3q10 earnings release brasil brokers reports 3q10 results€¦ · brasil brokers reports 3q10...

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3Q10 Earnings Release

3Q10 Earnings

Conference Call

Portuguese

November 12, 2010

01:00 p.m. (Brasília)

10:00 a.m. (New York)

Code: BR Brokers

Dial-in: +55 (11) 3301-3000

Replay: +55 (11) 3127-4999

Code Replay: 48421444

English

November 12, 2010

3:00 p.m. (Brasília)

12:00 p.m. (New York)

Dial-in: +1 (973) 935-8893

Replay: +1 (706) 645-9291

Code: 19555921

IR Contact

Álvaro Soares

CFO and IRO

Tel: +55 (21) 3433-3000 e-mail: [email protected]

www.brbrokers.com.br

Brasil Brokers Reports 3Q10 Results

Rio de Janeiro, November 11, 2010. Brasil Brokers Participações S.A. (BM&FBovespa:

BBRK3), a real estate brokerage and consulting firm with a strong presence in Brazil’s major real

estate markets, announces today its results for the third quarter of 2010 (3Q10).

The Company’s consolidated financial statements are prepared in accordance with generally

accepted accounting principles in Brazil (BR GAAP), pursuant to Brazilian Corporation Law and the

regulations of the Securities and Exchange Commission of Brazil (CVM).

3Q10 Highlights

Net revenue growth of 34% from 3Q09;

17,521 units sold, 19% more than in 3Q09;

Contracted sales grow 33% from 3Q09 to R$3.9

billion;

Adjusted EBITDA of R$33 million, up 44% from 3Q09;

Adjusted net income of R$21.5 million, growth of 56% from 3Q09.

mailto:[email protected]

http://www.brbrokers.com.br/

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Operating Performance

The following tables present the Company’s operating results for the third quarter of 2010 and

the comparisons with the third quarter of 2009.

(1) Total contracted sales from developments launched by Brasil Brokers, on an exclusive or partnership basis. (2) Includes 100% of Abyara Brokers’ numbers.

Operating Highlights 3Q09 (2) 3Q10 (2)

PSV (R$ thousands) (1) 4,150,989 6,496,941

Launched Units 21,587 28,599

Contracted Sales (R$ thousand) 2,923,615 3,882,326

Units Sold 14,702 17,521

14,702

17,521

3Q09 3Q10

Units Sold

2,924

3,882

3Q09 3Q10

Contracted Sales (R$ thousand)

4,151

6,497

3Q09 3Q10

PSV (R$ thousand)

21,587

28,599

3Q09 3Q10

Launched Units

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Sales by Market Segment In 3Q10, Contracted Sales totaled R$3,882 million, of which R$640 million originated from resales

of units, R$3,213 million from sales of launches, and R$29 million from sales of office space and

lots. Sales of residential and commercial units totaled R$3,853 million(1).

(1) Contracted Sales of residential and commercial units exclude the contracted sales of Primaz and of lots.

(2) ‘Other’ is composed of the contracted sales of Primaz and of lots.

Sales by State

Primary Market

In 3Q10, contracted sales from launches of residential and commercial units totaled R$3,213

million(1).Of this total, 71.9% was in the Southeast, 11.8% in the Northeast, 9.1% in the

Midwest, 4.4% in the North and 2.8% in the South.

(1) Excludes the contracted sales of Primaz and of lots.

81.8%82.8%

17.6%

16.5%0.6%

3Q09 3Q10

Primary Market Secondary Market Others

R$3,882 MMR$2,924 MM

0.8%

(2)

SP

52%

RJ

14%

GO

6%

MG5%

BA

5%

RN4%

PA

3%

RS3%

Others

8%

3Q10 Primary Market

SP53%

RJ

14%

BA6%

GO

5%

MG

5%

PA

4%

RN

3%

PE2%

Others8%

3Q09 Primary Market

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Secondary Market

In 3Q10, property resales totaled R$640 million(1), of which 76.2% was in the Southeast, 9.8% in

the South, 8.9% in the Midwest, 3.8% in the Northeast and 1.3% in the North.


