Edleun's 2013 first quarter records significant improvement in occupancy, revenue and profitability

CALGARY, May 8, 2013 /CNW/ - Edleun Group, Inc. ("Edleun" or the "Company") (TSX-V: EDU), the leading provider of quality early childhood education and care in Canada, announced today its financial results for the three months ended March 31, 2013.

These results reflect continued and significant improvement in the performance of stabilized centres and the initial contribution towards profitability from four new development and redevelopment centres opened late in 2012.

Portfolio performance highlights for the first quarter of 2013:

  • Portfolio-wide revenue of $11.5 million increased 43.0% from $8.0 million in the same period a year earlier including an increase of 11.9% at stabilized centres (see below for non-IFRS performance measure definitions);
  • Centre margin of $3.2 million represented a 27.6% increase from the same period a year earlier and 15.7% growth on a sequential quarter basis; for stabilized centres alone, the margin increased by 10.5% from the same period in the previous year;
  • Adjusted EBITDA of $0.97 million represented an increase of 44.6% compared to a year earlier and 64.9% on a sequential quarter basis;
  • Funds From Operations ("FFO") and Adjusted Funds From Operations ("AFFO") both achieved record levels of $0.76 million;
  • Centre margin as a percentage of revenue for the three month period was 30.8% for stabilized centres and 24.6% for non-stabilized centres; and
  • Portfolio-wide occupancy on a sequential quarter basis was 85.9% compared to 82.7% in the fourth quarter of 2012.  Occupancy at stabilized centres improved to 91.7% compared to 85.8% in the same period a year earlier.

New centre developments and redevelopments contributed increased cash flow during the quarter.  A summary of the change in occupancy in these centres is reflected in the following table:

                   
  McKenzie
Towne
  Chestermere   Lawrence   Highland
Park
  Total
Capital invested (in millions) $6.1   $6.1   $3.1   $1.6   $16.9
Number of  spaces 247   247   140   75   709
                   
Average occupancy % in Q4                  
   2012 73.3%   62.0%   72.9%   91.3%   71.2%
Average occupancy % in Q1                  
   2013 94.8%   70.9%   74.5%   91.8%   82.1%
Current occupancy % as at the
   date of this news release
99.3%   74.2%   80.6%   94.4%   86.3%


Other significant development in the quarter included:

  • In February 2013, the Company and its senior bank lender agreed to a $2 million increase to its existing $25 million credit facility and covenant amendments favourable to the Company; and
  • In February 2013, the Company completed the acquisition of a child care centre in Ottawa, Ontario, adding an additional 47 licensed spaces to the Company's portfolio.

"We are pleased to be reporting improved operating results, and in particular results that reflect the success of our new development centres opened last year.  Overall occupancy rates continue to rise in the four development centres that involved an investment of $17 million and created 709 new child care spaces.   The basic premise for child care in Canada remains unchanged: there are many underserved markets that offer the opportunity to provide quality child care," said Mary Ann Curran, Chief Executive Officer.

"We have opportunities and challenges in 2013.  Our Alberta centres are increasingly a solid platform for future growth and in Ontario we are pursuing a repositioning of select centres in the context of the implementation of full day kindergarten.  We are also on track with the implementation of our Enterprise Resource Planning system that will enable greater efficiencies in corporate spending and administrative expense," said Dale Kearns, President and Chief Financial Officer.

Financial Review

($000's except where otherwise noted and per share amounts)

Selected Quarterly Information

                                   
    Q1 2013   Q4 2012   Q3 2012   Q2 2012   Q1 2012   Q4 2011   Q3 2011   Q2 2011
Revenue $ 11,484 $ 10,594 $ 8,818 $ 8,984 $ 8,030 $ 5,840 $ 4,877 $ 3,958
Centre margin1   3,159   2,731   2,108   2,709   2,475   1,841   1,406   1,286
Centre margin %   28   26   24   30   31   31   29   32
Adjusted EBITDA1   973   590   (74)   616   673   192   (294)   137
                                   
