Kingsway International Reports Continued Profitable Earnings for the Third
Quarter Ended March 31, 2010
TORONTO, May 14 /CNW/ - Asian based financial services firm, Kingsway International Holdings Limited (TSX: KIH), ("Kingsway" or the "Company"), today announced its financial results for the three months ended March 31, 2010. Kingsway reported net income of US$10.0 million for the period, marking the company's second back-to-back profitable quarter. All figures quoted are in U.S. dollars unless otherwise specified.
In addition to a substantial increase over last quarter's already profitable results (Q2 of fiscal year 2010: $3.7 million net income), the financial performance for Kingsway International Holdings Limited and its subsidiaries (collectively the "Group") for the current period showed a significant year-over-year improvement. The Company attributes this steady progress mainly to the ongoing strength of the Chinese economy, where Kingsway has re-focused its business model to capitalize on the country's anticipated continued solid performance, particularly in the natural resources and financial sectors.
Financial highlights for the third quarter include:
- Net income was $10.0 million, or $0.1250 basic earnings per share,
compared with a net loss of $0.08 million, or $0.0010 loss per share,
for the same quarter last year;
- An increase in revenue from services and other income to $2.7 million,
compared with $2.3 million for the same period last year;
- Trading income from financial assets held for trading was $8.4
million, compared with $2.0 million for the same quarter last year;
- A one-off gain on disposal of shares of jointly controlled entities of
$7.7 million before non-controlling interests in current quarter.
"We are pleased with our overall financial performance this quarter," said Douglas Betts, President and CEO of Kingsway. "Following a recent strategic repositioning, we are now particularly focused on China's natural resources and financial sectors - our strengths - where we believe great opportunity lies as China positions itself as an ever-increasing force on the world economic stage."
Mr. Betts continues: "Kingsway is confident that China's role as an increasingly more dominant driver of world economic growth will continue, not simply in the country's capacity as an exporter of low cost goods, but also as a consumer. Accordingly, we expect China's ongoing demand for resources to continue to drive growth in the resource sectors, particularly in mining and energy. As such, we believe that our newfound focus will both enable us to capitalize on China's continuing growth and to sustain us during times of market uncertainty."
Financial Results for the Third Quarter
Revenue from services and other income increased 16% to $2.7 million in the current quarter from $2.3 million in the corresponding quarter last year. Trading income, both realized and unrealized, of $8.4 million was recorded in the current quarter compared with $2.0 million for the same quarter last year. The Group recorded total revenue of $11.1 million in the third quarter as compared with $4.3 million in the corresponding quarter last year, attributable to the recovery of the fund raising markets and abundant liquidity in the Hong Kong market.
Selling and administrative expenses increased to $5.7 million in the current quarter from $3.8 million for the same quarter last year, mainly attributable to the increase in variable staff costs, including the provision for staff bonuses.
The Group disposed of its interests in jointly controlled entities in March 2010 and a gain of $7.7 million before non-controlling interests was recorded in the current quarter. No comparable gain was recognized in the corresponding quarter last year.
Income before income taxes, non-controlling interests and discontinued operations in the current quarter increased to $5.1 million from $0.5 million in the third quarter last year. The Group recorded a net income of $10.0 million, or $0.1250 basic earnings per share, compared with a net loss of $0.08 million, or $0.0010 loss per share, for the corresponding quarter last year.
Segmented Results of Operations for the Third Quarter
-------------------------------------------------------------------------
Corporate Investment in
Finance & Securities Corporate
Capital Asset & Structured and Other
Brokerage Markets Management Investment Activities Total
$'000 $'000 $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Commission
& fee
income 2,006 407 - - 118 2,531
Interest
and other
income 59 4 - - 87 150
Trading (loss)/
income (13) 63 - 8,389 - 8,439
-------------------------------------------------------------------------
2,052 474 - 8,389 205 11,120
Inter-
segment
revenue 26 - - - 548 574
Selling and
admini-
strative
expenses (2,582) (724) (57) (1,291) (1,603) (6,257)
Share of
profit/
(loss) of
investments
subject to
significant
influence 3 - - (66) - (63)
Other expenses (32) (6) (1) (133) (62) (234)
-------------------------------------------------------------------------
(Loss)/income
before income
taxes, non-
controlling
interests and
discontinued
operations (533) (256) (58) 6,899 (912) 5,140
-------------------------------------------------------------------------
- Brokerage
Kingsway was ranked the Best Local Brokerage in Hong Kong as
determined by the Asiamoney Brokers Poll in October 2009, a category
in which it has been a top three contender for the last five
consecutive years.
The division organized several road shows for fund managers and
seminars for current and prospective retail clients, designed to
strengthen our client relationships. Further strengthening the
division's prospects, a new internet trading platform was implemented
in April 2010, which is expected to improve our service delivery
standard and expand our customer base.
