Counsel Announces Second Quarter 2013 Results

REVENUES INCREASE 45%; RECORD RESULTS IN MORTGAGES SOLD

TORONTO, Aug. 14, 2013 /CNW/ - Counsel Corporation ("Counsel" or the "Company") (TSX: CXS), a financial services company, today announced income from continuing operations attributable to shareholders of $5.5 million, or $0.06 per diluted share, on $46.4 million in revenue in the second quarter ended June 30, 2013, compared to $4.7 million, or $0.05 per diluted share, on $32.0 million in revenue in the same period of 2012. For the six months ended June 30, 2013, income from continuing operations attributable to shareholders was $7.3 million, or $0.08 per diluted share, on $72.1 million in revenue compared to $7.8 million, or $0.08 per diluted share, on $56.7 million in revenue in the same period of 2012. All amounts are stated in Canadian dollars, unless noted.

The Company also announced that all $12.0 million of the Company's convertible debentures issued May 31, 2011, which were convertible into common shares at $1.2264 per share, have been or will be converted. Approximately $10.9 million of the debentures were converted between May and July and the balance will be converted by August 16, 2013.

During the second quarter, the Company's residential mortgage lending business, Street Capital Financial Corporation ("Street Capital"), received approvals from the Canada Mortgage and Housing Corporation (CMHC) to be an approved issuer of National Housing Act mortgage backed securities and an approved seller under the Canada Mortgage Bond program.

"This was a superb quarter for us with our net income increasing 10% and revenue 45% over the same quarter last year," said Allan Silber, Chairman and CEO of Counsel Corporation. "Additionally, the conversion of our debentures significantly improves our balance sheet while potentially increasing the liquidity of our common shares."

"Our core residential mortgage lending business, Street Capital, recorded tremendous results in the quarter, including a record $2.5 billion in mortgages sold. It also increased its mortgages under administration to $15 billion, a 58% increase over the past year and a 25% increase for the year to date," added Mr. Silber. "In a short period of time, Street Capital has become one of Canada's leading prime residential mortgage lenders. The business has grown its mortgage broker origination network extensively due to its combination of excellent customer service and competitive mortgage products. It has also increased its funding capacity through new relationships with liquidity providers, who continue to provide strong wholesale demand for Street Capital's high quality mortgages, which are the result of its stringent underwriting and robust quality assurance processes. The CMHC approvals it has received to securitize mortgages directly broadens Street Capital's funding capabilities and provides the business with access to an additional source of liquidity for its mortgages."

The year-over-year increase in Counsel's revenue in the second quarter of 2013 was primarily due to an increase in the gain on sale of mortgages underwritten by Street Capital, despite lower spreads in the credit market compared to the same period in 2012. The year-over-year increase in income from continuing operations in the second quarter was due to contributions from Street Capital and a fair value appreciation of $2.9 million related primarily to an increase in the fair value of Counsel's private equity portfolio inclusive of foreign exchange fluctuations, compared to a fair value appreciation of $1.7 million in the second quarter of 2012.

Counsel's overall net income attributable to shareholders, including discontinued operations, increased to $4.5 million, or $0.05 per basic and diluted share, in the second quarter of 2013 versus $4.1 million, or $0.05 per basic and $0.04 per diluted share, in the second quarter of 2012. The year-over-year increase was primarily attributable to an increase of contributions from Street Capital and the increase in fair value appreciation noted above, partially offset by a  loss of $1.5 million in the Company's discontinued operations that were held for sale versus a loss of $0.8 million in the second quarter of 2012. For the six months ended June 30, 2013, net income attributable to shareholders was $5.2 million versus $7.5 million in the same period in 2012. The decrease was primarily attributable to a loss of $2.8 million in discontinued operations versus a loss of $0.4 million in the same period in 2012. The Company continues to pursue its plan to dispose of its non-core businesses, which were classified as discontinued operations in the first quarter of 2013, by the first quarter of 2014.

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 $46.3 million and $71.7 million in revenues in the three and six months ended June 30, 2013 compared to $31.9 million and $56.1 million in the respective corresponding periods in 2012. The increase in both periods was due to growth in the volume of mortgages sold. Operating expenses, consisting of the cost to source and underwrite mortgages sold by Street Capital, totaled $29.5 million and $47.1 million in the three and six months ended June 30, 2013 compared to $18.4 million and $31.9 million in the respective corresponding periods in 2012. The increases reflect the increase in mortgages sold, costs incurred to expand Street Capital's share of the mortgage broker channel, as well as investments made in the first quarter of 2013 to support the company's application for a bank license including non-recurring costs.

Street Capital sold $2.499 billion and $4.050 billion of mortgages in the three and six months ended June 30, 2013, compared to $1.615 billion and $2.674 billion in the respective corresponding periods in 2012. The business increased its portfolio of mortgages under administration to $15.0 billion at June 30, 2013 compared to $9.5 billion at June 30, 2012 and $13.3 billion at March 31, 2013.

Counsel's Management's Discussion and Analysis and Condensed Consolidated Interim Financial Statements for the three and six months ended June 30, 2013 will be available on SEDAR (www.sedar.com).

