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Press release from Marketwire

Morneau Shepell Inc. Continues Double Digit Growth in Revenue and Earnings Q2 2012

Wednesday, August 08, 2012

Morneau Shepell Inc. Continues Double Digit Growth in Revenue and Earnings Q2 201216:10 EDT Wednesday, August 08, 2012TORONTO, ONTARIO--(Marketwire - Aug. 8, 2012) - NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S.Morneau Shepell Inc. (the "Company" or "Morneau Shepell") (TSX:MSI) today reported its financial results for the three -month period ended June 30, 2012 (all amounts are in Canadian dollars, unless noted otherwise).Highlights:17.9 percent increase in revenue to $106.8 million, compared to $90.6 million in Q2 2011 15.6 percent increase in Adjusted EBITDA1 to $20.8 million from $18.0 million in the same period of 2011 Recent SBC Systems acquisition contributes to US new business success "Strong organic growth along with increased revenue from our acquired businesses is driving these very positive results," said Bill Morneau, Executive Chairman of the Company. "Looking forward, we expect future growth to be in line with our historical trends.""We experienced growth from all of our lines of business, with the largest contributions in the quarter coming from our pension and benefits outsourcing, and health management businesses," added Alan Torrie, President and CEO of Morneau Shepell. "These contributions were especially fueled by significant new man dates won in previous quarters that are coming fully on-line. Up-front costs to take these new mandates live are also reflected in our EBITDA growth to date."Q2 2012 Financial ReviewIn thousands of dollarsSecond quarter ended June 30, 2012Second quarter ended June 30, 2011(Unaudited)(Unaudited)Revenue$106,791$90,565Adjusted EBITDA(1)$20,763$17,993Adjusted EBITDA(1) margin19.4%19.9%Normalized Free Cash Flow(2)$15,637$10,709Profit$6,274$6,133For the three months ended June 30, 2012 ("Q2 2012"), the Company reported $106.8 million in revenue, a 17.9 percent increase from $90.6 million for the same period in June 30, 2011 ("Q2 2011" ). Total operating expenses (excluding depreciation and amortization expenses) were $86.9 million in Q2 2012, compared with $72.6 million in Q2 2011. Profit in Q2 2012 was $6.3 million, compared with $6.1 million in Q2 2011.Adjusted EBITDA(1) of $20.8 million increased by 15.6 percent from Q2 2011 due to the increase in revenue, offset by increased salaries and other operating expenses of $13.6 million after adjusting for expenses related to enterprise software replacement expense and operational effectiveness initiatives. Adjusted EBITDA(1) margin was 19.4 percent compared to 19.9 percent in Q2 2011.DividendsFor Q2 2012, the Company generated Normalized Free Cash Flow(2) of $15.6 million compared to $10.7 million in Q2 2011. The Normalized Payout Ratio(3) for Q2 2012 was 59.8 percent compared to 87.3 percent for Q2 2011. The 12-month rolling Normalized Payout Ratio(3) was 77.5 percent compared to 94.4 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 CallManagement of Morneau Shepell will host a conference call on Thursday, August 9, 2012, at 11:00 a.m. EDT. The conference call is open to all those wishing to attend, with a Question & 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 at www.morneaushepell.com.About Morneau Shepell Inc.Morneau Shepell Inc. is the largest Canadian-based firm offering benefits and pension consulting, outsourcing, as well as health management services. The company works with clients to develop end-to-end insights and solutions that integrate with their business strategies to achieve results. Through Benefits and Health Solutions Consulting, Pension Consulting, Health Management, Administration Solutions and Shepell·fgi's Employee and Family Assistance Program, Morneau Shepell helps clients reduce costs, increase employee productivity, and improve their competitive positions by supporting their employees' financial security, health and well-being.Established in 1966, Morneau Shepell serves over 8,000 clients, ranging from small businesses to some of the largest corporations and associations in North America. With approximately 2,800 employees in offices across North America, we provide services to organizations across Canada, in the United States and around the globe.Financial MeasuresTo assist investors in assessing the Company's financial performance, this news release also makes reference to certain financial measures such as EBITDA and Normalized Free Cash Flow. The Company believes that EBITDA and Normalized Free Cash Flow and their respective payout ratios are useful supplemental measures of performance as they are generally use 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. Financial measures do not have any standard meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers.(1) "Adjusted EBITDA" is defined as profit before finance costs, income taxes (expenses), depreciation, amortization, impairment losses, and certain non-recurring expenditures. (2) "Normalize 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 taxes paid) and certain non-recurring expenditures. (3) "Normalize Payout Ratio" is defined as dividends declared divided by Normalized Free Cash Flow. Forward-Looking StatementsThis 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.FOR FURTHER INFORMATION PLEASE CONTACT: Investor RelationsMorneau Shepell Inc.416-445-2700www.morneaushepell.com