|By PR Newswire||
|March 27, 2014 06:27 PM EDT||
TORONTO, March 27, 2014 /CNW/ - IBI Group Inc. (the "Company") (TSX: IBG) today announced financial results for the three months and year ended December 31, 2013.
The Company reported:
Cash flows from operating activities for the three months ended December
31, 2013 of $15.0 million and $9.5 million for the year ended December
Revenue for the three months ended December 31, 2013 of $77.8 million
and revenue for the year ended December 31, 2013 of $288.0 million.
EBITDA1 for the three months ended December 31, 2013 of $2.4 million and EBITDA1 for the year ended December 31, 2013 of $(32.6) million.
- Net loss for the three months ended December 31, 2013 of $100.9 million and net loss for the year ended December 31, 2013 of $223.5 million.
Results for the year ended December 31, 2013 were impacted by the following Adjustment Items:
Write down of unbilled work in process (WIP) of $35.0 million.
Write down of accounts receivable of $12.9 million.
- Write down of goodwill and intangible assets of $180.5 million.
During the year, the Company undertook a comprehensive review of WIP and accounts receivable balances. Changes to the factors that management used to assess its project balances included age, client, geographic location, time since last activity, and status of negotiation. Estimates related to the recoverability of the projects were reassessed under new management, and unbilled WIP and accounts receivable were identified as unlikely to be billed and collected. As result of that review, the Company provided for $35.0 million of unbilled WIP and $12.9 million of accounts receivable to recognize the uncertainty of converting these balances to cash. The Company will continue to pursue amounts for collection. Management is committed to reviewing estimates on an ongoing basis to assess the carrying value of WIP and accounts receivable.
The Company has a business plan it is managing that will result in a return to profitability and cash generation.
Throughout the year, the Company reviewed and reduced the carrying value of goodwill and intangible assets by $180.5 million. Management concluded that a write-down of goodwill and intangible assets was warranted given the decline in the Company's share price and market capitalization and the performance of businesses acquired by the Company compared to their purchase prices. The impairment is a non-cash charge that does not impact the Company's day-to-day liquidity, cash flow or the calculation of EBITDA under its senior credit facility covenants.
1 See "Definition of Non-IFRS Measures" contained in the MD&A.
Excluding the Adjustment Items, the Company reported:
Adjusted revenue1 for the year ended December 31, 2013 of $323.0 million.
Adjusted EBITDA1 for the year ended December 31, 2013 of $15.3 million.
- Adjusted net loss1 for the year ended December 31, 2013 of $8.3 million.
"2013 was a challenging financial year for the Company. The significant write-downs we undertook and our operating performance in 2013 was unacceptable," said Scott Stewart, Chief Executive Officer, IBI Group. "But the changes we implemented from the Recovery Program have already significantly reduced our operating costs and improved our collections. We look forward to continued improvements in this area in 2014. A key area of focus for the management team in 2014, is to ensure that we are diligently competing for new business in all of the markets we operate in."
The write downs of unbilled WIP and accounts receivable were based on
new estimates related to recoverability of the projects. Projects were
reassessed based on updated information, recent negotiations and
expected collections. Management is committed to reviewing estimates on
an ongoing basis to assess the carrying value of WIP and accounts
In connection with the write downs of unbilled WIP and accounts
receivable, the Company sought and received a waiver and amendment of
certain terms under its third amended and restated credit agreement as
described more fully in the MD&A for the year ended December 31, 2013;
The current level of the working capital tied up measured in gross
billings is 114 days at December 31, 2013. This is a decrease of 25
days compared to December 31, 2012 and is the result of an increase in
accounts receivable and WIP in the first half of 2013, the write down
of $35.0 million of unbilled WIP and $12.9 million of accounts
receivable, and the improved collections of accounts receivable in the
second half of 2013.
The Company's monthly operating costs on a go-forward basis have been
reduced as a result of decreased compensation expenses, consolidation
of operations, and cost reduction initiatives.
The results are summarized in the table below.
