FirstService Corp · TSX:FSV
FirstService — Shareholder Meeting (2010)
68 slides from FirstService's shareholder meeting presentation, Sep 19, 2010
Slide 1: Creating value one step at a time
4 Creating value one step at atime FirstService Annual General h FirstService
Slide 2: Welcome and meeting agenda
Good a'ernoon ladies and gentlemen. I would like to welcome you to this year’s annual mee:ng of shareholders. I am pleased to have with me Sco? Pa?erson, our President and Chief Opera:ng Officer and John Friedrichsen, our Chief Financial Officer. Each year at this :me we review our performance over the
Slide 3: Solid results in 2009 across three divisions
FirstService delivered solid results in 2009, demonstra:ng the power of our three opera:ng divisions that balance each other through the diversity of our opera:ons. Last year, we reported another solid performance from our ever resilient residen:al property management business. Enjoyed another very
Slide 4: Weathering the global recession
The global recession has been a challenge for many companies but FirstService weathered the storm be?er than most. In fact, we took advantage of the downturn to seize strategic growth opportuni:es at a :me when many compe:tors were scaling back. 4
Slide 5: Gaining control of Colliers International
The highlight of our year without ques:on was gaining control of Colliers Interna:onal. FirstService is now the world’s 3rd largest player in commercial real estate with 228 company owned‐offices in 41 countries and affiliate partners in 20 more. Owning Colliers gives FirstService one of the best‐known,
Slide 6: Shareholder returns since 1993 listing
FirstService was established in1989 and since then has successfully navigated good markets and bad to deliver strong returns for our shareholders. An investment of $10,000 in the shares of FirstService when we first listed on the Toronto Stock Exchange in 1993 is worth more than $150,000 today. That
Slide 7: Founding in 1989 and Superior Pools
Back in 1989 FirstService was founded as a private company on the basis of the experience I had founding Superior Pools the company I started as a teenager. Superior developed into a model company in its industry. Today it’s part of American Pools, North America’s largest commercial swimming pool op
Slide 8: Focus on the service industry
From the outset the FirstService strategy was to focus on the service industry, an industry that was out of favour with investors, dazzled by higher profile businesses. Our analysis showed the service industry was a substan:ally undervalued part of the economy making it an excellent place to invest.
Slide 9: First acquisition: College Pro Painters
We made our first move early in 1989 acquiring a business with similar characteris:cs to Superior – a company called College Pro Painters. This was a great opportunity to expand our business into service franchising while staying rela:vely close to our kni]ng. The College Pro management team led by S
Slide 10: Franchise system acquisitions
Subsequent acquisi:ons were franchise systems: •Paul Davis Restora:on; •California Closets; •Pillar‐to‐Post Home Inspec:on; and •Handyman Connec:on. Over :me our Property Services division grew to become the largest provider of property services through franchise and contractor networks in North Ame
Slide 11: Initial public offering and Intercon Security
Our Ini:al Public Offering raised $10 million on the Toronto Stock Exchange, which we used to acquire Intercon Security and establish our second service plaform. Intercon was in the business of providing integrated manpower and electronic security to corporate and ins:tu:onal clients. 11
Slide 12: Business Services platform in 1995
In 1995 we established our third service plaform in Business Services with the acquisi:on of BDP Business Data Services…among…others before we re‐branded the business, Resolve Corpora:on. 12
Slide 13: FirstService Residential platform
Then in 1996 and 1997 we began to build our fourth service plaform called FirstService Residen:al with the acquisi:ons of Prime Management, and The Con:nental Group, both in Florida. The founder of Con:nental, Gene Gomberg, led the expansion and s:ll leads the business today. Over the years we aggre
Slide 14: 1997 US share offering and revenue growth
In 1997 we also raised $20 million to fuel growth through our first US share offering expanding our shareholders base and strengthening our balance sheet for the future. Our revenue reached $263 million in 1999 thanks to the steady performance of our four service plaforms ‐‐ but it was :me to prepare
Slide 15: Colliers acquisition in 2004
One business that had been on our radar screen for a number of years was commercial real estate. Although more cyclical than our other plaforms, it shared many of the same a?ributes and had mul:ple growth opportuni:es. We also felt it was :me for FirstService companies to expand beyond its comfort z
Slide 16: Divestitures of Resolve and Security
So in 2006 we divested Resolve Corpora:on through an IPO of Trust Units and then in 2008 we sold our Security Division. Both of these dives:tures delivered huge returns to our shareholders and gave us the capital we needed to accelerate our growth in real estate services ‐‐ our strategic area of foc
Slide 17: Field Asset Services acquisition
