TORONTO, May 14, 2014 /CNW/ - IBI Group Inc. (the "Company") (TSX: IBG) today announced financial results for the three months ended March 31, 2014.
- Continue improvement in operational performance as a result of the new corporate structure
- EBITDA1, normalized for non-recurring professional fees and additional rent for the new office, was $6.7 million for the three months ended March 31, 2014 compared with $2.4 million for the three months ended December 31, 2013 and $7.3 million for same period last year
- Committed fees for 2014 now stands at approximately $285.0 million, over 85% of the 2014 plan, with total fee backlog of 8.5 months
- The U.S. and International regions continue to strengthen representing 44% of the Company's revenue for the period ended March 31, 2014 compared with 39% as at December 31, 2013
- Working capital improvement as billing and collection efforts have improved, receivables greater than 90 days were 34% Q1 2014 compared with 37% for Q4 2013 and 47% for Q1 2013
- Refinancing efforts currently underway to extend maturity date on convertible debentures maturing December 31, 2014 to June 30, 2019
- Other refinancing initiatives are ongoing to reduce borrowing under the senior credit facility, and include divesting non-strategic assets and securing subordinated debt
Key Financial Highlights
|(in thousands of dollars except for per share amounts)|| Three months
ended March 31,
| Three months
| Three months
ended March 31,
|Number of workings days||62||63||61|
|Net income (loss)||$||1,196||$||(3,795)2||$||656|
|Basic and diluted earnings per share ("EPS")||$||0.05||$||(0.17) 3||$||0.03|
|EBITDA1 as a percentage of revenue||6.1%||3.1%||8.6%|
|Cash from (used in) operations||$||1,929||$||15,034||$||(3,708)|
|(2) Represents Adjusted Net Income (Loss). See "Definition of Non-IFRS Measures" in the MD&A.|
|(3) Represents Adjusted Basic and Diluted Earnings per Share. See "Definition of Non-IFRS Measures" in the MD&A.|
1 See "Definition of Non-IFRS Measures" contained in the Management Discussion & Analysis ("MD&A")
For the three months ended March 31, 2014 revenue was $81.7 million, up 5% compared to Q4 2013. In Q4 2013, revenue was impacted by a slowdown in the educational sector in the United States, less contribution from major healthcare projects that were nearing completion and the impact of discounted fees on the pursuit phase of major P3 projects. In Q1 2014, revenue continued to return to more normalized levels with strength generated in the United States and International markets.
Compared to the three months ended March 31, 2013, revenue was down $2.9 million or 3% in the current period. The Company has continued to maintain a steady stream of volume in projects fairly consistent with the comparative period last year. However in the second half of fiscal 2013, significant provisions were charged to income for work-in-progress ("WIP") deemed non recoverable, which included work carried out on projects in the first half of 2013. Since Q3 2013, the Company has been carrying out more comprehensive reviews of its WIP.
The first quarter of fiscal year 2014 had net income of $1.2 million compared to a net loss of $100.9 million for the three months ended December 31, 2013. After adjusting the Q4 2013 net loss for the impact of the impairment charge recorded on goodwill and intangible assets, the adjusted net loss1 was $3.8 million, thereby resulting in a $5 million increase in net income. The increase was primarily attributable to the $3.9 million increase in revenue this period, a $1.5 million reduction in amortization charges on property, equipment and intangible assets which were written down in fiscal 2013, a $1.1 million increase in foreign exchange gain as a result of the weaker Canadian versus U.S. dollar, a $0.4 million decrease in acquisition related costs which were non-recurring, and a $0.5 million reduction in tax expense due to tax losses available from prior periods used to reduce current period income. Notable increases in expenses resulted from a $1.6 million or a 2.8% increase for salaries, fees and employee benefits to $59.1 million. When compared as a percentage of revenue, total salaries, fees and employee benefits were 72.3% for the three months ended March 31, 2014 compared to 73.9% for the three months ended December 31, 2013 (72.7% for the same period last year). The Company is currently working to reduce this even further.
