these digressions, including, but not limited to, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings, and catastrophic events. We stress that the above-mentioned list of important factors is not exhaustive. We encourage you to consider these and other factors carefully before making any investment decision and we urge you to avoid placing undue reliance on forward-looking statements. Further, you should be aware that the Company disclaims any obligation to publicly update or revise any such forward-looking statements whether as a result of new information, future events or otherwise, prior to the release of the next Management Discussion and Analysis to be released by the Company or except as required by law.
To find out more about Allen-Vanguard Corporation (TSX: VRS), visit our website at www.allen-vanguard.com.