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Press release from CNW Group

DATA Group Inc. announces second quarter results for 2012

Thursday, August 09, 2012

DATA Group Inc. announces second quarter results for 201207:45 EDT Thursday, August 09, 2012HIGHLIGHTSQ2 2012Second quarter 2012 ("Q2") Revenues of $82.6 million, Q2 Gross Profit of $21.1 million, and Q2 Net Income of $0.6 millionQ2 Dividends declared of $3.8 million or $0.163 per shareQ2 Adjusted EBITDA of $6.1 million (See Table 2 and "Non-GAAP Measures" below)YTD 2012Year to Date 2012 ("YTD") Revenues of $169.3 million, YTD Gross Profit of $44.3 million, and YTD Net Income of $4.2 millionYTD Dividends declared of $7.6 million or $0.326 per shareYTD Adjusted EBITDA of $13.8 million (See Table 2 and "Non-GAAP Measures" below)BRAMPTON, ON, Aug. 9, 2012 /CNW/ - DATA Group Inc. (TSX: DGI) ("DATA Group") announced its financial and operating results for the second quarter ended June 30, 2012, which includes the operating results of its subsidiaries DATA Group Ltd., The Fulfillment Solutions Advantage Inc. ("FSA") and FSA Datalytics Canada Inc. ("Datalytics")."I am encouraged by our progress on our growth strategy on a number of fronts in the second quarter and the first six months of 2012 as we continue to reposition DATA Group for sustainable, long term growth.  We generated increased new business revenue and increased overall revenue, reduced operating costs and improved gross profit, launched new products and services which are getting positive responses from the marketplace and we won significant new business agreements that will take effect later this year.  At the same time, our Adjusted EBITDA and net income did not meet expectations.  Going forward, we will continue to focus on the successful execution of our strategic growth plan in a prudent, well managed fashion.  We will closely manage the cost of our investment in the growth plan along with our financial results and we will also balance this investment and our results with the financial strategy of our business", said Michael Suksi, President and Chief Executive Officer.DATA Group is pleased to announce that its board of directors has appointed Bill Albino as a director.  Mr. Albino has extensive experience in document process outsourcing, business process outsourcing, digital print and technology services.  Mr. Albino has already begun providing valuable insight into the Data Group's strategy in these areas.OutlookDATA Group remains strategically focused on being the leading document management service provider in Canada, while expanding in marketing communications and concentrating on providing high value-added products and services.  Under the DATA Group's new strategic growth plan, it has implemented numerous initiatives to establish new revenue streams and to generate incremental cost savings to improve its profitability.  These include bundling DATA Group's new capabilities with its traditional core marketing offerings to create broader, single source solutions that provide greater value to clients and generate new revenues.  DATA Group remains focused on the successful, ongoing execution of this plan in a prudent, well managed fashion, balancing its investment in the growth plan with its financial strategy.  DATA Group's strategic goals for the remainder of 2012 include:Develop new, high growth digital products and services.  DATA Group will continue to research additional new products and services in both the digital direct marketing and the digital document management categories for future launch.  In the second quarter of 2012, DATA Group announced two additional new products and services that will positively impact its business in the future. The first of these is Marketing Campaign Management. This software based service enhances the effectiveness of marketing departments by creating collaborative, automated workflows between the client's marketing staff, their agencies and DATA Group. This allows for faster and more effective marketing campaign planning, creative design, execution and reporting on results.  DATA Group will charge a fee for the Marketing Campaign Management service.  In addition, this offering is bundled with DATA Group's other marketing services to create a complete client solution. Consequently, the Corporation expects this new offering will create additional new revenue and profit in all of these categories. The second new capability is Document Process Management. This is a progressive extension of DATA Group's existing Document Management Services.  Rather than only managing the client's supply of documents that have not yet been completed, Document Process Management will allow Data Group to also provide services associated with managing the client's completed documents.  More specifically, DATA Group will be adding new capabilities such as document management related workflow consulting, electronic document workflow automation, scanning and archiving of completed documents, and related data extraction from completed documents.Complete acquisitions that are aligned with DATA Group's growth plan and that are accretive immediately.  