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Morneau Shepell Inc. reports third quarter 2012 results

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Investor Relations / Canada

Morneau Shepell Inc. reports third quarter 2012 results

Continued strong growth

Not for distribution to US news wire services or for dissemination in the US

TORONTO, ON, November 14, 2012 – Morneau Shepell Inc. (the “Company” or “Morneau Shepell”) (TSX: MSI) today reported its financial results for the three- and nine-month period ended September 30, 2012 (all amounts are in Canadian dollars, unless noted otherwise).


  • Completed the strategic acquisition of Mercer Canada’s pension and benefits outsourcing business (effective November 1, 2012)
  • Continued strong top line growth with revenues of $101.3 million, up 10.6 percent, compared to $91.6 million for the same period of 2011

“The quarter was characterized by continued organic growth in our business,,” said Bill Morneau, Executive Chairman of the Company.  “We are on target with growth expectations, and continue to have a very strong pipeline to support our future growth, which we expect to be in line with our annual historical trends.”

“We had a solid third quarter, with organic revenue growth primarily coming from our outsourcing, health management and EAP practices.  The business continued to grow as a result of significant new client wins, increased mandates from current clients, and clients commencing service post-implementation,” said Alan Torrie, President and CEO of Morneau Shepell.  “Our acquisition of Mercer Canada’s pension and benefits outsourcing practice reinforces our already strong position in the outsourcing business in Canada, and is in line with our strategy to grow the business profitably both organically and through acquisitions.”

Q3 2012 financial review

In thousands of dollars

Third quarter ended September 30, 2012


Third quarter ended September 30, 2011













Adjusted EBITDA(1)







Adjusted EBITDA(1) margin






Normalized Free Cash Flow(2)















For the three months ended September 30, 2012, the Company reported $101.3 million in revenue, compared to $91.6 million for the same period in 2011, This represents 6.6 percent in organic revenue growth and 4.0 percent relating to acquisitions.. Total operating expenses (excluding depreciation and amortization expenses) were $83.1 million in Q3 2012, compared to $73.1 million in Q3 2011. The increase in operating expense is primarily due to expenses related to the recent SBC Systems and Jacques Lamarre acquisitions and incremental costs to support new growth. Profit in Q3 2012 was $6.1 million, compared with $6.4 million in Q3 2011.

Adjusted EBITDA(1) of $19.3 million for the three months increased by 4.3 percent from the same period in 2011 primarily due to growth in revenue of $9.8 million, partially offset by an increase in salaries and other operating expenses of $9.0 million after adjusting for expenses related to enterprise software replacement and operational effectiveness initiatives. Adjusted EBITDA(1) margin was 19.0 percent compared to 20.2 percent in Q3 2011, as a result of start-up costs related to new client wins in advance of the commencement of ongoing revenues.



During Q3 2012, the Company generated Normalized Free Cash Flow(2) of $11.4 million compared to $11.2 million in Q3 2011. The Normalized Payout Ratio(3) for Q3 2012 was 82.0 percent compared to 83.7 percent for Q3 2011. The 12-month rolling Normalized Payout Ratio(3)  for September 30, 2012 was 77.1 percent compared to 91.4 percent for the same period in 2011. 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 on Wednesday, November 14, 2012, at 3:00 p.m. ET. The conference call is open to all of 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 416.695.7806 (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 website


About Morneau Shepell Inc.

Morneau Shepell is the largest company in Canada offering human resources consulting and outsourcing services. The Company is the leading provider of Employee and Family Assistance Programs, as well as the largest administrator of pension and benefits plans. Through health and productivity, administrative, and retirement solutions, Morneau Shepell helps clients reduce costs, increase employee productivity, and improve their competitive position. Established in 1966, Morneau Shepell serves more than 8,000 clients, ranging from small businesses to some of the largest corporations and associations in North America. With approximately 3,000 employees in offices across North America, Morneau Shepell provides services to organizations across Canada, in the United States and around the globe. Morneau Shepell is a publicly-traded company on the Toronto Stock Exchange (TSX: MSI).  For more information, visit


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, Adjusted EBITDA, and Normalized Free Cash Flow. The Company believes that EBITDA, 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. These financial measures do not have any standard meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers.


"Adjusted EBITDA" is defined as profit before finance costs, income tax expenses, depreciation, amortization, impairment losses, and certain non-recurring expenditures.


"Normalized Free Cash Flow" is defined as cash provided by operating activities, adjusted for changes in non-cash operating working capital, capital expenditures, current income taxes (net of income taxes paid), and certain non-recurring expenditures.


"Normalized Payout Ratio" is defined as dividends declared 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.


For further information:

Michele Kumara

Helen Reeves