IBI Announces Highest Quarterly Revenue to Date:
- Revenue at $88.6 million, an increase of $6.3 million, +7.7%
- EBITDA1 $12.0 million, a decrease of $0.7 million, -5.5%
- Earnings per share of $0.2799
- Distributable Cash1 of $6.6 million; a decrease of $0.7 million, -9.6%
- Distributable Cash1 per share of $0.3184 vs declared of $0.2820. Payout ratio of 88.6%
- Backlog at equivalent level of work of approximately 9.5 months
TORONTO, Aug. 8, 2012 /CNW/ - IBI Group Inc. (the "Company") (TSX: IBG) today announced its financial results for the three and six months ended June 30, 2012.
The results for the second quarter ended June 30, 2012 are based on 63 available working days, which is consistent with the second quarter ended June 30, 2011 and the first quarter ended March 31, 2012. The highlights are:
- Revenue at $88.6 million was $6.3 million above the second quarter of 2011, and up $1.7 million compared with the first quarter of 2012. This is the highest quarterly revenue ever achieved by IBI Group. Revenue included organic growth of 3.5% over the second quarter of 2011. Public sector work represented approximately 69% of the $88.6 million of revenue in the quarter.
- EBITDA1 of $12.0 million decreased $0.7 million from the second quarter of 2011, and increased $0.6 million compared to the first quarter of 2012.
- EBITDA1 as a percentage of revenue for the second quarter of 2012 was 13.6%, a decrease of 1.8% when compared to the second quarter of 2011 and an increase of 0.5% when compared to the first quarter of 2012.
- Net Earnings per share ("EPS") for the second quarter of 2012 was $0.2799, an increase of $0.0439 (18.6%) compared with Net Earnings1,2 per share of $0.2360 for the second quarter of 2011 and an increase of $0.0734 (35.5%) compared with the net earnings per share of $0.2065 for the first quarter of 2012.
- Distributable cash1 of $6.6 million was down $0.7 million from the second quarter of 2011 and up $0.3 million when compared to the first quarter of 2012. The payout ratio for the second quarter of 2012 was 88.6%, an increase from 79.2% for the second quarter of 2011 and a decrease from 89.0% for the first quarter of 2012.
|(1)||See "Definition of Adjusted Net Earnings, EBITDA, Distributable Cash and Non-IFRS Measures"|
|(2)||The Company corrected an amount for its 2011 quarterly reporting related to non-cash imputed interest. See Note 13 of the unaudited interim condensed financial statements for the three and six months ended June 30, 2012.|
IBI reports the working capital tied up (accounts receivable, work in process and deferred revenue) in terms of gross billings per day. This is the most meaningful measure of performance with IBI increasingly assuming the lead role on large projects that involve more subconsultant participation in fee volume and recoverable expenses. The current level of the working capital tied up measured in gross billings is 147 days at the end of the second quarter 2012. A decrease of the equivalent of 9 days from the peak of 156 days at the end of the second quarter 2010. The 147 days is an increase of the equivalent of 5 days at the end of the second quarter of 2012 compared to the first quarter of 2012. Productive efforts in collection resulted in a decrease in accounts receivable aged over 90 days by the equivalent of one working day compared to the first quarter of 2012. Billing work in process resulted in the increase in accounts receivable aged less than 90 days. Notwithstanding, work in process increased by one day, which largely arises from an increase in numerous new projects with large subconsultant work such as the Tel Aviv Red Line Transit project. Management continues its commitment to strive to reduce the total working capital tied up. As of the end of July, the accounts receivable was further reduced by the equivalent of one day.
On April 20, 2012 the Company issued 2,700,000 common shares on a bought deal basis at a price of $15.00 per share to a syndicate of underwriters for gross proceeds of $40.5 million.
The Company has used the net proceeds from the offering for debt reduction and intends to use the proceeds for potential future acquisitions and general corporate purposes.
Concurrent with the offering, the Company completed, on a non-brokered private placement basis, the issuance of 667,000 shares at $15.00 per share to the Management Partnership in full satisfaction of $10.0 million of indebtedness owed by the Company to the Management Partnership.
The policy of IBI Group is to maintain the current level of the dividend based on the current level of revenue and earnings, as IBI Group did through the first and second quarter of 2012. IBI Group will continue to strive to reduce accounts receivable aged over 90 days as was achieved in the second quarter of 2012 and to grow the firm so as to increase revenue and earnings leading to the gradual reduction of the payout ratio.
