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Morneau Shepell Reports 2012 Fourth Quarter and 2012 Financial Results

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Investor Relations / Canada

Morneau Shepell Reports 2012 Fourth Quarter and 2012 Financial Results

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

TORONTO, ON, March 6, 2013 – Morneau Shepell Inc. (the "Company" or "Morneau Shepell") (TSX: MSI) today reported its financial results for 2012 (all amounts are in Canadian dollars, unless noted otherwise).



  • Continued strong top line growth with annual revenues increasing 14.9 per cent  compared to the previous year
  • Completed strategic acquisition of Mercer Canada's pension and benefits outsourcing business in Q4; improved margins post client conversions expected
  • Q4 profit affected by $4.7 million restructuring investment; expect to generate future cost improvements

"2012 was a good year for Morneau Shepell. We experienced 14.9 per cent total revenue growth, an outstanding result for the Company,” said Bill Morneau, Executive Chairman of Morneau Shepell.  “Going forward, we expect our continued growth to be in line with our longer term historical performance. All our lines of business are performing well with a solid pipeline of growth opportunities ahead of us.  On a quarterly basis, we generated revenue of $107.3 million, a 10.1 per cent increase year-over-year.


“In line with our strategy of growing both organically and by acquisition, we successfully completed two acquisitions in 2012. In Q4 2012, we acquired Mercer Canada’s Pension and Benefits Outsourcing business adding to the acquisition of SBC Systems in the first quarter. The integration of these businesses with our existing Administrative Solutions practice is proceeding as planned,” said Alan Torrie, President and CEO, Morneau Shepell.


The Company secured a number of significant new mandates and client wins during 2012.  In addition to the clients we acquired as a result of the acquisitions, Morneau Shepell successfully added a number of significant large US and Canadian clients in 2012 as well as extending our relationships further with a number of existing clients.  These new or expanded mandates include two provincial governments, a large American municipality, and one of North America’s largest financial institutions.


2012 Financial Review


In millions of dollars

Fourth quarter ended December 31, 2012

Fourth quarter ended December 31, 2011

Year ended December 31, 2012

Year ended December 31, 2011






Adjusted EBITDA(1)





Adjusted EBITDA margin





Normalized Free Cash Flow(2)











For the year ended December 31, 2012, the Company reported $419.3 million in revenue, a 14.9 per cent increase from $365.0 million for the twelve months ended December 31, 2011.  Total operating expenses (excluding depreciation and amortization) were $352.2 million in 2012, compared with $295.5 million in 2011.  Profit in 2012 was $21.0 million, compared with $24.9 million in 2011, as a result of increased adjusted EBITDA items.


Adjusted EBITDA of $78.1 million increased 11.5 per cent over $70.1 million in 2011 due to increased growth in revenue, partially offset by an increase in salaries and other operating expenses.  Adjusted EBITDA margin was 18.6 per cent, slightly lower than 19.2 per cent in 2011.


For the fourth quarter, adjusted EBITDA margin was 17.6 per cent compared to 18.5 per cent in 2011.  This was primarily as a result of the lower margins on the acquired Mercer business in the fourth quarter and start-up costs related to new client wins during the year. We expect the lower margins of the Mercer business to continue until we complete the conversion of these clients to our platform.


Normalized Free Cash Flow

Normalized Free Cash Flow for the year ended December 31, 2012 increased by $12.7 million to $53.3 million compared to $40.6 million for the same period in 2011.  The increase is primarily a result of an increase in adjusted EBITDA, and a decrease in capital expenditures, offset by an increase in current income taxes.


Annual Meeting of Shareholders

Morneau Shepell announced that it will hold its 2013 Annual General Meeting of Shareholders on May 14, 2013 in Toronto, Ontario, and it established a record date of March 19, 2013 for the meeting.


Notice of Conference Call

Management of Morneau Shepell will host a conference call on Wednesday, March 6, 2013 at 1:00 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 416.340.2217 (participant code 6455631) in the Toronto area, or 1.866.696.5910 (participant code 6455631) 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.


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