In November 2011, DATA Group completed the acquisition of FSA and a 70% interest in Datalytics, which was subsequently increased to 82.35%.  The products and services offered by FSA and Datalytics fit extremely well with DATA Group's recently launched web-based direct marketing services such as its gift card, direct mail and other marketing services.  The acquisition of FSA was immediately accretive.  DATA Group will continue to pursue additional acquisitions in the areas of digital direct marketing and digital document management.Continue DATA Group's aggressive sales effort to expand its market share in its core markets of document management and marketing services in order to generate new business.  DATA Group has expanded its capability in the growing areas of short run, on demand marketing print, and retail gift card and loyalty card production.  DATA Group has also expanded its sophisticated web-based ordering systems for digital print solutions, and has implemented a number of initiatives to gain market share, which include changes in its sales compensation program, additional sales resources, increased sales training, implementing sale process automation, and direct marketing campaigns to promote its products and services in the marketplace.  DATA Group will continue these and other growth-orientated initiatives in 2012.  In the second quarter and the first six months of 2012, DATA Group won $6.6 million and $10.4 million in new business.  As part of its expanded sales efforts, DATA Group will look to expand into markets in the United States as it follows its Canadian customers' expansion efforts.Find innovative new ways to generate incremental cost savings.  DATA Group's strategic sourcing department, process improvement initiatives and a focus on lease costs continued to generate incremental savings of approximately $1.1 million in the second quarter of 2012 and $2.1 million in the first six months of 2012 which contributed to DATA Group's improved gross profit.  DATA Group expects material cost savings from these initiatives in 2012.Table 1    The following table sets out selected historical financial information for the periods noted.Consolidated Financial Information    For the periods ended June 30, 2012 and 2011(in thousands of Canadian dollars, except per share/unit amounts, unaudited)Apr. 1 toJune 30,2012$Apr. 1 toJune 30,2011$Jan. 1 toJune 30,2012$Jan. 1 toJune 30,2011$Revenues82,60879,992169,256164,280Cost of revenues61,51959,806124,970122,679Gross profit21,05920,18644,28641,601     Selling, general and administrative expenses16,37114,69833,36629,565Corporate conversion costs-25384414Amortization of identifiable intangible assets2,3112,5654,6225,131     Income before finance costs and income taxes2,3772,6706,2146,491     Finance costs     Interest expense1,4701,3882,9502,744 Interest income(5)(19)(14)(45) Change in fair value of conversion options-(848)-(995) Amortization of transaction costs154132306262 1,6196533,2421,966     Income before income taxes7582,0172,9724,525          Income tax expense (recovery)     Current8044402,0521,027 Deferred(614)171(3,300)338 190611(1,248)1,365     Net income for the period5681,4064,2203,160     Net income attributable to shareholders/unitholders5881,4064,2483,160Basic and diluted income per share/unit0.030.060.180.13Number of common shares/units outstanding23,490,59223,490,59223,490,59223,490,592     Consolidated Statements of Financial Position Information(in thousands of Canadian dollars, unaudited)As atJune 30,2012$As atJune 30,2011$  Current assets85,26490,746  Current liabilities41,17537,307       Total assets275,657281,466  Total non-current liabilities121,544120,537       Shareholders' equity112,774-  Non-controlling interest164-  Total equity112,938-       Unitholders' equity-123,622       Table 2     The following table provides a reconciliation of net income (loss) to Adjusted EBITDA for the periods noted.  See "Non-GAAP Measures".Adjusted EBITDA Reconciliation    For the periods ended June 30, 2012 and 2011(in thousands of Canadian dollars, unaudited)Apr. 1 toJune 30,2012$Apr. 1 toJune 30,2011$Jan. 1 toJune 30,2012$Jan. 1 toJune 30,2011$Net income for the period5681,4064,2203,160Interest expense1,4701,3882,9502,744Interest income(5)(19)(14)(45)Change in fair value of conversion options-(848)-(995)Amortization of transaction costs154132306262Depreciation of property, plant and equipment1,4471,4122,8702,834Amortization of identifiable intangible assets2,3112,5654,6225,131Corporate conversion costs-25384414Current income tax expense8044402,0521,027Deferred income tax (recovery) expense(614)171(3,300)338Adjusted EBITDA6,1356,90013,79014,870     RESULTS OF OPERATIONSRevenuesFor the quarter ended June 30, 2012, DATA Group recorded revenues of $82.6 million, an increase of $2.6 million or 3.3% compared with the same period in 2011.  