REGINA, March 19, 2014 /CNW/ -
Information Services Corporation (TSX: ISV) ("ISC" or "the
Company") today reports on the Company's financial results for the
fourth quarter and year ended December 31,
2013.
Highlights of ISC's financial results:
Fourth Quarter 2013
- Total revenues were $20.0 million
for the three months ended December 31,
2013, an increase of $1.7
million or 9.6 per cent, compared to the $18.3 million for the three months ended
December 31, 2012. Revenues
increased across all three registries in the fourth quarter
compared to the same quarter last year. Revenues exclude the
Vital Statistics Registry which is treated as a discontinued
operation;
- EBITDA (earnings before interest, taxes, depreciation and
amortization) for the fourth quarter of 2013 was $8.3 million compared to $6.7 million for the fourth quarter of 2012, up
25.1 per cent quarter over quarter. ISC's 2013 fourth quarter
EBITDA margin was 41.6 per cent (35.3 per cent in 2012);
- Adjusted EBITDA grew to $8.4
million for the quarter as compared to $7.0 million for the same quarter last year, with
an Adjusted EBITDA margin of 41.9 per cent (38.1 per cent in 2012);
and
- Net income for the three months ended December 31, 2013 was $4.7
million or $0.27 per
share. In the fourth quarter 2012, net income was
$5.0 million, however for comparative
purposes, it is important to note that ISC was not subject to tax
in 2012. Excluding this quarter's tax expense and recovery, ISC
generated an increase in income over the fourth quarter 2012 of
$2.1 million, or 41.7 per cent.
Full-Year 2013
- Total revenues increased to $79.1
million for the year ended December
31, 2013, an increase of $3.9
million, or 5.2 per cent, compared to $75.2 million for the year ended December 31, 2012. Revenues exclude the Vital
Statistics Registry which is treated as a discontinued
operation;
- EBITDA for 2013 was $30.6
million, slightly ahead of the $28.8
million for 2012, with an EBITDA margin of 38.1 per cent
(37.2 per cent in 2012);
- Adjusted EBITDA rose to $34.0
million, a 12.7 per cent increase compared to the
$30.2 million generated in 2012, with
an Adjusted EBITDA margin of 43.0 per cent (40.1 per cent in
2012); and
- Net income for the year ended December
31, 2013 was $77.0 million or
$4.40 per share. In 2012 net
income for was $21.2 million, however
it is important to note that ISC was not subject to tax in 2012.
Excluding the income tax expense and recovery, ISC generated an
increase in income over 2012 of $3.9
million or 18.3 per cent.
Commenting on the Company's annual results, Jeff Stusek, President and CEO stated, "2013 was
an important year for ISC. The Company underwent significant
changes as an organization, but, most importantly, we continued to
serve our customers without interruption. It is in this
context that I would like to recognize the contributions of the
entire team at ISC, who made our change appear seamless while
ensuring the delivery of a solid financial performance."
"With privatization now behind us, our focus is to ensure that
we continue to provide the same high levels of satisfaction to all
our customers and maintain a strong balance sheet, while
judiciously exploring opportunities to create added value for our
existing and potential customers as well as value for
shareholders."
Management's Discussion of ISC's Summary Quarterly and Annual
Financial Results
(Thousands of CAD
dollars,
except earnings per share and where
noted) |
Three months
ended
December 31, |
Year ended
December 31, |
2013 |
2012 |
2013 |
2012 |
|
|
|
|
|
Revenue1 |
|
|
|
|
Land
Registry, Land
Survey
and Geomatics |
$15,688 |
$14,311 |
$61,141 |
$57,920 |
Personal
Property
Registry |
$2,358 |
$2,148 |
$9,787 |
$9,083 |
Corporate
Registry |
$1,982 |
$1,811 |
$8,170 |
$8,157 |
Other |
$11 |
$10 |
$33 |
$56 |
Total Revenue1 |
$20,039 |
$18,280 |
$79,131 |
$75,216 |
|
|
|
|
|
EBITDA2 |
$8,330 |
$6,659 |
$30,554 |
$28,794 |
EBITDA Margin2 (% of Revenues) |
41.6% |
35.3% |
38.1% |
37.2% |
Adjusted EBITDA2 |
$8,395 |
$6,972 |
$34,008 |
$30,167 |
Adjusted EBITDA Margin2 |
41.9% |
38.1% |
43.0% |
40.1% |
Net Income and total
comprehensive income |
$4,743 |
$5,028 |
$76,981 |
$21,240 |
Earnings per share3 |
$0.41 |
- |
$4.40 |
- |
Free cash flow2 |
- |
- |
$23,208 |
$22,561 |
|
|
|
|
|
Operating, general and
administrative expenses |
$11,709 |
$11,308 |
$47,822 |
$45,049 |
- Revenues do not include the Vital Statistics Registry.
- 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 year ended December 31, 2013.
- The calculation of earnings per share is based on net income
after tax and the weighted average number of shares outstanding
during the period.
