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IBI Group Inc. Announces Second Quarter Results

  • $12.7 million of EBITDA and $165.8 million in revenues for six months ended June 30, 2014

  • Completed amendment of 7% convertible unsecured subordinated debentures

  • Entered into non-binding letter of intent to sell certain operations

  • Negotiating amendment of senior lending facilities

TORONTO, Aug. 14, 2014 /CNW/ - IBI Group Inc. (the "Company") (TSX: IBG) today announced financial results for the three months ended June 30, 2014. 

Operational Highlights

  • EBITDA1 was $7.7 million for the three months ended June 30, 2014 compared with $5.0 million for the three months ended March 31, 2014 and $7.3 million for same period last year.

  • Committed fees for 2014 now stands at approximately $309 million. This represents approximately 94% of the 2014 plan, with total fee backlog of approximately eight months.

  • Net income for the three-month period ended June 30, 2014 was $0.9 million, compared with net income in the first quarter of this fiscal year totaling $1.2 million and a net loss of $100.9 million for the three months ended December 31, 2013.

  • Significant progress on negotiating an amendment to the senior lending facility.

Financial Highlights

(in thousands of dollars except for per share amounts)
(Unaudited)


Three months
ended June 30,
2014

Three months
ended June 30,
2013 


Six months
ended June 30,
2014

Six months
ended June 30,
2013 

Number of  workings days

63

64


125

125

Revenue

$

84,067

$

86,745


$

165,777

$

171,344

Net income (loss)

$

930

$

(76,039)


$

2,126

$

(75,383)

Basic and diluted earnings per share ("EPS")

$

0.04

$

(3.42)


$

0.09

$

(3.41)

EBITDA1

$

7,687

$

7,257


$

12,705

$

14,557

EBITDA1as a percentage of revenue

9.1%

8.4%


7.7%

8.5%

Cash from (used in) operations

$

6,688

$

(3,077)


$

8,617

$

(6,785)

 

__________________________________
1 See "Definition of Non-IFRS Measures" contained in the Management Discussion & Analysis ("MD&A").

Overview

The Company's financial results continue to demonstrate strength with revenue growing for the last nine-month period. Revenue for the three months ended June 30, 2014 was $84.1 million, compared with $81.7 million in the first quarter of this year and $77.8 million for the three months ended December 31, 2013 (a total 8% increase over this nine month period). This is consistent with the Company's long-term growth strategies to achieve and sustain results in line with industry performance.

EBITDA1 as a percentage of revenue increased to 9.1% (or $7.7 million) compared with 6.1% (or $5 million) for the three months ended March 31, 2014 and 3.1% (or $2.4 million) in the fourth quarter of 2013. Significant efforts have been expended over the past nine months to restructure and manage the operations by geographical region, thereby resulting in greater scrutiny of financial results by the leadership team. These changes have facilitated the Company's ability to improve business processes, identify synergies, implement cost management initiatives, evaluate return on assets and achieve growth in sales. Second-quarter results are reflective of these improvements coming to fruition, with the expectation that further improvements will be achieved in the forth coming quarters.

Net income for the three-month period ended June 30, 2014 was $0.9 million, compared with net income in the first quarter of this fiscal year totalling $1.2 million and a net loss of $100.9 million for the three months ended December 31, 2013. After adjusting the Q4 2013 net loss for the after-tax impact of the impairment charge recorded on goodwill and intangible assets, the adjusted net loss1 was $3.8 million. Growth in revenue has been a major contributor to the improvement in net income over these three periods, in addition to savings achieved from cost management initiatives implemented by the Company.

In addition, the Company made significant progress on its recapitalization plan by obtaining approval from the holders of the 7.0% convertible unsecured subordinated debentures to extend the maturity date from December 31, 2014 to June 30, 2019. This marks a significant milestone in the Company's overall refinancing efforts. The Company is currently negotiating an amended credit facility with the lending syndicate which is expected to be completed in the third quarter of this year. Lastly, subsequent to June 30, 2014, management entered into a non-binding letter of intent with a buyer to sell the assets of one of its divisions. The sale is expected to close in Q3 2014.

Recapitalization Highlights

Convertible Debentures

On July 16, 2014, a special meeting was held with holders (the "Debentureholders") of the 7.0% convertible unsecured subordinated debentures, which have a face value of $46 million and were scheduled to mature on December 31, 2014 (the "Debentures"), in relation to the proposal issued May 28, 2014 to extend the maturity date to June 30, 2019. As a result of the special meeting, the Company is pleased to announce that the extension of the maturity date to June 30, 2019 was approved for all Debentures. This represents an important milestone in the Company's recapitalization plan and will allow IBI Group the time needed to continue to execute on its strategic initiatives. The total face value of the promissory notes to be issued will be $3.6 million.

_________________________________
1 See "Definition of Non-IFRS Measures" contained in the Management Discussion & Analysis ("MD&A").

Divestures

The Company also has ongoing efforts in place to identify parts of the business where the return on assets does not align with the long-term growth and performance strategies established by the senior leadership team. It was determined that certain operations were no longer meeting expectations. Subsequent to June 30, 2014, management entered into a non-binding letter of intent with a buyer to sell the assets of one of its divisions, which is subject to certain conditions.  The Company expects that the sale will close in the third quarter. Proceeds from this sale may be used to repay amounts outstanding under the credit facility.

Credit Facility

The Company continues to demonstrate an improvement in financial results since the third quarter of the prior year with a gradual increase in revenue and EBITDA1 over this nine-month period, combined with cash collections exceeding targets on an aggregate basis over this same period. Furthermore, aging of receivables have improved whereby total balances outstanding over 90 days decreased to 31% as at June 30, 2014, compared to 37% as at December 31, 2013 and 47% as of June 30, 2013.  Accordingly, the Company is currently negotiating an amended credit facility with the lending syndicate which is expected to be completed in the third quarter of this year. An agreement has been reached on a term sheet, subject to final approval.  The term sheet contemplates revised and extended repayment terms and availability limits, covenants, and maturity date.     