The increase, before intersegment revenues, was the result of a $3.3 million increase in the DATA East and West segment and was offset by a $0.2 million decrease in the Multiple Pakfold segment.  For the six months ended June 30, 2012, DATA Group recorded revenues of $169.3 million, an increase of $5.0 million or 3.0% compared with the same period in 2011.  The increase, before intersegment revenues, was the result of a $5.8 million increase in the DATA East and West segment and a $0.1 million increase in the Multiple Pakfold segment. Beginning November 1, 2011, the results of FSA and Datalytics are included in the DATA East and West segment.Cost of Revenues and Gross ProfitFor the quarter ended June 30, 2012, cost of revenues increased to $61.5 million from $59.8 million for the same period in 2011.  Gross profit for the quarter ended June 30, 2012 was $21.1 million, which represented an increase of $0.9 million or 4.3% from $20.2 million for the same period in 2011.  The increase in gross profit for the quarter ended June 30, 2012 was attributable to a gross profit increase of $0.9 million in the DATA East and West segment and was offset by a gross profit decrease of $0.1 million in the Multiple Pakfold segment.  Gross profit as a percentage of revenues increased to 25.5% for the quarter ended June 30, 2012 compared to 25.2% for the same period in 2011.  For the six months ended June 30, 2012, cost of revenues increased to $125.0 million from $122.7 million for the same period in 2011.  Gross profit for the six months ended June 30, 2012 was $44.3 million, which represented an increase of $2.7 million or 6.5% from $41.6 million for the same period in 2011.  The increase in gross profit for the six months ended June 30, 2012 was attributable to gross profit increases of $2.6 million in the DATA East and West segment and $0.1 million in the Multiple Pakfold segment.  Gross profit as a percentage of revenues increased to 26.2% for the six months ended June 30, 2012 compared to 25.3% for the same period in 2011.Selling, General and Administrative Expenses and Severance ExpensesSelling, general and administrative ("SG&A") expenses, including administrative expenses of DATA Group Inc. but excluding amortization of identifiable intangible assets, for the quarter ended June 30, 2012 increased $1.7 million to $16.4 million compared to $14.7 million in the same period in 2011.  As a percentage of revenues, these costs were 19.8% of revenues for the quarter ended June 30, 2012 compared to 18.4% of revenues for the same period in 2011.  The increase in SG&A expenses for the three months ended June 30, 2012 was attributable to the inclusion of FSA and Datalytics in DATA Group's results of operations and investments to launch new products and services initiatives.  For each of the quarters ended June 30, 2012 and 2011, DATA Group incurred $0.3 million of severance expenses.  SG&A expenses for the six months ended June 30, 2012 increased $3.8 million to $33.4 million compared to $29.6 million for the same period of 2011. The increase in SG&A expenses was attributable to the inclusion of FSA and Datalytics in DATA Group's results of operations and investments to launch new products and services initiatives. As a percentage of revenues, these costs were 19.7% of revenues for the six months ended June 30, 2012 compared to 18.0% of revenues for the same period in 2011.  For the six months ended June 30, 2012 and 2011, DATA Group incurred $0.4 million and $0.5 million of severance expenses, respectively.  Severances costs for the three and six months ended June 30, 2011 and 2010 were included in SG&A and were related to the Data Group's on-going productivity improvements and cost reduction initiatives.  Severance costs for the three and six months ended June 30, 2012 and 2011 were included in SG&A and were related to DATA Group's ongoing productivity improvements and cost reduction initiatives.Corporate Conversion CostsDuring the six month periods ended June 30, 2012 and 2011, DATA Group incurred total professional fees of $0.1 million and $0.4 million, respectively, related to the conversion.  During the quarter ended June 30, 2011, DATA Group incurred total professional fees of $0.2 million related to the conversion of the Fund to a corporation on January 1, 2012.Adjusted EBITDAFor the quarter ended June 30, 2012, Adjusted EBITDA was $6.1 million, or 7.4% of revenues.  Adjusted EBITDA for the quarter ended June 30, 2012 decreased $0.8 million or 11.1% from the same period in the prior year primarily due to the cost of DATA Group's investment it its growth strategy.  These costs included selling, general and administration expense as described above.  The Adjusted EBITDA margin for the quarter, as a percentage of revenues, decreased from 8.6% of revenues in 2011 to 7.4% of revenues in 2012.  