REGINA, Aug. 13, 2014 /CNW/ - Information Services
Corporation (TSX:ISV) ("ISC" or "the Company"), Saskatchewan's exclusive provider of key
registry information services, today reported on the Company's
financial results for the second quarter ended June 30, 2014, and provided revised capital
expenditure guidance for 2014.
Highlights of ISC's Q2 2014 financial results
- Total revenue was $22.0 million,
an increase of $0.8 million or 3.9
per cent, compared to $21.2 million
for the three months ended June 30,
2013.
- EBITDA (earnings before interest, taxes, depreciation and
amortization) for the second quarter of 2014 was $8.6 million compared to $8.1 million in the second quarter of 2013, an
increase of 5.4 per cent. ISC's EBITDA margin for the second
quarter of 2014 was 38.9 per cent compared to 37.4 per cent in the
second quarter of 2013.
- Adjusted EBITDA was $8.6 million
for the quarter compared to $10.7
million in the same quarter last year, with ISC generating
an Adjusted EBITDA margin of 38.9 per cent for the quarter compared
to 50.3 per cent in the second quarter of 2013. The Adjusted EBITDA
margin in the second quarter of 2013 was unusually high, reflecting
adjustments for costs associated with the Initial Public Offering
("IPO") and discontinued operations.
- Net income for the three months ended June 30, 2014 was $5.3
million, or $0.30 per share.
In the second quarter last year, net income was $63.2 million, or $3.61 per share; however, for comparative
purposes, it is important to note that ISC claimed an income tax
recovery in the second quarter of 2013. Excluding the second
quarter's tax implications and discontinued operations, ISC
generated an increase in income over the second quarter of 2013 of
$0.3 million, or 4.5 per cent. This
translates to $0.42 per share for the
quarter ended June 30, 2014 compared
to $0.40 per share for the same
period in 2013.
- During the quarter, the Company finalized new five-year service
agreements with its information technology service providers.
Finalizing these agreements provides stability to the registries
and the operations, while updated terms provide the Company with
more flexibility in information technology cost management.
Management's Discussion of ISC's Summary Quarterly Financial
Results
(Thousands of CAD
dollars,
except earnings
per share and where noted)
|
Three months ended
June 30,
|
2014
|
2013
|
|
|
|
Revenue
|
|
|
Land Titles Registry,
Land Survey and Geomatics
|
$ 17,310
|
$ 16,410
|
Personal Property
Registry
|
$ 2,677
|
$ 2,702
|
Corporate
Registry
|
$ 2,028
|
$ 2,058
|
Other
|
$ 1
|
$ 12
|
Total
Revenue1
|
$ 22,016
|
$ 21,182
|
|
|
|
Operating, general
and administrative expenses
|
$ 13,460
|
$ 12,694
|
|
|
|
EBITDA2
|
$ 8,556
|
$ 8,119
|
EBITDA
Margin2 (% of Revenues)
|
38.9%
|
37.4%
|
Adjusted
EBITDA2
|
$ 8,556
|
$ 10,653
|
Adjusted EBITDA
Margin2
|
38.9%
|
50.3%
|
Net Income and total
comprehensive income
|
$ 5,308
|
$ 63,190
|
Earnings per share,
basic3
|
$ 0.30
|
$ 3.61
|
Earnings per share
excluding tax, basic
|
$ 0.42
|
$ 0.40
|
Free cash
flow2
|
$ 7,917
|
$ 7,395
|
- Revenue does not include the Vital Statistics Registry, which
is reflected as a discontinued operation.
- EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin
and Free cash flow are not recognized as a measure under IFRS and
do not have a standardized meaning prescribed by IFRS. See
"Non-IFRS Measures" in Management's Discussion & Analysis for
the second quarter ended June 30,
2014.
- The calculation of earnings per share is based on net income
after tax and the weighted average number of shares outstanding
during the period.
- Revenue for Land Titles Registry, Land Surveys Directory and
Geomatics was $17.3 million for the
three months ended June 30, 2014, an
increase of $0.9 million, or 5.5 per
cent, compared to the three months ended June 30, 2013. Revenue from the Land Titles
Registry remained strong due to an increase in the average price of
existing homes as well as a small increase in ownership transfer
volumes.
- Revenue for the Personal Property Registry (the "PPR") for the
three months ended June 30, 2014 was
$2.7 million, which represents a
slight decrease of 0.9 per cent from the same period in 2013.
Overall transaction volumes are up slightly by 1.4 per cent,
however, the main driver of revenue for this registry – personal
property security registration set-ups, where the price per
registration is variable based on the nature and term of the
security agreement – has shown a minor decrease in volume and
revenue which has contributed to an overall decrease in
revenue.
- Revenue for the Corporate Registry for the three months ended
June 30, 2014 was $2.0 million, a 1.5 per cent decrease compared to
the $2.1 million for the three months
ended June 30, 2013. Revenue from the
incorporation of new businesses, included in registrations,
declined by 5.7 per cent in the same period which accounts for the
majority of the difference.
