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Press release from CNW Group

Counsel announces Q1 2013 results

Wednesday, May 15, 2013

Counsel announces Q1 2013 results

19:13 EDT Wednesday, May 15, 2013

TORONTO, May 15, 2013 /CNW/ - Counsel Corporation ("Counsel" or the "Company") (TSX: CXS), a financial services company, today announced income from continuing operations of $3.1 million, or $0.02 per basic and diluted share, on $25.7 million in revenue in the first quarter ended March 31, 2013 compared to $2.7 million, or $0.03 per basic and diluted share, on $24.7 million in revenue in the same period of 2012. All amounts are stated in Canadian dollars, unless noted.

"We are extremely pleased with the increased momentum of our mortgage lending business in the first quarter," said Allan Silber, Chairman and CEO of Counsel Corporation. "Street Capital's business increased the volume of mortgages it originated by almost 15% compared to the same quarter last year and, according to an industry report, was third in mortgage broker market share during the quarter with almost 13% of funded volume compared to approximately 8% in the same quarter last year.

"Additionally, the business has grown its portfolio of mortgages under administration to $13.3 billion, an increase of more than 10% since the end of 2012," added Mr. Silber. "Capturing market share and adding to our assets under management are integral parts of the growth strategy for the business."

The year-over-year increase in Counsel's revenue in the first quarter of 2013 was primarily due to an increase in the gain on sale of mortgages underwritten by Counsel's mortgage lending business, Street Capital Financial Corporation ("Street Capital"), despite lower spreads in the credit market. The increase in income from continuing operations was primarily due to a fair value appreciation of $1.9 million related primarily to an increase in the fair value of Counsel's private equity portfolio net of foreign exchange fluctuations, compared to a fair value impairment of $0.5 million in the first quarter of 2012. The decrease in net income was primarily due to a loss of $1.3 million in Counsel's discontinued operations that were held for sale in the first quarter of 2013, compared to income of $0.3 million in the first quarter of 2012, as well as costs incurred to expand Street Capital's share of the mortgage broker channel, including non-recurring costs, and investments made to support the company's application for a bank license, which was filed in December 2012.

Net income attributable to shareholders, including discontinued operations, was $0.7 million, or $0.01 per basic and diluted share, for the first quarter of 2013 compared to $3.4 million, or $0.04 per basic and diluted share, for the same period of 2012.

Mortgage Lending Business

Counsel carries on its mortgage lending business through its wholly owned subsidiary Street Capital (www.streetcapital.ca). The company sources its mortgages solely through a network of independent, high quality mortgage brokers across Canada with whom it has built relationships. The company offers a broad lineup of high ratio and conventional mortgages, predominantly to prime borrowers, and sells the mortgages it underwrites to top-tier financial institutions. Business revenues are almost entirely from the gain on sale of mortgages.

The business generated $25.5 million in revenues in the first quarter of 2012 compared to $24.2 million in the same period in 2012. The increase was due to growth in the volume of mortgages originated. Expenses totaled $17.6 million and $13.4 million in the first quarter of 2013 and 2012, respectively. The increase was due to costs incurred to expand Street Capital's share of the mortgage broker channel and investments made to support the company's application for a bank license including non-recurring costs.

Street Capital originated $1.6 billion of mortgages in the three months ended March 31, 2013, compared to $1.4 billion in the corresponding period in 2012. The business increased its portfolio of mortgages under administration to $13.3 billion at March 31, 2013 compared to $8.3 billion at March 31, 2012 and $12.0 billion at December 31, 2012.

Discontinued Operations

In the first quarter of 2013, Counsel's Board of Directors approved a plan to accelerate the Company's strategic process to focus on financial services by disposing of its non-core operating business segments. After exploring alternatives, the Board concluded that the plan provides the best option to unlock shareholder value while allowing Counsel's management team to focus and build on the unique opportunity for growth and sustainable profitability provided by Street Capital.

The discontinued operations include:

  • Counsel's asset liquidation subsidiary Counsel RB Capital Inc. (OTCQB: CRBN), of which Counsel owns 71.3%;
  • Counsel's case goods subsidiary Fleetwood Fine Furniture LP, of which Counsel owns 71.2%; and,
  • Counsel's real estate properties including its interest in two properties that were under development and one investment property.

The preferred disposition for each of the businesses is based on maximizing their value for the benefit of Counsel shareholders. The Company expects the Case Goods business and Real Estate properties to be sold to third parties while the Asset Liquidation business is expected to be distributed to Counsel shareholders.

The Company is also winding down its private equity business.  Our private equitybusiness is carried on through our wholly-owned subsidiary, Knight's Bridge Capital Partners Inc. ("Knight's Bridge"), which is responsible for managing Counsel's portfolio investment opportunities. These investments are held by the KBCP Fund I (the "Fund"). For the first five years of the Fund, Knight's Bridge's mandate was to source new investment opportunities for the Fund. That five-year period has now expired and its current mandate is to maximize the value of each of its investments and dispose of them at the optimal time. As we expect that the disposition process will take more than 12 months, the business cannot be classified as a discontinued operation.

