Groupe Aeroplan Inc. Reports 2009 First Quarter Results - Underlying operating performance remains robust despite recession



    MONTREAL, May 12 2009 /CNW Telbec/ - Groupe Aeroplan Inc. (the
"Corporation") (TSX: AER), today reported its 2009 first quarter results.

    
    First Quarter 2009 Operating Highlights

       - Year over year gross billings and revenue at substantially the same
         levels as the first quarter of 2008
       - No significant increases in redemptions in any program and
         redemption costs in Canada in line with annual outlook and
         historical first quarter trends
       - Operating profit within 5% of first quarter of 2008
       - Coalition programs further enhanced, notably by the addition to the
         Nectar program of Homebase, the UK's second largest home improvement
         retailer
    

    "Despite the challenging economic environment, results are stable and are
tracking to our expectations, reflecting the stability of our key partnerships
and our robust business model," said Rupert Duchesne, President and Chief
Executive Officer. "In each of the regions we operate, our members are very
engaged in our programs. We continue to provide a high return to our partners
through our brands, active members as well as data analytics and are working
closely with all of them to help stimulate demand and drive key consumer
behaviours. What's more, the fact that our UK program, Nectar, continued its
expansion into the major home improvement category with the signing of
Homebase, the UK's second largest home improvement retailer, during the midst
of a deep recession, further calls attention to the value of our loyalty
proposition."
    "This quarter demonstrates the resiliency of our business, an important
selling feature of the bond issue we just completed," added David Adams,
Executive Vice President and Chief Financial Officer. "The ability to raise
$200 million in this extremely tight credit environment, especially as a new
investment grade issuer, is clearly a vote of confidence by the market in the
long-term strength, profitability and cash flow generating ability of our
business."

    
    First Quarter 2009 Financial Highlights

       - Gross Billings of $326.2 million
       - Revenue of $355.8 million
       - Operating income of $38.7 million
       - Net earnings of $23.2 million
       - Adjusted EBITDA of $65.2 million(*)
       - Adjusted net earnings of $44.6 million(*)

    -----------------------------------------------
    (*) See Non-GAAP measures below.
    

    Financial Performance (compared to First quarter 2008)


    Gross Billings
    --------------

    Consolidated gross billings for the three months ended March 31, 2009, on
a constant currency basis, were relatively stable, declining by only 1.9%
compared to the first quarter of 2008. Including the currency impact, gross
billings amounted to $326.2 million compared to $342.7 million, representing a
decrease of $16.5 million or 4.8%, 61% of which is explained by the
devaluation of the (pnds stlg) sterling compared to the Canadian $, affecting
the translation of our foreign operations.
    Groupe Aeroplan's ability to generate gross billings is affected by the
underlying behaviour of the Accumulation Partners' respective customer base
and their spending patterns, which are in turn affected by general economic
conditions.

    Revenue
    -------

    Revenue amounted to $355.8 million for the three months ended March 31,
2009 compared to $356.2 million for the three months ended March 31, 2008,
representing a marginal decrease of $0.4 million or 0.1%.

    Operating Income
    ----------------

    For the first quarter of 2009, operating income, before amortization of
accumulation partners' contracts and technology, amounted to $58.4 million,
substantially in line with the $63.8 million for the three months ended March
31, 2008, representing a decline of $5.4 million. The variance is mostly
attributable to an increase in the Average Cost of Rewards per Mile redeemed
under the Aeroplan program and a marginal increase in selling, general and
administrative expenses, compared to the first quarter of 2008.
    The increase in Average Cost of Rewards per Mile redeemed during the
quarter reflects the redemption mix of rewards, including the increase in the
cost of Star Alliance redemptions due to fluctuations of the US$, the
underlying distances of itineraries of air rewards redeemed, and marginally,
by unit cost increases related to reductions in capacity by the airline.

    Net Earnings
    ------------

    Net earnings of $23.2 million for the quarter reflected solid operational
performance and were affected by non-operating items related to the
Corporation's financial structure, foreign exchange fluctuations and income
tax expense related to the Canadian operations as a result of the conversion
to a corporation in the second quarter of 2008.

