People Corporation
TSX VENTURE : PEO

People Corporation

December 15, 2014 07:37 ET

People Corporation Announces Record Year-End Financial Results for Fiscal 2014 and Highlights Strategic and Operational Achievements for the Year

TORONTO, ONTARIO--(Marketwired - Dec. 15, 2014) - People Corporation (the "Company") (TSX VENTURE:PEO) today announced record financial results for the fiscal year ended August 31, 2014, and provided an update on the organizational achievements during the year that contributed to the ongoing successful execution of its strategic plan.

"Our record results in fiscal 2014 reflect our efforts over the past number of years related to all aspects of our strategy - including initiatives directed at organic growth, activities related to our transaction-based growth, and actions focused on building our overall organizational capabilities. During the year, we continued to enhance our value proposition to our various stakeholder groups, with ongoing development of our Shared Services and Shared Support divisions, which are an important component for our organic growth. The three acquisitions we completed during the year illustrate the flexibility in our transaction-based growth model - including as it relates to size, transaction structure, and strategic rationale," said Laurie Goldberg, Chairman and CEO of the Company. "At the same time, we have positioned the Company for its next stage of growth, implementing some important changes to our senior management team structure, and enhancing our access to financial capital through completing two highly successful financing transactions," continued Mr. Goldberg. "As we successfully execute our strategy, we continue to deliver record financial results, and for this fiscal year, substantial growth over the previous fiscal year, with a 29.3% increase in revenue and a 73.6% increase in Adjusted EBITDA."

"Our vision is to build the leading independent provider of group benefits, group pension and HR consulting products and services to organizations across Canada. These sectors are large and growing, with favourable underlying fundamentals and trends, and as a result, represent areas with significant opportunity, particularly for companies with scale. I am confident that we have the strategic plan, underpinned by a unique operational model and flexible transaction model, supported by strong access to capital, and being executed by a leading management team, to realize on our vision and continue to build a leading company in the sector," concluded Mr. Goldberg.

Highlights of Financial Results for the Fiscal Year ended August 31, 2014

Financial Results from Operations

People Corporation's financial results for the fiscal year ended August 31, 2014 reflect the strong execution of its strategic and operational plans, which include organic growth initiatives, growth from acquisitions, and an ongoing focus on operational excellence. For the 2014 fiscal year, revenues increased 29.3% to $42.5 million, and Adjusted EBITDA grew by 73.6% to $7.5 million.

12 months ended
Aug. 31, 2014
12 months ended
Aug. 31, 2013


Increase
Revenue $ 42,542,878 $ 32,892,159 29.3 %
Operating Income before Corporate Costs $ 11,256,369 $ 7,839,707 43.6 %
Operating Income before Corporate Costs margin 26.5 % 23.8 %
Adjusted EBITDA $ 7,542,081 $ 4,344,309 73.6 %
Adjusted EBITDA margin 17.7 % 13.2 %
Net income $ 1,540,861 $ 261,109 490.1 %

Revenue for the 2014 fiscal year was $42.5 million, which represents an increase of $9.6 million, or 29.3%, over fiscal 2013. Approximately 36.8%, or $3.5 million, of this represents annual organic growth in the business, attributable to the activities discussed below, such as the ongoing development of the Shared Services product/service offering, which has resulted in additional revenue from existing clients as well as the addition of new clients. The balance of the revenue growth, $6.1 million or 63.2%, over fiscal 2013 was attributable to the acquisitions completed in the fourth quarter of 2013 and over the course of fiscal 2014, the results for which are now included in the Company's results. The majority of the increase was due to the inclusion of results for Hamilton + Partners, which was acquired in the fourth quarter, and therefore was included in fiscal 2013 for only a portion of the fourth quarter, but was included for the entire year in fiscal 2014. For the acquisitions completed in 2014 (see below), the above figure reflects revenues of those entities only from the date of closing of the respective acquisitions, and therefore does not include a full year of the acquisitions' revenue and financial impact.

People Corporation has made, and continues to make, significant organizational investments that are necessary to create a unique value proposition and competitive edge to attract and maintain clients, and to achieve the benefits of scale in sectors where it is becoming increasingly important. The Company monitors Operating Income before Corporate Costs in order to assess the results of operations before consideration of the ongoing corporate investments required to position the Company for future growth. For the fiscal year ended August 31, 2014, Operating Income before Corporate Costs was $11.3 million, which represents an increase of $3.4 million, or 43.6%, over the prior fiscal year. The Company also strengthened the EBITDA before corporate costs margin from 23.8% in fiscal 2013 to 26.5% in fiscal 2014.