IBI Group continued in the second quarter of 2012 to expand its capability. Notable areas of expansion of capability include:
- IBI Group is experiencing continued growth worldwide in the architecture of social infrastructure; including health care, educational and justice related facilities, which includes new projects internationally;
- The application of IBI Group's capability in intelligent systems from transportation and communications to other applications including management of building systems, energy systems in water distribution and other significant applications that have applicability to metropolitan urban regions throughout the world, IBI Group continues to receive new mandates in world markets including a major new project for traffic management in South Africa;
- The growth in major transportation projects in which IBI Group has been mandated with lead role. A notable example is IBI Group being selected, after a rigorous international bidding process, as the prime contractor for the design contract by NTA - Metropolitan Mass Transit System Ltd. for the ten underground transit stations in the Tel Aviv metropolitan area; following a three month delay in Q3 of 2011, due to a legal challenge, the contract was settled and the work is now actively underway and the IBI scope is extending;
- The growth in the private sector work in real estate and industrial developments which continues to be strong in major Canadian urban areas, and in China; and
- The overall growth in the resources and capability of the firm. IBI Group has grown in the number of people reflecting the growth in revenue and now comprises 2,950 members of the firm, compared to 2,764 as at June 30, 2011. Including the T&Y acquisition concluded in July 2012 IBI Group now has 3,050 members. With this growth in personnel and professional excellence, IBI Group increasingly is awarded leading professional and managerial roles for proponents and owners of development projects. These include major projects in social infrastructure (such as the McGill University Health Centre in Montreal; Women's College hospital in Toronto and a wide range of other projects in Western Canada and the UK); major transportation projects in transit facilities, increasing work in the highway/road mode; airport expansion notably in Montreal and Toronto; the comprehensive provision of intelligent systems based on IBI Group software, integration of hardware, and the delivery of complete systems including ongoing operations (a major new highway traffic management system in South Africa); and now with improvement in certain private property markets, the leadership of major real property developments in Canada, Eastern Europe and Asia. In Canada, these include; land development in Alberta (particularly related to the strong growth in the North); diverse hi-rise residential and office buildings in Montreal, Toronto and Vancouver; major retail developments and work in the hospitality sector. The progress of the firm in extending the excellence of its professional capability and the breadth and depth of resources provides an increasingly effective platform for IBI Group as a significant participant in the design of physical aspects of urbanization throughout the world with IBI Group's global experience, complemented by IBI Group's established physical and operating presence in local communities.
The scope of these efforts is validation of IBI Group's integrated operating model of providing comprehensive professional services to clients in Canada, the USA and in international markets, resulting in the achievement in the second quarter of 2012 being the highest quarterly revenue of the Company to date.
Strategic Program of Growth
On August 3, 2012 IBI closed the acquisition of the practice of Taylor Young Limited Architects and Master Planners ("Taylor Young") within the IBI Group of Firms. Taylor Young is a full services architectural practice including professional skills in urban planning and design and landscape architecture, based in Manchester, UK with offices in Liverpool and London. The firm has a strong reputation in the design of facilities in healthcare, education, housing, as well as urban planning/design and landscape design for a broad range of clients. The firm is highly experienced in sustainability of design integrated with such facilities. This acquisition will further enhance IBI's professional strength in the UK market, particularly in the Midlands and the North, as well as contribute to the growing strength of the global practice of the firm in health and education. Professional experience in urban planning and urban design, as well as landscape architecture and the architecture of housing in the UK will broaden the current areas of practice of the IBI capabilities in the UK. Taylor Young has a very broad range of clients in the public sector with over 70% of the business gained on a repeat basis with long established client relationships. The firm has approximately 100 staff members and is well managed with profitable operations and a strong backlog of committed work.
IBI Group focused on strategic growth in Canada from the IPO in 2004 through to the third quarter of 2008. During that period of time, IBI Group acquired numerous firms of outstanding quality bringing the Canadian practice to a national leader in the areas of IBI's professional expertise. This focus on Canada first for strategic growth, enabled the acquisition of many firms in a short period of time as the greatest strength of IBI Group managerial and professional leadership was Canadian based. It was also financially efficient as the public entity within the IBI Group Partnership was a business income trust. Now that IBI Group has reached a leadership position professionally within the Canadian market, the strategic focus of acquisitions is outside Canada. Notwithstanding the focus shifting to attractive areas for IBI Group's practice outside Canada, IBI Group continues to consider specific acquisitions/strategic alliances that will enhance the strong presence of IBI Group in Canada.