FFO1   760   228   (285)   379   542   119   (314)   (22)
AFFO1   756   320   (400)   566   727   211   (329)   100
Net loss1   (396)   (1,587)   (1,543)   (539)   (793)   (810)   (957)   (541)
Per share amounts:                                
  Net loss   (0.003)   (0.013)   (0.013)   (0.005)   (0.007)   (0.007)   (0.008)   (0.006)
  FFO   0.006   0.002   (0.002)   0.003   0.005   0.001   (0.003)   (0.002)
  AFFO   0.006   0.003   (0.003)   0.005   0.006   0.002   (0.003)   0.001

Notes:

  1. During the fourth quarter of 2012, an error in the previously reported results for the first, second and third quarters of 2012 was identified. This error resulted in Salaries, Wages and Benefits under Centre Expenses for those quarters being understated by $62, $184 and $14, respectively. All amounts reported in this news release and the Company's MD&A have been amended to correct the error - see Adjusted EBITDA, FFO and AFFO table in the MD&A for further details. This error has no impact on the annual financial statements at December 31, 2012.

Results of Operations for the three months ended March 31, 2013

For the three months ended March 31, 2013, the Company reported revenue of $11.5 million (March 31, 2012 - $8.0 million) and centre margin of $3.2 million (March 31, 2012 - $2.5 million). Year over year revenue increase was due to a higher number of spaces available for enrollment, with centre margin as a percentage of revenue declining from 30.8% to 27.5% due primarily to occupancy levels at certain of the Company's new development centres which only came on-stream subsequent to the first quarter of 2012, the early stage financial performance of 2012 Ontario acquisitions and higher labour costs in the Alberta centres in order to recruit and retain staff and reduce turnover. First quarter revenues were 8.4% higher than revenues for the fourth quarter of 2012 on a sequential quarter basis due primarily to higher occupancy, fee increases at centres, the full quarter impact of the three child care centres acquired during the fourth quarter of 2012 and the addition of one centre during the first quarter of 2013.

Adjusted EBITDA for the first quarter of 2013 was $973 compared to $590 in the fourth quarter of 2012 and $673 in the first quarter of 2012. Adjusted EBITDA improved by $383 on a sequential quarter basis due to higher centre margin, partially offset by increased operating lease expense. Adjusted EBITDA for the first quarter of 2013 increased by $300 compared to the first quarter of 2012 due to the addition of 1,082 licensed spaces to the Company's portfolio during the twelve months ended March 31, 2013, partially offset by increased general and administrative expense and operating lease expense.

AFFO for the first quarter of 2013 was $756 compared to $320 in the fourth quarter of 2012 and $727 for the first quarter of 2012.  AFFO increased by $436 on a sequential quarter basis for reasons consistent with those described above coupled with a slight reduction in maintenance capital expenditure. AFFO increased marginally by $29 compared to the first quarter of 2012 primarily due to increased centre margin, partially offset by an increase in finance costs and operating lease expense.

FFO for the first quarter of 2013 was $760 compared to $228 for the fourth quarter of 2012 and $542 for the first quarter of 2012, the trends for which were substantially the same as AFFO.


   
  Q1 2013 Q4 2012 Q3 2012 Q2 2012 Q1 2012 Q4 2011 Q3 2011 Q2 2011
Centre margin for 
   the period
  3,159   2,731   2,108   2,709   2,475   1,841   1,406   1,286
General and
   administrative
   expense1
(1,453) (1,466) (1,501) (1,495) (1,343) (1,212) (1,432) (988)
Taxes, other than
   income taxes
(48) (43) (47) (59) (15) (88) (1) (1)
Operating lease
   expense
(685) (632) (634) (539) (444) (349) (267) (160)
Adjusted
   EBITDA
$ 973 $ 590 $ (74) $ 616 $ 673 $ 192 $ (294) $ 137


                                 
  Q1 2013 Q4 2012 Q3 2012 Q2 2012 Q1 2012 Q4 2011 Q3 2011 Q2 2011
Net loss for the
   period
$ (396) $ (1,587) $ (1,543) $ (539) $ (793) $ (810) $ (957) $ (541)
Depreciation and
   certain other
   non cash items
773 845 761 478 459 324 313 238
Acquisition  and
   development
   costs
383 430 497 440 876 605 330 281
Terminated
   projects
- 540 - - - - - -
FFO $ 760 $ 228 $ (285) $ 379 $ 542 $ 119 $ (314) $ (22)
Stock based
   compensation
61 174 170 237 196 104 69 166
Maintenance
   capital
   expenditure
(65) (82) (285) (50) (11) (12) (84) (44)
AFFO $ 756 $ 320 $ (400) $ 566 $ 727 $ 211 $ (329) $ 100

Notes:

  1. General and administrative expense for Q2 2011 and Q3 2011 is presented in this table excluding finance costs that were reported in general and administrative expense in the financial statements.

