Advantex Marketing International Inc.
CNSX : ADX

Advantex Marketing International Inc.

October 28, 2014 17:21 ET

Advantex Outlines Corporate Renewal Initiatives, Announces Fiscal 2014 Financial Results

TORONTO, ONTARIO--(Marketwired - Oct. 28, 2014) - Advantex Marketing International Inc. (CNSX:ADX), a specialist in marketing loyalty-reward programs, today outlined numerous measures it has taken to renew its business and put it on course for improved financial performance.

In a letter to shareholders accompanying its financial results for the fiscal fourth quarter and year ended June 30, 2014, Kelly Ambrose, Advantex's president and CEO, said: "The past year has been a challenging one for our company. But we have responded vigorously to the challenges, and believe we are now well placed to reap the fruits of our efforts."

Mr. Ambrose added: "We have strengthened existing partnerships and forged valuable new ones. We have reorganized our internal structure to focus more sharply on each of our three main business groups - CIBC/TD, Aeroplan and Caesars Entertainment. And we have acted decisively to put our balance sheet on a secure footing that reflects the current realities of our business."

Below is a summary of Advantex's fiscal 2014 results:

(All currency amounts are in Canadian dollars unless otherwise noted.)

Financial Highlights:

Fiscal 2014 Fiscal 2013 Increase/
(Decrease)
Revenues
Program operated in partnership with CIBC $14,025,000 $15,818,000 $(1,793,000)
Program operated in partnership with Aeroplan 2,505,000 1,067,000 1,438,000
Others 5,000 25,000 (20,000)
$16,535,000 $16,910,000 $ (375,000)
Net Income/(Loss) $ (715,000) $ 36,000 $ (751,000)

The fiscal 2014 performance reflects difficult business conditions for many of Advantex's roughly 1,700 merchants, resulting in a higher delinquency rate than expected on the company's Advance Purchase Marketing program. Under this program, Advantex buys merchants' future credit card receivables at a discount to face value. Write-offs for bad debts rose by 39.1% in fiscal 2014 to $1.27 million.

In another development, Canadian Imperial Bank of Commerce, one of Advantex's main partners, has acknowledged some erosion in its credit card business over the past year. As a result, more generous consumer rewards were required in the first half of the fiscal year to encourage merchant enrollment and retention.

Mr. Ambrose said that while the financial results were disappointing, Advantex is well-placed to reap the benefits of several significant achievements over the past year:

  • The renewal of partnership agreement with Canadian Imperial Bank of Commerce.
  • New partnership with Toronto-Dominion Bank.
  • New partnership with Caesars Entertainment.
  • A refinancing, under which the company has lightened its debt burden, lowered interest costs and reduced the number of fully-diluted common shares outstanding by almost a quarter.
  • Extension of a $8.5 million credit facility by one year to December 2015. The facility supports the Advance Purchase Marketing program, and thus makes a valuable contribution to Advantex's business.
  • A more conservative approach towards identifying and accounting for delinquencies among merchants enrolled in the Advance Purchase Marketing program.
  • Enhanced services to merchants. New initiatives include substantial improvements to Advantex's website enabling shoppers to locate merchants more easily; expanded digital marketing resources; and measures to help merchants target their promotions at consumers in specific locations. "Improved merchant satisfaction and loyalty are among our key goals for the coming year." Mr. Ambrose said.

Mr. Ambrose said: "Advantex is now a stronger, more nimble company, and we look forward to an improved financial performance in 2015. The combination of a growing merchant base, a rising volume of transactions and wider geographical coverage should translate into sustainable growth in revenues in the year ahead. Loyalty marketing is a multi-billion dollar business in North America and Advantex is well positioned to gain a wider share of this market with our proprietary technology and our outstanding partners."

The financial results and their discussion are provided in the annual consolidated financial statements and management's discussion and analysis for year ended June 30, 2014. They are available under Advantex's profile on www.sedar.com.

About Advantex:

Advantex provides specialized marketing programs that enable members of affinity groups to earn frequent-flyer miles and other loyalty rewards through purchases at participating merchants.

Through our partnerships with Aeroplan, Canadian Imperial Bank of Commerce, Toronto-Dominion Bank and Caesars Entertainment, we have contractual access to millions of consumers with above-average personal and household income. We also have partnerships with about 1,700 merchants in Canada and the US.

