IBI announces highest ever annual revenue and solid base for further growth
in 2010:
- Revenue at $273.7 million; increase of $35.9 million + 15.1%;
- EBITDA at $41.7 million; decrease of $3.9 million - 8.6%;
- Distributable Cash of $30.3 million; decrease of $4.2 million -
12.0%;
- Distributable Cash per unit of $1.7726 vs declared of $1.5997 -
payout ratio of 90.2%.
TORONTO, March 17 /CNW/ - IBI Income Fund (the "Fund") (TSX: IBG.UN) today announced its financial results for year ended December 31, 2009.
Revenue for the year ended December 31, 2009, was up $35.9 million (15.1%) to $273.7 million compared to $237.8 million for the year ended December 31, 2008. For the three months ended December 31, 2009, revenue was up $2.0 million (3.3%) to $68.2 million compared to $66.2 million for the three months ended December 31, 2008.
Revenue from strategic growth through acquisitions/mergers was approximately $42.0 million of the increase for the year ended December 31, 2009 and $8.4 million for three months ended December 31, 2009. This strategic growth was generated through the additional revenues resulting from the acquisitions/mergers of Gruzen Samton Architects, Planners and Interior Designers, LLP ("Gruzen Samton") in the second quarter of 2009, BFGC Architects, Planners, Inc. ("BFGC") and Stevens Group Architects Inc. ("SGA") in the third quarter of 2009 and Tetra Design Inc. ("Tetra") in the fourth quarter of 2009. In the fourth quarter, the disposition of the Sodem business also had an impact on the growth, with a reduction of revenue in the amount of $0.5 million compared to the prior year. The overall growth in activity was accomplished through a 10% increase in the average number of staff from 2,001 during 2008 to 2,202 during 2009.
EBITDA for the year ended December 31, 2009 was down $3.9 million (8.6%) to $41.7 million compared with $45.6 million for the year ended December 31, 2008. For the three months ended December 31, 2009, EBITDA was $8.7 million, down $4.2 million (32.4%) from $12.9 million for the three months ended December 31, 2008. As a percentage of revenue, EBITDA for the year ended December 31, 2009 was 15.2% compared with 19.2% for the year ended December 31, 2008. For the three months ended December 31, 2009, EBITDA was 12.7% as a percentage of revenue compared with 19.4% for the three months ended December 31, 2008. EBITDA for the three months ended December 31, 2009, was impacted by higher costs including write-offs of accounts receivable (remaining from lapse of certain private sector financing and projects). Expenses for the year totalled $232.0 million with the average quarter being $58.0 million and the fourth quarter being some $59.5 million which reflects these higher than regular costs.
All of the preceding includes the impact of foreign exchange. The foreign exchange losses incurred during 2009 compared with the foreign exchange gain in 2008 has had a significant impact on the EBITDA. Excluding the impact of foreign exchange, EBITDA for the year ended December 31, 2009 would have been $45.1 million (16.5% of revenue) compared with $35.4 million (14.9% of revenue) for the year ended December 31, 2008. Excluding the impact of foreign exchange, EBITDA for the three months ended December 31, 2009, would have been $9.2 million (13.5% of revenue) compared with $6.4 million (9.7% of revenue) for the three months ended December 31, 2008.
Net earnings before non-controlling interest of the Fund for the year ended December 31, 2009 were $13.1 million or $0.7568 per Unit (on a fully diluted basis) compared with $26.3 million or $1.6715 per Unit (on a fully diluted basis) for the year ended December 31, 2008. For the three months ended December 31, 2009, net loss before non-controlling interest was $2.4 million or $0.1329 per Unit (on a fully diluted basis) compared with earnings of $4.8 million or $0.3018 per Unit (on a fully diluted basis) for the three months ended December 31, 2008. As a percentage of revenue, net earnings before non-controlling interest were 3.5% for the year ended December 31, 2009, compared with 11.1% for the year ended December 31, 2008.
All of the preceding includes the impact of foreign exchange and the impairment of goodwill and intangible assets. Excluding the impact of foreign exchange and the impairment of goodwill and intangible assets (see "Definition of EBITDA, Distributable Cash and Non-GAAP Measures"), net earnings before non-controlling interest for the year ended December 31, 2009 would have been $19.5 million (7.1% of revenue) compared with $21.4 million (9.0% of revenue) for the year ended December 31, 2008. Excluding the impact of foreign exchange and the impairment of goodwill and intangible assets, net earnings before non-controlling interest for the three months ended December 31, 2009 would have been $1.2 million (1.8% of revenue) compared with $3.7 million (5.6% of revenue) for the three months ended December 31, 2008.