Net loss for the first quarter of 2013 was $396 compared to a loss of $1,587 in the fourth quarter of 2012 and a net loss of $793 in the first quarter of 2012.

In determining per share amounts the Company calculated the weighted average number of shares outstanding in accordance with the guidelines established by IFRS 3 Business Combinations and IAS 33 Earnings per Share.  The basic and diluted weighted average number of shares outstanding for the first quarter of 2013 was 121,719,316 (March 31, 2012- 116,709,441).  Basic and diluted net loss per share for the three months ended March 31, 2013 was $(0.003) (first quarter of 2012 - $(0.007)).

During the quarter the Company continued to make select investments of $172 in systems and infrastructure that, while impinging upon the Company's operating cash flow in the quarter, will provide significant operational improvements and increased profitability going forward.

The Company continues to maintain a solid financial position. At March 31, 2013, the Company had working capital of $3,296.  The Company has a $27 million credit facility agreement with a Canadian bank, under which the Company has advances of $17.0 million as at March 31, 2013 (December 31, 2012 - $17.0 million).  At March 31, 2013 the Company had $14.5 million of available capital through funds on hand and its bank credit facility for its operating, acquisition and development programs.

Outlook

As the Company looks forward to its third anniversary, the success of the business model has been validated as evidenced by the following trends:

  • Stabilized centres improved their ending occupancy level from 86.5% in the first quarter of 2012 to 92.3% in the first quarter of 2013, contributing to a revenue increase of 12% at these centres;
  • Increased Adjusted EBITDA to $973 in the first quarter of 2013, an increase of $383 (65%) from the fourth quarter of 2012, primarily due to increasing occupancy rates in recently opened centres; and
  • Centre developments that opened during 2012 representing $17 million of investment brought 709 spaces to underserved markets with occupancy rates at opening dates of 47% increasing to 86% as at the present date.

As at March 31, 2013, the Company operated 51 child care centres, of which 47 were purchased and four developed.  The critical mass is now in place to leverage the very best curriculum, complementary programming, nutritional counselling, technology and training methodologies.  These, together with our passionate, skillful staff, excellent facilities and state of the art equipment, underpin our brand and promise of excellence with respect to child care and development.

The basic premise of the Edleun value proposition and business model remains unchanged.  We continue to identify the potential for growth and believe there is an under-supply of high quality child care spaces in many markets.  We increasingly believe there is a greater opportunity for development, so there is a shift in emphasis to these three pillars of our external growth strategy - leasehold build-outs, co-locations and greenfield developments - while continuing to pursue select acquisitions.  The acquisition pipeline has been re-examined and all suitable opportunities are being acted upon. With several build-outs and now two co-location opportunities under consideration, we look forward to reporting further details in this regard.

During the first quarter of 2013, the Company has continued to invest in its ERP system and finalized its corporate legal structure.  Once the new systems are fully implemented, the Company expects to achieve reductions in overhead costs and more efficient and effective cost management at our centres.  We will also have better tools to identify opportunities for increased enrollment and lower costs.

Non IFRS Performance Measures

The Company uses "centre margin" as a performance indicator of child care centre operating results.  Centre margin does not have a standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures by other entities.  Centre margin is determined by deducting centre expenses from revenue. Centre expenses exclude net rents due under leases for leasehold properties and mortgage interest, if any, on those properties owned by the Company.

Edleun utilizes a number of key measures, such as Adjusted EBITDA, FFO, AFFO, occupancy and centre margin, that in its opinion are critical to measuring the progress of the Company towards its strategic goals. The Company uses "stabilized centre results" to measure performance. Acquired centres in Alberta are deemed to be stabilized 12 months following their acquisition.  Acquired centres in Ontario and British Columbia and new development centres in all provinces are deemed to be stabilized after 24 months.

