IBI Announces Strong Quarterly Revenue Second Highest to Date:

• Revenue at $86.9 million, increase of $9.1 million, +11.7%
• EBITDA¹ $11.4 million, increase of $0.7 million, +6.1%
• Earnings per share of $0.2065
• Distributable Cash¹ of $6.3 million; increase of $0.5 million, + 8.6%
• Distributable Cash¹ earned per share $0.3487 vs declared of $0.3105.  Payout ratio of 89.0%
• Backlog increase to equivalent level of work of approximately 10 months

TORONTO, May 11, 2012 /CNW/ - IBI Group Inc (the "Company") (TSX: IBG) today announced its financial results for the three months ended March 31, 2012, reported now for the fifth time under International Financial Reporting Standards ("IFRS").

Operating Highlights

The results for the first quarter of March 31, 2012 are based on 63 available working days, which is consistent with an average quarter, compared to 62 days in the first quarter of March 2011 and the fourth quarter of December 2011. The highlights are:

• Revenue at $86.9 million was $9.1 million above the first quarter of 2011, and down $1.1 million compared with the fourth quarter of 2011.
• EBITDA¹ of $11.4 million was up $0.7 million above the first quarter of 2011, and down $0.8 million compared to the fourth quarter of 2011.
• EBITDA¹ as a percentage of revenue for the first quarter of 2012 was 13.1%, a decrease of 0.7% when compared to the first quarter of 2011 and a decrease of 0.8% when compared to the fourth quarter of 2011.
• Net Earnings per share ("EPS") for the first quarter of 2012 was $0.2065, compared with Adjusted Net Earnings¹ per share of $0.2423 the first quarter of 2011 and $0.2311 for the fourth quarter of 2011.
• Distributable cash¹ of $6.3 million was up $0.5 million from the first quarter of 2011 and down $0.2 million when compared to the fourth quarter of 2011. As a result, the payout ratio for the first quarter of 2012 was 89%, an increase from 84.1% for the first quarter of 2011 and a decline from 89.5% for the fourth quarter of 2011. IBI is committed to increase the level of earnings such that the payout ratio of dividends and distributions will decrease to be in the range of 60% to 65%.

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Efforts continue to reduce the working capital tied up in accounts receivable, work in process and deferred revenue. IBI reports the working capital tied up in terms of gross billings per day. This is the most meaningful measure of  performance.  The measurement using gross billings is increasingly relevant as IBI assumes the lead role on large projects with more subconsultant participation in fee volume and recoverable expenses.  The current level of the working capital tied up measured in gross billings is 142 days at the end of the first quarter 2012 versus the peak of 156 days at the end of the second quarter 2010. The current level is an increase of the equivalent of 4 days at the end of the first quarter of 2012 compared to the fourth quarter of 2011. The target is to reduce working capital tied up to 115 days.

The MD&A also includes the reporting on the basis of working capital tied up measured in net fee billings per day.  This was the basis of measurement previously reported.  The current level of the working capital tied up measured in net fee billings is 178 days at the end of the first quarter 2012 versus the peak of 195 days at the end of the second quarter 2010. This is an increase of the equivalent of 5 days at the end of the first quarter of 2012 compared to the fourth quarter of 2011.  The equivalent target on this net fee billing basis is 140 days as stated in previous reporting.

Subsequent to Q1 2012 the Company closed the issuance of 2,700,000 common shares (the "Shares') on a bought deal basis at a price of $15.00 per Share to a syndicate of underwriters co-led by TD Securities Inc., CIBC World Markets Inc. and National Bank Financial Inc. for gross proceeds of $40,500,000 (the "Offering"). The Company granted the syndicate an over-allotment option, exercisable in whole or in part at any time up to 30 days following closing, to purchase up to an additional 405,000 Shares at the same offering price.

The Company intends to use the net proceeds from the Offering for potential future acquisitions, debt reduction and general corporate purposes.

Concurrent with the Offering, the Company has completed, on a non-brokered private placement basis, the issuance of 667,000 Shares at $15.00 per Share to IBI Group Management Partnership (the "Management Partnership") in full satisfaction of $10 million of indebtedness owed by the Company to the Management Partnership.