    Liquidity
    ---------

    At the end of the first quarter of 2009, the Corporation had $580.9
million of cash and cash equivalents and $36.1 million of short-term
investments, for a total of $617.0 million including the Aeroplan Canada
redemption reserve of $400 million.

    Adjusted EBITDA(*) and Free Cash Flow(*)
    ----------------------------------------
    (*) See Non-GAAP measures below

    Adjusted EBITDA for the three months ended March 31, 2009 amounted to
$65.2 million, which represents 20.0% of Gross Billings, compared to $73.3
million generated during the first quarter of 2008 or 21.4% of Gross Billings.
    Free cash flow used amounted to $(49.0) million, compared to $(24.5)
million for the three month period ended March 31, 2008, mainly as a result of
the temporary acceleration of payment terms, related to Air Canada, which is
expected to reverse commencing in June of 2009; and the settlement of accounts
payable, related to the seasonally high redemption activity of the last
quarter of 2008, typical of the Nectar program.

    Outlook for 2009

    Current market conditions, with reduced consumer expenditures, make it
difficult to predict 2009 performance. Assuming no further deterioration of
economic conditions, and anticipating a mild recovery in the latter part of
the year, the Corporation would expect to see modest consolidated growth in
gross billings for the full year 2009 as compared to 2008. In addition, for
2009, the Corporation expects the Average Cost of Rewards per Mile Redeemed,
under the Aeroplan Program, to remain in the low nineties for the remainder of
the year and not to exceed 0.95 cents on an annual basis throughout 2010 with
gross margin in the Canadian segment remaining relatively stable.
    The outlook provided constitutes forward-looking statements within the
meaning of applicable securities laws and should be read in conjunction with
the section below entitled "Caution Concerning Forward-Looking Statements".

    Corporate Developments

    Dividend
    --------

    The Corporation announced today that the Board of Directors has declared
a quarterly dividend of $0.125 per common share, payable on June 15, 2009 to
shareholders of record at the close of business on May 29, 2009.

    Issuance of Senior Secured Notes
    --------------------------------

    In April 2009, the Corporation issued an aggregate of $200 million
principal amount of 9% Series 1, Senior Secured Notes (the "Notes"), maturing
on April 23, 2012.
    The proceeds from the Notes issued were used to repay the $200 million
current portion of the bridge facility entered into at the time of the
acquisition of Loyalty Management Group.

    Recent Developments

    Partnerships

    Homebase
    --------

    On March 16, 2009, Nectar announced a new partnership with Homebase, the
UK's second largest home improvement retailer. Commencing this summer,
Homebase will become Nectar's do-it-yourself partner and Nectar members will
be able to earn Nectar Points at Homebase's 348 stores.

    Partner Promotions
    ------------------

    On March 23, 2009, Aeroplan announced that Aeroplan Members can take
advantage of new bonus offers from more than twenty-five participating
partners including Air Canada, Esso, Home Hardware, Hilton family of Hotels,
Hyatt Hotels & Resorts, Avis and Primus.

    Corporate Social Responsibility

    Earth Day Canada
    ----------------

    On April 16, 2009, Aeroplan announced Earth Day Canada as its newest
charitable partner in Aeroplan's Beyond Miles Program. Aeroplan launched the
partnership with a donation of 1,250,000 Aeroplan Miles and as part of its
commitment to the environment, Aeroplan will offset all carbon emissions from
flights taken by Earth Day Canada using donated miles.

    Non-GAAP Measures

    In order to provide a better understanding of the results, the following
terms are used:

    Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
    (Adjusted EBITDA)

    EBITDA adjusted for certain factors particular to the business, such as
changes in deferred revenue and Future Redemption Costs ("Adjusted EBITDA"),
is used by management to evaluate performance, and to measure compliance with
debt covenants. Management believes Adjusted EBITDA assists investors in
comparing the Corporation's performance on a consistent basis without regard
to depreciation and amortization, which are non-cash in nature and can vary
significantly depending on accounting methods and non-operating factors such
as historical cost.
    Adjusted EBITDA is not a measurement based on GAAP, is not considered an
alternative to operating income or net income in measuring performance, and is
not comparable to similar measures used by other issuers. For a reconciliation
to GAAP, please refer to the SUMMARY OF CONSOLIDATED OPERATING RESULTS AND
RECONCILIATION OF EBITDA, ADJUSTED EBITDA, ADJUSTED NET EARNINGS AND FREE CASH
FLOW included in the attached schedule. Adjusted EBITDA should not be used as
an exclusive measure of cash flow because it does not account for the impact
of working capital growth, capital expenditures, debt repayments and other
sources and uses of cash, which are disclosed in the statements of cash flows.

