TORONTO, ONTARIO--(Marketwired - May 16, 2017) - LOGiQ Asset Management Inc. ("LOGiQ" or the "Company") (TSX:LGQ) announces it has released its Condensed Consolidated Interim Financial Statements for the quarter ended March 31, 2017 and related Management's Discussion and Analysis.
For the second quarter ended March 31, 2017, LOGiQ revenues increased by 10 per cent to $7.5 million over the prior quarter revenues of $6.8 million. The revenue increase reflects the impact of the combination of LOGiQ (formerly Aston Hill Financial Inc.) and Front Street Capital in December 2016 for its first full quarter. Revenue generated by LOGiQ-managed investment funds decreased as a percentage of total revenue (currently 80% compared to 93% in the prior quarter).
In the second financial quarter ending March 31, 2017, LOGiQ saw assets under management or advisement ("AUM") decrease to $2.3 billion from $2.5 billion at December 31, 2016. The lower AUM is mainly the result of net redemptions of open-end funds. During the second quarter, gross sales of mutual funds were $23 million and redemptions were $285 million with $175 million from one special low fee account relationship.
At March 31, 2017, LOGiQ also had $2.5 billion of institutional advisory sales-related fee earning arrangements ("Global Advisory"). These are incremental to the $2.3 billion AUM.
Total expenses (excluding finance expense) for the second quarter were higher at $10.1 million compared to $8.1 million for the prior quarter. The higher corporate expense is mainly due to the full-quarter impact of combining LOGiQ and Front Street Capital. There were also non-recurring expenses of approximately $1 million incurred in the quarter ended March 31, 2017 associated with the integration of the businesses.
Adjusted EBITDA for the second quarter was negative $559,000, a decrease from the prior quarter adjusted EBITDA of $2.0 million. This was due mainly to the combination of LOGiQ and Front Street Capital. Net loss for the quarter was $2.8 million, as compared to a net loss in the prior quarter of $1.3 million.
Highlights of the Quarter
LOGiQ has taken a number of steps to reinforce the foundation for its future growth as a fully-integrated and diversified investment management firm:
- Expanding and enhancing the Board of Directors by adding Colleen McMorrow (recently retired from Ernst & Young), Gord McMillan (private investor) and Joe Oliver (former Federal Minister of Finance), to existing to existing members Donna Toth, Dr. Eldon Smith and Joseph Canavan.
- Strengthening the leadership team with a new Chief Financial Officer, new Chief Operating Officer, new Head of Sales Strategy and new Head of Marketing, and reinforcing each of their teams.
- Merging and restructuring funds into fewer, larger portfolios with more focused strategies, lower costs to unitholders and enhanced portfolio management strengths.
- Streamlining and upgrading trading operations and client relationship management platforms to reduce cost, maximize efficiency and to prepare us for future acquisitions.
"This quarter should be characterized as a transitional quarter as this is LOGiQ's first full quarter with all four businesses under our umbrella," said LOGiQ CEO, Joe Canavan. "Merging these three firms and acquiring institutional fee-earning arrangements brings many benefits to advisors and their clients, including strong leadership, leverage with vendors to reduce fund and corporate costs, scale within the fund lineup, synergies at the corporate level and sophisticated investment solutions."
Investors and readers of the Condensed Consolidated Interim Financial Statements for the quarter ended March 31, 2017 and related Management's Discussion and Analysis are cautioned that the results for the comparative quarter ended December 31, 2016 are not necessarily indicative of the ongoing operations of the business because the results include a full quarter of former Front Street Capital, 24 days each of LOGiQ Asset Management Inc. and Tuscarora Capital Inc., and eight days of results from the Global Advisory business. The results for the comparative quarter ended March 31, 2016 include only the results of former Front Street Capital.