Revenue Activity

Revenue for the quarter ended March 31, 2012 exceeded that of the quarter ended March 31, 2011. Work is underway on a wide range of projects (approximately 5,500 active projects).  Intensive efforts continue on major projects including the design contract for the ten underground stations on the planned LRT Red Line in Tel Aviv, McGill Health Centre, Glasgow Southern General Hospital, Women's College Hospital in Toronto, and other health care facilities; highway tolling projects and traffic management projects worldwide; a large number of educational facilities; continued strength in housing developments in Canada; new office development projects in Canada and China (replacing some slowdown in housing in China) and some major transit and highway projects.

Organic growth for the three months ended March 31, 2012 was up $3.9 million (5.1%) compared with the three months ended March 31, 2011. Public sector work represented approximately 69% of the $86.9 million of revenue in the quarter.

Building the Practice of IBI as "Global Designer of Local Communities"

The basic objective of IBI Group is to build a Global Professional Practice in the planning, design and development of the physical components of urbanization throughout the world.  Urbanization is one of the main driving forces in social and economic systems worldwide.  While there are cultural differences, much of the physical aspects in the formation of cities; transportation and other infrastructure, buildings and public spaces for the accommodation of human activity are subject to the same professional and technical substance.  Accordingly, the expanding knowledge and experience of IBI Group is transferrable throughout these world markets.  IBI Group's core areas of activity in Urban Land, Building Facilities, Transportation Infrastructure, and Intelligent Systems are the primary elements of the physical development of such urban areas. IBI Group is building this broad based expertise that provides the intelligence and knowledge that informs the work of IBI Group to address urbanization in metropolitan areas throughout the world.

IBI Group sees this intelligence in various perspectives:
1)	Intelligence regarding operations of facilities and infrastructure and the impact of change in technology on these operations. In major transportation and social infrastructure and in cities, the increasing scale of work of IBI Group provides the growing intelligence to enable IBI Group to establish centres of excellence that operate on a world scale throughout the whole of the firm.  This intelligence can then be deployed through the local offices serving local communities;
2)	Intelligence on human senses and interaction with infrastructure and the built urban environment; the expanding body of work that IBI Group has implemented enables IBI Group to assess with the participation of users of infrastructure and facilities the human reactions to these environments and to learn what functions better for the human senses;
3)	Intelligence on the technical aspects of the product of the work implemented; construction details in infrastructure and in building details regarding constructability, maintenance, costs; and
4)	Intelligence in the doing of the work; intelligent systems to access the body of knowledge; organization for the planning design and implementation.

As IBI Group grows, the knowledge base of our intelligence is both extended and intensified, heightening the quality of the work that IBI can produce.  The IBI Group model is to operate as one integrated global firm to access this intelligence and apply it by the delivery of that expertise through local communities.  Accordingly, IBI Group is growing in its diversity of professional skills and in establishing physical presence in local offices throughout the world.

The business benefits of this strategy are multiple:
1)	IBI Group has expanding and intensifying access to professional business opportunities with decreasing competition due to the IBI Group growing intelligence and expertise;
2)	IBI Group can move this intelligence to clients with needs in urban areas that are growing and be present where markets are robust as economies fluctuate; and
3)	IBI Group can access human talent in various areas of the world with the IBI global platform.

Accordingly, IBI Group will continue in this long term strategy through both organic and strategic growth.  The organic growth is the long term core of growth. IBI Group has achieved an average of 12% organic growth per year since 1995.  Organic growth in the first quarter of 2012 was 5.1%, demonstrating the continuing recovery from the recession that impacted operations in Q4 2008 and thereafter. Once IBI Group has established the base global platform, the continuing emphasis will be primarily on organic growth.

IBI Group also will grow via strategic growth from acquisitions, to advance IBI Group in reaching the base global platform and to strengthen areas of expertise. IBI Group pursued this strategy through the recession that started in late 2008. During this time, IBI Group continued to build a platform of world leading expertise in the design of health care facilities, in education facilities and intelligent systems, while addressing the reduction in housing developments in the USA and other markets.  IBI Group's long term strategy will be consistently pursued but with adjustments necessary from time to time, as was the case during this recent recession with respect to housing.

