Colliers International Group, Inc. :CIG-CA: Earnings Analysis: Q2, 2016 By the Numbers : August 3, 2016

Colliers International Group, Inc. reports financial results for the quarter ended June 30, 2016.

We analyze the earnings along side the following peers of Colliers International Group, Inc. – Mainstreet Equity Corp. and CBRE Group, Inc. Class A (MEQ-CA and CBG-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of CAD 622.05 million, Net Earnings of CAD 27.59 million.
  • Gross margins narrowed from 39.10% to 36.67% compared to the same period last year, operating (EBITDA) margins now 10.20% from 10.40%.
  • Year-on-year change in operating cash flow of -47.22% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth due to contribution of one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2015-06-30 2015-09-30 2015-12-31 2016-03-31 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 503.95 549.89 742.59 516.69 622.05
Revenue Growth (%YOY) -30.07 -26.2 -20.63 -31.51 23.43
Earnings (mil) -35.78 10.03 47.67 -9.89 27.59
Earnings Growth (%YOY) -451.52 -57.07 156.24 -231.8 177.1
Net Margin (%) -7.1 1.82 6.42 -1.91 4.44
EPS -0.87 0.26 1.23 -0.26 0.71
Return on Equity (%) -33.75 12.75 52.37 -10.04 28.01
Return on Assets (%) -8.81 2.96 13.11 -2.66 7.56

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Market Share Versus Profits

Revenues History
Earnings History

CIG-CA‘s change in revenue this period compared to the same period last year of 23.43% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that CIG-CA is holding onto its market share. Also, for comparison purposes, revenues changed by 20.39% and earnings by 379.09% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Earnings Growth Analysis

The company’s earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from 36.67% to 39.10% for the same period last year, while operating margins (EBITDA margins) went from 10.20% to 10.40% over the same time frame.

Gross Margin Versus EBITDA Margin

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

CIG-CA‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 13.12 days from 26.29 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Cash Versus Earnings – Sustainable Performance?

CIG-CA‘s change in operating cash flow of -47.22% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Margins

The company’s operating (EBIT) margins contracted from 8.04% to 8.00%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from -4.39% to 7.59%.

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Colliers International Group, Inc.

Company Profile

Colliers International Group, Inc. provides real estate-related services to the commercial, institutional and residential markets in North America and various countries around the world. It operates through three segments: Commercial Real Estate Services, Residential Real Estate Services and Property Services. The Commercial Real Estate Services segment offers brokerage property management, valuation and advisory services under the brand name Colliers International. The Residential Real Estate Services segment provides property management and related property services to residential communities in North America. The Property Services segment provides franchised and Company-owned property services to customers. The company was founded by Jay S. Hennick on February 25, 1988 and is headquartered in Toronto, Canada.

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