A MESSAGE FROM OUR CEO
2018 was another excellent year for FirstService Corporation
We have a proven business model and strategy that has delivered consistent revenue growth and shareholder returns for over two decades. We operate in huge, highly fragmented property service markets with significant running room for growth. Our relentless focus on customer experience drives retention, repeat business and word-of-mouth referral resulting in market share gains and consistent year-over-year organic growth. We augment this with selective tuck-under acquisitions to take total top-line growth to 10%+. Our 2018 results reflect the continued execution of our strategy and represent our 25th consecutive year of revenue growth.
We have many highlights to be proud of in 2018 including:
Double-Digit Revenue Growth
Our top line grew by 12% in 2018 with a healthy 50/50 balance between organic growth and acquisitions. We consider organic growth to be the most important measure of brand health across our various service lines and we are very pleased with the 6% generated year-over-year. We continue to differentiate our service delivery and win market share.
During 2018, we completed 15 strategic acquisitions balanced between our two divisions: ten in FirstService Brands and five in FirstService Residential. Through these transactions, we increased market share, broadened our service offering and expanded our geographic footprint. Importantly, the deals also brought new top-level talent into the FirstService family. The leadership and talent at prospective targets is the principal asset we focus on and ultimately pay for. Last year, we added a number of young leaders to our team and we expect them to help drive growth for many years.
Our consolidated margins increased again this year, by 70 basis points, supported by increases at both divisions. We have a strong culture of “continuous improvement” that drives our daily focus on customer experience and also results in the consistent realization of cost efficiencies across our operations. This has been particularly apparent in recent years at FirstService Residential as we consolidate systems and leverage our scale, and this discipline for incremental improvement extends to every operation.
Free Cash Flow Supported a Strong Balance Sheet and Increasing Dividends
We generated another year of strong operating cash flow, which enabled us to invest in our businesses while also driving internal and acquisition growth initiatives. Our balance sheet remained strong at year-end with a leverage ratio of 1.4x net debt to EBITDA. Early in 2018, we also expanded our debt capacity with an increased and extended credit facility allowing for $350 million of total borrowing (including a $100 million accordion feature). Our financial flexibility also allowed us to recently increase our annual dividend to US$0.60 per share, the fourth successive 10%+ hike and a cumulative 50% increase since our spin-off into a new public company in June 2015.
We launched our Social Purpose program in 2018 as a way to highlight our ongoing commitment to serving our local communities and to encourage our teams to do even more. The energy and enthusiasm around Social Purpose was incredible and in our first year, we participated in more than 200 community-related initiatives. In addition, our teams quickly embraced the opportunity to help each other by financially supporting the FirstService Relief Fund, which assists our people facing financial hardship during times of crisis. We approved 29 grants in 2018 with awareness and momentum increasing throughout the year.
We are an essential services company comprised of 34,000 employees who share a deep commitment to serve others. Our people are our greatest asset and the strength of their engagement is our competitive advantage. During 2018, we increased our investment in people development and culture-building initiatives for the fifth year running. We operate in very tight labour markets across North America and our ability to recruit, hire, onboard, train and retain employees who share our values is critical to our continued success. We aspire to be THE employer of choice in all our markets and, in 2018, we again saw returns from our investments with improvement in recruiting metrics, employee retention and employee engagement measures.
Summary and Look Forward
We are pleased with our strong 2018 results which continue an impressive run for us since our spin-off in June 2015. Revenues are up more than 70%, EBITDA is up 154% and our stock price is up 145% over the four years since. We have consistently stated that our long-term goal is to grow our revenues at an average annual rate of at least 10% with incremental growth at the EBITDA line. We have achieved and exceeded this goal for many years and are confident that 2019 will deliver more of the same. Our markets continue to show strength and operationally we are in an excellent position to capitalize on the opportunity
Longer term, we remain excited about the huge growth opportunities we have in our service markets and the potential for continued efficiencies and margin improvement across the board.
We want to thank our operating partners and teams for their continued commitment to making a difference every day. Together, we are successfully building iconic, winning brands with service excellence as the foundation. It is an exciting journey with much work still to do.
D. Scott Patterson
Chief Executive Officer