ADF Group Inc. (DRX) 2024年年度報告「TSX」.pdf

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1、 Toronto Stock Exchange:TSX/DRXDRX ANNUAL REPORT Fiscal Year Ended January 31,2024 TABLE OF CONTENTS ForwardForward-Looking StatementsLooking Statements Management of ADF Group Inc.ADF Group Inc.wishes to inform the reader that this document contains forward-looking statements within the meaning of

2、applicable securities laws,in which Managements expectations regarding ADF Group Inc.s future performance may be discussed.These forward-looking statements include information concerning ADF Groups probable or foreseeable future operating results and financial position and involve certain risks and

3、uncertainties regarding their future realization.These forward-looking statements are based on currently available data regarding competition,financial position,economic conditions and operating plans.The principal risks and uncertainties that could affect ADF Group Inc.s results,such that those res

4、ults could differ materially from those expressed in any forward-looking statements,are presented in Sections Current Economic Environment and External Factors to Which the Corporations Performance is Exposed of the Managements Discussion and Analysis of the Financial Position and Operating Results(

5、hereinafter MD&A Report)for the fiscal year ended January 31,2024.ANNUAL REPORT FOR THE FISCAL YEAR ENDED JANUARY 31,2024ANNUAL REPORT FOR THE FISCAL YEAR ENDED JANUARY 31,2024 MESSAGE TO OUR SHAREHOLDERS.1 FINANCIAL HIGHLIGHTS.2 MANAGEMENTS DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION AND OPER

6、ATING RESULTS.3 1.GENERAL.3 2.FORWARD-LOOKING STATEMENTS.3 3.GENERAL OVERVIEW.3 4.COMMERCIAL POSITIONING.3 5.MARKET TRENDS.3 6.SIGNIFICANT EVENTS OF THE FISCAL YEAR.4 7.SIGNIFICANT EVENT THAT OCCURRED SINCE JANUARY 31,2024.4 8.EXCHANGE RATE.5 9.NON-GAAP FINANCIAL MEASURES AND OTHER FINANCIAL MEASURE

7、S.5 10.SELECTED ANNUAL FINANCIAL INFORMATION.6 11.ANALYSIS OF OPERATING RESULTS FOR THE FISCAL YEAR ENDED JANUARY 31,2024.7 12.COMMENTS ON QUARTERLY RESULTS.9 13.CASH FLOWS AND FINANCIAL POSITION.10 14.CAPITAL STOCK.13 15.SHARE-BASED COMPENSATION.13 16.DIVIDENDS.15 17.ORDER BACKLOG.15 18.FINANCIAL P

8、OSITION.15 19.CURRENT ECONOMIC ENVIRONMENT.16 20.RELATED PARTY TRANSACTIONS.16 21.EXTERNAL FACTORS TO WHICH THE CORPORATIONS PERFORMANCE IS EXPOSED.16 22.FINANCIAL INSTRUMENTS.17 23.ASSESSMENT OF THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES,AND INTERNAL CONTROL OVER FINANCIAL REPORTING.18

9、 24.DISCLOSURE AND INSIDER TRADING POLICIES.18 25.MATERIAL ACCOUNTING POLICIES,UNCERTAINTY RELATING TO ESTIMATES AND CRITICAL ACCOUNTING JUDGMENTS.18 26.ENVIRONNEMENT.19 27.SUSTAINABLE DEVELOPMENT.20 28.HUMAN RESOURCES.20 29.SUBSEQUENT EVENT.20 30.OUTLOOK.20 31.ADDITIONAL INFORMATION.21 MANAGEMENTS

10、REPORT.22 INDEPENDENT AUDITORS REPORT.23 CONSOLIDATED FINANCIAL STATEMENTS.28 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.32 CORPORATE INFORMATION.55 ANNUAL REPORT FOR THE FISCAL YEAR ENDED JANUARY 31,2024 MESSAGE TO OUR SHAREHOLDERSMESSAGE TO OUR SHAREHOLDERS Year in and year out,we invest in ou

11、r capital assets and in the skill development of our talents.This is the modus operandi we have adopted to continue to build our future.We are constantly on the lookout for new developments,trends and changes.As such,nearly$110 million has been invested in our assets and human resources over the pas

12、t 15 years to ensure that we have the capacity to continue competing in our markets,regardless of the changes in the economy,including the construction of a brand new fabrication plant in Montana in the United ed States,and in recent years,the acquisition of a unique fully robotized fabrication line

13、,specialized training,and concrete actions to reduce our environmental footprint.Our most recent investment strategy in new technologies has further strengthened our leadership position in our industry,in our markets,and with a more diversified clientele.With the support of a motivated and talented

14、team,we have maintained our efforts to make sure we have a solid business foundation on which we can continue to build ADF Group for years to come.The results we publish attest to these years of effort.We have meticulously planned and executed various investment programs,some of which were innovativ

15、e and audacious,in order to have the most efficient plants and a wide range of products and services that can meet the needs of a diverse clientele.We closed the year with an order backlog of more than$500 million.Our revenues,gross margins and net income increased by 32%,105%and 152%respectively,co

16、mpared to the previous fiscal year.We generated$77.9 million in cash from operating activities and ended the fiscal year with$72.4 million in cash.Our results certainly reflect our investments.However,ADFs lifeblood comes from all of our talents,without whom all of our initiatives could not yield th

17、e desired results.ADF has always been recognized for the quality of its products,the execution of its work and the expertise of its personnel.To this end,ADF has always encouraged the development of skills and qualifications and ensures that the necessary training and mentoring conditions are in pla

18、ce to maintain a high level of expertise and moreover to give employees the opportunity to develop their professional careers within ADF.Our Corporation is also committed to being a corporate citizen which respects its environment and the communities where it operates.To this end,ADF has recently se

19、t up an employee committee to coordinate its sustainable development efforts.Fiscal 2024 has been more than adequate,and our work has only just begun.We will continue our efforts to grow our order book and find innovative solutions to improve our operational performance.We remain cautious in our app

20、roach to business risk management in order to continue the orderly growth of our Corporation.In closing,we want to highlight the resilience of our entire workforce.The last few years have clearly demonstrated their level of commitment and their pride in a job well done.We thank them for that.We woul

21、d like to take this opportunity to thank all our business partners,members of our Board of Directors and shareholders for their trust and support.The year 2024 was sadly marked by the passing of our father and founder of the family business(Au Dragon Forge Inc.),Mr.Giacomo(Jacques)Paschini,on Februa

22、ry 8,at the age of 99.He will be greatly missed.May he rest in peace.He truly deserves it.Chairman of the Board of Directors and Chief Chairman of the Board of Directors and Chief Executive OfficerExecutive Officer President and Chief Operating OfficerPresident and Chief Operating Officer Executive

23、ViceExecutive Vice-President,Treasurer and President,Treasurer and Corporate SecretaryCorporate Secretary (signed)(signed)(signed)Jean Paschini Pierre Paschini,P.Eng.Marise Paschini Terrebonne,Quebec,Canada,April 10,2024 Annual Report for the Fiscal Year Ended January 31,2024 Page 2 of 55 ADF Groupe

24、 Inc.FINANCIAL HIGHLIGHTS FISCAL YEARS ENDED JANUARY 31,Revenues Revenues(In millions$)Adjusted EBITDAAdjusted EBITDA(1)(In millions$and%of revenues)Net IncomeNet Income(In millions$)Fiscal Year Ended January 31,20242024 2023 2022 2021 2020(In thousands of dollars,unless otherwise specified)$Revenue

25、s 331,023331,023 250,890 280,740 172,593 179,710 Adjusted earnings before interest,taxes,depreciation and amortization(adjusted EBITDA)(1)55,93955,939 26,119 17,759 16,341 5,225 Income(loss)before income taxes expense 46,40646,406 16,854 11,059 9,019(1,986)Net income(loss)37,62237,622 14,935 9,563 6

26、,867(2,132)Basic and diluted earnings per share 1.1.1515 0.46 0.29 0.21(0.07)Cash flows from(used in)operating activities 7 77,8607,860 (2,612)2,669 28,842(894)Net acquisition of property,plant and equipment 5,7685,768 11,463 21,477 1,460 360 As at January 31,20242024 20232023 2022 2021 2020(In thou

27、sands of dollars,unless otherwise specified)$Total assets 3 328,60528,605 271,617 201,050 189,951 173,544 Shareholders equity 16162,1302,130 124,985 108,450 99,565 94,407 Cash and cash equivalents 72,37972,379 7,193 7,130 17,806 3,983 Working capital(2)110,110,100100 65,599 38,713 38,548 29,313 Work

28、ing capital ratio(2)2.042.04 :1:1 1.74:1 1.74:1 1.62:1 1.58:1 Order backlog(2)510,892510,892 376,489 373,100 436,200 328,700 NotesNotes (1)Adjusted EBITDA is a non-GAAP(Generally Accepted Accounting Principles)financial measure.A non-GAAP financial measure is not a standardized financial measure und

29、er the financial reporting framework used to prepare the Corporations financial statements and might not be comparable to similar financial measures used by other issuers.Refer to the Section 9“Non-GAAP Financial Measures and Other Financial Measures”of the MD&A Report for the Fiscal Year Ended Janu

30、ary 31,2024,for the definition of this metric and the reconciliation to the most comparable International Financial Reporting Standard issued by the International Accounting Standards Board(IFRS Accounting Standards).(2)Additional financial measures:refer to the Section 9 Non-GAAP Financial Measures

31、 and Other Financial Measures of the MD&A Report for the Fiscal Year Ended January 31,2024,for the definition of these metrics.9.6 2022 14.9 2023 37.6 2024 250.9 280.7 331.0 2023 2022 2024 17.8 2022 26.1 2023 55.9 16.9%2024 6.3%10.4%Annual Report for the Fiscal Year Ended January 31,2024 ADF Group I

32、nc.Page 3 of 55 MANAGEMENTS DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION AND OPERATING RESULTSMANAGEMENTS DISCUSSION AND ANALYSIS OF THE FINANCIAL POSITION AND OPERATING RESULTS 1.GENERAL The purpose of this Managements Discussion and Analysis of the Financial Position and Operating Results(her

33、einafter MD&A Report)is to provide the reader with an overview of the changes in the financial position of ADF Group Inc.(ADF,ADF Group or the Corporation)between February 1,2023,and January 31,2024.It also compares the operating results and cash flows for the fiscal year ended January 31,2024,to th

34、ose of the previous fiscal year.This MD&A Report covers all major events that occurred during the 2024 fiscal year and between February 1,2024,and April 10,2024.This MD&A Report should be read in conjunction with the Corporations consolidated financial statements and the notes thereto for the fiscal

35、 year ended January 31,2024.The consolidated financial statements and the comparative information have been prepared in accordance with the International Financial Reporting Standard as issued by the International Accounting Standards Board(IFRS Accounting Standards).The material accounting policies

36、 applied by the Corporation in accordance with IFRS Accounting Standards are presented in Note 2 to the consolidated financial statements for the fiscal year ended January 31,2024.The Corporation reports its results in Canadian dollars.All amounts in this MD&A Report are expressed in Canadian dollar

