SEAMARK Asset Management Ltd. Reports Third Quarter Financial Results
Wed Nov 4, 4:26 PMHALIFAX, Nov. 4 /CNW/ - SEAMARK Asset Management Ltd. today announced a loss of $0.02 per share for the third quarter of 2009. The loss includes a 2 cent per share impact from costs associated with exploring a recently announced business combination agreement with GrowthWorks Ltd.
A summary of the Company's financial results for the third quarter 2009 follow.
SEAMARK Asset Management Ltd. (TSX: SM.TO) provides investment management services across Canada to institutional clients, mutual funds, private clients, and the managed portfolio advisory programs (wrap programs) of many of Canada's leading investment dealers.
SUMMARY OF FINANCIAL RESULTS
UNAUDITED
Three months
2009 2008
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for the period ended September 30
($ in thousands, except per share)
Total revenue $ 1,273 $ 2,499
Earnings before income tax (266) 563
Net earnings (219) 333
Basic earnings per share $ (0.02) $ 0.03
Diluted earnings per share - 0.03
Basic weighted average common shares
outstanding (in thousands) 10,453 10,408
Diluted weighted average common shares
outstanding (in thousands) 10,721 10,803
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as of September 30, 2009 & December 31, 2008 2009 2008
($ in thousands)
Current assets $ 12,909 $ 14,203
Current liabilities 802 1,256
Total assets 13,827 15,525
Total liabilities 839 1,394
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This news release contains certain forward-looking statements, including Future Oriented Financial Information ("FOFI") in the "Outlook" section and in the "Financial Overview & Operating Highlights" section, notably in discussing expected expense levels, cash flow from operating activities and earnings guidance. Readers are cautioned that FOFI in these sections is provided solely to inform the reader of the management's current expectation and may not be appropriate for other purposes. Forward-looking statements may also include estimates, plans, expectations, opinions or other statements that are not statements of fact. These forward-looking statements are based on management's beliefs and assumptions related to the business conditions under which SEAMARK Asset Management Ltd. currently operates. While management considers these beliefs and assumptions to be reasonable based on information currently available to it, they are subject to numerous risks and uncertainties. Accordingly, actual results may differ significantly from those currently anticipated due to many factors including, but not limited to, changes in the level of assets under management, future absolute investment performance on behalf of clients, future relative investment performance compared to competitors, ability to retain and attract clients, ability to retain key personnel, ability to recruit qualified personnel, and changes to the regulatory environment under which SEAMARK operates. Readers are therefore cautioned not to place undue reliance on forward-looking statements. The forward-looking statements contained in this news release are made as of November 4, 2009, and are subject to change after such date. SEAMARK does not intend to revise or provide updates on these forward-looking statements except as required by applicable securities laws. The forward-looking statements are expressly qualified in their entirety by this cautionary statement.
FINANCIAL OVERVIEW & OPERATING HIGHLIGHTS
Earnings per share during the third quarter of 2009 were ($0.02) compared to $0.03 during the third quarter of 2008. Year-to-date, earnings are ($0.55) in 2009 compared to $0.09 in 2008.
The comparability of financial results between 2009 and 2008 are impacted by the following:
- For the third quarter 2009, transaction costs associated with a
potential business combination decreased basic and diluted earnings per
share by $0.02, increased expenses and decreased earnings before tax by
$254,000 and decreased net earnings by $158,000.
- Year-to-date 2009, costs associated with a reduction in staffing
decreased basic and diluted earnings per share by $0.01, increased
expenses and decreased earnings before tax by $151,000, and decreased
net earnings by $94,000.
- Year-to-date 2009, one-time expenses related to a separation agreement
with the former President and CEO decreased basic and diluted earnings
per share by $0.48, increased expenses and decreased earnings before
tax by $7,962,000, and decreased net earnings by $5,038,000.
