(August 1 – 14:45 ET) – BRM Capital Corp. has filed unaudited financial statements for the nine months ending May 31, highlighting the challenges emerging in the consolidating fund dealer business.
The fund dealer has undergone a huge transformation in the last year, closing six large acquisitions, and adding $104.9 million in goodwill to its balance sheet. The huge goodwill charge accounts for the difference between the cost of the acquisitions and the market value of their assets and liabilities.
For the nine months ended May 31, revenue jumped from $20.6 million to $121.6 million, however gross margin is down to 19% from 23%. Earnings before interest, taxes and amortization (EBITDA) is down slightly to $1.2 million from $1.23 million in the period last year. Factor in the amortization of goodwill and the firm is reporting a $2.7 million net loss, down from earnings of $672,191 in the comparable period last year.
During the third quarter the firm completed its sixth acquisition — Gestion Courvie — making it the largest fund dealer in the country with 4,000 advisors. “With this latest acquisition BRM has now secured critical mass not only at a national level but also in each major region in which it operates,” BRM notes in the filing.
The firm says that in the third quarter EBITDA was up to $1.725 million from $31,704 in the second quarter and ($561,243) in the first quarter. It attributes this improvement to the addition of Regal Capital and Gestion Courvie, and the “strong performance of all the planning firms”.
At end of the third quarter, BRM had more than $17 billion in assets under administration, including $178 million in Cartier mutual funds.
The firm says that operations integration is now its top priority, with technology investment heading the list. “Our goal is twofold: to enhance the capabilities of our financial advisors, making them even more competitive; and to make the distribution side of the business more efficient and more profitable.”
It also points to the importance of proprietary products in boosting its topline growth. “We are confident that as Cartier’s high-quality funds earn the confidence of BRM advisors and Cartier gathers assets, there will be a significant increase to BRM’s revenue stream.”
Finally, the firm is also proceeding to provide its reps with an option program that, “provides our most accomplished financial advisors with a direct interest in the growth of BRM, and puts them on common ground with management and shareholders.” In the third quarter it granted options to 300 advisors, and it plans to issue them another 100 advisors later this year.
Yesterday the firm submitted its option plan to the CDNX for approval. There are 18,626,430 shares reserved for issuance under the plan. Options can be granted for periods of up to six years at a price equal to BRM’s market price on the granting date.
-IE Staff