37、s,except where otherwise indicated.2.FORWARD-LOOKING STATEMENTS In order to provide shareholders and potential investors with additional information regarding ADF,in particular Managements assessment of future plans and operations,certain statements in this MD&A Report are forward-looking statements

38、 subject to risks,uncertainties and other important factors that could cause the Corporations actual performance to differ from those expressed in or implied by these forward-looking statements.Such factors include,but are not limited to the impact of economic conditions in Canada and the United Sta

39、tes;industry conditions including amendments in laws and regulations;increased competition;potential shortfall of qualified personnel or managers;availability and fluctuations in commodity prices;foreign exchange or interest rate fluctuations;stock market volatility;and the impact of accounting poli

40、cies issued by Canadian,U.S.and international standard setters.Some of these factors are further discussed under Section 21 External Factors to Which the Corporations Performance is Exposed in this MD&A Report.It should be noted that the list of factors that may affect future growth,results and perf

41、ormance,provided in this MD&A Report,is not exhaustive.The reader should not place undue reliance on forward-looking statements.The expectations expressed by the forward-looking statements are based on information available to the Corporation on the date such statements were made.However,there can b

42、e no assurance that such estimates will prove to be correct.All subsequent forward-looking statements made,whether written or verbally,by the Corporation or persons acting on its behalf,are expressly qualified in their entirety by the caveats referred to above.Unless otherwise required by applicable

43、 securities legislation,the Corporation expressly disclaims any intention,and assumes no obligation,to update or revise any forward-looking statements,whether as a result of new information,future events or otherwise.3.GENERAL OVERVIEW From a blacksmith shop founded in 1956,ADF Group has become over

44、 the years a North American leader in the design and engineering of connections,fabrication,including industrial coating,and installation of complex steel structures,heavy steel built-ups,as well as miscellaneous and architectural metalwork.The Corporations products and services are intended for the

45、 following five principal segments of the non-residential construction industry:office towers and high-rises,commercial and recreational buildings,airport facilities,industrial complexes and transport infrastructure.The Corporation uses the latest technologies in its industry and operates two state-

46、of-the-art fabrication plants and two cutting-edge paint shops.ADF Groups complex located in Canada houses the Corporations head office,the 58,530-square-metre(630,000-square-foot)fabrication plant,which includes the 3,900 square-meter(42,000 square feet)paint shop.ADFs complex in the United-States

47、is home to the 9,290-square-metre(100,000 square feet)fabrication plant,the 60-acre pre-assembly yard and the 4,460-square-meter(48,000 square feet)dual-purpose building,adjacent to the fabrication plant,housing a 2,323-square-meter(25,000 square feet)paint and blast zone,and a 2,137-square-meter(23

48、,000 square feet)area for preparation and detailing work.A pioneer in the development and implementation of innovative solutions,the Corporation is recognized for its engineering expertise,its project management,its important fabrication capacity and its skills in two specialized market niches:the f

49、abrication of steel superstructures with a high level of architectural and geometric complexity,and projects subject to fast-track schedules.ADF Groups commitment to deliver every project in accordance with the industrys highest quality standards constitutes a core aspect of the Corporations mission

50、.4.COMMERCIAL POSITIONING ADF Group serves a diversified client base in the non-residential construction market in Canada and the United States,including general contractors,project owners,engineering firms and project architects,structural steel erectors,and other steel structure fabricators.5.MARK

51、ET TRENDS The non-residential construction industry includes the products and services related to the construction of commercial,institutional and industrial buildings,such as office towers,commercial buildings,hotels,sports complexes,museums,recreational complexes,as well as manufacturing plants an

52、d other industrial facilities.This sector also encompasses public works,including the construction and renovation of infrastructure and buildings,notably,hydroelectric dams,airports,bridges and overpasses.It should be noted that the demand in this sector is related to business cycles.Generally,there

53、 are more private projects in a bull cycle,whereas government projects take over in a bear cycle.Annual Report for the Fiscal Year Ended January 31,2024 Page 4 of 55 ADF Group Inc.According to Management,approximately half of the non-residential projects use structural steel as a structural componen

54、t,while the other half primarily uses concrete.Generally,structural steel accounts for about 10%to 20%of a projects total cost,depending on the projects nature.Structural steel offers several advantages when compared to other materials,which explains its increasing use in the construction of complex

55、 structures.These advantages include durability,speed of installation,greater flexibility in fast-track projects,lower installation,and maintenance costs,as well as its high strength/weight ratio as a result of improved alloys.Generally,there are more complex steel structure projects in the United S

56、tates than in Canada,which can result in a certain dependence of the Corporation on the U.S.market.As announced by the White House towards the end of 2023,the effect of bringing some of the fabrication back to the U.S.A.,supported by U.S.programs and grants,has generated,and will continue to generat

57、e,significant investments through the coming quarters.We continue to see interesting opportunities in our markets and are actively pursuing our efforts to take advantage of these opportunities.6.SIGNIFICANT EVENTS OF THE FISCAL YEAR 6.1 Dividends On April 12,2023,the Corporations Board of Directors

58、approved a semi-annual dividend of$0.01 per share,which was paid on May 17,2023,to shareholders of record as at April 28,2023.On September 6,2023,the Corporations Board of Directors approved a semi-annual dividend of$0.01 per share,which was paid on October 17,2023,to Shareholders of Record as at Se

59、ptember 29,2023.6.2 New Financing On April 28,2023,the Corporation entered into a new agreement with its Canadian financial institution for its Canadian operating credit facility which increased from$30.0 million to$40.0 million.This amount remains subject to a margination calculation,but only when

60、the Corporation needs to draw over$20.0 million.All other terms and conditions remain similar to the previous terms.6.3 New Contracts On May 30,2023,the Corporation announced the signing of a series of new contracts in the United States worth a total of$142.0 million.The largest contract of this ser

61、ies of new orders,in terms of value,is for the first phase of a construction project in the pharmaceutical industry of the Midwest region.This contract consists in the design and engineering of connections,fabrication,including the supply of steel and the industrial coating,as well as the installati

62、on of the steel structure of a new large industrial building.On December 11,2023,the Corporation announced the signing of a series of new orders in Canada and the U.S.totaling$234.0 million.The Corporations management also announced that it has reached an agreement with the same client for the secon

63、d phase of the above-mentioned construction project.This major new contract is the largest in this series of new orders in terms of value.The nature and scope of work in this second phase of the project is similar as the first phase and consists of the design and engineering of the connections,the f

64、abrication work,including the supply of the steel and industrial coating,as well as the erecting of the steel structure and heavy steel components of a large-surface industrial-type building.Fabrication will begin in February 2024 and will extend over a period of approximately 15 months.This series

65、of new orders also includes the award of a new contract in the Southeastern region of the United States,which consists of,among other things,fabrication,including industrial coating,and the delivery of the steel structure of a new industrial building for a global manufacturing company in the aluminu

66、m sector.This project will extend over a 6-month period.In closing,ADF Group also announced the award of two new contracts in Canada,one in the public infrastructure sector and one in the industrial sector.6.4 Interest Rate Options On August 11,2023,the Corporation entered into interest rate options

67、 for a par value of$10.0 million to cover fluctuations in interest rate greater than 5.5%(based on the one-month CDOR)of its long-term floating rate debt denominated in Canadian dollars until August 23,2026.6.5 Ratification of the Collective Bargaining Agreement for Unionized Personnel at ADFs Terre

68、bonne Plant On December 3,2023,unionized employees at ADFs plant in Terrebonne,Quebec,ratified the renewal of the collective agreement for a period of five(5)years,following an agreement in principle reached on November 13,2023.The agreement covers 189 employees.6.6 U.S.Revolving Credit Given the Co

69、rporations liquidities,the U.S.revolving credit was not renewed and is therefore no longer available as at January 31,2024.7.SIGNIFICANT EVENT THAT OCCURRED SINCE JANUARY 31,2024 Dividend On April 10,2024,the Corporations Board of Directors approved a semi-annual dividend of$0.01 per share,payable o

70、n May 15,2024,to Shareholders of Record as at April 26,2024.Annual Report for the Fiscal Year Ended January 31,2024 ADF Group Inc.Page 5 of 55 8.EXCHANGE RATE The Corporation is subject to foreign currency fluctuations from the translation of revenues,expenses,assets and liabilities of its foreign o

71、perations and from commercial transactions denominated in foreign currencies.Average monthly rates(considered a reasonable approximation to actual rates at the date of transactions)are used to translate revenues(except for foreign exchange forward contracts)and expenses for the periods mentioned,whi

72、le closing rates translate assets and liabilities.During the fiscal year ended January 31,2024,as well as during the previous fiscal year,the Corporation used the following exchange rates between the Canadian and U.S.dollars:(CA$/US$)Consolidated Statements of Income and Comprehensive Income Consoli

73、dated Statements of Financial Position Quarterly Cumulative Fiscal 2024 Fiscal 2023 Fiscal 2024 Fiscal 2023 Fiscal 2024 Fiscal 2023 First quarter(April 30)1.3549 1.2666 1.3549 1.2666 1.3578 1.2792 Second quarter(July 31)1.3345 1.2867 1.3444 1.2767 1.3177 1.2824 Third quarter(October 31)1.3576 1.3301

74、 1.3488 1.2944 1.3871 1.3649 Fourth quarter(January 31)1.3523 1.3486 1.3497 1.3079 1.3397 1.3350 Annual averages 1.3497 1.3079 The Canadian dollar lost value against the U.S.dollar on a quarterly,annual and closing average basis compared to the corresponding rates last year.Given the decision by glo

75、bal central banks,including those of Canada and the United States,to soften inflation,the U.S.currency has benefited from its role as a safe haven currency and has appreciated against all major currencies,including the Canadian dollar.Although the Corporation enters,from time to time and in accordan

76、ce with its internal policy,into foreign exchange contracts to hedge the foreign exchange risk,these exchange rate variations had a positive impact of$5.0 million on gross margin for the fiscal year ended January 31,2024,and generated a$1.2 million foreign exchange loss in the Consolidated Statement

77、 of Income for the same period.9.NON-GAAP FINANCIAL MEASURES AND OTHER FINANCIAL MEASURES This MD&A Report is based on results prepared in accordance with IFRS Accounting Standards and includes non-GAAP financial measures and other financial measures.Non-GAAP financial measures provide useful additi

78、onal information,but do not have standardized meanings established in accordance with GAAP.Readers should be careful not to confuse or substitute them with performance measures prepared in accordance with GAAP.In addition,readers should avoid comparing these non-GAAP financial measures to similarly

79、titled measures provided or used by other issuers.When such indicators are presented,they are defined,and the reader is notified.The Corporation uses the following indicators to measure its operating performance and the achievement of objectives:Fiscal Years Ended January 31,2024 2023 Non-GAAP finan

80、cial measures Adjusted earnings before interest,tax,depreciation and amortization(Adjusted EBITDA)(in thousands of dollars)$55,939$26,119 Adjusted EBITDA margin(as a percentage of revenues)16.9%10.4%Supplementary financial measures Gross margin(as a percentage of revenues)22.0%14.2%As at January 31,