- Revenues from the Land Registry (which includes the Land Titles
Registry, Land Surveys Directory ("Land Surveys") and Geomatics)
remained strong in 2013 due to the increases in average prices of
existing homes, offsetting a decrease in volumes. Land transfer and
mortgage registration volumes for the year were down, due in part
to stricter mortgage rules implemented in 2012. The Company
also processed more high-value property registrations in 2013 than
in 2012, which generate a high fee per transaction.
- Revenue from the Personal Property Registry ("PPR") for the
year ended December 31, 2013 was up
7.8 per cent from the year ended December
31, 2012. The main driver of revenue for this
registry, personal property security registrations set-ups, has
increased 5.3 per cent in volume and 8.0 per cent in revenue.
Strong employment growth, a high rate of net migration, increased
retail sales and most importantly growth in in new motor vehicle
sales in Saskatchewan all
positively affected PPR revenue.
- Revenue from the Corporate Registry for the year ended
December 31, 2013 remained flat when
compared to the same period in 2012. As expected, The New
West Partnership Trade Agreement had an impact on revenues
year-over-year. However, third and fourth quarter volumes and
revenues showed positive growth with annual returns revenue up by
12.5 per cent for the second half of 2013.
- Operating, general and administrative expenses for the year
ended December 31, 2013 increased by
$2.7 million, or 6.2 per cent
compared to the year ended December 31,
2012. The increase was due to inflationary increases in
wages and salaries, information technology services costs, and
additional new expenses related to ISC becoming a public
company.
- Adjusted EBITDA for the year ended December 31, 2013 increased by $3.8 million, or 12.7 per cent over the same
period in 2012. The increase is a result of revenues increasing at
a rate of 5.2 per cent, which is greater than the increase of
$2.7 million in operating, general
and administrative expenses over 2012.
- Depreciation and amortization decreased $2.1 million, or 27.9 per cent, to $5.5 million for the year ended December 31, 2013 over the same period last year.
The significant decrease was due to certain intangible assets
reaching a fully depreciated state, combined with less capitalized
projects being recorded.
- ISC's tax status was initially reported to have changed upon
its listing on the TSX on July 9,
2013. However, subsequent review revealed that the actual
loss of ISC's tax exempt status was deemed to occur on June 27, 2013 when ISC and CIC entered into an
Underwriting Agreement with a syndicate of underwriters. As a
result, the income tax recovery recorded in the third quarter
should have been recorded in the second quarter. The quarterly
results shown in Management's Discussion & Analysis for the
year ended December 31, 2013 have
been adjusted to reflect this change, and future reporting periods
will be similarly adjusted.
- Capital expenditures for the year ended December 31, 2013 were $3.7 million compared to $7.7 million for the year ended December 31, 2012. In 2013, capital expenditures
were significantly lower both on an absolute basis and as a
percentage of our revenues as the Company deferred a number of
projects to focus efforts on the privatization and subsequent
initial public offering ("IPO"). Maintenance capital
expenditures were $2.4 million for
the year ended December 31, 2013,
which included work completed on continued development efforts
under the New West Partnership, leasehold improvements to Customer
Service Centres, the beginning of a technology hardware refresh and
planning for the modernization of the Corporate Registry.
Growth capital expenditures were $1.3
million for the year ended December
31, 2013, which included work completed on the renewal of
the survey plan processing system and a new services framework for
Business Registrations Saskatchewan.
- ISC's cash position as at December 31,
2013 was $27.6 million
compared to $21.1 million at the same
time in 2012. As at December 31,
2013, the Company had $9.9
million of long-term debt and no short-term borrowings.
Outlook:
In 2014, ISC is focused on delivering stable returns through a
focus on cost management while ensuring continuous compliance with
the Master Service Agreement ("MSA") and publicly traded company
requirements and investigating growth opportunities. ISC has
demonstrated operational excellence for many years and it is an
important objective to ensure this focus on strong operational and
financial results continues.
As the majority of our revenues, including those related to the
Land Titles Registry, Land Surveys, the PPR and the Corporate
Registry, are tied to economic conditions, we use general forecast
economic information to help predict our revenues. Key drivers of
favorable macro-economic conditions in the province that support
the growth of ISC revenue growth include the continuation of a low
interest rate environment, which encourages new home purchases and
resale transactions, strong consumption patterns and high levels of
private capital investment.
In that regard, prevailing economic conditions in Saskatchewan are generally expected to
continue in 2014 driving positive growth in gross domestic product
("GDP"). According to Bank of Montreal ("BMO") Capital Markets'1
most recent economic forecast for Saskatchewan, the provincial economy is
expected to post real GDP growth of 2.4 per cent growth in 2014.
Royal Bank of Canada ("RBC")
Economics Research2 projection for 2014 is currently 2.1
per cent.
Business confidence in Saskatchewan remains at levels similar to the
historical average over the past five years, around 68.4, according
to The Canadian Federation of Independent Business ("CFIB")'s
business barometer3 for the province. This level of
optimism may encourage new businesses to form; however, this may be
constrained by Saskatchewan's
tight labour supply, which is cited as one of the greatest
impediments to current sales and production growth.