For example in October 2007 one year before the downturn in the in US housing market we acquired Field Asset Services a leader in foreclosure services. The strong results from Field Assets more than off‐set the so'ness we experienced in our consumer‐oriented franchise systems in our Property Services
Slide 18: Milestones over 20 years
In the 20 years since we started FirstService, our company has accomplished a series of milestones that have demonstrated our character as partners, our rigour as operators, and most importantly our spirit of enterprise. In 2009 we closed our books with $1.7 billion in revenue and a successful track
Slide 19: Introducing key managers
Before I turn things over to Sco?, I would like to take a minute to introduce some of our key managers who are here with us today and to ask them to stand up and be recognized. Ladies and gentlemen would you please join me in a big round of applause for these outstanding individuals! 19
Slide 20: Board of directors
You have already been introduced to our directors. Our directors provide our management team with guidance, support and leadership and ensure we operate in accordance with the highest standards of corporate governance. Friends, may I please ask for another round of applause for our directors. 20
Slide 21: Operating review by Scott Patterson
I would now like Sco? Pa?erson, our President and Chief Opera:ng Officer, to review our performance over the past year. Sco? 21
Slide 22: Performance in tough global markets in 2009
Thank you, Jay and good a'ernoon. For a second year in a row we experienced very tough global markets in 2009 – but we are par:cularly pleased that in a year when CRE transac:ons were down globally by 45% and consumer confidence was off significantly – FSV delivered overall revenue and EBITDA growth du
Slide 23: Review of three service platforms
Jay has provided you with an overview of our major accomplishments in 2009 and now I will provide a closer look at the opera:ons of our three service plaforms. 23
Slide 24: Residential Property Management results
Our Residen'al Property Management plaform con:nued its solid track record pos:ng organic revenue growth of 5% and a 60 basis point increase in EBITDA margins over the previous year. 24
Slide 25: Residential platform organic growth since 1996
This plaform has been a stellar performer for us since incep:on in 1996 growing at an average organic rate of 10% over the last 13 years. 25
Slide 26: Largest residential manager in North America
We are the largest manager of residen:al communi:es in North America with opera:ons that now oversee more than 4,000 proper:es containing over one million residen:al units. We es:mate that we are almost 3 X the size of our closest compe:tor and the gap con:nues to grow. 26
Slide 27: Investing in scale, technology and processes
We have used our size and scale effec:vely to invest in technology, processes and products designed to provide clear value to our clients and differen:ate us from our compe:tors. We are absolutely focused on increasing this compe::ve advantage in the years to come, which will con:nue to drive market s
Slide 28: Property Services results
In Property Services our results were very strong once again this year with revenues up 32% overall. This division includes Field Asset Services – our foreclosure services company and several franchise systems including California Closets, Paul Davis Restora:on, Certa Pro Painters and 5 others. Our
Slide 29: Property Services margin improvement
Margins in this division were up an impressive 270bp for 2009 – a credit to our management teams in this division at FAS where they have successfully invested and scaled the business and taken full advantage of opera:ng leverage opportuni:es and at our consumer franchise systems where our entreprene
Slide 30: Outlook for foreclosure services market
Field Asset Services has been a big contributor to the FirstService results during the recession and as you can imagine there is much focus and many ques:ons about the outlook for FAS as the economy recovers. I thought I would take this opportunity to give you the best informa:on we have on the outl
Slide 31: US foreclosures and shadow inventory
In 2009 approximately 2.8 mm proper:es were foreclosed in the US – a 22% increase over 2008. Industry analysts es:mate that there are an addi:onal 7 million mortgages currently in default and this number may be conserva:ve. It is believed that most of these delinquent mortgages will ul:mately transi
Slide 32: Commercial Real Estate platform and Colliers
Our third plaform Commercial Real Estate operates under the Colliers Interna:onal brand and is the third largest player globally. The recession has had a significant nega:ve impact on the commercial real estate market in every region over the last two years – global transac:on ac:vity was down by 50%
Slide 33: Commercial Real Estate revenue and EBITDA
Revenues in this division were down 16% in 2009 compared to 2008 and EBITDA for the full year fell by 80%. Much of this year over year decline relates to early 2009 and it is important to note that our fourth qtr revenues were up 13% over 2008 with EBITDA up 33% a strong finish to the year and we bel
Slide 34: Market stabilization and 2010 outlook