IBI Group will continue to pursue work directly on behalf of the owners in what is commonly termed the "conventional" method, in which architects, engineers and other professionals are engaged directly by the owners. The owners then subsequently engage directly construction contractors and suppliers.  IBI Group will also continue to grow in the new methods of delivery in Design Build and Private Finance Initiative (PFI), and/or Public Private Partnerships (P3).  IBI Group's expanding relationships with world leading construction contractors and financiers/ investors in such work provides an alternate to delivery of facilities for public agencies who are lacking capital to invest in transport infrastructure and social infrastructure required for their societies.  This method has been effectively adopted in Canada, in Great Britain and other countries throughout the world. IBI Group is also broadening relationships with investors and financiers of facilities for private ownership.  IBI Group will work on a continuing basis to build the global practice of the firm.

This global platform within one fully integrated firm, and with local delivery of diversity of world experience in services, provides IBI Group the growth opportunities and dexterity to continue to succeed while facing economic slowdowns and turmoil.

To operate on this basis requires leadership in the professional development of the centres of excellence on a global basis, as well as leadership of the delivery of services on local levels to specific clients.  This leadership is provided by the owners of the Management Partnership who, in effect, are owner managers of the professional practice and business of the IBI Group Partnership.  The number of partners of the Management Partnership has increased in line with the rapid growth of the firm.  In 2004, at the time of the IPO, there were 35 partners and associate partners of the Management Partnership.  This number has now grown in 2012 to 91 including the election of a net additional 10 over 2011. These partners are compensated through management compensation, as well as dividends and distribution from IBI Group.  This aligns the interest of the partners in the Management Partnership with the interest of the investors in the IBI Group business through the Company.

The Management Partnership with 91 partners as of March 31, 2012 has grown to a scale that requires the clustering of the partners within geographic regions/and or functional areas of excellence so as to perform effectively.  The top leadership of the Management Partnership is represented by the chairman partner and CEO, the two managing partners, and five operating partners forming an executive group of 8 senior directors.  Four of the five operating directors were appointed to their positions effective February 1, 2012. The Management Partnership intends that with the continued growth of the practice and the business of IBI Group, and the election of more partners within the Management Partnership, that additional operating partners will be appointed.  The exposure to the full range of activities of the firm to this executive level will provide both the experience and continuity in the leadership of the firm.

Strategic Program of Growth in 2011

In September 2011, IBI Group concluded arrangements for the merger/acquisition of the professional practice of Dull Olson Weekes Architects, Inc., ("DOWA"), based in Portland, Oregon.  DOWA has established an outstanding reputation providing professional architectural services.  The practice is known for its high quality of design, technical competence, as well as social consciousness in its approach to sustainability and other societal values.  Focus of the work of the firm has been in educational facilities, social infrastructure and health and community facilities.  The merger of this practice within the IBI Group of Firms will complement the existing practice of IBI Group in Northwest U.S. which to date has been primarily based in the transportation infrastructure sectors including intelligent systems and functional planning and design of transportation/transit facilities.  This combination of social infrastructure along with transportation infrastructure is providing IBI Group with a strong, sustainable base across the United States as IBI Group succeeds in its plan of establishing national practices in these broad areas.

In June 2011, through the professional practice of IBI Group Architects, Engineers and Landscape Architects of New York, the IBI Group of firms formed a strategic alliance by merging with CRJA, Landscape Architects ("CRJA"), based in Boston, Massachusetts. CRJA will continue as a distinct entity within the IBI Group of Firms. CRJA has established a highly regarded recognised name in the practice of Landscape Architecture in the USA and worldwide, including numerous assignments at embassies of the government of the USA throughout the world.  The firm is known for its creative talent, technical expertise and consistency of professional services to its clients in successfully realising many landscape projects in educational campuses and building facilities in prestigious embassies, urban development of mixed uses; and design of public realm of streetscape and public places of all kinds. CRJA can now participate in projects of the IBI Group on this global basis, enhancing their reach in China and elsewhere and more effectively contribute in the USA through the network of IBI Group offices.

In March 2011, IBI Group concluded arrangements for the merger/acquisition of Bay Architects Inc, ("Bay") in Southeast Texas, based in Houston.  Bay is an architectural firm that specializes in educational facilities (schools and community colleges), along with other areas of architectural practice in civic, other institutional, retail, office and industrial facilities.  Bay-IBI is a further strategic component of the growing international practice of IBI Group in education.  Bay-IBI will also provide the strategic platform for IBI Group for growth in the State of Texas. New opportunities in the transportation sector are now being pursued combining the transportation experience of IBI Group from California and elsewhere with the Texas presence of Bay-IBI.

