TORONTO,
Aug. 6, 2014 /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, 2014 was $6.9
million or $0.54 per
Restricted Voting Share ("Share") and $12.6
million or $0.99 per Share,
respectively, as compared to $6.6
million or $0.51 per Share and
$12.1 million or $0.95 per Share, respectively, for the same
period in 2013.
OVERVIEW OF SECOND QUARTER OPERATING RESULTS
CFFO for the rolling 12 month period ended June 30, 2014 was $2.00 per Share as compared to $1.97 for the 12 months ended December 31, 2013. Royalties for the three and
six months ended June 30, 2014 were
$9.9 million and $18.0 million, respectively, compared to
$9.7 million and $17.8 million, respectively for the same period
in 2013. Net earnings or loss for the three and six months ended
June 30, 2014 was $4.0 million earnings and $0.8 million loss, or $0.42 earnings and $0.08 loss per Share, respectively, as compared
to net income of $3.4 million and
$2.8 million or $0.36 and $0.30 per
Share, respectively, for the same period in 2013.
During the Quarter, the Company generated CFFO of $6.9 million, up 5.6% from $6.6 million for the same period of 2013 driven
primarily by a combination of increased royalties and lower
administration costs. Royalties were up $0.1
million due primarily to an increase in the number of Agents
in the Network as a result of the acquisition of Franchise
Agreements at the beginning of the year and the implementation of
the previously announced $2 per month
increase in the Royal LePage fixed franchise fee. Operating costs
were down $0.2 million year-over-year
due primarily to the reduction of the Via Capitale management fee
from 30% to 20% under the new MSA, and the non-reoccurrence of
costs incurred to finalize the new MSA in 2013. Partially
offsetting these amounts is a $0.2
million bad debt provision recorded for certain franchisees
that are experiencing financial challenges.
For the rolling twelve months ended June
30, 2014, the Canadian Market, as defined by Market
transactional dollar volume, closed up 15.8%, at $186.2 billion, compared to the same period of
2013, driven by an increase of 8.0% in selling price and 7.2%
increase in units sold. For the three months ended June 30, 2014, the Canadian market transactional
dollar volume was up 12.7% over the same period in 2013, driven by
a 5.9% increase in selling price and a 5.1% increase in home sale
activity.
On a rolling twelve-month basis, the GTA Market experienced a
quarter-over-same-quarter increase of 18.1% driven by a 7.6%
increase in selling price, and a 9.8% increase in home sale
activity. For the three months ended June
30, 2014, the GTA Market experienced a 15.4% increase on an
8.3% increase in selling price and a 6.6% increase in home sale
activity over the same period in 2013.
The Company's revenue is primarily fixed in nature, based on the
number of REALTORS® in the network. 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.
"We are pleased with our financial and operational results
through the first half of the year. We continue to see the
expansion of our network of REALTORS® and a consistently high rate
of franchise renewals. These factors, as well as an increase in
fixed monthly fees paid by our agent network and an increase in the
overall number of homes sold, contributed to our strong but steady
revenue growth," said Phil Soper,
President and Chief Executive Officer, Brookfield Real Estate
Services Inc. "Given the dynamics of the Canadian real estate
market and our stable royalty stream, we believe we are well
positioned to deliver sustained growth for the remainder of
2014."
"Our key financial metrics for the second quarter and first half
of 2014 are solid. Our cash flow is well in excess of our
distributions, despite raising our targeted dividend 9% over 2013
levels," added Soper. "With our current payout ratio, we are well
placed to continue meeting our objective of providing our
stakeholders with an investment vehicle that pays stable
dividends."
__________________________________
1 REALTOR® is a trademark identifying
real estate licensees in Canada
who are members of the Canadian Real Estate Association.
The Company Network
As at June 30, 2014, the Company
Network was comprised of 15,697 REALTORS®, operating
under 308 franchise agreements providing services from 636
locations, with approximately one fifth share of the Market based
on 2013 transactional dollar volume.
Outlook
"Brookfield closed out a
successful quarter and first half of 2014, and we believe there are
attractive investment opportunities to further grow our revenue
stream during the remainder of the year and beyond, including
further expanding the number or REALTORS® in the Company Network
through acquisition or organic growth and increasing the efficiency
of our agents by developing and introducing new tools, services and
programs that assist franchisees and agents," said Soper. "The
improving economy and rebound in Canadian consumer sentiment,
combined with the investments we have made in our network in recent
years, set the stage for continued growth and profitability for the
Company."
Monthly Cash Dividend
The Company declared a cash dividend of $0.10 per share for the month of August 2014, payable on September 30, 2014, to shareholders of record on
August 29, 2014.
Board of Directors
At the Company's Annual General Meeting held on May 6, 2014, Mr. George
Myhal and Mr. Allen Karp
resigned as Directors of the Company. Subsequently,
Brookfield Asset Management Inc., as permitted in their
shareholders' agreement with the Company, appointed the Honourable
J. Trevor Eyton and Mr. Spencer
Enright to the Board.
On August 5, 2014, Mr.
Spencer Enright was elected Chairman
of the Board and Ms. Gail Kilgour
was appointed Chair of the Corporate Governance Committee.
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 prescribed 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 Company's network of
15,697 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 Company'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
Wednesday, August 6, 2014 at
10 a.m. ET to discuss its financial
results for the second quarter of 2014.
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 8, 2014 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, 2014
contain further information on the company's strategy, operations
and financial results and 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®. 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, 2014, the Company
network consisted of 15,697 REALTORS®. The Company network has
approximately one fifth share of the Canadian residential resale
real estate market based on 2013 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 71% 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.
SOURCE Brookfield Real Estate Services Inc.