Advantex shares trade on the Canadian Securities Exchange under the symbol ADX. For more information, go to www.advantex.com.

Forward-Looking Information

This Press Release contains certain "forward-looking information". All information, other than information comprised of historical fact, that addresses activities, events or developments that Advantex believes, expects or anticipates will or may occur in the future constitutes forward-looking information. Forward-looking information is typically identified by words such as: anticipate, believe, expect, goal, intend, plan, will, may, should, could and other similar expressions. Such forward-looking information relates to, without limitation, information regarding Advantex's: belief in its ability to improve its future financial performance including the expected growth in revenue; belief in its ability to gain a wider share of the loyalty marketing business in North America; and other information regarding Advantex's financial and business prospects and financial outlook is forward-looking information.

Forward-looking information reflects the current expectations or beliefs of Advantex based on information currently available to Advantex.

Forward-looking information is subject to a number of risks, uncertainties and assumptions that may cause the actual results of Advantex to differ materially from those discussed in the forward-looking information, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on Advantex. Factors that could cause actual results or events to differ materially from current expectations include those listed under "General Risks and Uncertainties" and "Economic Dependence" in Advantex's Management's Discussion and Analysis for the twelve months ended June 30, 2014.

All forward-looking information speaks only as of the date on which it is made and, except as may be required by applicable securities laws, Advantex disclaims any intent or obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise. Although Advantex believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such information due to the inherent uncertainty therein.

Advantex Marketing International Inc.

Consolidated Statements of Financial Position

(expressed in Canadian dollars)

June 30, 2014 June 30,2013
Assets
Current assets
Cash and cash equivalents 1,815,805 1,773,672
Accounts receivable (note 14) 809,189 599,339
Transaction credits (note 14) 10,278,706 13,632,654
Inventory (note 5) 90,425 139,985
Prepaid expenses and sundry assets 179,412 273,519
$13,173,537 $16,419,169
Non-current assets
Property, plant and equipment (note 7a) 237,420 299,528
Intangible assets (note 7b) 529,892 539,545
767,312 839,073
Total assets $13,940,849 $17,258,242
Liabilities
Current liabilities
Loan payable (note 8) 6,454,174 7,099,371
Accounts payable and accrued liabilities 4,219,904 3,420,130
14% Non-convertible debentures payable (note 9) - 1,736,298
12% Non-convertible debentures payable (note 10) - 6,055,336
$10,674,078 $18,311,135
Non-current liabilities
12% Non-convertible debentures payable (note 10) 4,661,833 -
$ 4,661,833 $ -
Total Liabilities $15,335,911 $18,311,135
Shareholders' deficiency
Share capital (note 11) 24,530,555 24,110,096
Contributed surplus (note 12) 4,090,382 808,167
Equity portion of debentures (note 10/12) - 2,114,341
Warrants (note 9/10/12) - 1,167,874
Accumulated other comprehensive income (47,383) -
Deficit (29,968,616) (29,253,371)
Total deficiency $(1,395,062) $(1,052,893)
Total liabilities and deficiency $13,940,849 $17,258,242

Economic and Financial dependence (note 2), Commitments and contingencies (note 17)

The accompanying notes are an integral part of these consolidated financial statements.

Approved by the Board:

Director: Signed "William Polley"

Director: Signed "Kelly Ambrose"

Advantex Marketing International Inc.

Consolidated Statements of Income and Comprehensive Income

For the years ended June 30, 2014 and 2013

(expressed in Canadian dollars)

2014 2013
$ $
Consolidated Statements of Income
Revenues 16,535,124 16,909,808
Direct expenses 6,325,467 5,549,977
10,209,657 11,359,831
Operating Expenses
Selling and marketing 3,803,278 3,770,393
General and administrative 4,555,426 4,266,296
Earnings from operations before depreciation, amortization and interest 1,850,953 3,323,142
Interest expense:
Stated interest expense - loan payable, and debentures 1,884,080 2,047,785
Non-cash interest expense on debentures 208,139 597,665
(241,266) 677,692
Write-off of investment (note 6) - 100,000
Depreciation of property, plant and equipment, and amortization of intangible assets 473,979 541,439
Net income/(loss) (715,245) 36,253
Earnings per share:
Basic and Diluted (note 19) 0.00 0.00
Consolidated Statements of Comprehensive Income
Net income / (loss) (715,245) 36,253
Other comprehensive income / (loss)
Translation adjustment (47,383) -
Comprehensive income / (loss) (762,628) 36,253

The accompanying notes are an integral part of these consolidated financial statements.

