TORONTO, Nov. 11, 2014 /CNW/ - Brookfield Real Estate Services Inc. (the Company) (TSX: BRE), a leading provider of services to residential real estate brokers and their REALTORS®1 today announced that cash flow from operations ("CFFO") for the three and nine months ended September 30, 2014 was $7.5 million or $0.59 per Restricted Voting Share ("Share") and $20.2 million or $1.57 per Share, respectively, as compared to $7.1 million or $0.55 per Share and $19.3 million or $1.50 per Share, respectively, for the same period in 2013.
OVERVIEW OF THIRD QUARTER OPERATING RESULTS
CFFO for the rolling 12 month period ended September 30, 2014 was $2.04 per Share as compared to $1.97 for the 12 months ended December 31, 2013. Royalties for the three and nine months ended September 30, 2014 were $10.8 million and $28.8 million, respectively, compared to $10.1 million and $27.9 million, respectively for the same period in 2013. Net earnings for the three and nine months ended September 30, 2014 was $2.2 million or $0.23 per Share and $1.4 million or $0.15 per Share, respectively, as compared to net loss of $2.5 million or $0.26 per Share and net earnings of $0.3 million or $0.03 per Share, respectively, for the same period in 2013.
During the Quarter, the Company generated CFFO of $7.5 million, up 6.0% from $7.1 million for the same period of 2013 driven primarily by increased royalties and offset partially by an increase in operating costs. Royalties were up $0.7 million due primarily to an increase in the number of Agents in the Network as a result of the acquisition of Franchise Agreements at the beginning of the year and the implementation of the previously announced $2 per month increase in the Royal LePage fixed franchise fee. Operating costs were up $0.3 million year-over-year due primarily to bad debt provision recorded for certain franchisees that are experiencing financial challenges.
For the rolling twelve months ended September 30, 2014, the Canadian Market, as defined by Market transactional dollar volume, closed up 13.4%, at $192.0 billion, compared to the same period of 2013, driven by an increase of 7.3% in selling price and 5.7% increase in units sold. For the three months ended September 30, 2014, the Canadian market transactional dollar volume was up 12.3%, at $52.9 billion over the same period in 2013, driven by a 6.9% increase in selling price and a 6.5% increase in home sale activity.
On a rolling twelve-month basis, the GTA Market experienced a quarter-over-same-quarter increase of 14.9%, at $51.5 billion driven by a 8.0% increase in selling price, and a 6.3% increase in home sale activity. For the three months ended September 30, 2014, the GTA Market experienced a 13.9% increase, at $13.8 billion on an 11.1% increase in selling price and a 5.6% increase in home sale activity over the same period in 2013.
The Company's revenue is primarily fixed in nature, based on the number of REALTORS® in the network. This structure provides revenue protection from the impact of revenue declines when the market cools, but also reduces the degree to which the Company participates in periods of rapid market expansion.
"We are delighted with the strong financial and operational results the Company delivered in the third quarter. Company royalties for the quarter were up seven per cent over the same quarter in 2013, while cash flow from operations for the quarter was up six per cent over the same period last year. The robust growth in these key measures was driven by an increase in the number of REALTORS® in our network, an increase in our fixed franchise fee, as well as an increase in market activity during the period," said Phil Soper, President and Chief Executive Officer, Brookfield Real Estate Services Inc.
The Company Network
As at September 30, 2014, the Company Network was comprised of 15,593 REALTORS®, operating under 306 franchise agreements providing services from 634 locations, with approximately one fifth share of the Market based on 2013 transactional dollar volume.
"The Canadian housing market enjoyed strong increases in both unit sales and average price in the quarter. Broader economic factors remain consistent with prior quarters and we expect similar conditions to remain in place through to the end of the year," added Soper.
Monthly Cash Dividend
The Company declared a cash dividend of $0.10 per share for the month of November 2014, payable on December 31, 2014, to shareholders of record on November 28, 2014.
This news release and accompanying financial statements make reference to cash flow from operations ("CFFO") on a total and per restricted voting share basis. CFFO is defined as net income prior to fair value changes, amortization, interest on Exchangeable Units, income taxes, items related to other income and interests of Exchangeable Unitholders. CFFO is used by the Company to measure the amount of cash generated from operations which is available to the Company's shareholders on a diluted basis where such dilution represents the total number of shares of the Company that would be outstanding if Exchangeable Unitholders converted Class B LP units into shares of the Company. The Company uses CFFO to assess its operating results, the value of its business and believes that many of its shareholders and analysts also find this measure of value to them. CFFO does not have any standard meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies.
This news release contains forward-looking information and other "forward-looking statements". The words such as "should", "will", "continue", "plan", "believe", "expect", "anticipate", "intend", "estimate", "approximate", "expected" and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Corporation to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those set forward in the forward looking statements include a change in general economic conditions, interest rates, consumer confidence, the level of residential real estate resale transactions, the average rate of commissions charged, competition from other traditional real estate brokers or from discount and/or Internet-based real estate alternatives, the availability of acquisition opportunities and/or the closing of existing real estate brokerage offices, other developments in the residential real estate brokerage industry or the Corporation that reduce the number of and/or royalty revenue from the Company's network of 15,593 REALTORS®, our ability to maintain brand equity through the use of trademarks, the availability of equity and debt financing, a change in tax provisions, and other risks detailed in the Company's annual information form, which is filed with securities commissions and posted on SEDAR at www.sedar.com. The Corporation undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Brookfield Real Estate Services Inc. will host a conference call on Tuesday, November 11, 2014 at 10 a.m. ET to discuss its financial results for the third quarter of 2014.
To access the call by telephone, please dial (888) 231-8191 or (647) 427-7450. Please connect approximately ten minutes prior to the beginning of the call to ensure participation. A recording of the conference call will be available on the Company's website by November 13, 2014 at http://www.brookfieldresinc.com/content/investor_centre-25063.html.
The Company's Interim Condensed Consolidated Financial Statements, Supplemental Information and IFRS overview for the three and nine months ended September 30, 2014 contain further information on the company's strategy, operations and financial results and can be found on our website at www.brookfieldresinc.com. The Company's Management Discussion and Analysis, Financial Statements and associated regulatory filings will follow within prescribed timelines. Shareholders are encouraged to read these documents.
Brookfield Real Estate Services Inc. Profile
The Company is a leading provider of services to residential real estate brokers and their REALTORS®. The Company generates cash flow from franchise royalties and service fees derived from a national network of real estate brokers and agents in Canada operating under the Royal LePage, Via Capitale Real Estate Network and Johnston & Daniel brand names. At September 30, 2014, the Company network consisted of 15,593 REALTORS®. The Company network has approximately one fifth share of the Canadian residential resale real estate market based on 2013 transactional dollar volume. The Company generates both fixed and variable fee components. Variable fees are primarily driven by the total transactional dollar volume from the sales commissions of REALTORS®, while fixed fees are based on the number of agents and sales representatives in the network. Approximately 71% of the Company's revenue is based on fees that are fixed in nature; this provides revenue stability and helps insulate the Company's cash flows from market fluctuations. The Company is listed on the TSX and trades under the symbol "BRE". For further information about the Company, please visit www.brookfieldresinc.com.
1 REALTOR® is a trademark identifying real estate licensees in Canada who are members of the Canadian Real Estate Association.
SOURCE: Brookfield Real Estate Services Inc.
For further information: Tammy Gilmer, Director, Public Relations & National Communications, Brookfield Real Estate Services Inc., [email protected], Tel: 416.510.5783