In January 2011, the merger of the practice of Cardinal Hardy Architectes, ("CHA") with Beinhaker Architects was completed. This practice continues as Cardinal Hardy Beinhaker Architects ("CHBA") affiliated with the IBI Group of firms.  In parallel, the merger of the Company Groupe Cardinal Hardy Inc. ("GCHI") directly within IBI Group was completed as well. CHBA is a full services architectural practice known for its outstanding design and technical work ranging from institutional projects in transportation, social infrastructure including building facilities in education and health, private development projects by leading developers in the Greater Montreal Region. The firm is also an expert with an outstanding portfolio of work in urban design and landscape architecture. This merger and the ongoing integration is proceeding very effectively and has resulted in additional assignments secured from clientele of the previously separate firms.

IBI Group focused on strategic growth in Canada from the IPO in 2004 through to the third quarter of 2008.  During that period of time, IBI Group acquired numerous firms of outstanding quality bringing the Canadian practice to a national leader in the areas of IBI's professional expertise.  This focus on Canada first for strategic growth, enabled the acquisition of many firms in a short period of time as the greatest strength of IBI Group managerial and professional leadership was Canadian based.  It was also financially efficient as the public entity within the IBI Group Partnership was a business income trust.  Now that IBI Group has reached a leadership position professionally within the Canadian market, the strategic focus of acquisitions is outside Canada.  Notwithstanding the focus shifting to attractive areas for IBI Group's practice outside Canada, IBI Group continues to consider acquisitions/strategic alliances that will enhance the IBI Group within Canada.  The USA continues to be the largest economy in the world and as such IBI will continue to focus on building our American business.  As noted in the second quarter report, IBI Group activity in industrial buildings, (the reawakened automotive industry), in education facilities, (charter schools, high schools, community colleges and university buildings), in intelligent systems; (traffic management, traveller information), and transportation including transportation oriented development, continued to be productive areas of IBI Group activity during the recession from late 2008 to present. IBI Group made acquisitions/strategic alliances on a selective basis of a series of prominent firms in various regions of the US with strength in the architecture of education facilities. The most recent example is DOWA in the northwest of the USA, operating in Oregon and Washington State.  IBI Group will continue to pursue this strategy with respect to these professional areas as well as an enhanced focus going forward on the architecture of health care facilities.  In the context of the continuing under-performing economic environment in the USA, there are outstanding opportunities for acquisition/strategic alliances with outstanding professional firms. The resources from these firms can also participate with IBI Group on work in Canada as well as other international markets as the economy of the USA recovers.

IBI Group is now more intensively engaged in pursuing strategic acquisitions/alliances in other international markets that include China, India, Eastern Europe, and South America, notably Brazil.  IBI Group has projects in all of these market areas and is increasing IBI Group personnel and presence in these markets through organic growth.  This organic growth will form the basis of integrating new firms within IBI Group through acquisition/strategic alliance.

Backlog

Committed fee volume for the ensuing 12 months represents approximately 10 months equivalent of work, based on the current pace of work that IBI Group has achieved during the last twelve months ended March 31, 2012. Backlog for government and public institutional clients now represents approximately 69% of total backlog.  Backlog is continuing to increase in building facility areas in health care, education, and housing, the industrial sector, in transportation terminals, transportation networks and intelligent systems.  IBI Group is increasingly receiving new mandates of a wide range of substantial projects in the design stage, as well as some of these now moving into design development and working drawings as projects proceed to sales.

IBI Group's committed backlog is approximately 16% of fee volume for projects outside of North America and 24% for the United States and 60% in Canada.

The current staff complement is appropriately sized for the backlog of ongoing committed work at the professional standards of the firm, with capacity to handle the work from the significant projects that IBI Group now has full authorization to proceed.  IBI Group will adjust staffing levels as necessary in respect to the pace of the work, with work on additional material projects expected to be initiated soon.