Conference Call
Counsel will host a conference call on Thursday, August 15, 2013 at 9:00 a.m. ET to discuss its 2013 second quarter financial results. Allan Silber, CEO of Counsel Corporation and Ed Gettings, CEO of Street Capital Financial Corporation, will chair the call. To participate in the call, please dial 647-427-7450 or 1-888-231-8191 ten minutes prior to the scheduled start of the call. A taped replay of the conference call will be available until Monday, September 16, 2013 by calling 416-849-0833 or 1-855-859-2056, reference number 31986620.

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.

Condensed Consolidated Interim Statements of Operations
(in thousands of Canadian Dollars, except per share amounts)
(Unaudited)
	Three months ended June 30,			Six months ended June 30,
	2013	2012		2013	2012
	$	$		$	$
Revenues	46,440	32,020		72,132	56,733
Expenses (exclusive of depreciation, amortization and interest expense shown below) and other (income) losses
Operating costs	29,464	18,446		47,101	31,910
Selling, general and administrative expense	9,463	6,094		14,953	12,318
Foreign exchange (gain) loss	-	35		-	53
Depreciation and amortization	330	332		663	735
Interest expense	540	560		1,111	1,151
Other	-	(2)		-	(3)
	39,797	25,465		63,828	46,164
Income before fair value adjustments	6,643	6,555		8,304	10,569
Fair value adjustments	2,901	1,667		4,768	1,171
Income before income taxes and discontinued operations	9,544	8,222		13,072	11,740
Income tax provision	1,767	1,977		2,225	2,817
Income from continuing operations	7,777	6,245		10,847	8,923
Less: Income attributable to non-controlling interest	2,390	1,765		3,924	1,564
Income attributable to shareholders	5,387	4,480		6,923	7,359
Income (loss) from discontinued operations	(1,468)	(756)		(2,800)	(422)
Less: Income (loss) attributable to non-controlling interest	(567)	(358)		(1,104)	(539)
Income (loss) attributable to shareholders	(901)	(398)		(1,696)	117
Net income attributable to shareholders	4,486	4,082		5,227	7,476
Basic net income (loss) per share :
Continuing operations	0.06	0.05		0.08	0.08
Discontinued operations	(0.01)	(0.00)		(0.02)	0.01
Basic net income per share	0.05	0.05		0.06	0.09
Weighted average number of common shares
outstanding (in thousands) - basic	90,621	85,364		88,249	85,256
Diluted net income (loss) per share:
Continuing operations	0.06	0.05		0.08	0.08
Discontinued operations	(0.01)	(0.01)		(0.02)	0.00
Diluted net income per share	0.05	0.04		0.06	0.08
Weighted average number of common shares
outstanding (in thousands) - diluted	98,386	96,051		95,806	95,581

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 Positions
(in thousands of Canadian Dollars)
(Unaudited)
							June 31,	December 31,
							2013	2012
							$	$
Assets
			Current assets
				Cash and cash equivalents			24,684	12,196
				Marketable securities			105	109
				Mortgages, accounts and deferred interest receivable			28,664	26,360
				Inventory			-	6,863
				Prepaid expenses, deposits and deferred charges			3,634	4,637
				Investment held for sale			-	1,851
				Income tax receivable			-	70
				Assets of discontinued operations			17,853	91
							74,940	52,177
			Non-current assets
				Deferred interest and mortgage receivable			15,921	17,086
				Deferred charges			30,417	24,692
				Investment properties			-	3,969
				Properties under development			-	6,739
				Property, plant and equipment			3,326	3,216
				Interests in joint ventures			-	3,600
				Investment in associates			-	20
				Portfolio investments			45,312	53,454
				Intangible assets			5,841	11,324
				Goodwill			24,919	43,837
				Deferred income tax assets			-	27,438
				Other assets			49	64
				Assets of discontinued operations			68,991	-
Total assets							269,716	247,616
Liabilities
			Current liabilities
				Accounts payable and accrued liabilities			44,782	30,395
				Customer deposits			-	587
				Income taxes payable			20	19
				Current portion of mortgages and loans payable			20,350	24,659
				Contingent consideration			5,478	-
				Contingent consideration			4,027	2,757
				Liabilities of discontinued operations			22,669	575
							97,326	58,992
			Non-current liabilities
				Mortgages and loans payable			1,000	16,144
				Convertible debentures			-	11,937
				Contingent consideration			4,290	9,264
				Deferred income tax liabilities			5,697	3,608
				Derivative liability			17	27
				Other liabilities			-	643
				Liabilities of discontinued operations			5,678	-
Total liabilities							114,008	100,615
Shareholders' equity							155,708	147,001
Total liabilities and shareholders' equity							269,716	247,616

 

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

 

 

SOURCE: Counsel Corporation

Counsel Corporation     
Stephen Weintraub
EVP, Secretary & CFO
[email protected]
Tel: [phone]

TMX Equicom 
Tim Foran
[email protected]
Tel: [phone] ext. 251