Adjusted EBITDA for the fiscal year ended August 31, 2014 was $7.5 million, representing an increase of 73.6%, or $3.2 million, as compared to the same period in 2013. Adjusted EBITDA margin increased from 13.2% in fiscal 2013 to 17.7% in fiscal 2014. The growth in Adjusted EBITDA and margin improvements are a result of the revenue growth discussed above, combined with the operating leverage that exists in the business, as the revenue associated with past investments in operations effectively increases operating earnings with limited additional incremental investment, operating expense, or corporate costs.

For the fiscal year ended August 31, 2014, the Company reported net income of $1.5 million, representing an increase of $1.3 million, or 490.1%, from fiscal 2013. The increase in net income is due to the factors outlined above, offset partially by incremental finance expense attributable to debt incurred in connection with acquisitions completed and non-recurring costs related to those acquisitions, and also to various non-cash expenses related to the accounting entries for items such as amortization of intangible assets.

Summary Financial Position

The Company's financial position is very strong, particularly given the financings completed during and shortly after the end of the fiscal year, discussed below. As a result, the Company is well-positioned to continue to execute on its growth strategy based on contributions from both organic and transaction-based initiatives. In addition, the financial position of the Company will accommodate the ongoing operational investments required to ensure the Company is delivering upon its value proposition to its clients, and achieving operational excellence and enhanced profitability.

The Company had cash balances of $3.1 million as at August 31, 2014. In addition to its cash resources, as discussed below, the Company recently completed a new credit facility with its senior lender that totals $35 million of credit capacity, including a $7 million term loan, a $5 million operating revolving facility and a $23 million acquisition revolving facility. Currently, only the term facility is drawn, providing for $28 million of unused credit capacity. The agreement underlying the credit facility contains certain financial covenants, including debt servicing ratios and other standard business operating and performance covenants, and the Company is currently compliant with all such covenants. In addition to the credit facility with its senior lender, as of August 31, 2014, the Company has $3.6 million owing to vendors from previous acquisitions, of which $2.0 million is due in the next twelve months.

The complete Financial Statements and Management's Discussion and Analysis for the fiscal year ended August 31, 2014, along with additional information about the Company and all of its public filings are available at www.sedar.com.

Strategic and Operational Highlights for the Fiscal Year ended August 31, 2014

People Corporation's vision is to build the leading independent provider of group benefits, group retirement and HR consulting products and services to organizations across Canada. The group benefits, group retirement and HR consulting sectors are large and growing, with favourable underlying business characteristics, positive trends, and current dynamics that are creating opportunities for companies with scale. In order to position itself for growth in this environment, the Company has made significant investments in people, technology and other organizational resources, and has developed techniques, processes and other intellectual capital to provide a compelling value proposition. Driven by these investments, the Company intends to pursue growth opportunities both organically, increasing its existing business by gaining new clients and a larger 'share of wallet' with existing clients, as well as through transactions in which new operating entities or subsidiaries become part of the Company.

Organic Growth and Organizational Initiatives

As detailed in the discussion of financial results, in fiscal 2014 the Company continued to deliver strong organic growth. Since organic growth will continue to be a cornerstone of the Company's overall strategy, significant activity aimed at driving this growth occurred during the year, and is to be expected in the future. As an example, the Company's Shared Services and Shared Support divisions provide resources to drive growth at existing operating subsidiaries, and the Company continues to make investments to enhance the offerings emanating from these divisions aimed at helping the Company's consultants successfully attract and retain clients, as well as increase the profitability of their client base.

The investments that the Company makes to drive organic growth are focused on achieving long-term sustainable growth and acceptable returns in the business. Given the nature of some of the investments to drive organic growth, such as hiring new consultants to increase the Company's sales capacity, there may be a short term impact on margins, as the full expense from the investment impacts the income statement, and it takes a period of time for the accompanying positive revenue impact to materialize. However, within an acceptable period of time, positive returns are achieved, and the favourable impact of the operating leverage these investments create is realized.

