Homeserve Reports Second Quarter Results
TORONTO, Oct. 14 /CNW/ - Homeserve Technologies Inc. today reported net income of $1.0 million on revenue of $2.7 million for the second quarter ended August 31, 2010 as compared to net income of $1.1 million on revenue of $2.9 million for the second quarter ended August 31, 2009. After preferred share dividends, net income or loss available to common shareholders was a loss of $0.01 per share for the second quarter as compared to income of $0.01 per share for the same period of the prior year.
Comprehensive income for the quarter which comprises net income and the unrealized gain, net of tax of the Company's investments was $2.2 million as compared to $1.7 million for the same period of the prior year.
The primary drivers of the year over year $0.1 million decrease in net income was the non-recurrence of income earned on the Company's investment portfolio, partially offset by a $0.9 million reduction in operating costs due to reduced staffing and marketing costs and the non-recurrence of a $0.4 million foreign exchange loss which arose on US dollar denominated cash balances held in the prior year. The absence of investment income in the current quarter is a result of the Company's sale of its investments in the prior fiscal year and reinvestment in the High Yield Advantage Fund, the results of which are recorded net of tax as other comprehensive income. Other comprehensive income for the current and comparative quarter for the prior year was solely attributed to the Company's investment returns from the High Yield Advantage Fund which was $1.2 million for the quarter, up from $0.6 million for the same period in the prior year.
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Interim statement of income
Three months ended Six months ended
($ thousands, except per common August 31, August 31,
share amounts) 2010 2009 2010 2009
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REVENUE 2,742 2,874 8,448 8,240
Cost of sales 183 216 275 279
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Gross margin 2,559 2,658 8,173 7,961
OPERATING EXPENSES
Selling, general and
administrative 373 1,240 1,079 2,107
Amortization of property, plant
and equipment 8 44 18 88
Amortization of intangible assets 1,228 1,228 2,456 2,456
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Income from operations before the
undernoted 950 146 4,620 3,310
Investment income - 77 - 142
Gain on sale of short-term
investments - 839 - 839
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Net income for the period 950 1,062 4,620 4,291
Preferred share dividends (995) (995) (1,989) (1,989)
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Net income (loss) to common
shareholders (45) 67 2,631 2,302
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Weighted average common shares
outstanding 6,944 6,944 6,944 6,944
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Common shares and common share
equivalents 6,944 6,944 6,944 6,944
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Basic and diluted earnings (loss)
per common share $(0.01) $0.01 $0.38 $0.33
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Interim statements of
comprehensive income Three months ended Six months ended
August 31, August 31,
($ thousands) 2010 2009 2010 2009
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Net income 950 1,062 4,620 4,291
Other comprehensive income 1,217 599 2,036 599
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Comprehensive income 2,167 1,661 6,656 4,890
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Outlook
The award of the Government of Canada Contract ("GOC Contract") for the combined Canadian Forces, Government of Canada Department and Agencies and the Royal Canadian Mounted Police to a subsidiary of BRPS for a five year term with two one-year renewal options, which commenced on December 1, 2009, secures significant relocation volumes from which the Company earns licensing fees.
ICON
In calendar 2011, the Company expects the following two significant impacts to its cash flow: the renewal of the ICON licensing arrangements and the timing of the GOC relocation file initiations as they relate to ICON licensing fee renewal terms. Commencing April 1, 2011, the ICON licensing arrangements renew for a two year term at which time fees earned per relocation file are expected to decrease to $200 per file from the current calendar year volume based $500, $400 and $250 per file fee. At 25,470 relocation files for fiscal 2010 this change would result in royalty fee decline from $10.4 million to $5.1 million. A substantial portion of the Company's ICON fees (80% in fiscal 2010) are earned from the GOC relocation contract. A significant portion of the GOC files are typically initiated during the spring and accordingly to the extent these files are initiated post March 31, 2011, the amount of licensing fees earned by the Company will be reduced as compared to prior years.
Despite the anticipated impact to cash flows in 2011 noted above, management anticipates that the fees earned from the GOC contract will provide sustainable cash flows for the Company in the immediately foreseeable future.
About Homeserve
Homeserve is a Canadian based software development and services company focused on home-related services for the real estate, relocation and banking industries. Homeserve provides a one-stop shopping service for home buyers and sellers, offering real-estate related products and services throughout the customer's purchasing and selling cycle, coordinated by a proprietary software system and contact centre.
Forward - Looking Statements
This press release contains forward-looking information, including "forward-looking statements". The words "will", "intends", "expected" and other expressions which are predictions of or indicate future events and trends and which 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, which may cause Homeserve's performance to differ materially from the description of the investment expressed or implied by such forward-looking statements. Although Homeserve believes that the anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information because they involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information. Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include general economic conditions; interest rate changes; availability of equity and debt financing; and other risks and factors described from time to time in the documents filed by the Company with the securities regulators in Canada including in the Annual Information Form under the heading "Risk Factors." The Company undertakes no obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise.
Additional Information
Detailed financial information and Management's Discussion and Analysis of Results and Financial Condition as at and for the quarter ended August 31, 2010 is posted on Homeserve's website (under Investor Relations, Financial Information) at www.homeserve.ca and should be read in conjunction with this press release and the Company's audited financial statements for the year ended February 28, 2010, which are and is also available on SEDAR's website at www.sedar.com.
%SEDAR: 00004370E
For further information: Stephen Tsao, Homeserve Technologies Inc., (416) 510-5307 or [email protected]
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