IBI Group Inc (TSX: IBG, OTC: IBIBF) is scraping five-year lows after reporting weak results for the first quarter of 2013. Numbers for the first three months of the year showed further weakness for margins, and management’s guidance for the rest of the year was decidedly cautious.

Management also noted during the company’s conference call to discuss earnings that most of the professionals who comprise IBI’s partnership roll are more focused on performing their professional responsibilities than they are concerned with the direction of the share price.

That’s encouraging from the standpoint of wanting everyone to put their best foot forward. But it’s an enervating perspective for shareholders not on the inside who’ve seen their positions drained over the past year.

First-quarter earnings per share were CAD0.03, down from CAD0.21 a year ago and well below the consensus expectation. Revenue declined 2.6 percent compared to the first quarter of 2012 to CAD84.6 million, as comparable revenue slid 7.8 percent. This was offset by a 4.9 percent bump due to acquisitions and a 0.3 percent positive impact from foreign exchange movements.

“Actual” earnings before interest, taxation, depreciation and amortization (EBITDA) as a percentage of revenue declined to 8.6 percent from 13.1 percent a year ago and 11.9 percent in the fourth quarter of 2012.

Management stressed that the first quarter of 2013 included on 61 working days as opposed to an average quarter’s 63. IBI estimates the impact of an extra two working days to be CAD2.8 million of revenue, based on the average revenue achieved in the quarter ended March 31, 2013.

“Normalized” EBITDA margin for the period–adjusted to 63 working days–was 11.5 percent. Even accepting management’s argument, a worrisome deterioration is evident.

Management reported a payout ratio based on distributable cash flow of 80.6 percent, relatively high given that IBI reduced its dividend by 50 percent in December 2012.

As for the balance of 2013, management guided to total fee revenue of approximately CAD360 million. IBI reported adjusted revenue–which includes the impact of any adjustments to unbilled work in process–of CAD350.3 million in 2012. Management expects growth to come from “a combination of strategic and organic” initiatives, including contributions from new acquisitions as well as more fees for existing operations.

Management also noted that “committed work” for 2013 is “the equivalent of approximately 10 months. EBITDA for the full year is forecast “at slightly above 12 percent of revenue.”

Backlog for government and public institutional clients now represents approximately 65 percent of total backlog. Most of this work is concentrated in building facility work in health care, education, and housing, the industrial sector, in transportation terminals, transportation networks and intelligent systems.

Sixty percent of committed backlog is for work in Canada, with 23 percent in the US and 17 percent outside North America. Although the domestic practice “continues to be very strong and is growing geographically,” real estate and physical development activity is slowing in the Great White North.

IBI is seeing “some encouraging growth in private sector real estate development and in intelligent system work” in the US, but management noted that projects for state and local governments are still hampered by lack of funding. The company is also facing competitive pressures. “There remain,” according to management, “challenges in the current environment.”

In the UK IBI’s practice “has slowed as a result of the third consecutive quarter of contraction of national economic activity.” Activity in other international markets “is increasing and provides encouraging prospects.”

Management was alarmingly reticent to discuss IBI’s significant debt obligations coming due over the next 20 months during its first-quarter conference call, dismissing a question from an analyst with the following response, from Chairman and CEO Phil Beinhaker:

I don’t really want to discuss them now other than what we’ve said before, and that is that we are aware of them. And we are working on a variety of approaches to manage them in a timely manner and not to wait to the last day. And we have a number of alternatives and the board will consider them and deliberate on them and we look forward to implementing them over the ensuing quarters.

Overall debt as a percentage of total assets was a relatively high 45.1 percent as of the end of 2012, and management sought and received an adjustment to get IBI in line with its fixed-charge coverage ratio for the year-end period. Among the three metrics that are the focus of IBI’s debt covenants is the payout ratio. This raises the specter of another dividend reduction should operating conditions not improve.

And based on management’s rather tepid commentary on the operating environments in its three main markets we’re not encouraged. Coupled with IBI’s underwhelming operating and financial performance for the first quarter, it’s time to exit the position.