Outlook

The following represents forward-looking information and users are cautioned that actual results may vary.

Management is forecasting approximately $330 million in total revenue for the year ended December 31, 2014 of which approximately 94% is committed and under contract. The Company continues to see an increase in committed work to be delivered in 2014, which now stands at approximately $309 million. The Company has approximately eight months of backlog (this is calculated on the basis of the current pace of work that the Company has achieved during the last 12 months ended June 30, 2014).

After adjusting for on-going costs of financial advisors, which are expected to be $3.8 million in 2014, the Company is forecasting the 2014 EBITDA1 margin to approach a level more consistent with industry standards. Ongoing efforts are underway to improve the monitoring of financial results, identify synergies and implement cost management initiatives, strengthen the billings and collections process, refinance the Company's credit facility and other long-term debt commitments, and divest operations that are not performing in line with the Company's growth strategies. The Company continues to seek out opportunities to enhance profitability.

_________________________________
1 See "Definition of Non-IFRS Measures" contained in the Management Discussion & Analysis ("MD&A").

"We are pleased with the substantial progress we have achieved towards stabilizing the Company's balance sheet and appreciate the support of our lenders and security holders. Management is also buoyed by the sustained momentum we have observed in our operational performance and in certain key markets," said Scott Stewart, CEO of IBI Group. "Management is continuing to review the divestment of certain operations and prioritizing organic growth."

This guidance should be read in conjunction with the "Caution Regarding Forward-Looking Information" below and is subject to the risks and uncertainties summarized in that section, which are more fully described in the Company's public disclosure documents.

Caution Regarding Forward-Looking Information

Statements in this news release that describe the Company's or management's expectations, forecasts, guidance or estimates may constitute "forward-looking" statements, and such statements use words such as "may", "will", "expect", "believe", "plan" and other similar terminology. Forward-looking statements also include statements that are not historical facts. Forward-looking statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this news release. Forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, IBI Group, or the industry in which they operate, to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Although the Company believes that the assumptions inherent in the forward-looking statements are reasonable, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those related to: (i) IBI's ability to maintain profitability and manage its growth; (ii) IBI's reliance on its key professionals; (iii) competition in the industry in which IBI operates; (iv) timely completion by IBI of projects and performance by IBI of its obligations; (v) fixed-price contracts; (vi) the general state of the economy; (vii) acquisitions by IBI; (viii) risk of future legal proceedings against IBI; (ix) the international operations of IBI; * reduction in IBI's backlog; (xi) fluctuations in interest rates; (xii) fluctuations in currency exchange rates; (xiii) potential undisclosed liabilities associated with acquisitions; (xiv) upfront risk for time invested in participating in consortiums bidding on large projects; (xv) limits under IBI's insurance policies; (xvi) the Company's reliance on distributions from IBI Group LP and IBI Group and, as a result, its susceptibility to fluctuations in IBI's performance; (xvii) unpredictability and volatility of the price of the Company's shares; (xviii) the degree to which IBI is leveraged; (xix) the possibility that the Company may issue additional shares diluting existing shareholders' interests; (xx) income tax matters; and (xxi) approval of the recapitalization plan by the Company's lending syndicate and achieving the specified requirements per the amended agreement; and (xxii) refinancing the convertible debentures which mature December 31, 2014. See "Risk Factors" discussed in the Company's Annual Information Form filed with the Canadian securities regulatory authorities. New risk factors may arise from time to time and it is not possible for management of the Company to predict all of those risk factors or the extent to which any factor or combination of factors may cause actual results, performance or achievements of the Company to be materially different from those contained in forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Although the forward-looking statements contained in this annual information form are based upon what management believes to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this news release, and the Company assumes no obligations to update or revise them to reflect new events or circumstances.

About IBI Group Inc.:

The Company is a TSX-listed corporation and its common shares trade under the symbol "IBG".

IBI Group is a globally integrated architecture, planning, engineering, and technology firm with over 2,600 professionals around the world. For more than 40 years, our dedicated professionals have helped clients create livable, sustainable, and advanced urban environments. We are one of the largest architecture firms in the world, and more than 300 of our staff architects, planners, designers and engineers are LEED accredited.

From high-rises to industrial buildings, schools to state-of-the-art hospitals, transit stations to highways, airports to toll systems, bike lanes to parks, we design every aspect of a truly integrated city for people to live, work, and play.

We organize our expertise into three areas:

  1. Intelligence: systems designer, software development.
  2. Buildings: building architecture, building engineering (mechanical, structural, electrical).
  3. Infrastructure: planning, urban design, landscape architecture, transportation, and engineering.

Our collaborative and combined approach focuses not only on creating the best solutions today, but also creating the right solutions for tomorrow.

We believe cities must be designed with intelligent systems, sustainable buildings, efficient infrastructure, and a human touch.

At IBI, we're defining the cities of tomorrow.

Investor Conference Call

The Company will hold a conference call on August 15, 2014 at 8:30 AM. (Toronto time). To participate in the conference call, please dial in before 8:30 AM. (Toronto time) to 1-800-891-8257 for local and toll-free North American access, or 1-212-231-2927 for international access.

An audio replay of the call will be available for 14 days, by dialing 1-416-626-4100 for international access or 1-800-558-5253 for local and toll-free North American access, pass code 21721172 followed by the number sign on your telephone keypad.

SOURCE IBI Group Inc.

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