Relative to the same quarter last year, net income increased by $0.5 million or 82%. While there was a slight decrease in revenue of 3% or $2.9 million, this was offset by a 4% or $2.4 million reduction in salaries, fees and employee benefits, a $1.4 million increase in foreign exchange gain as a result of the weaker Canadian versus U.S. dollar, a $1.4 million reduction in amortization charges on intangible assets which were written down in fiscal 2013, and a $0.8 million reduction in tax expense primarily due to tax losses available from prior periods used to reduce current period income. Notable increases in expenses resulted from a 13% or $0.6 million increase for rent charges attributed to the new Toronto location, $0.7 million in receivables which were deemed uncollectible, and a 29% or $1.0 million increase in interest expense due to higher interest rates charged on the outstanding senior credit facility.
Net income attributable to owners of the Company for the three months ended March 31, 2014 was $0.9 million or basic and diluted EPS of $0.05 per share compared to $0.5 million or $0.03 per share for the three months ended March 31, 2013 (net income attributable to the owners was a net loss of $2.9 million or a net loss per share of $0.17 for Q4 2013).
EBITDA2 of $5.0 million in the three months ended March 31, 2014 was down $2.3 million compared to $7.3 million for the three months ended March 31, 2013. The decline was the result of lower revenues in the current period, combined with higher rent charges of $0.6 million for the new office and higher professional fees of $1.1 million incurred for external advisors assisting with the Company's refinancing efforts.
EBITDA1 was up $2.6 million compared to the three months ended December 31, 2013 which was due to the 5% or $3.9 million increase in revenue and a $0.4 million decrease in acquisition related costs which were non-recurring in the current period. This was partially offset by a $1.6 million increase in salaries, fees and employee benefits expense.
Cash flows from operations for the three months ended March 31, 2014 were $1.9 million compared to cash flows used in operations of $3.7 million for the three months ended March 31, 2013; a net increase of $5.6 million. This is primarily the result of higher net income, lower income taxes paid, an improvement in the timeliness of issuing billings, and improved collections on receivables. Cash flows from operations for the three months ended December 31, 2013 was $15.0 million which was primarily related to improved billings and collection efforts.
The Company reports the working capital tied up (accounts receivable, work-in-progress and deferred revenue) in terms of gross billings per day. The current level of the working capital tied up in gross billings is 114 days at March 31, 2014. The total decrease of 29 days compared to March 31, 2013 (total working days is consistent with the three months ended December 31, 2013) is a result of more comprehensive reviews that were carried out by management in the second half of fiscal 2013 to reserve for WIP deemed non recoverable and receivables deemed uncollectible. Since Q3 2013, the Company continues to carry out regular comprehensive reviews of its WIP and receivables. Total working days of gross billings outstanding for the current period is representative of normalizing conditions. The Company has ongoing programs to reduce days outstanding even further.
Improved cash collection efforts by the Company have contributed to the improved results this quarter. Receivables outstanding over 90 days is 34% of total receivables as at March 31, 2014 compared to 47% for the same period last year and 37% as at December 31, 2013.
1 See "Definition of Non-IFRS Measures" contained in the Management Discussion & Analysis ("MD&A")
The Company has submitted a Recapitalization Plan to its lending syndicate. The plan addresses the requirement to reduce borrowing under the senior credit facility. This plan includes operational improvements and enhanced billing and collection efforts to increase operating cash flow, one of or a combination of the divesture of non-strategic assets and subordinated debt financing. The Company has been working with its lenders and has ongoing plans in place to meet these requirements.
In addition, a proposal was issued by the Company on May 7, 2014 to the holders of the 7.0% debentures ("Debentureholders") which have a face value of $46.0 million and mature on December 31, 2014. This proposal asks these holders to extend the maturity date to June 30, 2019.
The proposal offers a consent fee, consisting of an unsecured, non-convertible promissory bond equal to $70.00 per $1 thousand principal amount of debentures. This bond will be payable December 31, 2016 and bearing interest at the rate of 7.0% per annum. All amounts related to the bond will be payable on maturity. The fee is only being offered to Debentureholders who vote in favour of the proposal by May 26, 2014, subject to approval of the proposal.
A decision is expected to be finalized by the end of May 2014.
