NEW YORK, Sept. 19, 2012 (GLOBE NEWSWIRE) -- W.P. Stewart & Co., Ltd. Reports First Half 2012 Financial Results, Including:
- AUM of $1.6 Billion at August 31, 2012
- Cash/Marketable Securities of $20.8 Million at September 4, 2012
Financial Results
First Half Highlights
W.P. Stewart & Co., Ltd. ("W.P. Stewart" or the "Company") today reported a net loss on a GAAP basis of -$2.0 million, or -$0.42 per share (diluted) and -$0.42 per share (basic), for the six months ended June 30, 2012 compared to a loss on a GAAP basis of -$3.0 million in the first half of 2011, or -$0.60 per share (diluted) and -$0.60 per share (basic).
On a cash basis the Company reported a net loss of -$1.9 million, or -$0.39 per share (diluted) and -$0.39 per share (basic), for the six months ended June 30, 2012 compared to a loss on a cash basis of -$0.5 million in the first half of 2011 or -$0.10 per share (diluted) and -$0.10 per share (basic). The cash basis results reflect adjustments to net income of $0.1 million and $2.4 million in the first half of 2012 and 2011, respectively, representing non-cash income and expenses consisting of unrealized gains and losses, non-cash compensation, a gain on the acquisition of a subsidiary, the reversal of a tax reserve, depreciation, amortization, and other non-cash charges, on a tax-effected basis.
First-Half Business Commentary
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The first half of 2012 saw a strong performance from U.S. equities as investors reflected on the strong earnings growth seen in 2011 that had not been matched by market appreciation. Continued good earnings reports in the first half finally convinced investors that equities were a good value despite the continued uncertainties regarding global growth and the sovereign debt crisis in Europe. The market's move up was particularly pronounced in the first quarter but some of those gains were given back in the second quarter as some profits were taken and further concerns regarding growth, particularly in China, resurfaced.
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As yet this better performance by equities has not yet manifested itself into strong flows into the asset class; indeed bonds continue to be the area seeing the most growth; however, we do believe investors will take heart from these better returns and begin to reassess their exposure to equities. In Europe we are seeing a more positive attitude to U.S. equities as investors look to diversify away from those depressed economies and reduce their exposure to the Euro. The launch of a new Euro denominated class for the WP Stewart Holdings Fund has given us access to a number of new clients and we have seen positive flows into that fund class since its launch.
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Our belief that asset flows will improve are further strengthened by our continued good investment performance. As of August 31, 2012, for both the U.S. and global products our composite performance is generally ahead of the benchmarks over 1, 3 and 5 years.
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During the first-half of 2012, assets under management ("AUM") increased to approximately $1.5 billion as a result of roughly equal client inflows and outflows as well as the impact of market performance. The Company follows a practice of billing in advance based on prior quarter ending AUM. As a result, the drop in the S&P and client outflows during 4th Quarter 2011 decreased year end AUM and led to lower 1st Quarter 2012 billings. The impact is reflected in fee revenue for the first half of 2012 being lower by approximately $530,000 or 6.5% compared to the same period in the prior year. On a cash basis, revenue was also negatively impacted by lower realized gains during the period compared to the first-half of 2011.
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Compensation expense was higher during the first-half of 2012 compared to first-half 2011 due in part to accruals related to investment team performance bonuses and to severance costs associated with the acquisition of Bowen.
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We have also begun to see inflows into the UCITS IV global growth fund launched at the end of 2011 in Luxembourg, although as yet these flows have not been significant.
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On May 14, 2012 the Company completed the previously announced purchase of all the outstanding shares of Bowen Asia Limited, a Hong Kong private limited company, for a nominal amount. Since the total fair value of Bowen's identifiable net assets exceeded the nominal amount paid, the Company has recorded a gain included in Interest and Other Revenue for the period ending June 30, 2012. The Company had previously indirectly held a minority interest in Bowen until December 2009 when it sold its interest for a nominal amount plus an option to purchase a certain amount of shares for $1 under certain circumstances. At December 31, 2011, Bowen had approximately $35 million in assets under management. The Company has been working closely with Bowen since 1994 on the Asian investments.
- Year-to-date through the end of August, for the Company's U.S. and Global Equity Composites, the Company had a period of relative outperformance as compared to the S&P 500 and MSCI World Index, respectively, adding to our positive cumulative longer-term track records of 37 years for our U.S. Composite and 7 years for our Global Composite.
