TORONTO, June 16 /CNW/ - Northern Financial Corporation (TSX: NFC)
("Northern" or the "Company") today reported its financial results for the
fiscal year ended March 31, 2008 and restated its loss for fiscal 2007. The
Company reported net income of $311,791, or $0.03 per share, for fiscal 2008
compared to a restated loss of $8,453,283 in the prior year.
Subsequent to completion of the Company's consolidated financial
statements for the prior year, which were released on June 29, 2007, Lakeside
Steel Corporation ("Lakeside") finalized its net income on July 30, 2007,
which resulted in a change in the Company's share of Lakeside's net income.
The adjustment in Lakeside's net income related to its fiscal year ended
March 31, 2007 and accordingly, the Company's share of Lakeside earnings for
such fiscal year has been retroactively adjusted upward by $634,283. This
resulted in a lower restated net loss for fiscal 2007 of $8,453,283, or $0.91
per common share, down from $9,087,566 or $0.98 per common share.
Total revenue for the year ended March 31, 2008 was $23,446,763 compared
with $15,313,089 in the prior year. The increase in revenue was seen in almost
all major revenue categories.
Commission revenue of $8,961,594 for the year ended March 31, 2008 was
comparable to the prior year amount of $9,004,016. Underwriting and advisory
revenue increased to $10,820,035 from $8,999,533 in 2007 as Northern completed
more financings and advisory assignments during the year. Trading revenue was
$505,364 compared to a loss of $1,209,089 in the prior year. The prior year
trading loss was generated by a limited number of positions that were
subsequently sold. Interest revenue of $1,497,992 was up from $1,299,617 in
Merchant banking activities generated revenue of $1,686,206 in fiscal
2008 compared to a loss of $2,803,950 in the prior year. During the year the
Company sold its investment in Lakeside generating a gain of $1,566,616. The
Company has sold its merchant banking portfolio and now carries on its
merchant banking activities primarily through an associated company, Jaguar
Financial Inc. ("Jaguar").
Total expenses for the year ended March 31, 2008, were $23,344,902
compared with expenses of $20,831,989 in the prior year. Brokerage costs
increased to $21,572,134 from $19,972,950 in the prior year primarily as a
result of increased variable compensation due to increased revenue.
Interest expense decreased to $923,680 from $1,183,323 in 2007 as the
balance of loans outstanding was lower year over year. Northern's total debt
was reduced to $820,000 as at March 31, 2008. Merchant banking expense for the
year ended March 31, 2008 was $151,068 compared to a recovery of $2,339,497 in
the prior year. The recovery represented a reduction in accrued variable
compensation relating to the decline in the value of the merchant banking
investments in the prior year. General and administrative expenses declined to
$259,316 from $1,776,085 in the prior year. The decline is a result of lower
professional fees, the closure of the Company's London office at the end of
fiscal 2007 and a recovery of costs previously incurred. Depreciation and
amortization expenses increased to $438,704 from $239,128 in 2007. During the
year, the Company relocated to new office premises in most of its locations
across the country. Consequently, the Company wrote down the remaining value
of its existing leasehold improvements in those locations.
The Company generated cash flow of $570,083 in fiscal 2008 compared with
a cash flow deficit of $5,178,566 in the prior year.
During fiscal 2007, Northern made two important investments, one in
Jaguar and turned Jaguar into a merchant bank, and the other in Lakeside,
which was sold in fiscal 2008. The Company accounts for its investments in
Jaguar and Lakeside using the equity method, recording its share of earnings
as income. For the year ended March 31, 2008, the Company recorded income in
the amount of $505,313 for Jaguar and a loss of $295,383 for Lakeside prior to
the sale. For the prior year these amounts were a loss of $144,198 for Jaguar
and a restated gain of $234,283 for Lakeside. Northern continues to work
collaboratively with both these companies to create shareholder value.
While the Company's overall results for fiscal 2008 were a significant
improvement over the prior year, Northern, along with the financial services
industry generally, experienced a reduction in business volume in the latter
part of the fiscal year. Many brokerage firms and financial institutions
worldwide have experienced very substantial losses due to the asset backed
commercial paper crisis and resulting credit crunch, and in some cases have
required large capital injections. While Northern has managed to avoid the
huge losses experienced by other brokerage firms, the Company has recently
taken significant steps to mitigate the impact of reduced revenue by reducing
its fixed cost base through a reduction in staff levels, the closure of
unprofitable branch locations, and other cost saving measures. The Company's
objective is to produce profitable results in any type of market conditions.
Northern had cash and investments of $10.3 million as at March 31, 2008,
and shareholders equity of $10.0 million, or $1.02 per share at that date.
About Northern Financial Corporation
Northern Financial Corporation wholly owns Northern Securities Inc., a
full service investment dealer that provides financial advisory services to
retail and institutional clients and investment banking services to small
For further information:
For further information: Ann Krallisch, Director, Business Development,
Northern Securities Inc., (416) 644-8113, Fax: (416) 644-0270, e-mail: