Edleun Reports Continuing Growth With Higher Year-Over-Year Same Centre Occupancy, Revenue And Margin

CALGARY, Nov. 18, 2011 /CNW/ - Edleun Group, Inc. ("Edleun" or the "Company") (TSXV: EDU), the leading consolidator and developer of child care facilities across Canada, announced today its operational and financial results for the three and nine month periods ended September 30, 2011.

Highlights for the third quarter ended September 30, 2011 include:

  • On a portfolio wide basis, revenues for the third quarter of 2011 increased by 115% compared with the same period a year earlier and by 23% sequentially from the second quarter of 2011;
  • On a portfolio wide basis, centre margin as a percentage of revenue in the third quarter of 2011 increased to 29%, up from 27% in the same period a year ago;
  • For those centres in full operation during the current and prior year's third quarter ("same centre basis") revenues increased by 28%, centre margin in dollars by 43%, and centre margin as a percentage of revenue from 28% to 31%;
  • On a same centre basis, occupancy in the third quarter of 2011 rose to 89% from 79% in the same period a year ago, testament to the Company's strategy of improving the physical state of its centres, the educational curriculum, nutritious meal and other programs offered by Edleun;
  • Six child care centres in British Columbia acquired in June 2011 came on stream;
  • Acquisition of  a redevelopment property in Calgary for $830,000 with a capacity of 75 licensed child care spaces upon opening;
  • Purchase of a redevelopment property in Kelowna, British Columbia for $950,000 which will add 127 licensed child care spaces in this underserved market;
  • Acquisition of an underperforming child care centre and underlying real estate in Calgary for $1,125,000 that adds 95 spaces to Edleun's portfolio; and
  • Subsequent to quarter end, the company closed on the purchase of three child care centres and underlying real estate in the Calgary area that add 263 child care spaces; and entered into a definitive agreement to acquire a fourth centre in this market with 70 licensed spaces.

"The third quarter was critical on several fronts: it marked the beginning of our expansion outside of Alberta with acquisitions in British Columbia, initial steps to enter the Ontario market and measurable advancement of our co-location strategy," said Ty Durekas, President and CEO of Edleun. "The Company made important strides in program areas including curriculum, in-centre technology based learning and corporate development and marketing.  Edleun continues to raise the bar in terms of the quality of our centres and the excellence of our operations and staff. This is evidenced by the Company's improving financial performance and the positive feedback from families with children in Edleun centres."

Financial review

Third quarter revenue was $4.9 million, a 115% increase over the same period a year earlier and a 23% increase on a sequential basis compared with the second quarter of 2011. Same centre revenue revenues increased by 28% when compared with the same three month period in fiscal 2010.  Six centres located in British Columbia acquired at the end of June 2011 contributed to revenue in the third quarter, offset, in part, by the effect of summer seasonality. Revenue for the nine months ended September 30, 2011 was $12.3 million compared with $3.1 million a year earlier, the fourfold increase due to a larger portfolio of centres and organic growth therein.

Portfolio centre margin in the third quarter improved to $1.4 million, 9% higher than reported for the second quarter of 2011 and more than double the level in the third quarter a year earlier. Same centre margin in dollars for the three month period improved by 43% year over year. Centre margin for the nine months ended September 30, 2011 was $3.9 million, a fourfold increase from the prior year period.

Centre margin as a percentage of revenue of 29% in the third quarter of 2011 was three points lower on a sequential quarter basis as a result of summer seasonality and the impact of start-up and integration costs in the recently acquired British Columbia centres.  On a year over year basis, centre margin for the third quarter improved from 27% to 29% reflecting higher occupancy levels. Lower centre margin levels in the third quarter are anticipated because of reduced demand during summer months. Third quarter results also reflected the Company taking  advantage of the summer slowdown to undertake maintenance capital expenditures for centres, expansion of curriculum and implementation of in-centre technology based learning.

