Altus Group Limited
TSX : AIF

Altus Group Limited

August 14, 2013 16:09 ET

Altus Group Reports Second Quarter Financial Results for 2013

ARGUS Software Achieves Outstanding Performance; North America RVA Delivers Strong Results

TORONTO, ONTARIO--(Marketwired - Aug. 14, 2013) - Altus Group Limited ("Altus Group") (TSX:AIF) today announced financial and operating results for the second quarter ended June 30, 2013.

Adjusted EBITDA was $13.8 million for the three months ended June 30, 2013, up 17.1% from the same period last year. Revenues were $78.6 million for the quarter, down 0.4% compared to the same period in 2012, and up 3.0% excluding 2012 revenues derived from businesses and offices that were sold or closed. Second quarter Adjusted EBITDA and revenue growth were driven by strong performance in ARGUS Software and North America RVA.

Highlights for the quarter:

  • Outstanding performance from ARGUS Software, as Adjusted EBITDA rose 311.9% to $3.2 million, as compared to the same period last year. Revenues were strong at $9.6 million, rising 23.9% year over year;
  • Strong results from North America RVA, as Adjusted EBITDA rose 87.4% to $5.5 million, as compared to the same period last year. Revenues were $19.8 million, rising 19.8% from the same period in 2012;
  • Adjusted earnings per share were $0.27 for the quarter, as compared to $0.14 in the same period in 2012;
  • Acquisition of Complex Property Advisors Corporation ("CPAC"); and,
  • Dividends of $0.15 per common share were declared, consistent with prior quarters.

"Strong results from ARGUS Software and North America RVA reflect healthy global market demand for our offerings, along with the positive execution of our business model. We continue to pursue attractive opportunities to further strengthen our core business units, leverage our high calibre team of professionals and drive value through our differentiated service, software and data solutions," said Robert Courteau, Chief Executive Officer, Altus Group.

The impressive revenue growth from ARGUS Software was driven by strong license momentum from ARGUS Enterprise, the world's leading asset and investment management platform, and higher maintenance and consulting revenues. Significant North America RVA revenue growth was primarily due to new client acquisitions in the US appraisal management business, as well as a higher volume of due diligence engagements.

Revenues were lower in North America Cost as a result of the sale of Altus Capital Planning in 2012 and our intended transition away from lower margin engagements. Similarly, Asia Pacific Cost revenues were impacted by the office closures undertaken in 2012 and fewer low value engagements. North America Tax revenues, excluding billable disbursements related to appeal fees, were in line with prior year results.

Notably, the higher Adjusted EBITDA in Q2 2013, as compared to Q2 2012, was the result of strong revenue performances by both ARGUS Software and North America RVA combined with prudent cost management. Declines in earnings were experienced in North America Realty Tax, North America Cost and Asia Pacific Cost. The reduction in earnings reflected investments in staffing to further expand North America Realty Tax into the US market and North America Cost into Western Canada. Asia Pacific Cost was impacted by lower revenues net of lower compensation costs.

Adjusted earnings per share for the second quarter of 2013 were $0.27, as compared to $0.14 in the same period in 2012. Under IFRS accounting, profit (loss) for the quarter ended June 30, 2013 was $3.2 million or $0.14 per share, basic, and $0.13 per share, diluted, as compared to $3.7 million or $0.16 per share, basic, and $(0.03) per share, diluted, in the same quarter in 2012.

On July 1, 2013, Altus Group acquired CPAC for total consideration of approximately $8.6 million, subject to adjustments. Based in Texas, CPAC is a leading provider of appraisal and specialized property tax consulting services to the healthcare and industrial sectors. The acquisition supports Altus Group's growth strategy into the US, and is expected to be accretive to Adjusted earnings per share within the first twelve months.

During the second quarter of 2013, Altus Group declared dividends of $0.15 per common share, which are eligible for the DRIP program.

Analyst Call Details

To discuss these results, Altus Group will hold its Q2 analyst conference call at 5:30 p.m. (ET) on Wednesday, August 14, 2013. To access the conference call, please dial one of the following numbers five minutes prior to the scheduled start time: 416-340-2216 (GTA) or 1-866-226-1792 toll-free. A recording of this call will be available August 15 - 22, 2013. To access the recording, please call 905-694-9451 (GTA) or 1-800-408-3053 toll-free (passcode: 9312104). The recording will also be available at www.altusgroup.com.

