Groupworks Financial Corp.
TSX VENTURE : GWC

Groupworks Financial Corp.

April 29, 2010 17:05 ET

Groupworks Announces Second Quarter Results for Fiscal 2010

TORONTO, ONTARIO--(Marketwire - April 29, 2010) - Groupworks Financial Corp. ("Groupworks" or the "Company") (TSX VENTURE:GWC) announces its financial results for the second quarter and six months ended February 28th, 2010 including record revenue growth and the signing of a number of very significant new clients during the period.

Revenue for the second quarter and six months ended February 28th, 2010 was $5.0 and $9.9 million respectively, up 120% and 169% from the $2.3 and $3.7 million in the comparative periods of fiscal 2009. The increase in revenue in both periods is attributable to the mergers and acquisitions completed in 2009 and revenue growth from the Company's employee benefits consulting services and administrative services.

While revenues for the six month period grew by $6.2 million, operating costs increased by only $5.8 million thereby causing Operating Income before Corporate Costs to increase over the period to $2.1 million compared to $1.6 million for the prior year, representing an increase in operating profits of 30%. The increase in operating profit is representative of scale economies from growth in the underlying employee benefits business and the growth in administrative services despite poor performance in the sales of Recruiting, Outplacement and HR Consulting services.

Although Operating Income before Corporate Costs increased, Corporate Costs for the six month period rose by $0.8 million which negated the financial gain from the increase in operating profit. Corporate Costs for the six months ended February 28, 2010 were $1.4 million and are representative of the company's ongoing investment in management, systems and corporate initiatives which are expected to provide scale economies and support the Company's planned acquisitions over future fiscal periods.

As a result of the above, EBITDA decreased to $0.7 million in the first six months of fiscal 2010 from $1.1 million for the same period the prior year which represents a decrease of $0.4 million or 36%. Accordingly, the Company had net income of $0.04 million in the six months ended February 28, 2010, compared to net income of $0.6 million in the same period in the prior year.

During the first six months of fiscal 2010 the company initiated and completed a number of strategic initiatives including the integration and consolidation of finance and accounting which included the selection and implementation of an enterprise accounting system and enhanced financial policies and controls. In addition, the company invested significantly in its proprietary inside sales system and processes to increase lead generation and future revenue generating opportunities. Other initiatives included a detailed strategic review and planning process, a corporate financial plan and a geographic expansion of employee benefits services into the Winnipeg and Montreal marketplaces.

The Company continued its focus on maintaining liquidity and building capital resources. The Company is actively pursuing financing arrangements to fund acquisitions and future growth. As a result of the Company's acquisitions and cash management policies cash increased by $1,682.8 since February 28, 2009 and as a result of seasonal cash demand and inflows, cash balances were $1,973.4 as at February 28, 2010.

"Our results confirm that we are one of the fastest growing employee benefits and pension advisory firms in the country. Since year end, we have expanded our client list, including many national and brand name companies and reinforced Groupworks' status as a leading provider of benefit, pension and HR advice in Canada," said Laurie Goldberg, Chairman & CEO of Groupworks. "As we look forward, our goal is to execute a number of acquisitions in accordance with our strategic plan so as to enhance our geographic growth and client focused services across Canada."

The Financial Statements and Management Discussion and Analysis for the period ended February 28th, 2010, along with additional information about the Company and all of its public filings are available at www.sedar.com.

About Groupworks Financial Corp.

Groupworks Financial Corp. is a leading employee benefits and pension consulting firm in Canada. With a growing national footprint of ten offices in six provinces, Groupworks is bringing together the leading advisors in the industry, offering innovative and customized HR, benefit and pension solutions to its clients.

Forward-Looking Information

This news release contains "forward-looking information" within the meaning of applicable securities laws, such as information 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 forward-looking information including the completion of the transaction, the impact of that transaction on our earnings and cash flow, and the anticipated benefits of the transaction. This information is not a guarantee of future performance and is subject to numerous risks and uncertainties, including those described in our publicly filed documents (which are available on SEDAR at www.sedar.com). Those risks and uncertainties include: our ability to maintain profitability and manage growth; strong competition from other advisors and changes in the current legislation could result in significant competition from the banking industry; failure of information systems and technology; dependence on key clients; seasonality of revenues and the resulting possible impairment on working capital; reliance on key professionals; additional financing may be required and may not be available under terms favourable to us; there can be no assurance that any suitable future acquisition will be available to us or that, if available, the terms of the acquisition will be favourable to us; and a change in general economic conditions. Many of these risks and uncertainties can affect our actual results and could cause our actual results to differ materially from those expressed or implied in any forward-looking information made by us or on our behalf. Given these risks and uncertainties, investors should not place undue reliance on forward looking information as a prediction of actual results. All forward-looking information in this news release is qualified by these cautionary statements. This information is made as of the date of this news release and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward looking information, whether as a result of new information, future events or otherwise. Additionally, we undertake 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.

Non GAAP Financial Measures

EBITDA, which is defined as earnings (loss) before interest, taxes, dividends, depreciation and amortization, is not a financial measure recognized by Canadian generally accepted accounting principles ("GAAP") and does not have a standardized meaning prescribed by GAAP. Operating Income before Corporate Costs means EBITDA plus expenses incurred at the corporate office. The difference between EBITDA and Operating Income before Corporate Costs is equal to Corporate Costs which include expenses related to acquisitions. Analysis of these differences enables understanding of the operating leverage inherent in the financial results of an acquisitive company. Operating leverage is a term used to describe the quantum of acquired EBITDA that falls to EBITDA of a company following an acquisition and is useful to the understanding of the resulting incremental overheads and synergies. The Company believes that these Non-GAAP financial measures provide meaningful information on the Company's performance and operating results. Readers are cautioned that EBITDA or the Company's calculation of the Operating Income do not have standardized meanings as prescribed by GAAP and may not be comparable to similar measures presented by other companies. Further, readers are cautioned that EBITDA or Operating Income should not replace Net income or loss or cash flows from operating, investing and financing activities (as determined in accordance with GAAP), as an indicator of the Company's performance.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

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