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Press release from CNW Group

IBI ANNOUNCES ENHANCED 2011 FIRST QUARTER EARNINGS:

Wednesday, June 01, 2011

IBI ANNOUNCES ENHANCED 2011 FIRST QUARTER EARNINGS:17:57 EDT Wednesday, June 01, 2011Revenue at $77.8 million, the highest quarter of revenue to date; increase of $9.7 million +14.2%  EBITDA at $10.5 million; increase of $1.4 million +15.4%Distributable Cash of $5.8 million; decrease of $0.6 million - 8.7%Distributable Cash per share and unit of $0.3231 vs declared of $0.276.  Payout ratio of 85.4%.TORONTO, June 1, 2011 /CNW/ - IBI Group Inc (the "Company") (TSX: IBG) today announced its financial results for three months ended March 31, 2011, reported now for the first time under International Financial Reporting Standards ("IFRS").Operating Highlights The first quarter of 2011 results demonstrated the continued firming of the operating results of IBI Group as compared to the first quarter of 2010 and the fourth quarter of 2010.  The results of the first quarter of 2011 are based on 62 available working days compared with 63 workings for an average quarter and for the fourth quarter 2010.  The one additional day to "normalize" to an average quarter would have resulted in approximately $1.3 million of additional revenue.  The highlights are:Revenue at $77.8 million,  the highest quarterly amount to date ($79.1M normalized) was $9.7 million above the first quarter of 2010, and up $2.0 million compared with the fourth quarter of 2010 ( $3.3M  normalized).EBITDA1 of $10.5 million ($11.8M normalized) was $1.4 million above the first quarter of 2010, and down $1.0 million compared with the fourth quarter of 2010 (normalized up $0.3M compared to the fourth quarter of 2010).EBITDA1 as a percentage of revenue for the first quarter of 2011 was 13.5% (14.9% normalized), an increase of 0.1% to the first quarter of 2010 and down 1.6% when compared to the fourth quarter of 2010 at 15.1% (down 0.2% normalized).Distributable cash of $5.8 million ($7.1M normalized) was $0.6 below first quarter of 2010,  down $2.3 million when compared to the fourth quarter of 2010 (down $1.0M normalized).Dividends and distributions paid were 85.4% of cash earned compared to 111.9% to the first quarter 2010.The Net earnings attributable to the Company of $0.3 million was $2.8 million less than the adjusted net earnings attributable to the Company for the first quarter 2010 of  $3.1 million and down $2.5 million when compared to the $2.8 million previously reported 2010 first quarter results prepared under Pre-Changeover  Accounting ("PCAS"), (prior to IFRS generally referred to as GAAP). The decrease reflects a one-time non-cash deferred tax charge of $3.1 million associated with the conversion of the Trust to a Company.The combined amount of working capital tied up in accounts receivable, work in process and deferred revenue continued to improve measured in the equivalent numbers of working days; down to 167 days as at March 31, 2011 from 175 days equivalent at end of fourth quarter 2010. During the period of the recession, the working capital tied up rose from the equivalent of 180 working days in the fourth quarter of 2009 up to 195 days in second quarter of 2010.  Significant progress has been made in reducing this working capital tied up with the reduction down to 178 days in third quarter of 2010, 175 days in fourth quarter of 2010 and now to 167 days as at March 31, 2011.The basis of this firmer performance is discussed in paragraphs below.(1)     See "Definition of Adjusted Net Income, EBITDA, Distributable Cash and Non-IFRS Measures"Revenue ActivityRevenue for the first quarter 2011 exceeded that of the fourth quarter of 2010, as well as the first quarter 2010. Work is underway on a wide range of projects (approximately 5,500 active projects). Intensive efforts continue on major projects including the McGill Health Centre, Southern Glasgow General Hospital and other health care facilities; highway tolling projects worldwide; a large number of educational facilities; continued strength in housing developments in Canada and China; and some major transit and highway projects.Organic growth in the first quarter of 2011 increased by $0.5 million (0.7%) as compared with the first quarter of 2010, and increased by $0.3 million (0.4%) as compared to the fourth quarter 2010.  This return of organic growth over the previous quarter is understated as the first quarter 2011 was 62 days. Normalized to a 63 day average quarter would have added $1.3 million, an increase of $1.6 million over the fourth quarter of 2010 (2.1%). IBI anticipates continued organic growth through 2011.Public sector work again exceeded 67% of the $77.8 million of revenue in the first quarter.Strategic Program of GrowthAt the end of the fourth quarter of 2010, IBI Group completed the acquisition and merger of CSM Engineering Ltd. ("CSM"), based in Fort McMurray, Alberta.  CSM has been leading the civil engineering practice in the development of land and infrastructure in Fort McMurray, for over a decade. The acquisition is now enabling IBI Group and CSM to jointly continue the practice of civil engineering for land development and infrastructure in Fort McMurray and Northern Alberta.  