(In thousands of Canadian dollars expect per share amounts)

                                   
    Q3 2011     Q2 2011     Q1 2011     Q4 2010     Q3 2010     Q2 2010
(47-day period)
Revenue $ 4,877   $ 3,958   $ 3,502   $ 3,124   $ 2,270   $ 867
Centre margin   1,406     1,286     1,194     1,005     616     273
Centre margin %   29%     32%     34%     32%     27%     31%
Net loss(1)   (957)     (541)     (249)     (678)     (896)     (1,724)
Loss per share   (0.008)     (0.006)     (0.003)     (0.007)     (0.009)     (0.033)
FFO   (314)     (22)     71     (193)     (564)     (1,445)
AFFO   (329)     100     136     (60)     (432)     (206)
Cash   18,026     24,270     7,035     8,662     12,856     22,769
# of centres   29     22     20     20     17     11
Licensed spaces
  2,539     2,038     1,833     1,815     1,527     1,061

(1)     Net income for 2010 restated to reflect IFRS

FFO and AFFO

Adjusted Funds From Operations ("AFFO") (see Non-IFRS Performance Measures below for AFFO and FFO definitions) for the third quarter of 2011 was negative $329,000 or $(0.003) per share compared to $100,000 or $0.001 per share in the immediately preceding second quarter.  This decline of $429,000 was due primarily to an increase in general administrative expense which included expenditures on marketing that management anticipates to be distributed more evenly through the full year going forward.  The summer season also represents the opportune time to invest in and introduce new curriculum, technology, toys and furniture to the centres which is expected to benefit operations going forward. Funds from Operations ("FFO") for the third quarter declined by $292,000 for reasons cited above.

(in thousands of Canadian dollars)

                 
    Three months ended
  September 30,
2011
June 30,
2011
March 31,
2011
December 31,
2010
         
Net loss for the period $ (957) $ (541) $ (249) $ (678)
Depreciation 313 238 205 178
Property acquisition costs 330 281 115 307
FFO $ (314) $ (22) $ 71 $ (193)
Stock based compensation  - option grants 69 166 96 132
Maintenance capital expenditures (84) (44) (31) -
AFFO $ (329) $ 100 $ 136 $ (61)

Net loss for the third quarter of 2011 was $957,000 or ($0.008) per share, an increase of $416,000 compared with the loss reported for the second quarter of 2011. This loss, in part, reflects a significant increase in costs related to child care centre acquisitions which, in turn, is a reflection of the Company's acquisition and pipeline expansion strategy. In anticipation of greater growth in coming periods, property acquisition costs have risen in each quarter this year. While these expenditures should benefit the Company on a long term basis, under IFRS these costs are expensed. The loss also reflects higher general and administrative expense which increased $437,000 (for the reasons discussed above).

"We are particularly pleased with same centre year -over -year increases in quarterly revenue of 23%, centre margin in dollars of 43% and centre margin as a percentage of revenue from 28% to 31%, a strong indication that our strategy of offering quality care is successful and well received by parents," said Dale Kearns Chief Financial Officer of Edleun. "We were also pleased to see the impact of summer seasonality was at the low end of our range of expectations. Moreover, the Company completed the third quarter with approximately $43 million of financial liquidity. Approximately $17 million is committed under various purchase agreements and development programs, leaving ample funding to continue to further advance our pipeline of additional acquisitions, developments, and redevelopments in new markets without dilution to shareholders."

As at September 30, 2011, the Company has grown from a start-up in May 2010 with 11 child care centres and 1,061 licensed spaces in Alberta to 38 child care centres with 3,675 licensed spaces (including those centres acquired and under contract, construction or redevelopment) located in Alberta and British Columbia.

Outlook

Edleun management continues to evaluate and pursue a range of acquisition opportunities in both existing and new markets, including Ontario and Eastern Canada. As well, part of the Company's strategy to bring further supply of licensed child care spaces to the Canadian market involves working with leading commercial and residential property owners to co-locate new centres in their properties.  These co-location opportunities will provide an important amenity to parents in underserved communities and offers Edleun access to markets that may not otherwise be available.