Management is forecasting approximately $330.0 million total revenue for the year ended December 31, 2014 of which approximately 86% is committed and under contract. The Company continues to see an increase in committed work to be delivered in 2014, which now stands at approximately $285.0 million. The Company has approximately eight and a half months of backlog (this is calculated on the basis of the current pace of work that the Company has achieved during the last 12 months ended March 31, 2014).
"We are very pleased with the continued stability and operational momentum in our business. While we remain ever cautious, we believe that the new IBI is well poised to benefit from growing strength in the key markets we compete in," said Scott Stewart, CEO of IBI Group. "We thank our clients for their steadfast support, our employees for their enthusiasm and our shareholders for their patience."
After adjusting for on-going costs of financial advisors, which are expected to be $3.0 million in 2014, the Company is forecasting the 2014 EBITDA margin to approach a level more consistent with industry standards. The strategic review undertaken last year has resulted in right-sizing the Company and has led to a material reduction in overhead costs, the effects of which will be seen throughout 2014.
Management intends to focus on diligently competing for accretive new business opportunities in each of the key markets the Company operates in and will continue to prioritize organic growth over acquisitions.
This guidance should be read in conjunction with the "Caution Regarding Forward Looking Information" below and is subject to the risks and uncertainties summarized in that section, which are more fully described in the Company's public disclosure documents.
Caution Regarding Forward-Looking Information
Statements in this news release that describe the Company's or management's expectations, forecasts, guidance or estimates may constitute "forward-looking" statements, and such statements use words such as "may", "will", "expect", "believe", "plan" and other similar terminology. Forward-looking statements also include statements that are not historical facts. Forward-looking statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this news release. Forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, IBI Group, or the industry in which they operate, to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Although the Company believes that the assumptions inherent in the forward-looking statements are reasonable, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those related to: (i) IBI's ability to maintain profitability and manage its growth; (ii) IBI's reliance on its key professionals; (iii) competition in the industry in which IBI operates; (iv) timely completion by IBI of projects and performance by IBI of its obligations; (v) fixed-price contracts; (vi) the general state of the economy; (vii) acquisitions by IBI; (viii) risk of future legal proceedings against IBI; (ix) the international operations of IBI; * reduction in IBI's backlog; (xi) fluctuations in interest rates; (xii) fluctuations in currency exchange rates; (xiii) potential undisclosed liabilities associated with acquisitions; (xiv) upfront risk for time invested in participating in consortiums bidding on large projects; (xv) limits under IBI's insurance policies; (xvi) the Company's reliance on distributions from IBI Group LP and IBI Group and, as a result, its susceptibility to fluctuations in IBI's performance; (xvii) unpredictability and volatility of the price of the Company's shares; (xviii) the degree to which IBI is leveraged; (xix) the possibility that the Company may issue additional shares diluting existing shareholders' interests; (xx) income tax matters; and (xxi) approval of the recapitalization plan by the Company's lending syndicate and achieving the specified requirements per the amended agreement; and (xxii) refinancing the convertible debentures which mature December 31, 2014.. See "Risk Factors" discussed in the Company's Annual Information Form filed with the Canadian securities regulatory authorities. New risk factors may arise from time to time and it is not possible for management of the Company to predict all of those risk factors or the extent to which any factor or combination of factors may cause actual results, performance or achievements of the Company to be materially different from those contained in forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Although the forward-looking statements contained in this annual information form are based upon what management believes to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this news release, and the Company assumes no obligations to update or revise them to reflect new events or circumstances.
Investor Conference Call
The Company will hold a conference call on Thursday May 15, 2014 at 8:30 a.m. Eastern Time. To participate in the conference call, please dial in before 8:30 a.m. EST to 1-800-891-8257 (alternate number 1-647-722-6865) for local and toll-free North American access, or 1-212-231-2922 for international access.
An audio replay of the call will be available for 14 days, by dialing 1-416-626-4100 for local or 1-800-558-5253 for toll-free international access, pass code 21715392 followed by the number sign on your telephone keypad.
SOURCE: IBI Group Inc.
For further information:
Stephen Taylor, CFO
IBI Group Inc.
230 Richmond Street West, 5th Floor
Toronto, ON M5V 1V6
Bayfield Strategy, Inc.