All amounts in Canadian dollars unless otherwise indicated.
Highlights
- The pipeline of potential borrowers at June 30, 2018 was $1.3
billion, and currently stands at $1.4
billion with three signed back term sheets totaling
approximately $260 million.
- Subsequent to June 30, 2018, the
Company originated two new loans with commitments totaling
$163 million and a gross loans
receivable balance as of August 13,
2018 of $139 million before
derecognition, or $37 million after
derecognition. In addition, the Company received full
repayment of one loan, with commitments totaling $26.3 million and a gross loans receivable and
net loans receivable balance as of August
13, 2018 of $11.1 million
before derecognition, or $2.8 million
after derecognition.
- Total revenue of $89.4 million in
the second quarter of 2018 increased by $62.6 million from the same period in 2017,
primarily due to the consolidation of three additional businesses,
partially offset by lower interest and fees in the lending
business.
- Provision for loan losses for Q2-2018 was $21.3 million primarily related to a $12.7 million provision on one specific loan
concentrated in the energy sector as a result of a delay in
expected future cashflows with the remainder related to
foreign exchange. Provision for loan losses for the current
year-to-date period of $36.3 million, the majority of which was
non-cash, with $14.4 million related
to foreign exchange, was recorded in the statements of income for
the current year to- date period.
- During Q2-2018, there were indications of impairment at one of
the Company's businesses (Otto Industries North America Inc.)
that reflected declines in forecasted performance, notwithstanding
positive Q2-2018 results, due to market conditions and lower
than expected economic performance of certain businesses. As
a result, $15.5 million was
recorded in the statements of comprehensive income as an
impairment of goodwill for the period.
- In Q2-2018 Callidus recognized a recovery in the statements of
comprehensive income of $7.4 million under the Catalyst
guarantee due to the recognition of specific loan loss provisions
and other asset impairments in the current quarter. During the
current year-to-date period, the Company recognized a
recovery in the statements of comprehensive income of
$37.3 million under the Catalyst
guarantee due to the recognition of specific loan loss
provisions and other asset impairments in the current year and
confirmation of coverage of the Catalyst guarantee related to
a specific loan.
- Net loss of $40.8 million in
Q2-2018 compared to a loss of $25.8
million in the prior year period.
- Loss of $0.75 per share (diluted)
for the second quarter of 2018 compared to a loss of $0.51 in the same period in 2017.
- Net loss of $47.8 million for
the current year-to-date period compared to a loss of
$29.3 million for the first six
months of 2017.
- Loss of $0.90 per share (diluted)
for the current year-to-date period compared to a loss of
$0.58 for the first six months of
2017.
The Company has discontinued disclosure of unrecognized yield
enhancements in light of comments expressed by the Ontario
Securities Commission. The Ontario Securities Commission has
advised the Company that it will continue to name the Company on
its Refilings and Errors List for the next following three
years.
TORONTO, Aug. 13, 2018 /CNW/ - Callidus Capital
Corporation (TSX:CBL) (the "Company" or "Callidus") today announced
its unaudited financial and operating results for the quarter ended
June 30, 2018.
|
|
|
|
For Three Months
Ended
|
Year to
date
|
|
($ 000s unless
otherwise indicated)
|
Jun 30,
2018
|
Mar 31,
2018
|
Jun 30,
2017
|
Jun 30,
2018
|
Jun 30,
2017
|
|
Net loans receivable
(before
derecognition), end
of period (1)
|
244,688
|
244,709
|
472,324
|
244,688
|
472,324
|
|
Gross loans
receivable (before
derecognition), end
of period (1)
|
1,131,482
|
1,106,140
|
1,028,423
|
1,131,482
|
1,028,423
|
|
Average loan
portfolio outstanding (1)
|
1,119,327
|
1,080,836
|
1,029,803
|
1,100,081
|
1,123,948
|
|
Gross yield (%)
(1)
|
6.6%
|
6.3%
|
11.2%
|
6.4%
|
16.3%
|
|
Total
revenues(2)
|
89,437
|
56,248
|
26,884
|
145,685
|
58,463
|
|
Net interest margin
(%) (1)
|
-0.5%
|
-0.4%
|
3.5%
|
-0.9%
|
5.7%
|
|
Net (loss)
income
|
(40,825)
|
(7,023)
|
(25,801)
|
(47,848)
|
(29,318)
|
|
Earnings per share
(diluted)
|
($0.75)
|
($0.13)
|
($0.51)
|
($0.90)
|
($0.58)
|
|
Recognized yield
enhancements(3)
|
-
|
-
|
-
|
-
|
5,800
|
|
Leverage ratio
(%)(1)
|
40.5%
|
38.2%
|
37.3%
|
40.5%
|
37.3%
|
|
2018 amounts are
under IFRS 9 and 2017 amounts are under IAS 39.