Non IFRS Performance Measures

The Company's business, which is focused on the acquisition and development of Canadian child care centres and includes the ownership of a significant portfolio of real estate, reports net income that includes deduction for property acquisition costs and non-cash charges such as depreciation and stock based compensation expense. Reflecting these factors and consistent with the practice of the Canadian real estate industry, the Company focuses on FFO and AFFO as key and relevant financial metrics to measure and compare operating performance. FFO and AFFO are meaningful non-IFRS supplemental financial measures.

Results are impacted by, among other items, accounting guidelines that require property 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 FFO and AFFO.

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.  The Company also uses FFO and AFFO as indicators of financial performance.  FFO and AFFO do not have standardized meanings prescribed by IFRS.  FFO and AFFO are presented to assist in the analysis of the Company's performance.  The Company's method of calculating FFO and AFFO may be different from other entities and, accordingly, may not be comparable to such other entities. 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.

Conference Call

Edleun Group Inc. will hold a conference call on Monday November 21 at 4:00 pm Eastern Time, to discuss the results of the third quarter of fiscal 2011. 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 (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 Monday, November 28, 2011, at midnight. To access the archived conference call, dial (416) 849-0833 or 1-855-859-2056 and enter the reservation number 29155078 followed by the number sign.

A live audio webcast of the conference call will be available at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3750560. 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, Early Learning & Care child care centres in Canada offering early education and child care services to children ages 6 weeks to 13 years.  Edleun strives to provide children with a solid foundation for future success and to inspire a lifelong love of learning.  The Company values real-life learning techniques, using the familiar framework of a young child's day, relationships and experiences to create learning opportunities in everyday moments. Edleun's commitment is to provide children, families and employers with access to, and choice of, quality early childhood education programs, helping Canadians balance their work and family lives.

The Company's objectives include the acquisition and improvement of existing child care centres and development of new child care centres across Canada.  Edleun is developing new "state of the art" Early Learning & Care centres in residential communities which are currently underserved.

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.

Consolidated Statements of Financial Position

                     
($000's)   September 30,
2011
December 31,
2010
January 1,
2010
Assets        
         
Non-current assets        
  Property and equipment   $ 26,441 $ 18,717 $ -
  Intangible assets   13,162 9,183 -
    39,603 27,900 -
Current assets        
  Cash and cash equivalents     18,026   8,662   -
  Accounts receivable   1,072 603 -
  Prepaid expenses   1,984 243 -
  Deferred financing costs   255 - -
  Short term investments   88 204 -
    21,425 9,712 -
         
Total Assets   $ 61,028 $ 37,612 $ -
         
         
Liabilities        
         
Non-current liabilities        
  Deferred tax liability   $ 34 $ 34 $ -
    34 34 -
Current liabilities        
  Accounts payable and accrued liabilities     2,084   1,369   75
  Deferred revenue   185 80 -
    2,269 1,449 75
         
Total Liabilities   2,303 1,483 75
         
Shareholders' Equity        
  Share capital   62,586 38,463 -
  Contributed surplus   1,309 1,089 -
  Accumulated deficit   (5,170) (3,423) (75)
Total Shareholders' Equity   58,725 36,129 (75)
         
Total Liabilities and Shareholders' Equity   $ 61,028 $ 37,612 $ -

Condensed Consolidated Statements of Operations, Comprehensive Loss and Deficit

                         
      Three months ended
September 30,
    Nine months ended
September 30,
($000's)     2011     2010     2011     2010
                         
Revenue   $ 4,877   $ 2,270   $ 12,337   $ 3,137
                         
Centre expenses                        
  Salaries, wages and benefits     2,508     1,260     6,164     1,751
  Other operating expenses     963     395     2,288     498
      1,406     615     3,885     888
                         
