- Revenue at $69.8 million; decrease of $1.2 million - 1.7%;
- EBITDA at $10.1 million; decrease of $1.9 million - 15.6%;
- Distributable Cash of $7.3 million; decrease of $2.8 million - 27.6%
- Distributable Cash per unit of $0.4114 vs declared of $0.3999 -
payout ratio of 97.2%.
TORONTO, Aug. 4 /CNW/ - IBI Income Fund (the "Fund") (TSX: IBG.UN) today announced its financial results for three and six months ended June 30, 2010.
The second quarter 2010 results demonstrated the firming of the operating results of IBI Group as compared to the fourth quarter 2009 and the first quarter of 2010. The results of the second quarter of 2010 are based on 63 available working days which is consistent with an average quarter. The highlights are:
- Revenue at $69.8 million, was $1.2 million below the second quarter
of 2009 and up $1.7 million compared with the first quarter of 2010;
- EBITDA(1) of $10.1 million was $1.9 million below the second quarter
of 2009, and up $1.1 million compared with the first quarter of 2010;
- Distributable cash(1) of $7.3 million was $2.8 million below the
second quarter of 2009, and up $1.1 million compared with the first
quarter of 2010;
- Backlog of committed work for the next twelve months has increased
and now stands at over ten months activity at the pace of the first
half of 2010.
The basis of this performance is discussed in paragraphs below.
Revenue Activity
Revenue for the second quarter exceeded that of the first quarter on an average daily basis, and as a result of one additional working day for the quarter, revenue was up $1.7 million. The revenue in the second quarter was lower than expected, caused by the slippage of progress on certain public projects in Canada and further softening of the markets in Florida, Michigan and New York in the USA. However, the backlog of committed work continued to increase during the quarter, and now stands at over ten months activity at the pace of the first half of 2010, and over nine months based on the greater pace that IBI Group anticipates for the second half of 2010. This backlog includes notable projects such as the McGill Medical Centre, (which has now achieved financial close), Women's College Hospital (which has now achieved financial close) and many other new substantial projects.
Organic growth in the second quarter of 2010 declined by $10.0 million (14.1%) as compared with the second quarter of 2009, and declined by $0.7 million (1.0%) as compared to the first quarter 2010. This performance relative to the first quarter of 2010 was below expectations as noted for the reasons above. However with the continuing increase of new assignments in the private sector, increased activity in the public sector including the substantial projects referred to above, IBI Group anticipates net organic growth being achieved through subsequent quarters of 2010. There will also be new strategic growth through the merger of Nightingale Architects in Health care as well as Education and Science Facilities, along with the other earlier acquisitions and new acquisitions currently under consideration.
Public sector work grew proportionately and in this quarter exceeded 67% of the $69.8 million of revenue.
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(1) See "Definition of EBITDA, Distributable Cash and Non-GAAP Measures.
Strategic Program of Growth
During the second quarter, IBI Group completed the acquisition of Nightingale Architects Ltd ("Nightingale"). Nightingale is a leading architectural practice, specialising in facilities for health care and for education and science. The practice has been in existence for over twenty years and has grown steadily to its current complement of 240 members operating in six offices in the UK, as well as an office in South Africa. Nightingale is a practice leader in social infrastructure in the UK, actively engaged in major building projects in that base of operation and other projects internationally including Eastern Europe, the Gulf, Australia and South Africa. The firm is an architect of choice of public agencies, as well as private development proponents/construction contractors for the delivery of health care facilities through private finance initiatives, public private partnerships and design build. These major private companies, operating in the UK, are also similarly engaged in other world markets affording Nightingale the opportunity to provide architectural services for these clients for projects elsewhere. The integration of the executive team of Nightingale is a strategic advancement in relation to three basic objectives of IBI Group: building the world platform of IBI, becoming a leader in world scale projects in health care and other areas of social infrastructure, and strengthening the business of IBI. In fact, as we approach the end of only the second month of working together, there are underway, joint efforts and business development initiatives targeting professional work opportunities.
During the first quarter IBI Group completed the acquisition of MAAK Technologies Inc. ("MAAK"). This firm's expertise in water engineering and systems applications extends IBI Group's work in systems technology to the important area of water resources. It also broadens the IBI Group practice geographically with further strengthening in the Caribbean.
IBI Group is engaged in discussions with other firms for acquisitions in international markets where IBI Group is currently active including China and India.
IBI Group is in discussion with firms in Canada to complement certain functional skills and improve overall strength in areas where IBI Group is currently practicing.
IBI Group continues to be committed to further growth in the USA. Discussions are under way with several USA based firms in connections with potential acquisitions. These acquisitions could add professional skills and strengthen IBI Group's presence in major centres of population in the six urban regions of the USA. IBI Group expects such acquisitions to be concluded during the remainder of 2010 and continuing in 2011. As IBI Group has noted previously, the firms being acquired may not achieve the levels of profitability of which they are capable within the current economic environment in the USA. While this may dampen EBITDA and distributable cash as a percentage of net fee revenue in the short term and is of concern to the IBI Group, the firm continues to believe this is a sound strategic investment program which will realise significant results within an improved economic environment, strengthened with the international reach of the IBI Group within the next few years.
Major Projects
As noted above, the McGill University Centre has now achieved financial close with the affiliated architectural firms of IBI Group being the lead building architects working in support of the Consortium led by SNC Lavalin. This significant project together with Women's College Hospital and other public work, as well as in the revitalisation of the private sector across Canada, where IBI Group services the design of housing will all lead to increased fee volumes in the ensuing quarters.
