Morneau Shepell Inc.

Morneau Shepell Inc.

August 11, 2011 17:19 ET

Morneau Shepell Reports Q2 2011 Financial Results

TORONTO, ONTARIO--(Marketwire - Aug. 11, 2011) -


Morneau Shepell Inc. (the "Company" or "Morneau Shepell") (TSX:MSI) today reported its financial results for the three-month period ended June 30, 2011 (all amounts are in Canadian dollars, unless noted otherwise).


  • Record revenue of $90.6 million, an 8.2 percent increase, compared to $83.7 million in Q2 2010.
  • 13.5 percent increase in Adjusted EBITDA(1) to $18.0 million for the second quarter, from $15.8 million in the same period of 2010.
  • Adjusted EBITDA(1) margin of 19.9 percent, compared to 18.9 percent for the second quarter of 2010.

"We are pleased with our results in this past quarter," said Bill Morneau, Executive Chairman of the Company. "We showed continued growth momentum in all of our lines of business."

"Our strategic initiatives to grow our Health Management business are producing good results," said Alan Torrie, President and CEO of Morneau Shepell. "We have seen solid revenue growth in this business for the last two quarters, as well as a number of new client mandates."

Canada Post recently announced to its employees that Morneau Shepell, together with Great-West Life, has been selected to partner with Canada Post Corporation for the provision of disability management services to its employees.

"This is a very significant relationship for us," continued Mr. Torrie. "Canada Post will become one of our largest clients, and an important one for our growing Health Management business."

Q2 2011 Financial Review

In thousands of dollars Second quarter ended June 30, 2011 Second quarter ended June 30, 2010
(Unaudited) (Unaudited)
Revenue $ 90,565 $ 83,669
Adjusted EBITDA(1) $ 17,993 $ 15,848
Adjusted EBITDA(1) margin 19.9 % 18.9 %
Normalized Free Cash Flow(2) $ 10,720 $ 11,901
Profit(3) $ 6,133 $ 12,345

For the three months ended June 30, 2011 ("Q2 2011"), the Company reported $90.6 million in revenue, an 8.2 percent increase from $83.7 million for the same period in June 30, 2010 ("Q2 2010"). Total operating expenses (excluding depreciation and amortization expenses) totalled $72.3 million in Q2 2011, compared with $67.8 million in Q2 2010. Profit in Q2 2011 was $6.1 million, compared with $12.3 million in Q2 2010 (after IFRS related adjustments).

Adjusted EBITDA(1) of $18.0 million increased by 13.5 percent from Q2 2010 due to the increase in revenue combined with cost saving initiatives that began in late 2010. Adjusted EBITDA(1) margin was 19.9 percent compared to 18.9 percent in Q2 2010.


For Q2 2011, the Company generated Normalized Free Cash Flow(2) of $10.7 million compared to $11.9 million in Q2 2010. The Normalized Payout Ratio(4) for Q2 2011 was 87.2 percent compared to 94.7 percent for Q2 2010. The 12-month rolling Payout Ratio is 94.1 percent compared to 97.6 percent for the same period in 2010. The Company is maintaining its policy of paying a monthly 6.5 cent dividend on each share.

Notice of Conference Call

Management of Morneau Shepell will host a conference call today, Friday, August 12, 2011, at 10:00 a.m. EDT. The conference call is open to all those wishing to attend, with a Question & Answer period to follow the presentation. In order to participate in the live conference call, please call 416-695-7806 (participant code 8122527) in the Toronto area, or 1-888-789-9572 (participant code 8122527) throughout the rest of Canada. A replay of the call will be available via the Morneau Shepell Web site at

About Morneau Shepell Inc.

Morneau Shepell Inc. is the largest Canadian based human resources consulting and outsourcing firm focused on pension, benefit, employee assistance programs and workplace health and productivity solutions. We offer solutions to assist employers in supporting the financial security, health and productivity of their employees. With approximately 2,500 employees in offices across North America, we provide services to organizations across Canada, in the United States and around the globe.

IFRS Adoption

This is the Company's first year reporting its financial results under International Financial Reporting Standards. Adopting IFRS did not result in changes to actual revenue or cash flows but did affect the Company's consolidated financial position to some extent. To understand the reconciliations between Canadian GAAP and IFRS, please see the note in the financial statements released for the period ended June 30, 2011 and March 31, 2011.

Financial Measures

To assist investors in assessing the Company's financial performance, this news release also makes reference to certain financial measures such as EBITDA and Normalized Free Cash Flow. The Company believes that EBITDA and Normalized Free Cash Flow and their respective payout ratios are useful supplemental measures of performance as they are generally used by Canadian businesses as indicators of financial performance. See the footnotes to the "Results of Operations" chart in the Company's MD&A for more details. Financial measures do not have any standard meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers.

(1) "Adjusted EBITDA" is defined as profit before finance costs, income taxes (recovery), depreciation, amortization, impairment losses, and non-recurring expenditures.
(2) "Normalized Free Cash Flow" is defined as cash from operating activities, adjusted for changes in non-cash operating working capital, capital expenditures and certain non-recurring expenditures.
(3) Profit for the quarter ended June 30, 2010 includes $5.1 million of IFRS related income in respect of LP units and LTIP awards.
(4) "Normalized Payout Ratio" is defined as dividends 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 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.

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