Morneau Sobeco Income Fund

Morneau Sobeco Income Fund

November 11, 2009 10:25 ET

Morneau Sobeco Announces Positive Results for Third Quarter 2009

Highlights: - Continued growth in revenue and profit for the third quarter - Fund names Bill Morneau as Executive Chairman; Alan Torrie becomes President and CEO

TORONTO, ONTARIO--(Marketwire - Nov. 11, 2009) -


Morneau Sobeco Income Fund (TSX:MSI.UN) (the "Fund") today announced positive third quarter 2009 results for its operating business. Revenue in the third quarter ended September 30, 2009 increased by $5.8 million, or 7.7%, to $81.7 million compared to $75.9 million for the same period in 2008. The primary contributors to growth were increased revenue from Employee Assistance Program (EAP) services, pension consulting services, pandemic disease crisis management services and the October 2008 acquisition of Leong & Associates.

Standardized EBITDA for the third quarter 2009 was $17.2 million, an increase of $3.3 million or 23.8% from the third quarter 2008. Standardized EBITDA margin for the third quarter 2009 was 21.1%, compared to 18.4% for the same period in 2008. Standardized EBITDA per Unit (basic) for the third quarter was $0.363, compared to $0.342 for third quarter 2008.

"These results reflect not only the success of our acquisition of Shepell.fgi in June 2008, and its own organic growth, but also the continued strength of our existing business. We are pleased with both our revenue and EBITDA improvements on a year-to-date basis. " said Bill Morneau, Executive Chairman of the Fund.

2009 Third Quarter Results in More Detail

For the third quarter ended September 30, 2009, cash flow from operating activities was $20.7 million, an increase of $15.9 million from $4.8 million in the third quarter 2008, primarily due to improvements in working capital. The Standardized Distributable Cash Payout Ratio for third quarter 2009 was 65.4%, compared to 248.6% for the same period in 2008. The Adjusted Consolidated Distributable Cash Payout Ratio in third quarter 2009 was 96.2%, compared to 86.5% for third quarter 2008. The higher Adjusted Consolidated Distributable Cash Payout Ratio reflects increased distributions during the period due to the issuance of additional Units on March 24, 2009. On a 12-month rolling basis ended September 30, 2009, the Adjusted Consolidated Distributable Cash Payout Ratio was 89.7%, compared to 81.8% for the same 12-month period in 2008. The comparable 2008 Payout Ratios only include four months' results for the Shepell-fgi business. Net income for third quarter of 2009 was $3.9 million compared to net income of $0.6 million for the same period in 2008.

Economic Conditions and Outlook

"Our positive third quarter results reflect the Fund's ability to continue delivering consistent, solid performance value to Unitholders," said Alan Torrie, President and Chief Executive Officer. "This strong business performance has helped to solidify our position within our markets, and we remain positive about our prospects for the remainder of 2009 and going forward."

Senior Executive Appointments

The Fund has announced the appointment of Bill Morneau as Executive Chairman of the Fund, as Alan Torrie assumes the role of Chief Executive Officer, in addition to his current role as President.

"With the strong performance of the organization and the successful integration of Shepell-fgi, we believe we are well positioned to focus on our next phase of growth and performance," said Bill Morneau. "As Executive Chairman, the majority of my time and efforts will involve working with our executive team on growth initiatives, significant client relationships and overall governance of our organization."

In his role as President and CEO, Mr. Torrie will continue to be responsible for the ongoing growth strategy and operational performance of the Fund.

"As Alan and I move into our new roles, we believe that this partnership will help ensure continued growth for the Fund. I look forward to Alan's continued strong leadership and expertise as Chief Executive Officer of the Fund," Mr. Morneau said.

Conference Call

The Fund's third quarter 2009 results will be discussed during a conference call with Bill Morneau, Executive Chairman; Alan Torrie, President and Chief Executive Officer, and Scott Milligan, Chief Financial Officer, on Wednesday, November 11, 2009 at 2:00 p.m. ET. The conference call is open to all those wishing to attend, with a Question and Answer period to follow the presentation. In order to participate in the live conference call, please call 416-695-7806 (in the Toronto area), or 1-888-789-9572 throughout the rest of Canada. Participant pass code is: 8122527. A replay of the call will be posted on the Morneau Sobeco website at

About Morneau Sobeco Income Fund

Morneau Sobeco Income Fund is the largest Canadian-owned firm providing human resource consulting and outsourcing services. Through Morneau Sobeco and Shepell-fgi, the firm delivers solutions to assist employers in managing the financial security, health and productivity of their employees. With over 2,200 employees in offices across North America, Morneau Sobeco Income Fund offers its services to organizations that are situated in Canada, in the United States and around the globe.

Non-GAAP Financial Measures

To assist investors in assessing the Fund's financial performance, this news release also makes reference to certain non-GAAP measures such as Standardized EBITDA, Standardized Distributable Cash and Adjusted Consolidated Distributable Cash. The Fund believes that Standardized EBITDA is a useful measure in evaluating performance of the Fund. It is used to monitor compliance with debt covenants and to make decisions related to distributions to Unitholders rather than net income due to the significant amount of amortization expense related to the firm's intangible assets. The Fund also believes that Standardized Distributable Cash and Adjusted Consolidated Distributable Cash and their respective payout ratios are useful supplemental measures of performance as they are generally used by Canadian open-ended business income funds as indicators of financial performance. See the footnotes to the "Results of Operations" chart in the firm's MD&A for more details. Non-GAAP measures do not have any standard meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other issuers. "Standardized EBITDA" is defined as earnings before interest, taxes, depreciation and amortization. "Standardized Distributable Cash" is defined as cash from operating activities, including the effects of changes in non-cash operating working capital, less maintenance capital expenditures and Consolidated Distributable Cash available to non-controlling interest. "Adjusted Consolidated Distributable Cash" is defined as cash from operating activities adjusted for maintenance capital expenditures excluding changes in non-cash operating working capital. "Standardized Distributable Cash Payout Ratio" is defined as declared distributions divided by Standardized Distributable Cash. "Adjusted Consolidated Distributable Cash Payout Ratio" is defined as declared distributions divided by Adjusted Consolidated Distributable Cash.

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 Fund's publicly filed documents (available on SEDAR at and in the firm's MD&A under the heading "Risks and Uncertainties". Those risks and uncertainties include current economic conditions, income tax matters, ability to maintain profitability and manage growth, reliance on information systems and technology, reputational risk, dependence on key clients, and reliance on key professionals. Additional risks and uncertainties will also arise in connection with the acquisition and Shepell-fgi's business, including without limitation: increased leverage and restrictive covenants; potential undisclosed liabilities associated with the acquisition and the Fund's limited indemnification from the vendor of Shepell-fgi's; the integration of the combined business; Shepell-fgi's agreements with its customers; relationships with channel partners; competition; dependence on key customers; relationships with service providers; reliance on key personnel; regulatory risks; timing of revenue collection; fixed price contracts; currency fluctuations; confidentiality of client information; risks of future legal proceedings; and certain tax risks associated with the acquisition. Many of these risks and uncertainties can affect the firm's actual results and could cause the Fund's actual results to differ materially from those expressed or implied in any forward-looking statement made by the Fund 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 Fund 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 Fund undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of the Fund, its financial or operating results or its securities.

Contact Information

  • Morneau Sobeco Income Fund
    William Morneau
    Executive Chairman
    (416) 445-2700
    Morneau Sobeco Income Fund
    Lynn Korbak
    General Counsel and Corporate Secretary
    (416) 445-2700