Adjusted EBITDA for the six months ended June 30, 2012 was $13.8 million, or 8.1% of revenues. Adjusted EBITDA for the six months ended June 30, 2012 decreased $1.1 million or 7.3% from the same period in the prior year and the Adjusted EBITDA margin for the six month period, as a percentage of revenues, decreased from 9.1% of revenues in 2011 to 8.1% of revenues in 2012.Interest Expense and Finance CostsInterest expense on long-term debt outstanding under DATA Group's credit facilities and DATA Group's outstanding $45.0 million aggregate principal amount of 6.00% Convertible Unsecured Subordinated Debentures (the "6.00% Convertible Debentures") was $1.5 million for the three months ended June 30, 2012 compared to $1.4 million for the same period in 2011, and was $3.0 million for the six months ended June 30, 2012 compared to $2.8 million for the same period in 2011.  The increase in interest expense during the three and six months ended June 30, 2012 was the result of higher outstanding balances and higher rates of interest charged on those balances.Finance costs for the three and six months ended June 30, 2011 included recoveries of $0.8 million and $1.0 million, respectively, related to the change in the fair value of the Fund's conversion options.  The conversion options were the conversion feature in each of the Fund's outstanding convertible debentures, which is measured at fair value at each reporting date.  The Fund's obligations under those convertible debentures were assumed by the Corporation in connection with the Arrangement.  As a result of the Fund's conversion to a corporation on January 1, 2012, those conversion option liabilities were classified as equity on the financial statements of the Corporation due to the change in the nature of the underlying security to shares from units and are not re-measured at fair value at each reporting date.Income TaxesDATA Group reported income before income taxes of $0.8 million, a current income tax expense of $0.8 million and a deferred income tax recovery of $0.6 million for the three months ended June 30, 2012 compared to income before income taxes of $2.0 million, current income tax expense of $0.4 million and a deferred income tax expense of $0.2 million for the three months ended June 30, 2011.  DATA Group reported income before income taxes of $3.0 million, a current income tax expense of $2.1 million and a deferred income tax recovery of $3.3 million for the six months ended June 30, 2012 compared to income before income taxes of $4.5 million, a current income tax expense of $1.0 million and a deferred income tax expense of $0.3 million for the six months ended June 30, 2011.  The current tax expense for the three and six months ended June 30, 2012 were higher than the same periods in 2011 due to the Fund's conversion to a corporation, which resulted in more income being subject to income taxes.  The deferred income tax recovery was due to the conversion, a change in estimates of future reversals of temporary differences and new temporary differences that arose during the three and six months ended June 30, 2012.  As a result of the conversion, DATA Group re-measured its deferred tax assets and liabilities at the corporate tax rates applicable to corporations, which are lower than the top marginal tax rate for individuals used by the Fund.  In addition, the Fund's conversion option liabilities were reclassified as equity on January 1, 2012 and the associated deferred tax liability was reversed.  As a result of these changes, DATA Group recorded a deferred income tax recovery $2.0 million during the first quarter of 2012.Net IncomeNet income for the quarter ended June 30, 2012 was $0.6 million compared to a net income of $1.4 million for the quarter ended June 30, 2011.  The decrease in comparable profitability for the quarter ended June 30, 2012 was due to higher SG&A expenses, finance costs, and current income tax expense, respectively.  The decrease in comparable profitability was partially offset by the deferred income tax recovery due the change in estimate of future reversals of temporary differences, higher gross profit in the second quarter of 2012 as a result of cost savings realized from DATA Group's ongoing productivity improvement and cost reduction initiatives and the acquisition of FSA, respectively.Net income for the six months ended June 30, 2012 was $4.2 million compared to a net income of $3.2 million for the six months ended June 30, 2011.  The increase in comparable profitability for the six months ended June 30, 2012 was substantially due to higher gross profit, the acquisition of FSA, and the deferred income tax recovery due to the change in estimate of future reversals of temporary differences and the conversion of the Fund to a corporation.  The increase in comparable profitability during the first half of 2012 was partially offset by higher SG&A expenses, a larger recovery related to the change in the fair value of the conversion options in the Fund's outstanding convertible debentures in 2011, and a higher current income tax expense as discussed above.INVESTING ACTIVITIESCapital expenditures for the quarter ended June 30, 2012 of $0.7 million related primarily to maintenance capital expenditures.  