- Year-to-date 2009, an impairment of intangible assets decreased basic
and diluted earnings per share by $0.02, increased expenses and
decreased earnings before tax by $296,000, and decreased earnings after
tax by $205,000.
- Year-to-date 2009, an other-than-temporary impairment of temporary
investments decreased basic and diluted earnings per share by $0.01,
increased expenses and decreased earnings before tax by $110,000, and
decreased earnings after tax by $93,000.
- Year-to-date 2009, a future tax asset valuation allowance decreased
basic and diluted earnings per share by $0.01 and increased expenses
and decreased net earnings by $94,000.
- For the third quarter 2008, non-recurring expense recoveries, primarily
as a result of a reversal of CEO relocation costs, increased basic and
diluted earnings per share by approximately $0.02, increased earnings
before income taxes by $300,000 and increased net earnings by $195,000.
SEAMARK's revenues from clients are derived as a percentage of the
clients' assets under management ("AUM"). The following tables summarize the
changes in AUM during the third quarter and year-to-date 2009 and 2008.
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Quarterly Change AUM Summary
(in billions)
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3rd Quarter 2009 3rd Quarter 2008
AUM Net Market AUM AUM Net Market AUM
End of New Value End of End of New Value End of
3rd Assets Change 2nd 3rd Assets Change 2nd
Quarter Quarter Quarter Quarter
2009 2009 2008 2008
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Total
Firm 1.99 (0.08) 0.11 $1.96 2.99 (0.24) (0.27) $3.50
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Institu-
tional
clients 1.46 (0.07) 0.09 1.44 1.75 (0.15) (0.16) 2.06
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Mutual
funds 0.11 - - 0.11 0.12 (0.01) (0.01) 0.14
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Wrap
programs 0.32 (0.01) 0.02 0.31 0.98 (0.07) (0.09) 1.14
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Private
clients 0.10 - - 0.10 0.14 (0.01) (0.01) 0.16
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Year to Date Change in AUM Summary
(in billions)
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First 9 Months 2009 First 9 Months 2008
AUM Net Market AUM AUM Net Market AUM
End of New Value End of End of New Value End of
3rd Assets Change 4th 3rd Assets Change 4th
Quarter Quarter Quarter Quarter
2009 2008 2008 2007
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Total
Firm 1.99 (0.82) 0.28 $2.53 2.99 (0.51) (0.37) $3.87
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Institu-
tional
clients 1.46 (0.26) 0.20 1.52 1.75 (0.24) (0.19) 2.18
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Mutual
funds 0.11 (0.01) 0.01 0.11 0.12 (0.03) (0.02) 0.17
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Wrap
programs 0.32 (0.53) 0.06 0.79 0.98 (0.23) (0.15) 1.36
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Private
clients 0.10 (0.02) 0.01 0.11 0.14 (0.01) (0.01) 0.16
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Revenues during the third quarter of 2009 were $1.3 million compared to $2.5 million for the third quarter of 2008. Revenues year-to-date were $4.9 million, down from $8.4 million for the first nine months of 2008. The decline in revenues is the result of a decline in assets under management.
General and administrative expenses for the third quarter of 2009 were $1.3 million (year-to-date $4.7 million) compared to $1.9 million for the same period in 2008 (year-to-date $6.6 million). Total expenses were $1.5 million in the quarter ($13.5 million year-to-date) compared to $1.9 million for the third quarter of 2008 ($6.8 million year-to-date 2008). The comparability of expenses is impacted by the items noted above. In addition, expenses have generally declined as a result of the smaller workforce required to service a smaller client base.
In the Company's first quarter release, it provided future-oriented financial information indicating that, excluding any unusual or one-time items, quarterly expenses for the final nine months of 2009 were expected to average less than $1.4 million and, excluding the impact of non-cash expenses (amortization, non-cash compensation and share purchase financing), less than $1.2 million. The Company is on track to meet these expectations. Average expenses during the second and third quarter excluding the impact of above-noted unusual or one-time expenses were $1.4 million and, excluding the impact of non-cash expenses, were $1.2 million.