Investment Performance and Assets Under Management Update
The performance for the W.P. Stewart U.S. Equity Composite (the "Composite") for the six month period ended June 30, 2012, was 10.3%, gross, and 9.8%, net, compared with 9.5% for the S&P 500. For the three years ending June 30, 2012, annualized performance for the Composite was 16.6%, gross, and 15.5%, net, which was 0.9% behind of the S&P 500 at 16.4% for the same period. For the five years ending June 30, 2012, annualized performance for the Composite was 4.0%, gross, and 2.9%, net, which was 2.7% ahead of the S&P 500 at 0.2% for the same period.
As of August 31, 2012, year-to-date performance for the Composite was 17.5%, gross, and 16.8%, net, compared with 13.5% for the S&P 500. For the three year period ending August 31, 2012, performance for the Composite was 15.9%, gross, and 14.9%, net, compared with 13.6% for the S&P 500. For the five years ending August 31, 2012, annualized performance for the Composite was 5.0%, gross, and 3.9%, net, which was 2.6% ahead of the S&P 500 at 1.3% for the same period.
The performance for the W.P. Stewart Global Composite (the "Global Composite") for the six month period ended June 30, 2012, was 7.9%, gross, and 7.4%, net, compared with 5.9% for the MSCI World Index. For the three years ending June 30, 2012, annualized performance for the Global Composite was 14.1%, gross, and 13.0%, net, which was 2.0% ahead of the MSCI World Index at 11.0% for the same period. For the five years ending June 30, 2012, annualized performance for the Global Composite was 1.6%, gross, and 0.7%, net, which was 3.7% ahead of the MSCI World Index at -3.0% for the same period.
As of August 31, 2012, year-to-date performance for the Global Composite was 13.1%, gross, and 12.4%, net, compared with 10.0% for the MSCI World Index. For the three year period ending August 31, 2012, performance for the Global Composite was 12.5%, gross, and 11.4%, net, compared with 7.9% for the MSCI World Index for the same period. For the five years ending August 31, 2012, annualized performance for the Global Composite was 2.4%, gross, and 1.5%, net, which was 3.3% ahead of the MSCI World Index at -1.8% for the same period.
AUM at August 31, 2012 was approximately $1.6 billion (preliminary), compared with approximately $1.5 billion at June 30, 2012, $1.4 billion at December 13, 2011 and $1.5 billion at June 30, 2011. In the attached tables a complete breakdown of AUM flows for the period ended June 30, 2012 with comparisons to earlier periods is provided.
The Company releases composite portfolio investment returns on a monthly basis and intends to release AUM data at least on a quarterly basis. The performance returns are posted on the Company's website at www.wpstewart.com, usually within one week of month-end and AUM quarterly updates will be posted usually within one month of the quarter-end. A complete history of the performance of the Composite is available on the Company's website. Performance results and AUM data are subject to change on final reconciliation of all relevant data.
The Company had cash and marketable securities at June 30, 2012 of $20.3 million. The Company has no debt. As of September 4, 2012, the Company had cash and marketable securities balances of approximately $20.8 million. In addition, the joint venture company that owned the Company's headquarters building in Bermuda completed its sale of the building in May 2010 and is expected to distribute its assets, including the proceeds of the sale, to its joint venture partners, The Bank of Bermuda and the Company.
Other Items
For the six months ended June 30, 2012 non-cash compensation expense related to the Company's restricted share issuances to employees was approximately $1.7 million. For the same period of the prior year, the non-cash compensation charge was approximately $2.1 million. These non-cash compensation expenses are included in "employee compensation and benefits".
The Company's provision/(benefit) for taxes for the six months ended June 30, 2012 was -$0.94 million (benefit) versus $48,000 (provision) in the comparable period of the previous year reflecting the settlement of an ongoing tax audit with the State of New York. The Company is currently engaged in an audit with a taxing authority.
Shareholders' equity at June 30, 2012 was approximately $19.2 million.
Please see the tables included in this release for further detail on revenue and expenses for the six months ended June 30, 2012 and 2011.
W.P. Stewart & Co., Ltd. is an asset management company that has provided research-intensive equity management services to clients throughout the world since 1975. The Company is headquartered in New York, New York and has additional operations or affiliates in Europe and Hong Kong.
The Company's shares are currently traded on the Pink Sheets under the symbol "WPSL".