Adjusted EBITDA is calculated by deducting from centre margin: general and administrative expenses, operating lease expense and taxes other than income taxes. FFO is calculated by adjusting the net loss to add back acquisition costs expensed as incurred, depreciation and certain other non-cash items. AFFO is calculated by adjusting FFO to add back stock based compensation and deduct maintenance capital expenditures.  Maintenance capital expenditures consist of capital expenditures that are capitalized for accounting purposes but are considered to represent recurring costs such as facilities and leasehold maintenance and the replacement of toys, appliances and other equipment.

The Company also uses adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA"), Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO") as indicators of financial performance.  Adjusted EBITDA, FFO and AFFO do not have standardized meanings prescribed by IFRS.  The Company's method of calculating Adjusted EBITDA, FFO and AFFO may be different from other entities and, accordingly, may not be comparable to such other entities. Adjusted EBITDA, FFO and AFFO: (i) do not represent cash flow from operating activities as defined by IFRS; (ii) are not indicative of cash available to fund all liquidity requirements, including capital for growth; and (iii) are not to be considered as alternatives to IFRS based net income for the purpose of evaluating operating performance.

Net income / loss is impacted by, among other items, accounting standards that require child care centre acquisition and transaction costs to be expensed as incurred.  As the Company executes its consolidation and development strategy in the Canadian child care market, it will routinely incur such expenses which will negatively impact the Company's reported net income / loss, but not Adjusted EBITDA, FFO and AFFO.

Conference Call

Edleun Group Inc. will hold a conference call Thursday, May 9th, 2013 at 10:00 am ET (8:00 am MT), to discuss the results of the first quarter of fiscal 2013. The Company's full Financial Statements and Management's Discussion and Analysis will be available on SEDAR at www.sedar.com.

To access the conference call by telephone, dial 1-647-427-7450 or 1-888-231-8191. Please connect approximately 10 minutes prior to the beginning of the call. The conference call will be archived for replay until Thursday, May 16, 2013, at midnight. To access the archived conference call, dial 1-416- 849-0833 or 1-855-859-2056 and enter the reservation number 67356772 followed by the number sign.

A live audio webcast of the conference call will be available at: http://www.newswire.ca/en/webcast/detail/1157749/1264311. Please connect at least 10 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above website for 90 days.

About Edleun Group Inc.
Edleun is the leading provider of high-quality, community-based Early Learning & Care centres in Canada offering early education and child care services to children ages six weeks to 13 years.  Edleun is committed to preparing children for the next step in their education and life, offering families and employers access to and choice of quality early childhood education programs, as well as enhanced opportunities and career advancement for Early Childhood Educators.

Publicly traded on the Toronto Stock Exchange (TSX-V: EDU), the Company's objectives include the acquisition and subsequent improvement of existing child care centres and developing new state-of-the-art Early Learning and Care Centres in underserved Canadian communities.

The Company currently has a total of 51 operating centres in its portfolio representing approximately 4,990 licensed child care spaces.

Forward-Looking Statements

Certain statements in this Release which are not historical facts may constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Any statements related to Edleun's projected revenues, earnings, growth rates, revenue mix, staffing and resources, and product plans are forward looking statements as are any statements relating to future events, conditions or circumstances. The use of terms such as "believes", "anticipated", "expected", "projected", "targeting", "estimate", "intend" and similar terms are intended to assist in identification of these forward-looking statements. Readers are cautioned not to place undue reliance upon any such forward-looking statements. Such forward-looking statements are not promises or guarantees of future performance and involve both known and unknown risks and uncertainties that may cause the actual results, performance, achievements or developments of Edleun to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions. Except as required by law, Edleun does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change.

The Company undertakes no obligation, except as required by law, to update publicly or otherwise any forward-looking information, whether as a result of new information, future events or otherwise, or the above list of factors affecting this information. Many factors could cause the actual results of Edleun to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Edleun Group, Inc.
Consolidated Statements of Financial Position
(Unaudited)

         
(CDN $000's)   March 31,
2013
  December 31,
2012
Assets      
       
Non-current assets      
  Property and equipment   $ 45,819 $ 46,205
  Goodwill and definite life intangible assets   28,602 28,184
    74,421 74,389
Current assets      
  Cash   5,995 5,800
  Accounts receivable   2,021 1,663
  Prepaid and other expenses   1,200 1,864
  Short term investments   259 259
    9,475 9,586
       
