IBI Group Inc. Announces Third Quarter Results

IBI achieved the following in the quarter:

• Signs new banking agreement
• Amends and extends debentures which were due this year
• Completes divestments to reduce bank debt
• Revenues of $73.6 million from continuing operations
• Committed annual fees $313 million, backlog of 8.5 months

TORONTO, Nov. 12, 2014 /CNW/ - IBI Group Inc. (the "Company") (TSX: IBG) today announced financial results for the three months ended September 30, 2014. 

OPERATIONAL HIGHLIGHTS

• Negotiated amended and restated credit facilities with total availability of $87 million and reset the maturity date to March 31, 2016 with senior lenders.
• Amended and extended the $46 million of 7% debentures which are now due June 30, 2019.
• Sold the Quebec assets and operations of IBI/DAA Group Inc., CHB-IBI Group Inc., and Martin, Marcotte-Beinhaker Inc. to Service Intégrés Lemay & Associés Inc. and 49% of its operations in China for approximately $13.2 million, subject to final balance sheet adjustments.
• Net income from continuing operations for the three month period ended September 30, 2014 was $7 million, compared with net loss from continuing operations of $40.3 million for the three months ended September 30, 2013.
• Adjusted EBITDA from continuing operations was $4.3 million for the three months ended September 30, 2014 compared with $4.4 million for same period last year.
• Committed fees now stand at approximately $313 million for 2014. This represents approximately 98% of the 2014 plan, with total fee backlog of approximately 8.5 months.

FINANCIAL HIGHLIGHTS

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

FINANCIAL OVERVIEW

Consistent with prior summer seasonal trends, revenue from continuing operations for the three months ended September 30, 2014 was $73.6 million, compared with $34.6 million in the third quarter of 2013. Results for Q3 2013 were reduced by a $31 million provision against work in process.

Net income from continuing operations for the three month period ended September 30, 2014 was $7 million compared to a net loss of $40.4 million for the three months ended September 30, 2013 (provision of $11.3 million related to accounts receivable was taken in Q3 2013). Net income from continuing operations was impacted in the third quarter in 2014 by the higher professional fees and double rent. Included in continuing operations results are charges of $0.95 million (2014 YTD $ 2.9 million) to earnings for professional advisors assisting the company in its restructuring efforts and double rent charges for its Toronto offices of $0.75 million (2014 YTD $2.1 million).

Results from continuing operations were increased by a gain of $18.7 million on the extinguishment of convertible debentures, which were originally due on December 31, 2014. Results from continuing operations were also reduced by charges related to capital assets and leases associated with the properties sold in Quebec of $8.4 million.

Adjusted EBITDA for the quarter was $4.7 million compared to an Adjusted EBITDA of $4.8 million in the third quarter of 2013. Third quarter results are a reflection of the slower summer period compared to the second quarter of this year.

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 and the debentureholder vote, the maturity date of these debentures has been extended to June 30, 2019. In connection with the vote, an additional $3.5 million of consent fee notes were issued.

Sale of Assets and Operations in Quebec and China

The Company announced on October 2, 2014, that it had reached an agreement to sell the Quebec assets and operations of IBI/DAA Group Inc., CHB-IBI Group Inc., and Martin, Marcotte-Beinhaker Inc. to Services Intégrés Lemay & Associés Inc. ("Lemay"). The Company also sold a 30 percent equity interest in IBI Group Urban Consultant (Beijing) Co. Ltd. ("IBI China") to Lemay and a 19 percent equity interest to Daniel Arbour  ("Arbour").

The sale of these assets generated approximately $13.2 million (subject to closing balance sheet final adjustments with the buyer) in cash. The Company also retains $1.8 million of accounts receivable, which will be collected in the normal course. Certain amounts are held in escrow and the $9.1 million received at closing has been utilized to reduce existing indebtedness under the Company's credit facility in October. These assets were evaluated as part of the recapitalization plan and were divested as these operations were not meeting expectations and were underperforming.

