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