|
|
|
|
(1)
|
Refer to
"Forward-Looking and Non-IFRS Measures" in this press
release. These financial measures are not recognized measures
under IFRS and do not have a standardized meaning prescribed by
IFRS. Therefore, they may not be comparable to similar
measures used by other issuers.
|
|
(2)
|
Certain comparative
figures have been reclassified to conform with current period
presentation.
|
|
(3)
|
Recognized yield
enhancements are recorded in the statements of income in total
revenues (YTD Q2-2018 – nil; YTD Q2-2017 - $7.0 million) and in
loss on derivative assets associated with loans (YTD Q2-2018 – nil;
YTD Q2-2017 - loss of $1.2 million).
|
|
(4)
|
Income statement data
is after derecognition, unless otherwise indicated.
|
Business Update (As at August 13,
2018)
Loan Portfolio – The Company's pipeline at June 30, 2018 was $1.3
billion, and currently stands at $1.4
billion with three signed back term sheets totaling
approximately $260 million.
As noted earlier in this release, subsequent to the end of the
second quarter, the Company originated two new loans with
commitments totaling $163 million and
a gross loans receivable balance as of August 13, 2018 of $139
million before derecognition, or $37
million after derecognition. In addition, the Company
received full repayment of one loan, with commitments totaling
$26.3 million and a gross loans
receivable and net loans receivable balance as of August 13, 2018 of $11.1
million before derecognition, or $2.8
million after derecognition.
As previously disclosed, Callidus undertakes extensive due
diligence before closing on a loan transaction and there can be no
assurance that the results of the due diligence will be
satisfactory to Callidus. The Company continues to maintain a
cautious approach in reviewing potential prospects due to increased
sectoral liquidity, as it has observed a rising number of deals
being signed by competitors at lower yields as credit dollars
continue to pour back into the market.
As at June 30, 2018, net loans
receivable have remained flat from December
31, 2017 as increased funding was partially offset by
higher provisions for loan losses and the consolidation of Midwest
Asphalt Corporation in the first quarter of 2018 as this loan
was removed from loans receivable and the company was consolidated
in the financial statements.
Acquired Subsidiary Companies – A total of six loans have
been removed from loans receivable and consolidated in the
financial statements in order to protect collateral in each of
those loans.
Total non-interest revenues for these acquired subsidiary
companies: (i) for the second quarter of 2018 was $90.8 million, an increase of $72.7 million or 402% from the same quarter last
year and (ii) for the current year-to-date period was $148.1 million, an increase of $121.5 million or 457% from the same year-to-date
period last year, primarily due to the consolidation and
recognition, for accounting purposes, of non-interest revenues of
the injection molding, forest products, and paving businesses since
June 2017, November 2017 and January
2018 respectively.
Total gross margin for these acquired subsidiary companies for
the second quarter of 2018 was 15.6%, an increase of 1.5 percentage
points from 14.1% in the same quarter last year due primarily to:
(i) the consolidation of the forest products business in
November 2017, for which gross
margins were 24% in the second quarter of 2018 and (ii) 2
percentage point increase in gross margin for the gaming business
to 58% in the second quarter of 2018. Gross margin for the current
year-to-date period was 12.6%, a decrease of 2.9 percentage points
from 15.5% in the same year-to-date period last year due primarily
to: (i) the aluminum castings and paving businesses experiencing
more negative gross margins in the period and (ii) 2 percentage
point decrease in gross margin for the injection molding business
to 4% in the current year-to-date period.
Callidus continues to work with these subsidiaries to implement
strategic decisions and execute new business plans as part of their
respective turnarounds and is pleased with the progress achieved to
date at several of them.
Provision for Loan Losses – Provision for loan losses of
$21.3 million was recorded in the
statements of income for the second quarter of 2018.
This primarily related to a $12.7
million provision on one specific loan concentrated in
the energy sector as a result of a delay in expected future
cashflows with the remainder related to foreign exchange.
