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Press release from CNW Group

Counsel Announces Second Quarter 2012 Results

Tuesday, August 14, 2012

Counsel Announces Second Quarter 2012 Results16:18 EDT Tuesday, August 14, 2012Net Income Increases Five-fold From Q2 2011TORONTO, Aug. 14, 2012 /CNW/ - Counsel Corporation ("Counsel" or the "Company") (TSX: CXS), a financial services company, today announced net income attributable to shareholders of $4.1 million, or $0.05 per basic share and $0.04 per diluted share, for the second quarter of 2012 compared to $0.8 million, or $0.01 per basic and diluted share, for the same period in 2011. For the six months ended June 30, 2012, Counsel had net income of $7.5 million, or $0.09 per basic share and $0.08 per diluted share, versus a loss of $0.7 million, or $0.01 per basic and diluted share, in the first half of 2011. The Company recorded revenues of $38.8 million and $70.1 million for the three and six month periods ended June 30, 2012, respectively, compared to $18.6 million and $21.2 million for the three and six month periods ended June 30, 2011, respectively. All amounts are stated in Canadian dollars, unless noted.Mortgage LendingThe significant year-over-year increase in Counsel's revenues and income was primarily attributable to having a full period of contributions from Counsel's mortgage lending business, Street Capital Financial Corporation ("Street Capital"), which was acquired on May 31, 2011.Street Capital generated $6.1 million in income from continuing operations in the second quarter of 2012 on $31.9 million in revenues. For the six months ended June 30, 2012, Street Capital had $11.3 million in income from continuing operations on $56.1 million in revenues. Street Capital's revenues are comprised primarily of the gain on sales of mortgages it has underwritten to institutional investors. The company sold $2.7 billion of mortgages over the first half of the year (it sold $3.7 billion in the full year 2011), and is now among the top mortgage underwriters operating through the broker channel in Canada. Street Capital had $9.5 billion in mortgages under administration as at June 30, 2012, compared with $5.7 billion at June 30, 2011 and $8.3 billion at March 31, 2012."We're extremely pleased with Street Capital's progress and performance during its first 13 months under Counsel," said Allan Silber, Chairman and CEO of Counsel. "The company has sold more than $5 billion in mortgages since being acquired while maintaining stringent underwriting processes; its income has increased each of the past three quarters; and its mortgages under administration have grown by 67% over the past year. The latter measurement represents a sizeable opportunity for Street Capital as it is the face of all direct communication with borrowers and can therefore generate higher margin mortgage renewals when its current mortgages under administration mature."During the second quarter, Street Capital launched a carefully planned expansion into the near prime segment of the Canadian mortgage market with the introduction of its Street Options Program. Near prime is a segment of the mortgage credit market just below prime and comprised of borrowers who are unable to find financing through traditional sources. The company believes the segment is underserved despite offering potentially higher profit margins, and that it can leverage its network of relationships with mortgage brokers to become a significant participant in the space over time. Street Capital sells the mortgages it originates through its Street Options Program to institutional investors, as it does with mortgages generated through its prime lending business. Street Capital plans to expand the Street Options Program progressively across Canada but it expects that prime mortgages will comprise the vast majority of mortgages it originates in 2012.Asset LiquidationCounsel's asset liquidation business is led by its other major operating company, Counsel RB Capital LLC ("Counsel RB"). Counsel RB is a value driven, innovative leader in distressed and surplus capital asset transactions and a wholly owned subsidiary of Counsel RB Capital Inc. ("CRBCI") (OTCQB: CRBN), a publicly traded company controlled by Counsel.In the second quarter of 2012, income from continuing operations from the asset liquidation business was $0.1 million on $4.0 million in revenues, compared to income from continuing operations of $2.1 million on $11.4 million in revenues in the same quarter in 2011. For the six months ended June 30, 2012, income from continuing operations was $1.0 million on $8.1 million in revenues, versus $2.8 million in income from continuing operations on $13.7 million in revenues in the first half of 2011. Revenues in the second quarter of 2012 were comprised of the proceeds of:asset sales of $2.1 million (Q2 2011 - $11.2 million);earnings from equity accounted joint ventures of $0.2 million (Q2 2011 - $0.2 million); and,commissions and fees of $1.8 million (Q2 2011 - $0.1 million).Asset sales were higher in the second quarter of 2011 due mainly to the sale of a paper mill in New Hampshire in that period, a significant transaction. Commissions and fees increased significantly in the second quarter of 2012 due primarily to revenues contributed by global auction and asset advisory firm Heritage Global Partners, Inc. ("HGP"), which was acquired by CRBCI at the end of February, 2012.Subsequent to the second quarter in July, Counsel RB and HGP expanded their global operations into key Latin American markets via a strategic alliance with Asset Remarketing De R.L de C.V. ("Asset Remarketing"). Under the agreement, Asset Remarketing will conduct asset acquisition and disposition engagements in its Latin American markets together with Counsel RB and HGP on behalf of their clients."We are encouraged by Counsel RB's progress this year to becoming a unique global provider of a full suite of capital asset solutions for its clientbase," said Mr. Silber. "Its agreement with Asset Remarketing builds on the acquisition of Heritage Global Partners, which conducts auctions around the world. Counsel RB now has the key pieces in