Edleun's first quarter 2012 results highlighted by record revenue, cash flow, and continued growth in its child care centre portfolio

CALGARY, May 17, 2012 /CNW/ - Edleun Group, Inc. ("Edleun" or the "Company") (TSX-V: EDU), the leading provider of quality early childhood education and care in Canada, announced today its operational and financial results for the three months ended March 31, 2012 while continuing to grow its portfolio at a strong pace to 46 centres representing more than 4,900 child care spaces.

Highlights for the first quarter ended March 31, 2012 include:

• More than a twofold increase in the number of licensed child care spaces in service in the first quarter 2012 compared to the same quarter in 2011 -- from 1,833 spaces to 3,908 spaces and 1,031 under development;
• Recorded a 129% increase in revenue in the first quarter of 2012 over the first quarter of the prior year;
• Reported the Company's highest quarterly Adjusted Funds From Operations ("AFFO" is the Company's principal measure of profitability) in corporate history of $789,000; a sequential quarterly increase of 274%;
• On a per share basis, AFFO increased to $0.007 in 2012's first quarter from $0.001 in 2011's first quarter and $0.002 in the preceding quarter;
• For "same centres" in operation during both the current and the prior year's first quarter:
• occupancy increased from 80% to 88%
• revenues increased by 16% and
• centre margin (in dollars) increased 22%
• Acquisition of a seventh Ontario centre located in Oakville, Ontario for $800,000, adding 199 spaces;
• Acquisition of an eighth Ontario centre located in Burlington, Ontario for $425,000, providing 49 spaces and potential for further expansion;
• Commenced the development process for the Company's third greenfield child care centre located in the Seton area of Calgary; and
• Entering into an agreement with Canadian Apartment Properties Real Estate Investment Trust ("CAPREIT"), one of Canada's largest rental apartment owners, to locate child care centres in selected CAPREIT properties.

Highlights for the period subsequent to quarter end include:

• Completion of the re-development of the Highland Park Learning Centre in Calgary and commencement of operations, adding 75 licensed child care spaces to the Company's portfolio;
• Completion of re-development of the Lawrence Learning Centre in Kelowna, British Columbia with operations expected to commence in the second quarter, adding 150 licensed child care spaces to the Company's portfolio;
• Handover of the Lake Chestermere Learning Centre from the construction contractor with operations expected to commence in July 2012, adding 247 licensed spaces to the Company's portfolio.

"In the first quarter we continued to take further advantage of acquisition opportunities in Ontario while substantially advancing the first in a series of redevelopment initiatives," said Ty Durekas, Chief Executive Officer of Edleun. "Our focus in the near term remains on bringing additional spaces to the portfolio through a combination of opening four new development and redevelopment centres and executing on our robust acquisition pipeline. Our new centres under development continue to enjoy favourable pre-enrolment rates at virtually every age level which should support solid initial occupancy levels."

"Our record results demonstrate the impact of momentum from acquisition activity," said Dale Kearns, President of Edleun.  "We can expect a further increase in cash flow from planned future acquisitions to be funded from current financial resources of $22 million, as well as development properties that are nearing completion and will be on stream as early as next quarter. These development and redevelopment properties add 719 licensed spaces and will continue to support meaningful short and longer term growth.  The existing portfolio has generated meaningful increases in performance, including same centre results, which have contributed to solid revenue and AFFO growth this quarter."

Financial Review

Three months ended March 31, 2012

First quarter revenue was $8.0 million, a 129% increase over the same period a year earlier and a 37% increase on a sequential basis compared to the fourth quarter of 2011. Same centre revenue increased by 16% when compared with the same three month period in fiscal 2011.  Revenues for the first quarter of 2012 were higher than revenues for the same period in 2011 due to an increase in the number of centres (from 20 to 39, excluding one centre acquired on March 31, 2012) and same centre growth within the centre portfolio.

Portfolio centre margin (see Non-IFRS Performance Measures below for centre margin definition) for the first quarter of 2012 was $1,343,000 or 112% higher than the same period of 2011. Portfolio centre margin as a percentage of revenue was 31% in 2012 versus 34% in 2011. The decrease in centre margins as a percentage of revenue is largely due to lower centre margins realized in the British Columbia centres acquired in the second quarter of 2011. Same centre margins increased from 34% to 36% year over year.

