Accord Announces First Quarter 2020 Results
Accord Financial Corp. (TSX – ACD) today released its financial results for the quarter ended March 31, 2020. The financial figures presented in this release are reported in Canadian dollars and have been prepared in accordance with International Financial Reporting Standards.
Summary of Financial Results
|Three Months Ended March 31|
|Average funds employed (millions)||362||347|
|Net (loss) earnings attributable to shareholders (000’s)||(5,876)||1,643|
|Adjusted net (loss) earnings (000’s) (note)||(5,414)||1,816|
|(Loss) earnings per common share (basic and diluted)||(0.69)||0.19|
|Adjusted (loss) earnings per common share (basic and diluted)||(0.63)||0.22|
|Book value per share (March 31)||$ 10.27||$ 10.65|
Net loss attributable to shareholders (“shareholders’ net loss”) was $5,876,000 in the first quarter of 2020 compared to the shareholders’ net earnings of $1,643,000 last year. Shareholders’ net loss primarily resulted from an $8.8 million provision for losses due to the economic impact of COVID-19 on the Company’s portfolios, as well as a $897,000 impairment charge against assets held for sale. The provision for credit and loan losses in the current quarter comprised a $4.1 millioncharge for write-offs of specific accounts and a $4.7 million increase in the Company’s allowances for losses. Revenue declined by 5% to $12,015,000 in the first quarter compared to $12,588,000 last year as a result of declining yields, mainly due to lower Canadian and U.S. prime rates of interest, which impact interest earned on the Company’s floating rate loans to clients, as well as a number of non-earning accounts.
Loss per Common Share (“LPS”) was 69 cents compared to Earnings per Common Share (“EPS”) of 19 cents in the first quarter of 2019. Adjusted net loss was $5,414,000 compared to adjusted net earnings of $1,816,000 in the first quarter of 2019. Adjusted LPS was 63 cents compared to adjusted EPS of 22 cents in last year’s first quarter. Average funds employed were 4% higher at $362 million this year compared to $347 million last year. At March 31, 2020, the Company’s portfolio represented a cross-section of North America’s most dynamic industries. With hundreds of small and medium-sized clients representing almost every industry sector, its loan portfolio by funds employed is broadly diversified as follows:
- • By geography: 59% US, 41% Canada
- • By product: 51% asset-based lending, 42% equipment finance, 7% media finance
- • By industry: widely diversified portfolio, with manufacturing the highest industry sector at 25%
Commenting on the first quarter’s results, Mr. Simon Hitzig, CEO, noted: “We entered 2020 firing on all cylinders, and were looking forward to accelerating Accord’s growth trajectory. Then, as the world knows, the United States and Canadachose to suspend economic activity in the battle to tame Covid-19. We’ve been through many economic cycles, but none that descended so quickly and completely. Accord has never traded credit quality for growth, and so we entered the downturn with a strong portfolio. As you would expect, we combed through the portfolio, analyzing the pandemic’s operational and financial impact on each borrower, their customers, suppliers and the collateral we’ve funded against and set up the provisions and allowances we felt were necessary.” Mr. Hitzig further added “We know from experience that an economic dislocation creates tremendous growth opportunities in commercial finance. These are the kinds of markets in which we earn our stripes.”
At a recent meeting of the Company’s Board of Directors, a quarterly dividend of $0.05 per common share was declared, payable June 1, 2020 to shareholders of record at the close of business May 15, 2020.
About Accord Financial Corp.
Accord Financial Corp. is a leading North American finance company providing distinctive working capital solutions to companies from coast-to-coast. Accord’s flexible finance programs cover the full spectrum of asset-based lending, from factoring and inventory finance, to equipment leasing and trade finance, to film and media finance. For 42 years, Accord has helped businesses manage their cash flows and maximize financial opportunities.
Note: Non-IFRS measures
The Company’s financial statements have been prepared in accordance with IFRS. The Company uses a number of other financial measures to monitor its performance and believes that these measures may be useful to investors in evaluating the Company’s operating performance and financial position. These measures may not have standardized meanings or computations as prescribed by IFRS that would ensure consistency between companies using these measures and are, therefore, considered to be non-IFRS measures. The non-IFRS measures presented in this press release are as follows:
1) Adjusted net earnings and adjusted EPS. The Company derives these measures from amounts presented in its IFRS prepared financial statements. Adjusted net earnings comprise shareholders’ net earnings before stock-based compensation, business acquisition expenses (transaction and integration costs and amortization of intangible assets) and restructuring expenses. Adjusted EPS (basic and diluted) is adjusted net earnings divided by the weighted average number of common shares outstanding (basic and diluted) in the period. Management believes adjusted net earnings is a more appropriate measure of operating performance as it excludes items which do not relate to ongoing operating activities. The following table provides a reconciliation of the Company’s net earnings to adjusted net earnings:
|Three Months Ended March 31|
|Shareholders’ net (loss) earnings||(5,876)||1,643|
|Adjustments, net of tax:|
|Business acquisition expenses||55||131|
|Adjusted net (loss) earnings||(5,414)||1,816|
2) Book value per share – book value is shareholders’ equity and is the same as the net asset value (calculated as total assets minus total liabilities) of the Company less non-controlling interests. Book value per share is the book value divided by the number of common shares outstanding as of a particular date.
3) Funds employed are the Company’s finance receivables and loans, an IFRS measure. Average funds employed are the average finance receivables and loans calculated over a particular period.