CALGARY, AB, March 10, 2022
/CNW/ - Crown Capital Partners Inc. ("Crown" or the
"Corporation") (TSX: CRWN) today announced its financial results
for the fourth quarter and year ended December 31, 2021. Crown's complete financial
statements and management's discussion and analysis are available
on SEDAR at www.sedar.com.
Effective July 13, 2021, in
connection with the previously announced transactions that included
a divestment of 87.5% of our 100% interest in our alternative
lending fund management business (Crown Private Credit Partners
Inc., or "CPCP"), the transfer of the management contracts for our
credit funds to CPCP, and a partial sale of our interest in Crown
Partners Fund (reducing our effective ownership to 28.0%), Crown
Partners Fund is no longer being recognized as a subsidiary and is
now recognized by Crown as an investment in associate using the
equity method. As a result, many of our asset, liability, revenue
and expense balances as at and for the three months and year ended
December 31, 2021 are not directly
comparable to equivalent balances for prior periods. These
transactions were consistent with management's plan to shift
towards a capital-light business model and achieve liquidity in our
lending portfolio.
2021 Financial & Operating Highlights
- Total revenue increased to $47.4
million, compared with $44.8
million in 2020, due mainly to significantly higher network
services revenue, which offsets reduced interest revenue.
- Network services revenue increased to $27.6 million in 2021 (58% of total revenue), up
from $12.1 million (27% of total
revenue) in 2020. This segment contributed net income before income
taxes of $4.2 million (2020 – net
loss before income taxes of $4.4
million), inclusive of depreciation and amortization expense
of $3.6 million (2020 – $5.5 million), with the year-over-year
improvement attributable to the acquisition of Galaxy in
September 2020 and organic
growth.
- Interest revenue declined to $13.2
million, compared with $27.7
million in 2020, reflecting the planned reduction in the
Company's lending portfolio and the above-mentioned deconsolidation
of Crown Partners Fund, formerly the primary source of total
interest revenue.
- Crown's financial results now include Crown's share of
earnings in Crown Partners Fund, which is comprised of its
proportionate share of the reported earnings of Crown Partners Fund
in respect of its limited partnership and general partnership
interests in that fund. For the period from July 13, 2021 to December
31, 2021, the share of earnings of Crown Partners Fund was
$4.7 million versus $nil prior to
July 13, 2021. For the full year
ended December 31, 2021, we
recognized aggregate income before income taxes of $9.3 million (2020 – $10.9
million) in relation to our investment in Crown Partners
Fund with the decrease in 2021 primarily the result of a decrease
in our effective ownership.
- Substantially improved profitability in 2021, with net income
of $2.0 million ($0.23 per basic share), compared with a net loss
and comprehensive loss of $13.4
million ($1.44 loss per basic
share) in 2020.
- Adjusted Funds from Operations1 of $12.7 million ($1.45 per basic share) in 2021, compared with
$13.1 million ($1.40 per basic share) in 2020.
- Through two Substantial Issuer Bids (SIBs) and its Normal
Course Issuer Bid, Crown returned approximately $13.8 million to shareholders during 2021 and
reduced total shares outstanding by 22%.
- Total equity at year-end decreased to $69.1 million, from $81.2
million at the end of 2020, mainly because of share
repurchases. Total equity per share increased to $9.74 per basic share from $8.96 per share at year-end 2020 as a result of
improved profitability and share repurchases.
- Significantly reduced Crown's exposure to alternative lending.
At year end, Crown had net assets of $47.1
million in Specialty Finance, compared with $89.0 million at year-end 2020.
- Subsequent to year end, Crown commenced its third SIB, pursuant
to which it purchased for cancellation 1,330,000 of its outstanding
common shares at a purchase price of $7.50 per share, reducing its outstanding shares
by a further 18.8%.
Management commentary: "We made steady progress in 2021
transforming Crown's operations and balance sheet by greatly
reducing our investment in the alternative lending business,
returning capital to shareholders and increasing operating earnings
in our other lines of business, which we believe is the best path
to long-term value creation," said Chris
Johnson, President and CEO of Crown. "Our Network Services
business, which represented 67% of fourth-quarter revenue,
continues to show strong growth in revenue and operating earnings,
more than offsetting the impact of lower interest revenue. Since
the beginning of 2021, our strategy and transactions – including
three SIBs – accelerated the return of almost $24 million of capital through the purchase of
over 3.3 million common shares, reducing shares outstanding by more
than 36%. The combination of these activities yielded
year-over-year gains in net income, earnings per share, and book
value per share – and they have positioned the company well for
growth as we build further scale in key operating segments
organically and through strategic acquisitions."