About Altus Group

Altus leads the global real estate industry in offering professional real estate advisory services, data solutions and intelligence about an organization's assets, generating a wealth of knowledge and insight. Altus has over 1,700 employees in multiple offices around the world, including Canada, the United Kingdom, the United States, Australia and China. We operate five interrelated Business Units, bringing years of experience and a broad range of expertise together into one comprehensive platform: Research, Valuation and Advisory; Cost Consulting and Project Management; Property Tax, Geomatics and ARGUS Software. Altus' clients include banks, financial institutions, governments, pension funds, asset and fund managers, developers and landlords and companies engaged in the oil and gas industry.

Forward-Looking Information

Certain information in this press release may constitute "forward-looking information" within the meaning of applicable securities legislation. All information contained in this press release, other than statements of current and historical fact, is forward-looking information. Generally, forward-looking information can be identified by use of words such as "may", "will", "expect", "believe", "plan", "would", "could" and other similar terminology. All of the forward-looking information in this press release is qualified by this cautionary statement.

Forward-looking information includes, but is not limited to, information that relates to Altus Group's objectives, strategies and intentions, and future financial and operating performance and prospects. Forward -looking information is not, and cannot be, a guarantee of future results or events. Forward-looking information is based on, among other things, opinions, assumptions, estimates and analyses that, while considered reasonable by Altus Group at the date the forward-looking information is provided, inherently are subject to significant risks, uncertainties, contingencies and other factors that may cause actual results, performance or achievements, industry results or events to be materially different from those expressed or implied by the forward -looking information. The material factors or assumptions that Altus Group identified and were applied by Altus Group in drawing conclusions or making forecasts or projections set out in the forward-looking information include, but are not limited to: the successful execution of its business strategies; consistent and stable economic conditions or conditions in the financial markets; consistent and stable legislation in the various countries in which we operate; no disruptive changes in the technology environment; the opportunity to acquire accretive businesses; the successful integration of businesses; and, the continued availability of qualified professionals.

Inherent in the forward-looking information are known and unknown risks, uncertainties and other factors that could cause Altus Group's actual results, performance or achievements, or industry results, to differ materially from any results, performance or achievements expressed or implied by such forward-looking information. Those risks, uncertainties and other factors that could cause actual results to differ materially from the forward-looking information include, but are not limited to: general state of the economy; competition in the industry; ability to attract and retain professionals; integration of acquisitions; dependence on oil and gas sector; dependence on Canadian multi-residential market; customer concentration; currency risk; interest rate risk; reliance on larger software transactions with longer and less predictable sales cycles; success of new product introductions; ability to respond to technological change and develop products on a timely basis; ability to maintain profitability and manage growth; revenue and cash flow volatility; credit risk; protection of intellectual property or defending against claims of intellectual property rights of others; weather; fixed-price and contingency engagements; operating risks; performance of obligations/maintenance of client satisfaction; appraisal mandates; legislative and regulatory changes; risk of future legal proceedings; insurance limits; income tax matters; ability to meet solvency requirements to pay dividends; leverage and restrictive covenants; unpredictability and volatility of common share price; capital investment; and issuance of additional common shares diluting existing shareholders' interests, as well as those described in Altus Group's publicly filed documents, including the Annual Information Form (which are available on SEDAR at www.sedar.com).

Given these risks, uncertainties and other factors, investors should not place undue reliance on forward -looking information as a prediction of actual results. The forward-looking information reflects Altus Group's and management's current expectations and beliefs regarding future events and operating performance and is based on information currently available to management. Although Altus Group has attempted to identify important factors that could cause actual results to differ materially from the forward-looking information contained herein, there are other factors that could cause results not to be as anticipated, estimated or intended. The forward- looking information contained herein is current as of the date of this press release and, except as required under applicable law, Altus Group does not undertake to update or revise it to reflect new events or circumstances. Additionally, Altus Group undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of Altus Group, its financial or operating results, or its securities.

