Accord Announces Fourth Quarter and Fiscal 2020 Results
Accord Financial Corp. (TSX – ACD) today released its financial results for the fourth quarter and year ended December 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 Dec. 31||Year Ended Dec. 31|
|Average funds employed (millions)||360||395||347||378|
|Net earnings (loss) attributable to shareholders (000’s)||1,384||(658)||417||6,444|
|Adjusted net earnings (loss) (000’s) (note)||2,095||(2,136)||2,032||4,939|
|Earnings (loss) per common share (basic and diluted)||0.16||(0.08)||0.05||0.76|
|Adjusted earnings (loss) per common share (basic and diluted)||0.24||(0.25)||0.24||0.58|
|Book value per share (December 31)||$10.50||$10.77|
“After several years of strategic change and top line growth, Accord’s profit was sideswiped by the economic downturn caused by the Covid-19 pandemic. Our financial strength allowed us to battle the enormous headwinds shoulder to shoulder with our clients – supporting many with innovative solutions and much-needed capital.” said President and CEO Simon Hitzig.
The Covid-19 induced economic turmoil slowed new business originations, which, combined with lower borrowings from many of the Company’s existing clients, caused average funds employed to decline to $347 million in 2020 from $378 million last year. Average yields also declined, reflecting lower interest rates generally in The United States and Canada. These factors combined to drive revenue down to $48,501,000 in 2020 from $56,175,000 in 2019.
As growth picked up in the fourth quarter, net earnings attributable to shareholders (“shareholders’ net earnings”) turned positive for the year, finishing 2020 at $417,000 compared with $6,444,000 in 2019. Lower revenue and an increased provision for losses were the main drivers of the decline in net earnings. Earnings Per Common Share (“EPS”) were $0.05 compared to $0.76 last year. Adjusted net earnings were $2,032,000 in 2020 compared to $4,939,000 in 2019. Adjusted EPS declined to $0.24 compared to $0.58 in the previous year. Book value per share was $10.50 at year-end.
After reaching a low point for the year in early summer, funds employed grew over the second half. Average funds employed grew from $327 million in the third quarter to $360 million in the fourth quarter, with revenue keeping pace with portfolio growth. Compared to the fourth quarter of 2019, however, revenue declined by 10% to $12,903,000 from $14,297,000.
Fourth quarter performance made progress towards recapturing the Company’s pre-Covid earnings momentum. Shareholders’ net earnings were $1,384,000 compared to a net loss of $658,000 in the fourth quarter last year. Net earnings improved mainly due to a reduced provision for losses. EPS was 16 cents compared to a Loss Per Common Share (“LPS”) of 8 cents last year. Adjusted net earnings were $2,095,000 in the fourth quarter compared to an adjusted net loss of $2,136,000 in the same period last year. Adjusted EPS was 24 cents compared to an adjusted LPS of 25 cents in last year’s fourth quarter.
Commenting further on 2020’s results, Mr. Hitzig stated: “The long round trip, from peak to trough, and back to our previous growth path, left us with little to show for our efforts. Given the extreme economic disruption, we take some solace in the fact that the Company finished the year with a small profit, extending our streak of annual profits to thirty-nine years. I’m proud of the support we provided to our clients, and confident we are positioned to deliver stronger results for our shareholders in 2021.”
About Accord Financial Corp.
Accord Financial is North America’s most dynamic commercial finance company providing fast, versatile financing solutions for companies in transition including factoring, inventory finance, equipment leasing, trade finance and film/media finance. By leveraging our unique combination of financial strength, deep experience and independent thinking, we craft winning financial solutions for small and medium-sized businesses, simply delivered, so our clients can thrive. For 43 years, Accord has helped businesses manage their cash flows and maximize financial opportunities.
For further information, please visit www.accordfinancial.com or contact:
Senior Vice President, Chief Financial Officer
Accord Financial Corp.
602 – 40 Eglinton Avenue East
Toronto, ON M4P 3A2
(416) 961-0304 Ext. 207
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 Dec. 31||Year Ended Dec. 31|
|Shareholders’ net earnings||1,384||(658)||417||6,444|
|Adjustments, net of tax|
|Business acquisition expenses||54||(1,222)||220||(1,381)|
|Adjusted net earnings||2,095||(2,136)||2,032||4,939|
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.