New Banking Agreement

The Company amended its credit facilities to $87 million at today's date with the senior lenders. The new agreement amends the repayment terms, availability limits, and covenants to correspond with the company's longer term business plan. The maturity date of the new agreement has been set at March 31, 2016.

Growth

The markets in which the Company operates continue to be robust, and the Company is committed to long-term value creation for the benefit of all shareholders. With this in mind, the Company is currently working on its annual business plan for 2015, which will explore opportunities to expand its service offerings and work strategically within the geographical regions where the Company has a strong community presence. The plan will emphasize continuing efficiencies in existing operations to maximize returns and cash generation in 2015.

OUTLOOK

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

Management is forecasting approximately $318 million in total revenue for the year ended December 31, 2014 of which approximately 98% is committed and under contract. The Company continues to see an increase in committed work to be delivered in 2015, which now stands at approximately $160 million. The Company has approximately 8.5 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 September 30, 2014).

The Company implemented plans to further improve the cash flow by reducing its investment in its balance sheet. New procedures and tools have been developed to shorten timeframes for billing and collecting customer accounts. As part of these initiatives, the Company has initiated the implementation of an Enterprise Resource Planning (ERP) system, enhancing the job tracking, billing and collections processes.

"We continue to work hard for the shareholders of this company in our operational execution and pursuit of a stronger balance sheet, while stabilizing the Company and evaluating new opportunities for organic growth," said Scott Stewart, CEO of IBI Group. "Management continues to focus on providing the highest quality service to our clients by enhancing our employees capabilities, processes and systems. IBI is a firm built on talented employees who are committed to delivering the best services to our clients."

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

Caution Regarding Forward-Looking Information

Certain statements in this news release may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company and its subsidiary entities, including IBI Group (collectively, the "Company"), 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. When used in this news release, such statements use words such as "may", "will", "expect", "believe", "plan" and other similar terminology. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this news release. These forward-looking statements involve a number of risks and uncertainties, including those related to: (i) the Company's ability to maintain profitability and manage its growth; (ii) the Company's reliance on its key professionals; (iii) competition in the industry in which the Company operates; (iv) timely completion by the Company of projects and performance by the Company of its obligations; (v) reliance on fixed-price contracts; (vi) the general state of the economy; (vii) acquisitions by the Company; (viii) risk of future legal proceedings against the Company; (ix) the international operations of the Company; * reduction in the Company's backlog; (xi) fluctuations in interest rates; (xii) fluctuations in currency exchange rates; (xiii) potential undisclosed liabilities associated with acquisitions; (xiv) upfront risk of time invested in participating in consortia bidding on large projects; (xv) limits under the Company's insurance policies; (xvi) the Company's reliance on distributions from its subsidiary entities and, as a result, its susceptibility to fluctuations in the performance of the Company's subsidiary entities; (xvii) unpredictability and volatility of the price of Common Shares; (xviii) the degree to which the Company is leveraged may affect its operations; (xix) dividends are not guaranteed and will fluctuate with the Company's performance; (xx) the possibility that the Company may issue additional Common Shares diluting existing Shareholders' interests; (xxi) income tax matters; (xxii) approval of the recapitalization plan by the Company's lending syndicate which is required by March 31, 2015 and achieving the specified requirements per the amended agreement. These risk factors are discussed in detail under the heading "Risk Factors" in the Company's annual information form for the year ended December 31, 2013. 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 news release 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.

The Company uses non-IFRS measures in this release. Please refer to the Management Discussion & Analysis filed for this quarter for definitions of the terms used.

Investor Conference Call

The Company will hold a conference call on November 12, 2014 at 8:30 a.m. (Toronto time). To participate in the conference call, please dial in before 8:30 a.m. (Toronto time) to 1-800-381-7839 for local and toll-free North American access, or 1-212-231-2915 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 21736581, followed by the number sign on your telephone keypad.

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 2,200 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.

IBI, defining the cities of tomorrow.

SOURCE: IBI Group Inc.