The professional engineering team of CSM now being integrated within the IBI Group   constitutes an experienced and broadly based professional team to serve the continuing community and infrastructure needs in Fort McMurray, arising from the continuing developments of the oil sands. CSM and IBI Group have collaborated on projects previously, and are doing work in joint venture currently for mutual clients. This merging of the CSM professional engineering practise within IBI Group facilitates a more comprehensive and effective service to clients. The merger with IBI Group enables CSM to broaden and strengthen the talent and experience of CSM to undertake larger scale projects with more comprehensive services. It also opens broader horizons for the growth of the CSM professional team over the longer term within the IBI Group of Firms.In January 2011, the merger of the practice of Cardinal Hardy Architectes, (CHA) with Beinhaker Architects was completed. This practice continues as Cardinal Hardy Beinhaker Architects affiliated with the IBI Group of firms. In parallel, the merger of the Company Groupe Cardinal Hardy Inc. (GCHI) directly within IBI Group was completed as well. CHBA is a full services architectural practice known for its outstanding design and technical work ranging from institutional projects in transportation, social infrastructure including building facilities in education and health, private development projects by leading developers in the Greater Montreal Region. The firm is also expert with an outstanding portfolio of work in urban design and landscape architecture. This merger and the ongoing integration is proceeding very effectively and has resulted in additional assignments secured from clientele of the previously separate firms.In March 2011, IBI Group concluded arrangements for the merger / acquisition of Bay Architects Inc, (Bay) in Southeast Texas, based in Houston.  Bay is an architectural firm that specializes in educational facilities, (schools and community colleges), along with other areas of architectural practice in civic, other institutional, retail, office and industrial facilities. Bay-IBI  is a further strategic component of the growing international practice of the IBI Group in education.  Bay-IBI will also provide the strategic platform for IBI Group for growth in the large and prosperous State of Texas. New opportunities in transportation sector are being now pursued combining the transportation experience of IBI Group from California and elsewhere with the Texas presence of Bay-IBI.IBI Group continues to be committed to growth in the USA.   Discussions are under way with a number of USA based firms in connection with potential acquisitions. These acquisitions could add further skills and strengthen IBI Group's presence in major centres of population in the six urban regions of the USA. IBI Group expects additional acquisitions to be concluded during 2011.  As IBI Group has noted previously, the firms being acquired may not achieve the levels of profitability of which they are capable within the current economic environment in the USA.  While this may dampen EBITDA and distributable cash as a percentage of net fee revenue in the short term and is of concern to the IBI Group, the firm continues to believe this is a sound strategic investment program which will realise significant results within an improved economic environment, strengthened with the international reach of the IBI Group within the next few years.  In fact, IBI Group is currently experiencing an increase in demand for its services in the USA market notably in the automotive sector related to plant refurbishments for production changes and expansion.IBI Group is also engaged in discussions with other firms for strategic relationships and acquisitions in international markets where IBI Group is currently active including; China, India, Eastern Europe and South America.Backlog:The IBI Group committed fee volume for the year 2011 represents in excess of nine months equivalent work. Backlog for Government and public institutional clients continues to be in excess of 67% of total backlog.  Backlog continues to increase in building facility areas in health care (IBI was just awarded its first significant building mandate in health care in the USA), in education, in transportation terminals, transportation networks and systems technology.  IBI Group is increasingly receiving new mandates in the design stage of new private sector projects, as well as some of these now moving into design development and working drawings as projects proceed to sales.The scope of these efforts is validation of IBI Group's integrated operating model of providing comprehensive professional services to clients in Canada, the USA and in International markets resulting in the achievement of the highest quarterly revenue of the firm to date.IBI has grown in numbers of people reflecting the growth and revenue and now comprises some 2,600 members of the firm, appropriately sized for the backlog.With this growth in personnel and professional excellence, IBI increasingly is awarded leading professional and managerial roles for proponents and owners of development projects.  These include major projects in social infrastructure such as the McGill University Medical Centre in Montreal; major transportation projects in transit facilities, as well as increasingly in the highway/road modes; the comprehensive provision of intelligent systems based on IBI software, integration of hardware, and the delivery of complete systems including ongoing operations; and now with a turn in certain private property markets, the leadership of major real property developments in Canada, Eastern Europe and Asia.  The progress of the firm in extending the excellence of its professional capability and the breadth and depth of resources provides an increasingly effective platform for IBI as a significant participant in the design of physical aspects of urbanization across the world with IBI's global experience complemented by IBI's established physical and operating presence in communities throughout the world.Subsequent Transactions:On May 31, 2011, the company concluded arrangements for a new 5 year $120 million credit facility with an $80 million accordion feature. This reflects the policy of the Company to use bank debt for operating purposes and for interim financing for acquisitions. Pursuant to this policy, the Company will replace bank debt with longer term debt at fixed interest rates including debt through bonds, convertible debentures and other instruments or through capital raised from future equity issues.The new facility has advantages to the Company