Brookfield Real Estate Services Inc. reports second quarter 2012 results and monthly dividend
August 02 2012 - 4:00PM
PR Newswire (Canada)
TORONTO, Aug. 2, 2012 /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 six months ended
June 30, 2012 was $7.4 million or $0.57 per Restricted Voting Share
("Share") and $12.9 million or $1.01 per Share, respectively, as
compared to $6.8 million or $0.53 per Share and $12.5 million or
$0.98 per Share, respectively, for the same period in 2011. CFFO
for the rolling 12 month period ended June 30, 2012 was $2.00 per
Share as compared to $1.97 for the 12 months ended December 31,
2011. Royalties for the three and six months ended June 30, 2012
were $10.0 million and $18.2 million, respectively, compared to
$9.8 million and $18.1 million, respectively for the same period in
2011. Net earnings for the three and six months ended June 30, 2012
was $7.9 million and $4.7 million, or $0.83 and $0.49 earnings per
Share, respectively, as compared to net income of $4.9 million and
$3.1 million or $0.52 and $0.33 per Share, respectively, for the
same period in 2011. OVERVIEW OF SECOND QUARTER OPERATING RESULTS
During the Quarter, the Company generated CFFO of $7.4 million as
compared to $6.8 million for the same period in 2011 as a result of
increased market activity, a $0.2 million recovery of previously
written off receivables and reduced reporting costs, partially
offset by a $0.2 million decrease in other revenue and services
fees. Other revenue and services decreased by $0.2 million quarter
over quarter, as the Company discontinued an agent website program
that was no longer relevant. On a rolling twelve-month basis, the
Canadian market transactional dollar volume of $170.8 billion
increased by 10% from June 30, 2011, driven by a 3% and 7% increase
in selling price and home sale activity, respectively. For the
three months ended June 30, 2012, the Canadian market transactional
dollar volume was up 5% over the same period in 2011, solely driven
by increase in home sale activity. On a rolling twelve-month basis,
the GTA Market experienced a quarter-over-same-quarter increase of
18% driven by a 8% increase in selling price and 10% increase in
home sale activity. For the three months ended June 30, 2012, the
GTA Market experienced an 12% increase on a 7% and 4% increase in
selling price and home sale activity, respectively over the same
period in 2011. The higher than anticipated rise in home prices is
largely driven by the consistent shortage of listings in the
single-detached homes market, resulting in competition among home
buyers, and low interest rates, which continues to draw home buyers
into the Market. The Company's revenue is primarily fixed in
nature, based on the number of REALTORS(®) in the network, which
decreased 1%, period over period. This structure provides revenue
protection from the impact of revenue declines when the market
cools, but also reduces the degree to which the Company
participates in periods of rapid market expansion. "While
tumultuous economic conditions beyond our borders have been a drag
on Canadian consumer confidence, the relatively favourable domestic
outlook and stimulative effect of pervasively low interest rates
have continued to support real estate activity at healthy levels."
said Phil Soper, President and Chief Executive Officer, Brookfield
Real Estate Services, Inc. It has been an encouraging year from a
growth perspective. Our franchising prospects are building at
a good pace as skilled brokerage operators from across the country
look favourably upon the company's offerings and agree to join the
network. As well, early conversions to our Royal LePage brand
from the Brookfield's acquisition of Prudential Real Estate will
positively impact the Company's future results. The Company Network
As at June 30, 2012 the Company Network was comprised of 15,249
REALTORS(®), operating under 412 franchise agreements providing
services from 662 locations, with an approximate 22% share of the
Market based on 2011 transactional dollar volume. Outlook "The
industry has enjoyed three years of strong house price appreciation
in almost all regions of the country, but home prices cannot grow
faster than salaries and the underlying economy indefinitely,"
added Soper. "Some regions have reached or perhaps even exceed
the current upper level of price resistance. We expect prices
and unit sales to level off in many major markets, bringing the
full year 2012 into line with our original growth forecast."
Monthly Cash Dividend The Company declared a cash dividend of
$0.092 per share for the month of August 2012, payable on September
28, 2012, to shareholders of record on August 31, 2012. 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, 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. Management Services Agreement The Company is
managed pursuant to a Management Services Agreement between the
Company and Brookfield Real Estate Services Manager Limited (the
"Manager"), a subsidiary of Brookfield Asset Management. The
Management Services Agreement would automatically renew for a ten
year renewal term on August 7, 2013, unless the Company or the
Manager gives notice of its intention not to renew the Management
Services Agreement not later than August 6, 2012. The Company
and the Manager have agreed to delay the date for delivery of such
notice to on or before December 31, 2012. The Management
Services Agreement has been in effect since 2003 and was
originally designed for an Income Trust structure. The
Company intends to ensure that any future ongoing management
arrangements are in the best interests of the Company and its
shareholders. 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, August 3, 2012 at 10 a.m. ET to discuss its second
quarter financial results. To access the call by telephone, please
dial (888) 231-8191 or (647) 427-7450. Please connect approximately
ten minutes prior to the beginning of the call to ensure
participation. A recording of the conference call will be available
on the Company's website by August 7, 2012 at
http://www.brookfieldresinc.com/content/investor_centre-25063.html.
Supplemental Information The Company's Interim Condensed
Consolidated Financial Statements, Supplemental Information and
IFRS overview for the three and six months ended June 30, 2012
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,
2012, the Company network consisted of 15,249 REALTORS(®). The
Company network has an approximate 22% 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: Tammy
GilmerDirector, Public Relations & National
CommunicationsBrookfield Real Estate Services
Inc.tgilmer@brookfieldres.comTel: 416.510.5783
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