Non-IFRS Measures

Altus Group uses certain non-IFRS measures as indicators of financial performance. Readers are cautioned that they are not defined performance measures under IFRS and may differ from similar computations as reported by other similar entities and, accordingly, may not be comparable to financial measures as reported by those entities. We believe that these measures are useful supplemental measures that may assist investors in assessing an investment in shares of Altus Group and provide more insight into our performance.

Adjusted Earnings before Interest, Taxes, Depreciation and Amortization, ("Adjusted EBITDA"), represents operating profit (loss) adjusted for the effect of amortization of intangibles, depreciation of property, plant and equipment, acquisition-related expenses (income), restructuring costs, share of profit or loss of associate, unrealized foreign exchange gains (losses), gains (losses) on sale of property, plant and equipment, gains (losses) on sale of business assets, impairment charges, Executive Compensation Plan costs, gains (losses) on hedging transactions and other expenses or income of a non-operating and/or non-recurring nature.

Adjusted Earnings (Loss) per Share, ("Adjusted EPS"), represents basic earnings per share adjusted for the effect of amortization of intangibles acquired as part of business acquisitions, non-cash finance costs (income) related to the revaluation of amounts payable to unitholders, distributions related to amounts payable to unitholders, acquisition-related expenses (income), restructuring costs, share of profit or loss of associate, unrealized foreign exchange gains (losses), gains (losses) on sale of property, plant and equipment, gains (losses) on sale of business assets, interest accretion on vendor payables, gain (loss) on settlement of US convertible debentures, impairment charges, Executive Compensation Plan costs, gains (losses) on hedging transactions and other expenses or income of a non-operating and/or non-recurring nature. All of the adjustments are made net of tax.

