Counsel Announces Third Quarter 2013 Results

MORTGAGE SALES RISE 32%; MUA GROWS TO $16.7B; REVENUES INCREASE 33%; CONSOLIDATED EPS DOUBLES

TORONTO, Nov. 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 $3.0 million, or $0.03 per basic and diluted share, on $38.5 million in revenue in the third quarter ended September 30, 2013, compared to $4.0 million, or $0.05 per basic and diluted share, on $29.0 million in revenue in the same period of 2012. For the nine months ended September 30, 2013, income from continuing operations attributable to shareholders was $10.0 million, or $0.11 per basic and diluted share, on $110.6 million in revenue compared to $11.4 million, or $0.13 per basic and diluted share, on $85.7 million in revenue in the same period of 2012. Excluding the expense related to the increase in the market value of the Company's deferred share units (DSUs), income from continuing operations attributable to shareholders was $4.0 million and $11.8 million in the three and nine months ended September 30, 2013 respectively, compared to $4.1 million and $11.6 million in the respective corresponding periods in 2012. All amounts are stated in Canadian dollars, unless noted.

"We're quite pleased with our results in the third quarter. Our core residential mortgage lending business, Street Capital, continued to grow rapidly, recording $2.3 billion in mortgage sales compared to $1.7 billion in Q3 2012," said Allan Silber, Chairman and CEO of Counsel Corporation. "The company's mortgage sales have grown significantly year-to-date as well, and this strong growth has counteracted the impact of lower spreads in the credit market compared to the same period in 2012."

"Street Capital's mortgages under administration also grew to $16.7 billion, a 56% increase over the past year," added Mr. Silber. "We are now one of Canada's largest non-bank residential mortgage lenders, the result of our focus on cultivating a healthy portfolio of mortgages through stringent underwriting and robust quality assurance combined with the provision of excellent customer service and competitive mortgage products for mortgage brokers and borrowers."

Counsel's revenues are almost entirely generated from its mortgage lending business. The year-over-year increase in Counsel's revenue in the third quarter of 2013 reflects growth in the volume of mortgages sold by Street Capital Financial Corp. ("Street Capital").

Counsel's overall net income attributable to shareholders, including discontinued operations, increased to $3.6 million, or $0.04 per basic and diluted share, in the third quarter of 2013 versus $1.9 million, or $0.02 per basic and diluted share, in the third quarter of 2012. The year-over-year increase was primarily attributable to $0.6 million in income from the Company's discontinued operations attributable to shareholders versus a loss of $2.2 million in the third quarter of 2012. For the nine months ended September 30, 2013, net income attributable to shareholders was $8.8 million, or $0.10 per basic and diluted share, versus $9.3 million, or $0.11 per basic and diluted share, in the same period in 2012. The result includes an expense of $1.8 million due to the increase in market value of the Company's DSUs in the first nine months of 2013, versus an increase of $0.2 million in the nine months ended September 30. In June 2011, the Company ceased granting DSUs. In November, 2013, the Company and the existing DSU holders agreed to amend the DSU Plan to provide for payment in shares rather than cash; therefore, there will be no further impact on the statement of operations.

As part of its focus on financial services, 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 end of the first quarter of 2014. As part of this process, during and subsequent to the quarter, the Company completed the sale of two of its remaining real estate properties.

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 $38.3 million and $110.0 million in revenues in the three and nine months ended September 30, 2013 compared to $28.9 million and $85.0 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 $24.5 million and $71.6 million in the three and nine months ended September 30, 2013 compared to $15.7 million and $47.6 million in the respective corresponding periods in 2012. The increases reflect the increase in mortgages sold and costs incurred to expand Street Capital's share of the mortgage broker channel.

Street Capital sold $2.266 billion and $6.316 billion of mortgages in the three and nine months ended September 30, 2013, compared to $1.674 billion and $4.385 billion in the respective corresponding periods in 2012. The business increased its portfolio of mortgages under administration to $16.7 billion at September 30, 2013 compared to $10.7 billion at September 30, 2012 and $15.0 billion at June 30, 2013.