($000) except per share and centre statistics		Q1 2012		Q4 2011		Q3 2011		Q2 2011		Q1 2011		Q4 2010		Q3 2010		Q2 2010 (47-day period)
Revenue		$	8,030	$	5,840	$	4,877	$	3,958	$	3,502	$	3,124	$	2,270	$	867
Centre margin		2,537		1,841		1,406		1,286		1,194		1,005		616		273
Centre margin %		31		31		29		32		34		32		27		31
Net loss^(2)		(731)		(811)		(957)		(541)		(249)		(678)		(896)		(1,724)
FFO		604		119		(314)		(22)		71		(193)		(564)		(1,445)
AFFO		789		211		(329)		100		136		(61)		(432)		(206)
Per share amounts:
	Net loss	(0.006)		(0.007)		(0.008)		(0.006)		(0.003)		(0.007)		(0.009)		(0.033)
	FFO	0.005		0.001		(0.003)		(0.002)		0.001		(0.002)		(0.006)		(0.028)
	AFFO	0.007		0.002		(0.003)		0.001		0.001		(0.008)		(0.005)		(0.004)
Cash		3,803		1,911		18,026		24,270		7,035		8,662		12,856		22,769
Available under credit facility		18,626		22,100		24,800		24,800		24,800		-		-		-
# of centres in operation		40		38		29		22		20		20		17		11
# of centres under development or redevelopment		6		5		3		2		1		-		-		-
Licensed spaces in operation		3,908		3,660		2,539		2,038		1,833		1,815		1,527		1,061
Spaces under development or redevelopment		1,031		803		569		494		247		-		-		-

Note: Net income for 2010 restated to reflect IFRS

AFFO (see Non-IFRS Performance Measures below for AFFO and FFO definitions) for the first quarter of 2012 was $789,000 compared to $211,000 in the fourth quarter of 2011 and $136,000 for the first quarter of 2011.  It is noteworthy that AFFO has generally improved each quarter since commencement of the Company's operations primarily as a result of: (i) growth in the portfolio of centres; (ii) improved performance in same centre operations, and (iii) offset in part by lower summer occupancy and the impact of seasonal maintenance capital expenditures. Additionally, higher levels of general and administrative costs as a result of the increase in the size of the portfolio have been incurred.  AFFO per share for the first quarter of 2012 was $0.007 compared to $0.002 for the fourth quarter of 2011 and $0.001 for the first quarter of 2011.

Funds from Operations ("FFO") for first quarter of 2012 was $604,000 compared to $119,000 for the fourth quarter of 2011 and $71,000 for the first quarter of 2011, the trends being substantially the same as AFFO. FFO per share for the first quarter of 2012 was $0.005 compared with $0.001 for the fourth quarter of 2011 and $0.001 for the first quarter of 2011.

($000)	Q1 2012		Q4 2011		Q3 2011		Q2 2011		Q1 2011
Net loss for the period	$	(731)	$	(810)	$	(957)	$	(541)	$	(249)
Depreciation and certain other non cash items	459		325		313		238		205
Acquisition costs	876		605		330		281		115
FFO	$	604	$	119	$	(314)	$	(22)	$	71
Stock based compensation  - option grants	196		104		69		166		96
Maintenance capital expenditures	(11)		(12)		(84)		(44)		(31)
AFFO	$	789	$	211	$	(329)	$	100	$	136

Net loss for the first quarter of 2012 was $731,000 ($0.006 per share) compared with a net loss of $249,000 ($0.003 per share) in the first quarter of 2011. Factors contributing to the net loss included higher general and administrative expense of $1,358,000 compared with $934,000 during the first quarter of 2011 and higher business acquisition costs of $876,000 compared with $115,000 during the first quarter of the prior year. Under IFRS, acquisition costs, which are clearly critical to a business strategy involving consolidation of the Canadian child care business through acquisitions and development, must be expensed in the quarter in which they are incurred. During the first quarter of 2012 the Company incurred $478,000 and $63,000 of non-recurring costs related to reorganization of internal services in property acquisition costs and general and administrative expenses, respectively.

The Company's balance sheet remains very strong with minimal debt. At March 31, 2012, the Company had cash and cash equivalents of $3.8 million. Under its $25 million credit facility the Company has $18.6 million of available capital, which together with funds on hand provides $22.4 million available for working capital, acquisitions and development initiatives.

Outlook

During 2011 the Company nearly doubled its size by acquiring 18 child care centres and expanding its presence beyond Alberta into British Columbia, with the purchase of seven child care centres, and Ontario, with the purchase of six child care centres. Half of the 2011 acquisitions occurred in the fourth quarter, including the three centres acquired in Calgary in November and the initial six Ontario acquisitions in mid-December. Consequently, these nine acquisitions, adding 1,121 licensed child care spaces to the Company's portfolio, only began to have a meaningful impact on the Company's financial performance in the first quarter of 2012. These acquisitions are expected to provide a full year of operations benefitting the Company's financial performance in 2012. In addition, the Company acquired two Ontario centres late in Q1 2012, the full financial benefit of which will accrue to the Company going forward.

