Property services provider FirstService shares fall 12 per cent

By Eric Shackleton, The Canadian Press

TORONTO - Shares of FirstService Corp. (TSX: FSV.TO) fell more than 10 per cent Thursday after the company reported a quarterly loss of US$12 million.

FirstService shares fell C$2.77 or roughly 12 per cent to C$19.96 in trading on the Toronto Stock Exchange as 681,000 shares traded hands. The company, which keeps its books in U.S. dollars, reported a loss of US$12 million or 40 cents per share for the quarter ended March 31, compared with a profit of $2.4 million or six cents per share a year ago.

Revenue in what was the fourth quarter of the company's financial year was $371.7 million, up from $275.7 in the same quarter last year.

FirstService said the drop in earnings came as its commercial real estate segment reported operating results below expectations, mainly in its U.S. operations.

Net earnings for the company's financial year were $27.4 million or 85 cents per share, down from $34.8 million or $1.08 per share.

Annual revenue rose to $1.57 billion, up 33 per cent from $1.2 billion.

CEO Jay Hennick said Thursday as the property services provider sees lots of room to grow its business through acquisitions in a slowing U.S. economy.

In the past year, "we completed several strategic acquisitions adding substantial depth and breadth to our service offerings," Hennick told a conference call with analysts.

"We also initiated a significant divestiture creating substantial value for our shareholders and increasing our financial capacity to capitalize on emerging growth opportunities at exactly the right time in the business cycle."

About 60 per cent of the company's holdings are in North America and 40 per cent in Europe, Asia, Australia and New Zealand.

In April, the company agreed to sell its integrated security division to Tyco's (NYSE: TYC) ADT Security for US$187 million in cash. The deal is to close in June, Hennick said.

"The sale of the security business is a key strategic move for FirstService, designed to intensify our focus on being a global provider of diversified real estate services," he said.

"The proceeds from the divestiture together with our existing financial resources provides for a service with access to more than $300 million of available capital to fund our growth without having to issue additional equity," said Hennick.

It also gives FirstService "lots of drive power" to continue to grow and develop its business and to create significant share value for shareholders.

Colliers International, FirstService's commercial real estate services business, was impacted by market conditions and recorded disappointing results "affecting our overall quarter and our year," said Hennick.

However, "revenue and EBITDA from our other two core service lines, residential property management and property services, were both up sharply over the prior year, demonstrating the stability and balance inherent in our diversified business model," he said.

Going forward, said Hennick, FirstService "is extremely well positioned" to capitalize on opportunities in global real estate services despite some short term uncertainties in global markets.

He said the company has several tuck-in acquisitions in mind, but he declined to discuss any of them.

"Our goal over the next five years is to be a $4 billion company with a stock price which is at least three times where it is today," he said.

"To accomplish this we're going to have to continue to do all the right things ... to be disciplined in our execution ... to grow internally by about eight per cent per year on average."