Provision for loan losses of $36.3 million was recorded in the statements
of income for the current year to- date period. Of this total
year-to-date provision, approximately $14.4
million is related to foreign exchange with the
remainder primarily attributed to a $14.3
million provision on one specific loan concentrated in
the energy sector as a result of a delay in future expected
cashflows.
During the second quarter of 2018 Callidus recognized a recovery
in the statements of comprehensive income of $7.4 million
under the Catalyst guarantee due to the recognition of specific
loan loss provisions and other asset impairments in the
current quarter. During the current year-to-date period, the
Company recognized a recovery in the statements of
comprehensive income of $37.3 million
under the Catalyst guarantee due to the recognition of
specific loan loss provisions, other asset impairments and
confirmation of coverage of the Catalyst guarantee related to
a specific loan.
Normal Course Issuer Bid – In April 2018, the Toronto Stock Exchange accepted
Callidus' notice of intention to undertake a normal course issuer
bid ("NCIB"). Under the terms of the NCIB, Callidus may acquire up
to 2,648,529 of its common shares, representing 5% of the
52,970,597 common shares comprising Callidus' total issued and
outstanding common shares as of April 2, 2018, and will be
purchased only when and if the Company considers it advisable. The
NCIB will terminate on the earlier of April 17, 2019 or
on the date on which the maximum number of common shares that can
be acquired pursuant to the NCIB have been purchased.
The Company's directors and management believe that from time to
time the market price of Callidus' common shares does not reflect
the underlying value of the common shares and that the purchase of
common shares for cancellation at such times is a prudent corporate
measure that will both increase the proportionate interest in the
Company of, and be advantageous to, all of the Company's remaining
shareholders.
No purchases have been made to date under the current Normal
Course Issuer Bid. As the Company continues to pursue a
potential privatization transaction, it is maintaining a trading
blackout and purchases under the Normal Course Issuer Bid may only
be effected when that blackout ceases.
Liquidity and Changes to Credit Facility – The Company's
primary sources of short-term liquidity are cash and cash
equivalents and undrawn credit facilities. Assuming a participation
rate for Catalyst Fund Limited Partnership V of approximately 75%,
total liquidity as at June 30, 2018
would be able to support in excess of $345
million of new loans. In addition, as business acquisitions
are rehabilitated, we will pursue opportunities to monetize these
investments where and when we believe, capital may be deployed in
opportunities that generate superior returns. Timing of these
divestitures is uncertain and will be assessed on a case by case
basis, taking into account performance of the investment and the
macro-economic conditions impacting the sector of the
investment.
Privatization Process – The Company continues to pursue a
privatization and has no material facts or changes to report.
Strategy for restoring and building shareholder value -
Callidus reaffirmed its previously announced six strategies for
restoring and building shareholder value, the first of which is
prudently growing the loan portfolio, which management believes it
is moving forward with, as indicated in this press release. The
other strategies the Company continues to pursue and remains
committed to are: actively managing the loan portfolio to minimize
realized losses and with a goal of maximizing recovery of the loan
loss provisions recorded to date; maximizing the cash-flow and
value of businesses consolidated; prudently increasing leverage,
including seeking external sources of financing at the subsidiary
level; enhancing the management team as appropriate; and
considering other transactions that could support and / or benefit
the Corporation.
IFRS and non-IFRS Measures - Management uses both IFRS
and non-IFRS measures to monitor and assess the operating
performance of the Company's operations. Throughout this
press release, Management uses the following terms and ratios which
do not have a standardized meaning under IFRS and are unlikely to
be comparable to similar measures presented by other
organizations:
Average loan portfolio outstanding is calculated before
derecognition for the annual periods using daily loan balances
outstanding. The average loan portfolio outstanding grosses
up the loans receivable for (i) businesses acquired, (ii) the
allowance for loan losses, and (iii) discounted facilities.
This information is presented to enable readers to see, at a
glance, trends in the size of the loan portfolio.