Counsel's Management's Discussion and Analysis and Condensed Consolidated Interim Financial Statements for the three months ended March 31, 2013 will be available on SEDAR (www.sedar.com).

About Counsel Corporation (www.counselcorp.com)
Counsel Corporation (TSX: CXS) is a financial services company operating in residential mortgage lending through its wholly owned subsidiary Street Capital Financial Corporation, one of the largest non-bank mortgage lenders in Canada. Founded in 1979 and a public company for more than a quarter century, Counsel's goal is to build consistently profitable, industry-leading financial services companies by investing in great leaders and providing them with the strategic guidance and financial resources they need to succeed.

Forward-Looking Statements
The 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.



Consolidated Interim Statements of Operations
For the three months ended March 31
(in thousands of Canadian Dollars, except per share amounts)
(Unaudited)
       
    Three months ended March 31,
    2013 2012
    $ $
       
Revenues   25,692 24,713
       
Expenses      
  Operating costs   17,637 13,464
  Selling, general and administrative expense   5,490 6,224
  Foreign exchange (gain) loss   - 18
  Depreciation and amortization   333 403
  Interest expense    571 591
    24,031 20,700
       
Income before fair value adjustments   1,661 4,013
       
Fair value adjustments    1,867 (496)
Income before income taxes and discontinued operations   3,528 3,517
       
Income tax provision   458 839
       
Income from continuing operations   3,070 2,678
Less: Income (loss) attributable to non-controlling interest   1,534 (201)
Income attributable to shareholders   1,536 2,879
       
Income (loss) from discontinued operations    (1,332) 334
Less: Income (loss) attributable to non-controlling interest   (537) (181)
Income (loss) attributable to shareholders   (795) 515
       
Net income attributable to shareholders   741 3,394
       
Basic and diluted net income (loss) per share :      
  Continuing operations   0.02 0.03
  Discontinued operations   (0.01) 0.01
       
Basic and diluted net income per share    0.01 0.04
       
Weighted average number of common shares      
outstanding (in thousands) - basic and diluted    85,851 85,148

The notes contained in the Company's condensed consolidated interim financial statements are an integral part of these statements.




Consolidated Interim Statements of Financial Position
As at March 31, 2013 and December 31, 2012
(in thousands of Canadian Dollars)
(Unaudited)
    March 31, December 31,
    2013   2012
    $   $
Assets                
  Current assets              
    Cash and cash equivalents    5,538   12,196
    Marketable securities    109   109
    Mortgages, accounts and deferred interest receivable    23,878   26,360
    Inventory   -   6,863
    Prepaid expenses, deposits and deferred charges   2,788   4,637
    Investment held for sale   -   1,851
    Income tax receivable   -   70
    Assets of discontinued operations   12,959   91
    45,272   52,177
  Non-current assets            
    Deferred interest and mortgage receivable    15,921   17,086
    Deferred charges   26,525   24,692
    Investment properties   -   3,969
    Properties under development    -   6,739
    Property, plant and equipment    2,895   3,216
    Interests in joint ventures   -   3,600
    Investment in associates   -   20
    Portfolio investments   48,945   53,454
    Intangible assets   5,964   11,324
    Goodwill   24,919   43,837
    Deferred income tax assets   -   27,438
    Other assets   49   64
    Assets of discontinued operations   67,162   -
                 
Total assets   237,652   247,616
                 
Liabilities                
  Current liabilities              
    Accounts payable and accrued liabilities    20,146   30,395
    Customer deposits    -   587
    Income taxes payable    19   19
    Current portion of mortgages and loans payable    6,133   24,659
    Contingent consideration   2,757   2,757
    Liabilities of discontinued operations    23,795   575
    52,850   58,992
  Non-current liabilities            
    Mortgages and loans payable    11,426   16,144
    Convertible debentures   11,948   11,937
    Contingent consideration   9,445   9,264
    Deferred income tax liabilities    3,994   3,608
    Derivative liability   33   27
    Other liabilities       -   643
    Liabilities of discontinued operations     2,422   -
Total liabilities   92,118   100,615
                 
Shareholders' equity    145,534   147,001
                 
Total liabilities and shareholders' equity   237,652   247,616

The notes contained in the Company's condensed consolidated interim financial statements are an integral part of these statements.


 

 

 

SOURCE: Counsel Corporation

For further information:

Counsel Corporation     
Stephen Weintraub
EVP, Secretary & CFO
saw@counselcorp.com
Tel: (416) 866-3058

TMX Equicom
Tim Foran
tforan@tmxequicom.com
Tel: (416) 815-0700 ext. 251

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