    Adjusted Net Earnings

    Net earnings in accordance with GAAP adjusted for Amortization of
Accumulation Partners' contracts and technology; Change in deferred revenue,
Change in Future Redemption Costs and the income tax effect thereon calculated
at the effective income tax rate as reflected in the statement of operations,
provides a measurement of profitability calculated on a basis consistent with
Adjusted EBITDA.
    Adjusted Net Earnings is not a measurement based on GAAP, is not
considered an alternative to net earnings in measuring profitability, and is
not comparable to similar measures used by other issuers. For a reconciliation
to GAAP, please refer to the SUMMARY OF CONSOLIDATED OPERATING RESULTS AND
RECONCILIATION OF EBITDA, ADJUSTED EBITDA, ADJUSTED NET EARNINGS AND FREE CASH
FLOW included in the attached schedule.

    Standardized Free Cash Flow ("Free Cash Flow")

    Free Cash Flow is a non-GAAP measure recommended by the CICA in order to
provide a consistent and comparable measurement of free cash flow across
entities of cash generated from operations and is used as an indicator of
financial strength and performance.

    
    Free Cash Flow is defined as cash flows from operating activities, as
    reported in accordance with GAAP, less adjustments for:

    (a) total capital expenditures as reported in accordance with GAAP; and
    (b) dividends, when stipulated, unless deducted in arriving at cash flows
        from operating activities.
    

    For a reconciliation to cash flows from operations please refer to the
SUMMARY OF CONSOLIDATED OPERATING RESULTS AND RECONCILIATION OF EBITDA,
ADJUSTED EBITDA, ADJUSTED NET EARNINGS AND FREE CASH FLOW included in the
attached schedule.
    EBITDA and Free Cash Flow are non-GAAP measurements prescribed by the
CICA in accordance with the draft recommendations provided in their February
2008 publication, Improved Communications with Non-GAAP Financial Measures -
General Principles and Guidance for Reporting EBITDA and Free Cash Flow.

    Quarterly Investor Conference Call / Audio Webcast

    Groupe Aeroplan Inc. will hold an analyst call at 1:00 p.m. ET on Tuesday
May 12, 2009 to discuss its 2009 first quarter results. The call may be
accessed by dialing toll free: 1-800-731-5774 or 416-644-3425 for the Toronto
area. The call will be simultaneously audio webcast at
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2627020
    An archive of the audio webcast will be available at:
http://www.groupeaeroplan.com/pages/invEvents.php for ninety days following
the original broadcast.
    The unaudited interim consolidated financial statements, the MD&A and a
slide presentation will be accessible on the investor relations website at
groupeaeroplan.com under Financial Results.

    About Groupe Aeroplan Inc.

    Groupe Aeroplan Inc. is a leading international loyalty management
corporation. Groupe Aeroplan owns Aeroplan, Canada's premier loyalty program
and Nectar, the United Kingdom's leading coalition loyalty program. In the
Gulf Region, Groupe Aeroplan owns 60 per cent of Rewards Management Middle
East, the operator of Air Miles programs in the United Arab Emirates, Qatar
and Bahrain. Groupe Aeroplan also operates LMG Insight & Communication, a
customer-driven insight and data analytics business offering international
services to retailers and their suppliers.

    For more information about Groupe Aeroplan, please visit
www.groupeaeroplan.com.