The market dynamics are somewhat different from region to region but we do see markets stabilizing and we an:cipate modest recovery in 2010 with a stronger second half to the year. All our regions were down in 2009 compared to 2008 but we an:cipate every region being up in 2010. Throughout 2010 we wi
Slide 35: Buildings and CO2 emissions
Commercial and residen:al buildings account for more than 30 per cent of the world’s C02 emissions from fossil fuels. We collec:vely manage approximately 1.5 billion square feet of commercial and residen:al space around the world – surely one of the top 2 or 3 companies globally. 35
Slide 36: Social responsibility and energy reduction
As a leader we believe we have a social responsibility to use our unique posi:on of influence to reduce the energy consumed in our managed buildings while simultaneously helping our clients achieve meaningful cost savings. 36
Slide 37: New sustainability strategy and 25% target
In 2009 we embarked on a new sustainability strategy with a specific goal of reducing the energy consumed in our managed buildings by 25%. 37
Slide 38: FS Energy initiative in New York
We will carefully implement our sustainability program…one step at a :me and learn from our successes. Our first step was the crea:on of an ini:a:ve called FS Energy which is focused on our 350 NY City mul: family high‐rises. 38
Slide 39: FS Energy consumption database
FS Energy revolves around an energy consump:on database which took 15 months for us to build and comprises complete energy consump:on data for our NYC porfolio of proper:es for the past two years. The database is unique in the market due to our size and scale. It enables us to benchmark our managed
Slide 40: Early successes in energy savings
We are already seeing impressive early successes and believe we are well on track to achieving our goal for New York over the next 3 years. Ul:mately we believe our investment to develop cleaner energy solu:ons for our clients will build customer loyalty and a?ract new clients as it further differen:
Slide 41: Financial review by John Friedrichsen
And now I will pass the floor to John. Thank you, Sco? and good a'ernoon everyone. 41
Slide 42: 2009 a challenging year
2009 was a challenging year for most companies as the impact from the global recession was felt across all sectors. Though FirstService was not spared from having to deal with these difficult condi:ons, tough decisions were made early in the year which helped us not only post be?er results in 2009, bu
Slide 43: 2009 revenue and EBITDA
In our first year repor:ng results for our new calendar year ended December 31, 2009, FirstService generated revenues of $1.70 billion, up 1% over calendar 2008 while genera:ng EBITDA of $133.1 million up 7% compared to $124.7 million last year. 43
Slide 44: Adjusted earnings per share
Our adjusted earnings per share for 2009 were $1.42 compared to $1.37 per share in the same period in 2008. Our adjusted earnings per share exclude several non‐cash charges that we believe are not indica:ve of the on‐going results generated by our opera:ons… as we have more fully described in our an
Slide 45: Adjustments and tax rate
Included in these adjustments and consistent with last year, is an adjustment for the value of tax loss carry‐forwards, which GAAP does not allow us to currently recognize despite a carry forward period of up to 20 years, as well as non‐tax deduc:ble goodwill impairment charge recorded in our first q
Slide 46: Operating cash flow
I’d now like to spend a minute on opera:ng cash flow in 2009, which, in our view, is a much more meaningful way to evaluate our opera:ng performance. We look at our opera:ng cash flow as EBITDA minus Interest minus Cash Taxes which is the cash flow we generate from our opera:ons, ignoring fluctua:ons in
Slide 47: Capital expenditures
As market condi:ons began to stabilize during 2009, we modestly increased our annual investment in capital expenditures to $24.2 million compared to $21.8 million during the same period in 2008 reinves:ng 18% of EBITDA in our business vs. 17% of EBITDA last year, and well below our historical range
Slide 48: Acquisition investments in 2009
During 2009 we also con:nued to invest in acquisi:ons of new companies as well as increasing our stake in our exis:ng companies with a total of $73 million deployed during the year compared to $93 million in the prior period. 48
Slide 49: Colliers UK investment
Investments in 2009 included $14 million for a 29.9% interest in Colliers UK, based in London, which we viewed as strategically important given the significance of this opera:on within Colliers, as well as the opportunity to establish a global gateway into Western Europe via London, which will benefit
Slide 50: Five-year revenue growth
While measuring our annual results is important, of more significance to our shareholders is our longer‐term performance. Over the last 5 years, our Company has delivered a compound annual growth rate in revenues of 27%. 50
Slide 51: Five-year EBITDA growth
As well, during this same 5 year period, FirstService generated a compound annual growth in EBITDA of 23%. 51
Slide 52: Five-year adjusted EPS growth
Finally, during the last 5 years, we have delivered compound annual growth in our adjusted earnings per share of 40%. Few public companies have this kind of long‐term track record of success as Jay has already men:oned at the outset. 52
