TORONTO, March 11, 2015 /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 twelve months ended December 31, 2014 was $5.7 million or $0.45 per Restricted Voting Share (“Share”) and $25.9 million or $2.02 per Share, respectively, as compared to $6.0 million or $0.46 per Share and $25.2 million or $1.97 per Share, respectively, for the same period in 2013.
Royalties for the three and twelve months ended December 31, 2014 were $8.6 million and $37.4 million, respectively, compared to $8.3 million and $36.3 million, respectively, for the same period in 2013. Net earnings for the three and twelve months ended December 31, 2014 were $2.5 million or $0.26 per Share and $3.9 million or $0.41 per Share, respectively, as compared to net earnings of $0.6 million or $0.06 per Share and net earnings of $0.9 million or $0.09 per Share, respectively, for the same period in 2013.
OVERVIEW OF FOURTH QUARTER OPERATING RESULTS
During the Quarter, the Company generated CFFO of $5.7 million, down 4.0% from $6.0 million for the same period of 2013, driven primarily by an increase in operating costs related to bad debt recoveries recorded in the last quarter of 2013 and a $0.3 million increase in interest costs related to the early refinancing of the Company’s $53 million debt facilities and $2 million operating line. The new $53 million debt facility has a variable rate interest obligation which the Company swapped under contract to a fixed rate of 3.64%. The swap results in an annual interest obligation of $1.9 million, which is approximately $1.0 million less than the estimated interest obligation for 2014 under the previous debt arrangements.
Royalties for the quarter were up $0.3 million or 3% due primarily to an increase in the number of REALTORS® in the Network as a result of the acquisition of Franchise Agreements at the beginning of the year, the implementation of the previously announced $2 per month increase in the Royal LePage fixed franchise fee, and increased premium fees from a robust GTA market.
For the twelve months ended December 31, 2014, the Canadian market, as defined by market transactional dollar volume, closed up 12.1%, at $196.3 billion, compared to the same period in 2013, driven by an increase of 6.7% in selling price and 5.1% increase in units sold. For the three months ended December 31, 2014, the Canadian market transactional dollar volume was up 11.8%, at $41.4 billion over the same period in 2013, driven by a 5.9% increase in selling price and a 5.6% increase in home sale activity.
For the twelve months ended December 31, 2014, the GTA Market, as defined by market transactional dollar volume, closed up 13.4% at $52.8 billion driven by a 8.1% increase in selling price, and a 4.9% increase in home sale activity. For the three months ended December 31, 2014, the GTA market experienced a 14.1% increase in transactional dollar volume to $11.3 billion, driven by a 7.9% increase in selling price and a 5.7% 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 the strong financial and operational performance of the Company during the fourth quarter and the full fiscal year. We are delighted that as of January 1, 2015, our network of REALTORS® exceeded 16,000 for the first time. This important milestone represents an almost doubling of our network since our initial public offering 12 years ago,” said Phil Soper, President and Chief Executive Officer, Brookfield Real Estate Services Inc.
The Company Network
As at December 31, 2014, the Company Network was comprised of 15,377 REALTORS®, operating under 302 franchise agreements providing services from 637 locations, with approximately one fifth share of the market based on 2014 transactional dollar volume.
“In the final quarter of 2014 most Canadian provinces experienced modest year-over-year house price appreciation, while select markets in Toronto and Vancouver saw continued steep price increases,” added Soper. “We expect the rapid drop in the value of oil will indirectly impact housing markets across the country. In central Canada, the correspondingly lower Canadian dollar and stimulative effect of lower fuel costs are expected to lift the export sector, buoy consumer spending and be generally supportive of the residential real estate industry. In the energy producing provinces of Alberta, Saskatchewan and Newfoundland, we expect to see lower consumer confidence and expect that low priced oil will be a drag on the market, firstly through lower transaction volumes, followed by softness in home prices. The Bank of Canada’s move to lower the bank rate is expected to mitigate the negative impact of lower energy prices in the energy producing regions, and to further strengthen housing activity in other regions.”
Monthly Cash Dividend
The Company declared a cash dividend of $0.10 per share for the month of March 2015, payable on April 30, 2015, to shareholders of record on March 31, 2015.
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.
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 15,377 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.
Brookfield Real Estate Services Inc. will host a conference call on Wednesday, March 11, 2015 at 10 a.m. ET to discuss its financial results for the fourth 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 March 12, 2015 at http://www.brookfieldresinc.com/content/investor_centre-25063.html.
The Company’s Condensed Consolidated Financial Statements, Supplemental Information and IFRS overview for the three and twelve months ended December 31, 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. (TSX: BRE) is a leading provider of services to residential real estate brokers and a network of 15,377 REALTORS®, as at December 31, 2014. It generates cash flow from fixed and variable fees derived from real estate brokers and agents operating in Canada under the Royal LePage, Via Capitale and Johnston & Daniel brands. Approximately 71 per cent of company revenue is based on fees that are fixed in nature, providing revenue stability and helping insulate cash flows from market fluctuations. The recurring fixed revenue structure combined with strong brands and a successful growth strategy position it to continue generating stable, long-term cash flows and paying monthly dividends to shareholders. For further information, 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
SOURCE Brookfield Real Estate Services Inc.