Sales by Income Segment

Primary Market

Of the total of R$3,213 million(1) in contracted sales in the Primary Market, 22.4% was from

properties in the economic segment (up to R$150,000), 41.2% from the middle segment

(R$150,000 to R$350,000), 22.5% from the mid-high segment (R$350,000 to R$650,000) and

13.9% from the high segment (over R$650,000).


RJ

54%

SP

13%

RS

9%

GO

9%

MG

7%

BA

2%PA

1% Others

4%

3Q10 Secondary Market

RJ

62%

RS

9%

SP

9%

MG

8%

GO

3%

ES

3%Others

6%


Economic (up to

R$150k)26%

Middle(R$150 to R$350k)

40%

Mid-High(R$350 to R$650k)

21%

High(above

R$650k)13%

3Q09 Primary Market

Economic (up to

R$150k)22%

Middle(R$150 to R$350k)

41%

Mid-High(R$350 to R$650k )

23%

High(above

R$650k)14%

3Q10 Primary Market

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Secondary Market

Of the total of R$ 640 million(1) in contracted sales in 3Q10, 16.8% was generated by properties

in the economic segment (up to R$150,000), 33.4% from the middle segment (R$150,000 to

R$350,000), 24.4% from the mid-high segment (R$350,000 to R$650,000) and 25.4% from the

high segment (over R$650,000).


Other Operating Information

The following table presents other operating information from the subsidiaries on September 30,

2010, broken down by region.

Economic (up to

R$150k)17%

Middle(R$150 to

R$350k)33%

Mid-High

(R$350 to R$650k)

24%

High(above

R$650k)

25%


Economic

(up to R$150k)

23%

Middle(R$150 to

R$350k)35%

Mid-High(R$350 to R$650k)

22%

Highabove

R$650k)20%


Southeast 9,559 588 938

Northeast 1,297 115 145

South 545 57 79

Midwest 654 104 207

North 494 42 68

TOTAL 12,549 906 1,437(1)

Includes points of sale of Rede Morar

Region Sales Forces Sales Point (1) Employees

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Synergy Program

In order to promote the integration of the subsidiaries’ operations, we created the Synergy

Program, whose key objectives are to increase revenues and sales efficiency, streamline

operating costs and standardize processes and systems.

The program is organized into fronts, and the status of activities on each front is given below:

Financial Performance

This section presents the Company’s results for 3Q10. Note that the Company's results

consolidate 80% of the results of the subsidiary Abyara Brokers.

Service Revenue Gross service revenue from Brasil Brokers’ subsidiaries, consisting of brokerage commissions,

totaled R$93.7 million in 3Q10, generating an average commission of 2.52% from the contracted

sales of R$3.7 billion (considering only 80% of Abyara Brokers’ contracted sales). After deducting

sales taxes, Net Revenue in 3Q10 came to R$84.2 million, representing a 34% increase over the

R$62.9 million recorded in 3Q09.

FRONTS ACHIEVED IN 3Q10 SCHEDULED FOR 4Q10

Management

Processes and

Systems

- Roll-out of the Unified Sales

System at all subsidiaries, using

Geomarketing and CRM tools for

both the primary and secondary

markets;

- Conclusion of the 1st phase of

the Payroll Centralization.

- Roll-out of the Unified Sales System

at all subsidiaries;

- Conclusion of the final phase of the

Payroll Centralization;

- Centralization of IT production

environment;

- Roll-out of the company's new

website for all subsidiaries.

Human Resources

- Training Program for Sales

Team Leaders for 6 groups;

- 4th Sales Manager

Development Workshop;

- Implementation of Profit

Sharing Program at parent

company.

- Conclusion and implementation of

the New Training Program for Brokers;

- Mortgage Loan Training Program

for the Sales Team

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Cost of Services and Operating Expenses

In 3Q10, the financial statements consolidated expenses we consider to be nonrecurring, such as

those related to the development and implementation of commercial projects (unified system for

launch, resale and website sales), as well as the fees paid to legal advisors, the inauguration of

new stores and the restructuring of our subsidiaries. After adjustments, adjusted operating costs

and expenses totaled R$51.2 million in 3Q10. The table below shows the effect of these expenses

on the amounts booked.

