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President and CEO’s Message to Shareholders

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Strategic renewal while delivering solid growth in 2017

2017 was a year of solid growth that met our expectations and delivered strong shareholder returns. We were pleased with our organic revenue and EBITDA growth. Over the past year, we also completed a review of our strategy and chose the focus areas in our business that will drive our success for many years to come.

Revenues reached $631.2 million, increasing $39.1 million or 6.6 per cent compared to the previous year. Adjusted EBIDTA increased 7.6 per cent to $120.8 million while Adjusted EBITDA margins were marginally higher at 19.1 per cent compared to 19.0 per cent last year.

The strength of our 2017 performance derives from solid performance in our four core businesses, an acceleration of our U.S. expansion strategy, the addition of new innovative products and the successful integration of four tuck-in acquisitions.

As we move forward into 2018, we do so with the confidence that Morneau Shepell is well positioned strategically, operationally and financially to continue to deliver profitable growth that meets or exceeds historical levels of performance.

2017 highlights: delivering today, ready for tomorrow

In addition to solid performance in 2017, our teams completed a comprehensive review of our corporate strategy that resulted in an updated plan for the next planning horizon. This revised strategic plan reflects our evolving perspective on how best to drive sustainable, profitable growth in a dynamic, increasingly globalized HR sector. Our strategy has five key elements:

  • Drive the successful execution of our core businesses – building on our client base, strong talent, and innovation within our Administration, Employee Support Solutions (ESS), Absence Management and Consulting businesses.
  • Accelerate growth through U.S. expansion – focusing on high-potential markets in the public and private sector for Defined Benefits plans, ESS, and Health and Welfare programs.
  • Deploy new technology solutions to address macro trends – in areas such as predictive analytics, digitally-based CBT solutions as well as leveraging artificial intelligence and machine learning.
  • Collaborate across our Lines of Business to increase client value and drive growth – ensuring we maximize our deep portfolio of solutions to create great client experiences.
  • Transform how we do business and achieve best-in-class efficiency – to simplify how we operate, improve margins and continually improve our scalability.

Operationally, our 2017 highlights include:

Our client satisfaction levels for the Company continued to be very positive, where greater than eight out of 10 clients were very satisfied with Morneau Shepell. Our annual employee engagement survey also confirmed that our people are productively engaged in the business. We believe high client and employee satisfaction levels are important success factors in driving our business forward.

Last year, we had major client wins in the U.S. in our Administration and ESS lines of business, confirming that our growth in that important market is based on sound fundamentals.

Also during the year, we closed two and integrated four tuck-in acquisitions, including Pro Health Group, a health and wellness services company based in Quebec, and Chestnut Global Partners, a U.S.-based international EAP provider. We completed these acquisitions with available funds from operations.

In 2017, we continued to explore new growth opportunities beyond our existing core businesses. We launched a new business concept in 70 North American universities to provide international students with mental health services using phone and online chat. More recently, we began client testing a new mobile application – based on a Siri-like interface – that provides users with automated answers to their inquiries. Going forward, we see other opportunities to leverage digital competencies to transform core services and provide entirely new services in new markets.

During the year, we continued to add talent to strengthen our Company with a focus on our Consulting business, ensuring we have the expertise to deliver on our strategy and maintain our competitive edge.

Community engagement has long been central to our brand and values. In 2017, we were pleased to partner with the Centre for Addiction and Mental Health (CAMH) in a joint effort to support “150 Leading Canadians for Mental Health.” This national program celebrates Canadians who have changed the course of mental illness. We also continue to be the mental health partner for the Canadian Olympic Committee, supporting athletes, coaches and their families.

Looking ahead with confidence

As the scale of the Company continues to increase, along with a diversification in our geographic market and product scope, we believe we have the right strategic plan to guide us over the next few years and deliver results for all stakeholders.

In closing, I would like to acknowledge the vision, creativity and business acumen of Founder Frank Morneau, who, in 2018, has decided to retire from our Board of Directors after 52 years of distinguished service. I want to sincerely thank Frank for his guidance and support over the years and especially during my transition to CEO.

On behalf of the Company’s leadership team, I would like to extend my appreciation to all the people who make this company successful – our employees, clients, business partners, Board of Directors and investors.

Stephen Liptrap
President and CEO

Stephen Liptrap