- Operating, general and administrative expenses were
$13.5 million for the three months
ended June 30, 2014 compared to
$12.7 million for the three months
ended June 30, 2013, an increase of
$0.8 million or 6.0 per cent. The
overall increase was mainly due to an increase in wages and
salaries, as well as costs related to being a publicly listed
company. However, there were decreases in information technology
costs and costs related to project initiatives.
- Depreciation and amortization for the three months ended
June 30, 2014 was $1.2 million, a decrease of $0.2 million compared to the same period of 2013.
The decline was due to certain projects reaching a fully amortized
state in 2013 and less expenditure on capital to date in 2014.
- Net income and total comprehensive income for the three months
ended June 30, 2014 was $5.3 million, or $0.30 per share, compared to $63.2 million, or $3.61 per share for the same period in 2013. The
unusual results in 2013 were due to an income tax recovery being
recorded in the second quarter of 2013 with ISC becoming a taxable
entity effective June 27, 2013.
By way of comparison, net income, excluding income tax expense and
discontinued operations for the three months ended June 30, 2014 was $7.3
million, or $0.42 per share,
compared to $7.0 million, or
$0.40 per share for the same period
of 2013.
- Adjusted EBITDA totalled $8.6 million for the three months ended
June 30, 2014 compared to
$10.7 million for the same period
in 2013. The difference relates to adjustments made in 2013
for one-time expenses associated with the IPO and for the net loss
from discontinued operations.
- As of June 30, 2014, the Company
held cash of $30.5 million, up from
$24.7 million as at March 31, 2014, providing flexibility to meet any
unanticipated cash requirement due to changes in working capital
commitments or liquidity risk associated with financial
instruments.
Outlook
The majority of our revenues are linked to economic conditions.
The Saskatchewan economy continues
to show solid economic performance for 2014, albeit at a slower
rate of growth than originally projected. This has resulted in a
number of analysts revising their economic forecasts down
slightly.
According to Bank of Montreal
("BMO") Capital Markets'1 most recent economic
forecast for Saskatchewan, the
provincial economy is expected to post real gross domestic
product ("GDP") growth of 2.4 per cent growth in 2014, down
from 2.5 per cent earlier in their April projection. Royal Bank of
Canada's Economics
Research2 projection for 2014 is currently 1.4 per
cent, down from 2.0 per cent in March.
_________________________________
1 BMO Capital Markets Economics – Provincial Economic
Outlook – July 2014
Employment growth in Saskatchewan was up 3.4 per cent in 2013, but
is expected to only reach 1.7 per cent in 2014.3 Average
weekly earnings for the month of April in 2014 were up 4.3 per
cent compared to April of 2013,4 while manufacturing
sales rose 11 per cent for the first quarter of 2014 compared to
the same period in 2013.5
The housing and mortgage markets are important components of our
Land Titles Registry. Canada Mortgage and Housing Corporation
("CMHC") Housing Market Outlook currently forecasts a modest
increase in existing home sales volumes in Saskatchewan for 2014, revised down slightly
from their first quarter report.6 Average home resale
prices are expected to increase by 3.0 per cent in 2014, revised
from 2.4 per cent from the same report. While mortgage rates began
increasing at the beginning of 2013, they then started to decline
at the end of the third quarter but have since steadied, with some
lenders offering below 3.0 per cent.
Saskatchewan housing starts for
January to June of 2014 were up 12.1 per cent over the same period
in 2013, while the number of completions is up 18.9 per
cent.7 Despite this increase, the number of building
permits issued from January to May of 2014 was down 15.9 per cent
compared to the same period in 2013, while the value of building
permits has declined by 12.5 per cent8. In addition, the
new housing price index for Saskatchewan (as well as Regina and Saskatoon) has been trending up consistently
since mid-2009, with an occasional minor month-over-month
decline
While we continued to see a large number of high-value property
registrations during the first six months of 2014 (which generate a
high fee per transaction), we expect the volume and resulting
revenue to subside somewhat for the remainder of 2014.
For the Personal Property Registry, retail trade and new vehicle
sales can be a gauge for expected revenues in the PPR. For January
to April 2014, retail sales increased
by 6.5 per cent over the same period in 2013 in Saskatchewan.9 The number of units
of new vehicles sold decreased by 2.2 per cent in the first four
months of 2014 compared to the same period in 2013, although the
total value of sales increased by 0.8 per cent.10
Despite this decline, Scotiabank is currently forecasting slight
increases in annual motor vehicles sales for 2014 over
201311.
At the end of June, heavy rains resulted in severe flooding in a
number of communities across Saskatchewan. Approximately 8.0 per cent of
the land expected to produce crops12 and a number of
highways were submerged, and damage claims continue to be filed
with various insurers.13 While the long-term economic
effect of this extreme weather event is unknown at this time, any
change to the projected provincial growth could impact ISC's
revenues.