IBI has in the recent past years achieved major strategic growth in the UK. IBI initiated operations in the UK in the early 1990's and established through organic growth, a presence in intelligent systems applied to transportation and communications. This practice was involved recently in traffic control planning and management for the London Olympics. More recently, IBI acquired the firm of Nightingale, architects with an international reputation as a centre of excellence in the planning and design of hospitals and other health care facilities. Nightingale also has experience in buildings for scientific, academic and research purposes, as well as buildings for educations. As noted above, IBI closed the acquisition of the practice of Taylor Young. IBI now has a robust presence in the UK market, including offices in the south and midlands/north of England, as well as in Scotland, and a presence in the Republic of Ireland. As in Canada, IBI anticipates that its further growth in the British Isles markets will be focused on more on organic growth, building and expanding upon this existing base of operations. IBI will similarly consider specific opportunities for further acquisitions/strategic alliances and that will enhance the IBI practice within the British Isles.
The USA continues to be the largest economy in the world and as such IBI will continue to focus on building our American business. As noted in the second quarter report, IBI Group activity in industrial buildings, (the reawakened automotive industry), in education facilities, (charter schools, high schools, community colleges and university buildings), in intelligent systems; (traffic management, traveller information), and transportation including transportation oriented development, continued to be productive areas of IBI Group activity during the recession from late 2008 to present. IBI Group made acquisitions/strategic alliances on a selective basis of a series of prominent firms in various regions of the US with strength in the architecture of education facilities. The most recent example is DOWA in the northwest of the USA, operating in Oregon and Washington State. IBI Group will continue to pursue this strategy with respect to these professional areas as well as an enhanced focus going forward on the architecture of health care facilities. In the context of the continuing under-performing economic environment in the USA, there are outstanding opportunities for acquisition/strategic alliances with outstanding professional firms. The resources from these firms can also participate with IBI Group on work in Canada as well as other international markets as the economy of the USA recovers.
The basic model of IBI is to initiate its presence through organic growth in geographic regions in which IBI believes it can effectively provide its professional services in the four broad areas of practice. Following that initial organic growth creating an initial core group, IBI then accelerates the growth through strategic acquisitions as has now been largely accomplished in Canada and the British Isles. IBI will similarly consider acquisitions/alliances in other international markets including China, India, Eastern Europe, Brazil and Mexico. Similarly to Canada and the British Isles, the long-term growth in these emerging markets for IBI will be based on continuing organic growth on top of the expanded base achieved through strategic growth. In longer term, that will place IBI in a sustainable model of generating additional net fee revenues and income and cash earned through continuing organic growth on a global platform and mitigate the requirement for significant amounts of additional capital for financing strategic growth.
- Committed fee volume for the ensuing 12 months represents approximately 9.5 months equivalent of work, based on the current pace of work that IBI Group has achieved during the last twelve months ended June 30, 2012. Backlog for government and public institutional clients now represents approximately 69% of total backlog. Backlog continues to be very strong in building facility areas in health care, education, and housing, the industrial sector, in transportation terminals, transportation networks and intelligent systems. IBI Group is increasingly receiving new mandates for a wide range of substantial projects in the design stage, as well as some of these now moving into design development and working drawings as projects proceed to sales;
- IBI Group's committed backlog is approximately 14% of fee volume for projects outside of North America and 25% for the United States and 61% in Canada which is generally consistent with the distribution of revenue earned in the current quarter; and
- The current staff complement is appropriately sized for the backlog of ongoing committed work at the professional standards of the firm, with capacity to handle the work from the significant projects that IBI Group now has full authorization to proceed. IBI Group will adjust staffing levels as necessary in respect to the pace of the work, there are some areas of activity that may require additional staff and others needing some trimming of current staff numbers with further efforts as were taken during this second quarter of 2012. IBI Group successfully deploys staff resources through its platform of intelligent systems throughout its network of offices. However, the requirement for local staff and specialized skills does lead to the adjustments both upwards and downward in accordance with project requirements.