1 See "Definition of Non-IFRS Measures" contained in the MD&A.
(in thousands of dollars except for
per share amounts)
|Number of workings days||63||63||-||251||251||-|
|Net income (loss)||$||(100,908)||$||(26,528)||$||(74,380)||$||(223,468)||$||(14,412)||$||(209,056)|
|Basic and diluted earnings per share ("EPS")1||$||(4.4614)||$||(1.1861)||$||(3.2753)||$||(10.0470)||$||(0.7000)||$||(9.3470)|
|Write down of WIP and accounts receivable||$||-||$||16,000||$||(16,000)||$||47,858||$||16,000||$||31,858|
|Goodwill and intangible asset impairment||$||100,900||$||14,483||$||(86,417)||$||180,501||$||14,483||$||166,018|
|Adjusted net earnings (loss)1||$||(3,795)||$||258||$||(4,053)||$||(8,347)||$||12,374||$||(20,359)|
|Basic and diluted adjusted earnings per share ("Adjusted EPS")1||$||(0.1678)||$||0.0118||$||(0. 1795)||$||(0.3753)||$||0.5962||$||(0.9715)|
|Adjusted EBITDA1 as a percentage of adjusted revenue1||3.1%||11.9%||(8.8%)||4.7%||12.4%||(7.7%)|
|Cash from (used in) operations||$||15,034||$||1,456||$||13,578||$||9,462||$||(3,484)||$||12,946|
|Free cash flow1||$||14,328||$||(3,775)||$||18,103||$||3,205||$||(27,960)||$||31,165|
(1) See "Definition of Non-IFRS Measures" contained in the MD&A.
The Company's consolidated financial statements and management's discussion and analysis are available in the Investors section of the Company's website at www.ibigroup.com and are also available on the website maintained by the Canadian securities regulatory authorities at www.sedar.com.
Summary of 2013 Recovery Program
Over 2013, the Company undertook a variety of initiatives as part of its previously announced Recovery Program. Below is a summary of what was achieved:
Balance Sheet/Liquidity: The elimination of the Company's dividend, operational efficiencies,
enhanced billings and collection processes and lower compensation costs
has improved cash flow. The Company has improved operating cash flow
significantly in the second half of 2013 and collections continue to be
a top priority of the Company.
Human Resources and Compensation: For the year ended December 31, 2013, the Company reduced
approximately 271 positions. Compensation costs in the fourth quarter
of 2013 were $2.1 million less than the third quarter of 2013 and in
line with management expectations. The Company continues to monitor the level of committed work to staffing
levels and will make appropriate adjustments as necessary.
Operational Efficiency: The management team continues to integrate information systems,
resulting in cost savings and better quality information. Senior
management has worked to improve the level of coordination and
integration among the Company's offices, improving productivity, while
maintaining overall quality. Senior management has led a wide-ranging
program to reduce overhead and administrative expenses throughout the
- Growth: The Company will continue to prioritize organic growth over acquisitions. The Company is leveraging strategic hires to lead the firm into new markets.
The Company has submitted a Recapitalization Plan to its lending syndicate. The plan addresses the requirement to reduce borrowing under the senior facility. This plan includes operational improvements and enhanced billing and collection efforts to increase operating cash flow, and, one of or a combination of the divesture of non-strategic assets and subordinated financing.
In addition, the Company is planning on refinancing the 7% Debentures due December 31, 2014. The Company has retained Canaccord Genuity to assist with this process within the first three quarters of 2014.
Guidance for 2014
The following represents forward looking information and users are cautioned that actual results may vary.
Management is forecasting total revenue for the year ended December 31, 2014 of approximately $330 million. Approximately 80% of our forecasted revenue for 2014 is committed, and under contract.
The Company has approximately eight and a half 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 December 31, 2013.) After adjusting for on-going costs of financial advisors which is expected to be $3.0 million in 2014, the Company is forecasting the 2014 EBITDA1 margin to approach a level more consistent with the industry standards.
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.
1 See "Definition of Non-IFRS Measures" contained in the MD&A
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; and (xx) income tax matters. 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.
Investor Conference Call
The Company will hold a conference call on Friday March 28, 2013 at 8:30 a.m. Eastern Time. To participate in the conference call, please dial in before 8:30 a.m. EST to 1-800-906-5924 for local and toll-free North American access, or 1-416-641-6684 for international access.
An audio replay of the call will be available for 14 days, by dialing 416-626-4100 for local and international access, or 1-800-558-5253 for toll-free North American access, pass code 21710134 followed by the number sign on your telephone keypad.
SOURCE IBI Group Inc.