Other Professional Progress
Other progress in the professional work of IBI Group in the second quarter of 2010 included:
- Continuing work on a suite of tolling and traffic management projects
in Greece which, have withstood the financial challenges regarding
the relatively large debt of that country;
- Continued further work in the growing health care practice of IBI
Group; which has very significantly increased opportunities arising
from the Nightingale merger. IBI Group and Nightingale are now
engaged in healthcare projects in Canada, the UK , Eastern Europe,
Australia, on existing work with increased business development
opportunities in these jurisdictions along with others including
China and India;
- Further continuing organic growth of the IBI Group practice in China;
- Further progress in the growth of the practice in India with
additional new private sector assignments.
Investor Conference Call
The Fund will hold a conference call on Thursday, August 5, 2010 at 8:30 a.m. Eastern Standard Time (EST). To participate in the conference call, please dial in before 8:30 a.m. EST to 800 754-1382 for local and toll-free North American access, or 1 212 231 2900 for international access
An audio replay of the call will be available for 14 days, by dialling 416-626-4100 for local and international access, or 1 800 558-5253 for toll-free North American access, passcode 21476388 followed by the number sign on your telephone keypad.
Selected Consolidated Financial Information and Reconciliation of Non-GAAP Measures
Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
in thousands of dollars
except for per Unit
amounts
Revenue $ 69,790 $ 71,032 $ 137,865 $ 136,696
--------------------------------------------
Expenses 59,702 59,083 118,752 115,476
--------------------------------------------
Earnings before income taxes,
interest and amortization
(EBITDA) 10,088 11,949 19,113 21,220
Interest 2,446 1,451 4,677 2,634
Income taxes 1,006 1,716 1,137 2,184
Amortisation of property and
equipment and intangible
assets 2,943 3,132 5,652 6,172
Amortization of deferred
credit - leases (13) (28) (25) (56)
--------------------------------------------
Net earnings before
non-controlling
interest $ 3,706 $ 5,678 $ 7,672 $ 10,286
--------------------------------------------
Basic and diluted net
earnings per Unit $ 0.2076 $ 0.3380 $ 0.4297 $ 0.6215
--------------------------------------------
Distributable Cash
Cash flow used in operating
activities $ 6,316 $ (520) $ 1,376 $ (1,897)
Less: Capital expenditures (865) (413) (1,325) (883)
--------------------------------------------
Standardized Distributable
Cash $ 5,451 $ (933) $ 51 $ (2,780)
Add (deduct):
Change in non-cash
operating working
capital 223 8,796 11,661 17,311
Current income tax expense 1,209 2,222 1,559 3,172
Income taxes paid 459 62 336 (641)
--------------------------------------------
Distributable Cash $ 7,342 $ 10,147 $ 13,607 $ 17,062
--------------------------------------------
Weighted average basic and
diluted Distributable
Cash per Unit(1) $ 0.4114 $ 0.6040 $ 0.7632 $ 1.0278
--------------------------------------------
Aggregate distributions
declared $ 7,187 $ 6,853 $ 14,291 $ 13,379
--------------------------------------------
Basic and diluted aggregate
distributions declared per
Unit(1) $ 0.3999 $ 0.3999 $ 0.7998 $ 0.7998
--------------------------------------------
(1) Distributable Cash per Unit amounts are calculated by including both
the Class A partnership units and the Class B partnership units in
the denominator.
Definition of EBITDA, Distributable Cash and Non-GAAP Measures
Distributable Cash does not have a standardized meaning prescribed by GAAP, but is a measure generally used by Canadian open-ended income funds as an indicator of financial performance. The Fund defines Distributable Cash as cash flow from operating activities before change in non-cash working capital and income taxes and after capital expenditures and income taxes paid. A reconciliation of Distributable Cash to cash flow from operating activities has been provided under the heading "Selected Consolidated Financial Information and Reconciliation of Non-GAAP Measures".
The Fund's method of calculating distributable cash may differ from similar computations as reported by other similar entities and, accordingly, may not be comparable to distributable cash as reported by such entities. The Fund believes that its distributable cash is a useful supplemental measure that may assist prospective investors in assessing the return on their investment in Units.
References to "EBITDA" are to earnings before interest, income taxes, depreciation and amortization. Management of the Fund believes that in addition to net earnings, EBITDA is a useful supplemental measure as it provides readers with an indication of cash available for distribution prior to debt service, capital expenditures and income taxes. Readers should be cautioned, however, that EBITDA should not be construed as an alternative to net earnings determined in accordance with GAAP as an indicator of the Fund's performance or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows. EBITDA is not a recognized measure under GAAP and does not have a standardized meaning prescribed by GAAP, and the Fund's method of calculating EBITDA may differ from other issuers. Accordingly, EBITDA may not be comparable to similar measures used by other issuers. A reconciliation of net earnings with EBITDA has been provided under the heading "Selected Consolidated Financial Information and Reconciliation of Non-GAAP Measures"
Discussion in this press release of net earnings before non-controlling interest, EBITDA and distributable cash include the impact of foreign exchange gain (loss) as the Fund believes this provides useful information for readers to assess the performance of the Fund.
%SEDAR: 00021044E
For further information: Allan J. Kamerman, IBI Income Fund, 230 Richmond Street West, 5th Floor, Toronto, ON, M5V 1V6, Tel: 416-596-1930
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