Selected Consolidated Financial Information and Reconciliation of Non-IFRS Measures
			Three months ended March 31, 2012			Three months ended March 31, 2011
			(Unaudited)			(Unaudited)^3
in thousands of  dollars except for per Share amounts and ratios
Revenue			$	86,896		$	77,785
Expenses				75,493			67,037
Earnings before income taxes, interest and amortization (EBITDA^1)				11,403			10,748
Interest				3,603			3,503
Change in fair value and other finance costs (income)				59			(66)
Income taxes - current				1,090			1,652
Income taxes - deferred (recovery)				(138)			2,493
Amortization of property and equipment and intangible assets				2,559			2,729
Foreign exchange loss				289			218
Acquisition-related costs				208			218
Net earnings before non-controlling interest			$	3,733		$	1
Non-controlling interest				1,037			-
Net earnings attributable to owners of the Company			$	2,696		$	1
One time non-cash tax on conversion to a corporation				-			3,131
Proportion of earning attributable to Class B Partnership Units				-			(871)
Adjusted Net Earnings^1,3			$	2,696		$	2,261
Basic net earnings per Share^1			$	0.2065		$	0.2423
Distributable Cash^1
Cash flow from (used in) operating activities				(10,122)			3,125
Less: Capital expenditures				(870)			(590)
Standardized Distributable Cash^1				(10,992)			2,535
Add:
	Change in non-cash operating working			15,711			1,217
	Acquisition-related costs			208			218
	Current income tax expense			1,090			1,652
	Exchange loss			289			218
Distributable Cash^1			$	6,306		$	5,840
Weighted average basic distributable cash per Share^2			$	0.3487		$	0.3253
Aggregate distributions declared			$	5,615		$	4,909
Payout ratio				89.0%			84.1%

(1)	See "Definition of Adjusted Net Earnings, Adjusted Net Earnings per Share, EBITDA, Distributable Cash and Non-IFRS Measures".
(2)	Distributable cash per Share amounts are calculated by including both the common  shares of the Company and the Class B partnership units in the denominator which is a non-IFRS measure.
(3)	The Company corrected an amount for its 2011 quarterly reporting related to non-cash imputed interest. See Note 13 of the unaudited interim condensed financial statements for the three months ended March 31, 2012.

Definition of Adjusted Net Earnings, EBITDA, Distributable Cash and Non-IFRS Measures

Adjusted Net Earnings is equal to the Net earnings for the period plus distributions treated as an expense and fair value adjustments on Trust Units and exchangeable interest liabilities for 2010 and a one time non-cash adjustment on conversion to a corporation for 2011.

Distributable cash is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS.  The Company defines distributable cash as cash flow from operating activities before change in non-cash operating working capital, interest paid, income tax expense, acquisition-related costs, foreign exchange losses and after capital expenditures, foreign exchange gains, interest recovered, and income tax recovery, where applicable.  Reconciliations of distributable cash to cash flow from operating activities have been provided under the headings "Distributable Cash" and "Summary of Quarterly Results".

The Company'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. Management of the Company believes that distributable cash is a useful supplemental measure that may assist readers in assessing the return on an investment in Common Shares.

References in this MD&A to EBITDA are to earnings before interest, income taxes, depreciation and amortization, acquisition-related costs, foreign exchange gains and losses, fund distributions treated as an expense, fair value adjustment on financial liabilities and restructuring and special charges. Management of the Company believes that in addition to net earnings, EBITDA is a useful supplemental measure as it provides readers with an indication of cash available for dividend 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 IFRS as an indicator of the Company's performance or to cash flows from operating activities as a measure of liquidity and cash flows. EBITDA is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS, and the Company's method of calculating EBITDA may differ from the methods used by other similar entities. Accordingly, EBITDA may not be comparable to similar measures used by such entities. Reconciliations of net earnings to EBITDA have been provided under the headings "Selected Consolidated Financial Information" and "Summary of Quarterly Results".

Investor Conference Call

The Company will hold a conference call on May 14, 2012 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 1-888-612-1050 for local and toll-free North American access, or 1-303-223-2681 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 21588674 followed by the number sign on your telephone keypad.

 

 

Tony Long, CFO
IBI Group Inc.
230 Richmond Street West, 5^th Floor
Toronto, ON M5V 1V6
Tel: [phone]