Q4 2021 Financial Highlights
- Continued growth of the Network Services revenue stream and
operating profit. Network Services revenue increased by 21% to
$7.0 million in Q4 2021 (67% of total
revenue for the quarter), up from $5.7
million in Q4 2020, the first full quarter for which each of
WireIE and Galaxy were subsidiaries of Crown. This segment
generated net income before income taxes of $0.9 million in Q4 2021, inclusive of
depreciation and amortization expenses totaling $0.9 million.
- Interest revenue for Q4 2021, which solely includes revenue
from Crown Power Fund, was $0.3
million, compared with $6.3
million in the prior year. The decrease primarily reflects
the deconsolidation of Crown Partners Fund.
- We recognized share of earnings in Crown Partners Fund
of $2.8 million (2020 - $nil),
compared with aggregate income before income taxes of $2.5 million recognized in Q4 2020 in relation to
our investment in Crown Partners Fund.
- Adjusted Funds from Operations1 were $2.5 million ($0.30
per basic share) in the quarter, compared with $3.0 million ($0.32
per basic share) in Q4 2020, with the aggregate impact of the
derecognition of Crown Partners Fund as a subsidiary, a reduction
in the balance of Crown Partners Fund's investments and a reduction
in Crown's percentage ownership of Crown Partners Fund offsetting
an increased contribution from the Network Services platform.
- Net income and comprehensive income of $0.2 million, compared with a net loss of
$(2.4) million in Q4 2020.
Q4 & FY2021 Financial Results Summary
Selected
Quarterly Information
|
|
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|
|
|
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Three Months
Ended
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Twelve Months
Ended
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FOR THE PERIODS ENDED
DEC. 31
(THOUSANDS, EXCEPT PER SHARE AND NUMBER OF COMMON
SHARES)
|
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2021
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2020
|
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2021
|
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2020
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Revenue:
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|
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|
|
|
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Network services
revenue
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$
6,969
|
|
$
5,739
|
|
$
27,643
|
|
$
12,116
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Interest
revenue
|
|
298
|
|
6,276
|
|
13,248
|
|
27,711
|
Share of earnings of
Crown Partners Fund
|
2,769
|
|
-
|
|
4,728
|
|
-
|
Fees and other
income
|
|
386
|
|
391
|
|
2,013
|
|
1,811
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Net gain (loss) on
investments
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|
-
|
|
152
|
|
(236)
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|
3,186
|
Total
revenue
|
|
10,422
|
|
12,558
|
|
47,396
|
|
44,824
|
Net income (loss)
attributable to Shareholders
|
|
200
|
|
(2,378)
|
|
2,010
|
|
(13,404)
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Adjusted Funds from
Operations1
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|
2,515
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|
2,955
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|
12,666
|
|
13,061
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Total
assets
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140,115
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325,823
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140,115
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325,823
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Total
equity
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69,075
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81,174
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69,075
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81,174
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Per share:
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- Net income (loss)
to Shareholders - basic
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$
0.02
|
|
$
(0.26)
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$
0.23
|
|
$
(1.44)
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- Net income (loss)
to Shareholders - diluted
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0.02
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(0.26)
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0.23
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(1.44)
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- Adjusted Funds from
Operations per share - basic1
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0.30
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0.32
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1.45
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|
1.40
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- Total equity per
share - basic
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9.74
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8.96
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9.74
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8.96
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Number of common
shares:
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|
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|
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- Outstanding at end
of period
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7,093,102
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9,056,468
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7,093,102
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9,056,468
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- Weighted average
outstanding - basic
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8,296,122
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9,116,395
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8,735,781
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9,309,772
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- Weighted average
outstanding - diluted
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8,296,122
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9,175,272
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8,735,781
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9,368,046
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Reconciliation
of Income (Loss) before Income Taxes to Adjusted Funds from
Operations
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Year
Ended
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FOR THE YEARS ENDED
DEC. 31
(THOUSANDS)
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2021
|
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2020
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Income (loss)
before income taxes attributable to Shareholders
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|
$
|
2,381
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$
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(16,245)
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Adjustments for
amounts attributable to Shareholders in relation to:
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Finance
costs
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3,565
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4,979
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Depreciation expense,
net of lease payments on right-of-use assets
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2,362
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|
4,158
|
Subtotal - Earnings
attributable to Shareholders before income, finance
costs
|
|
|
|
|
|
and depreciation
expense, net of lease payments on right-of-use assets
|
8,308
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|
(7,108)
|
Adjustments for
amounts attributable to Shareholders in relation to:
|
|
|
|
|
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Non-cash share-based
compensation
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(420)
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|
701
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Asset impairment
expense
|
|
|
2,957
|
|
2,455
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Gain on
acquisition
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(73)
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-
|
Share of earnings of
Crown Partners Fund attributable to
|
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limited partnership
interest
|
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(3,170)
|
|
-
|
Income distributions
received from Crown Partners Fund
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|
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2,472
|
|
-
|
Net unrealized
investment losses
|
|
|
1,299
|
|
(104)
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Provision for credit
losses
|
|
|
1,171
|
|
15,571
|
Finance fees received
in investments carried at amortized cost but not
included
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|
|
|
|
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in fees and other
income
|
|
|
-
|
|
956
|
Amortization
component of interest revenue on loans carried at amortized
cost
|
|
|
(173)
|
|
(622)
|
Network services fees
received on customer contracts but not included in
contractual
|
|
|
|
|
|
network services
revenue
|
|
|
886
|
|
1,411
|
Amortization
component of network services revenue
|
|
|
(591)
|
|
(199)
|
Adjusted Funds
from Operations1
|
|
$
|
12,666
|
|
$
|
13,061
|
1
Adjusted Funds from Operations is not a measure of financial
performance (nor does it have a standardized meaning) under IFRS.