Employment growth was up 3.5 per cent for the first eleven
months, with 18,600 jobs being added. Weekly earnings rose 3.2 per
cent in the first ten months of 2013 to $946.37. Manufacturing sales rose 6.4 percent to
$12.8 billion in the first ten months
of 2013. A record 38.4 million tonne crop was produced in 2013,
resulting in exports of $27.2 billion
from January to October.
___________________________________
1 BMO Capital Markets Economics - Provincial Economic
Outlook - February 2014
2 RBC Economics Provincial Outlook - December 2013
3 CFIB Economics Business Barometer - Provincial Summary
- December 2013
Despite these records, the economy has experienced some
setbacks, which will likely dampen growth expectations somewhat in
2014. Crown land oil lease sales were down 40 per cent from the
province's March estimates and may be an indication that activity
in this sector will decline in 2014, which could result in slower
growth across the province. Global commodities prices are declining
and logistical challenges may make it more difficult to reach
export markets, which could have a negative impact on different
sectors of the Saskatchewan
economy in 2014.
With respect to ISC's offerings, Canada Mortgage and Housing
Corporation ("CMHC") Housing Market Outlook4 currently
forecasts a slight increase in existing home sales volumes in
Saskatchewan for 2014. Average
home resale prices are expected to increase marginally in 2014 by
2.4 per cent. While mortgage rates have begun to increase modestly,
they are forecast to remain favorable in 2014, all of which
impacts our land registry revenues.
For ISC's PPR, patterns of retail trade and new vehicle sales
provide a useful metric for expected revenues in the PPR.
From January to November 2013, retail
trade5 in Saskatchewan
grew 3.3 per cent over the same period in 2012. New vehicle
sales increased 5.3 per cent from January to November 2013 compared to the same period in
2012, while the value of vehicle sales grew 11.8 per cent over the
same period.
To our flat fees, the MSA and related Registry Operating
Agreements specify the maximum fees allowed to be charged to the
public for particular Core Registry Services. The maximum
fees are adjustable on a yearly basis and are based on a formula
tied to inflation as measured by the Saskatchewan Consumer Price
Index published by Statistics Canada6. These adjustment
provisions do not apply to any value-based fees. There are no
restrictions on the fees we may charge for non-core Ancillary
Services that use registry data. ISC expects to generally adjust
prices as outlined in the MSA.
The key drivers of our expenses will continue to be wages and
salaries, information technology and project initiatives costs as
we continue to focus on efficiency and effectiveness, leveraging
investment in systems and processes while maintaining a high level
of customer service. We expect our operating, general and
administrative expenses to modestly increase based on inflation and
in connection with becoming a publicly traded company and as we
expand our business.
In 2013, EBITDA margins were unusually high as a result of our
focus on the IPO and not on operational initiatives and project
work. Adjusted EBITDA margins in 2014 should return to more
normal levels of approximately 35 per cent. One of our
objectives will be to grow margins by approximately 0.5 per cent
per year over the next several years, primarily through operational
efficiencies.
As a result of the above economic factors and potential fee
adjustments, our revenues are expected to remain stable in 2014 and
EBITDA margins are expected to return to the more normal level of
35 per cent.
___________________________________
4 CMHC Housing Market Outlook - Canadian Edition - First
Quarter 2014
5 Statistics Canada
(CANSIM Table 079-0003: New motor vehicle sales, Canada, provinces and territories),
Statistics Canada, (CANSIM, table 080-0020: Retail trade, by
province and territory (Monthly- Seasonally Adjusted)
6 Statistics Canada,
CANSIM, table 326-0021 and Catalogue nos. 62-001-X and 62-010-X
Capital investment will be aligned to our strategic priorities
and will focus on initiatives that:
- build or maintain corporate infrastructure;
- contribute to compliance obligations;
- produce process or technology improvement that increase
revenues or reduce costs;
- grow the business; and/or
- generate an appropriate and acceptable return on
investment.
Management expects its capital expenditures to be in the
$8.0 to $10.0 million range in 2014.
As demonstrated by our automation of the survey plan
processing system, we remain committed to increasing the level of
automation in our work flows and developing new technologies that
lower overall costs.
Looking forward into 2014 our capital expenditures are expected
to include ongoing renewals of systems and technology
hardware. One of our more significant expenditures is
expected to be the modernization of the Corporate Registry, and we
now expect this initiative to extend beyond the end of 2014.
Note to Readers:
This news release provides a general summary of Information
Services Corporation's results for the fourth quarters and years
ended December 31, 2013 and
2012. 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/annual-reports
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
March 20, 2014 to discuss these
results. Dial-in numbers for the conference call are:
1-416-764-8609 or toll-free at 1-888-390-0605.
A live audiocast of the conference call is available at the
following link:
http://www.newswire.ca/en/webcast/detail/1316261/1453381
A replay of the call will be available 24 hours after the event
until 11:59 p.m. EST on April 24, 2014,
at http://isc.investorroom.com/events. To access the archived
conference call, please dial 1-888-390-0541 and enter passcode
941465.
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 Consolidated Financial Statements and Notes and
Management's Discussion and Analysis for the year-ended
December 31, 2013 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