Financial Highlights
| (in thousands of dollars, except assets under management, fee earning arrangements and per share amounts) | |||||||||
| As at March | As at December | As at March 31, | |||||||
| 31, 2017 | 31, 2016 | 2016 | |||||||
| Assets under management (in $millions) | $ | 2,286 | $ | 2,530 | $ | 688 | |||
| Institutional advisory sales-related fee earning arrangements (in $millions) | $ | 2,550 | $ | 2,465 | $ | Nil | |||
| Total fee earning arrangements and assets under management (in $millions) | $ | 4,836 | $ | 4,995 | $ | 688 | |||
| Total assets | $ | 88,084 | $ | 92,337 | $ | 7,747 | |||
| Shares outstanding | 327,041,000 | 327,124,000 | 107,563,000 | ||||||
| For the three months ended | March 31, 2017 | December 31, 2016 1 | March 31, 2016 | ||||||
| Total revenues | $ | 7,548 | $ | 6,819 | $ | 3,312 | |||
| Total expenses excluding finance expense | 10,104 | 8,060 | 3,425 | ||||||
| Total finance expense (income) | 717 | 138 | - | ||||||
| Net losses (gains) or financial assets and liabilities at fair value through profit and loss | 1 | (28 | ) | 6 | |||||
| Loss before income taxes | $ | (3,272 | ) | $ | (1,407 | ) | $ | (107 | ) |
| Income tax recovery | $ | (508 | ) | $ | (140 | ) | $ | - | |
| Net loss | $ | (2,764 | ) | $ | (1,267 | ) | $ | (107 | ) |
| Net income to non-controlling interest | 1 | 3 | - | ||||||
| Net loss to controlling interest | $ | (2,765 | ) | $ | (1,270 | ) | $ | (107 | ) |
| Per share - Basic and diluted | $ | (0.008 | ) | $ | (0.008 | ) | $ | (0.001 | ) |
| EBITDA2 | $ | (1,006 | ) | $ | (802 | ) | $ | 260 | |
| Adjusted EBITDA2 | $ | (559 | ) | $ | 2,048 | $ | 254 | ||
Notes:
- The prior quarter ended December 31, 2016 includes a full quarter results for each of LOGiQ Asset Management Inc. (formerly Aston Hill Financial Inc. and Tuscarora, and 8 days of results from the Institutional Advisory Group. The March 31, 2016 3 and 6 months results are former Front Street Capital only.
- EBITDA is comprised of net loss to controlling interest before finance expense, income tax recovery, amortization of intangible assets - finite life, amortization of deferred sales commissions and depreciation of property and equipment. Adjusted EBITDA is comprised of EBITDA before restructuring costs, net (gains) losses on financial assets and liabilities at fair value through profit or loss and share based compensation.
See "Use of Non-IFRS measures" below.
| Percent of Revenues by Source for Three Months Ended March 31, 2017 | |
| LOGiQ Managed Investment Funds | 80% |
| Institutional, Global Advisory sales-related Fee Earning Arrangements, and Other | 11% |
| Sub-Advisory Mandates | 2% |
| Brokerage | 7% |
Impacts on Q2 2017 Results
- First full quarter of results incorporating all businesses combinations completed during December 2016.
- Closing of reverse acquisition transaction between Front Street and Aston Hill to form LOGiQ on December 8, 2016 and subsequently commencing trading on the Toronto Stock Exchange as LOGiQ under the ticker symbol "LGQ" on December 14, 2016.
- Concurrent with closing the reverse acquisition on December 8, 2016, amending the terms of former
Aston Hill's convertible debentures, which, as amended, commenced trading on the Toronto Stock Exchange on December 14, 2016, under the ticker symbol "LGQ.DB". Such amendments included:- amending the maturity date from January 31, 2019 to June 30, 2021;
- reducing (in part by virtue of a partial repayment through the issuance of Common shares) the aggregate principal amount of the debentures from $33.7 million to $20.2 million;
- increasing the interest rate on the Debentures from 6.50% to 7.00% and changing the corresponding interest payment dates from January 31 and July 31 to June 30 and December 31 of each year;
- changing the conversion price for each Common Share to be issued upon the conversion of the Debentures from the existing $0.65 per share to $0.30 per share;
- removing the ability of the Company to repay the redemption price, principal amount or accrued interest in Common Shares; and
- introducing certain negative covenants in respect of the Company that will provide added protection to the holders of the Debentures.
