Counsel announces fourth quarter and year-end 2014 results and provides bank application update

TORONTO, March 25, 2015 /CNW/ - Counsel Corporation ("Counsel" or the "Company") (TSX: CXS), a financial services company, today announced financial results for the year ended December 31, 2014 and provided an update regarding the application of its subsidiary, Street Capital Financial Corporation ("Street Capital"), to Canada's Minister of Finance for approval to operate as a federally regulated Schedule I Bank.

All amounts are stated in thousands of Canadian dollars unless otherwise noted.

Fiscal 2014 Financial Highlights

  • Revenue increased by 6% to $147,312 from $138,999 in 2013.
  • Pre-tax income from continuing operations increased by 86% to $51,463 from $27,642 in 2013.
  • Mortgages sold were roughly in-line with the previous year, at $7.8 billion, compared to $7.7 billion in 2013.
  • Diluted earnings per share from continuing operations increased by 56% to $0.25, from $0.16 in 2013. 2014 EPS includes a $0.015 per share goodwill impairment charge related to the wind-down of Knight's Bridge Capital Partners Inc. ("Knight's Bridge"), which occurred in Q4-2014.

Fiscal 2014 Strategic and Operational Highlights

  • Street Capital continued to grow mortgages under administration (MUA) during the year. MUA increased by 23% to $21.6 billion from $17.5 billion in 2013.
  • Mortgage renewal rates at Street Capital were in the high 70% range.
  • In accordance with its strategic plan to focus on Street Capital, the Company divested its non-financial businesses. As of the end of the first quarter of 2015, the Company will also have successfully divested most of the core holdings in its Private Equity business.

Q4-2014 Financial Highlights

  • Revenue increased by 38% to $39,078 from $28,394 in Q4-2013.
  • Pre-tax income from continuing operations increased by 42% to $14,670 from $10,298 in Q4-2013.
  • Mortgages sold were $2.2 billion, compared to $1.4 billion in Q4-2013.
  • Diluted earnings per share from continuing operations was $0.04, compared with $0.05 in Q4-2013. Q4-2014 EPS includes a $0.015 per share goodwill impairment charge related to the wind-down of Knight's Bridge.

 

"I am highly encouraged by the strong results we generated in the fourth quarter," said Allan Silber, Chairman and CEO of Counsel Corporation. "The execution of Street Capital's strategy resulted in a market share gain in Q4 and business momentum that continued into Q1. In 2015, we are taking our first steps as a focused, financial services company. Our priority this year is to continue to grow Street Capital through originations and complimentary offerings, while driving incremental bottom-line contribution from mortgage renewals."

Bank Application Update

Street Capital, a Canadian residential mortgage lender, has applied to Canada's Minister of Finance for approval to operate as a federally regulated Schedule I Bank. Street Capital's application requires approvals from the Minister of Finance for Letters Patent and the Office of the Superintendent of Financial Institutions ("OSFI") for an Order to Commence Operations.

Typically, a new applicant will submit its application for incorporation with the intention of obtaining an approval for Letters Patent from the Minister of Finance. Should approval for Letters Patent be obtained, the applicant has twelve (12) months from receipt in order to obtain an Order to Commence Operations from OSFI. In Street Capital's case it has chosen to apply for a continuance of its existence from a corporation incorporated under the Canada Business Corporations Act to a federally regulated Schedule I Bank under the Bank Act (Canada) ("Bank Act"). While the end result is the same, the process is different in that the grant of an approval for continuance under the Bank Act by Canada's Minister of Finance and OSFI's approval for an Order to Commence Operations, if received, would be obtained at the same time. Street Capital chose this application route for operational and administrative ease given its ongoing operations and has been informed by its professional advisors that the timing of ultimate approvals in either case would be similar. 

Allan Silber noted, "We believe it is important for our stakeholders to have a better understanding of the process we are going through in connection with Street Capital's bank application. We do not want our stakeholders to draw any conclusions regarding the application process from the fact that no announcement has been made regarding receipt of Letters Patent to date. Our stakeholders should not expect to see public notification of Street Capital's successful receipt of Letters Patent with another period of time to follow in order to obtain an Order to Commence. Street Capital's approvals, should they be received, will be obtained all at once."

Ed Gettings, CEO of Street Capital added, "Street Capital continues to work with representatives at OSFI in order to satisfy the necessary requirements. To date, our efforts have been focused on providing all necessary business information and financial plans as well as policies and procedures, which are currently under review by OSFI. Our next major milestone is the OSFI onsite visit. During their visit, OSFI staff will review our control environment and look at how we operate day to day in order to satisfy themselves that the requirements necessary to obtain an Order to Commence Operations are in place. Should we be successful, we would expect the necessary approvals to be forthcoming. We are thankful for the time and dedication spent by OSFI on our application and we look forward to continuing to work with them through to a successful conclusion of the process."

Revenues

Counsel's revenues are almost entirely generated from its mortgage lending business. The year-over-year increase of Counsel's revenues in 2014 reflects growth in the volume of mortgages sold by Street Capital.