including:Reduced interest cost;Greater flexibility in terms of guarantees and documentation required for non-material acquisitions;Reduced financial covenants;Reduced standby fee on the $120 million committed;Enhanced capacity for acquisitions, of an additional $80 million to a total of $200 million;Providing for greater flexibility as the extended 5 year maturity date will extend past the December 31, 2014 due date of the $46 million convertible debentures.This new facility replaces the existing $150 million credit facility which is to mature August 31, 2012.Investor Conference CallThe Company will hold a conference call on Thursday, June 2, 2011 at 8:30 a.m. Eastern Standard Time (EST). To participate in the conference call, please dial in before 8:30 a.m. EST to 800 926-6734 for local and toll-free North American access, or 1 416 981 9013 for international access.An audio replay of the call will be available for 14 days, by dialling 416-626-4100 for local and international access, or 1 800 558-5253 for toll-free North American access, passcode 21521090 followed by the number sign on your telephone keypad.Selected Consolidated Financial Information and Reconciliation of Non-IFRS Measuresin thousands of  dollars except for per Unit amountsThree months endedMarch 31, 2011Three months endedMarch 31, 2010Revenue    $  77,785    $  68,075Expenses                              67,255           58,949Earnings before income taxes, interest and amortization (EBITDA2)          10,530      9,126Interest          3,115            2,231Change in Fair Value and other finance costs (income)          (66)          (37,373)Income taxes - current          1,652      350Income taxes - deferred          2,493      (349)Amortization of property and equipment and intangible assets                2,729             2,697Acquisition-related costs             218                        65Net earnings before non-controlling interest                   389           41,505Non-controlling interest    109-Net earnings           280     41,505Distribution paid to Unitholders    -5,111Distribution paid to exchangeable unitholders     2,010Change in Fair Value of trust units    -(29,902)Change in Fair Value of exchangeable interest liability    -(11,760)Change in Fair Value of derivative liability embedded in convertible debentures    -(2,678)Proportion of earning attributable to Class B Partnership Units     (1,200)Adjusted Net Earnings          280     3,086Basic net earnings per Share (units in 2010)               0.0217          0.2415Distributable Cash      Cash flow used in operating activities       3,005(5,005)Less: Capital expenditures      (590)  (460)Standardized Distributable Cash         2,415      (5,465)Add (deduct):        Change in non-cash operating working capital   (1,542)   9,945  Deferred transaction costs    12087  Acquisition-related costs    21865Interest expenses    2,9371,382  Current income tax expense    1,652350Distributable Cash (2)    $  5,800$  6,364Weighted average basic distributable cash per Share or  Unit       $  0.3231   $  0.3567Aggregate distributions declared              4,909           7,104Payout ratio              85.4%         111.9%(1)     See "Definition of EBITDA, Distributatle Cash and Non-IFRS Measures"(2)     Distributable Cash per Share or Unit amounts are calculated by including common shares 2011and the Class A units.Definition of EBITDA, Distributable Cash and Non-IFRS Measures Distributable Cash does not have a standardized meaning prescribed by IFRS but is a measure generally used by Canadian open-ended companies as an indicator of financial performance. The Company defines Distributable Cash as cash flow from operating activities before change in non-cash working capital and income taxes and after capital expenditures, income taxes paid, deferred transaction costs and acquisition-related costs.  A reconciliation of Distributable Cash to cash flow from operating activities has been provided in the MD&A under the heading "Selected Consolidated Financial Information and Reconciliation of Non-IFRS Measures".The Company's method of calculating distributable cash may differ from similar computations as reported by other similar entities and, accordingly, may not be comparable to distributable cash as reported by such entities. The Company believes that its distributable cash is a useful supplemental measure that may assist prospective investors in assessing the return on their investment in Units.References to "EBITDA" are to earnings before interest, income taxes, depreciation and amortization, deferred transaction costs, change in fair value of interest rate swap and acquisition-related cost. Management of the Company believes that in addition to net earnings, EBITDA is a useful supplemental measure as it provides readers with an indication of cash available for distribution prior to debt service, capital expenditures and income taxes. Readers should be cautioned, however, that EBITDA should not be construed as an alternative to net earnings determined in accordance with IFRS as an indicator of the Company's performance or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows. EBITDA is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS, and the Company's method of calculating EBITDA may differ from other issuers. Accordingly, EBITDA may not be comparable to similar measures used by other issuers. A reconciliation of net earnings with EBITDA has been provided in the MD&A under the heading "Selected Consolidated Financial Information and Reconciliation of Non-IFRS Measures".Discussion in this press release of net earnings before non-controlling interest, EBITDA and distributable cash include the impact of foreign exchange gain (loss) as the Company believes this provides useful information for readers to assess the performance of the Company. For further information: Tony Long IBI Group Inc 230 Richmond Street West, 5th Floor Toronto, ON M5V 1V6 Tel: 416-596-1930