Lease expense     267     116     557     148
General and administrative     1,479     942     3,454     2,002
Property acquisition costs     330     222     725     483
Stock-based compensation     69     132     331     808
Depreciation     313     110     756     128
      2,458     1,522     5,823     3,569
                         
Loss before the undernoted items     (1,052)     (907)     (1,938)     (2,681)
                         
Other income     95     11     191     11
Net Loss and Comprehensive Loss   $ (957)   $ (896)   $ (1,747)   $ (2,670)
                         
Net loss per share                        
  Basic and diluted   $ (0.008)   $ (0.010)   $ (0.017)   $ (0.054)
Weighted average number of common shares                        
  Basic and diluted     116,005,319     92,220,301     104,919,792     49,714,678

Condensed Consolidated Statements of Changes in Shareholders' Equity

                         
(000's)   Share
Capital
    Contributed
Surplus
    Accumulated
Deficit
    Shareholders'
Equity
                       
Balance, January 1, 2010   $ -   $ -   $ (75)   $ (75)
                         
Reverse takeover transaction                        
  Share capital acquired from legal parent     901     -     -     901
  Deficit and contributed surplus elimination of legal parent     (117)     -     -     (117)
  Equity consideration - finders fees     300     -     -     300
  Equity consideration - asset purchase     1,000     -     -     1,000
Share issuance     40,742     -     -     40,742
Share issuance costs     (3,899)     -     -     (3,899)
Fair value of warrants issued     (448)     448     -     -
Stock-based compensation     -     508     -     508
Net loss and comprehensive loss     -     -     (2,670)     (2,670)
                         
Balance, September 30, 2010   $ 38,479   $ 956   $ (2,745)   $ 36,690
                         
                         
Balance, January 1, 2011   $ 38,463   $ 1,089   $ (3,423)   $ 36,129
                         
Share issuance     25,003     -     -     25,003
Share issuance costs     (1,494)     -     -     (1,494)
Stock-based compensation     -     331     -     331
Warrants exercised     232     (36)     -     196
Stock options exercised     382     (75)     -     307
Net loss and comprehensive loss     -     -     (1,747)     (1,747)
                         
Balance, September 30, 2011   $ 62,586   $ 1,309   $ (5,170)   $ 58,725

Condensed Consolidated Statements of Cash Flow

                         
      Three months ended
September 30,
    Nine months ended
September 30,
(000's)     2011     2010     2011     2010
                         
Cash provided by (used in):                        
                         
Operating Activities:                        
Net loss   $ (957)   $ (896)   $ (1,747)   $ (2,670)
Items not affecting cash:                        
  Depreciation     313     110     756     128
  Amortization of deferred financing costs     15     -     44     -
  Stock-based compensation     69     132     331     808
Change in non-cash working capital     407     (15)     (1,674)     467
      (153)     (669)     (2,290)     (1,267)
                         
Investing Activities                        
Acquisitions     (1,125)     (7,052)     (6,012)     (20,452)
Reverse takeover cash acquisition     -     -     -     558
Property and equipment     (4,955)     (2,120)     (6,462)     (2,671)
Restricted cash     -     (39)     116     (155)
      (6,080)     (9,211)     (12,358)     (22,720)
                         
Financing Activities                        
Proceeds of share issue     -     -     25,003     40,742
Share issuance costs     (11)     (33)     (1,494)     (3,899)
Exercise of warrants     -     -     196     -
Exercise of options     -     -     307     -
      (11)     (33)     24,012     36,843
                         
Change in Cash and Cash Equivalents     (6,244)     (9,913)     9,364     12,856
Cash and cash equivalents, beginning of period     24,270     22,769     8,662     -
Cash and cash equivalents, end of period   $ 18,026   $ 12,856   $ 18,026   $ 12,856


 

 

 

SOURCE Edleun Group, Inc.

For further information:

Dale Kearns, Chief Financial Officer of Edleun Group, Inc. at (403) 705-0362 ext. 406, or Nick Hurst of the Equicom Group, Inc. at (403) 218-2835.

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