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Morneau Shepell reports 2014 third quarter financial results
Investor Relations / Canada

Morneau Shepell reports 2014 third quarter financial results

/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S./

TORONTO, Nov. 12, 2014 /CNW/ - Morneau Shepell Inc. (the "Company" or "Morneau Shepell") (TSX: MSI) today reported its financial results for the three-month and nine-month periods ending September 30, 2014 (all amounts are in Canadian dollars unless noted otherwise).

Highlights

  • Strong revenue growth of 12.0 per cent in the quarter versus the comparative quarter of 2013
  • Adjusted EBITDA margin for the third quarter was 18.4 per cent, Adjusted EBITDA was $24.4 million, and profit for the third quarter was $7.2 million

"Revenue and Adjusted EBITDA both experienced double digit growth this quarter, as our business continues the momentum we established in the first half of this year," said Alan Torrie, President and CEO of Morneau Shepell. "Our financial performance remains strong this year, and our organic growth is in line with historical levels."

"Our organic growth was led by our Administrative Solutions business, and largely driven by strong numbers coming out of our operations in the United States. Our integration of the Groupe AST acquisition met expectations and accounted for the majority of this quarter's non-organic growth," added Torrie. "We remain focused on our core businesses and in line with our strategy, we divested the clinic-based occupational health operations, which primarily operated in remote locations.  This divestiture resulted in a pre-tax gain of $2.1 million in the quarter and we expect the financial implications going forward to be modest."


Q3 2014 Financial Review

In thousands of dollars

Three months

ended September 30, 2014

Three months

ended September 30, 2013

Nine months

ended  September 30, 2014

Nine months
ended September 30, 2013

Revenue

$132,703

$118,526

$404,671

$352,584

Adjusted EBITDA

$24,429

$21,909

$76,346

$66,311

Adjusted EBITDA margin

18.4%

18.5%

18.9%

18.8%

Normalized Free Cash Flow

$9,357

$11,056

$37,084

$38,040

Profit

$7,235

$6,937

$24,679

$21,724

For the three months ended September 30, 2014, the Company reported $132.7 million in revenue, an increase of $14.2 million or 12.0 per cent from the same period 2013. Total operating expenses (excluding depreciation and amortization expenses) were $112.5 million in Q3 2014, compared to $98.0 million in Q3 2013.

Adjusted EBITDA increased by $2.5 million or 11.5 per cent to $24.4 million compared to $21.9 million for the same period in 2013. The increase is primarily due to growth in revenue of $14.2 million, partially offset by an increase in salaries and other operating expenses of $11.7 million after EBITDA adjustments.

Adjusted EBITDA margin was 18.4 per cent, comparable to 18.5 per cent in the same period of 2013.

During Q3 2014, Normalized Free Cash Flow for the Company decreased by $1.7 million to $9.4 million compared to $11.1 million for the same period in 2013 due to the timing of planned 2014 capital expenditures.

The 12-month rolling Normalized Payout Ratio at Q3 2014 was 70.6 per cent compared to 73.2 per cent in 2013. The improvement is primarily due to higher Normalized Free Cash Flow during the past twelve months.

The Company is maintaining its policy of paying a monthly dividend of 6.5 cents per share.

Notice of Conference Call
Management of Morneau Shepell are hosting a conference call on Wednesday, November 12, 2014, at 1 p.m. ET.  The conference call is open to all those wishing to attend, with a question and answer period to follow. In order to participate in the live conference call, please call 416.340.2217 (participant code 2809543) in the Toronto area, or 1.866.696.5910 (participant code 2809543) throughout the rest of Canada. A replay of the call will be available via the Morneau Shepell website at morneaushepell.com.

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, the largest administrator of pension and benefits plans and the largest provider of integrated absence management solutions in Canada. 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 20,000 clients, ranging from small businesses to some of the largest corporations and associations in North America. With approximately 3,600 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 morneaushepell.com.

Financial Measures
To assist investors in assessing the Company's financial performance, this news release also makes reference to certain financial measures such as adjusted EBITDA, adjusted EBITDA margin, Normalized Free Cash Flow and Normalized Payout Ratio. The Company believes that adjusted EBITDA, adjusted EBITDA margin, Normalized Free Cash Flow and Normalized Payout Ratio are useful supplemental measures of performance as they are generally used by Canadian businesses as indicators of financial performance. See the Company's MD&A for more details. These financial measures do not have any standard meaning prescribed by International Financial Reporting Standards and therefore may not be comparable to similar measures presented by other issuers.

(1)

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

(2)

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

(3)

"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 www.sedar.com) 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.

SOURCE Morneau Shepell - Investor Relations

For further information: Investors: Michele Kumara, 416.383.6463, mkumara@morneaushepell.com; Media: Helen Reeves, 416.345.5633, hreeves@morneaushepell.com