- Completion, on December 20, 2016, of a non-brokered private placement consisting of the issuance of an aggregate of 34.4 million common shares in the capital of the Company (each, a "Common Share") at a price of $0.15 per Common Share for gross proceeds of $5.2 million. Finder's fees of 6% cash and 6% in broker warrants exercisable for 24 months from the date of closing of the private placement at $0.15 per common share were paid in connection with the private placement.
Updates Subsequent to Quarter End
- Launching an advertising campaign in April through July.
- Launching a National Advisory Council to ensure Advisor input to LOGiQ's investment solutions, services and support.
- Achievement of expense synergies and savings as a result of business combinations completed during December 2016.
- Based upon closed contracts, the Global Advisory business has grown to $2.9 billion as of May 15, 2017 and the Company is exploring the potential to launch unique institutional investment solutions to its retail platform from this group of fund managers.
Frank Mersch to Retire from Company
The Company announces that Frank Mersch will retire from the firm effective June 30, 2017. Mr. Mersch has decided to scale back his professional activities and to exit the retail mutual fund business. The company and Mr. Mersch will work together to ensure a smooth transition of his portfolio management duties, which may include entering into a subadvisory agreement with Mr. Mersch on a transitional basis. As Mr. Mersch retains a substantial ownership position in LOGiQ Hedge Fund, Management of the Company anticipates a transfer of the management contract for LOGiQ Hedge Fund to another registered firm. We are very supportive of Mr. Mersch as he charts a path forward into retirement after decades of portfolio management success and we are grateful for his ongoing commitment to unitholders during the transition period.
About LOGiQ:
LOGiQ (logiqasset.com) is a diversified asset management company with a suite of retail mutual funds, closed end funds, hedge funds and pooled funds, and also provides segregated institutional managed accounts and institutional advisory sales. LOGiQ has assets under management or advisement and institutional advisory sales-related fee earning arrangements that are not managed or advised, totaling approximately $4.8 billion as at March 31, 2017.
The Company will host a conference call on Tuesday May 16, 2017 at 8:30am EDT. The conference call will be chaired by Joe Canavan, President and Chief Executive Officer. The number to use for this call is Toronto local (416) 764-8608 or toll-free (+1) 888-664-6370, Conference ID: 70523796. Please call in at least 10 minutes prior to the call.
Notice to Reader: Use of Non IFRS Measures and Forward-Looking Statements
- Adjusted EBITDA and EBITDA: Adjusted EBITDA and EBITDA, as defined above, are not standardized earnings measures prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies. Such measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS, such as Net income (loss) to controlling shareholders; however, management believes that most of its shareholders, creditors, other stakeholders and investment analysts find these measures useful performance benchmarks in analyzing LOGiQ's results, as an important indicator to of the Company's ability to generate operating cash flows and are important measures to increase comparability of performance between periods.
- Forward-Looking Statements: This news release contains certain "forward-looking statements" within the meaning of such statements under applicable securities law. Forward-looking statements are frequently characterized by words such as "plan", "continue", "expect", "project", "intend", "can", "believe", "anticipate", "estimate", "may", "will", "potential", "proposed" and other similar words, or statements that certain events or conditions "may" or "will" occur. These statements are only predictions. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this news release. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. The Company undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change, unless required by law. The reader is cautioned not to place undue reliance on forward-looking statements.
For a detailed description of the risks and uncertainties facing the Company and its business and affairs, readers should refer to the annual financial statements and management discussion and analysis for the year ended September 30, 2016 of Front Street Capital, both of which are available on SEDAR under the Company's profile at www.sedar.com in addition to the unaudited condensed consolidated interim financial statements for the three and six month periods ended March 31, 2017 together with the corresponding Management's Discussion and Analysis for additional risk factors described under "Risk Management".
The TSX has neither approved nor disapproved the information contained herein.
Contact Information:
President & Chief Executive Officer
LOGiQ Asset Management Inc.
(416) 583-2300
Mary Anne Palangio
Chief Financial Officer
LOGiQ Asset Management Inc.
(416) 583-2300