Slide 53: Conservative balance sheet and convertible debentures
Another key aspect of our past success and always an important element of our strategy going forward is our conserva:ve balance sheet. In 2009 we took significant steps to further bolster our financial posi:on by comple:ng a $77 million subordinated conver:ble debenture offering, with a 5 yr fixed rate
Slide 54: Leverage and interest coverage
With our leverage, measured in terms of net debt to EBITDA, of 1.76 :mes as at December 31st, consistent with our leverage a year ago, and trailing 12 month interest coverage of just over 9 :mes, these metrics illustrate the strength and depth of our financial capacity and support our investment grad
Slide 55: Pro forma leverage after conversion
In fact, if we proforma our leverage to adjust for the conversion of our conver:ble subordinated debentures into common shares, our leverage reduces to 1.13 :mes. Needless to say, FirstService has a very strong capital base from which to operate and selec:vely invest in growth‐related ini:a:ves. Thi
Slide 56: Credit facility and fixed-rate notes
Our debt capital structure includes a commi?ed revolving credit facility of up to $225 million, of which about $47 million was drawn at year‐end, and which matures in September 2012. This facility, provided by a syndicate of 7 major banks complements our long‐term, fixed‐rate notes totaling $178 mill
Slide 57: Financial capacity to execute strategy
With ample financial capacity and availability, modest debt levels, and strong internally generated cash flow…..we are well posi:oned to fund our opera:ons going forward, execute our strategy….and focus our a?en:on on successfully managing the challenges and opportuni:es ahead of us! Now I’d like to t
Slide 58: Positioning for continued growth
As you have heard we have taken significant steps over the past year to posi:on FirstService for con:nued growth in the years to come. We have intensified our focus as a global real estate services company; We have managed our opera:ons effec:vely during very difficult market condi:ons; And we have acted
Slide 59: Executing the strategic plan in 2009
FirstService entered 2009 prepared to weather the storm but we did not want to let market sen:ments cloud our judgment or weaken our resolve to execute on our strategic plan. It’s always temp:ng during a recession to hunker down and play it safe. But that would have been a huge mistake in our case!
Slide 60: Colliers shareholders agree to single ownership
In October the global shareholders of Colliers overwhelmingly agreed to transi:on the company from its roots as a decentralized network of affiliates owners to one Colliers. To one centrally‐owned business under the opera:on and control of FirstService. 60
Slide 61: Colliers UK and London foothold
The new agreement also paved the way for us to strengthen our foothold in London ‐‐ one of the strongest referral markets in the world ‐‐ with a strategic investment in Colliers UK which also owns the Colliers businesses in Ireland and Spain. Taking control of the Colliers brand had been our goal si
Slide 62: Colliers acquisition and global mandates
The acquisi:on of Colliers is another powerful example of the FirstService opera:ng principles and partnership philosophy in ac:on. As always we were disciplined in our approach ‐‐ and our pa:ence and determina:on to execute on a strategy we knew was right was well rewarded. FirstService is now the
Slide 63: Service levels and talent attraction
We can now ensure that Colliers delivers the highest levels of service from down the street to around the world. Our full control of the Colliers brand will also strengthen our ability to a?ract and retain the best and brightest in the industry. We now have a compelling story to tell. About who we a
Slide 64: Common brand, strategy and synergies
And opera:onally Colliers can now execute on a common brand posi:on, strategy, and business plan and benefit from the economies of scale and the synergies of a larger and more collabora:ve organiza:on. But the most important benefit of all is that FirstService now owns a renewed and reinvigorated Coll
Slide 65: Colliers International brand
The “Colliers Interna:onal” name is an extremely well‐known and ins:tu:onal quality brand. An icon in the global real estate services industry. 65
Slide 66: Three real estate service businesses with growth opportunities
As owners we have a tremendous opportunity to liberate the full poten:al of all of our brands across the en:re organiza:on. With 3 complimentary real estate service businesses ‐‐ commercial real estate residen:al property management and property services; Each with tremendous growth opportuni:es and
Slide 67: Tribute to Sam Hennick
Before I close I would like to acknowledge a man who le' behind a tremendous legacy. As many of you know my father Sam Hennick passed‐away recently. Sam was a huge contributor to the values and principles that have grown to become the FirstService Way. His greatest gi's were in his more important ro
Slide 68: Closing remarks and questions
FirstService enters 2010 strongly posi:oned to benefit from the coming recovery in real estate and the emerging demand that makes it one of the largest markets in the world. This year we will demonstrate once again the importance of our proven business model our diversified footprint and our disciplin