Distributable Cash - For the year ended December 31, 2009, the Fund generated $30.3 million of Distributable Cash, down $4.1 million (12.0%), compared with $34.4 million for the year ended December 31, 2008. For the three months ended December 31, 2009, the Fund generated $4.6 million of Distributable Cash, down $5.3 million (53.8%) compared with $9.9 million for the three months ended December 31, 2008. On a per Unit basis, based on the weighted average number of Units outstanding, Distributable Cash was $1.7726 for the year ended December 31, 2009, a decrease of $0.4125 compared with $2.1851 for the year ended December 31, 2008. This represents a payout ratio of 90.2% for the year ended December 31, 2009, compared with 71.0% for the year ended December 31, 2008.
All of the preceding includes the impact of foreign exchange. Excluding the impact of foreign exchange, Distributable Cash for the year ended December 31, 2009 would have been $33.6 million (payout ratio of 81.9%) compared with $24.2 million (payout ratio of 100.8%) for the year ended December 31, 2008. Excluding the impact of foreign exchange, Distributable Cash for the three months ended December 31, 2009 would have been $5.1 million (payout ratio of 138.9%) compared with $3.5 million (payout ratio of 180.0%) for the three months ended December 31, 2008.
Backlog:
The IBI committed fee volume for the year 2010 represents nine months equivalent of work. Backlog for Government and public institutional clients is now in excess of 65% of total backlog. Backlog is continuing to increase in building facility areas in health care, education, in transportation terminals, transportation networks and systems technology. IBI Group is increasingly receiving new mandates in the design stage of new private sector projects, although there is an overall decline in private sector as construction documentation and construction phase services are completed for older projects.
Operating Highlights and Major Achievements:
The economic recession commenced in the fourth quarter 2008 and continued through to 2009, rendering the past year the most challenging for the IBI Group since the recession of the early 1990's. This general economic recession impacted IBI Group's work in the private sector.
IBI Group was affected not only by this slowdown, but also by the high levels of debt on the IBI Group balance sheet arising from the major acquisition program through 2008 which was financed by borrowings from banks.
The IBI Group achievements in 2009 were outstanding in the face of these two sets of challenges.
Revenue growth
IBI Group achieved the highest level of fee volume ever, $273.7 million, with an increase of $35.9 million (15.1%) over 2008. This growth in revenue was realized through four strategic acquisitions: three in the USA and one in Canada. It is noteworthy that IBI Group was successful in concluding these acquisitions utilising the payment of IBI units along with cash thereby enabling IBI Group to continue its strategically planned growth by acquisition notwithstanding the levels of debt.
While organic revenue declined by $6.1 million (2.6%) in 2009 as compared to 2008, IBI Group was successful in achieving substantial organic growth in public sector work, almost entirely compensating for the rapid decline in private sector activity over the year. This was achieved through intensively diligent efforts in business development to increase IBI Group's share of public sector work across Canadian, US and international projects in health care, education, transportation and systems. Public sector work exceeded 65% of the $273.7 million in revenue for 2009 as compared to the 40% in the first half of 2008, a year in which total revenue was $237.8 million. Redeployment also required engaging new staff to strengthen skills in public sector activities, and the reduction of staff focused in private sector work. It was also strengthened by the strategic growth through the acquisitions of four firms, all of whom were entirely focused on public sector work in different markets and functional areas.
Improvements to balance sheet
IBI Group was also successful in achieving major improvements to the balance sheet for the year which included:
- raising of equity, approximately $14.5 million;
- extending bank credit for three years to December 31, 2012 and
increasing the operating limit to $150.0 million as well as the
addition of a fourth bank to the lending syndicate;
- raising further working capital through the convertible debenture of
$46.0 million;
- the sale of the Sodem business which had the positive effect of
relieving IBI Group of the obligation to provide $10.0 million of
working capital as security for performance bonds for the contracts
of that operation. IBI Group also recovered its full investment in
that business and realized a gain through the operations of the
business since January 2006;
- completing acquisitions during the year incorporating payment through
the issuance of equity together with a smaller portion of debt,
further strengthening the balance sheet as compared with the all cash
and debt used in prior year acquisitions.
As a consequence of these activities, the balance sheet of IBI Group is significantly improved and provides for a solid base for the firm going forward.
Strategic program for the growth in the USA
IBI Group successfully continued its strategic program of growing the business in the USA. The economy in the USA continued to suffer severe challenges throughout 2009. These challenges affected IBI Group particularly with regards to private sector work including residential development in Florida, industrial buildings in Giffels Engineering activity, and planning/urban design work related to housing in California. Notwithstanding, IBI Group has experienced organic growth overall in the US with increased projects in systems (including 511 Traveller Information Systems in various major states across the USA), transit work in transportation engineering and design, and facilities for social infrastructure in education and other facilities. To this organic growth was added the strategic component of the addition of three firms: Gruzen Samton of New York and Washington; BFGC of San Jose, Bakersfield and San Luis Obispo, and Tetra of Los Angeles, California. The complement of IBI Group staff across the USA is now approximately 650 people.