For the six months ended June 30, 2012, DATA Group incurred capital expenditures of $1.0 million related primarily to maintenance capital expenditures and $0.4 million related to the investment in identifiable intangible assets consisting of software licences.  These capital expenditures were financed by cash flow from operations and existing cash resources.FINANCING ACTIVITIESAt June 30, 2012, DATA Group had a bank overdraft of $0.4 million which consisted of financing provided by its suppliers in the form of outstanding cheques of $4.5 million offset by cash and cash equivalents of $4.1 million.  During the three and six months ended June 30, 2012, DATA Group repaid $1.5 million and $2.5 million of its Revolving Bank Facility outstanding, respectively.  For the three and six months ended June 30, 2012, DATA Group paid aggregate cash dividends of $3.8 million and $6.3 million, respectively, to its shareholders.  For the six months ended June 30, 2012, DATA Group paid aggregate cash distributions of $1.3 million to holders of the common shares of DATA Group (formerly unitholders of the Fund).About DATA Group Inc.DATA Group Inc. is a leading provider of document management and marketing solutions.  We provide integrated web and print based communications, information management and associated professional services.  We differentiate ourselves and provide value to our customers by focusing on innovative, high value solutions and on exceptional performance at delivering on our promises and commitments.  We have over 1,950 employees working from 34 locations across Canada to accomplish this.Additional information relating to DATA Group Inc. is available on www.datagroup.ca, and in the disclosure documents filed by DATA Group Inc. on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.All financial information in this press release is presented in Canadian dollars and in accordance with generally accepted accounting principles ("GAAP") measured under International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB") for publicly accountable entities, unless otherwise noted.  Financial figures presented prior to January 1, 2012 are those of The DATA Group Income Fund, the predecessor to DATA Group Inc.FORWARD-LOOKING STATEMENTSCertain statements in this press release constitute "forward-looking" statements that involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, objectives or achievements of DATA Group, or industry results, to be materially different from any future results, performance, objectives or achievements expressed or implied by such forward-looking statements.  When used in this press release, words such as "may", "would", "could", "will", "expect", "anticipate", "estimate", "believe", "intend", "plan", and other similar expressions are intended to identify forward-looking statements.  These statements reflect DATA Group's current views regarding future events and operating performance, are based on information currently available to DATA Group, and speak only as of the date of this press release.  These forward-looking statements involve a number of risks, uncertainties and assumptions and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such performance or results will be achieved.  Many factors could cause the actual results, performance, objectives or achievements of DATA Group to be materially different from any future results, performance, objectives or achievements that may be expressed or implied by such forward-looking statements.  The principal factors, assumptions and risks that DATA Group made or took into account in the preparation of these forward-looking statements include the risk that DATA Group may not be successful in growing its business or in managing its organic growth; DATA Group's ability to develop and successfully market new products and services; competition from competitors supplying similar products and services; DATA Group's ability to grow its sales or even maintain historical levels of its sales of printed business documents; the impact of economic conditions on DATA Group's businesses; risks associated with acquisitions by DATA Group; increases in the costs of paper and other raw materials used by DATA Group and DATA Group's ability to maintain relationships with its customers. Additional factors are discussed elsewhere in this press release and under the heading "Risks and Uncertainties" in DATA Group's management's discussion and analysis and in DATA Group's other publicly available disclosure documents, as filed by DATA Group on SEDAR (www.sedar.com).  Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, estimated or expected.  Unless required by applicable securities law, DATA Group does not intend and does not assume any obligation to update these forward-looking statements.NON-GAAP MEASURESThis press release includes certain non-GAAP measures as supplementary information. When used in this press release, EBITDA means earnings before interest and finance costs, taxes, depreciation and amortization.  