81、2024 2023 Supplementary financial measures Working capital(in thousands of dollars)$110,100$65,599 Working capital ratio 2.04:1 1.74:1 Order backlog(in thousands of dollars)$510,892$376,489 9.1 Adjusted EBITDA and Adjusted EBITDA Margin The adjusted EBITDA and the adjusted EBITDA margin show the ext

82、ent to which the Corporation generates profits from operations,without considering the following items:Net financial expenses;Income tax expense;Foreign exchange(gain)loss,and Depreciation and amortization of property,plant and equipment,intangible assets and right-of-use assets.Annual Report for th

83、e Fiscal Year Ended January 31,2024 Page 6 of 55 ADF Group Inc.Net income is reconciled with adjusted EBITDA in the table below:Fiscal Years Ended January 31,2024 2023(In thousands of dollars)$Net income 37,622 14,935 Income tax expense 8,784 1,919 Net financial expenses 2,573 1,999 Amortization 5,8

84、00 5,323 Foreign exchange loss 1,160 1,943 Adjusted EBITDA 55,939 26,119 As a%of revenues(1)16.9%10.4%(1)The adjusted EBITDA margin results from dividing adjusted EBITDA by revenues.Adjusted EBITDA for the fiscal year ended January 31,2024,more than doubled year-over-year.This increase was driven by

85、 a higher net income which,as explained in more detail hereinafter,benefited from higher revenues and margins in the fiscal year ended January 31,2024.Adjusted EBITDA for the fiscal year ended January 31,2023,increased by$8.4 million,in line with higher gross margin in the fiscal year.Adjusted EBITD

86、A for this fiscal year benefited from the forgiveness of an initial$1.3 million(US$1.0 million)loan issued to a U.S.subsidiary.9.2 Gross Margin as a Percentage of Revenues The gross margin as a percentage of revenue indicator is used by the Corporation to assess the level of profitability for a give

87、n period based on the project mix for that same period.This indicator is subject to fluctuations in project prices and also in the operational efficiency of the Corporation.The indicator of gross margin as a percentage of revenues results from dividing gross margin by revenues.In general,the Corpora

88、tion aims to improve this indicator but recognizes that its fluctuation depends on the type of project signed and several other factors,including the economic context.9.3 Working Capital and Working Capital Ratio The working capital indicator is used by the Corporation to assess whether current asse

89、ts are sufficient to meet current liabilities.Working capital is equal to current assets,less current liabilities,whereas the working capital ratio is calculated by dividing current assets by current liabilities.Overall,the Corporation aims to achieve a working capital ratio of at least 2.0:1.While

90、this ratio,at 1.74:1,was below this target for the fiscal years ended January 31,2023,that same ratio exceeded this target during the fiscal year ended January 31,2024,reaching 2:04:1.The Corporation establishes the achievement of this goal on the pursuit of its strategy focusing on the execution of

91、 contracts generating positive cash flows throughout their execution.However,the Corporation also recognizes that the growth of its order backlog adds some pressure on working capital,thus explaining the level of this ratio in relation to the Corporations long-term objective.It should be noted that

92、the drawing up and/or revision of this corporate goal depends on several factors,such as the economic context and development projects that might materialize.9.4 Order Backlog The order backlog is a measure used by the Corporation to assess future revenue levels.The order backlog includes firm order

93、s obtained by the Corporation,either through a firm contract or a formal notice to proceed confirmed by the client.The order backlog disclosed by the Corporation therefore includes the portion of confirmed contracts that have not been put into production.In general,the Corporation aims to improve th

94、is indicator but recognizes that its fluctuation is dependent on several factors,including the economic context.10.SELECTED ANNUAL FINANCIAL INFORMATION Fiscal Years Ended January 31,2024 2023 2022(In thousands of dollars and in dollars per share)$Revenues 331,023 250,890 280,740 Net income 37,622 1

95、4,935 9,563 Basic and diluted per share 1.15 0.46 0.29 Total assets 328,605 271,617 201,050 Non-current liabilities 60,999 57,851 40,211 Annual dividend per share 0.02 0.02 0.02 Revenues for the fiscal year ended January 31,2024,totalled$331.0 million,posting an increase of$80.1 million from the pre

96、vious fiscal year.This increase is in line with the increase of the Corporations order backlog,which has continued its growth started a few years ago,as a result of the various initiatives implemented by the Corporation.Annual Report for the Fiscal Year Ended January 31,2024 ADF Group Inc.Page 7 of

97、55 Net income posted an increase of$22.7 million during the fiscal year ended January 31,2024,compared with fiscal 2023,in line with improved revenues and gross margin and consequently adjusted EBITDA.Total assets for the fiscal year ended January 31,2024,increased by$57.0 million compared with the

98、previous fiscal year mainly due to the increase in liquidities and net income.11.ANALYSIS OF OPERATING RESULTS FOR THE FISCAL YEAR ENDED JANUARY 31,2024 During the 12 months of operations between February 1,2023,and January 31,2024,the Corporation pursued its activities consisting of the design and

99、engineering of connections,fabrication,including industrial coating,and installation of complex steel structures and heavy steel built-ups,in Canada and the United States.11.1 Revenues and Gross Margin Fiscal Years Ended January 31,2024 2023 Annual Variations(In thousands of dollars and in percentag

100、es)$%Revenues 331,023 250,890 80,133 31.9 Cost of goods sold 258,102 215,321 42,781 19.9 Gross margin 72,921 35,569 37,352 105.0 As a%of revenues(1)22.0%14.2%7.8 (1)Gross margin as a percentage of revenues is a supplementary financial measure.Refer to the Section 9“Non-GAAP Financial Measures and Ot

101、her Financial Measures”of this MD&A Report,for definition of this metric.Revenues Revenues during the fiscal year ended January 31,2024,totalled$331.0 million,which is$80.1 million higher than for the fiscal year ended January 31,2023.Revenues are recognized progressively based on costs incurred to

102、date relative to the total estimated costs at completion on the various projects executed during the fiscal year.The change in revenues is mainly due to the execution of projects in the order backlog.In addition,the change in the foreign exchange rate during the 2024 fiscal year had a favorable impa

103、ct of$12.3 million on revenues.In terms of economic dependence,ADF has realized during the fiscal year ended January 31,2024,69%of its revenues from four(4)clients,for respective amounts of$92.2 million,$48.7 million,$45.7 million and$42.1 million all from the United States,and each accounting for 1

104、0%or more of the Corporations revenues.Only one of these clients was among the clients representing more than 10%of revenues for the fiscal year ended January 31,2023.For the fiscal year ended January 31,2023,the Corporation realized 62%of its revenues from three(3)clients,for respective amounts of$

105、46.1 million,$52.9 million,and$57.4 million all from the United States,each accounting for 10%or more of the Corporations revenues.Although the Corporation attempts to limit the concentration of its revenues,given the nature of its activities and market,its revenues are likely to remain concentrated

106、 among a restricted number of clients in upcoming quarters.Gross Margin The gross margin,in dollar value,increased by$37.4 million during the 2024 fiscal year compared with the 2023 fiscal year.Gross margin,as a percentage of revenues,(1)went from 14.2%during the fiscal year ended January 31,2023,to

107、 22.0%during the fiscal year ended January 31,2024.This increase as a percentage of revenues is explained by the level of fabrication activity compared with the previous fiscal year,thus generating a better absorption of fixed costs,as well as by the improvement in internal efficiency from the inves

108、tments made in recent years in automation at ADFs plant in Terrebonne,Quebec.Fabrication hours are not only the Corporations core activity but are also its most value-added activity.To that effect,revenues during the fiscal year ended January 31,2024,were comprised of 40%of fabrication hours,compare

109、d with 29%for the fiscal year ended January 31,2023.Increases or decreases in raw material(mainly steel)prices do not generally have a material impact on the gross margin since in some of the contracts in hand,the clients supply the steel to be transformed by ADF,whereas protection clauses with rega

110、rds to price changes are usually included in contracts where ADF supplies the steel.In addition,the natural hedge attributable to revenues and the purchase of raw materials in U.S.dollars mitigates the impact of exchange rate fluctuations.(1)Gross margin as a percentage of revenues is a supplementar

111、y financial measure.Refer to the Section 9“Non-GAAP Financial Measures and Other Financial Measures”of this MD&A Report,for definition of this metric.Annual Report for the Fiscal Year Ended January 31,2024 Page 8 of 55 ADF Group Inc.11.2 Selling and Administrative Expenses Fiscal Years Ended January

112、 31,2024 2023 Annual Variations(In thousands of dollars and in percentage)$%Selling and administrative expenses 22,782 14,773 8,009 54.2 As a%of revenues 6.9%5.9%1.0 Selling and administrative expenses amounted to$22.8 million,which is$8.0 million higher than for the 2023 fiscal year.This increase i

113、s explained by the market value adjustment of Deferred Share Units(DSU)and Performance Share Units(PSU),in line with the increase in the Corporations share price,that went from$2.12 per share as at January 31,2023,to$8.00 per share a year later,as at January 31,2024,as well as by the increase in wag

114、es,in line with the cost of living.11.3 Amortization In accordance with IFRS Accounting Standards,amortization expense is included in the cost of goods sold and selling and administrative expenses.However,Management considers it appropriate to continue separately commenting on amortization expense s

115、ince it is considered a significant,although non-cash,component in the analysis of the Corporations profit margins.Fiscal Years Ended January 31,2024 2023 Annual Variations(In thousands of dollars and in percentage)$%Amortization 5,800 5,323 477 9.0 As a%of revenues 1.8%2.1%(0.3)The amortization exp

116、ense for the 2024 fiscal year amounted to$5.8 million,which is$0.5 million higher than in fiscal 2023.This variation in amortization is mainly explained by the start-up,for the full fiscal year,of capital investments made in the recent years,mainly automation at ADFs plant in Terrebonne,Quebec.The a

117、mortization expenses breakdown is as follows:Fiscal Years Ended January 31,2024 2023 Annual Variations(In thousands of dollars and in percentages)$%Amortization expense included in cost of goods sold 4,531 4,127 404 9.8 Amortization expense included in selling and administrative expenses 1,269 1,196

118、 73 6.1 Total amortization 5,800 5,323 477 9.0 11.4 Net Financial Expenses Fiscal Years Ended January 31,2024 2023 Annual Variations(In thousands of dollars and in percentage)$%Net financial expenses 2,573 1,999 574 28.7 As a%of revenues 0.8%0.8%The increase in net financial expenses is explained by

119、 the impact of higher debt level and the increase in the interest rates on ADFs floating-rate loans,net of interest income the fiscal year ended January 31,2024(see Section 13 Cash Flows and Financial Position below).11.5 Foreign Exchange Loss Fiscal Years Ended January 31,2024 2023 Annual Variation

120、s(In thousands of dollars and in percentage)$%Foreign exchange loss 1,160 1,943(783)(40.3)As a%of revenues 0.4%0.8%(0.4)The foreign exchange loss recorded during the fiscal year ended January 31,2024,included a$2.0 million foreign exchange loss on ongoing operations and a$0.8 million foreign exchang

