Jovian Reports Results for Third Quarter Fiscal 2013

TORONTO, Feb. 12, 2013 /CNW/ - Jovian Capital Corporation (TSX: JOV) ("Jovian") today released its results for the three and nine months ended December 31, 2012. The current fiscal year consolidates the results of Hahn Investment Stewards & Company Inc. ("Hahn"), which Jovian acquired control of on March 31, 2012; prior to that date, Jovian accounted for its investment in Hahn under the equity method.

Q3 Fiscal 2013 Highlights

  • Jovian issued a special dividend of $3.00 per common share using proceeds received from the sale of Jovian's mutual fund dealer subsidiary MGI Financial Inc. ("MFI") and its Exchange Traded Fund ("ETF") business, transactions that were completed in fiscal 2012. The special dividend coincided with the release of certain funds Jovian received from the sale of its ETF business but which had been held in escrow.
  • Revenues of $12.6 million, a 5% decrease from the $13.2 million revenues from continuing operations recorded in Q3 fiscal 2012, resulting from a decline in revenues in the wealth management segment partially offset by an increase in revenues in the asset management segment, including from Hahn.
  • EBITDA and Adjusted EBITDA from continuing operations of negative $1.3 million versus negative $11.8 and negative $11.5 million, respectively, in the comparable quarter in fiscal 2012. The comparable quarter included a profit pool payment provision (the "Profit Pool Payment Provision") of $12.2 million, adjusted in the subsequent quarter to $7.0 million.
  • Loss from continuing operations of $1.7 million, or negative $0.19 per diluted share, compared to a loss of $7.3 million, or negative $0.86 per diluted share, in Q3 fiscal 2012. The comparable quarter's results included the Profit Pool Payment Provision.
  • Net loss of $1.7 million, or negative $0.19 per diluted share, compared to net earnings (including from discontinued operations) of $57.1 million, or $6.58 per share in Q3 fiscal 2012. The comparable quarter's results included the Profit Pool Payment Provision and a $66.2 million non-recurring gain, net of taxes, from Jovian's sale of MFI and the ETF business during that quarter.
  • Client assets (exclusive of discontinued operations) of $6.7 billion as at December 31, 2012, a 6% increase from $6.3 billion as at December 31, 2011 and a 6% increase from $6.3 billion as at September 30, 2012.

"We are pleased with the top line growth in our profitable asset management segment and have a very positive view of all of our companies in this segment," said Philip Armstrong, C.E.O. "Our performance numbers continue to be strong and we are diversifying our client base, including winning a number of significant institutional and First Nations mandates."

"However, significantly lower trading volumes continued to negatively impact brokerage commissions and investment banking revenues in our wealth management segment during the quarter," continued Mr. Armstrong. "Impressive equity market returns in the calendar year 2012 is a positive indicator, though, particularly if it results in an increase in investor confidence in equities, which has been shaken by market volatility and the uncertain economic environment."

"Finally, we feel that the payment of $7 in distributions during the nine months was significant and illustrates our commitment to ensure that our shareholders benefit from the growth in the value of our assets," concluded Mr. Armstrong.

Selected Financial Data (unaudited)

thousands of Canadian dollars except per share
amounts
Three months ended Nine months ended
   Dec. 31/12 Dec. 31/11 Dec. 31/12 Dec. 31/11
 Revenues   12,622 13,236 38,298 34,928
Compensation and benefits, management and
investment advisory fees, and other operating
expenses
13,932 24,750 41,241 49,080
 Adjusted EBITDA1 from continuing operations   (1,310) (11,514) (2,943) (14,152)
 Share-based compensation expense2   288 646
 EBITDA1 from continuing operations   (1,310) (11,802) (2,943) (14,798)
Loss from continuing operations   (1,764) (7,294) (5,701) (12,382)
Earnings from discontinued operations  
64,390
60,815
Earnings (Loss) for the period (1,764) 57,096 (5,701) 48,433
Loss from continuing operations per share -
basic & diluted  
$(0.19) $(0.86) $(0.60) $(1.44)
 Earnings (Loss) per share - diluted   $(0.19) $6.58 $(0.60) $5.67

1 EBITDA and Adjusted EBITDA are non-IFRS performance measures utilized by Jovian. EBITDA is defined here as earnings before finance costs, taxes, depreciation and amortization, gains on sale and other income or expense, and share of profit or loss of equity accounted investees (net of income tax).  Adjusted EBITDA is EBITDA adjusted for additional non-cash items.
2 For measurement purposes, share-based compensation expense, which is a non-cash item, is excluded from compensation and benefits expense in this table in order to determine Adjusted EBITDA.

Financial Review

Revenue from continuing operations

Three months ended December 31

thousands of Canadian
dollars
Asset
Management
Wealth
Management
Corporate Consolidated
  2012 2011 2012 2011 2012 2011 2012 2011
Commissions and fees 8,105 7,221 3,156 3,354 15 16 11,276 10,591
Investment banking - - 676 1,284 58 (318) 734 966
Principal trading - - 71 891 - - 71 891
Other 40 18 306 347 195 423 541 788
TOTAL 8,145 7,239 4,209 5,876 268 121 12,622 13,236

Revenue from continuing operations for the three months ended December 31, 2012, was $12.6 million ($12.2 million exclusive of Hahn) compared to $13.2 million in the same three month period in the previous fiscal year. The decrease was a result of a decline in revenues in the wealth management segment, specifically: a decrease in principal trading revenue to $0.1 million from $0.9 million in the comparable quarter, which included unrealized losses associated with broker warrants of negative $0.1 million for the current quarter versus unrealized gains of $0.8 million in the comparable quarter; and, reduced investment banking mandates and brokerage commissions reflecting reduced market trading volumes. The decrease was partially offset by an increase in investment management revenues in the asset management segment driven largely by an approximately commensurate increase in assets under management.