For more information, please visit the Company's website at http://www.wpstewart.com, or call W.P. Stewart Investor Relations at 1-888-695-4092 (toll-free within the United States) or 1-212-750-8585 (outside the United States) or e-mail to IRINFO@wpstewart.com. Statements made in this release concerning our assumptions, expectations, beliefs, intentions, plans or strategies are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ from those expressed or implied in these statements. Such risks and uncertainties include, without limitation, the effects of the Company's 2010 corporate reorganization, the adverse effect from a decline or volatility in the securities markets, the general downturn in the economy, the effects of economic, financial or political events, a loss of client accounts, inability of the Company to attract or retain qualified personnel, a challenge to our former U.S. tax status, competition from other companies, changes in government policy or regulation, a decline in the Company's products' performance, inability of the Company to implement its operating strategy, the effects of the Company's delisting and deregistration under the U.S. Securities Act of 1934, inability of the Company to manage unforeseen costs and other effects related to legal proceedings or investigations of governmental and self-regulatory organizations, industry capacity and trends, changes in demand for the Company's services, changes in the Company's business strategy or development plans and contingent liabilities. The information in this release is as of the date of this release, and will not be updated as a result of new information or future events or developments.
| SUMMARY of KEY COMPARATIVE STATISTICS | |||
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For the Six Months Ending June 30 |
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| 2012 | 2011 | ||
| Revenue (in millions) | $ 8.32 | $ 8.30 | 0.2% |
| Total Operating Expenses (in millions) | $ 11.25 | $ 11.21 | 0.3% |
| AUM (in billions) | $ 1.50 | $ 1.52 | -1.8% |
| Average Gross Management Fee - Annualized | |||
| Including Performance Fee accounts1 | 0.99% | 1.02% | |
| Excluding Performance Fee accounts1 | 1.21% | 1.26% | |
| Common shares outstanding | 4,777,955 | 4,939,242 | |
| (weighted adv. diluted & basic basis) | |||
| GAAP BASIS | |||
| Net Income (in millions) | $ (2.0) | $ (3.0) | 32.9% |
| Earnings per Share (Basic & Diluted) | $ (0.42) | $ (0.60) | 30.0% |
| CASH BASIS | |||
| Net Income (in millions) | |||
| As Reported | $ (2.0) | $ (3.0) | 32.9% |
| Excluded Non-cash Income & Expenses2 | $ 0.1 | $ 2.5 | 94.5% |
| Net of Non-cash Income & Expenses2 | $ (1.9) | $ (0.5) | -264.4% |
| Earnings per Share (Basic & Diluted) | |||
| As Reported | $ (0.42) | $ (0.60) | 30.0% |
| Excluded Non-cash Income & Expenses2 | $ (0.03) | $ (0.50) | 94.0% |
| Net of Non-cash Income & Expenses2 | $ (0.39) | $ (0.10) | -290.0% |
| 1 Performance fee based accounts, pay a lower quarterly base fee plus an annual performance fee at year-end if earned | |||
| 2 Non-cash Income & Expenses: Consisting of unrealized gains and losses, non-cash compensation, depreciation, amortization, and other non-cash charges on a tax-effected basis | |||
| W.P. Stewart & Co., Ltd. | |||
| Condensed Consolidated Statements of Financial Condition | |||
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June 30, 2012 |
December 31, 2011 |
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| (Unaudited) | |||
| Assets: | |||
| Cash and cash equivalents | $ 16,302,206 | $ 18,176,603 | |
| Fees receivable | 157,133 | 119,443 | |
| Investments in unconsolidated affiliates | 2,017,832 | 2,017,832 | |
| Receivables from affiliates, net | 535,122 | 1,423,414 | |
| Investments, trading (cost $2,701,009 and $2,843,907 for 2012 and 2011, respectively) | 2,938,491 | 2,624,718 | |
| Investments, available for sale (cost $881,026 and $12,400 for 2012 and 2011, respectively) | 815,945 | 431,340 | |