Adjusted EBITDA for the three months ended June 30, 2012 means EBITDA adjusted with no adjustments.  Adjusted EBITDA for the three months ended June 30, 2011 means EBITDA adjusted for corporate conversion costs.  Adjusted EBITDA for the six months ended June 30, 2012 and 2011, respectively, means EBITDA adjusted for corporate conversion costs.  DATA Group believes that, in addition to net income (loss), EBITDA and Adjusted EBITDA are useful supplemental measures in evaluating the performance of DATA Group and its predecessors.  EBITDA and Adjusted EBITDA are not earnings measures recognized by IFRS and do not have any standardized meanings prescribed by IFRS.  Therefore, EBITDA and Adjusted EBITDA are unlikely to be comparable to similar measures presented by other issuers.Investors are cautioned that EBITDA and Adjusted EBITDA should not be construed as an alternative to net income (loss) determined in accordance with IFRS as an indicator of DATA Group's performance.  For a reconciliation of net income (loss) to Adjusted EBITDA, see Table 2 above.CONSOLIDATED STATEMENTS OF FINANCIAL POSITION     (in thousands of Canadian dollars, unaudited) June 30, 2012$ December 31, 2011$Assets    Current assets     Cash and cash equivalents - 4,046 Trade receivables 38,493 43,647 Inventories 42,152 40,786 Prepaid expenses and other current assets 4,619 4,691  85,264 93,170     Non-current assets     Deferred income tax assets 801 887 Property, plant and equipment 22,232 24,149 Identifiable intangible assets 22,160 26,367 Goodwill 145,200 145,200  275,657 289,773Liabilities    Current liabilities     Bank overdraft 410 - Trade payables 28,876 32,466 Provisions 192 163 Income taxes payable 731 1,933 Deferred revenue 9,692 9,039 Dividends/distributions payable 1,274 1,273  41,175 44,874     Non-current liabilities     Revolving bank facility 57,632 60,123 Convertible debentures 42,011 42,229 Deferred income tax liabilities 1,098 5,686 Other non-current liabilities 2,396 2,617 Pension obligations 15,750 14,043 Other post-employment benefit plans 2,657 2,525  162,719 172,097Equity     Shareholders' equity     Shares 215,336 - Units - 215,336 Conversion options 516 - Deficit (103,078) (97,973)  112,774 117,363Non-controlling interest 164 313  112,938 117,676  275,657 289,773      CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE (LOSS) INCOME   (in thousands of Canadian dollars, except per share/unit amounts, unaudited)For the three months ended June 30, 2012For the three months ended June 30, 2011 $$Revenues82,60879,992   Cost of revenues61,54959,806   Gross profit21,05920,186   Expenses        Selling, commissions and expenses9,3738,657      General and administration expenses excluding amortizationof identifiable intangible assets6,9986,041      Corporate conversion costs-253      Amortization of identifiable intangible assets2,3112,565 18,68217,516   Income before finance costs and income taxes2,3772,670   Finance costs        Interest expense1,4701,388      Interest income(5)(19)      Change in fair value of conversion options-(848)      Amortization of transaction costs154132 1,619653   Income before income taxes7582,017   Income tax expense (recovery)        Current804440      Deferred(614)171 190611   Net income for the period5681,406   Other comprehensive (loss) income   Actuarial losses on post-employment benefit obligations(2,314)- Taxes post-employment adjustment above612- (1,702)-   Comprehensive (loss) income for the period(1,134)1,406   ATTRIBUTABLE TO  SHAREHOLDERS' or UNITHOLDERS'   Net income5881,406 Other comprehensive loss(1,702)- Comprehensive (loss) income for the period(1,114)1,406   NON-CONTROLLING INTEREST   Net loss(20)- Other comprehensive income (loss)-- Comprehensive loss for the period(20)-   Basic income per share/unit0.030.06Diluted income per share/unit0.030.06   CONSOLIDATED STATEMENTS OF INCOME AND  COMPREHENSIVE INCOME   (in thousands of Canadian dollars, except per share/unit amounts, unaudited)For the six months ended June 30, 2012For the six months ended June 30, 2011 $$Revenues169,256164,280   Cost of revenues124,970122,679   Gross profit44,28641,601   Expenses        Selling, commissions and expenses19,15917,516      General and administration expenses excluding amortizationof identifiable intangible assets14,20712,049      Corporate conversion costs84414      Amortization of identifiable intangible assets4,6225,131 38,07235,110   Income before finance costs and income taxes6,2146,491   Finance costs        Interest expense2,9502,744      Interest income(14)(45)      Change in fair value of conversion options-(995)      Amortization of transaction costs306262 3,2421,966   Income before income taxes2,9724,525   Income tax expense (recovery)        Current2,0521,027      Deferred(3,300)338 (1,248)1,365   Net income for the period4,2203,160   Other comprehensive (loss) income   Deferred income tax recovery on conversion to a corporation406- Actuarial losses