Total Assets   $ 83,896 $ 83,975
 
Liabilities      
       
Non-current liabilities      
  Long term debt and financing leases   $ 16,053 $ 11,828
  Convertible debentures - liability component     4,485   4,353
    20,538 16,181
Current liabilities      
  Accounts payable and accrued liabilities   4,115 3,925
  Deferred revenue   970 867
  Current portion of debt and financing leases   1,094 5,488
    6,179 10,280
       
Total Liabilities   26,717 26,461
       
Shareholders' Equity      
  Share capital   66,030 66,030
  Convertible debentures - equity component   342 342
  Equity settled share based compensation   1,645 1,584
  Accumulated deficit   (10,838) (10,442)
Total Shareholders' Equity   57,179 57,514
       
Total Liabilities and Shareholders' Equity   $ 83,896 $ 83,975

Edleun Group, Inc.
Consolidated Statements of Operations and Comprehensive Loss
Three months ended March 31, 2013 and 2012
(Unaudited)

             
(CDN $000's)   March 31,
2013
March 31,
2012
       
Revenue   $ 11,191 $ 7,792
Government grants   293 238
Total revenue   11,484 8,030
       
Centre expenses      
  Salaries, wages and benefits   6,122 4,080
  Other operating expenses   2,203 1,475
Centre margin   3,159 2,475
       
Operating leases   685 444
Finance   293 46
General and administrative   1,453 1,343
Taxes, other than income taxes   48 15
Acquisition and development costs   383 876
Stock-based compensation   61 196
Depreciation and amortization   652 392
    3,575 3,312
       
Loss before other income   (416) (837)
       
Other income   20 44
             
Net Loss and Total Comprehensive Loss   $ (396) $ (793)
       
Net loss per share      
  Basic and diluted   $        (0.003) $          (0.007)
Weighted average number of common shares      
  Basic and diluted   121,719,316      116,709,441
       



Edleun Group, Inc.
Consolidated Statements of Changes in Shareholders' Equity
Three months ended March 31, 2013 and 2012
(Unaudited)

 
(CDN $000's) Share Capital Convertible
Debentures -
Equity
Component
Equity Settled
Share Based
Compensation
Accumulated
Deficit
Shareholders'
Equity
                     
Balance at January 1, 2012 $ 62,931 $ - $ 1,330 $ (5,980)   $ 58,281
                     
Stock-based compensation   -   -   196   -   196
Warrants exercised   2,662   -   (412)   -   2,250
Net loss and comprehensive loss   -   -   -   (793)   (793)
                     
Balance at  March 31, 2012 $ 65,593 $ - $ 1,114 $ (6,773) $ 59,934
                     
                     
Balance at January 1, 2013 $ 66,030 $ 342 $ 1,584 $ (10,442) $ 57,514
                     
Stock-based compensation   -   -   61   -   61
Net loss and comprehensive loss   -   -   -   (396)   (396)
                       
Balance at  March 31, 2013 $ 66,030 $ 342 $ 1,645 $ (10,838) $ 57,179
                     

Edleun Group, Inc.


Consolidated Statements of Cash Flow
Three months ended March 31, 2013 and 2012
(Unaudited)

             
      March 31,     March 31,
(CDN $000's)     2013     2012
             
Cash provided by (used in):            
             
Operating Activities:            
Net loss   $ (396)   $ (793)
Items not affecting cash:            
  Depreciation and amortization     676     392
  Finance costs     293     46
  Stock-based compensation     61     196
Change in non-cash working capital     236     712
Cash generated from operations     870     553
             
Finance costs paid     (194)     -
Net cash generated by operating    activities     676     553
             
Investing Activities            
Acquisitions     -     (1,225)
Property and equipment     (310)     (3,633)
      (310)     (4,858)
             
Financing Activities            
Exercise of warrants     -     2,250
Loan proceeds     -     3,996
Loan repayments     (132)     (49)
Finance lease repayments     (39)     -
      (171)     6,197
             
Change in Cash     195     1,892
Cash at beginning of period     5,800     1,911
Cash at end of period   $ 5,995   $ 3,803


 

 

 

 

SOURCE: Edleun Group

For further information:

please contact Dale Kearns, President of Edleun Group, Inc. at (403) 705-0362 ext. 406.

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Edleun Group

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