Jovian’s aggressive expansion strategy

(August 5, 2005) Jovian Capital has its sights set on the lucrative Ontario and British Columbia markets as it continues towards its goal of becoming a true national player.

Philip Armstrong, CEO of the two-year-old holding company, which maintains head offices in both Winnipeg and Toronto, says considering the size of the markets, an expanded presence in the two provinces is a must. He says much of the Jovian growth will come from expanding the base of its biggest subsidiary, Rice Financial.

The mid-tier financial services company has a “great name” on the Prairies — it was founded nearly 40 years ago by Tom Rice in Brandon, MB — but Armstrong says the time is right to raise its profile across the rest of the country.

“Rice has great infrastructure and it has spent a lot of time over the years investing in technology. That will allow us to grow the company in a very efficient manner,” he says. “B.C. is obviously a very good market. More and more people are retiring there than in the rest of Canada. We would also like to expand to Quebec at some time.”

Armstrong hasn’t set a target for growing from its nearly 200 advisors and $3.7 billion of assets under administration but says he’s in search of quality over quantity. “We’re going to look for strategic alliances with advisors. We may also look to open offices ourselves,” he says, noting the firm’s compensation levels are “mid-range.”

Industry analyst Dan Hallett, president of Windsor-based Dan Hallett & Associates, says he likes the poaching strategy because it’s less expensive than making acquisitions.

“But [Jovian] is going to have some competition. The bigger bank-owned dealers have been known to write signing bonuses to bigger producers,” he notes.

Armstrong says Jovian is also looking to grow another one of its retail arms, MGI Securities, which recently changed its name from McFarlane Gordon. He notes there aren’t the same geographic ambitions as with Rice — MGI already has offices in Calgary, Montreal, London and Winnipeg — and $850 million in assets under administration.

“The idea is to grow the business around those locations,” he says, noting two years ago, MGI had just $150 million in assets.

Jovian’s strategy has been to acquire different companies in different areas of the industry but allow them to maintain their identities and brands while consolidating the back office, technology and financing functions.

Some of the companies under its umbrella include alternative manager Pescara Partners, high-net-worth manufacturer Accumulus Management and fee-only financial planner T.E. Financial Consultants.

Armstrong is optimistic the decision by Robin Cornwell, a financial services analyst at Catalyst Financial Services Equity Research, to cover Jovian will help with its growth goals as well as making the jump from the TSX Venture Exchange to the S&P/TSX Composite Index.

Toronto-based Cornwell predicts Jovian’s total assets of $8.1 billion will grow to $13 billion by the end of 2007.

“I think Jovian will be quite a significant player. They are in a position where they can consolidate in several different areas of the financial services industry. They’re building in an area that is very attractive,” he says.

Judging from recent financials, Jovian appears to be on the right track. It reported a profit of $300,000 for its fourth quarter ended March 31, down 25 per cent from the same three month period a year ago, but its 12-month profit rang in at $500,000, up from a loss of $500,000 a year ago.

Jovian shares recently topped $1 and have been regularly hitting 52-week highs since mid-June.

Geoff Kirbyson is a freelance writer based in Winnipeg

(08/05/05)