The Company continues to have a substantial pipeline of opportunity for acquisitions and development and anticipates announcements related thereto in the near term. In total, the addition of 719 spaces as a result of the completion of the four development/redevelopment centres subsequent to March 31, 2012 will begin to have a material impact on the balance of 2012 and 2013 as they represent 19% more spaces than those online as at March 31, 2012.

Additionally, with its solid balance sheet and low debt levels, the Company has access to substantial non dilutive capital to execute is pipeline of accretive acquisitions and new development initiatives in subsequent quarters of 2012.

Details of Annual General and Special Meeting of Shareholders

The Company is holding its Annual General and Special Meeting of Shareholders at the Sheraton Centre Toronto, 123 Queen Street West, Conference Rooms D&E, on Thursday, May 24, 2012 at 4:15 pm.

Non IFRS Performance Measures

The Company's business, which is oriented toward the acquisition and development of child care centres and includes the ownership of a significant portfolio of real estate, reports net income that includes deduction for acquisition costs and non-cash charges such as depreciation and stock based compensation expense. Reflecting these factors and consistent with the practice of the Canadian real estate industry, the Company focuses on FFO and AFFO as key financial metrics to measure and compare operating performance. FFO and AFFO do not have standardized meanings prescribed by IFRS.  The Company's method of calculating FFO and AFFO may be different from other entities and, accordingly, may not be comparable to such other entities. FFO and AFFO: (i) do not represent cash flow from operating activities as defined by IFRS; (ii) are not indicative of cash available to fund all liquidity requirements, including capital for growth; and (iii) are not to be considered as alternatives to IFRS based net income for the purpose of evaluating operating performance.

The Company uses "centre margin" as a performance indicator of child care centre operating results.  Centre margin does not have a standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures by other entities.  Centre margin is determined by deducting centre expenses from revenue. Centre expenses exclude net rents due under leases for leasehold properties and mortgage interest, if any, on those properties owned by the Company.

Net income / loss is impacted by, among other items, accounting standards that require child care centre acquisition and transaction costs to be expensed as incurred.  As the Company executes its consolidation and development strategy in the Canadian child care market, it will routinely incur such expenses which will negatively impact the Company's reported net income / loss, but not FFO and AFFO.

Conference Call

Edleun Group Inc. will hold a conference call on Tuesday May 22 at 4:30 pm Eastern Time, to discuss the results of the first quarter of fiscal 2012. The Company's full Financial Statements and Management's Discussion and Analysis will be available on SEDAR at www.sedar.com.

To access the conference call by telephone, dial [phone] or 1-888-231-8191. Please connect approximately 10 minutes prior to the beginning of the call. The conference call will be archived for replay until Tuesday, May 29, 2012, at midnight. To access the archived conference call, dial [phone] or 1-855-859-2056 and enter the reservation number 82117022 followed by the number sign.

A live audio webcast of the conference call will be available at: http://www.newswire.ca/en/webcast/detail/974429/1047717. Please connect at least 10 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above website for 90 days.

About Edleun Group Inc.

Edleun is the leading provider of high-quality, community-based Early Learning & Care child care centres in Canada offering early education and child care services to children ages six weeks to 13 years. Edleun is committed to preparing children for the next step in their education and life, offering families and employers access to and choice of quality early childhood education programs, as well as enhanced opportunities and career advancement for Early Childhood Educators.

Publicly traded on the Toronto Stock Exchange (TSX-V:EDU), the Company's objectives include the acquisition and subsequent improvement of existing child care centres and developing new state-of-the-art Early Learning and Care Centres in underserved Canadian communities.

The Company currently has a total 46 centres in its portfolio including: 41 centres in operation and five in various stages of development or redevelopment representing 4,939 licensed child care spaces.

Forward-Looking Statements

Certain statements in this Release which are not historical facts may constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Any statements related to Edleun's projected revenues, earnings, growth rates, revenue mix, staffing and resources, and product plans are forward looking statements as are any statements relating to future events, conditions or circumstances. The use of terms such as "believes", "anticipated", "expected", "projected", "targeting", "estimate", "intend" and similar terms are intended to assist in identification of these forward-looking statements. Readers are cautioned not to place undue reliance upon any such forward-looking statements. Such forward-looking statements are not promises or guarantees of future performance and involve both known and unknown risks and uncertainties that may cause the actual results, performance, achievements or developments of Edleun to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions. Except as required by law, Edleun does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change.