on post-employment benefit obligations(3,036)- Taxes post-employment adjustment above796- (1,834)-   Comprehensive income for the period2,3863,160   ATTRIBUTABLE TO  SHAREHOLDERS' or UNITHOLDERS'   Net income4,2483,160 Other comprehensive loss(1,834)- Comprehensive income for the period2,4143,160   NON-CONTROLLING INTERESTS   Net loss(28)- Other comprehensive income (loss)-- Comprehensive loss for the period(28)-   Basic income per share/unit0.180.13Diluted income per share/unit0.180.13CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY         Attributable to Shareholders'  (in thousands of Canadian dollars, unaudited)SharesUnitsConversionoptionsDeficitTotalShareholders'EquityNon-controllinginterestTotalEquity $$$$$$$        Balance as at December 31, 2010-215,336-(87,234)128,102-128,102        Net income for the period---3,1603,160-3,160        Total comprehensive income for the period---3,1603,160-3,160        Distributions declared---(7,640)(7,640)-(7,640)                Balance as at June 30, 2011-215,336-(91,714)123,622-123,622                        Balance as at December 31, 2011-215,336-(97,973)117,363313117,676        Effect of conversion to a corporation215,336(215,336)516-516-516         215,336-516(97,973)117,879313118,192        Net income (loss) for the period---4,2484,248(28)4,220        Other comprehensive loss for the period---(1,834)(1,834)-(1,834)        Total comprehensive income (loss) for the period---2,4142,414(28)(2,386)        Acquisition of non-controlling interest---121121(121)-        Dividends declared---(7,640)(7,640)-(7,640)                Balance as at June 30, 2012215,336-516(103,078)112,774164112,938        CONSOLIDATED STATEMENTS OF CASH FLOWS     (in thousands of Canadian dollars, unaudited) For the three monthsended June 30, 2012 For the three monthsended June 30, 2011  $ $Cash provided by (used in)    Operating activities    Net income for the period 568 1,406Adjustments to net income          Depreciation of property, plant and equipment 1,447 1,412      Amortization of identifiable intangible assets 2,311 2,565      Pension expense 108 124      Contributions made to pension plans (770) (726)      (Gain) loss on disposal of property, plant and equipment (2) 16      Change in fair value of conversion options - (848)      Amortization of transaction costs 154 132      Accretion of convertible debentures 75 74      Other non-current liabilities (126) (66)      Other post-employment benefit plans 65 39      Deferred income tax (recovery) expense (614) 171  3,216 4,299Changes in working capital 2,141 (60)  5,357 4,239Investing activities    Purchase of property, plant and equipment (667) (312)Proceeds on disposal of property, plant and equipment 7 -  (660) (312)Financing activities    Bank overdraft 410 -Financing costs (10) (9)Repayment of revolving bank facility (1,500) -Dividends or distributions paid (3,820) (3,820)  (4,920) (3,829)     (Decrease) increase in cash and cash equivalents during the period (223) 98Cash and cash equivalents - beginning of period 223 5,171Cash and cash equivalents - end of period - 5,269     Supplemental cash flow information        Interest paid 2,064 1,737    Income taxes paid 1,350 -      CONSOLIDATED STATEMENTS OF CASH FLOWS     (in thousands of Canadian dollars, unaudited) For the six months ended June 30, 2012 For the six months ended June 30, 2011  $ $Cash provided by (used in)    Operating activities    Net income for the period 4,220 3,160Adjustments to net income          Depreciation of property, plant and equipment 2,870 2,834      Amortization of identifiable intangible assets 4,622 5,131      Pension expense 216 247      Contributions made to pension plans (1,545) (1,452)      (Gain) loss on disposal of property, plant and equipment (1) 35      Change in fair value of conversion options - (995)      Amortization of transaction costs 306 262      Accretion of convertible debentures 149 148      Other non-current liabilities (221) (130)      Other post-employment benefit plans 132 80      Deferred income tax (recovery) expense (3,300) 338  7,448 9,658Changes in working capital (250) (3,862)  7,198 5,796Investing activities    Purchase of property, plant and equipment (959) (873)Purchase of identifiable intangible assets (415) -Proceeds on disposal of property, plant and equipment 7 -  (1,367) (873)Financing activities    Bank overdraft 410 -Financing costs (148) (9)Repayment of revolving bank facility (2,500) -Dividends or distributions paid (7,639) (7,640)  (9,877) (7,649)     Decrease in cash and cash equivalents during the period (4,046) (2,726)Cash and cash equivalents - beginning of period 4,046 7,995Cash and cash equivalents - end of period - 5,269     Supplemental cash flow information        Interest paid 2,779 2,274    Income taxes paid 3,254 - SOURCE: DATA Group Inc.For further information: Mr. Michael Suksi President and Chief Executive Officer DATA Group Inc. Tel: (905) 791-3151 Mr. Paul O'Shea Chief Financial Officer DATA Group Inc. Tel: (905) 791-3151