Advantex Marketing International Inc.

Consolidated Statements of Changes in Deficiency

For the years ended June 30, 2014 and June 30, 2013

(expressed in Canadian dollars)

Class A
preference
shares
$
Common
shares
$
Contributed
surplus
$
Equity
portion of
debentures
$
Warrants
$
Deficit
$
Accumulated
Other
comprehensive
income /
(loss)
Total
$
Balance - July 1, 2012 3,815 24,106,281 793,198 2,114,341 1,196,013 (29,289,624) - (1,075,976)
Net income and comprehensive income for the year 36,253 - 36,253
Stock based compensation
Value of services recognized 14,969 14,969
Partial repayment of debentures (notes 9 and 10) (28,139) (28,139)
Balance - June 30, 2013 3,815 24,106,281 808,167 2,114,341 1,167,874 (29,253,371) - (1,052,893)
Balance - July 1, 2013 3,815 24,106,281 808,167 2,114,341 1,167,874 (29,253,371) - (1,052,893)
Net loss and comprehensive loss for the year (715,245) (47,383) (762,628)
Transfer to Contributed surplus (notes 9,10, and 12) 3,282,215 (2,114,341) (1,167,874)
-
Issue of common shares as part of refinancing of debentures (notes 10 and 11) 420,459 420,459
Balance - June 30, 2014 3,815 24,526,740 4,090,382 - - (29,968,616) (47,383) (1,395,062)

The accompanying notes are an integral part of these consolidated financial statements.

Advantex Marketing International Inc.

Consolidated Statements of Cash Flow

For the years ended June 30, 2014 and 2013

(expressed in Canadian dollars)

2014
$
2013
$
Cash flow provided by / (used in) Operating activities
Net income / (loss) for the year $(715,245) $36,253
Adjustments for:
Write-off of investment - 100,000
Depreciation of property, plant and equipment, and amortization of intangible assets 473,979 541,439
Unrealized foreign exchange gain (47,701) -
Stock-based compensation 14,969
Accretion charge for debentures 208,139 597,665
(80,828) 1,290,326
Changes in items of working capital
Accounts receivable (209,529) 367,098
Transaction credits 3,353,948 462,719
Inventory 49,560 64,370
Prepaid expenses and sundry assets 94,107 41,935
Accounts payable and accrued liabilities 799,635 (708,134)
4,087,721 227,988
Net cash provided by / (used in) operating activities 4,006,893 1,518,314
Investing activities
Purchase of property, plant and equipment, and intangible assets (402,218) (828,362)
Net cash (used in) investing activities (402,218) (828,362)
Financing activities
Proceeds from loan payable (645,197) 383,680
Payments on maturity / retirement of debentures (notes 9 and 10) (7,895,967) -
Proceeds from refinancing debentures (note 10) 5,159,000 -
Partial repayment of debentures - (376,033)
Transaction costs, debenture: refinancing (note 10), partial early repayment (180,514) (8,700)
Net cash generated from / (used in) financing activities (3,562,678) (1,053)
Effect of exchange rate changes on cash and cash equivalents 136 -
Increase (decrease) in cash and cash equivalents during the year $42,133 $688,899
- From continuing operations 184,787 877,514
- From discontinued operations (note 16) (142,654) (188,615)
Increase in cash and cash equivalents $42,133 $688,899
Cash and cash equivalents - Beginning of year 1,773,672 1,084,773
Cash and cash equivalents - End of year 1,815,805 1,773,672
Additional Information
Interest paid $1,781,502 $2,058,694
For purposes of the cash flow statement, cash comprises:
Cash $1,810,805 $1,768,672
Term Deposits $5000 $5000
$1,815,805 $1,773,672

The accompanying notes are an integral part of these consolidated financial statements.

Contact Information

  • Advantex Marketing International Inc.
    Mukesh Sabharwal
    Vice-President and Chief Financial Officer
    905-470-9558 ext. 249
    Email: mukesh.sabharwal@advantex.com