121、e gain relating to the fair value of financial derivatives.During the 2024 fiscal year,a$0.2 million foreign exchange gain on the translation of foreign subsidiaries was recorded in Comprehensive Income.The foreign exchange loss recorded during the fiscal year ended January 31,2023,included a$0.6 mi

122、llion foreign exchange gain on ongoing operations and a$2.5 million foreign exchange loss relating to the fair value of financial derivatives.During the 2023 fiscal year,a$2.2 million foreign exchange gain on the translation of foreign subsidiaries was recorded in Comprehensive Income.The Corporatio

123、n is exposed to exchange rate fluctuations between the Canadian and U.S.dollars,since a significant portion of its revenues is generally recorded in U.S.dollars.Annual Report for the Fiscal Year Ended January 31,2024 ADF Group Inc.Page 9 of 55 For the fiscal year ended January 31,2024,89%of the Corp

124、orations revenues were recorded in U.S.dollars(85%during the fiscal year ended January 31,2023).Considering the improvement in U.S.markets and its facilities in Great Falls,Montana,the Corporation expects that the percentage of its revenues in U.S.dollars will continue to be significant during the f

125、iscal year 2025.In line with its hedging policy,to manage its net risk between the future US-denominated cash inflows and outflows,the Corporation entered into foreign exchange forward contracts.As at January 31,2024,the Corporation was party to foreign exchange forward contracts for the sale of US$

126、85.9 million(US$44.6 million as at January 31,2023)with maturities varying between three(3)months to twelve(12)months with rates between 1.3000 and 1.3735(between 1.2744 and 1.3544 as at January 31,2023).Based on the balance as at January 31,2024,of the Corporations financial instruments denominated

127、 in foreign currencies,a 10%fluctuation in the exchange rate between the Canadian and U.S.dollars(all other variables remaining constant),would have had no impact on net income before tax(no impact during the fiscal year ended January 31,2023).However,this information only applies to financial instr

128、uments based on year-end balances and does not take into account the impact of foreign exchange fluctuations on revenues and other miscellaneous expenses for a complete fiscal year.11.6 Income Tax Expenses Fiscal Years Ended January 31,2024 2023 Annual Variations(In thousands of dollars and in perce

129、ntage)$%Income tax expenses 8,784 1,919 6,865 Pos.As a%of revenues 2.7%0.8%1.9 The effective tax rates for the fiscal years ended January 31,2024 and 2023,stood respectively at 18.9%and 11.4%,compared with the Corporations Canadian effective rate,which is 27%.These effective rates come mainly from t

130、he mix of profits or losses of ADFs different subsidiaries,according to their legal and tax jurisdictions.As of January 31,2023,the Corporation had$25.4 million in operating losses available in the United States for carry-forward purposes,for which no deferred tax benefit had been recognized.As of J

131、anuary 31,2024,the balance of these losses was$5.3 million,and given that the Corporation now believes that it is likely that it will have sufficient future taxable income,the deferred tax benefits have been recognized.11.7 Net Income,Basic and Diluted Earnings per Share Fiscal Years Ended January 3

132、1,2024 2023(In thousands of dollars and in percentage)$Total net income 37,622 14,935 Total basic and diluted earnings per share 1.15 0.46 The increase in net income during the fiscal year ended January 31,2024,compared with the previous fiscal year,results from items previously explained in this se

133、ction,and more specifically,from higher revenues and gross margins.12.COMMENTS ON QUARTERLY RESULTS The trends observed in the analysis of quarterly results do not necessarily represent those of the future results of the Corporation.ADFs fabrication activities are not,as such,subject to seasonal flu

134、ctuations.However,the non-residential construction market in which the Corporation is active goes through upward and downward cycles.Overall,quarterly fluctuations in the following indicators result mainly from the changes in the revenue mix and accrued costs within different projects and for every

135、given period,together with the lags between the recognition of costs and revenues,where appropriate,that could result from the use of estimates based on the percentage-of-completion method.More specifically and considering the results for the last eight(8)quarters presented hereinafter,these quarter

136、ly fluctuations are mostly explained by the fabrication schedules of the different projects underway.Considering that revenues are recognized progressively based on costs incurred to date relative to the total estimated costs at completion on the various projects executed by the Corporation,revenue

137、and operating results can differ significantly from quarter to quarter because of these execution schedules.Annual Report for the Fiscal Year Ended January 31,2024 Page 10 of 55 ADF Group Inc.12.1 Results for the Last Eight(8)Quarters Fiscal Years Ended January 31,2024 2023 4th Quarter(01.31.2024)3r

138、d Quarter(10.31.2023)2nd Quarter(07.31.2023)1st Quarter(04.30.2023)4th Quarter(01.31.2023)3rd Quarter(10.31.2022)2nd Quarter(07.31.2022)1st Quarter(04.30.2022)(In thousands of dollars and in dollars per share)$Revenues 88,394 82,143 80,215 80,271 51,501 64,999 66,382 68,008 Gross margin 21,620 20,07

139、2 17,779 13,450 9,037 9,779 8,532 8,221 As a%of revenues(1)24%24%22%17%18%15%13%12%Adjusted EBITDA(2)15,495 17,769 12,644 10,031 5,873 7,543 7,101 5,602 As a%of revenues(2)18%22%16%12%11%12%11%8%Income before income tax expense 14,255 13,277 10,949 7,925 3,918 3,300 5,746 3,890 Net income 10,511 11,

140、198 10,542 5,371 2,343 2,910 5,426 4,256 Basic and diluted per share 0.32 0.34 0.32 0.16 0.07 0.09 0.17 0.13 (1)Gross margin as a percentage of revenues is a supplementary financial measure.Refer to the Section 9“Non-GAAP Financial Measures and Other Financial Measures”of this MD&A Report,for defini

141、tion of this metric.(2)Adjusted EBITDA and adjusted EBITDA margin(as a percentage of revenues)are non-GAAP financial measures.A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare the Corporations financial statements and might n

142、ot be comparable to similar financial measures used by other issuers.Refer to the Section 9“Non-GAAP Financial Measures and Other Financial Measures”of this MD&A Report,for definition of these metrics and the reconciliation to the most comparable IFRS Accounting Standards.12.2 Results for the Fourth

143、 Quarter Ended January 31,2024 For the 3-month period ended January 31,2024,the Corporation recorded revenues of$88.4 million,up by$36.9 million from the fourth quarter of the 2023 fiscal year.The change compared with this quarter is explained by the fabrication schedule,in line with the order backl

144、og in hand,and is in line with the trend observed since the beginning of the 2024 fiscal year.The gross margin,as a percentage of revenues(1)stood at 24.4%for the fourth quarter ended January 31,2024,compared with 17.5%for the corresponding quarter of fiscal 2023.The margins increase between these t

145、wo quarters is primarily explained by a better absorption of fixed costs,in line with higher revenues and continued improvement in internal efficiency generated by the automation of operating process at ADFs plant in Terrebonne,Quebec.The Corporation recorded net income of$10.5 million during the la

146、st quarter of fiscal 2024,compared with net income of$2.3 million for the corresponding period of fiscal 2023,which benefited from the increase in revenues and in gross margins,as previously explained.(1)Gross margin as a percentage of revenues is a supplementary financial measure.Refer to the Secti

147、on 9“Non-GAAP Financial Measures and Other Financial Measures”of this MD&A Report,for definition of this metric.13.CASH FLOWS AND FINANCIAL POSITION The Corporation has a sound financial position and is on a solid footing to address its financial needs.Taking into account its cash and cash equivalen

148、ts position,its credit facility and the level of planned capital spending,the Corporation does not expect any liquidity risk in a foreseeable future.On January 31,2024,cash and cash equivalents totalled$72.4 million,up by$65.2 million compared with January 31,2023.In addition,as at January 31,2024,a

149、nd as at January 31,2023,the Corporation did not draw from its credit facilities.Management believes that these available funds are sufficient to support the growth and execution of its order backlog in hand on January 31,2024,and to meet its financial commitments for the 2025 fiscal year.Furthermor

150、e,the Corporation continually appraises the opportunities to use part of its liquidities to finance certain projects that could provide additional long-term competitive advantages.It also looks at opportunities for accelerated payments discounts negotiated with suppliers(see Section 30 Outlook).Annu

151、al Report for the Fiscal Year Ended January 31,2024 ADF Group Inc.Page 11 of 55 13.1 Operating Activities The Corporations operating activities are summarized as follows:Fiscal Years Ended January 31,2024 2023(In thousands of dollars)$Net income adjusted for non-cash items 58,791 22,378 Changes in n

152、on-cash operating working capital items:Accounts receivable 13,589(48,647)Contract assets(2,217)(12,011)Inventories(2,849)(550)Prepaid expenses and other current assets(1,213)103 Accounts payable and other current liabilities 10,749 5,478 Contract liabilities 1,113 29,787 Others(10)(10)19,162(25,850

153、)Income tax(paid)recovery (93)860 Cash flows from(used in)operating activities 77,860(2,612)Net income adjusted for non-cash items totalled$58.8 million during the 2024 fiscal year,which is$36.4 million more than during the 2023 fiscal year.This difference is for the most part explained by the incre

154、ase in net income.During the 2024 fiscal year,changes in non-cash operating working capital items generated cash of$19.2 million.This cash inflow is mostly explained by the decrease in accounts receivables($13.6 million)and the higher accounts payable and other current liabilities($10.7 million),net

155、 of the increase in contract assets($2.2 million)and inventories($2.8 million).These variations are in line with the activity level as at January 31,2024,compared with the same date a year ago,including the impact of new contracts announced in December 2023.The change in non-cash working capital req

156、uired cash of$25.9 million in fiscal 2023.This cash outflow was mainly due to increases in accounts receivable($48.6 million)and contract assets($12.0 million),net of the increase in contract liabilities($29.9 million).13.2 Investing Activities The Corporations investing activities are summarized as

157、 follows:Fiscal Years Ended January 31,2024 2023(In thousands of dollars)$Acquisition of property,plant and equipment(5,768)(11,463)Acquisition of intangible assets(720)(698)Others 222 80 Cash flows used in investing activities(6,266)(12,081)During the 2024 fiscal year,$6.3 million in liquidities we

158、re used mainly for the acquisition of property,plant and equipment($5.8 million)and intangible assets($0.7 million).Acquisition of property,plant and equipment during the fiscal year ended January 31,2024,was mainly for the maintenance of fabrication equipment at ADFs plants in Terrebonne,Quebec and

159、 in Great Falls,Montana.For the fiscal year ended January 31,2023,the vast majority of the acquisitions of property,plant and equipment were for the capital investment program aimed at outfitting ADFs fabrication plant in Terrebonne,Quebec,with a brand-new robotic production line unique in North Ame

160、rica,as well as new programmable and automated equipment.The intangible assets for both fiscal years relate primarily to the in-house development and implementation of production,estimating and financial software.The Corporation anticipates capital expenditures for fiscal year 2025 of$5.0 million,to