Revenues for 2014 were $147,312, compared to $138,999 in 2013. Of the 2014 amount, revenues of $138,964 were composed of gains on the sale of mortgages sourced and underwritten by the Company's Mortgage Lending business compared to $136,008 in 2013.

For the fourth quarter of 2014, revenues were $39,078 compared to $28,394 for the same period one year ago. Of the 2014 amount, revenues of $38,298 were composed of gains on the sale of mortgages sourced and underwritten by the Company's Mortgage Lending business compared to $26,605 in 2013.

Over the past five years, Street Capital has experienced steady growth in mortgages originated and sold, which continues to be a primary driver for the business.

Income before income tax and discontinued operations

Income before income tax and discontinued operations for 2014 was $51,463, an increase of over 80% from $27,642 in 2013. For the fourth quarter of 2014, income before income tax and discontinued operations was $14,670, up 42%, from $10,298 for the same period in 2013.

Net Income

Net income attributable to shareholders in 2014 was $12,929, compared with $9,466 for 2013. In the fourth quarter 2014, net income attributable to shareholders was $4,904 compared with $655 for the same period one year ago. In 2014, diluted earnings per share from continuing operations was $0.25, including a $0.015 per share goodwill impairment charge related to the wind-down of Knight's Bridge, which occurred in Q4-2014. Diluted earnings per share from continuing operations in 2013 was $0.16. For the fourth quarter of 2014, diluted earnings per share from continuing operations was $0.04, compared with $0.05 in the same period 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. Street Capital 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.

Counsel's Management's Discussion and Analysis and Audited Consolidated Financial Statements for the year ended December 31, 2014 will be available on SEDAR (www.sedar.com).

Conference Call

Counsel will host a conference call later today, Wednesday, March 25, 2015 at 11:00 a.m. ET to discuss its 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 for two weeks following the call and may be accessed by calling 416-849-0833 or 1-855-859-2056, reference number 4461855.

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.


COUNSEL CORPORATION





CONSOLIDATED STATEMENT OF OPERATIONS 





FOR THE YEAR ENDED DECEMBER 31

(in thousands of Canadian dollars, except per share data)








2014

2013




$

$






Revenues






Gain on sale of mortgages



138,964

136,008


Interest and fee income



4,223

2,991


Other



4,125

-




147,312

138,999

Expenses






Operating costs



84,300

86,160


Selling, general and administrative expense



34,492

30,902


Foreign exchange



(83)

105


Depreciation and amortization



1,297

1,334


Interest expense



2,826

2,810


Other



-

(214)




122,832

121,097






Income before fair value adjustments



24,480

17,902






Fair value adjustments  



26,983

9,740

Income before income taxes and discontinued operations



51,463

27,642






Income tax provision 



7,045

5,728






Income from continuing operations



44,418

21,914






Income (loss) from discontinued operations 



(11,594)

(8,649)






Net income 



32,824

13,265






Net income attributable to non-controlling interest



19,895

3,799






Net income attributable to shareholders



12,929

9,466











Basic and diluted net income (loss) per share :






Continuing operations



0.25

0.16


Discontinued operations



(0.12)

(0.06)






Basic and diluted net income per share 



0.13

0.10






Weighted average number of common shares





outstanding (in thousands) - basic and diluted



99,142

92,705






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



COUNSEL CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS AT DECEMBER 31, 2014 AND 2013

(in thousands of Canadian dollars)



2014

2013


$

$

Assets




Current assets





Cash and cash equivalents

36,152

17,580



Marketable securities

419

410



Mortgages, loans, accounts and deferred fees receivable

29,366

22,004



Securitized mortgage loans

4,731

-



Portfolio investments

30,910

-



Prepaid expenses

7,058

4,655



Assets of discontinued operations

854

18,415


109,490

63,064


Non-current assets





Deferred fees and mortgages receivable

26,594

19,403



Securitized mortgage loans

45,587

-



Prepaid expenses

44,796

35,557



Property, plant and equipment

4,706

3,079



Portfolio investments

9,100

53,220



Intangible assets

5,101

5,594



Goodwill

23,465

24,919



Deferred income tax assets

9,939

10,224



Assets of discontinued operations

486

53,367




Total assets

279,264

268,427




Liabilities




Current liabilities




Accounts payable and accrued liabilities

45,961

29,458



Income taxes payable

3

4



Loans payable

11,973

14,025



Securitization liabilities

4,576

-



Contingent consideration

2,600

4,027



Liabilities of discontinued operations

1,017

20,550


66,130

68,064


Non-current liabilities




Loans payable

6,934

6,703



Securitization liabilities

45,970

-



Contingent consideration

2,308

4,543



Deferred income tax liabilities

26,219

19,573



Derivative liability

-

9



Liabilities of discontinued operations

150

318

Total liabilities

147,711

99,210




Shareholders' equity 

131,553

169,217




Total liabilities and shareholders' equity

279,264

268,427




The notes contained in the Company's audited consolidated 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; Loderock Advisors: Jonathan Ross, jon.ross@loderockadvisors.com, Tel: (905) 334-0095

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