Given the growth the Company has achieved, and the ongoing development and evolution of the business, in October 2014, the Company announced some organizational changes to position the Company to continue its growth. In particular, Bonnie Chwartacki, previously Executive Vice President, assumed the role of President, with responsibility for operations and strategic initiatives, in addition to overseeing the Shared Services division. Brevan Canning, previously Vice President, Finance, assumed a new role as Executive Vice President Finance and Group Head - Group Benefit Solutions. In addition to continuing to manage the Company's finance function, in his new role Brevan is assuming responsibility as leader of the Company's third party administration business, including sales and distribution, client service, underwriting and technology. In addition to these changes in the structure of the senior management team, also in October 2014, the Company announced that Mr. Eric Stefanson had been appointed to the Board of Directors of the Company. Mr. Stefanson possesses broad knowledge of corporate governance and public company operations, and significant experience in government, industry and public practice, which will be highly beneficial to the Company as its Board of Directors provides guidance and direction to management on matters related to strategy, operations and overall organizational initiatives.

Mr. Goldberg commented, "These organizational changes are directed at positioning the Company for future growth. As our scale increases, it is important to have our senior management team focused on continuing to nurture ongoing product and service development that will drive organic growth. As we continue to grow, we expect to broaden the senior team to ensure that we have the intellectual capital in place to continue to advance our strategy."

Transaction-Related Growth

An important component to the Company's growth continues to be through acquisitions, as the current conditions, dynamics and trends in the group benefits, group retirement and HR consulting sectors create an environment in which scale is increasingly important, and thus where consolidation is likely. During the past fiscal year, the Company completed three acquisitions, bringing the total number of acquisitions completed in the past two fiscal years to seven.

The acquisitions completed during fiscal 2014 illustrate the variety of potential transactions available to the Company. For example, in June 2014, the Company announced the acquisition of the group benefits business of Bryan H. Lupe and Associates ("BHL"), based in Winnipeg, Manitoba. As the first acquisition for the Company in Winnipeg, this transaction was strategically significant, and substantially increased the Company's presence in the market, adding a firm with an outstanding reputation for client service and creativity. Later in the same month, the Company completed the acquisition of Fairles Benefit Services ("FBS"), based in Waterloo, Ontario. Through this acquisition, which was completed by the Company's subsidiary, Bencom Financial Services Group ("Bencom"), the Company increased its presence in Southwestern Ontario. Furthermore, the acquisition represents a unique opportunity for Bencom, as the FBS business will operate in close association with Bencom, and under the direction of Bencom's practice leader, contributing to its ongoing growth as part of the People Corporation family.

"The acquisitions we completed during the year illustrate the variety in the types of transactions that the Company may complete," commented Mr. Goldberg. "The transactions we will consider range from small to large, but all share the characteristic of having a strong underlying strategic rationale. This may include a strategically attractive market, as in the acquisition of BHL, or fulfilling a promise to our partners in our subsidiaries to help them grow, as through the acquisition of FBS by Bencom," continued Mr. Goldberg. Mr. Goldberg concluded, "Our unique value proposition, which includes a transaction model that is flexible to address the objectives of vendors, and an operating model that supports the ongoing success and growth of the underlying businesses, continues to attract transaction partners, and we expect acquisition-based growth to be an important component of the Company's overall growth strategy going forward."

Positioning for Ongoing Growth

Given the success of the Company in the past few years in attracting acquisition partners as part of its transaction-based growth strategy, the positive organic growth achieved as the Company continues to increase its scale and enhance its value proposition, as well as the current momentum in both of these components of its overall growth strategy, during the year the Company conducted a review of its financing structure. The overall objective of the review was to ensure that the Company was well-positioned to take advantage of future growth opportunities, with access to financial capital in sufficient capacity, with appropriate flexibility, and in a cost effective manner. As a result of this review, the Company recently completed two financing transactions.

In April 2014, the Company completed a highly successful $10.4 million bought deal private placement of common shares, issuing a total of 4.8 million common shares at a price of $2.15 per share. The offering was very well received by investors, with demand significantly exceeding supply. The proceeds of the offering were used for investments in growth opportunities, both organically-based and transaction-related, as well as to pay down the Company's senior debt, and for general corporate purposes.

In November 2014, the Company announced a new credit facility totaling $35 million, which significantly expanded the capacity, improved the cost effectiveness and enhanced the flexibility of its senior debt facility. The new facility includes a $5 million operating revolving facility, a $7 million term loan and a $23 million acquisition revolving facility. In addition, the acquisition facility has an "accordion" feature whereby, subject to certain terms and conditions, it can be increased by an additional $15 million, taking the acquisition facility to $38 million of availability, and overall credit capacity to $50 million. Currently, only the term loan is drawn, thereby providing the Company with $28 million of available senior credit capacity, which could be increased to $43 million with full use of the "accordion" feature.