The Company undertakes no obligation, except as required by law, to update publicly or otherwise any forward-looking information, whether as a result of new information, future events or otherwise, or the above list of factors affecting this information. Many factors could cause the actual results of Edleun to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Condensed Consolidated Statements of Financial Position

(CDN $000's)			March 31, 2012			December 31, 2011
Assets
Non-current assets
	Property and equipment		$		38,562	$		33,434
	Goodwill		23,439			22,940
	Definite life intangible assets		283			340
			62,284			56,714
Current assets
	Cash and cash equivalents			3,803			1,911
	Accounts receivable		1,825			1,589
	Prepaid and other expenses		3,726			3,606
	Short term investments		39			39
			9,393			7,145
Total Assets			$		71,677	$		63,859
Liabilities
Non-current liabilities
	Debt and financing leases		$		6,805	$		2,260
	Deferred tax liability				42			42
			6,847			2,302
Current liabilities
	Accounts payable and accrued liabilities			4,022			2,877
	Deferred revenue		592			399
	Debt and financing leases		220			-
			4,834			3,276
Total Liabilities			11,681			5,578
Shareholders' Equity
	Share capital		65,593			62,931
	Equity settled share based compensation		1,114			1,330
	Accumulated deficit		(6,711)			(5,980)
Total Shareholders' Equity			59,996			58,281
Total Liabilities and Shareholders' Equity			$		71,677	$		63,859

Condensed Consolidated Statements of Operations and Comprehensive Loss

(CDN $000's)			March 31, 2012		March 31, 2011
Revenue			$	8,030	$	3,502
Centre expenses
	Salaries, wages and benefits		4,018		1,709
	Other operating expenses		1,475		599
			2,537		1,194
Lease expense Finance costs			444 46		130 -
General and administrative			1,358		934
Acquisition costs			876		115
Stock-based compensation			196		96
Depreciation and amortization			392		205
			3,312		1,480
Loss before other income			(775)		(286)
Other income			44		37
Net Loss and Total Comprehensive Loss			$	(731)	$	(249)
Net loss per share
	Basic and diluted		$	(0.006)	$	(0.003)
Weighted average number of common shares
	Basic and diluted		116,709,441		92,438,815

Condensed Consolidated Statements of Changes in Shareholders' Equity

(CDN 000's)		Share Capital			Equity Settled Share Based Compensation			Accumulated Deficit			Shareholders' Equity
Balance at January 1, 2011		$		38,463	$	1,089		$	(3,424)		$	36,128
Stock-based compensation		-			96			-			96
Warrants exercised		232			(36)			-			196
Stock options exercised		19			-			-			19
Net loss and comprehensive loss		-			-			(249)			(249)
Balance at March 31, 2011		$		38,714	$	1, 149		$	(3, 673)		$	36,190
Balance at January 1, 2012		$		62,931	$	1,330		$	(5,980)		$	58,281
Stock-based compensation				-		196			-			196
Warrants exercised				2,662		(412)			-			2,250
Net loss and comprehensive loss				-		-			(731)			(731)
Balance at  March 31, 2012		$		65,593	$	1,114		$	(6,711)		$	59,996

Condensed Consolidated Statements of Cash Flow

(CDN 000's)			March 31, 2012		March 31, 2011
Cash provided by (used in):
Operating Activities:
Net loss			$	(731)	$	(249)
Items not affecting cash:
	Depreciation and amortization		392		205
	Finance costs		46		13
	Stock-based compensation		196		96
Change in non-cash working capital			650		(796)
			553		(731)
Investing Activities
Acquisitions			(1,225)		-
Property and equipment			(3,633)		(1,111)
			(4,858)		(1,111)
Financing Activities
Exercise of warrants			2,250		196
Exercise of options			-		19
Loan proceeds			3,996		-
Loan repayments			(49)		-
			6,197		215
Change in Cash and Cash Equivalents			1,892		(1,627)
Cash and cash equivalents, beginning of period			1,911		8,662
Cash and cash equivalents, end of period			$	3,803	$	7,035
Cash and cash equivalents comprised of:
Cash			$	3,803	$	6,433
Cash equivalents				-		602
			$	3,803	$	7,035

 

 

Dale Kearns, President of Edleun Group, Inc. at [phone] ext. 406, or Nick Hurst of the Equicom Group, Inc. at [phone].