    Caution Concerning Forward-Looking Statements

    Certain statements in this news release may contain forward-looking
statements. Forward-looking statements, by their nature, are based on
assumptions and are subject to important risks and uncertainties. Any
forecasts or forward-looking predictions or statements cannot be relied upon
due to, amongst other things, changing external events and general
uncertainties of the business and its corporate structure. Results indicated
in forward-looking statements may differ materially from actual results for a
number of reasons, including without limitation, risks related to the business
and the industry, dependency on top accumulation partners, Air Canada or
travel industry disruptions, Air Canada liquidity issues, airlines industry
changes and increased airline costs, reduction in activity, usage and
accumulation of Aeroplan Miles, retail market/economic downturn, greater than
expected redemptions for rewards, industry competition, supply and capacity
costs, unfunded Future Redemption Costs, failure to safeguard databases and
consumer privacy, consumer privacy legislation, changes to the Aeroplan and
Nectar Programs, seasonal nature of the business, other factors and prior
performance, regulatory matters, VAT appeal, reliance on key personnel, labour
relations and pension liability, technological disruptions and inability to
use third party software, failure to protect intellectual property rights,
currency fluctuations, interest rate and currency fluctuations, leverage and
restrictive covenants in current and future indebtedness, dilution of Groupe
Aeroplan shareholders, uncertainty of dividend payments, level of
indebtedness-refinancing risk, managing growth as well as the other factors
identified throughout the MD&A. The forward-looking statements contained in
this release represent Groupe Aeroplan's expectations as of May 11, 2009, and
are subject to change after that date. However, Groupe Aeroplan disclaims any
intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise, except as
required under applicable securities regulations.

    
    SUMMARY OF CONSOLIDATED OPERATING RESULTS AND RECONCILIATION OF EBITDA,
    ADJUSTED EBITDA, ADJUSTED NET EARNINGS AND FREE CASH FLOW

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (in thousands, except share
     and per share information)           Three months ended
    (unaudited)                                March 31,         % Variation
                                         ------------------------------------
                                         2009          2008
    -------------------------------------------------------------------------
    Gross Billings from the sale of
     Aeroplan Miles                      326,248       342,650          (4.8)
    -------------------------------------------------------------------------
    Aeroplan Miles revenue               335,744       337,286          (0.5)
    Other revenue                         20,080        18,929           6.1
    -------------------------------------------------------------------------
    Total revenue                        355,824       356,215          (0.1)
    Cost of rewards                     (226,362)     (223,227)          1.4
    -------------------------------------------------------------------------
    Gross margin                         129,462       132,988          (2.7)
    Selling, general and
     administrative expenses             (66,141)      (64,511)          2.5
    Depreciation and amortization         (4,937)       (4,672)          5.7
    -------------------------------------------------------------------------
    Operating income before
     amortization of Accumulation
     Partners' contracts and
     technology                           58,384        63,805          (8.5)
    -------------------------------------------------------------------------
    Depreciation and amortization          4,937         4,672           5.7
    -------------------------------------------------------------------------
    EBITDA(2)                             63,321        68,477          (7.5)
    -------------------------------------------------------------------------
    Adjustments:
      Change in deferred revenue
        Gross billings from the
         sale of Aeroplan Miles          326,248       342,650
        Aeroplan Miles revenue          (335,744)     (337,286)
      Change in Future Redemption
       Costs(1)                           11,403          (574)
        (Change in Net Aeroplan
         Miles outstanding x
         Average Cost  of Rewards
         per Mile for the period)
    -------------------------------------------------------------------------
    Subtotal of Adjustments                1,907         4,790
    -------------------------------------------------------------------------
    Adjusted EBITDA(2)(4)                 65,228        73,267         (11.0)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings in accordance
     with GAAP                            23,228        42,132
    Weighted average number of
     shares (units)                  199,383,818   199,402,619
    Earnings per share (unit)               0.12          0.21
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings in accordance
     with GAAP                            23,228        42,132
    Amortization of accumulation
     partners' contracts and
     technology                           19,715        22,678
    Subtotal of Adjustments
     (from above)                          1,907         4,790
    Effective tax rate(3)                  15.69         (7.75)
    Tax on adjustments at the
     effective rate                         (299)          371
    -------------------------------------------------------------------------
    Adjusted net earnings(2)              44,551        69,971
    Adjusted net earnings per
     share (unit)                           0.22          0.35
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flow (used in) from
     operations                          (16,012)       24,403
    Maintenance Capital
     Expenditures                         (7,982)       (6,865)
    Dividends / distributions            (24,997)      (41,994)
    Free cash flow(2)                    (48,991)      (24,456)       (100.3)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total dividends / distributions
     declared                             24,997        41,994
    Total dividends / distributions
     declared per share (unit)             0.125          0.21
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The per unit cost derived from this calculation is retroactively
        applied to all prior periods with the effect of revaluing the
        liability on the basis of the latest available average unit cost;
    (2) A non-GAAP measurement;
    (3) Effective tax rate calculated as follows: income tax expense per
        statement of operations / earnings before income taxes for the
        period;
    (4) A non-GAAP measurement, excluding the effect of "Foreign Exchange"
        line of the Statement of Operations, as it reflects the
        impact of the currency SWAP.