Nine months ended December 31

thousands of Canadian
dollars
Asset
Management
Wealth
Management
Corporate Consolidated
  2012 2011 2012 2011 2012 2011 2012 2011
Commissions and fees 24,783 22,250 8,839 10,848 48 16 33,670 33,114
Investment banking - - 2,046 4,905 185 (7) 2,231 4,898
Principal trading - - 217 (4,942) - - 217 (4,942)
Other 81 179 1,167 973 932 706 2,180 1,858
TOTAL 24,864 22,429 12,269 11,784 1,165 715 38,298 34,928

For the nine months ended December 31, 2012, revenue from continuing operations was $38.3 million ($36.9 million exclusive of Hahn) versus $34.9 million in the comparable period in the previous fiscal year. The increase was primarily attributable to: an increase in principal trading revenues in the wealth management segment to $0.2 million from negative $4.9 million in the comparable period, including unrealized gains on broker warrants of $1.2 million for the current period versus unrealized losses of $8.9 million in the comparable period; and, increased assets under management ("AUM") and related fees for Jovian's asset management segment. Partially offsetting this increase were reductions in brokerage commissions and investment banking revenues, both in Jovian's wealth management segment, reflecting lower market trading volumes.

Expenses

Total net expenses from continuing operations were $14.4 million in Q3 fiscal 2013 ($13.9 million exclusive of Hahn), compared to $8.3 million in the corresponding quarter in fiscal 2012 (exclusive of the Profit Pool Payment Provision). For the nine months ended December 31, 2012, total net expenses were $44.0 million ($42.0 million exclusive of Hahn) versus $35.1 million in the comparable period last year (exclusive of the Profit Pool Payment Provision). The prior year was inclusive of income tax recoveries of $5.9 million and $6.4 million, respectively, for the three and six month periods. The income tax recoveries in the current fiscal period were $0.5 million and $1.2 million, respectively.

Adjusted EBITDA and EBITDA

Adjusted EBITDA and EBITDA from continuing operations for the three months ended December 31, 2012 were both negative $1.3 million (exclusive of Hahn, negative $1.2 million) compared to $0.7 and $0.4 million, respectively, during the three months ended December 31, 2011 (exclusive of the Profit Pool Payment Provision). Exclusive of Hahn and the Profit Pool Payment Provision, the year-over-year reduction in EBITDA in the quarter was primarily the result of a decline in wealth management segment revenues. For the nine months ended December 31, 2012, Adjusted EBITDA and EBITDA from continuing operations were both negative $2.9 million (exclusive of Hahn, negative $2.3 million) versus negative $1.9 and $2.6 million, respectively, for the comparable period last year (exclusive of the Profit Pool Payment Provision).  Exclusive of Hahn and the Profit Pool Payment Provision, the year-over-year reduction in EBITDA during the current period was partially attributable to: an increase in expenses in the asset management segment, notably costs incurred to support the growth of the segment and to promote the 40th anniversary of Jovian's subsidiary T.E. Wealth; and, increased corporate expenses, including non-routine professional fees incurred during the period.

Earnings

For the three and nine months ended December 31, 2012, Jovian reported net loss from continuing operations of $1.8 million, or negative $0.19 per diluted share, and net loss of $5.7 million, or negative $0.60 per diluted share, respectively. For the three and nine months ended December 31, 2011, Jovian reported net loss from continuing operations of $7.3 million, or negative $0.86 per diluted share, and net loss of $12.4 million, or negative $1.44 per diluted share, respectively. Exclusive of the Profit Pool Payment Provision, Jovian reported earnings from continuing of operations of $4.9 million in Q3 fiscal 2012 and a loss of $0.2 million in the nine months ended December 31, 2011.

Liquidity and Capital Resources

Cash and those investments considered highly liquid included in securities owned on the consolidated balance sheet were $28.4 million as at December 31, 2012, compared with $55.0 million as at September 30, 2012.

About Jovian Capital Corporation

Jovian acquires, creates and grows financial services companies specializing in two primary market segments: wealth management and asset management. The Jovian group of companies (MGI Securities Inc., MGI Securities (USA) Inc., T.E. Wealth, Leon Frazer & Associates Inc., Hahn Investment Stewards & Company Inc., JovFinancial Solutions Inc. and Fit Private Investment Counsel Inc.) oversees approximately $6.7 billion of client assets ($5.2 billion in client assets managed or advised and $1.5 billion in assets under administration).  Additional information is available at www.joviancapital.com and www.sedar.com.

 

SOURCE: Jovian Capital Corporation

For further information:

Don Sangster, Investor Relations, Jovian Capital Corporation, (416) 933-5744; or
Philip Armstrong, C.E.O., Jovian Capital Corporation, (416) 933-5752.