62.9

84.2

3Q09 3Q10

Net Income (R$MM)

(em R$MM) 1Q10 2Q10 3Q10

(1) Service Costs (3.2) (3.0) (4.6)

G&A Expenses and Fees (44.3) (47.0) (47.1)

Non-recurring Expenses 2.0 1.7 2.2

Investments in the implementation of SSC 1.2 0.4 0.1

Commercial Projects 0.1 0.4 0.3

Lawyers and Consulting Fees 0.7 0.3 1.7

Store Opening Expenses - 0.4 0.0

DelForte Frema Restructuring - 0.3 0.1

(2) Adjusted G&A Expenses (42.3) (45.3) (45.0)

(3) Other Operating Expenses/Revenues (0.8) (0.6) (1.6)

(1)+(2)+(3) Total Adjusted Operating Expenses and Costs (46.2) (48.9) (51.2)

Total Costs and Expenses - Accounting Adjustments

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Adjusted Net Income Brasil Brokers' adjusted net income in 3Q10 was R$21.5 million, representing adjusted net

margin of 26%. The adjustment of net income excludes the financial expenses booked in the

period due to the adjustment to present value of accounts payable and receivable, and the

nonrecurring and restructuring expenses booked at the holding company and subsidiaries.

Reconciliation (R$ million) 3Q09 3Q10

Net Income 11.9 19.4

Present Value Adjustment (0.2) (0.04)

Restructuring Expenses - -

Non-recurring Expenses 2.1 2.2

Adjusted Net Income (1) 13.8 21.5

Adjusted Net Margin 21.9% 25.6%

(1) Adjusted Net Income is not an accounting method, it consists in the period net profit less

the goodwill amortization, present value adjustment, restructuring expenses and non-recurring

expenses.

Adjusted Net Income (R$million)

and Adjusted Net Margin (%)

13.8

21.5

3Q09 3Q10

** 22% ** 26%

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Adjusted EBITDA(1)

Brasil Brokers’ Adjusted EBITDA(1) in the quarter was R$ 33 million, for adjusted EBITDA margin

of 39%.

Income Tax and Social Contribution Tax

Brasil Brokers’ income tax and social contribution tax on net income totaled R$10.5 million in the

quarter. Brasil Brokers’ total income tax and social contribution tax in the quarter refers to the

taxes of subsidiaries, which corresponded to 11.2% of their gross revenue.

Reconciliation (R$ million) 3Q09 3Q10

Adjusted Net Income 13.8 21.5

Financial Results (0.5) (1.7)

Income Tax and Social Contribution 7.4 10.5

Depreciation and Amortization 2.1 2.2

Minority Interest 0.1 0.5

Adjusted EBITDA(1) 23.0 33.0

Ajusted EBITDA Margin 36.6% 39.2%

(1) Adjusted EBITDA consists of income before net financial result, income tax and social

contribution tax, depreciation and amortization and non-operating income. Adjusted EBITDA

is not a measure in accordance with generally accepted accounting principles in Brazil (BR

GAAP), does not represent cash flow for the periods presented, and should not be

considered a substitute for net income as an indicator of operating performance, or as a

substitute for cash flow as an indicator of liquidity. Adjusted EBITDA does not have a

standardized meaning and our definition of Adjusted EBITDA may not be comparable to that

used by other companies.

23.0

33.0

3Q09 3Q10

** 37% ** 39%

Adjusted EBITDA (R$MM)

and Adjusted EBITDA Margin (%)

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Cash & Cash Equivalents

Cash and cash equivalents at the close of 3Q10 totaled R$65.9 million. These amounts refer

basically to investments in bank certificates of deposit and fixed-income funds, with yields

ranging from 100.5% to 105.5% of the overnight interbank deposit (CDI) rate. The Company also

has receivables totaling R$81.3 million, with an average estimated term of 95 days.