Selected Consolidated Financial Information and Reconciliation of Non-IFRS Measures
in thousands of dollars except for per Share and per Unit
amounts and ratios
ended June 30,
ended June 30,
ended June 30,
ended June 30,
Earnings before income taxes, interest and
|Change in fair value and other finance costs (income)||41||187||100||122|
|Income taxes - current||1,047||1,548||3,200||3,200|
|Income taxes - deferred||(445)||(263)||(583)||2,230|
|Amortization of property and equipment and intangible assets||2,505||2,603||5,064||5,332|
|Foreign exchange loss (gain)||(142)||66||147||284|
|Net earnings before non-controlling interest||$||5,680||$||4,247||$||9,413||$||4,248|
|Net earnings attributable to owners of the Company||$||4,304||$||3,061||$||7,000||$||3,062|
|One time non-cash tax on conversion to a corporation||-||-||-||3,131|
|Proportion of earning attributable to Class B Partnership Units||-||-||-||(874)|
|Adjusted Net Earnings1||$||4,304||$||3,061||$||7,000||$||5,319|
|Basic net earnings per Share2||$||0.2799||$||0.2360||$||0.4864||$||0.4100|
|Cash flow from (used in) operating activities||$||(818)||$||(17,437)||$||(10,940)||$||(14,312)|
|Less: Capital expenditures||(749)||(607)||(1,619)||(1,197)|
|Standardized Distributable Cash1||$||(1,567)||$||(18,044)||$||(12,559)||$||(15,509)|
|Change in non-cash operating working||7,277||23,372||22,988||24,589|
|Current income tax expense||1,047||1,548||2,137||3,200|
|Exchange (gain) loss||(142)||66||147||284|
|Weighted average basic distributable cash per Share3||0.3184||0.4081||0.6671||0.7335|
|Aggregate distributions declared||$||5,889||$||5,814||$||11,504||$||10,723|
|(1)||See "Definition of Adjusted Net Earnings, Adjusted Net Earnings per Share, EBITDA, Distributable Cash and Non-IFRS Measures".|
|(2)||Distributable cash per Share amounts are calculated by including both the common shares of the Company and the Class B partnership units in the denominator which is a non-IFRS measure.|
|(3)||The Company corrected an amount for its 2011 quarterly reporting related to non-cash imputed interest. See Note 13 of the unaudited interim condensed financial statements for the three and six months ended June 30, 2012.|
Definition of Adjusted Net Earnings, EBITDA, Distributable Cash and Non-IFRS Measures
Adjusted Net Earnings is equal to the Net earnings for the period plus distributions treated as an expense and fair value adjustments on Trust Units and exchangeable interest liabilities for 2010 and a one time non-cash adjustment on conversion to a corporation for 2011.
Distributable cash is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS. The Company defines distributable cash as cash flow from operating activities before change in non-cash operating working capital, interest paid, income tax expense, acquisition-related costs, foreign exchange losses and after capital expenditures, foreign exchange gains, interest recovered, and income tax recovery, where applicable. Reconciliations of distributable cash to cash flow from operating activities have been provided under the headings "Distributable Cash" and "Summary of Quarterly Results".
The Company's method of calculating distributable cash may differ from similar computations as reported by other similar entities and, accordingly, may not be comparable to distributable cash as reported by such entities. Management of the Company believes that distributable cash is a useful supplemental measure that may assist readers in assessing the return on an investment in Common Shares.
References in this MD&A to EBITDA are to earnings before interest, income taxes, depreciation and amortization, acquisition-related costs, foreign exchange gains and losses, fund distributions treated as an expense, fair value adjustment on financial liabilities and restructuring and special charges. Management of the Company believes that in addition to net earnings, EBITDA is a useful supplemental measure as it provides readers with an indication of cash available for dividend prior to debt service, capital expenditures and income taxes. Readers should be cautioned, however, that EBITDA should not be construed as an alternative to net earnings determined in accordance with IFRS as an indicator of the Company's performance or to cash flows from operating activities as a measure of liquidity and cash flows. EBITDA is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS, and the Company's method of calculating EBITDA may differ from the methods used by other similar entities. Accordingly, EBITDA may not be comparable to similar measures used by such entities. Reconciliations of net earnings to EBITDA have been provided under the headings "Selected Consolidated Financial Information" and "Summary of Quarterly Results".
Investor Conference Call
The Company will hold a conference call on August 9, 2012 at 8:30 a.m. Eastern Standard Time (EST). To participate in the conference call, please dial in before 8:30 a.m. EST to 1-888-612-1050 for local and toll-free North American access, or 1-303-223-2681 for international access.
An audio replay of the call will be available for 14 days, by dialling 416-626-4100 for local and international access, or 1-800-558-5253 for toll-free North American access, passcode 21598094 followed by the number sign on your telephone keypad.
SOURCE: IBI Group Inc.For further information:
Tony Long, CFO
IBI Group Inc.
230 Richmond Street West, 5th Floor
Toronto, ON M5V 1V6