News Column

Morneau Shepell Reports 2014 First Quarter Financial Results

May 12, 2014

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Company continues steady growth

TORONTO, May 12, 2014 /CNW/ - Morneau Shepell Inc. (the "Company" or "Morneau Shepell") (TSX: MSI) today reported its financial results for the three-month period ending March 31, 2014 (all amounts are in Canadian dollars, unless noted otherwise).

Highlights

• A 13.3 per cent increase in revenue to $131.1 million compared to $115.7 million for the same period in 2013 • A 14.5 per cent increase in adjusted EBITDA to $24.7 million versus the comparative period last year

"Morneau Shepell has had a very good start to the year," said Bill Morneau, Executive Chair of Morneau Shepell. "We expect to continue our long term trend of consistent growth."

"We're pleased with the strong results our business delivered for the first quarter of 2014," said Alan Torrie, President and CEO of Morneau Shepell.  "Our revenue growth exceeded historical levels in the first quarter, and is expected to proceed at normal levels during the remainder of the year. Our investment in the business, new acquisitions, capital structure, established business relationships and prospective client base is expected to continue to yield positive results for the Company. "

Torrie added, "Organic growth contributed to an increase in revenue of 11.0 per cent over the comparative quarter in 2013 with the increase coming from all four lines of business.  This growth was a result of the commencement of service for outsourcing contracts secured in prior quarters, new business wins, and U.S. health exchange enrollment."

Q1 2014 Financial Review

In thousands of dollarsThree months ended March 31,

2014
Three months ended March 31,

2013
Revenue $131,091$115,730
Adjusted EBITDA $24,677$21,554
Adjusted EBITDA margin 18.8% 18.6%
Normalized Free Cash Flow $14,688$11,585
Profit$8,484$6,951



For the three months ended March 31, 2014, the Company reported $131.1 million in revenue, an increase of 13.3 per cent or $15.4 million from the same period in 2013.  Total operating expenses (excluding depreciation and amortization expenses) were $108.6 million in Q1, 2014, compared to $95.5 million in Q1, 2013.

Adjusted EBITDA of $24.7 million increased by $3.1 million or 14.5 per cent from $21.6 million for Q1, 2013. This increase is primarily due to growth in revenue of $15.4 million, partially offset by an increase in salaries and other operating expenses of $12.2 million after EBITDA adjustments.

Adjusted EBITDA margin was 18.8 per cent compared to 18.6 per cent for the same period in 2013.

During Q1, 2014, the Company generated Normalized Free Cash Flow of $14.7 million compared to $11.6 million in Q1, 2013.  The 12-month rolling Normalized Payout Ratio at Q1 2014 was 65.5 per cent compared to 72.4 per cent at Q1, 2013. The decrease in the 12-month rolling Normalized Payout Ratio is primarily due to the higher adjusted EBITDA during the past 12 months.

The Company is maintaining its policy of paying a monthly dividend of 6.5 cents per share.

Notice of Conference Call

Management of Morneau Shepell are hosting a conference call on Tuesday, May 13, 2014, at 9:30 a.m. ET.  The conference call is open to all those wishing to attend, with a question and answer period to follow. In order to participate in the live conference call, please call 416.695.7806 (participant code 5161706) in the Toronto area, or 1.888.789.9572 (participant code 5161706) throughout the rest of Canada. A replay of the call will be available via the Morneau Shepell website at morneaushepell.com.

About Morneau Shepell Inc.

Morneau Shepell is the largest company in Canada offering human resources consulting and outsourcing services. The Company is the leading provider of Employee and Family Assistance Programs, the largest administrator of pension and benefits plans and the largest provider of integrated absence management solutions in Canada. Through health and productivity, administrative, and retirement solutions, Morneau Shepell helps clients reduce costs, increase employee productivity, and improve their competitive position.

Established in 1966, Morneau Shepell serves more than 20,000 clients, ranging from small businesses to some of the largest corporations and associations in North America. With approximately 3,500 employees in offices across North America, Morneau Shepell provides services to organizations across Canada, in the United States, and around the globe. Morneau Shepell is a publicly-traded company on the Toronto Stock Exchange (TSX: MSI). For more information, visit morneaushepell.com.

Financial Measures

To assist investors in assessing the Company's financial performance, this news release also makes reference to certain financial measures such as adjusted EBITDA, adjusted EBITDA margin, Normalized Free Cash Flow and Normalized Payout Ratio. The Company believes that adjusted EBITDA, adjusted EBITDA margin, Normalized Free Cash Flow and Normalized Payout Ratio are useful supplemental measures of performance as they are generally used by Canadian businesses as indicators of financial performance. See the Company's MD&A for more details. These financial measures do not have any standard meaning prescribed by International Financial Reporting Standards and therefore may not be comparable to similar measures presented by other issuers.

(1)      "Adjusted EBITDA" is defined as profit before finance costs, income tax expenses, depreciation, amortization, impairment losses, and certain unusual expenditures.
(2)      "Normalized Free Cash Flow" is defined as cash provided by operating activities, adjusted for changes in noncash operating working capital, capital expenditures, current income taxes (net of income taxes paid), and certain unusual expenditures.
(3)      "Normalized Payout Ratio" is defined as dividends declared divided by Normalized Free Cash Flow.



Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of applicable securities laws, such as statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Use of words such as "may", "will", "expect", "believe", or other words of similar effect may indicate a "forward-looking" statement. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those described in the Company's publicly filed documents (available on SEDAR at www.sedar.com) and in the firm's MD&A under the heading "Risks and Uncertainties". Those risks and uncertainties include ability to maintain profitability and manage growth, reliance on information systems and technology, reputational risk, dependence on key clients, reliance on key professionals and economic conditions. Many of these risks and uncertainties can affect the firm's actual results and could cause the Company's actual results to differ materially from those expressed or implied in any forward-looking statement made by the Company or on the firm's behalf. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. All forward-looking statements in this news release are qualified by these cautionary statements. These statements are made as of the date of this news release and, except as required by applicable law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Additionally, the Company undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of the Company, its financial or operating results or its securities.

SOURCE Morneau Shepell - Investor Relations


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