Income tax recovery for the third quarter 2009 was $0.1 million compared to income tax expense of $0.2 million in 2008. The decline in income tax expenses reflects the decline in taxable income, which is the result of an overall decline in earnings before taxes.
Year-to-date 2009 SEAMARK had an income tax recovery of $2.9 million compared to an income tax expense of $0.7 million year-to-date 2008. The income tax recovery is comprised of current tax recovery of $2.8 million as a result its pre-tax loss and future income tax recovery of $0.1 million due to a decrease in future tax liabilities, primarily from the impairment of intangible assets, offset by an increase in the valuation allowance for the future tax assets associated with equity compensation grants.
As projected during the Company's first quarter 2009 release, SEAMARK generated positive cash flow from operating activities during the third quarter of 2009.
LIQUIDITY & CAPITAL RESOURCES
SEAMARK's total available liquid assets, consisting of cash, short-term investments and temporary investments as of September 30, 2009 were $8.1 million, up from $7.4 million at the beginning of the quarter and down from $11.0 million a year ago. The decline in total available liquid assets from a year ago primarily reflects payments associated with a separation agreement with the former President and CEO. The increase during the quarter primarily reflects positive cash flow from operating activities.
The Company is exposed to a number of financial risks by virtue of its investment activities, encompassing market risk, currency risk, fair value interest rate risk and credit risk. The Company's risk management program is based primarily on limiting the exposure to each of these risks to a level that is not expected to have a significant impact on financial performance or the Company's capital resources.
The Company invests primarily in money market instruments, which are limited to securities rated R1-Low or higher. No investments are made in structured debt instruments, including asset backed commercial paper.
The Company also holds certain temporary investments, which are the capital the Company has invested in new products as they are introduced into the marketplace. These products generally consist of mutual and other funds that are comprised of a selection of marketable securities, primarily equity securities including a portion for which the underlying companies are domiciled outside Canada. Consequently, the Company is impacted by both the changing value of the securities in the market, as well as changes in the relative value of foreign currencies vis-à-vis the Canadian dollar. The Company does not hedge these two risks; rather, it minimizes risk by limiting the amount of capital allocated to new product introduction to amounts which would not materially impact the financial strength and capacity of the Company. In addition, each fund is diversified by sector and the type of businesses in which the investee companies are engaged.
There are no current liquidity concerns with any financial instruments held by SEAMARK.
Currently available liquid assets are expected to be adequate to meet SEAMARK's financial needs and to fund current operations; therefore, no additional capital resources have been arranged.
OUTLOOK
The Company has entered into a business combination agreement with GrowthWorks Ltd. to form a new, more diversified asset management company. Details regarding the potential transaction, including conditions of approval, were set out in a press release issued on October 29, 2009.
Financial market conditions have generally returned to normal after the turmoil of late 2008 and early 2009. This is reflected in improved equity and corporate bond valuations and improved investor sentiment. Future changes in market value appreciation of assets under management are also likely to return to more normal magnitudes, after the very large declines and subsequent rebounds that have characterized the past twelve months.
Relative investment performance remains supportive of asset retention and new asset acquisition. SEAMARK's performance in each of its core investment mandates ranks very well against its competitors over critical one-, three-, and four- year periods.
Notwithstanding the Company's strong relative investment performance and improving industry conditions, the ability to win new business from institutional consultant channels is expected to be limited prior to a sustained improvement in AUM trends. Factors potentially impacting SEAMARK's ability to win and retain business are otherwise as discussed in the Outlook section of the Company's MD&A for the year ended December 31, 2008.
SEAMARK is financially strong, well financed and adequately capitalized. There is no current expectation that any additional capital resources will be required or that the Company's ability to continue to deliver quality service to its clients would be disrupted.
ContactsJill McKimCorporate Secretary
SEAMARK Asset Management Ltd.
(902) 423-9367