Revenue in the current quarter increased 64% to $2.1 million, compared
with $1.3 million in the same quarter last year, as a result of the
recovery of the fund raising activities and active market activities
in Hong Kong.
The division recorded an overall loss of $0.5 million in the third
quarter, compared with $0.8 million in the same quarter last year.
- Corporate Finance & Capital Markets
The division recorded total revenue of $0.5 million in the current
quarter, compared with $0.7 million in the corresponding quarter last
year. Net loss of $0.3 million was recognized in the third quarter,
compared with an income of $0.01 million in the same quarter last
year.
The division participated in several underwriting and placing
activities in the current fiscal year, and is also taking part in
several projects including IPO sponsorships.
- Asset Management
There was no revenue recorded in the current quarter, compared with
$0.5 million in the same quarter last year. The division recorded an
overall loss of $0.06 million in the third quarter, compared with a
gain of $0.4 million in the same quarter last year.
The division is now looking for suitable investment opportunities to
set up a new private equity fund.
- Investment In Securities and Structured Investments
Trading income in the division increased significantly to $8.4 million
in the current quarter from $1.7 million in the corresponding quarter
last year, mainly due to the recovery of the Hong Kong stock market
over the last two quarters.
Selling and administrative expenses has also increased accordingly to
$1.3 million in the current quarter, compared with $0.2 million in the
same quarter last year, as a result of the increase in variable staff
costs including the provision for staff bonuses.
As a result, the division recorded an overall income of $6.9 million
in the third quarter, compared with an income of $1.6 million from
continuing operations in the same quarter last year.
- Corporate and Other Activities
The results of the division remained stable with an overall loss of
$0.9 million recognized in current quarter, comparable to $0.8 million
in last year's corresponding quarter.
Dividends
The FY2009 final dividend of C$0.020 (equivalent to US$0.019) per common share was paid on December 8, 2009 from contributed surplus. The dividend was reflected as an appropriation of contributed surplus during the period ended March 31, 2010.
Outlook
The Group operates primarily from its base in Hong Kong. While Kingsway expects continued volatility in this market, it also believes that this volatility carries the potential for substantial opportunity.
Kingsway continues to believe in opportunities that are developing in the North American financial services and real estate sectors and in some natural resource producers in North America, Australia and Latin America. As the Company continues to grow, it plans to adopt a focus on such opportunities which could add value to its core businesses.
The Company is confident in the sustainable growth of the Chinese economy and that China's influence as a global economic force will continue to increase, particularly in those sectors where Kingsway is focused, being natural resources - mining and energy - and infrastructure. The Company believes the changes it has instituted will be beneficial to its shareholders and will position Kingsway to be a successful financial services provider and investor in these sectors, which it believes will continue to prosper from China's increasing needs for natural resources.
About Kingsway International Holdings Limited (TSX: KIH)
Kingsway International is a strategically positioned, asset based financial services firm focused on linking China's high growth economy with the global investment community. Through the Kingsway Group's worldwide operations (encompassing Kingsway International and its subsidiaries), the Company conducts operations through two main arms: Capital Markets and Asset Management. The Group operates from six offices located in Hong Kong, Beijing, Shanghai, Shenzhen and Toronto.
China is widely recognized as an increasingly important player on the world's financial stage. As the country continues to grow, its greatest needs will lie in energy and resources. Following a recent restructuring, Kingsway is positioned as a middle tier provider of financial services in these sectors and an opportunistic investor in these and related sectors. The Group's strategy is to use investment activities strategically to generate advisory services revenue while creating value for its shareholders through asset accumulation.
Leveraging a 20-year track record and significant relationships throughout Asia, Kingsway continues with its strategic focus on China, working with China based groups with a particular focus in financial services and in natural resources - particularly mining and energy - and infrastructure.
Founded in 1990, Kingsway International is listed on the main board of the Toronto Stock Exchange under the symbol KIH.
For more information on Kingsway International's core business and new strategic direction, please visit the Company's website at www.kingwaygroup.ca.
FORWARD-LOOKING (SAFE HARBOUR) STATEMENTS
This press release contains forward-looking statements that are based on the beliefs of Management and reflect the Group's current expectations. In certain cases, forward-looking information can be identified by the use of words such as "estimate", "project", "belief", "anticipate", "intend", "expect", "plan", "predict", "may", "should", "will", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, investors should not place undue reliance on forward-looking information. Forward-looking information is provided as of the date of this press release, and the Company assumes no obligation to update or revise them to reflect new events or circumstances.
For further information: Gary Quedado, Kingsway Group, (416) 861-3099 Ext. 238, [email protected]
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