IBI Group continues to be committed to growth in the USA. Discussions are under way with other firms which would add further skills and geographic representation to the IBI Group network in major centres of population in six large urban regions of the USA. IBI Group continues to view acquisitions in the current environment as a strategic opportunity establishing a base platform for significant growth as the US economy moves into recovery mode. Acquisitions at this time are at relatively modest prices compared to the future potential. However, in the short term, the firms being acquired may not achieve the levels of profitability of which they are capable within a stronger and economic environment particularly with the strength and international reach of the IBI Group. This may dampen EBITDA and distributable cash as a percentage of revenue in the short term. However, IBI Group continues to believe this is a sound investment program which will realize substantial results within the next few years.
Currency Gains/Losses
As noted in the preceding sections, the currency gains and losses have affected the consistency of recent results. This arose from the revaluation of accounts receivable denominated in US currency reported in Canadian currency.
This issue has been favourably resolved for the future by an internal hedging arrangement through which borrowings of IBI Group in US funds are approximately equivalent to the accounts receivable, so that there is an internal counter-balancing effect of any currency fluctuations between US and Canadian currency.
Major Projects
IBI is currently engaged in preliminary work on three major projects: the McGill Medical Centre; the Eglinton Avenue transit line in Toronto; a major new city in a foreign jurisdiction. IBI Group had anticipated these projects moving from the preliminary stages to commitment thus intensifying the level of work of the firm in the fourth quarter of 2009. This did not occur and had a dampening effect on the anticipated revenue of IBI Group in the fourth quarter by approximately $4.0 million. IBI Group continues to work on these projects at a lower level of activity than would have been the case had they been committed.
Other Professional Progress
Other progress in the professional work of IBI Group in 2009 included:
- Continuing the work on the large suite of projects in Greece in
tolling and traffic management which are all underway;
- Consolidation of the operations of the transit and transport design
practice and progress in the build out of the full staffing of the
transport design office;
- Continued further work in growing the health care practice of IBI
across Canada, initial modest projects in health care in the United
States, as well as forays in health care in international markets;
- The growth and solidifying of the IBI practice in China which
commences the year 2010 with a full backlog of work for a wide range
of clientele from north to south in the major cities and in resort
areas of the Pacific coast of China;
- Further progress in the development of the practice in India with the
subsequent award of a major new planning design assignment for
Science City;
- Further increase in the private sector assignments for building
design, particularly in the residential sector across Canada.
The scope of these efforts is validation of IBI Group's integrated operating model of providing comprehensive professional services to clients in Canada, the USA and abroad.
Investor Conference Call
The Fund will hold a conference call on Thursday, March 18, 2010 at 8:30 a.m. Eastern Daylight Time (EDT). To participate in the conference call, please dial in before 8:30 a.m. EST to 800 920-2986 for local and toll-free North American access, or 1 212 231 2903 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 21462638 followed by the number sign on your telephone keypad.
Selected Consolidated Financial Information and Reconciliation of
Non-GAAP Measures
Three Three
months months
ended ended Year ended Year ended
in thousands of December 31, December 31, December 31, December 31,
dollars except for 2009 2008 2009 2008
per Unit amounts Unaudited Unaudited
Revenue $ 68,194 $ 66,185 $ 273,673 $ 237,772
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Expenses 59,501 53,329 231,982 192,171
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Earnings before income
taxes, interest and
amortization (EBITDA) 8,693 12,856 41,691 45,601
Interest 2,605 1,372 7,139 4,155
Income taxes 62 (1,973) 3,412 (666)
Amortisation of property
and equipment and
intangible assets 3,029 3,371 12,781 10,667
Amortization of deferred
credit - leases (28) (50) (112) (204)
Impairment of goodwill
and intangibles 3,039 5,354 3,039 5,354
Purchase price
adjustment 2,346 - 2,346 -
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Net earnings before
non-controlling
interest $ (2,360) $ 4,782 $ 13,086 $ 26,295
---------------------------------------------------
Basic and diluted net
earnings per Unit $ (0.1329) $ 0.3006 $ 0.7568 $ 1.6745
---------------------------------------------------
Distributable Cash
Cash flow used in
operating activities $ (6,070) $ 12,052 $ (6,606) $ 450
Less: Capital
expenditures (526) (636) (1,804) (4,421)
---------------------------------------------------
Standardized
Distributable Cash $ (6,596) $ 11,416 $ (8,410) $ (3,971)
Add (deduct):
Change in non-cash
operating working
capital 12,938 (647) 37,141 38,589
Current income tax
expense (780) 79 4,017 2,407
Income taxes paid (986) (948) (2,495) (2,635)
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Distributable Cash $ 4,576 $ 9,900 $ 30,253 $ 34,390
---------------------------------------------------
Weighted average
basic and diluted
Distributable Cash
per Unit(1) $ 0.2576 $ 0.6229 $ 1.7726 $ 2.1851
---------------------------------------------------
Aggregate
distributions
declared $ 7,105 $ 6,270 $ 27,558 $ 24,336
---------------------------------------------------
Basic and diluted
aggregate
distributions
declared per Unit(1) $ 0.4000 $ 0.4000 $ 1.5997 $ 1.5524
---------------------------------------------------
(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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