Clarke Inc. Reports 2011 First Quarter Results

HALIFAX, May 26, 2011 /CNW/ - Clarke Inc. ("Clarke" or the "Company") (TSX: CKI CKI.DB CKI.DB.A) today announced its results for the three months ended March 31, 2011.

Net loss of the Company for the three months ended March 31, 2011 was $0.9 million or $0.04 per share compared with a net loss of $2.5 million or $0.10 per share in the corresponding period in 2010.

Basic loss per share ("EPS") from continuing operations for the three months ended March 31, 2011 was $0.04, compared to $0.06 for the three months ended March 31, 2010, an improvement of $0.02 per share. Book value per share at March 31, 2011 was $5.37, an increase of $1.62 or 43.2% from a book value per share of $3.75 on March 31, 2010.

RESULTS OF OPERATIONS

Highlights of the interim consolidated financial statements for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 are as follows:

 
  March 31, 2011 
March 31, 2010
$
Revenue and other income 47.7 45.0
Loss from continuing operations attributable to equity holders of the Company       (0.8) (1.5)
Net loss attributable to equity holders of the Company (0.9) (2.5)
Comprehensive loss attributable to equity holders of the Company (0.9) (2.8)
Basic EPS    
Loss from continuing operations (0.04) (0.06)
  Net loss (0.04) (0.10)
  Total assets 266.5 264.1
Book value per share 5.37 3.75

QUARTER ENDED MARCH 31, 2011

The net loss attributable to equity holders of the Company for the three months ended March 31, 2011 was $0.9 million, compared to a net loss of $2.5 million during the same period in 2010. Under IFRS, all publicly traded securities have been designated as at fair value through profit and loss. This means that all unrealized and realized gains and losses are included in investment and other income in the consolidated statements of earnings. Under Canadian GAAP, all unrealized gains and losses were recorded in accumulated other comprehensive income. In the three months ended March 31, 2011, the Company had net realized and unrealized losses of $1.0 million compared to $1.9 million for the same period in 2010.

Earnings per share ("EPS") from continuing operations for the three months ended March 31, 2011 was a loss of $0.04, compared to $0.06 for the three months ended March 31, 2010, an improvement of $0.02 per share. This difference was largely driven by the lower net loss incurred during the period, as the investment segment delivered improved results in 2011 compared to the first quarter of 2010.

Clarke's Investment segment delivered income before income taxes of $7.1 million in the three months ended March 31, 2011, up from $3.6 million in the three months ended March 31, 2010. The value of the Company's investment portfolio decreased by $1.1 million during the quarter, net of transactions. That compared favourably to a $1.9 million realized and unrealized loss on publicly traded investments during the three months ended March 31, 2010. A decline in the value of the Company's investments in Cinram International Income Fund and Royal Host Inc. was partially offset by increases in value of other investments. During the quarter there were $2.1 million in net purchases of securities.

The Company's Freight Transportation segment experienced continued competitive pressure in 2011. While revenue and other income for the three months ended March 31, 2011 was $1.3 million higher than revenue and other income earned in the same period in 2010, the segment delivered EBITDA before certain intercompany charges of $1.6 million, which is equal to the result for the three months ended March 31, 2010.

Clarke's Home Heating segment had revenues for the three months ended March 31, 2011 that were up slightly when compared to the same period in 2010.  The change is attributable to increased furnace sales, offset by reduced revenues on sales to the United States due to the appreciation of the Canadian dollar. As a result of the strong currency, EBITDA for the three months ended March 31, 2011 was $0.4 million, compared to $1.0 million in the same period in 2010.

The Company's Entertainment segment consists of Clarke's 50% interest in the digital music licensing business that was formed as part of the restructuring of Madacy completed in late 2010. EBITDA was $0.6 million for the three months ended March 31, 2011, compared to $0.5 million for the same period in 2010.

OUTLOOK

Clarke continues to improve its focus by reducing the number of businesses in which it is invested and increasing the level of time and energy spent on each remaining investment.  In the first quarter of 2011 the Company continued to provide direct support to its core businesses, by aiding managers in the freight business with a review of possible growth opportunities, assisting principals in the home heating business with the integration of a recent acquisition and overseeing a value-testing process for the Company's remaining home entertainment assets.