___________________________________
2 RBC Economics Provincial Outlook –
June 2014
3 CMHC Housing Market Outlook – Canadian Edition –
Second Quarter 2014.
4 Statistics Canada CANSIM Table 281-0063:
Employment and average weekly earnings including overtime (SEPH),
seasonally adjusted, for all employees by industries classified
using the NAICS, monthly (persons unless otherwise noted) –
July 2014.
5 Statistics Canada CANSIM Table 304-0015:
Manufacturing Sales by NAICS and Province – June 2014.
6 CMHC Housing Market Outlook – Canadian Edition –
Second Quarter 2014.
7 Statistics Canada CANSIM Table 027-0001: Canada
Mortgage and Housing Corporation, housing starts, under
construction, and completions in centres 10,000 and over –
July 2014.
8 Statistics Canada CANSIM Table 026-0001: Building
permits, residential values and number of units, by type of
dwelling – July 2014.
9 Statistics Canada CANSIM Table 080-0020: Retail trade,
sales by NAICS – July 2014.
10 Statistics Canada CANSIM Table 079-0003: New
motor vehicle sales, Canada,
provinces and territories –July 2014.
11 Scotiabank Global Economics – Global Forecast
Update – June 2014.
12 CBC News. "Up to 3 Million Saskatchewan Farm
Acres Flooded." – July 2014.
13 The Star Phoenix: "Disaster Assistance Claims
Pile Up." July 10, 2014.
Based on the moderate economic growth expectations for
Saskatchewan, the Company
continues to expect revenue to remain stable in 2014 and annual
EBITDA margins to return to the normalized level of approximately
35 per cent. ISC also continues to anticipate a modest increase in
operating, general and administrative expenses based on inflation
as well as the costs associated with being a publicly traded
company.
During the first six months of 2014, the Company focused more on
operational initiatives than expected (some of which had been
deferred from 2013 because of the IPO), as opposed to capital
initiatives. As such, the Company has revised its expected capital
expenditure spend for 2014 to be in the range of $5.0 million to $7.0 million, down from the
planned $8.0 million to $10.0
million.
Note to Readers:
This news release provides a general summary of Information
Services Corporation's results for the second quarters ended
June 30, 2013 and 2014. Readers
are encouraged to download the Company's complete financial
disclosures. Links to ISC's financial statements and related notes
and Management's Discussion and Analysis for the period are
available on ISC's website in the Investor section of the site at
http://isc.investorroom.com/index.php?s=63. All figures are in
Canadian dollars unless otherwise noted.
Copies can also be obtained at www.sedar.com by searching
Information Services Corporation's profile or by contacting
Information Services Corporation at investor.relations@isc.ca
Conference Call And Webcast
The Company is hosting a conference call and webcast at
9:00 a.m. Saskatchewan Time;
11:00 a.m. Eastern Time on
August 14, 2014 to discuss these
results. Dial-in numbers for the conference call are:
1-416-764-8688 or toll-free at 1-888-390-0546.
A live audiocast of the conference call is available at the
following link:
http://www.newswire.ca/en/webcast/detail/1388941/1541045
About ISC
ISC is a provider of registry and information services to the
Province of Saskatchewan. The
Company is the exclusive provider of the Land Titles Registry, Land
Surveys Directory, Personal Property Registry and Corporate
Registry in Saskatchewan, which
are key supporters of economic activity in the province.
Cautionary Note Regarding Forward-Looking Information
This news release contains forward-looking information within
the meaning of applicable Canadian securities legislation,
including certain assumptions with respect to the Saskatchewan economy, consumer confidence,
interest rates, level of unemployment, inflation, real estate
market in Saskatchewan, claim
liabilities, income taxes, our ability to attract and retain
skilled staff, employee future benefits, goodwill and intangibles
are material factors in preparing forward-looking statements and
management's expectations. Forward-looking information involves
known and unknown risks, uncertainties and other factors that may
cause actual results or events to differ materially from those
expressed or implied by such forward-looking information. Although
ISC believes the forward-looking information contained in this
release is based upon reasonable assumptions, readers are cautioned
not to place undue reliance on forward-looking information as it is
inherently uncertain and no assurance can be given that the
expectations reflected in such information will prove to be
correct. Many factors and risks could cause our actual results to
differ materially from those expressed or implied by
forward-looking information including those detailed in ISC's
Annual Information Form, dated March 19,
2014, ISC's unaudited condensed Consolidated Financial
Statements and Notes and Management's Discussion and Analysis for
the quarter ended June 30, 2014 as
well as other documents filed by ISC with Canadian securities
regulators through SEDAR (www.sedar.com) from time to time.
Investors and others should carefully consider the above-noted
factors and risks and other uncertainties and potential events. The
forward-looking information in this release is made as of the date
hereof and, except as required under applicable securities
legislation, ISC assumes no obligation to update or revise such
information to reflect new events or circumstances.
SOURCE Information Services Corporation