    This section includes sequential quarterly data for the five quarters
    ended March 31, 2009.

    -------------------------------------------------------------------------
    SUMMARY OF QUARTERLY RESULTS

    -------------------------------------------------------------------------
    (in thousands,
     except per
     share amounts)  2009                         2008
    (unaudited)      Q1          Q4          Q3          Q2          Q1
                     $           $           $           $           $
    -------------------------------------------------------------------------
    Gross Billings   326,248     364,437     355,603     357,858     342,650
    -------------------------------------------------------------------------
    Aeroplan Miles
     revenue         335,744     409,552     313,319     317,579     337,286
    Other revenue     20,080      20,780      21,635      19,149      18,929
    -------------------------------------------------------------------------
    Total revenue    355,824     430,332     334,954     336,728     356,215
    Cost of rewards  226,362     252,229     191,033     192,593     223,227
    -------------------------------------------------------------------------
    Gross margin     129,462     178,103     143,921     144,135     132,988
    Selling,
     general and
     administrative
     expenses         66,141      66,426      71,027      69,627      64,511
    Depreciation
     and
     amortization      4,937       6,494       4,472       4,998       4,672
    -------------------------------------------------------------------------
    Operating
     income before
     amortization
     of Accumulation
     Partners'
     contracts and
     technology       58,384     105,183      68,422      69,510      63,805
    Amortization of
     Accumulation
     Partners'
     contracts and
     technology       19,715      19,836      22,636      22,688      22,678
    -------------------------------------------------------------------------
    Operating
     income           38,669      85,347      45,786      46,822      41,127
    -------------------------------------------------------------------------
    Net earnings
     (loss)           23,228  (1,073,752)(2)  34,956      31,454      42,132
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Adjusted
     EBITDA(1)(4)     65,228      77,814      80,026      77,327      73,267
    -------------------------------------------------------------------------
    Adjusted net
     earnings(1)      44,551      84,661(3)   63,229      60,822      69,971
    -------------------------------------------------------------------------
    Net earnings      23,228      86,948(3)   34,956      31,454      42,132
    Earnings per
     share / unit       0.12        0.44(3)     0.18        0.16        0.21
    -------------------------------------------------------------------------
    Free cash
     flow(1)         (48,991)     42,492     115,868      43,636     (24,456)
    -------------------------------------------------------------------------
    Earnings per
     share (unit),
     in accordance
     with GAAP -
     Groupe
     Aeroplan /
     Fund               0.12       (5.39)       0.18        0.16        0.21
    -------------------------------------------------------------------------
    (1) A non-GAAP measurement.
    (2) Includes impairment charge.
    (3) Excludes impairment charge.
    (4) A non-GAAP measurement, excluding the effect of the "Foreign
        Exchange" line of the Statement of Operations, as it reflects the
        impact of the currency SWAP.
    




For further information:

For further information: Media: Michele Meier, (514) 205-7028,
michele.meier@aeroplan.com; JoAnne Hayes, (416) 352-3706,
joanne.hayes@aeroplan.com; Analysts: Trish Moran, (416) 352-3728,
trish.moran@aeroplan.com


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