Mr. Bill Morneau reports

MORNEAU SHEPELL REPORTS 2015 SECOND QUARTER RESULTS

Morneau Shepell Inc. has released its financial results for the three-month period ended June 30, 2015 (all amounts are in Canadian dollars, unless noted otherwise).

Highlights compared with the same period in 2014:

• Revenue for the quarter was $142.4-million. Organic revenue growth was 4.7 per cent. Year-to-date organic revenue growth was 5.8 per cent.
• Adjusted earnings before interest, taxes, depreciation and amortization margin was 19.7 per cent compared with 19.3 per cent.
• Adjusted EBITDA increased 3.0 per cent to $28.1-million.
• Normalized free cash flow increased by 23.1 per cent to $16.1-million.

"We are pleased with the solid financial performance of the company in the second quarter," said Bill Morneau, executive chair of Morneau Shepell. "The continued growth this quarter, and for the first half of this year, is particularly gratifying as we are comparing this year's results against the exceptionally high-growth figures we obtained last year."

"Organic revenue, which excludes acquisitions and divestitures, increased in the second quarter of 2015 by 4.7 per cent or $6.4-million," said Alan Torrie, president and chief executive officer of Morneau Shepell. Mr. Torrie added, "The recent announcement of our acquisition of the health and benefits administration business of Ceridian in the U.S. positions the company well for ongoing growth opportunities and to meet the changing competitive landscape and needs of our customers."

                                               FINANCIAL REVIEW
                                            (in thousands of dollars)

                            Three months ended  Three months ended  Six months ended  Six months ended
                                 June 30, 2015       June 30, 2014     June 30, 2015     June 30, 2014

Revenue                               $142,420            $140,877          $280,812          $271,968
Adjusted EBITDA                        $28,060             $27,240           $54,704           $51,917
Adjusted EBITDA margin                    19.7%               19.3%             19.5%             19.1%
Normalized free cash flow              $16,054             $13,039           $30,229           $27,727
Profit                                  $9,272              $9,246           $17,483           $17,444

For the three months ended June 30, 2015, the company reported $142.4-million in revenue, an increase of 1.1 per cent or $1.5-million from the same period in 2014. Total operating expenses (excluding depreciation and amortization expenses) were $117.8-million in second quarter 2015, compared with $115.9-million in second quarter 2014.

Adjusted EBITDA of $28.1-million increased by $800,000 or 3.0 per cent from $27.2-million for second quarter 2014. The increase is primarily due to growth in revenue of $1.5-million, partially offset by an increase in salaries and other operating expenses of $700,000 after EBITDA adjustments for Mercer Canada outsourcing conversion costs.

Adjusted EBITDA margin was 19.7 per cent compared with 19.3 per cent for the same period in 2014.

Normalized free cash flow for the three months ended June 30, 2015, increased by $3.0-million to $16.1-million compared with $13.0-million for the same period in 2014. The increase was mainly due to lower capital expenditures and higher adjusted EBITDA in the current period.

The 12-month rolling normalized payout ratio at second quarter 2015 was 70.6 per cent compared with 68.4 per cent at second quarter 2014.

The company is maintaining its policy of paying a monthly dividend of 6.5 cents per share.

Notice of conference call

Management of Morneau Shepell is hosting a conference call on Aug. 5 at 12 p.m. ET. The conference call is open to all those wishing to attend, with a question-and-answer period to follow the presentation. To participate in the live conference call, please call 416-340-2217 (participant code 6093913) in the Toronto area, or 1-866-696-5910 (participant code 6093913) throughout the rest of Canada. A replay of the call will be available on the Morneau Shepell website.

We seek Safe Harbor.