161、 keep the production equipment current at its plants in Terrebonne,Quebec and in Great Falls,Montana.Annual Report for the Fiscal Year Ended January 31,2024 Page 12 of 55 ADF Group Inc.13.3 Financing Activities The Corporations financing activities were as follows:Fiscal Years Ended January 31,2024

162、2023(In thousands of dollars)$Issuance of long-term debt 20,000 Repayment of long-term debt(2,296)(2,216)Payment of lease liabilities(686)(804)Dividends paid(653)(653)Interest paid(3,053)(2,177)Others 7 Cash flow(used in)from financing activities(6,688)14,157 During fiscal year 2024,financing activi

163、ties required$6.7 million in liquidities,compared with a cash inflow of$14.2 million during the previous fiscal year.Beside the grant of two debts totaling$20.0 million,during the fiscal year ended January 31,2023,which were part of the investment program for the automation of fabrication processes

164、at ADFs Terrebonne plant,the amounts paid during the two years analyzed were for the repayment of the long-term debt,as well as lease obligations,the payment of dividends and of interest.a)New Financing from Investissement Qubec During the fiscal year ended January 31,2022,being January 14,2022,and

165、January 18,2022,the Corporation obtained from Investissement Qubec(IQ),two bank loans with progressive disbursements,totaling$20.0 million,to finance its equipment modernization and robotization program at its Terrebonne plant.These two loans,which progressive disbursements began in February 2022,ar

166、e detailed as follows:The first of these two bank loans,totaling$12.3 million,bear interest at IQs annual prime rate plus 1.5%and benefit from a 24-month capital repayment moratorium at the end of which it will be repayable by 96 capital payments of$128,125 starting in March 2024 and ending in Febru

167、ary 2032.As at January 31,2023,the Corporation had drawn$12.3 million on this loan,that is the entirety of the loan.The second of these two bank loans,totaling$7.7 million benefit from a 36-month capital repayment moratorium,at the end of which it will be repayable by 83 capital installments of$91,6

168、67 beginning in March 2025 to end with a final capital payment of$91,639 in February 2032.As at January 31,2023,the Corporation had drawn an amount of$7.7 million on this loan,representing also the entirety of the loan.This loan,which bears no interest has been valued at fair value using an interest

169、 rate commonly used on the market.Therefore,interest at the implicit annual rate of 3.95%is calculated monthly.The difference of$1.6 million between this fair value of$6.1 million and the cash received in the amount of$7.7 million has been accounted for as a grant against the fixed assets to which i

170、t relates.These two loans are guaranteed by a first rank movable hypothec in the amount total of$24.0 million on the universality of machinery and equipment,present and future.They are also subject to compliance with certain financial ratios.During the fiscal years 2024 and 2023,the Corporation reim

171、bursed a total of$3.0 million on its long-term debts and lease liabilities for each of these two fiscal years.The Corporation also paid a total of$0.7 million in dividends to its Shareholders of Record,for each of the fiscal years 2024 and 2023.13.4 Payment of Rent and Interest and Payment of Princi

172、pal on Debt The Corporation pays interest on its long-term debts,based on interest rates ranging between 0%and 8.7%as at January 31,2024.The Corporation is currently making monthly principal repayments totalling less than$0.3 million on these debts.Other rent payments relating to lease liabilities a

173、nd other long-term contracts are described in Section 13.6 Contractual Obligations below.13.5 Debt Covenants During the fiscal year ended January 31,2024,the Corporation met all covenants with its lenders,and still did at the date hereof.Management expects it will continue to respect its commitments

174、 during fiscal year 2025.Annual Report for the Fiscal Year Ended January 31,2024 ADF Group Inc.Page 13 of 55 13.6 Contractual Obligations Long-Term Debt Long-term debt,excluding interest and deferred financing costs,is detailed as follows:(In thousands of dollars)$Less than one year 3,076 2 to 3 yea

175、rs 8,608 4 to 5 years 8,608 And over 26,512 Total 46,804 Lease Obligations The lease liabilities excluding interest,are detailed as follows:(In thousands of dollars)$Less than one year 827 2 to 3 years 1,555 4 to 5 years 1,114 And over 170 Total 3,666 14.CAPITAL STOCK Information on the outstanding

176、shares:Subordinate Voting Shares Multiple Voting Shares(1)Total Outstanding Shares(In thousands of dollars,and in number of shares)Number$Number$Number$As at January 31,2023 and 2024 18,297,099 52,126 14,343,107 16,001 32,640,206 68,127(1)These shares carry 10 votes per share.At the date hereof,the

177、number of shares outstanding remained unchanged.15.SHARE-BASED COMPENSATION 15.1 Deferred Share Units(DSU)a)External Directors This deferred compensation plan allows every external director,who wants to participate,to defer in whole or in part his/her directors compensation(including fees and attend

178、ance fees),by electing to receive a percentage of this compensation in the form of DSU,which will be bought back in cash by the Corporation on the date the External Director ceases to be a director of the Corporation by reason of death,retirement or loss of function as director.When a director elect

179、s to participate in this plan,the Corporation credits the account of the director for a number of units equal to the deferred compensation divided by the market value of the Subordinate Voting Shares,which is established using the average closing price during the five(5)trading days preceding the da

180、te of grant.DSU are not convertible into shares of the Corporation and do not result in a dilution to shareholders.In addition,and independently to DSU that can be granted to External Directors for the purposes of deferring their directors compensation,the DSU plan also allows the Corporations Board

181、 of Directors to award,at its discretion,DSU to any external director,executive officer and key employee.If it sees fit,the Board of Directors can attach conditions related to time and/or to the Corporations performance to the vesting of these DSU.When the Corporation pays dividends on Subordinate a

182、nd Multiple Voting Shares,the accounts of the Directors,Executive Officers and key employees(see paragraph b)below)are credited for the amount in the form of additional units using the same basis of calculation previously described.The DSU are re-evaluated at fair value at the end of each reporting

183、period until the vesting date,using the market price of the Corporations subordinate voting shares.During the fiscal year ended January 31,2024,DSU compensation to External Directors recorded in the Consolidated Statement of Income amounted to an expense of$1.6 million(a$0.2 million expense during t

184、he fiscal year ended January 31,2023),including the impact of the change in the market price of the Corporations share.Annual Report for the Fiscal Year Ended January 31,2024 Page 14 of 55 ADF Group Inc.The fluctuation in DSU for External Directors was as follows:Fiscal Years Ended January 31,2024 2

185、023(In number of deferred share units)Number Number Outstanding,at the beginning of fiscal year 166,653 54,996 Granted 81,932 111,657 Outstanding and vested,at the end of fiscal year 248,585 166,653 The carrying amount and the intrinsic value of the liabilities related to the External Directors vest

186、ed DSU were$1.9 million as at January 31,2024($0.4 million as at January 31,2023).b)Executive Officers and Key Employees As set forth in the DSU Plan,the Corporation may grant DSU,on a discretionary basis to its Executive Officers and key employees.These DSU usually vest gradually over a 2 to 5-year

187、 period,at a rate of 20%to 50%per year.The vested DSU will be bought back in cash by the Corporation on the date its holder ceases to be an officer or employee of the Corporation by reason of death,retirement,or loss of function as officer or employee.The DSU are progressively expensed as incurred o

188、ver the vesting period and their costs is determined using a valuation model based on the market price of the Corporations Subordinate Voting Shares.The DSU are re-evaluated at the fair value at the end of each reporting period until the vesting date,using the market price of the Corporations Subord

189、inate Voting Shares.The DSU compensation for Executive Officers and key employees,recorded in the Consolidated Statement of Income during the fiscal year ended January 31,2024,amounted to an expense of$2.3 million($0.3 million expense during the fiscal year ended January 31,2023),including the impac

190、t of the variation in the Corporations share price.The fluctuation in DSU for the Executive Officers and key employees was as follows:Fiscal Years Ended January 31,2024 2023(In number of deferred share units)Number Number Outstanding,at the beginning of fiscal year 378,267 330,570 Granted 37,854 47,

191、697 Outstanding,at the end of fiscal year 416,121 378,267 Vested,at the end of fiscal year 338,973 280,016 The carrying amount of the liabilities related to Executive Officers and key employees DSU,amounting to$3.0 million as at January 31,2024($0.7 million as at January 31,2023),and of which$2.6 mi

192、llion correspond to the intrinsic value of vested DSU as at January 31,2024($0.6 million as at January 31,2023).15.2 Performance Share Units Plan(PSU)As part of its long-term compensation plan,the Corporation may issue PSU to its Executive Officers and key employees.PSU are not convertible into shar

193、es of the Corporation and do not result in dilution for shareholders.The acquired PSU are only redeemable in cash by the Corporation upon the expiration of three(3)years after their grant(the PSU Settlement Date),subject to the achievement of financial targets.PSU tranches whose vesting conditions h

194、ave not been met on the applicable vesting date are canceled,without compensation.PSU also entitle holders to receive additional units each time dividends are paid on the Corporations subordinate voting shares.Compensation expense is recognized in the Consolidated Statement of Income over the vestin

195、g period and the counterpart is recognized in current liabilities in the Consolidated Statement of Financial Position.Changes in fair value between the grant date and the valuation date result in a change in liability and compensation expense.The fair value of a PSU at any given date(for example,its

196、 grant date,vest date or PSU settlement date,etc.)is equal to the market value of the subordinate voting shares of the Corporation on that date,calculated using the average closing price subordinate voting shares of the Corporation on the Toronto Stock Exchange during the five(5)trading days immedia

197、tely preceding that date.During the fiscal year ended January 31,2024,PSU compensation for Executive Officers and key employees amounted to a$0.7 million expense($0.2 million expense for the fiscal year ended January 31,2023)including the impact of the variation in the Corporations share price.Annua

198、l Report for the Fiscal Year Ended January 31,2024 ADF Group Inc.Page 15 of 55 Fluctuations in PSU for Executive Officers and key employees were as follows:Fiscal Years Ended January 31,2024 2023(In number of performance share units)Number Number Outstanding,at the beginning of fiscal year 218,378 3

199、17,744 Granted 36,389 74,786 Settled(125,441)(174,152)Outstanding,at the end of fiscal year 129,326 218,378 Vested,at the end of fiscal year 52,178 91,641 As at January 31,2024,the carrying amount of the liabilities related the Executive Officers and key employees PSU,amounted to$0.9 million($0.4 mi

200、llion as at January 31,2023),including an amount of$0.4 million,which corresponds to the intrinsic value of the vested PSU as at January 31,2024($0.2 million as at January 31,2023).16.DIVIDENDS During the fiscal year ended January 31,2024,two semi-annual dividends of$0.3 million each(or$0.01 per sha

201、re),were recognized as distribution to the Shareholders of Record of the Corporation as at April 28,2023,and September 29,2023,respectively,totalling$0.7 million(or$0.02 per share),of which$0.4 million for Subordinate Voting Shares and$0.3 million for Multiple Voting Shares.These sums were paid on M

202、ay 17,2023,and October 17,2023,respectively.During the fiscal year ended January 31,2023,two semi-annual dividends of$0.3 million each(or$0.01 per share),were recognized as distribution to the Shareholders of Record of the Corporation as at April 29,2022,and September 29,2022,respectively,totalling$