Management intends to continue identifying underperforming businesses with meaningful net assets and existing or potential competitive strengths, and investing in these businesses in a way that best protects Clarke's capital.  We will seek to identify, incentivize and retain strong management teams for such businesses that can develop and implement effective business plans.  We will also augment many of the functions performed by these management teams, by drawing upon our training and experience to deliver treasury, tax, real estate, valuations, accounting and IT services, particularly in the context of corporate transactions.

Given the opportunity, we will continue to repurchase the Company's convertible debentures and Common Shares at times and prices that management feels are beneficial to the Company.  We will also constantly review the Company's portfolio of investments, divesting of mature investments and increasing Clarke's position where there is an opportunity to build long-term value.

Clarke will continue to seek out investment opportunities that, in management's view, will deliver attractive returns in the long-term.  We will, where possible, invest alongside experienced operators and strategic partners in businesses that demonstrate growth or turnaround potential. Clarke will remain very active on its shareholders' behalf, utilizing the Company's investment experience and strategic relationships to build businesses that are expected to deliver long-term shareholder value.

Further information about Clarke, including Clarke's Consolidated Financial Statements and Management's Discussion & Analysis for the quarter ended March 31, 2011, is available at www.sedar.com and www.clarkeinc.com.

About Clarke

Halifax-based Clarke Inc. invests in undervalued businesses and participates actively where necessary to enhance performance and increase return.  Clarke's securities trade on the Toronto Stock Exchange (CKI, CKI.DB; CKI.DB.A); for more information about Clarke Inc., please visit our website at www.clarkeinc.com.

Note on Forward-Looking Statements and Risks

This press release may contain or refer to certain forward-looking statements relating, but not limited to, the Company's expectations, intentions, plans and beliefs with respect to the Company.  Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "does not expect", "is expected", "budget", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or equivalents or variations, including negative variations, of such words and phrases, or state that certain actions, events or results, "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. Forward-looking statements include, without limitation, those with respect to the future price of  securities held by the Company, changes in these securities holdings, changes to the Company's hedging practices, currency fluctuations, requirements for additional capital, changes to government regulations and the timing and possible outcome of pending litigation. Forward-looking statements rely on certain underlying assumptions that, if not realized, can result in such forward-looking statements not being achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements.

With respect to the Company's Investment segment, such risks and uncertainties include, without limitation, the Company's investment strategy, legal and regulatory risks, general market risk, potential lack of diversification in the Company's investments, reliance on certain key executives, interest rates and foreign currency fluctuations and other factors.  With respect to the Company's Freight Transportation segment, such risks and uncertainties include, without limitation, competition, expiry of certain leases, labour relations, the use of third party service providers, dependence on certain personnel, fuel costs, weather conditions, customer relationships, claims, litigation and insurance, government regulation of the transport industry and other factors.  With respect to the Company's Home Heating segment (formerly the Steel Tanks segment), such risks and uncertainties include, without limitation, the costs of housing and major consumer products, energy costs, alternative energy sources, steel costs, foreign exchange risk, and other factors.  With respect to the Company's Entertainment segment, such risks and uncertainties include, without limitation, the impact of the Internet on retail distribution channels and delivery format. Other general risks and uncertainties include, without limitation, environmental considerations, use of information technology and information systems, safety issues, concentration of sales among a small number of customers, the seasonality of business cycles for certain segments, commodity market risk, risks associated with investment in derivative instruments and other factors.

Although the Company has attempted to identify important factors that could cause actual actions, events or results or cause actions, events or results not to be estimated or intended, there can be no assurance that forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Other than as required by applicable Canadian securities laws, the Company does not update or revise any such forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events. Accordingly, readers should not place undue reliance on forward-looking statements. 

SOURCE CLARKE INC.

For further information:

Ian Wilkie
Chief Financial Officer
Clarke Inc.
Telephone: (902) 442-3990

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CLARKE INC.

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