The Company has no exposure to derivatives or any other instruments with variable exchange

rates or variable yields.

Operating cash flow in 3Q10 was positive R$14.7 million, due to the cash generated from

operations of R$24.3 million and the increase of R$9.6 million in working capital needs.

CAPEX cash flow was negative R$8.4 million in the quarter. This result is due to the expansion

and modernization of our facilities related primarily to the inauguration of new branch offices in

the secondary market, with the inauguration in this year alone of 14 new stores, as well as to the

investments in systems and equipment related to the consolidation of our operations.

Financing flow in the quarter was negative R$10.6 million, including the payment of dividends of

R$10.7 million.

Debt

At the end of 3Q10, the Company’s loan and financing obligations totaled R$63,000. The

Company has no liabilities based on derivative operations or pegged to exchange rates.

Cash Flow (R$ million) 3Q10

Cash and Cash Equivalents 70.1

Operating Activities 14.7

Investment Activities (8.4)

Financial Activities (10.6)

Cash and Cash Equivalents in the end of the period 65.9

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Financial Statement (R$ ‘000)

3Q10 3Q09

Contracted Sales* 3,715,544 2,821,947

Average Commission 2.52% 2.54%

Revenues of Services 93,736 71,679

Discounts and Rebates (1,393) (3,305)

Taxes on Revenues (8,101) (5,483)

Net Revenues 84,243 62,891

Cost of services provided (4,596) (3,111)

Gross Income 79,647 59,779

Operating Costs and Expenses (48,775) (38,880)

Administratives Expenses (41,689) (32,629)

Management Remuneration (4,292) (4,459)

Allowance for doubtful accounts (1,153) (2,011)

Other Operating Revenues (Expenses) (1,641) 218

EBITDA 30,872 20,899

EBITDA Margin 36.6% 33.2%

Depreciation and Amortization (2,185) (2,149)

Amortization of Goodwill Investments - -

Financing Expenses (468) (825)

Present Value Adjustment (11.638/07) 38 234

Financing Income 2,124 1,297

Income before taxes 30,381 19,457

Income Tax (7,689) (5,485)

Social contribution Tax (2,814) (1,946)

Minority Interest (463) (138)

Net Income for the period 19,415 11,887

Net Margin 23.0% 18.9%

Non-recurring expenses (2,168) (2,117)

Adjusted Net Income 21,546 13,770

Adjusted Net Margin 25.6% 21.9%

Adjusted EBITDA 33,040 23,016

Adjusted EBITDA Margin 39.2% 36.6%

* Considers only 80% contracted sales of Abyara Brokers.

Financial Statement

12


Consolidated Balance Sheet on September 30, 2010 (R$ '000)

ASSET

3Q10 3Q09

Assets

Cash, Cash Equivalents 65,874 53,834

Accounts Receivable 78,992 57,928

Advance from suppliers 156 404

Tax to Recover 7,934 6,000

Loans and other Credits with

Related Parties - -

Prepaid Expenses 2,906 1,996

Other Current Assets 8,924 3,941

Total Current Assets 164,786 124,103

Noncurrent Assets

Long Term Assets

Accounts Receivable 2,288 1,337

Result from disproportionate interest 4 1,357

Available properties for sales 2,217 2,894

Related parties 264 431

Advance for future Capital Increase - -

Other Credits 2,287 138

7,060 6,157

Investments in Controled Companies - -

Property 38,349 30,262

Intagible asset 314,605 308,901

Deferred - -

352,954 339,163

Total Noncurrent Assets 360,014 345,320

Total Assets 524,800 469,423

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Consolidated Balance Sheet on September 30, 2010 (R$ '000)

