Brookfield Real Estate Services Inc. Reports Third Quarter of 2011 Results and Monthly Dividend
November 04 2011 - 7:00AM
PR Newswire (Canada)
TORONTO, Nov. 4, 2011 /CNW/ - Brookfield Real Estate Services Inc.
(the Company) , 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 nine months ended
September 30, 2011 was $7.3 million and $19.9 million,
respectively, as compared to $6.9 million and $20.2 million,
respectively, for the same period in 2010. CFFO per Restricted
Voting Share ("Share") for the three and nine months ended
September 30, 2011 was $0.57 and $1.55 per Share, respectively, as
compared to $0.54 and $1.58 per Share, respectively, in the same
period of 2010. CFFO for the rolling 12 month period ended
September 30, 2011 was $1.94 per Share as compared to $1.97 for the
12 months ended December 31, 2010. Royalties for the three and nine
months ended September 30, 2011 were $10.3 million and $28.3
million, respectively, compared to $9.8 million and $28.5 million,
respectively for the same period in 2010. Net earnings for the
three and nine months ended September 30, 2011 was $8.1 million and
$11.2 million, or $0.85 and $1.18 earnings per Share, respectively,
as compared to a net loss of $12.1 million and $21.5 million, or
$1.28 and $2.27 loss per Share, respectively, for the same period
in 2010. OVERVIEW OF THIRD QUARTER OPERATING RESULTS During the
quarter, the Company generated cash flow from operations ("CFFO")
of $7.3 million as compared to $6.9 million for the same period in
2010. Management anticipates the 12-month rolling CFFO by the end
of 2011 will be ahead of 2010's $1.97 per share as a result of a
projected steady 2011 housing market and the non-recurrence of a
$0.05 per share one-time charge for the Conversion of the Company
to a corporation in the fourth quarter of 2010. To understand what
has transpired in the Market for the first nine months of 2011 and
how it impacts our outlook for the remainder of the year, a review
of year-to-date 2011 and 2010 Market activity is required. On a
rolling twelve month basis, the third quarter of 2011 closed out at
a Market transactional dollar volume of $162.8 billion, up 7% from
December 31, 2010, driven by a 6% increase in selling price and a
modest 1% increase in home sale activity. For the three months
ended September 30, 2011, transactional dollar volume was up 22%
over the same period in 2010, driven by an 8% and 14% increase in
selling price and home sale activity, respectively. The increase in
selling price on a twelve-month rolling and quarterly basis is
largely driven by a combination of a consistent shortage of
listings resulting in more competition between homebuyers, positive
employment and income growth, and continued expectation of low
mortgage rates. While the twelve-month rolling home sale activity
for September 30, 2011 as compared to December 31, 2010 increased
moderately by 1%; home sale activity on a quarter-over-same-quarter
basis increased by 14% due to an active 2011 summer Market, the
carry-through of second quarter 2011 homes sales and the fall off
of the 2010 comparative Market activity. The carry-through of
second quarter 2011 home sales arises as much of the increased home
sale activity experienced in the second quarter of 2011 came
through in the month of June which benefited the Quarter due to the
lag effect of the Company recording royalty revenue when the home
closes, which is typically 30 to 45 days after the sale has been
reported by the Market. In 2010 the Market was up significantly for
the first two quarters as consumers sought to complete their home
purchases ahead of the Harmonized Sale Tax and tighter mortgage
lending rules, with a subsequent reduction in home sale activity in
the third and fourth quarters. "Brookfield Real Estate Services
Inc. is pleased to report its third consecutive quarter of positive
financial performance for 2011," said Phil Soper, president and
chief executive officer, Brookfield Residential Real Estate
Services Inc. "The two primary measures used to determine our
financial performance - namely royalty revenues and cash flow from
operations - both experienced quarter-over-quarter increases in Q3,
underscoring the strength of the Company structure and its ability
to generate strong, stable dividends for its shareholders." The
Company Network As at September 30, 2011 the Company Network was
comprised of 15,295 REALTORS®, operating under 390 franchise
agreements providing services from 656 locations, with an
approximate 23% share of the Market based on 2010 transactional
dollar volume. For the nine months ended September 30, 2011 the
Company Network decreased by 13 Agents or 0.1%. Outlook Based on
data from the Royal LePage House Price Survey, the average price of
a home in Canada increased between 5.7% and 7.8% in the third
quarter of 2011, depending on housing type, compared to the
previous year. The strength of home price appreciation in the third
quarter exceeded expectations as very low interest rates buoyed
consumer confidence in a comparatively stable Canadian economy.
However, year-over-year gains appear deceptively strong in
comparison to a weak third quarter of 2010. A resilient domestic
economy, coupled with the stimulative effect of very low interest
rates, has extended the post-recession recovery in house prices.
The third quarter saw a return to a normal seasonal business cycle
as price appreciation slowed in many areas - with some average
values even falling slightly - after the busy spring trading
season. The strength in Canada's national housing market is being
driven by the country's largest urban centres. While a broader
slowdown is expected in the year ahead the structure of the
Company's royalty stream is expected to mitigate this impact.
Monthly Cash Dividend Today, the Company declared a cash dividend
of $0.092 per share for the month of October 2011, payable on
November 30, 2011, to shareholders of record on October 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 15,295 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 November 4, 2011 at 10:00 a.m. Eastern Time to
discuss its third 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 November 7, 2011 at
http://www.brookfieldresinc.com/content/investor_centre/webcasts_and_presentations-25072.html.
Supplemental Information The Company's Consolidated Interim
Financial Statements, Supplemental Information and IFRS overview
for the quarter ended September 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 September 30, 2011, the Company
network consisted of 15,295 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. (1) REALTOR® is a trademark identifying
real estate licensees in Canada who are members of the Canadian
Real Estate Association. Brookfield Real Estate Services Inc.
CONTACT: ContactTammyGilmerDirector, Public Relations &
National CommunicationsBrookfield Real Estate Services
Inc.tgilmer@brookfieldres.comTel: 416.510.5783
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