SELECTED FINANCIAL INFORMATION
Three Months Ended June 30, Six Months Ended June 30,
In Thousands of Canadian Dollars, except for per share amounts 2013 2012 2013 2012
Operations
Revenues $ 78,572 $ 78,908 $ 154,726 $ 165,086
Adjusted EBITDA 13,828 11,809 26,081 25,672
Operating profit (loss) 7,822 5,026 19,546 13,717
Profit (loss) 3,207 3,678 10,050 6,546
Earnings (loss) per share:
Basic $ 0.14 $ 0.16 $ 0.44 $ 0.28
Diluted $ 0.13 $ (0.03 ) $ 0.39 $ 0.03
Adjusted $ 0.27 $ 0.14 $ 0.52 $ 0.40
Dividends declared per share $ 0.15 $ 0.15 $ 0.30 $ 0.30
SEGMENTED INFORMATION
Revenues
Three Months Ended
June 30,
Six Months Ended
June 30,
In Thousands of Canadian Dollars 2013 2012 % Change 2013 2012 % Change
North America RVA $ 19,839 $ 16,554 19.8 % $ 38,503 $ 34,009 13.2 %
North America Realty Tax 14,469 13,545 6.8 % 29,642 27,992 5.9 %
North America Cost 7,534 10,836 (30.5 %) 15,222 26,155 (41.8 %)
North America Geomatics 15,886 16,324 (2.7 %) 31,680 34,695 (8.7 %)
ARGUS Software 9,645 7,783 23.9 % 18,250 14,893 22.5 %
UK 6,157 6,184 (0.4 %) 11,394 11,199 1.7 %
Asia Pacific Cost 5,131 8,338 (38.5 %) 10,185 16,883 (39.7 %)
Eliminations (89 ) (656 ) 86.4 % (150 ) (740 ) 79.7 %
Total $ 78,572 $ 78,908 (0.4 %) $ 154,726 $ 165,086 (6.3 %)
SEGMENTED INFORMATION
Adjusted EBITDA
Three Months Ended
June 30,
Six Months Ended
June 30,
In Thousands of Canadian Dollars 2013 2012 % Change 2013 2012 % Change
North America RVA $ 5,499 $ 2,934 87.4 % $ 10,531 $ 6,676 57.7 %
North America Realty Tax 3,893 4,530 (14.1 %) 7,191 8,562 (16.0 %)
North America Cost 1,471 2,169 (32.2 %) 2,891 4,523 (36.1 %)
North America Geomatics 3,458 3,686 (6.2 %) 6,601 9,535 (30.8 %)
ARGUS Software 3,155 766 311.9 % 5,260 1,543 240.9 %
UK 2,217 2,324 (4.6 %) 3,508 3,497 0.3 %
Asia Pacific Cost 238 1,198 (80.1 %) 363 1,826 (80.1 %)
Corporate (6,103 ) (5,201 ) (17.3 %) (10,264 ) (9,855 ) (4.2 %)
Eliminations - (597 ) 100.0 % - (635 ) 100.0 %
Total $ 13,828 $ 11,809 17.1 % $ 26,081 $ 25,672 1.6 %
RECONCILIATION OF ADJUSTED EBITDA TO PROFIT (LOSS)
Three Months Ended June 30, Six Months Ended June 30,
In Thousands of Canadian Dollars 2013 2012 2013 2012
Adjusted EBITDA $ 13,828 $ 11,809 $ 26,081 $ 25,672
Depreciation and amortization (4,542 ) (5,932 ) (9,191 ) (11,539 )
Acquisition related (expenses) income (45 ) - (255 ) -
Share of profit (loss) of associate 21 (119 ) (57 ) (519 )
Unrealized foreign exchange gain (loss) (442 ) 727 (71 ) 2,137
Gain (loss) on sale of property, plant and equipment (186 ) (73 ) (192 ) 1,378
Gain (loss) on hedging transactions - (590 ) - (400 )
Gain (loss) on sale of certain business assets (59 ) 494 5,219 494
Executive Compensation Plan costs (116 ) (89 ) (218 ) (144 )
Restructuring costs (17 ) (1,313 ) (1,150 ) (3,099 )
Other non-operating and/or non-recurring costs (620 ) 112 (620 ) (263 )
Operating profit 7,822 5,026 19,546 13,717
Finance (costs) income, net (3,547 ) 1,519 (7,490 ) (3,711 )
Profit (loss) before income tax 4,275 6,545 12,056 10,006
Income tax recovery (expense) (1,068 ) (2,867 ) (2,006 ) (3,460 )
Profit (loss) $ 3,207 $ 3,678 $ 10,050 $ 6,546
Interim Condensed Consolidated Statements of Comprehensive Income (Loss)
For the Three and Six Months Ended June 30, 2013 and 2012
(Unaudited)
(Expressed in Thousands of Canadian Dollars, Except for Shares and Per Share Amounts)
Three months ended June 30 Six months ended June 30
2013 2012 2013 2012
Revenues
Revenues $ 78,572 $ 78,908 $ 154,726 $ 165,086
Less: disbursements 6,139 7,969 13,436 20,607
Net revenue 72,433 70,939 141,290 144,479
Expenses
Employee compensation 47,475 46,286 93,218 94,055
Occupancy 3,448 3,444 6,988 6,662
Office and other operating 9,046 9,313 16,104 15,382
Amortization of intangibles 3,374 4,644 6,895 9,080
Depreciation of property, plant and equipment 1,168 1,288 2,296 2,459
Acquisition related expenses (income) 45 - 255 -
Share of (profit) loss of associate (21 ) 119 57 519
Restructuring costs 17 1,313 1,150 3,099
(Gain) loss on sale of certain business assets 59 (494 ) (5,219 ) (494 )
Operating profit (loss) 7,822 5,026 19,546 13,717
Finance costs (income), net 3,547 (1,519 ) 7,490 3,711
Profit (loss) before income tax 4,275 6,545 12,056 10,066