203、0.7 million(or$0.02 per share),of which$0.4 million for Subordinate Voting Shares and$0.3 million for Multiple Voting Shares.These sums were paid on May 17,2022,and October 18,2022,respectively.17.ORDER BACKLOG ADF Groups order backlog(1)totalled$510.9 million on January 31,2024,compared with$376.5

204、million on the same date a year earlier.This variation is attributable to new contracts and contractual changes,net of the execution of contracts.As at January 31,2024,48%of the order backlog consisted of fabrication hours the Corporations core business and most value-added activity compared with 55

205、%on January 31,2023.Most of the contracts in hand as at January 31,2024,will progressively be executed by the middle of the fiscal year ending January 31,2026.(1)The order backlog is a supplementary financial measure.Refer to the Section 9“Non-GAAP Financial Measures and Other Financial Measures”of

206、this MD&A Report,for the definition of this metric.18.FINANCIAL POSITION As at January 31,2024,the Corporation had a sound financial position.The Corporations solid consolidated statement of financial position allows it to obtain,when required,the necessary bonding for the award of large-scale contr

207、acts.This represents a major advantage for ADF within its markets.The following table provides details on the major changes in the Consolidated Statement of Financial Position between January 31,2024,and January 31,2023.Sections Changes(In millions of dollars)Explanatory Notes Cash and cash equivale

208、nts 65.2 See Section 13 Cash Flows and Financial Position of this MD&A Report.Accounts receivable(13.1)Variation of billing level in line with activity level and work progress schedules.Contract assets,net of contract liabilities 0.7 Net variance between the work progress and progressive revenue bil

209、ling;the difference reflecting the progress schedule.These variations do not include any adjustment,being either a change in the work progress or change in the price estimate.Investment tax credit 3.1 Investment tax credit obtained for the acquisition of equipment used for fabrication and processing

210、,and which will be realized during the fiscal year ending January 31,2025.Property,plant and equipment,intangible assets and right-of-use assets(4.2)Change from acquisition of property,plant and equipment and intangible assets($6.5 million)net of amortization($5.8 million),investment tax credit($4.8

211、 million)and foreign exchange impact ($0.1 million).Annual Report for the Fiscal Year Ended January 31,2024 Page 16 of 55 ADF Group Inc.Sections Changes(In millions of dollars)Explanatory Notes Accounts payable and other current liabilities 15.5 Change in line with the level of activity at the respe

212、ctive closing dates.Long-term debt and lease liabilities(including current portions)(2.7)Change from reimbursement of long-term debts($2.3 million)and lease liabilities($0.7 million)net of foreign exchange impact and other miscellaneous items($0.3 million).Deferred income tax assets net of deferred

213、income tax liabilities 6.4 Variations in timing differences between tax and accounting of certain items.19.CURRENT ECONOMIC ENVIRONMENT Although the trends are improving in certain markets served by the Corporation,a degree of uncertainty remains regarding the economic context.In times of economic u

214、ncertainty,the Corporation is faced with the following challenges:Its business segment is strongly dependent on project owners capacity to finance their projects.For lack of financing,certain projects can be delayed or simply abandoned.Although the Corporation strives to mitigate this risk by focusi

215、ng its marketing efforts on projects whose financing is most likely to materialize,it has no control over financial market trends,and Certain project owners who secured financing on the start-up of projects could be forced to cease the work pursuant to the withdrawal of financing,due to a lack of ca

216、pital of either the project lender or the owner.The Corporation mitigates this risk by ensuring that amounts due are diligently collected and,insofar as possible,maintaining at all times a positive cash flow for every project.Moreover,the Corporation does business with owners who are financially sol

217、id.At the date hereof,no project of the Corporation is subject to such constraints.From a financing point of view,the Corporation has a sound financial position and currently respects all its financial covenants.It expects it will continue to do so during the next 12 months.While the investment prog

218、ram in previous years represents a larger investment,capital expenditures are closely monitored by Management.The Corporation does not anticipate any liquidity problems,in particular since its credit facility is issued by a Canadian chartered bank with a solid credit rating,and the Corporations majo

219、r clients are leaders in their respective fields.Based on the foregoing,the Corporation maintains its short-term prospects(see Section 30 Outlook)and does not currently foresee any short-term elements that could compromise its course of business.That being said,the Corporation will continue to use c

220、aution and will closely monitor the situation(see Sections 21 External Factors to Which the Corporations Performance is Exposed and 30 Outlook).20.RELATED PARTY TRANSACTIONS During the fiscal year ended January 31,2024,certain advances were granted to executive-shareholders.These advances were fully

221、 reimbursed at the date hereof and no outstanding balances remained as at January 31,2024.Moreover,in the normal course of business,management agreements have been reached with companies held by a group of majority shareholders.These transactions are measured at the exchange value,which is the consi

222、deration established and accepted by the related parties:Fiscal Years Ended January 31,2024 2023 Company Type Transactions with ADF Group Inc.(In$)(In$)Groupe JPMP Inc.Executives Three executives of ADF Group are compensated through this company for their work within the Corporation,as stipulated in

223、 their contracts of employment(see Section 10 Executive Compensation of the Management Information Circular for the 2024 fiscal year).1,286,140 1,247,155 ADF Group Inc.Executives Other compensation paid directly to Executives.1,056,915 900,955 21.EXTERNAL FACTORS TO WHICH THE CORPORATIONS PERFORMANC

224、E IS EXPOSED 21.1 Global Pandemic A pandemic outbreak,as demonstrated by COVID-19,must now be considered in external factors that may influence ADFs performance.Although the type of pandemic or future variant is innumerable,and the impacts of these pandemics on the sector in which our Corporation op

225、erates can be multiple,the Corporation will now have to monitor this new risk.The measures taken by ADF to minimize the impacts of COVID-19 on all operations will serve as the basis for future years and will need to be adjusted,if necessary,according to the potential impacts of future pandemics.21.2

226、 Exchange Rate The exchange rate fluctuation between the Canadian and U.S.dollars has an impact on the Corporations results.Thus,a$1.2 million foreign exchange loss was recorded for the fiscal year ended January 31,2024,compared with a$1.9 million foreign exchange loss for the 2023 fiscal year.Annua

227、l Report for the Fiscal Year Ended January 31,2024 ADF Group Inc.Page 17 of 55 In order to minimize the impact of exchange rate fluctuations on its results,the Corporation implemented the following protective measures:Issuance of debts in U.S.dollars;When advantageous,the raw material(steel)and weld

228、ing products required for fabrication are purchased in U.S.dollars,and A foreign exchange policy to protect a portion of the net exchange risk between cash inflows and outflows denominated in U.S.dollars.21.3 Operating Risks and Uncertainties The following is a description of the Corporations main o

229、perating risks and uncertainties:a)Uncertainties Relating to the World Economy The uncertainty related to the global economy could have a negative impact on the Corporations business segment,i.e.the non-residential construction industry,particularly in North America,its primary market.At the date he

230、reof,although the Corporations order backlog will provide work for the next quarters,the uncertainty relating to the global economy could adversely affect the Corporations revenues and profitability beyond that period.b)Bonding Capacity and Irrevocable Letters of Credit During the fiscal year ended

231、January 31,2024,the Corporation maintained the necessary bid bonds and/or letters of credit to its business partners,required for bids,as well as in the scope of contractual commitments,or other financial instruments,such as performance,payment and supply bonds,or an irrevocable letter of credit.c)O

232、perational Risks and Uncertainties That Could Have an Impact on the Corporations Financial Position and Operating Results Normally,ADFs contracts are performed under contractual arrangements at firm prices.ADF has developed and applies rigorous risk assessment and management practices to reduce the

233、nature and extent of the financial,technical and legal risks specific to each of these contractual agreements.ADFs continued commitment to strict risk management practices when undertaking and executing contracts includes the technical risks assessment,legal review of contracts,application of tight

234、cost controls and scheduling of projects,regular review of projects revenues,costs and cash flows,and implementation of agreements aimed at generating positive cash flows from projects and other provisions aimed at mitigating risks.The following items could have an impact on the Corporations future

235、financial position and operating results:Economic conditions could exert pressure on the profit margins on new projects to be negotiated with clients and have an impact on the order backlog and the award of new contracts;Contractual changes overlapping two periods,that is,for which costs would have

236、been recognized but no revenues recorded during a given period and no final settlement concluded with the client at the end of that period,could have an impact on the Corporations results and cash flows in the following period,subsequent to the signing of this agreement;An increase in the price of s

237、teel might be a risk,although it would be mitigated by the sale price adjustment clauses concluded with clients and included in contracts;The risk associated with the fluctuations in interest rates is also mitigated by having a mix between fixed-rate and variable-rate debts,as well as available liqu

238、idities,when appropriate,that can generate financial revenues.This risk is also mitigated by the implementation of interest rate options that limit fluctuations in interest rates on a portion of the Corporations variable debt;Competition in the Corporations business segment;Economic dependency relat

239、ed to the concentration of its client base;the Corporation strives to mitigate this risk through its development strategy of broadening its geographical and market sectors;The imposition by the United States,historically ADFs main market,of tariffs or other protectionist measures on imported process

240、ed steel;Fluctuations in the exchange rate between the Canadian and U.S.dollars.However,this risk is mitigated in part by the foreign currency hedge policy adopted by the Corporations Executive Officers,and The nature of contracts in hand,depending on the type of client,can influence the delay of co

241、llection.When these contracts are funded by government agencies,it is possible that the collection period of contract receivables is not impacted upward.However,the risk related to the collection is minimal given that these sums are actually guaranteed by government agencies.When these same contract

242、s are funded by non-governmental organizations,Management believes that the vast majority of these accounts are not doubtful accounts since that they are with well-established companies.22.FINANCIAL INSTRUMENTS A significant number of items in the Corporations Statement of Financial Position include

243、 financial instruments.The Corporations financial assets consist of cash,cash equivalents,accounts receivable,contract assets,as well as derivative financial instruments,whose fair market value is positive.Financial liabilities include credit facilities,accounts payable and other current liabilities

244、,contract liabilities,long-term debt and derivative financial instruments,whose fair market value is negative.Annual Report for the Fiscal Year Ended January 31,2024 Page 18 of 55 ADF Group Inc.As at January 31,2024 and 2023,the carrying amount of these financial instruments did not significantly di

245、ffer from the fair market value,either because of their forthcoming maturity date(in the case of cash,cash equivalents,accounts receivable,contract assets and liabilities,credit facilities,and accounts payable and other current liabilities),or because the Corporation believed it could obtain similar

246、 conditions and schedules in the case of the long-term debt(excluding lease liabilities)or since they are re-evaluated at their fair value at the end of every period(in the case of derivative financial instruments)(see Note 24 Financial Instruments in the Consolidated Financial Statements for the fi

247、scal year ended January 31,2024).Derivative financial instruments are typically used to manage the Corporations foreign exchange and interest rate risk exposure.They are generally comprised of foreign exchange forward contracts and an interest rate swap.The Corporation is mostly exposed to credit,li

248、quidity and market risks,including exchange rate and interest rate risks,when using financial instruments.A description of how the Corporation manages these risks is included hereinabove in this MD&A Report,as well as in Note 23 Financial Risk Management in the Consolidated Financial Statements for

249、the fiscal year ended January 31,2024.23.ASSESSMENT OF THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES,AND INTERNAL CONTROL OVER FINANCIAL REPORTING In accordance with National Instrument 52-109,Certification of Disclosure in Issuers Annual and Interim Filings,disclosure controls and procedu

250、res have been designed to provide reasonable assurance that the information that must be presented in Corporations interim and annual reports is accumulated and communicated to management on a timely basis,including the Chief Executive Officer and the Chief Financial Officer,so that appropriate deci

251、sions can be made regarding disclosure.Internal control over financial reporting has also been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS Accounting Standards.The Chief Executive Office

252、r and the Chief Financial Officer have evaluated the effectiveness of Corporations disclosure controls and procedures as at January 31,2024,as well as the effectiveness of Corporations internal control over financial reporting as of the same date using the criteria set forth by the Committee of Spon

253、soring Organizations of the Treadway Commission(COSO)on Internal Control Integrated Framework(2013 Framework)and have concluded that they are effective.During the quarter ended January 31,2024,no changes were made to internal control over financial reporting that have materially affected,or are reas

254、onably likely to materially affect,internal controls and procedures.24.DISCLOSURE AND INSIDER TRADING POLICIES In accordance with its internal policies and guidelines,the Corporation diligently reports all relevant financial information.In addition,when the Corporation publishes its financial result

255、s or announces major contract awards or any other material information,it enforces a blackout period for its directors and managers,as well as for its personnel who wishes to trade on ADF Groups securities,in order to ensure compliance and transparency of any trading by persons regarded as insiders.

256、With regard to the employees,this blackout period can,under the circumstances,be either enforced for all the Corporations employees or limited to a more restricted number of employees according to their knowledge of privilege information concerning the event to be disclosed.25.MATERIAL ACCOUNTING PO

257、LICIES,UNCERTAINTY RELATING TO ESTIMATES AND CRITICAL ACCOUNTING JUDGMENTS ADFs material accounting policies is described in Note 2 Material Accounting Policies of the Notes to Consolidated Financial Statements for the Fiscal Year Ended January 31,2024.The preparation of financial statements in acco

258、rdance with IFRS Accounting Standards,requires Management to make judgements in the application of accounting policies used and to make estimates and assumptions that affect the reported amounts of assets and liabilities,as well as the disclosure of contingent assets and liabilities at the date of t

259、he consolidated financial statements and the reported amounts of revenues and expenses during the periods.Because financial reporting involves accounting judgements and entails the use of estimates,actual results could differ from those estimates.Underlying estimates and assumptions are periodically

260、 reviewed,and the impact of any changes is recognized immediately.The significant accounting judgements and estimates used by the Corporation to prepare the financial statements are:25.1 Revenue Recognition The identification of revenue-generating contracts with customers,the identification of perfo

261、rmance obligations,the determination of the transaction price and its allocation between identified performance obligations,the use of the appropriate revenue recognition method(over time or at a specific point in time)for each performance obligation and the measure of progress for performance oblig

262、ation satisfied over time are the main aspects of the revenue recognition process,all of which require judgment and the use of assumptions.The transaction price corresponds to the amount of consideration to which the Corporation expects to be entitled in exchange for transferring promised goods or s

263、ervices to a customer.Such amount may require the Corporation to estimate an amount of a variable consideration,notably from estimated volume of work,claims and unpriced contract modifications,incentives or penalties,among others.Furthermore,the Corporation needs to constraint the transaction price

264、by including only the amount for which it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.The amount of variable consideration to be included in the t

265、ransaction price of a given contract is determined by using various estimates and assumptions,which could be based on historical experience with the same customer or other similar contracts,third-party assessments,legal interpretation of relevant contractual clauses and probabilistic methodologies,a

266、mong others.Due to the uncertain nature of the estimations,the amount of a variable consideration may vary significantly over time.Such estimated amount of a variable consideration then needs to be updated at the end of each reporting period.Annual Report for the Fiscal Year Ended January 31,2024 AD

267、F Group Inc.Page 19 of 55 The determination of anticipated costs for completing a contract is based on estimates that can be affected by a variety of factors such as potential variances in scheduling and cost of materials along with the availability and cost of qualified labour and subcontractors,pr

268、oductivity,and possible claims from subcontractors.A change in any of those factors could affect revenues recognition.25.2 Assessment and Amortization of Long-Lived Assets Management reviews the useful lives of its amortizable assets at each reporting date.The carrying amounts are analyzed at the en

269、d of each fiscal year.Actual results could however differ because of technical obsolesce,particularly with regards to hardware and software.25.3 Significant Judgment in Determining the Lease Term of Contracts The Corporation determines the lease term as the non-cancellable period of the lease,togeth

270、er with any periods covered by an option to extend the lease,if it is reasonably certain to be exercised,or any periods covered by an option to terminate the lease,if it is reasonably certain not to be exercised.The Corporation applies judgment in assessing whether it is reasonably certain to exerci

271、se its options to extend its leases or to not exercise its options to terminate its leases,by considering all facts and circumstances that create an economic incentive to exercise an extension option or not to exercise a termination option.The assessment is reviewed if a significant event or a signi

272、ficant change in circumstances occurs which affects this assessment and that is within the Corporations control.25.4 Income Taxes The Corporation calculates the income tax expense for each jurisdiction where it operates.However,the actual income tax amounts become definitive only upon the filing of

273、income tax returns and acceptance thereof by the competent authorities,which occur after the financial statements are published.Judgements must periodically be made to determine if deferred income tax assets must be recognized in the Consolidated Statement of Financial Position.Deferred income tax a

274、ssets,including unused tax losses,require Management to assess whether the Corporation will generate taxable income in subsequent periods,in order to use deferred income tax assets.Once the assessment is done,if the Corporation believes that it is likely that a portion of its deferred income tax ass

275、ets will not be realized,the deferred income tax asset is derecognized.The estimate of future taxable income is based on cash flow from operations forecasts and applicable tax laws in effect in each jurisdiction.Should future cash flows and taxable profit differ materially from these estimates,it co

276、uld have an impact on the Corporations ability to realize the net deferred income tax assets at the reporting date of the financial position.25.5 Impairment of Non-Financial Assets ADFs Management makes judgments in assessing whether changes to certain factors would be considered an indicator of imp

277、airment,which include both internal and external factors such as:changes in signed backlog,changes in adjusted EBITDA margin,changes in EBITDA multiples of comparable companies,and the Corporations market capitalization compared to its net assets.An impairment loss is recognized,if any,for the amoun

278、t by which an assets or CGUs(cash-generating units)carrying amount exceeds its recoverable amount,which is the higher of fair value less cost of disposal and value in use.For the purpose of assessing the potential impairment of the Corporations non-financial assets,management would use the fair valu

279、e less costs of disposal model to estimate the fair value based on earnings before interest depreciation and amortization(EBITDA)multiple approach.The significant assumptions,which affect the financial analysis include revenues,operating costs and margins,foreign exchange rates and comparable compan

280、ies EBITDA multiple.These estimates are subject to certain risks and uncertainties that may affect the determination of the recoverability of the Corporations non-financial assets.As at January 31,2024 and 2023,the management of the Corporation has determined that there is no indicator of impairment

281、 and therefore no impairment test has been performed.26.ENVIRONNEMENT ADFs operations are subject to various laws and regulations adopted by federal,provincial,state and local governments pertaining to environmental protection.The Corporations Terrebonne and Great Falls facilities were built on vaca

282、nt lands.The operations that could have a potential impact on the environment are welding,which generates smoke,and equipment maintenance,which generates waste oil,and industrial coating,which generate fumes and vapours.ADF has installed appropriate pollution control equipment in order to comply wit

283、h the existing laws and regulations and ensures to perform in the normal course of business,the investments required to meet the highest standards.Waste oil is recuperated by specialized firms.The Corporation has the necessary environmental certificates of authorization for its facilities and for al

284、l expansion phases subsequently carried out.Moreover,as part of the construction of its new paint shop in Terrebonne,the Corporation updated its environmental certificate of authorization for all its operations located in Terrebonne,including its fabrication plant.Following these investments,ADF Gro

285、ups facilities in Terrebonne meet the highest environmental standards.More recently,during the fiscal year ended January 31,2022,as part of the new financing that the Corporation obtained,the Corporation conducted phase I and phase II environmental assessments at its Terrebonne,Quebec site,which did

286、 not identify any deficiencies or contaminants requiring corrective action in accordance with applicable environmental standards.Annual Report for the Fiscal Year Ended January 31,2024 Page 20 of 55 ADF Group Inc.For the fiscal years ended January 31,2024 and 2023,and taking into account the precedi

287、ng paragraph,the requirements with regard to environmental protection did not have a significant financial or operational impact on the Corporations capital expenditures,net income and competitive position.The Corporation does not expect to incur any costs outside the normal course of business to co

288、mply with environmental requirements.27.SUSTAINABLE DEVELOPMENT During the fiscal year ended January 31,2024,the Corporation began a process to adopt a Sustainable Development Policy.Established around the three ESG axes(environment,social and governance),ADF will identify in the coming months the k

289、ey objectives for each of these three axes while endowing itself with targets and means to achieve these targets.Since the beginning of the fiscal year 2024,ADF has implemented several initiatives that will allow the Corporation to move forward in this process,including setting up a Sustainable Tran

290、sition committee.This committee,which is made up of ADF employees,will allow the Corporation to keep its employees up to date with the latest developments,while allowing ADF Management to have ongoing feedback.The Corporation has also retained the services of an external firm to assess how ADF manag

291、es its energy,and measures its Scope 1,2 and 3 greenhouse gas(GHG)emissions,water and residual materials for all ADF Group facilities,both in Canada and in the United States.The results of this assessment are now being analyzed and will be incorporated into the Sustainable Development objectives tha

292、t the Corporation will adapt in the coming quarters.In the meantime,the Corporation produced its first-ever Sustainability Report,which is available with all public disclosure documents for the fiscal year ended January 31,2024,as well as on the Corporations website(),which highlights the Corporatio

293、ns sustainability initiatives.Several other initiatives,including the recycling and composting of waste generated by ADFs operation have been set in motion.The Corporation will continue to provide regular quarterly update in its MD&A Reports,including the findings of the report on energy and scope 1

294、,2 and 3 GHG,water and residual materials,and possible solution and objectives to improve its overall performance.28.HUMAN RESOURCES As at January 31,2024,the Corporation employed a total of 550 people across its head office,fabrication complex and paint shop in Terrebonne,Quebec,Canada,and its offi

295、ce,fabrication plant and paint shop in Great Falls,Montana,U.S.A.,and as well as the sales office and various construction sites in the United States.29.SUBSEQUENT EVENT Dividend On April 10,2024,the Corporations Board of Directors approved a semi-annual dividend of$0.01 per share payable on May 15,

296、2024,to Shareholders of Record as at April 26,2024.30.OUTLOOK The fiscal year that closed on January 31,2024,saw the Corporation reach several important objectives.Revenues exceeded the$300 million mark,while the order backlog topped the$500 million as at January 31,2024.These targets are in additio

