Morneau Sobeco Income Fund

Morneau Sobeco Income Fund

May 13, 2009 09:43 ET

Morneau Sobeco Announces Solid First Quarter Results for 2009

Highlights: - Strong financial results for the first quarter - Results highlight consistent performance and continued growth

TORONTO, ONTARIO--(Marketwire - May 13, 2009) -


Morneau Sobeco Income Fund (TSX:MSI.UN) (the "Fund") today announced first quarter results for 2009 that highlight its continued solid financial performance. For the first three months ended March 31, 2009 the operating business performed well with revenue at $81.8 million or 109% over the same period last year. Standardized EBITDA margin for the quarter was 15.1%, with Standardized EBITDA decreasing by 2.0% to $0.296 per Unit (basic). The net loss for the quarter is in the amount of $530,000. These results include the Shepell-fgi business which was acquired in June 2008.

"Our first quarter results highlight the strength of our business," said Bill Morneau, Chairman and CEO of the Fund. "We continued to build on our successful 2008 revenue and profitability growth. First quarter revenue results have exceeded our expectations in both our pension consulting and Employee Assistance Program (EAP) businesses. Revenue in our pension consulting business increased by 27%, compared to the same period last year (of which, 8.5% is attributable to the acquisition of Leong & Associates completed in October 2008). EAP services utilization was higher than budgeted for this period with an 18% increase in usage over the same period in 2008. This resulted in increased expenses in the first quarter to provide EAP services, and, due to the nature of our contractual arrangements with some clients, a portion of the revenue related to the growth of our EAP business is expected to be recognized in future quarters."

2009 First Quarter Results In More Detail

Revenue for the three months ended March 31, 2009 exceeded our expectations, and grew by 109% to $81.8 million compared to $39.1 million for the same period in 2008. There was a net loss for the period of $530,000 compared to net income of $2.8 million for the same period in 2008, primarily due to increased amortization expenses of $6.9 million related to the Shepell-fgi. acquisition.

In the first quarter of 2009, Standardized EBITDA was $12.3 million, compared to $8.4 million for the same period in 2008. Standardized EBITDA margin was 15.1%. Removing the effect of the inclusion of a fair value loss on foreign exchange contracts of $0.5 million, EBITDA margin was 15.7%. Margin is lower in the first quarter, primarily as a result of the increased expenses related to higher-than-expected usage of EAP. Standardized EBITDA per Unit (basic) was $0.296 compared to $0.302 in 2008, a decrease of 2.0%. Standardized Distributable Cash for the first three months ended March 31, 2009 was $5.7 million or $0.158 per Unit (basic). This compares to a use of cash of $0.3 million for the same period in 2008. Standardized Distributable Cash Payout Ratio for the quarter was 156%. Adjusted Consolidated Distributable Cash grew by $1.5 million to $9.2 million or $0.220 per Unit (basic) which compares to $7.7 million in 2008. The Adjusted Consolidated Distributable Cash Payout Ratio was 111.4% compared to 79.6% for the same period in 2008. The 12 month rolling Standardized Distributable Cash Payout Ratio is 94.9%, and the 12 month rolling Adjusted Consolidated Distributable Cash Payout Ratio is 81.8% compared to 90.8% and 86.2%, respectively for the same period in 2008.

Economic Conditions & Outlook

Alan Torrie, President of the Fund says the Fund maintains its cautiously optimistic outlook for financial performance in 2009.

"As we have anticipated, our clients and their employees are turning to us for solutions to address the impact of the current economic climate. In particular, we are seeing an increase in EAP utilization as well as pension consulting mandates relating to the business challenges presented by the slowing economy. There have also been new opportunities to deliver additional workplace health management services as we help our clients develop and implement H1N1 Influenza A pandemic planning initiatives."

"Our proven solutions are playing an increasingly important role as clients look for cost-effective ways to manage human resources issues and address problems that can impact both profitability and workplace productivity," said Mr. Torrie.

Appointment of Chief Financial Officer

The Fund today also announced senior management changes. Nancy Lala, currently Chief Financial Officer (CFO) of Morneau Sobeco Income Fund, has decided to leave the organization to pursue a broader business role with About Communications. Ms. Lala will continue to play a key executive and leadership role at the Fund until the end of August.

The Fund has named Scott Milligan as the new Chief Financial Officer, effective June 15, 2009. Mr. Milligan joins the organization from Zarlink Semiconductor Inc. He brings to Morneau Sobeco Income Fund a wealth of experience as Senior Vice President and CFO of a number of Canadian-based organizations that were are publicly traded in both Canada and the United States. Mr. Milligan's previous experience also includes progressively senior finance roles with MCI Canada, Pepsi Bottling Group, Campbell Soup Company and Price Waterhouse.

"We wish Ms. Lala the best of luck in her new assignment, and welcome Mr. Milligan to Morneau Sobeco," said Mr. Torrie. "His successful track record of financial leadership will be a valuable asset to us as we leverage our recent doubling in size for future growth and profitability."

Conference Call

The Fund's first quarter 2009 results will be discussed during a conference call with Bill Morneau, Chairman and Chief Executive Officer; Alan Torrie, President, and Nancy Lala, Chief Financial Officer, on May 13, 2009 at 1:00 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: 7282447. A replay of the call will be available 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 approximately 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; 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