Brookfield Real Estate Services Inc. reports second quarter of 2011 results and monthly dividend
August 05 2011 - 7:00AM
PR Newswire (Canada)
TORONTO, Aug. 5, 2011 /CNW/ -- Royalties and cash flow from
operations steady amidst year-over-year decline in market activity
TORONTO, Aug. 5, 2011 /CNW/ - Brookfield Real Estate Services Inc.
(the Company) (TSX: BRE), a leading provider of services to
residential real estate brokers and their REALTORS®¹, today
announced that cash flow from operations ("CFFO") for the three and
six months ended June 30, 2011 was $6.8 million or $0.53 per
restricted voting share ("Share") and $12.5 million or $0.98 per
Share, respectively, as compared to $7.6 million or $0.59 per Share
and $13.3 million or $1.04 per Share, respectively, for the same
period in 2010. CFFO for the rolling 12 month period ended June 30,
2011 was $1.91 per Share as compared to $1.97 for the 12 months
ended December 31, 2010. Royalties were $9.8 million for the
quarter, as compared to $10.5 million for the same period in 2010.
Net earnings for the three and six months ended June 30, 2011 was
$4.9 million or $0.52 per Share and $3.1 million or $0.33 per
Share, respectively, as compared to earnings of $9.0 million or $
0.95 per Share and a net loss $9.4 million or $0.99 per Share,
respectively, for the same period in 2010. OVERVIEW OF SECOND
QUARTER OPERATING RESULTS During the quarter, the Company generated
CFFO of $6.8 million as compared to $7.6 million for the same
period in 2010. With the timing of the 2010 Market taken into
context, and no significant changes in the Company's risk factors,
Management anticipates that the Company's CFFO per Share for 2011
will be ahead of the 2010 $1.97 per Share due to an anticipated
2011 Market trajectory at or above 2010 Market levels, our stable
agent base and the nonrecurrence of the approximate $0.05 per Share
charge in the fourth quarter of 2010 for the conversion of the
Company to a corporation. To understand what has transpired in the
Markets for the first half of 2011 and how this affects our year to
date and full year royalties and CFFO outlook, a review of the
2010 Market activity is required. The year over year $0.8 million
decrease in our CFFO for the quarter can be attributed to the
timing of Market activity and the lag effect of the Company
recording its royalties when a home sale transaction closes which
is typically 30 to 45 days after the Market has reported the home
sale. In the first half of 2010, the Market was up substantially
due to the pull through of Market activity to the first half of
2010 as a result of the threat of increasing interest rates and
restricted credit due to the introduction of government mandated
mortgage lending rules and the imposition of Harmonized Sales Taxes
in Ontario and British Columbia. On a rolling twelve month basis
this activity drove June 30, 2010 Market transactional dollar
volumes to $167 billion, up 37% over the same period ending June
30, 2009, while for the remainder of 2010, Market activity declined
and the year finished at a Market transactional dollar volume of
$151.6 billion, 2% ahead of 2009 levels. On a rolling twelve month
basis the second quarter of 2011 closed out at a Market
transactional dollar volume of $155.4 billion, up 2.5% from the
twelve months ended December 31, 2010. During the second
quarter of 2011, the national Market experienced a quarter over
same quarter increase of 7% on a 8% selling price increase,
partially offset by a 1% decline in homes sales. With approximately
78% of the quarter over same quarter increase coming through in the
month of June, Management expects a significant spill over into the
third quarter when the Company records the royalties associated
with this Market activity as the home sale transactions close. "The
Company's second quarter performance highlights the strength of
this organization's structure, which continues to generate strong
cash flow from operations and consistent dividends for our
shareholders," said Phil Soper, president and chief executive
officer, Brookfield Real Estate Services Inc. "The Company
continues to grow and expand its REALTOR® network and develop
technological platforms to drive continued financial performance."
The Company Network As at June 30, 2011 the Company Network was
comprised of 15,361 REALTORS®, operating under 392 franchise
agreements providing services from 663 locations, with an
approximate 23% share of the Market based on 2010 transactional
dollar volume. For the six months ended June 30, 2011 the Company
Network increased by 53 agents or 0.3% with the increase of 247
agents by way of franchise contracts acquired at the beginning of
the year being partially offset by a 106 and 88 decline in agents
in the first and second quarter respectively with a significant
amount of this decrease originating from the Province of Quebec
where the introduction of new Real Estate Regulations earlier in
2010 with their associated professional and monetary requirements
have reduced the number of new entrants to the industry.
Consequently where franchisees typically have a turnover of lower
producing agents, this turnover is not being replaced with new
entrants. Adding to this decrease are REALTORS® who have decided to
leave the industry due to higher fees or have opted to operate
their own independent brokerage operations as permitted under the
new Real Estate Regulations. The decrease in agents during the
quarter occurred primarily in the month of April, commensurate with
the month when required payment of association fees become due.
Since April the change in agent count appears to have stabilized.