Gross yield is defined as total revenues before
derecognition divided by the average net loan portfolio outstanding
after adjusting for loans classified as businesses acquired. While
gross yield is sensitive to non-recurring fees and yield
enhancements earned (for example, as a result of early repayment),
the Company has included this information as it believes the
information to be instructive given the frequency of receipt of
non-recurring fees and enables readers to see, at a glance, trends
in the yield of the loan portfolio
Gross loans receivable is defined as the sum of (i) the
aggregate amount of loans receivable on the relevant date, (ii) the
loan loss allowance on such date, (iii) the book value of
businesses acquired as they appear on the balance sheet, and (iv)
discounts on loan acquisitions.
|
|
|
|
|
After
Derecognition
|
Before
Derecognition
|
After
Derecognition
|
Before
Derecognition
|
|
($ 000s)
|
June 30,
2018
|
June 30,
2018
|
December 31,
2017
|
December 31,
2017
|
|
Loan
facilities
|
$
|
1,162,720
|
$
|
1,214,466
|
$
|
1,096,888
|
$
|
1,162,483
|
|
Gross loans
receivable
|
1,108,383
|
1,131,482
|
1,022,193
|
1,046,983
|
|
Less: Discounted
facilities
|
(7,575)
|
(7,575)
|
(7,575)
|
(7,575)
|
|
Less: Allowance for
loan losses
|
(339,946)
|
(342,294)
|
(358,217)
|
(359,079)
|
|
Less: Cumulative
change in fair value of financial
instruments(1)
|
(47,507)
|
(47,507)
|
-
|
-
|
|
Less: Impairment on
goodwill and businesses acquired(2)
|
(86,584)
|
(86,584)
|
(57,421)
|
(57,421)
|
|
Less: Businesses
acquired(2)
|
(402,835)
|
(402,834)
|
(375,602)
|
(375,602)
|
|
Net loans
receivable
|
$
|
223,936
|
$
|
244,688
|
$
|
223,378
|
$
|
247,306
|
|
2018 amounts are
under IFRS 9 and 2017 amounts are under IAS 39.
|
|
|
|
(1)
|
Certain loans
receivable have been reclassified from loans receivables at
amortised cost under IAS 39 to loans receivables measured at
FVTPL under IFRS 9.
|
|
|
|
(2)
|
Businesses acquired
are presented in the statements of financial position by their
respective assets and liabilities.
|
Return on equity ("ROE") is defined as net income after
derecognition divided by quarterly average shareholders'
equity. Return on equity is a profitability measure that
presents the annualized net income as a percentage of the capital
deployed to earn the income.
Yield enhancement is defined as a component of a lending
arrangement that Callidus negotiates in addition to the original
loan agreement including additional fees, profit participation
arrangements and equity and equity like instruments. Should a value
be determined for the enhancement and depending on its contractual
nature, the related amount may be recognized in the statements of
comprehensive income as a part of interest income, fee income or as
a financial instrument at fair value through profit or loss
("recognized yield enhancements") or may be unrecognized, which
includes yield enhancements relating to controlling interests,
depending on the appropriate accounting treatment under IFRS. The
Company has discontinued disclosure of unrecognized yield
enhancements in light of comments expressed by the Ontario
Securities Commission.
Total gross margin is defined as total non-interest
revenues less cost of total cost of sales, divided by total
noninterest revenues, expressed as a percentage.
Leverage ratio is defined as total debt (net of
unrestricted cash and cash equivalents) divided by gross loans
receivable before derecognition. Total debt consists of the
senior debt, revolving credit facilities, collateralized loan
obligation and subordinated bridge facility.
The non-IFRS measures should not be considered as the sole
measure of the Company's performance and should not be considered
in isolation from, or as a substitute for, analysis of the
Company's financial statements.
About Callidus Capital Corporation
Established in
2003, Callidus Capital Corporation is a Canadian company
that specializes in innovative and creative financing solutions for
companies that are unable to obtain adequate financing from
conventional lending institutions. Unlike conventional lending
institutions who demand a long list of covenants and make credit
decisions based on cash flow and projections, Callidus credit
facilities have few, if any, covenants and are based on the value
of the borrower's assets, its enterprise value and borrowing needs.
Further information is available on our
website, www.calliduscapital.ca.
Conference Call
Callidus will host a conference call
to discuss the second quarter 2018 results on Tuesday, August
14, 2018 at 1:00 p.m. Eastern Time. The dial in number
for the call is (647) 427-7450 or (888) 231-8191 (Conference
ID: 2592555). A taped replay of the call will be available
until August 21, 2018 at (416)
849-0833 or (855) 859-2056.
SOURCE Callidus Capital Corporation