Equity Financial Holdings Inc. (TSX:EQI) ("EQI" or "the Corporation"), a
Canadian financial services company serving the corporate and institutional
markets, and the retail mortgage market, reported today its financial results
for the three months ended June 30, 2011.
Financial Highlights (all dollar amounts, except per-share, are in $000s unless
otherwise stated)(1)
Three months ended Six months ended
Jun. 30 Jun. 30
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2011 2010 2011 2010
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Unaudited Unaudited Unaudited Unaudited
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Revenue $ 17,875 $ 6,325 $ 24,792 $ 11,408
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Revenue growth 183% 24% 117% 26%
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EBITDA $ 10,625 $ 986 $ 12,633 $ 1,888
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Net income and comprehensive
income $ 7,313 $ 570 $ 8,580 $ 1,042
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Net income & comprehensive
income growth 1183% 134% 723% 130%
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Earnings per share, basic $ 0.82 $ 0.08 $ 1.04 $ 0.15
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Earnings per share, diluted $ 0.80 $ 0.08 $ 1.02 $ 0.15
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Diluted earnings per share
growth 900% 100% 580% 114%
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Return on equity (annualized) 64% 10% 45% 9%
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Cash and cash equivalents at
period end $ 28,452 $ 14,805 $ 28,452 $ 14,805
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1 The following unaudited information was determined in accordance with
International Financial Reporting Standards (IFRS), except EBITDA (Earnings
Before Income Taxes, Depreciation and Amortization) and Return on Equity
(annualized) (net income divided by the simple average of opening and closing
shareholders' equity, multiplied by the appropriate factor to arrive at an
annualized figure) which do not have any standardized meaning prescribed by IFRS
and may not be comparable to similar measures presented by other issuers.
However, we believe financial analysts and investors view these as key measures
of certain aspects of our performance. They use EBITDA as an indication of our
ability to invest in property, plant and equipment, and to raise and service
debt; and they use Return on Equity as a key indicator of whether we use our
capital resources efficiently. These measures should not be considered as an
alternative to cash flows from operating activities nor to any other measures of
performance presented in accordance with IFRS.
The second quarter of 2011 generated exceptional financial results for EQI,
establishing new records for quarterly revenue, quarterly net income and
quarterly earnings per share. Our revenue, net income and earnings per share for
the first six months of the year have already exceeded the results we achieved
for all of fiscal 2010.
The second quarter saw strong performance across all our established lines of
business, including the highest quarterly contribution to date from large-volume
corporate trust and foreign exchange transactions. These drove some 60% of total
quarterly revenues, accelerating the growth of capital resources available to
pursue our business strategies. We believe that the impact of such transactions
in this quarter is evidence of our success in accessing the opportunities that
exist in this area. Even so, the amount and timing of large-volume transactions
is inherently unpredictable and it remains impossible to forecast the incidence
of such transactions for the remainder of 2011 or for subsequent periods.
While recording our best-ever results from our existing businesses, we also took
significant steps to further our strategy and broaden our revenue sources. After
over a year of preparation, we recorded the first transactions from our
expansion into residential mortgage lending. Although this business unit made
only a modest contribution to revenue in this initial quarter, the volumes of
activity are in line with our plans and expectations. As at June 30, 2011 we
have originated over $20 million of mortgages and have commitments to fund a
further $14 million. We believe this pace of mortgage originations is consistent
with our previously disclosed target of $100 million in outstanding loans within
the first twelve months of operations.
Highlights of our results for the second quarter are as follows:
Revenue increased by $11,550, or 183%, to $17,875; for the year to date, it
increased by $13,384, or 117%, to $24,792. The increase is predominantly
attributable to large-volume trust and foreign exchange transactions.
Net earnings increased by $6,743 or 1,183% to $7,313; for the year to date, it
increased by $7,538 or 723%, to $8,580. Our operating expenses increased by only
36% (28% for the year to date), proportionately much less than the increase in
our revenue, reflecting how our operations benefit from large-volume
transactions which allow us to leverage our existing infrastructure.
Basic earnings per share for the second quarter correspondingly increased by
$0.74 or 925%, to $0.82; for the year to date, it increased by $0.89 or 593%,
from $0.15 to $1.04. Diluted earnings per share for the second quarter
correspondingly increased by $0.72 or 900%, from $0.08 to $0.80; for the year to
date, it increased by $0.87 or 580%, from $0.15 to $1.02.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
increased by $9,639 or 977%, to $10,625; for the year to date, it increased by
$10,745 or 569%, to $12,633.
Annualized return on Equity increased to 64% from 10%; for the year to date, it
increased to 45% from 9%.
EQI President & CEO Paul G. Smith said,
"With the results of our second quarter, we have already exceeded our results
for all of fiscal 2010. These results were due in large part to significant
revenues from large-volume transactions. We believe this is evidence of our
success in accessing the opportunities that exist in this area.
Even so, revenues from this source remain inherently unpredictable, and while we
expect momentum across our existing lines of business to remain strong in the
second half of fiscal 2011, we do not expect to repeat the results we reported
for this second quarter.