Outlook Price appreciation and housing activity are expected to
slow during the second half of 2011, though housing performance in
the first half of 2011 will support a national average house price
forecast of 7.7 per cent higher than year ended 2010. Sales volume
is forecast to decrease marginally by 2.0 per cent over the same
period, as a result of satisfied pent-up demand which emerged post
recession and interest rates which have stayed at historically low
levels for an extended period of time and increasingly have become
less of a stimulus. We expect year-over-year prices to appreciate
modestly in the third quarter as most housing markets across Canada
cooled during the same period in 2010. Similarly we expect this
year's final quarter to display a flat year-over-year price
performance when compared to an unusually strong fourth quarter of
2010. Monthly Cash Dividend Today, the Company declared a cash
dividend of $0.092 per share for the month of August 2011, payable
on September 30, 2011, to shareholders of record on August 31,
2011. IFRS During the first quarter the Company commenced reporting
in accordance with International Financial Reporting Standards
("IFRS"). It is important to note that under IFRS our key financial
performance measure is CFFO per Share which is commensurate with
the previous distributable cash per unit measure. The net loss for
the quarter and the comparative period in 2010 were driven by the
accounting for various non-cash items under IFRS. A copy of our
interim consolidated financial statements for the quarter with an
explanation of these adjustments and a discussion of the impact of
IFRS on our financial results can be found on our website. CFFO
This news release and accompanying financial statements make
reference to cash flow from operations ("CFFO") on a total and per
restricted voting share basis. CFFO is defined as net income prior
to fair value changes, amortization, interest on exchangeable
units, interest on Trust units, income taxes, items related to
other income and interests of exchangeable unitholders. CFFO is
used by the Company to measure the amount of cash generated from
operations which is available to the Company's shareholders on a
diluted basis where such dilution represents the total number of
shares of the Company that would be outstanding if exchangeable
unitholders converted Class B LP units into shares of the Company.
The Company uses CFFO to assess its operating results, the value of
its business and believes that many of its shareholders and
analysts also find this measure of value to them. CFFO does not
have any standard meaning pre- scribed by IFRS and therefore may
not be comparable to similar measures presented by other companies.
Forward-Looking Statements This news release contains
forward-looking information and other "forward-looking statements".
The words such as "should", "will", "continue", "plan", "believe",
"expect", "anticipate", "intend", "estimate", "approximate",
"expected" and other expressions that are predictions of or
indicate future events and trends and that do not relate to
historical matters identify forward-looking statements. Reliance
should not be placed on forward-looking statements because they
involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements of
the Corporation to differ materially from anticipated future
results, performance or achievement expressed or implied by such
forward-looking statements. Factors that could cause actual results
to differ materially from those set forward in the forward looking
statements include a change in general economic conditions,
interest rates, consumer confidence, the level of residential real
estate resale transactions, the average rate of commissions
charged, competition from other traditional real estate brokers or
from discount and/or Internet-based real estate alternatives, the
availability of acquisition opportunities and/or the closing of
existing real estate brokerage offices, other developments in the
residential real estate brokerage industry or the Corporation that
reduce the number of and/or royalty revenue from the Corporation's
network of 15,361 REALTORS®, our ability to maintain brand equity
through the use of trademarks, the availability of equity and debt
financing, a change in tax provisions, and other risks detailed in
the Fund's annual information form, which is filed with securities
commissions and posted on SEDAR at www.sedar.com. The Corporation
undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law. Conference
Call Brookfield Real Estate Services Inc. will host a conference
call on Friday August 5, 2011 at 10:00 a.m. Eastern Time to discuss
its second quarter financial results. To access the call by
telephone, dial (647) 427-7450 or (888) 231-8191. Please connect
approximately 10 minutes before the beginning of the call to ensure
participation. A recording of the conference call will be available
on the Company's website by Monday August 8, 2011 at
http://www.brookfieldresinc.com/content/investor_centre-25063.html.
Supplemental Information The Company's Consolidated Interim
Financial Statements, Supplemental Information and IFRS overview
for the quarter ended June 30, 2011 containing further information
on the company's strategy, operations and financial results can be
found on our website at www.brookfieldresinc.com. The Company's
Management Discussion and Analysis, Financial Statements and
associated regulatory filings will follow within prescribed
timelines. Shareholders are encouraged to read these documents.
Brookfield Real Estate Services Inc. Profile The Company is a
leading provider of services to residential real estate brokers and
their REALTORS®¹. The Company generates cash flow from franchise
royalties and service fees derived from a national network of real
estate brokers and agents in Canada operating under the Royal
LePage, Via Capitale Real Estate Network and Johnston & Daniel
brand names. At June 30, 2011, the Company network consisted of
15,361 REALTORS®. The Company network has an approximate 23% share
of the Canadian residential resale real estate market based on
transactional dollar volume. The Company generates both fixed and
variable fee components. Variable fees are primarily driven by the
total transactional dollar volume from the sales commissions of
REALTORS®, while fixed fees are based on the number of agents and
sales representatives in the network. Approximately 68% of the
Company's revenue is based on fees that are fixed in nature; this
provides revenue stability and helps insulate the Company's cash
flows from market fluctuations. The Company is listed on the TSX
and trades under the symbol "BRE". For further information about
the Company, please visit www.brookfieldresinc.com. To view this
news release in HTML formatting, please use the following URL:
http://www.newswire.ca/en/releases/archive/August2011/05/c9876.html
p Tammy Gilmerbr/ Director, Public Relations & Global
Communicationsbr/ Brookfield Real Estate Services Inc.br/ a
href="mailto:tgilmer@brookfieldres.com"tgilmer@brookfieldres.com/abr/
Tel: 416.510.5783 /p
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