2012 was the game changing year for ESE when revenue started to increase substantially and yearly losses turned into major profits. Revenue between 2009 to 2012 was under $2.5 million per year. Afterwards it was always over $5 million. Assets started to increase and liabilities decreased. This was all done without dilution. ESE is leveraged towards the US dollar and this is a major benefit right now as a Canadian based company. Below are the yearly breakdowns from 2012 to 2015 + Q1 2016
Year End: 2012
Total Assets: $2,415,938
Total Liabilities: $2,577,937
Revenue: $5,113,248
Earnings: $197,953 or $0.018c
Year End: 2013
Total Assets: $2,838,026
Total Liabilities: $2,634,966
Revenue: $5,578,487
Earnings: $374,557 or $0.035c
Year End: 2014
Total Assets: $2,462,691
Total Liabilities: $2,481,167
Revenue: $5,248,724
Earnings: Loss of $232,038 – Read MD&A statement below (Due to oil price starting to drop)
The financial results for the year ended June 30, 2014 show a loss as compared to a profit at June 30, 2013. The decrease in comprehensive income can be attributed primarily to Allan R. Nelson Engineering (1997) Inc showing a significant loss during 2014. This was exacerbated by reduced profits in the Encore Electronics business unit. Allan R. Nelson Engineering saw its year start off with several major projects being put on hold or cancelled by clients as they anticipated market changes. Our clients told us that many of these projects were due to restart soon, however that status remained throughout most of the year.
Year End: 2015
Total Assets: $2,911,638
Total Liabilities: $2,273,047
Revenue: $5,834,345
Earnings: $656,878 or $0.063c – As you can see, the company made changes and was profitable again
This year has seen modest improvements in sales in both the engineering business and the electronics manufacturing business. Combined with modest improvements on the cost side we have had a significant improvement in the bottom line for both business units. Engineering has attained just short of break even and the electronics manufacturing has doubled its bottom line contribution to the business. During the year the company continued to capitalize R&D into new products. Management is confident that the potential market for these new products exceeds the capitalized value of the R&D. A significant portion of this year’s income is a direct result of increases in the value of the US dollar investments in our electronics manufacturing subsidiary in the United States.
Quarter: Q1 2016
Total Assets: 2,946,395
Total Liabilities: $2,221,793
Revenue: $1,298,639
Earnings: $86,200 or $0.0082c
If you read the MD&A, this quarter had some issues with orders and of course decreased demand from the oil engineering subsidiary. However, with the US dollar rising and added orders coming in Q2 that were supposed to be in Q1, it’s inevitable that ESE.V will keep putting out profitable quarters and paying off liabilities while increasing their assets. Their callable debt only has a small portion to be paid yearly and then will be fully paid by 2026, so there is little concern in this department.
From MD&A: Once again this quarter is impacted by the continuing low price of oil. The engineering division shows almost a 40% decrease in revenue over the same period last year. On a straight US dollar basis the electronics division is down slightly, although after adjusting for currency, the Canadian dollar value of the first quarter sales are up slightly from the first quarter last year. Overall our revenues are down about 10% from the first quarter last year. The Allan R. Nelson Engineering division has reduced staffing and continues to monitor costs. We anticipate continued slow revenue for the foreseeable future due to the continued low price of oil and the resulting impacts on the Alberta economy. While revenue potential for Encore Electronics continues to look good, slow parts delivery in the first quarter has pushed some customer deliveries into the second quarter. The net effect is that while still profitable, the level of profit is down from this quarter last year
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