In the third quarter we expect the expansion of our residential mortgage loan
portfolio will remain on pace with our target of achieving $100 million in loans
outstanding by the end of our first twelve months of operations. We expect to
fund those mortgages primarily through our deposit-taking activities,
specifically by issuing Guaranteed Investment Certificates. Our strong
performance during this quarter has also provided additional capital resources
which will be available for this purpose."
Our Interim Consolidated Financial Statements and Management's Discussion and
Analysis for the second quarter ended June 30, 2011 can be found in our filings
on SEDAR at www.sedar.com and on the Corporation's website at
www.equityfinancialholdings.com.
Quarterly Conference Call
EQI will hold a conference call on Thursday August 11, 2011 at 9AM Eastern Time
to discuss its second quarter operating results and answer questions.
Participants can dial (416-340-2216) or toll free (866-226-1792).
About Equity Financial Holdings Inc.
Through its wholly owned subsidiaries, EQI provides transfer agent, corporate
trust, foreign exchange, retail mortgage and corporate secretarial services to
the corporate and institutional markets, and the retail mortgage market. Learn
more at www.equityfinancialholdings.com.
Advisory notes:
Certain portions of this press release as well as other public statements by the
Corporation contain "forward-looking information" within the meaning of
applicable Canadian securities legislation, which is also referred to as
"forward- looking statements", which may not be based on historical fact.
Wherever possible, words such as "will", "plans," "expects," "targets,"
"continue", "estimates," "scheduled," "anticipates," "believes," "intends,"
"may," and similar expressions or statements that certain actions, events or
results "may," "could," "would," "might" or "will" be taken, occur or be
achieved, have been used to identify forward-looking information. Such
forward-looking statements include, without limitation, the Corporation's
earnings expectations, fee income, expense levels, general economic, political
and market factors in North America and internationally, interest and foreign
exchange rates, global equity and capital markets, business competition,
technological change, changes in government regulations, unexpected judicial or
regulatory proceedings, catastrophic events, and the Corporation's ability to
complete strategic transactions and integrate acquisitions and other factors.
All material assumptions used in making forward-looking statements are based on
management's knowledge of current business conditions and expectations of future
business conditions and trends, including their knowledge of the current credit,
interest rate and liquidity conditions affecting the Corporation and the
Canadian economy. Certain material factors or assumptions are applied by the
Corporation in making forward-looking statements, including without limitation,
factors and assumptions regarding interest and foreign exchange rates,
availability of key personnel, the effect of competition, government regulation
of its business, computer failure or security breaches, future capital
requirements, its ability to fund its mortgage business, the value of mortgage
originations, the competitive nature of the alternative mortgage market, the
expected margin between the interest earned on its mortgage portfolio and the
interest to be paid on its deposits, the relative continued health of real
estate markets, acceptance of its products in the marketplace, as well as its
operating cost structure and the current tax regime.
Forward-looking statements reflect the Corporation's current views with respect
to future events and are subject to a number of risks and uncertainties. Actual
results may differ materially from results contemplated by the forward-looking
statements. Readers should not place undue reliance on such forward-looking
statements, as they reflect the Corporation's current views with respect to
future events and are subject to risks and uncertainties and are necessarily
based upon a number of estimates and assumptions that, while considered
reasonable by the Corporation, are inherently subject to significant business,
economic, regulatory, competitive, political and social uncertainties and
contingencies.
Many factors could cause the Corporation's actual results, performance or
achievements to be materially different from any future results, performance, or
achievements that may be expressed or implied by such forward-looking
statements, including among others a significant downturn in capital markets or
the economy as a whole, errors or omissions by the Corporation in providing
services to its customers, significant changes in foreign currency exchange
rates, extreme price and volume fluctuations in the stock markets, significant
increases in the cost of complying with applicable regulatory requirements,
civil unrest, economic recession, pandemics, war and acts of terrorism which may
adversely impact the North American and global economic and financial markets,
inability to raise funds through public or private financing in the event that
the Corporation incurs operating losses or requires substantial capital
investment in order to respond to unexpected competitive pressures, significant
changes in interest rates, failure by Equity Financial Trust Company ("EFT") to
meet ongoing regulatory requirements to carry on its deposit-taking and mortgage
activities, the failure of borrowers or counterparties to honour their financial
or contractual obligations to EFT, failure by the Corporation to generate or
obtain sufficient cash or cash equivalents in a timely manner and at a
reasonable price or to meet its commitments as they become due, failure by EFT
to adequately monitor and/or adjust its mortgage portfolio management practices
for changing circumstances, failure by the Corporation to attract and to retain
the necessary employees to meet its needs, failure by EFT to adequately monitor
the services provided by third party service providers or to establish
alternative arrangements if required, failure by EFT to secure sufficient
deposits from securities dealers or a sufficient level of mortgage origination
from its mortgage broker network, a failure of the computer systems of the
Corporation or one or more of its service providers or the risks detailed from
time-to-time in the Corporation's quarterly filings, annual information forms,
annual reports and annual filings with securities regulators. Forward-looking
information will be updated as required pursuant to the requirements of
applicable securities laws.
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