Water Treatment Revenues Increase 30%

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Water Treatment Revenues Increase 30%

H2O Innovations of Canada Has Released Year end 2014 results, a Good Indicator of Growth in the Water Treatment Sector

H2OInnovation Inc. announces its results for the fourth quarter and 2014 fiscal year endedJune 30, 2014. H2O Innovation's fiscal year 2014 results showed revenues of$34.8 Mdown from$36.1 Mfor fiscal year 2013, a 3.6% reduction year over year. Despite the small decline in revenues, the Company has shown a significant increase of 134% of its new bookings of water treatment projects, pushing the order backlog to a record-high of$38.3M as atJune 30, 2014.

The Company also solidified its business model through the acquisition of Piedmont Pacific Corporation ("Piedmont"), a world-known manufacturer of specialty couplings, adding to the portfolio of specialty products and services. The Company's gross profit before depreciation and amortization improved over the year from 25.6% in fiscal year 2013 to 26.6% in fiscal year 2014, due to business mix and improved project execution.

The Company's new bookings for water treatment projects secured increased by 134% from$17.9 Mduring fiscal year 2013 to$41.8 Mduring current fiscal year. As atJune 30, 2014, Company's sales backlog stands at$38.3 Mcompared to$14.1 Mas atJune 30, 2013.

The bookings over revenues ratio of the Company's stood at 2.4 for fiscal year 2014, compared to 0.78 for fiscal year 2013. "This is a good indicator that we will assist to an increase of revenues derived from water treatment projects in the coming fiscal year. Such solid order backlog at the beginning of this new 2015 fiscal year gives us the ability to better plan the allocation of our resources and growth",stated Frédéric Dugré, President and Chief Executive Officer of H2OInnovation Inc.

The decline of 3.6% in revenues in fiscal year 2014 is mainly attributable to the lower level of revenues from water treatment projects deliveries and projects progress, caused by delays beyond our control. However, these projects will be delivered during the next fiscal year. The decline was partly offset by the higher level of revenues from sales of specialty products and services, further pushed by the acquisition ofPiedmontin the course of the year.

In fiscal year 2014, revenues from water treatment projects stood at$17.6 Mcompared with$22.9 Min fiscal year 2013, while revenues from specialty products and services reached$17.2Min fiscal year 2014 compared with$13.2 Min fiscal year 2013. The decline of revenues from water treatment projects was partly offset by the higher level of revenues from sales of specialty products and services.

For the year endedJune 30, 2014sales from specialty products and services, which are of recurring nature, accounted for 49% of total revenues, while this proportion was 37% in the previous fiscal year. "The increase of 30% of revenues from sales of specialty products and services is the result of a strategic decision to acquirePiedmont, and strengthening our relationship with our customers, providing a steady stream of revenues and creating a direct value to our shareholders",stated Frédéric Dugré.

The acquisition ofPiedmontcompleted onDecember 5, 2013, is part of this strategy to generate greater revenues from specialty products. Additional efforts aimed at increasing the organic growth associated with our maple syrup production equipment and products and our specialty chemical products have also paid off. Indeed, our distribution network for maple syrup production equipment now has a total of 30 distributors covering the province ofQuebecand the Northeast ofthe United States, an addition of 3 distributors over the current fiscal year. Furthermore, the additions made to the Professional Water Technology ("PWT") sales force of specialty chemical products also supported the growth of recurring revenues from specialty products and services.

This strategy for organic growth of revenues from sales of specialty products and services is proven to be winning since it minimizes the impact of revenue volatility associated with revenues derived from water treatment projects, reinforces long-term relationships with its customers and maintain a higher gross profit.

Source: Stock House

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