Morneau Sobeco Income Fund

Morneau Sobeco Income Fund

August 12, 2009 12:01 ET

Morneau Sobeco Announces Positive Second Quarter Results

Highlights: - Second quarter revenue and profit met expectations - Results reflect consistent and stable business performance in 2009

TORONTO, ONTARIO--(Marketwire - Aug. 12, 2009) -


Morneau Sobeco Income Fund (TSX:MSI.UN) (the "Fund") today announced positive second quarter 2009 results for its operating business. Revenue in the second quarter ended June 30, 2009 grew by 62.1%, or $32.5 million to $84.9 million. This compares to $52.4 million for the same quarter in 2008, primarily reflecting the contributions of the 2008 acquisitions of Shepell-fgi and Leong & Associates. Standardized EBITDA for the period increased by $5.5 million, or 52.5% to $16.0 million, compared to $10.5 million for the same period last year. Standardized EBITDA margin was 18.8%, and Standardized EBITDA per Unit (basic) increased by 2% to $0.336, compared to $0.329 in the second quarter 2008. Net income was $3.3 million for the quarter, compared to $2.5 million for the same period in 2008.

"We are pleased with our 2009 second quarter results and the continuing success of the Shepell-fgi integration," said Bill Morneau, Chairman and CEO of the Fund. "Our EAP utilization, which grew at an unusually high pace in the first quarter, returned within our expected growth range, with EAP revenue growing by 6.8%, compared to the 2008 second quarter, while our organic pension consulting revenue growth of 15.3% continued to reflect strong market demand."

2009 Second Quarter Results in more detail

Adjusted Consolidated Distributable Cash grew by $1.7 million to $11.4 million or $0.240 per Unit (basic) which compares to $9.7 million or $0.305 per Unit (basic) in 2008. The Adjusted Consolidated Distributable Cash Payout Ratio was 98.4%, compared to 75.0% for the same period in 2008 and the corresponding 12-month rolling payout ratio is 87.3%, compared to 82.9% for the second quarter of last year.

The strong revenue growth, combined with the increase in receivables due to the seasonal nature of the Shepell-fgi business, together with the timing of the annual bonus payments, resulted in Standardized Distributable Cash for the 2009 second quarter of $45,000 or $0.001 per Unit (basic), compared to $8.2 million or $0.310 per Unit (basic) for the same period in 2008. Similarly, Cash from Operations for the quarter was $1.6 million, compared to $10.5 million for the second quarter of 2008. The 12-month rolling Standardized Distributable Cash Payout Ratio is 140.9%, compared to 87.0% for the same period in 2008, which primarily reflects the Shepell-fgi EAP case volume and the associated payments for the services, which will be invoiced to customers in future quarters.

Economic Conditions and Outlook

"We continue to remain positive about our prospects for 2009, and our ability to deliver solid value to our Unitholders as we move into the last half of the year," said Alan Torrie, President of the Fund. "We continue to see solid growth in EAP, pension consulting and pandemic management services. Notwithstanding this growth, the current economic environment is resulting in a lengthening of the purchase cycle in some areas of our business, as some clients delay their decision-making. As well, we expect our consulting services to show the typical seasonal softness during the summer months as we have experienced in prior years."

Conference Call

The Fund's second quarter 2009 results will be discussed during a conference call with Bill Morneau, Chairman and Chief Executive Officer; and Alan Torrie, President, on August 12, 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) 340-2217 if in the Toronto area, or 1-866-696-5910 throughout the rest of Canada. Participant pass code is: 8122527. A replay of the call will be posted on the Morneau Sobeco web site at

About Morneau Sobeco Income Fund

Morneau Sobeco Income Fund is one of the largest Canadian human resources consulting and outsourcing firms focused on pension, benefit, employee assistance programs and other workplace health and productivity solutions. Through Morneau Sobeco and Shepell-fgi we offer solutions to assist employers in supporting the financial security, health and productivity of their employees. With more than 2,200 employees in offices across North America, Morneau Sobeco Income Fund provides services to organizations across 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
    Chairman and CEO
    (416) 445-2700
    Morneau Sobeco Income Fund
    Lynn Korbak
    General Counsel and Corporate Secretary
    (416) 445-2700