3Q10 3Q09

Liabilities

Loans and Financing 63 113

Suppliers 6,275 4,360

Wages and Burden Payable 8,404 8,328

Taxes and Contribution Payable 25,571 19,455

Advance from Clients 2,624 481

Dividends Payable 234 4

Payable Accounts - Company Acquisition - 16,882

Loans and other related parties payable 392 315

Usufruct of Results 760 943

Other Accounts Payable 4,575 4,575

Total Current Liabilities 48,898 55,456

Noncurrent Liabilities

Long Term Liabilities

Loans and Financing - 40

Provisions for Contingencies 2,419 2,419

Taxes Payable - 183

Payable Accounts - Company Acquisition - -

Investment Provisions (Losses) - -

Others accounts Payable 615 985

Total Non Current Liabilities 3,034 3,627

Minoritary Interest 1,394 382

Shareholders' Equity

Subscribed Capital 344,359 344,359

Capital Reserve 40,348 23,454

Accumulated Losses 86,767 42,145

Total Shareholders Equity 471,474 409,958

Total Liabilities and Shareholders' Equity 524,800 469,423

LIABILITIES

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Consolidated Income Statement

Period from July 1 to September 30, 2010

Consolidated Income Statement

3Q10 3Q09

Revenues of Services 93,736 71,679

Discounts and Rebates (1,393) (3,305)

Taxes on Revenues (8,101) (5,483)

Net Revenues 84,242 62,891

Cost of services provided (4,596) (3,111)

Gross Income 79,646 59,779

Operating Costs and Expenses

Administratives Expenses (42,842) (34,640)

Management Remuneration (4,292) (4,459)

Depreciation and Amortization (2,185) (2,149)

Amortization of Goodwill Investments - -

Financing Expenses (430) (591)

Financing Income 2,124 1,297

Other Operating Revenues (Expenses) (1,641) 218

Equity income - -

(49,265) (40,323)

Income before taxes 30,381 19,457

Income Tax (7,689) (5,485)

Social contribution Tax (2,814) (1,946)

Minority Interest (463) (138)

Net Income for the period 19,415 11,887

15


Cash Flow Statement

Period from July1 to September 30, 2010

Cash Flow3Q10 3Q09

Net Income from 07/01 to 09/30 19,415 11,887

Adjustments for reconciliation between losses and net operating revenue

Depreciation 2,192 1,806

Amortization (6) 343

Investments goodwill amortization - -

Credit Provisions (Losses) 2,798 (2,129)

Provisions for contingencies - (2)

Market value adjustment accounts receivable (38) -

Market value adjustment accounts payable - -

Adjusted Net Income 24,361 11,905

Variation between Assets and Liabilities

Accounts Receivable (13,132) 2,602

Taxes to recover (360) -

Accounts Receivable - related parties (10) 357

Other current assets (2,410) (1,252)

Advance for future Capital Increase - -

Others Long Term Assets 1,987 1,065

Suppliers 812 324

Wages and Burden Payable 455 362

Taxes and Contribution to recover 1,680 1,120

Taxes and Contribution payable (1) (49)

Advances from Clients 927 (347)

Payable to related parties (78) (92)

Usufruct of Results - (125)

Other Current Liabilities (97) (492)

Others Long Term Liabilities 601 (217)

(9,626) 3,256

Net Cash Used in Activities 14,735 15,161

From Investment Activities

Share buy back - -

Available properties for sales (368) 200

Fixed Assets (7,764) (2,913)

Intangible Assets (309) (964)

Intangible Assets (Payable Company Acquisition) - (10,062)

Deferred asset - -

Net Cash in Investment Activities (8,441) (13,739)

From Financing Activities with third parties

Loans and financing (22) (48)

Payable company acquisition - (2,588)

Net Cash in Investment Activities with third parties (22) (2,636)

From Financing Activities with Shareholders

Capital increase - 10,500

Capital reserve - premium on sale of shares - -

Minority shareholders 124 139

Interest distribution and advance of dividends (10,671) (7)

Net Cash From Financing Activities with Shareholders (10,547) 10,632

Availability Increase (Losses) (4,275) 9,418

Cash and Equivalent in the Beggining of the Period 70,149 44,416

Cash and Equivalent in the end of the period 65,874 53,834

3q10 earnings release brasil brokers reports 3q10 results€¦ · brasil brokers reports 3q10...

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