Morneau Shepell Inc.
TSX : MSI

Morneau Shepell Inc.

November 07, 2011 17:34 ET

Morneau Shepell Reports Q3, 2011 Financial Results

TORONTO, ONTARIO--(Marketwire - Nov. 7, 2011) -

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

Highlights:

  • 10.2 percent increase in revenue to a record $91.6 million, compared to $83.1 million in Q3 2010
  • Record EBITDA of $18.5 million for the third quarter, from $17.9 million in the same period of 2010.
  • Completed acquisition of EAP provider Jacques Lamarre & Associates, adding 900 clients with 1.4 million employees and their families.

"Our third quarter results show that the growth trends that began in the later part of 2010 are continuing," said Bill Morneau, Executive Chairman of the Company. "This growth reflects contributions from all of our service lines and is the result of both new business wins and expanded mandates from existing clients."

"In this past quarter we expanded our pension outsourcing offering, launched a number of innovative EAP products and completed an accretive acquisition," added Alan Torrie, President and CEO of Morneau Shepell. "We believe that there continue to be significant opportunities in our current and prospective client base which will contribute to continued success in future quarters."

Q3 2011 Financial Review
In thousands of dollars Third Third Nine Nine
quarter quarter months months
ended ended ended ended
Sept. 30, Sept. 30, Sept 30, Sept 30,
2011 2010 2011 2010
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue $ 91,574 $ 83,083 $ 267,541 $ 248,176
Adjusted EBITDA(1) $ 18,491 $ 17,857 $ 52,093 $ 47,775
Adjusted EBITDA(1) margin 20.2% 21.5% 19.5% 19.3%
Normalized Free Cash Flow(2) $ 11,189 $ 12,147 $ 32,487 $ 34,192
Profit $ 6,387 $ 8,671 $ 18,978 $ 20,845

For the three months ended September 30, 2011 ("Q3 2011"), the Company reported $91.6 million in revenue, a 10.2 percent increase from $83.1 million for the same period in September 30, 2010 ("Q3 2010"). Total operating expenses (excluding depreciation and amortization expenses) totalled $73.1 million in Q3 2011, compared with $65.8 million in Q3 2010. Profit in Q3 2011 was $6.4 million, compared with $8.7 million in Q3 2010 (after IFRS related adjustments).

Adjusted EBITDA(1) of $18.5 million increased by 3.6 percent from Q3 2010 due to the increase in revenue offset by increased operating expenses. Adjusted EBITDA(1) margin was 20.2 percent compared to 21.5 percent in Q3 2010.

Dividends

For Q3 2011, the Company generated Normalized Free Cash Flow(2) of $11.2 million compared to $12.1 million in Q3 2010. The Normalized Payout Ratio(3) for Q3 2011 was 83.5 percent compared to 92.8 percent for Q2 2010. The 12-month rolling Payout Ratio is 114.9 percent compared to 140.4 percent for the same period in 2010. In the quarter, the Company maintained 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 on Tuesday, November 8, 2011, at 9:30 a.m. EST. 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 8508656) in the Toronto area, or 1-888-789-9572 (participant code 8508656) throughout the rest of Canada. A replay of the call will be available via the Morneau Shepell Web site at www.morneaushepell.com.

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 September 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 Adjusted EBITDA and Normalized Free Cash Flow. The Company believes that Adjusted 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) "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 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.

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