Income tax expense (recovery) 1,068 2,867 2,006 3,460
Profit (loss) for the period attributable to equity holders $ 3,207 $ 3,678 $ 10,050 $ 6,546
Other comprehensive income (loss):
Items that may be reclassified to profit or loss in
subsequent periods:
Cash flow hedges 531 (239 ) 582 680
Currency translation differences 4,643 2,556 5,942 (718 )
Other comprehensive income (loss), net of tax 5,174 2,317 6,524 (38 )
Total comprehensive income (loss) for the period, net of tax, attributable to equity holders $ 8,381 $ 5,995 $ 16,574 $ 6,508
Earnings (loss) per share attributable to the equity holders of the Company during the period
Basic earnings (loss) per share $ 0.14 $ 0.16 $ 0.44 $ 0.28
Diluted earnings (loss) per share $ 0.13 $ (0.03 ) $ 0.39 $ 0.03
Interim Condensed Consolidated Balance Sheets
As at June 30, 2013 and 2012
(Unaudited)
(Expressed in Thousands of Canadian Dollars)
June 30, 2013 December 31, 2012
Assets
Current assets
Cash and cash equivalents $ 6,733 $ 4,703
Trade and other receivables 102,004 105,746
Current income taxes recoverable 1,133 637
109,870 111,086
Non-current assets
Trade and other receivables 291 3,320
Investment in associate 14,523 6,380
Deferred income taxes 12,633 12,429
Property, plant and equipment 17,982 18,663
Intangibles 77,162 80,022
Goodwill 188,634 186,139
311,225 306,953
Total Assets $ 421,095 $ 418,039
Liabilities
Current liabilities
Trade and other payables $ 65,340 $ 69,599
Current income taxes payable 656 997
Borrowings 1,295 1,361
Provisions 1,400 2,098
68,691 74,055
Non-current liabilities
Trade and other payables 6,861 6,120
Borrowings 202,809 205,449
Derivative financial instruments 2,635 3,783
Provisions 181 102
Deferred income taxes 1,873 1,084
Amounts payable to unitholders 2,800 3,052
217,159 219,590
Total Liabilities 285,850 293,645
Shareholders' Equity
Share capital 278,473 279,227
Equity component of convertible debentures 6,356 6,356
Contributed surplus 5,544 3,598
Accumulated other comprehensive income (loss) 5,557 (967 )
Deficit (160,685 ) (163,820 )
Total Shareholders' Equity 135,245 124,394
Total Liabilities and Shareholders' Equity $ 421,095 $ 418,039
Interim Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2013 and 2012
(Unaudited)
(Expressed in Thousands of Canadian Dollars)
Six months ended June 30
2013 2012
Cash flows from operating activities
Profit (loss) before income tax $ 12,056 $ 10,006
Adjustments for:
Amortization of intangibles 6,895 9,080
Depreciation of property, plant and equipment 2,296 2,459
Amortization of lease inducements 53 93
Tax credits recorded through employee compensation (521 ) -
Finance costs (income), net 7,490 3,711
Share-based compensation 325 144
Unrealized foreign exchange (gain) loss 71 (2,137 )
(Gain) loss on sale of certain business assets (5,278 ) (494 )
(Gain) loss on disposal of property, plant and equipment 192 (1,378 )
Share of (profit) loss of associate 57 519
Net changes in operating working capital (1,997 ) (9,907 )
21,639 12,096
Less: interest paid (3,182 ) (5,452 )
Less: income tax paid (1,613 ) (360 )
Add: income tax received 174 664
Net cash provided by (used in) operating activities 17,018 6,948
Cash flows from financing activities
Proceeds from exercise of options 713 -
Redemption of Altus UK LLP Class B and D limited liability partnership units (170 ) (78 )
Financing fees paid - (2,155 )
Proceeds from borrowings 817 48,000
Repayment of borrowings (5,016 ) (55,031 )
Dividends paid (6,894 ) (6,912 )
Treasury shares purchased under Restricted Share Plan (2,277 ) -
Interest paid to other unitholders (106 ) (122 )
Net cash provided by (used in) financing activities (12,933 ) (16,298 )
Cash flows from investing activities
Purchase of intangibles (473 ) (1,538 )
Purchase of property, plant and equipment (1,621 ) (2,752 )
Proceeds from disposal of property, plant and equipment 43 5,296
Proceeds on disposal of certain business assets - 6,251
Net cash provided by (used in) investing activities (2,051 ) 7,257
Effect of foreign currency translation (4 ) 66
Net increase (decrease) in cash and cash equivalents 2,030 (2,027 )
Cash and cash equivalents
Beginning of period 4,703 6,590
End of period $ 6,733 $ 4,563

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