297、n to the liquidity growth of more than$65 million and net income of more than$37 million,which is more than twice the net income recorded a year ago,on January 31,2023.This performance was noticed by the financial market as evidenced by the performance of ADF shares(TSX:DRX),which went from$2.12 per

298、 share on January 31,2023,to$8.00 per share as at January 31,2024,representing an increase of 377%.These results reflect the efforts put forward by ADF during the past years,from the construction of its state-of-the-art plant in Great Falls,Montana nearly 10 years ago to the fabrication processes ro

299、botization and automation investment program at ADFs Terrebonne plant in Quebec.During this period,ADF has invested approximately$110 million in its infrastructure to position itself as a North American leader in the fabrication of all types of steel structures and heavy steel components.We are reap

300、ing the benefits of this work and the sustained efforts of all ADF employees.In light of ADFs order backlog as at January 31,2024,Management is confident that it will be able to continue to grow the Corporations revenues for the fiscal year beginning February 1,2024.That said,the work has only just

301、begun.While we are proud of the progress and results of the fiscal year ended January 31,2024,we continue our efforts to grow ADFs order backlog and achieve operational excellence.The uncertainties in the markets served by the Corporation remain and we will remain vigilant in order to continue ADFs

302、healthy growth.Annual Report for the Fiscal Year Ended January 31,2024 ADF Group Inc.Page 21 of 55 31.ADDITIONAL INFORMATION The Corporation regularly discloses information through press releases,quarterly and annual reports and the Annual Information Form,available on the Corporations website at an

303、d the SEDAR(System for Electronic Document Analysis and Retrieval)website at .Mr.Jean-Francois Boursier,CPA Ms.Marise Paschini(signed)(signed)Chief Financial Officer Executive Vice-President,Treasurer and Corporate secretary Terrebonne,Quebec,Canada,April 10,2024Annual Report for the Fiscal Year End

304、ed January 31,2024 Page 22 of 55 ADF Group Inc.MANAGEMENTS REPORT To Our Shareholders ADF Group Inc.s(the Corporation)consolidated financial statements and Managements Discussion and Analysis(MD&A Report)and all other information in the Annual Report,are the responsibility of the Corporations Manage

305、ment and have been approved by its Board of Directors.The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board(IFRS Accounting Standards).The MD&A Report has been pr

306、epared in accordance with the requirements of Canadian securities regulators.The consolidated financial statements and MD&A Report include items that are based on Managements best estimates and judgments.Financial information provided elsewhere in the Annual Report is consistent with that shown in t

307、he consolidated financial statements.Management maintains accounting and internal control systems that are designed to provide reasonable assurance that financial information is reliable and assets are safeguarded.The Board of Directors is responsible for ensuring that management fulfills its respon

308、sibilities for the financial reporting and ultimately responsible for reviewing and approving the consolidated financial statements and MD&A Report,The Board of Directors carries out this responsibility principally through its Audit Committee,consisting of independent directors.The Audit Committee r

309、eviews the Corporations consolidated financial statements and MD&A Report and formulates the appropriate recommendations to the Board of Directors.The independent auditor appointed by the shareholders has full access to the Audit Committee,with or without Management being present.The consolidated fi

310、nancial statements have been audited by PricewaterhouseCoopers LLP,independent auditor,in accordance with Canadian generally accepted auditing standards on behalf of the shareholders.The independent auditors report,hereafter,outlines the scope of its audits and set forth its opinion on the consolida

311、ted financial statements.Jean Paschini Jean-Franois Boursier,CPA(signed)(signed)Chairman of the Board of Directors and Chief Executive Officer Chief Financial Officer Annual Report for the Fiscal Year Ended January 31,2024 ADF Group Inc.Page 23 of 55 INDEPENDENT AUDITORS REPORT Annual Report for the

312、 Fiscal Year Ended January 31,2024 Page 24 of 55 ADF Group Inc.Annual Report for the Fiscal Year Ended January 31,2024 ADF Group Inc.Page 25 of 55 Annual Report for the Fiscal Year Ended January 31,2024 Page 26 of 55 ADF Group Inc.Annual Report for the Fiscal Year Ended January 31,2024 ADF Group Inc

313、.Page 27 of 55 Annual Report for the Fiscal Year Ended January 31,2024 Page 28 of 55 ADF Group Inc.CONSOLIDATED FINANCIAL STATEMENTS Fiscal Years Ended January 31,2024 and 2023 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As at January 31,2024 2023(In t

314、housands of Canadian dollars)$ASSETS Current assets Cash and cash equivalents 72,379 7,193 Accounts receivable(Note 4)77,844 90,921 Current income tax assets 115 714 Contract assets(Note 13)44,862 42,541 Inventories(Note 5)13,534 10,679 Investment tax credit(note 6)3,112 Prepaid expenses and other c

315、urrent assets 3,730 2,332 Total current assets 215,576 154,380 Non-current assets Property,plant and equipment(Note 6)86,615 90,378 Right-of-use assets(Note 7)21,173 21,848 Intangible assets(Note 8)3,925 3,640 Deferred income tax assets(Note 18)266 Other non-current assets 1,050 1,371 Total assets 3

316、28,605 271,617 LIABILITIES Current liabilities Accounts payable and other current liabilities(Note 10)55,441 39,985 Current income tax liabilities 235 Contract liabilities(Note 13)46,168 44,533 Other current liabilities 964 Current portion of lease liabilities(Note 7)827 806 Current portion of long-

317、term debt(Note 11)3,040 2,258 Total current liabilities 105,476 88,781 Non-current liabilities Long-term debt(Note 11)42,138 44,927 Lease liabilities(Note 7)2,839 3,528 Deferred income tax liabilities(Note 18)15,876 9,240 Other non-current liabilities 146 156 Total liabilities 166,475 146,632 SHAREH

318、OLDERS EQUITY Capital stock(Note 12)68,127 68,127 Contributed surplus 6,435 6,435 Accumulated other comprehensive income 8,283 8,107 Retained income 79,285 42,316 Total shareholders equity 162,130 124,985 Total liabilities and shareholders equity 328,605 271,617 The accompanying notes are an integra

319、l part of these consolidated financial statements.ON BEHALF OF THE BOARD OF DIRECTORS,Director Director(signed)(signed)Jean Paschini Guy Pelletier,CPA,ASC Annual Report for the Fiscal Year Ended January 31,2024 ADF Group Inc.Page 29 of 55 CONSOLIDATED STATEMENTS OF INCOMECONSOLIDATED STATEMENTS OF I

320、NCOME Fiscal Years Ended January 31,2024 2023(In thousands of Canadian dollars,except the number of shares and the amounts per share)$Revenues(Notes 13 and 25)331,023 250,890 Cost of goods sold(Note 14)258,102 215,321 Gross Margin 72,921 35,569 Selling and administrative expenses(Note 14)22,782 14,7

321、73 Net financial expenses(Note 17)2,573 1,999 Foreign exchange loss 1,160 1,943 26,515 18,715 Income before income tax expense 46,406 16,854 Income tax expense(Note 18)8,784 1,919 Net income for the fiscal year 37,622 14,935 Earnings per share Basic and diluted per share(Note 19)1.15 0.46 Average nu

322、mber of outstanding basic and diluted shares(in thousands)(Note 19)32,640 32,640 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMECONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Fiscal Years Ended January 31,2024 2023(In thousands of Canadian dollars)$Net income for the fiscal year 37,622 14,935 Other

323、 comprehensive income(loss):Exchange differences on translation of foreign operations(a)176 2,246 Comprehensive income for the fiscal year 37,798 17,181 a)Will subsequently be reclassified to net income.The accompanying notes are an integral part of these consolidated financial statements.Annual Rep

324、ort for the Fiscal Year Ended January 31,2024 Page 30 of 55 ADF Group Inc.CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITYCONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY Capital Stock(Note 12)Contributed Surplus Accumulated Other Comprehensive Income Retained Income Total(In thous

325、ands of Canadian dollars)$Balance,February 1,2022 68,120 6,435 5,861 28,034 108,450 Net income for the fiscal year 14,935 14,935 Other comprehensive income 2,246 2,246 Comprehensive income for the fiscal year 2,246 14,935 17,181 Dividends (653)(653)Shares issuance upon exercise of options 7 7 Balanc

326、e,January 31,2023 68,127 6,435 8,107 42,316 124,985 Capital Stock(Note 12)Contributed Surplus Accumulated Other Comprehensive Income Retained Income Total(In thousands of Canadian dollars)$Balance,February 1,2023 68,127 6,435 8,107 42,316 124,985 Net income for the fiscal year 37,622 37,622 Other co

327、mprehensive income 176 176 Comprehensive income for the fiscal year 176 37,622 37,798 Dividends (653)(653)Balance,January 31,2024 68,127 6,435 8,283 79,285 162,130 The accompanying notes are an integral part of these consolidated financial statements.Annual Report for the Fiscal Year Ended January 3

328、1,2024 ADF Group Inc.Page 31 of 55 CONSOLIDATED STATEMENTS OF CASH FLOWSCONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Years Ended January 31,2024 2023(In thousands of Canadian dollars)$OPERATING ACTIVITIES Net income for the fiscal year 37,622 14,935 Non-cash items:Amortization of property,plant and

329、equipment(Note 6)4,612 4,118 Amortization of right-of-use assets(Note 7)753 835 Amortization of intangible assets(Note 8)435 370 Gain on disposal of property,plant and equipment(31)(802)Unrealized(gain)loss on derivative financial instruments(1,168)968 Unrealized foreign exchange gain(176)(1,158)Sha

330、re-based compensation(Note 12)4,576 724 Income tax expense(Note 18)8,784 1,919 Government grants(Note 14)(1,280)Net financial expenses(Note 17)2,573 1,999 Others 811(250)Net income adjusted for non-cash items 58,791 22,378 Change in non-cash working capital items(Note 20)19,162(25,850)Income tax rec

331、overy(paid)(93)860 Cash flows from(used in)operating activities 77,860(2,612)INVESTING ACTIVITIES Acquisition of property,plant and equipment(Note 6)(5,768)(11,463)Acquisition of intangible assets(Note 8)(720)(698)Others 222 80 Cash flows used in investing activities(6,266)(12,081)FINANCING ACTIVITI

332、ES Issuance of long-term debts(Notes 11 et 20)20,000 Repayment of the long-term debt(Note 20)(2,296)(2,216)Payment of lease liabilities(Note 20)(686)(804)Dividends paid(653)(653)Interest paid (3,053)(2,177)Others 7 Cash flows(used in)from financing activities(6,688)14,157 Impact of fluctuations in f

333、oreign exchange rate on cash and cash equivalents 280 599 Net change in cash and cash equivalents during the fiscal year 65,186 63 Cash,and cash equivalents,beginning of fiscal year 7,193 7,130 Cash and cash equivalents,end of fiscal year 72,379 7,193 The accompanying notes are an integral part of these consolidated financial statements.Annual Report for the Fiscal Year Ended January 31,2024 Page