place to take advantage of favourable industry conditions. The combination of an increase in the supply of surplus assets stemming from the economic slowdown and a wealth of foreign capital in regions with fast-growing economies and robust manufacturing sectors is creating an attractive environment for industrial equipment and related asset transactions. For the second half of the year, Counsel RB expects to close several projects it has been working on and benefit from a robust pipeline of new business."Counsel's Management's Discussion and Analysis and Financial Statements for the three and six months ended June 30, 2012 have been filed and are available on SEDAR ( Counsel Corporation Counsel Corporation (TSX: CXS) is a financial services company that operates through its individually branded businesses in residential mortgage lending, distressed and surplus capital asset transactions, real estate finance and private equity investment. For further information, please visit Counsel's website at StatementsThe statements made in this release that are not historical facts contain forward-looking information that involves risks and uncertainties. All statements, other than statements of historical facts, which address Counsel Corporation's expectations, should be considered as forward-looking statements. Such statements are based on knowledge of the environment in which Counsel Corporation currently operates, but because of the factors listed herein, as well as other factors beyond Counsel Corporation's control, actual results may differ materially from the expectations expressed in the forward-looking statements. Important factors that may cause actual results to differ from anticipated results include, but are not limited to, obtaining necessary approvals and other risks detailed from time to time in the Company's securities and other regulatory filings.Condensed Consolidated Interim Statements of OperationsFor the three months and six months ended June 30, 2012 and 2011(in thousands of Canadian Dollars, except per share amounts) (Unaudited) Three months ended June 30, Six months ended June 30, 20122011 20122011 $$ $$      Revenues38,809 18,552 70,128 21,238      Expenses (exclusive of depreciation, amortization and interest expense shown below) and other (income) losses      Operating costs22,449 12,449 39,779 13,983 Selling, general and administrative expense9,423 5,955 17,985 8,933 Foreign exchange (gain) loss(879)416 (16)1,699 Depreciation and amortization341 25 752 55 Interest expense 804 507 1,655 890 Other 278 (15) (274)(15) 32,416 19,337 59,881 25,545      Income (loss) before fair value adjustments6,393 (785) 10,247 (4,307)      Fair value adjustments 717 112 1,100 (352)Income (loss) before income taxes and discontinued operations7,110 (673) 11,347 (4,659)      Income tax provision (recovery)1,636 (820) 2,857 (1,408)      Income (loss) from continuing operations5,474 147 8,490 (3,251)Less: Income (loss) attributable to non-controlling interest1,407 (593) 1,025 (2,427)Income (loss) attributable to shareholders4,067 740 7,465 (824)      Income from discontinued operations 15 62 11 179Less: Income (loss) attributable to non-controlling interest- 21 - 33Income (loss) attributable to shareholders15 41 11 146      Net income (loss) attributable to shareholders4,082 781 7,476 (678)      Basic net income (loss) per share :      Continuing operations0.05 0.01 0.09 (0.01) Discontinued operations0.00 0.00 0.00 0.00      Basic net income (loss) per share 0.05 0.01 0.09 (0.01)      Weighted average number of common shares     outstanding (in thousands) - basic85,364 75,319  85,256 75,993             Diluted net income (loss) per share:      Continuing operations0.04 0.01  0.08 (0.01) Discontinued operations0.00 0.00  0.00 0.00       Diluted net income (loss) per share 0.04 0.01  0.08 (0.01)      Weighted average number of common shares     outstanding (in thousands) - diluted96,051 75,319  95,581 75,993  The notes contained in the Company's condensed consolidated interim financial statements are an integral part of these statements.Condensed Consolidated Interim Statements of Financial Position As at June 30, 2012 and December 31, 2011(in thousands of Canadian Dollars) (Unaudited)     June 30,December 31,     20122011     $$Assets       Current assets       Cash and cash equivalents   14,757 15,212   Marketable securities   204 255   Mortgages, accounts and deferred interest receivable 30,406 15,643   Inventory   1,315 3,197   Prepaid expenses, deposits and deferred charges5,297 2,262   Assets of discontinued operations  119 180      52,098 36,749  Non-current assets      Deferred interest receivable   15,509 12,483   Deferred charges  21,003 15,880   Investment properties  3,876 -   Properties under development   6,709 11,502   Property, plant and equipment   3,444 3,502   Interests in joint ventures  1,707 3,514   Investment in associates  2,543 2,482   Portfolio investments  50,836 47,460   Intangible assets  6,334 6,654   Goodwill   53,185 44,844   Deferred income tax assets  29,325 29,271   Other assets   66 67        Total assets    246,635 214,408        Liabilities       Current liabilities       Accounts payable and accrued liabilities 33,939 21,441   Customer deposits  1,866 1,641   Income taxes payable   131 284   Notes payable   1,028 -   Current portion of mortgages and loans payable 13,452 8,728   Liabilities of discontinued operations 666 629      51,082 32,723  Non-current liabilities      Mortgages and loans payable   17,758 20,035   Convertible debenture  11,915 11,893   Contingent consideration  11,666 10,715   Deferred income tax liabilities   7,294 4,463   Derivative liability  68 131   Other liabilities  943 2,353 Total liabilities     100,726 82,313        Shareholders' equity   145,909 132,095        Total liabilities and shareholders' equity  246,635 214,408  The notes contained in the Company's condensed consolidated interim financial statements are an integral part of these statements. SOURCE: Counsel CorporationFor further information: Counsel Corporation      Stephen Weintraub EVP, Secretary & CFO  Tel: (416) 866-3058 The Equicom Group Tim Foran Tel: (416) 815-0700 ext. 251