Financial Highlights - Net Income Up 37% as Fundings Nearly Double (All references to quarters or years are for the fiscal periods and all currency amounts are in Canadian dollars unless otherwise noted.)
- Net income rose 37% to $6.8 million from $4.9 million a year earlier. Reported net income was affected by its decision to take a one-time after tax write-off of $0.7 million related to infrastructure and other expenditures from which it no longer expects to benefit. Removing the one-time effects of this write-off would result in net income of $7.4 million in the 2007 first quarter, 51.0% greater than in the 2006 quarter.
- Basic and diluted earnings per share were $0.25 and $0.23, respectively in the 2007 quarter ($0.27 and $0.26, respectively, if the write-off is excluded), compared with $0.17 and $0.17 a year earlier.
- Mortgage fundings in the first quarter at $340.0 million were nearly double those in the 2006 period ($175.4 million).
- Mortgages and other assets under administration rose to $2.48 billion as at January 31, 2007, up 29% from $1.92 billion a year earlier, and 10.1% higher than the 2006 year-end amount of $2.25 billion.
- Return on average shareholders' equity increased to 24.5% in 2007 first quarter (27.0% excluding the one-time write-off), compared with 21.3% a year earlier.
- Revenues totaled $18.2 million in the 2007 first quarter, up 51% from $12.0 million in the 2006 period.
- Cash flow from operations for the first-quarter 2007 was $5.3 million or $0.19 and $0.18 per basic and diluted share, respectively (after removing the effects of the one-time write-off), compared with $3.6 million ($0.13 per basic and $0.12 per diluted share) in the 2006 quarter.
Dividend Increase
Recognizing the company's strong financial performance, positive outlook, and increased cash flow, Xceed's Board of Directors approved a 14.3% (one cent per share) increase in the company's quarterly cash dividends for the 2007 first quarter. The Board declared payment of $0.08 per common share, payable on May 10, 2007 to shareholders of record on April 25, 2007. This is the sixth increase in quarterly dividends that Xceed's Board has approved since the company initiated payments in the 2005 fiscal second quarter, with the payment of $0.02 per share.
Growth Confirms Success of Xceed's Strategies Implemented in 2006
"Xceed Mortgage's very strong financial performance to start 2007 is attributable to a number of factors, including favourable market and mortgage interest rate conditions. Perhaps more importantly, our results confirm the success of the marketing strategies that we initiated beginning in mid-2006 that have resulted in our ability to gain further market penetration through the channels that distribute our products," said Ivan Wahl, Chairman and Chief Executive Officer.
"The adjustments we made to our products, sales, and marketing initiatives, which include increases to our business development personnel were key factors in our ability to nearly double the amount of mortgage fundings from a year ago, leading to the healthy increase in our assets under administration to nearly $2.5 billion," he said.
The increase in mortgage fundings enabled Xceed to sell $297.3 million of mortgages to securitization vehicles during the 2007 first quarter. In the corresponding 2006 period, the company sold $186 million to securitization vehicles. The company recorded a net gain on the sale of mortgages to securitization trusts of $13.2 million in the 2007 first quarter, up from $10.4 million in the 2006 period.
The net gain represented 4.4% of the mortgages sold, compared with 5.6% in the 2006 first quarter. The lower 2007 first-quarter level is consistent with recent quarters (4.8% in the 2006 third quarter and 4.4% in the fourth quarter). This is mainly the result of Xceed changing its average sales mix towards better credit-profile borrowers, as well as the origination of mortgages with shorter terms arranged on a fixed-rate basis, which entail lower spread margins than the mix of business originated in certain past quarters.
To manage the growth of its mortgage fundings, during 2006, the company significantly increased its processing ability and, as the result, in the 2007 first quarter it employed an average of 132 full-time staff, a 24.5% increase from the average of 106 employed in the 2006 period. This increases staffing adversely affected the company's productivity index which, excluding the effects of the one-time expenditures, was 41.7% for the first-quarter 2007, compared with 34.2% in the 2006 quarter. A lower productivity index generally is associated with a more-efficient cost structure, however the company views the increased staffing as needed to maintain its reputation for service quality as it has grown its business.
The average mortgage default ratio (90 or more days in arrears) on the company's combined securitized and non-securitized portfolio increased to 2.29% in the 2007 first quarter from 1.68% in 2006 period (and compared with 2.22% for all of 2006). The increase is primarily due to the aging of the portfolio, since defaults are less likely to occur in the early stages of a mortgage term. -- www.cnxmarketlink.com
Posted March 14th, 2007 by ruzik_tuzik