In evaluating this measure, investors should consider that the
methodology applied in calculating these measures might differ
among companies and analysts. The Corporation has provided a
reconciliation of income (loss) before income taxes to Adjusted
Funds from Operations in this news release. We believe that
Adjusted Funds from Operations is a useful supplemental measure in
the context of Crown's specialty finance and network services focus
to assist investors in assessing the cash anticipated to be
generated by Crown's business, including cash received in relation
to its various revenue streams, that is attributable to
Shareholders. Adjusted Funds from Operations should not be
considered as the sole measure of Crown's performance and should
not be considered in isolation from, or as a substitute for,
analysis of the Corporation's financial
statements.
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Conference Call & Webcast
Crown will host a conference call and webcast to discuss its Q4
2021 financial results at 10:00 a.m.
ET on March 11, 2022. The call
will be hosted by Chris Johnson,
President & CEO, and Michael
Overvelde, CFO. To participate in the call, dial (647)
794-4605 or (888) 204-4368 using the conference ID 3439134. The
webcast can be accessed at www.crowncapital.ca under Investor
Relations. Listeners should access the webcast or call 10-15
minutes before the start time to ensure they are connected.
About Crown Capital Partners (TSX:CRWN)
Founded in 2000 within Crown Life Insurance Company, Crown
Capital Partners is a leading specialty finance company currently
operating mainly in the telecommunications infrastructure and
distributed power markets. We focus on alternative asset classes
that require a specialized capital partner, and we aim to create
long-term value by acting as both a manager of investment funds for
institutional partners and as a direct investor in operating
businesses serving these markets. For additional information,
please visit crowncapital.ca.
FORWARD-LOOKING STATEMENTS
This news release
contains certain "forward looking statements" and certain "forward
looking information" as defined under applicable Canadian and U.S.
securities laws. Forward-looking statements can generally be
identified by the use of forward-looking terminology such as "may",
"will", "expect", "intend", "estimate", "anticipate",
"believe", "continue", "plans" or similar terminology.
Forward-looking statements in this news release include, but are
not limited to, statements, management's beliefs, expectations or
intentions regarding the alternative financial market, the network
services market and the general economy, transaction pipeline,
Crown's business plans and strategy, including anticipated
investment dispositions and capital deployments and the timing
thereof, and Crown's future earnings. Forward-looking statements
are based on forecasts of future results, estimates of amounts not
yet determinable and assumptions that while believed by management
to be reasonable, are inherently subject to significant business,
economic and competitive uncertainties and contingencies.
Forward-looking statements are subject to various risks and
uncertainties concerning the specific factors identified in the
Crown's periodic filings with Canadian securities regulators.
See Crown's most recent annual
information form for a detailed discussion of the risk factors
affecting Crown. In addition, Crown's dividend policy will be
reviewed from time to time in the context of the Corporation's
earnings, financial requirements for its operations, and other
relevant factors and the declaration of a dividend will always be
at the discretion of the board of directors of the Corporation.
Crown undertakes no obligation to update forward-looking
information except as required by applicable law. Such
forward-looking information represents management's best judgment
based on information currently available. No forward-looking
statement can be guaranteed and actual future results may vary
materially. Accordingly, readers are advised not to place undue
reliance on forward-looking statements or information.
SOURCE Crown Capital Partners Inc.