Accord Announces Second Quarter Financial Results and Approval of Debenture Amendments
Accord Financial Corp. (“Accord” or the “Company”) (TSX – ACD) today released its financial results for the second quarter ended June 30, 2023. A series of amendments to its 2018 convertible debentures were also approved at a special meeting of debenture holders this morning. The financial figures presented in this release are reported in Canadian dollars and have been prepared in accordance with International Financial Reporting Standards.
Second Quarter Financial Results
| Three Months Ended June 30 | ||
|---|---|---|
| 2023 | 2022 | |
| $ | $ | |
| Finance Receivables and Loans (June 30) (millions) | 479 | 453 |
| Revenue (000’s) | 17,933 | 16.491 |
| Net earnings (loss) attributable to shareholders (000’s) | -263 | 121 |
| Adjusted net earnings (loss) (000’s) (note) | -166 | 170 |
| Earnings (loss) per common share (basic and diluted) | -0.03 | 0.01 |
| Adjusted earnings (loss) per common share (basic and diluted) | -0.02 | 0.02 |
| Book value per share (June 30) | $11.79 | $11.78 |
Commenting on the financial results, the Company’s President and CEO, Mr. Simon Hitzig, stated: “After more than a year of navigating tough headwinds, reflected in a flat or slightly declining loan portfolio most quarters, Accord’s portfolio turned the corner in the second quarter.” The Company’s finance receivables and loans grew to $479.3 million at June 30, 2023, up 5.7% year-over-year. “As anticipated in this economic environment, new business activity across all our operating companies is building,” added Hitzig.
Supported by generally higher yields, revenue rose slightly year-over-year to $17.9 million in the second quarter and grew to $36.4 million for the six months to June 30, 2023, up 11.4% over the same period last year. However, rising interest costs, and challenges passing through interest rate costs in certain segments, contributed to a net loss attributable to shareholders of $263,000. Year-to-date net earnings attributable to shareholders were $1.8 million, down from $3.3 million in the same period last year. The second quarter loss per share of 3 cents brought year-to-date earnings per share to 21 cents, compared to 38 cents in the first six months of 2022. Book value per common share held steady at $11.79, compared to $11.78 at June 30, 2022 and $11.80 at the start of the year.
Mr. Hitzig noted, “It’s been a long journey, but the tide is turning. The major banks are clearly starting to restrict their commercial lending appetite, creating a cyclical opportunity to leverage Accord’s expertise, and reliance on strong collateral, to finance companies that may no longer meet the banks’ criteria. We are seeing stronger deal flow in all our operating companies, in many cases originating with the banks.”
Adding to the organic growth, on July 1st Accord launched its latest program with Export Development Canada (“EDC”), building on its successful risk-sharing partnership, unparalleled in the non-bank small business lending segment. The Accord|EDC Trade Expansion Lending Program (“TELP”) provides financing to companies throughout the export supply chain. EDC’s 75% loan loss guarantee allows Accord to offer faster, simpler approvals, supporting a wider range of SMEs. Since 2021 Accord has lent $250 million to more than 1,500 Canadian small businesses, supported by similar EDC programs now replaced by TELP.
Approval of the Debenture Amendments
The Company also announced that at a special meeting of the holders (the “Debentureholders”) of its 7% convertible unsecured subordinated debentures issued on December 18, 2018 and due December 31, 2023 (the “Debentures”), Debentureholders approved an extraordinary resolution amending the terms of the Debentures (the “Amendments”) as follows:
- Increasing the interest rate on the Debentures from 7% to 10%, effective as of January 2, 2024;
- Extending the maturity date of the Debentures from December 31, 2023 to January 31, 2026;
- Removing the conversion right of the Debentureholders;
- Removing the Company’s right to repay the principal amount of the Debentures in common shares of the Company on the new maturity date or any redemption date; and
- Providing that the Debentures are not redeemable prior to February 1, 2024, except in the event of a change of control.
Full details of the Amendments are set out in the Company’s management information circular dated June 30, 2023 (the “Circular”), available under the Corporation’s profile on SEDAR+ at www.sedarplus.ca, and will be incorporated into a supplemental trust indenture as of August 15, 2023.
Debenture holders owning 80.28% of the outstanding Debentures voted as follows:
| Votes in Favour | % in Favour |
|---|---|
| 16,338 ($16,338,000 of Debentures) | 98.55% |
| Votes Against | % Against |
|---|---|
| 240 ($240,000 of Debentures) | 1.45% |
The Toronto Stock Exchange (the “TSX”) has conditionally approved the Amendments, however, they remain subject to the final approval of the TSX. Any Debentureholder that voted for the Amendments and did not withdraw a valid form of proxy or voting instruction form voting in favor of the Amendments on or prior to August 8, 2023 will receive a cash consent fee of $20 per $1,000 principal amount of Debentures held by the Debentureholder as of June 26, 2023 in accordance with the requirements set out in the Circular, provided that the Amendments are validly approved by the TSX.
“The extension of $20.65 million of capital represents a vote of confidence from an important stakeholder group and brings clarity to the balance sheet as we prepare for the next phase of growth,” commented Irene Eddy, CFO.
Looking ahead, Mr. Hitzig added “We are grateful for the support shown by Accord’s investors and Debentureholders through this tough period. Our equity base remains strong at more than $100 million and we continue to enjoy support from a syndicate of six major banks, combining for ample funding to support the next phase of growth.”
About Accord Financial Corp.
Accord is North America’s most dynamic commercial finance company providing fast, versatile financing solutions for companies in transition including asset-based lending, factoring, equipment leasing, inventory finance, 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 45 years, Accord has helped businesses manage their cash flows and maximize opportunities.
For further information please visit www.accordfinancial.com or contact:
Irene Eddy
Senior Vice President, Chief Financial Officer
Accord Financial Corp.
40 Eglinton Avenue East, Suite 602
Toronto, ON M4P 3A2
(416) 961-0304
ieddy@accordfinancial.com
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:
- 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 June 30 2023 2022 $’000 $’000 Shareholders’ net earnings (263) 121 Adjustments, net of tax: Stock-based compensation 17 28 Adjusted net earnings (loss) (000’s) (note) 25 21 Restructuring expenses 55 0 Adjusted net earnings (166) 170 - 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 or shareholders’ equity divided by the number of common shares outstanding as of a particular date.
- 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.
Forward-Looking Statements
This news release contains certain “forward-looking statements” and certain “forward-looking information” as defined under applicable Canadian 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 Amendments. 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 Accord’s periodic filings with Canadian securities regulators. See Accord ‘s most recent annual information form and most recent management’s discussion and analysis of results of operations and financial condition for a detailed discussion of the risk factors affecting Accord. 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.