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

Conference Call
Counsel will host a conference call on Friday, November 15, 2013 at 9:00 a.m. ET to discuss its 2013 third 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, December 16, 2013 by calling 416-849-0833 or 1-855-859-2056, reference number 91519205.

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 September 30,			Nine months ended September 30,
		2013	2012		2013	2012
		$	$		$	$
Revenues		38,473	28,986		110,605	85,719
Expenses
	Operating costs	24,520	15,716		71,621	47,626
	Selling, general and administrative expense	9,049	7,319		24,002	19,634
	Foreign exchange (gain) loss	-	(58)		-	(5)
	Depreciation and amortization	344	325		1,007	1,060
	Interest expense	447	557		1,558	1,708
		34,360	23,859		98,188	70,023
Income before fair value adjustments		4,113	5,127		12,417	15,696
Fair value adjustments		159	16		4,927	1,187
Income before income taxes and discontinued operations		4,272	5,143		17,344	16,883
Income tax provision		1,206	1,269		3,431	4,085
Income from continuing operations		3,066	3,874		13,913	12,798
Less: Income (loss) attributable to non-controlling interest		34	(159)		3,959	1,405
Income attributable to shareholders		3,032	4,033		9,954	11,393
Income from discontinued operations		307	(2,718)		(2,492)	(3,141)
Less: Income (loss) attributable to non-controlling interest		(245)	(540)		(1,349)	(1,079)
Income (loss) attributable to shareholders		552	(2,178)		(1,143)	(2,062)
Net income attributable to shareholders		3,584	1,855		8,811	9,331
Basic and diluted net income (loss) per share :
Continuing operations		0.03	0.05		0.11	0.13
Discontinued operations		0.01	(0.03)		(0.01)	(0.02)
Basic and diluted net income per share		0.04	0.02		0.10	0.11
Weighted average number of common shares
outstanding (in thousands) - basic and diluted		96,224	85,783		90,622	85,433

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 (in thousands of Canadian Dollars) (Unaudited)
							September 30,	December 31,
							2013	2012
							$	$
Assets
					Current assets
						Cash and cash equivalents	37,877	12,196
						Marketable securities	117	109
						Mortgages, accounts and deferred interest receivable	36,967	26,360
						Inventory	-	6,863
						Prepaid expenses, deposits and deferred charges	4,216	4,637
						Investment held for sale	-	1,851
						Income tax receivable	-	70
						Assets of discontinued operations	17,058	91
							96,235	52,177
					Non-current assets
						Deferred interest and mortgage receivable	14,559	17,086
						Deferred charges	33,878	24,692
						Investment properties	-	3,969
						Properties under development	-	6,739
						Property, plant and equipment	3,141	3,216
						Interests in joint ventures	-	3,600
						Investment in associates	-	20
						Portfolio investments	45,751	53,454
						Intangible assets	5,718	11,324
						Goodwill	24,919	43,837
						Deferred income tax assets	-	27,438
						Other assets	49	64
						Assets of discontinued operations	68,197	-
Total assets							292,447	247,616
Liabilities
					Current liabilities
						Accounts payable and accrued liabilities	65,343	30,395
						Customer deposits	-	587
						Income taxes payable	19	19
						Current portion of mortgages and loans payable	14,933	24,659
						Contingent consideration	4,027	2,757
						Liabilities of discontinued operations	24,943	575
							109,265	58,992
					Non-current liabilities
						Mortgages and loans payable	6,623	16,144
						Convertible debentures	-	11,937
						Contingent consideration	4,416	9,264
						Deferred income tax liabilities	6,972	3,608
						Derivative liability	14	27
						Other liabilities	-	643
						Liabilities of discontinued operations	319	-
Total liabilities							127,609	100,615
Shareholders' equity							164,838	147,001
Total liabilities and shareholders' equity							292,447	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