Counsel Announces First Quarter Results

MUA GROWS TO $18.2B; REVENUE UP 16%

TORONTO, May 15, 2014 /CNW/ - Counsel Corporation ("Counsel" or the "Company") (TSX: CXS), a financial services company, today announced financial results for the three months ended March 31, 2014.  All amounts are stated in Canadian dollars unless otherwise noted.

First Quarter 2014 Financial Highlights

  • Achieved record mortgages under administration of $18.2 billion
  • Mortgages sold decreased slightly to $1.4 billion from $1.6 billion in Q1 2013.
  • Revenue increased by 16% to $29.8 million from $25.7 million in Q1 2013.
  • Pre-tax income from continuing operations increased by over 150% to $8.9 million from $3.5 million in Q1 2013.
  • Diluted earnings per share from continuing operations increased to $0.07, from $0.02 in Q1 2013.

First Quarter Operational Highlights

  • In the first quarter of 2013, Counsel's Board of Directors approved a plan to dispose of the Company's non-core operating business segments - Asset Liquidation, Case Goods and Real Estate - in order to focus on its financial services business. By the end of the first quarter of 2014, the Company had successfully completed this plan.
  • A special dividend-in-kind was declared on March 20, 2014, payable on April 30, 2014, to Counsel's shareholders of record as at April 1, 2014, in the amount of approximately 0.2084 shares of Heritage Global Inc. for each Counsel share owned on the record date.  The dividend comprised all of the Company's 20,644,481 shares of Heritage Global, its Asset Liquidation business.
  • In March, the Company sold its Case Goods business to an investor group led by the President of Fleetwood Fine Furniture.
  • Street Capital Financial Corporation ("Street Capital"), the Company's residential mortgage lending business, announced the launch of a Rental Program for the small rental market to further expand its product portfolio and customer offerings.

"During the quarter, we completed the divestiture of our non-core assets in line with our strategy announced last year," said Allan Silber, Chairman and CEO of Counsel Corporation. "We are now solely focused on investing in and growing our financial services business as the platform to create value for our shareholders."

Counsel's revenues are almost entirely generated from its Mortgage Lending business. For the first quarter 2014 revenue was $29.8 million, an increase of 16%, compared to $25.7 million in first quarter 2013. The increase in 2014 was attributable to higher spreads in the credit market and a gain of approximately $4 million from the extinguishment of a debt below face value

Income before income taxes and discontinued operations for the quarter was $8.9 million, an increase of over 150% from $3.5 million in the same period one year ago.

Net loss attributable to shareholders in the first quarter 2014 was $6.4 million, compared with net income of $0.7 million for the same period one year ago reflecting the divesture from the Asset Liquidation and Case Goods businesses and the last Real Estate property. In the first quarter 2014, diluted earnings per share from continuing operations was $0.07, up significantly compared with $0.02 from one year ago.

Mortgage Lending Business

Counsel carries on its residential 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.

In the first quarter 2014, the business generated $25.5 million in mortgage lending revenues consistent with the results recorded in the same period of last year. Mortgages sold experienced a slight decline, which was offset by higher credit spreads.

Operating expenses, consisting of the cost to source and underwrite mortgages sold by Street Capital, totaled $15.6 million in the first quarter 2014, down 11%, compared with $17.6 million recorded in the same period last year.

During the first quarter, Street Capital sold $1.4 billion of mortgages, compared with $1.6 billion recorded in the same period one year ago. The business experienced further growth in its portfolio of mortgages under administration to $18.2 billion at March 31, 2014 compared to $13.3 billion at March 31, 2013.

Counsel's Management's Discussion and Analysis and Condensed Consolidated Interim Financial Statements for the three months ended March 31, 2014 will be available on SEDAR (www.sedar.com).

Conference Call
Counsel will host a conference call on Thursday, May 15, 2014 at 5:00 p.m. EDT to discuss its 2014 first 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, June 16, 2014 by calling 416-849-0833 or 1-855-859-2056, reference number 41007843.

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
FOR THE THREE MONTHS ENDED MARCH 31
(In thousands of Canadian dollars, except per share data) (Unaudited)

  Three months ended March 31
  2014
$
2013
$
Revenues    
  Operating revenue 25,711 25,692
  Other 4,125 -
  29,836 25,692
     
Expenses    
  Operating costs 15,654 17,637
  Selling, general and administrative expense 8,111 5,490
  Foreign exchange (gain) loss (353) -
  Depreciation and amortization 294 333
  Interest expense 365 571
  24,071 24,031
     
Income before fair value adjustments 5,765 1,661
     
Fair value adjustments 3,099 1,867
Income before income taxes and discontinued operations 8,864 3,528
     
Income tax provision 1,447 458
     
Income from continuing operations 7,417 3,070
Less: Income attributable to non-controlling interest 1,008 1,534
Income from continuing operations attributable to shareholders 6,409 1,536
     
Loss from discontinued operations (11,782) (1,332)
Less: Income (loss) attributable to non-controlling interest 1,053 (537)
Loss from discontinued operations attributable to shareholders (12,835) (795)
     
Net income (loss) attributable to shareholders (6,426) 741
     
Basic and diluted net income (loss) per share:    
  Continuing operations 0.07 0.02
  Discontinued operations (0.13) (0.01)
     
Basic and diluted net income (loss) per share (0.06) 0.01
     
Weighted average number of common shares
outstanding (in thousands) - basic and diluted
99,063 85,851

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 
AS AT MARCH 31, 2014 AND DECEMBER 31, 2013
(In thousands of Canadian dollars) (Unaudited)

  March 31 December 31
  2014
$
2013
$
Assets    
Current assets    
  Cash and cash equivalents 11,880 17,580
  Marketable securities 413 410
  Mortgages, loans, accounts and deferred interest receivable 36,009 22,004
  Prepaid expenses, deposits and deferred charges 4,875 4,655
  Shares held for dividend-in-kind 15,749 -
  Assets of discontinued operations 863 18,415
  69,789 63,064
Non-current assets    
  Deferred interest and mortgages receivable 17,871 19,403
  Deferred charges 36,753 35,508
  Property, plant and equipment 3,659 3,079
  Portfolio investments 65,006 53,220
  Intangible assets 5,471 5,594
  Goodwill 24,919 24,919
  Other assets 49 49
  Assets of discontinued operations 622 53,367
Total assets 224,139 258,203
     
Liabilities    
Current liabilities    
  Accounts payable and accrued liabilities 31,279 29,458
  Dividend payable 15,749 -
  Income taxes payable 2 4
  Current portion of mortgages and loans payable 9,003 14,025
  Contingent consideration 4,027 4,027
  Liabilities of discontinued operations 1,021 20,550
  61,081 68,064
Non-current liabilities    
  Mortgages and loans payable 11,069 6,703
  Contingent consideration 4,672 4,543
  Deferred income tax liabilities 10,746 9,349
  Derivative liability 3 9
  Liabilities of discontinued operations 238 318
Total liabilities 87,809 88,986
Total equity 136,330 169,217
     
Total liabilities and equity 224,139 258,203

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
Renée Lam
rlam@tmxequicom.com
Tel: (416) 815-0700 ext. 258

Profil de l'entreprise

Counsel Corporation

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