"As evidenced by these financings, our key providers of capital, namely equity investors and our senior debt lender, are very supportive of the Company and have confidence in the ongoing successful execution of our strategy," commented Mr. Goldberg. "We appreciate their support, as it positions us very well with strong access to capital to make the necessary investments to continue to grow our Company."

Other Accolades

The success that People Corporation has achieved in executing its strategic plan and delivering record financial results in successive periods has attracted accolades from third party organizations that recognize companies and individuals for their achievements.

For the fourth time in recent years, People Corporation was recognized as part of the definitive rankings of Canada's Fastest Growing Companies by PROFIT Magazine. With five-year revenue growth of 377%, People Corporation was included in the PROFIT 500 list for 2014, as it had been for 2013. In addition, the Company had previously been included in the PROFIT 50 rankings of two-year revenue growth in 2010 and 2011.

In October, the Company's Chairman and CEO, Laurie Goldberg, was awarded the regional EY Entrepreneur of the Year Prairies 2014 for the Professional and Financial Services category. The EY Entrepreneur of the Year awards celebrate the contribution and spirit of entrepreneurs, with finalists chosen based on their vision, leadership, financial success and social responsibility. Mr. Goldberg commented, "While I am honoured to receive recognition as a Prairie region category winner, it is the team we have at People Corporation - including our Board of Directors, management team, professionals and staff - that have contributed to the success we have achieved to date. I am very excited for our future, as with the strong team we have in place, I have no doubt that we will continue to successfully execute on our strategy."

About People Corporation

People Corporation is a national provider of group benefits, group retirement and human resource services. We have offices across Canada, each led by a team of experts and backed by the resources of a national company that is traded on the TSX-V. Our industry experts provide uniquely valuable insight while customizing our innovative suite of services to the specific needs of our clients. Whatever your sector, whatever your scale, putting our expertise and proven track record to work will make a difference to your people and your bottom line.

Further information is available at www.peoplecorporation.com.

Forward-Looking Information

This news release contains "forward-looking information" within the meaning of applicable securities laws, such as information 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 forward-looking information including the completion of the transaction, the impact of that transaction on our earnings and cash flow, and the anticipated benefits of the transaction. This information is not a guarantee of future performance and is subject to numerous risks and uncertainties, including those described in our publicly filed documents (which are available on SEDAR at www.sedar.com). Those risks and uncertainties include: our ability to maintain profitability and manage growth; strong competition from other consultants and changes in the current legislation could result in significant competition from the banking industry; failure of information systems and technology; dependence on key clients; seasonality of revenues and the resulting possible impairment on working capital; reliance on key professionals; additional financing may be required and may not be available under terms favourable to us; there can be no assurance that any suitable future acquisition will be available to us or that, if available, the terms of the acquisition will be favourable to us; and a change in general economic conditions. Many of these risks and uncertainties can affect our actual results and could cause our actual results to differ materially from those expressed or implied in any forward-looking information made by us or on our behalf. Given these risks and uncertainties, investors should not place undue reliance on forward looking information as a prediction of actual results. All forward-looking information in this news release is qualified by these cautionary statements. This information is made as of the date of this news release and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward looking information, whether as a result of new information, future events or otherwise. Additionally, we undertake 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.

Non-IFRS Financial Measures

Adjusted EBITDA and Operating Income before Corporate Costs are not recognized measures under International Financial Reporting Standards ("IFRS"). Management believes that in addition to revenue, net income and cash flows, the supplemental measures of Adjusted EBITDA and Operating Income before Corporate Costs are useful as they provide investors with an indication of earnings from operations before debt management and non-recurring and other adjustments. Investors should be cautioned, however, that Adjusted EBITDA and Operating Income before Corporate Costs should not be construed as an alternative to net income determined in accordance with IFRS as an indicator of the Company's performance. The Company's method of calculating these measures may differ from other public issuers and, accordingly, may not be comparable to similar measures used by other issuers. For a detailed explanation of how the Company's non-IFRS measures are calculated, please refer to the Company's MD&A filing for the year ended August 31, 2014, which can be accessed via the SEDAR Web site (www.sedar.com).

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

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