| Furniture, equipment, software and leasehold improvements (net of accumulated depreciation and amortization of $1,567,889 and $1,525,021 for 2012 and 2011, respectively) | 478,579 | 463,866 | |
| Income taxes receivable | 1,336,109 | 1,338,184 | |
| Deferred income taxes receivable | 376,707 | 413,176 | |
| Other assets | 938,749 | 2,640,134 | |
| $ 25,896,873 | $ 29,648,710 | ||
| Liabilities and Shareholders' Equity: | |||
| Liabilities: | |||
| Employee compensation and benefits payable | $ 605,767 | $ 1,935,628 | |
| Fees payable | 84,068 | 356,613 | |
| Vendor payables | 1,736,794 | 2,291,320 | |
| Accrued expenses and other liabilities | 4,257,336 | 5,424,914 | |
| 6,683,965 | 10,008,475 | ||
| Shareholders' Equity: | |||
| Non-controlling interest | -- | 99,989 | |
| Common shares, $0.01 par value (12,500,000 shares authorized; 5,019,851 and 5,019,219 shares issued, 5,017,351 and 5,016,719 shares outstanding at June 30, 2012 and December 31, 2011, respectively) | 50,198 | 50,192 | |
| Additional paid-in-capital | 141,374,638 | 139,711,936 | |
| Accumulated other comprehensive income | 579,094 | 584,196 | |
| Retained earnings/(deficit) | (122,785,697) | (120,800,753) | |
| Common shares held in treasury, at cost, $0.01 par value (2,500 shares at June 30, 2012 and December 31, 2011) | (5,325) | (5,325) | |
| 19,212,908 | 19,640,235 | ||
| $ 25,896,873 | $ 29,648,710 | ||
| W.P. Stewart & Co., Ltd. | |||
| Unaudited Condensed Consolidated Statements of Operations | |||
| For the Six Months Ended June 30, | |||
| 2012 | 2011 | % | |
| (Unaudited) | (Unaudited) | ||
| Revenue: | |||
| Fees (includes fees from affiliates of $549,989 and $499,666 for 2012 and 2011, respectively) | $ 7,562,150 | $ 8,092,121 | -6.5% |
| Realized and unrealized gains/(losses) on investments | 271,203 | 76,226 | 255.8% |
| Interest and other | 490,137 | 133,796 | 266.3% |
| 8,323,490 | 8,302,143 | 0.3% | |
| Expenses: | |||
| Employee compensation and benefits | 6,040,106 | 5,843,534 | 3.4% |
| Fees paid out | 771,998 | 810,922 | -4.8% |
| Commissions, clearance and trading | -- | (770) | |
| Research and administration | 2,387,221 | 2,253,758 | 5.9% |
| Marketing | 694,540 | 741,555 | -6.3% |
| Depreciation and amortization | 42,868 | 73,455 | -41.6% |
| Other operating | 1,316,068 | 1,490,490 | -11.7% |
| 11,252,801 | 11,212,944 | 0.4% | |
| Income/(loss) before taxes | (2,929,311) | (2,910,801) | -0.6% |
| Provision/(benefit) for taxes | (944,367) | 48,711 | |
| Net income/(loss) | $ (1,984,944) | $ (2,959,512) | 32.9% |
| Earnings/(loss) per share: | |||
| Basic earnings/(loss) per share | $ (0.42) | $ (0.60) | 30.0% |
| Diluted earnings/(loss) per share | $ (0.42) | $ (0.60) | 30.0% |
| W.P. Stewart & Co., Ltd. | |||
| Net Flows of Assets Under Management* | |||
| (in millions) | |||
| For the Six Months Ended | |||
| Jun. 30, 2012 | Dec. 31, 2011 | Jun. 30, 2011 | |
| Existing Accounts: | |||
| Contributions | $ 102 | $ 30 | $ 60 |
| Withdrawals | (143) | (97) | (86) |
| Net Flows of Existing Accounts | (41) | (67) | (26) |
| Publicly Available Funds: | |||
| Contributions | 26 | 12 | 19 |
| Withdrawals | (15) | (49) | (21) |
| Direct Accounts Opened | 53 | 11 | 8 |
| Direct Accounts Closed | (22) | (30) | (102) |
| Net New Flows | 42 | (56) | (96) |
| Net Flows of Assets Under Management | $ 1 | $ (123) | $ (122) |
| * The table above sets forth the total net flows of assets under management for the six months ended June 30, 2012, December 31, 2011 and June 30, 2011, respectively, which include changes in net flows of existing accounts and net new flows (net contributions to our publicly available funds and flows from new accounts minus closed accounts). The table excludes total capital appreciation or depreciation in assets under management with the exception of the amount attributable to withdrawals and closed accounts. | |||