TORONTO, Aug. 5, 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 months ended June 30, 2015 was $7.5 million or $0.59 per fully diluted Restricted Voting Share (“Share”), an increase of 8.4% as compared to the $6.9 million or $0.54 per Share generated in 2014. For the six months ended June 30, 2015, CFFO was $13.5 million or $1.06 per Share as compared to $12.6 million or $0.99 per Share in 2014.
OVERVIEW OF SECOND QUARTER OPERATING RESULTS
CFFO for the rolling 12 month period ended June 30, 2015 was $2.09 per Share as compared to $2.00 per Share for the 12 months ended June 30, 2014. Royalties for the three and six months ended June 30, 2015 were $10.3 million and $18.8 million, respectively, compared to $9.9 million and $18.0 million, respectively, for the same periods in 2014. Net earnings for the three months ended June 30, 2015 were less than $0.1 million, or nil per Share as compared to $4.0 million, or $0.26 per share in 2014. For the six months ended June 30, 2015, the Company generated a net loss of $3.5 million, or $0.37 per Share as compared to a net loss of $0.8 million, or $0.08 per Share in 2014.
The improvement in CFFO was driven by increased royalty fees and a reduction in operating costs. Royalties in the quarter were up $0.4 million compared to 2014 due primarily to an increase in the number of Agents in the Company’s network of REALTORS® (“Network”) as a result of the acquisition of franchise agreements on January 1, 2015. As at June 30, 2015, the total number of REALTORS® in the Company Network stood at 16,105 as compared to 15,697 at June 30, 2014. Cash operating expenses were lower in the quarter as compared to the second quarter of 2014 due to reduced interest costs and lower bad debt expenses.
For the rolling twelve months ended June 30, 2015, the Canadian residential resale real estate market (“Canadian Market”), as defined by total transactional dollar volume, closed up 13.7%, at $211.7 billion, compared to the same period of 2014, driven by an increase of 7.2% in selling price and 6.1% increase in units sold. For the three months ended June 30, 2015, the Canadian Market was up 17.0%, at $74.2 billion, over the same period in 2014, driven by a 9.3% increase in selling price and a 7.1% increase in home sale activity.
On a rolling twelve-month basis, the housing market in the greater Toronto area (“GTA”) experienced a year-over year increase of 19% driven by a 9.3% increase in selling price, and a 8.9% increase in home sale activity. For the three months ended June 30, 2015, the GTA housing market experienced a 25.6% increase on an 11.1% increase in selling price and a 13% increase in home sale activity over the same period in 2014.
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 have had a successful first half of 2015 from both a financial and operational perspective,” said Phil Soper, President and Chief Executive Officer, Brookfield Real Estate Services Inc. “Our cash flow from operations, was up over 8% for the quarter compared to the same period last year, thanks to the combination of an increase in royalties and a decrease in operating costs.”
“Several exciting initiatives were announced during the second quarter, including a mid-year addition of 719 REALTORS® to our network, an expansion of our borrowing capacity and an increase in our distribution to shareholders, the second increase in our dividend since the beginning of 2014,” added Soper.
The Company Network
As at June 30, 2015, the Company Network was comprised of 16,105 REALTORS®, operating under 301 franchise agreements providing services from 660 locations, with approximately one fifth share of the Canadian Market based on 2014 transactional dollar volume.
“Brookfield Real Estate Services Inc. reached the mid-point of 2015 in excellent shape, and the outlook for our business remains promising. Even with the strong growth we have seen in our agent count over the past 18 months, we believe that attractive investment opportunities remain to further grow the Company Network,” said Soper. “Looking at the broader market, six months in, 2015 is shaping up to be a record year in terms of total sales, thanks in large part to booming markets in Toronto and Vancouver and a far more subdued than expected adjustment in Calgary. While economic headwinds do persist at home and abroad, we are confident that the market will remain healthy for the sum of the year.”
Monthly Cash Dividend
The Company declared a cash dividend of $0.1042 per share payable on September 30, 2015, to shareholders of record on August 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 operating income prior to deducting impairment and amortization of intangible assets. 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 and the value of its business and believes that many of its shareholders and analysts also find this measure useful. CFFO does not have any standard meaning prescribed by International Financial Reporting Standards (“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”. Words such as “outlook”, “believe”, “further”, “grow”, “shaping up”, “will”, “remain”, and other expressions that are predictions of or could 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 Company 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 indicated in the forward looking statements include: a change in general economic conditions (including interest rates, consumer confidence and other general economic factors or indicators), the level of residential real estate resale transactions, the availability of attractive investment opportunities, the average rate of commissions charged, competition from other real estate brokers or from discount and/or Internet-based real estate alternatives, the closing of existing real estate brokerage offices, other developments in the residential real estate brokerage industry or the Company that reduce the number of REALTORS® in the Company’s Network or royalty revenue from the Company’s Network, our ability to maintain brand equity through the use of trademarks, the methods used by shareholders or analysts to evaluate the value of the Company and its publicly traded securities, the availability of equity and debt financing, a change in tax law or regulations, 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 Company 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, August 5, 2015 at 10 a.m. ET to discuss its financial results for the second quarter of 2015.
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 Thursday August 6, 2015 in the Investor Centre.
The Company’s Management Discussion and Analysis, Financial Statements and associated regulatory filings will follow within prescribed timelines and will be posted on the Company’s website at www.brookfieldresinc.com. 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, 2015, the Company Network consisted of 16,105 REALTORS®. The Company Network has approximately one fifth share of the Canadian Market based on 2014 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 Company’s 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.
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.