Element Financial on Target with Growth Strategy Reports Strong Originations and Financial Results for the Nine-Month Period Ended December 31, 2011

/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW./

  • New business volumes reached a total of $278.1 million for the nine-month period ended December 31, 2011, an increase of $231.5 million or 497% over new business volumes originated during the financial year ended March 31, 2011.
  • Total revenues increased to $10.4 million for the nine-month period ended December 31, 2011, an increase of $8.7 million or 501% over the amount reported for the financial year ended March 31, 2011.
  • Loss from operations before non-cash share-based compensation was $0.4 million for the nine-month period ended December 31, 2011, a marked improvement when compared to the loss of $1.3 million incurred during the year ended March 31, 2011and in line with management's expectations.
  • Total assets grew to $416.7 million at December 31, 2011, an increase of $369.6 million or 785% over the amount reported as at March 31, 2011.
  • Term funding facilities increased by $115 million with further increases under negotiation.
  • Strong and robust M&A pipeline.

TORONTO, Feb. 23, 2012 /CNW/ - Element Financial Corporation (TSX: EFN) one of Canada's leading independent equipment finance companies, providing equipment financing to owner/operators and to small and medium-sized businesses across North America, today announced financial results for the fourth quarter of calendar 2011 as well as for the nine-month period ended December 31, 2011.

"The nine-month period ended December 31, 2011 was a transformational period for Element," stated Steven Hudson, Chairman and Chief Executive Officer of Element. "We built an industry leading infrastructure, a capital structure and a portfolio management capacity capable of executing on our multi-billion dollar growth plans. We secured a leading and experienced management team, we expanded our labour force from 15 employees at the beginning of the period to over 80 employees today, we expanded our capital structure by raising $250 million from two separate private placements of common shares, we extended our term funding facilities with life insurance companies by adding a new facility while increasing the total facilities from $80 million to $195 million, we expanded our short term borrowing facilities with a Canadian Schedule 1 Bank to $25 million, and we accessed the public capital market as a result of the going-public transaction and amalgamation with Mira. In addition, Element invested approximately $160 million to acquire the assets and operations of Alter Moneta , providing the Company with a proven lease administration platform which historically has managed a $2+ billion North American lease portfolio. On January 30, 2012, we also announced the formation of Element Capital as a new business unit dedicated to large equipment financing and leasing transaction, including energy related assets, corporate aircraft and helicopters, rail and road transport, as well as large-scale construction equipment. We also have a strong and robust pipeline and are in various stage of discussion with regards to potential M&A opportunities. As a result of these growth initiatives and the additional and increased access to liquidity, Element is well positioned to continue on its growth plan to become a leading independent equipment finance company in North America" added Mr. Hudson.

In 2011, in conjunction with the reverse takeover transaction and amalgamation of Element with Mira II Acquisition Corp ("Mira") on December 15, 2011, Element changed its financial year end from March 31 to December 31. Accordingly, the comparative amounts in the condensed consolidated statements of operations and cash flows presented below are as at and for the nine-month period ended December 31, 2011, while the comparative statements as at and for the year ended March 31, 2011 cover the twelve-month period then ended.

Basis of presentation

The consolidated financial statements for the nine-month period ended December 31, 2011 have been prepared in accordance with International Financial Reporting Standards ("IFRS") and are reported in Canadian dollars. For all periods up to and including March 31, 2011, the Company prepared consolidated financial statements in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"). With this first time adoption of IFRS, and the transition date of April 1, 2010, all comparative information has been prepared in accordance with IFRS.

The selected financial information included in this press release is summary only and should be read in conjunction with the Company's audited consolidated financial statements as at and for the nine-month period ended December 31, 2011, and the notes thereto, and accompanying management discussion and analysis of such results that have been filed on SEDAR at www.sedar.com.

Nine-Month Period Ended December 31, 2011 Highlights Include:

  • New business volumes for the nine-month period ended December 31, 2011 increased by $231.5 million or 497% to $278.1 million compared to the $46.6 million reported for the financial year ended March 31, 2011.
  • Total revenue grew to $10.4 million for the nine-month period ended December 31, 2011, an increase of $8.7 million or 501% over the $1.7 million reported for the financial year ended March 31, 2011.
  • Net financial income grew to $5.9 million for the nine-month period ended December 31, 2011, an increase of $5.1 million or 653% compared to the $0.8 million reported for the financial year ended March 31, 2011.
  • Finance receivables grew to $231.5 million as at December 31, 2011, an increase of $193.9 million or 516% compared to the $37.6 million reported as at March 31, 2011.
  • Total assets grew to $416.7 million as at December 31, 2011 compared to the $47.1 million as at March 31, 2011.
  • Shareholders' equity grew to $238.3 million as at December 31, 2011, an increase of $230.3 million over the amount of $8.0 million reported as at March 31, 2011.
  • The portfolio continues to perform extremely well with delinquencies at 0.28% of total finance receivables.

Selected Financial Information

The following table summarizes key selected financial data as at and for the nine-month period ended December 31, 2011, as at and for the year ended March 31, 2011 and as at and for the six-month period ended March 31, 2010:

(in $000's for stated values, except ratios and per share
amounts)
As at and for the
nine-month
period ended
December 31,
2011
As at and for
the year ended
March 31,
2011
As at and for
the six-month
period ended
March 31,
2010
  $ $ $
Total revenue 10,386 1,728 363
Operating loss before transaction costs (1,587) (1,449) (128)
Less: Transaction costs 5,957 - -
Loss after transaction costs and before taxes (7,544) (1,449) (128)
Net loss after taxes (6,071) (1,449) (128)
Total assets 416,715 47,073 6,450
Finance receivables, net 231,537 37,586 5,095
Loan originations 119,671 46,604 2,403
Loan acquisition 158,474 - -
  278,145 46,604 2,403
Total  non-current liabilities - Secured borrowings 172,517 34,612 5,379
Average outstanding finance receivables 168,099 17,782 5,108
Average outstanding debt 119,624 15,980 5,553
Number of shares outstanding 66,380 4,412 292
Average number of shares outstanding 33,302 3,923 90
Total Shareholders' equity 238,341 8,001 379
Operating loss before transaction costs per share (basic
and diluted)
($0.05) ($0.37) ($1.42)
Net loss per share (basic and diluted) ($0.18) ($0.37) ($1.42)

Overall Performance Highlights

The Company's finance receivables portfolio of leases and loans has grown substantially over the last two periods from $5.1 million at March 31, 2010 to $37.6 million at March 31, 2011 to $231.5 million at December 31, 2011. This growth has been achieved as a result of an increase in the level of originations from $2.4 million during the six-month period ended March 31, 2010 to $46.6 million during the financial year ended March 31, 2011, to $119.7 million for the nine-month period ended December 31, 2011. The strong growth in the Company's origination volumes is the result of a combination of factors, including, an expansion of the Company's in-house sales team, geographic representation across Canada and the entry into new vertical markets such as healthcare and golf equipment finance. In addition, the Company acquired $158.5 million of finance receivables pursuant to the Alter Moneta acquisition. As a result, average outstanding finance receivables grew from $17.8 million for the financial year ended March 31, 2011 to $168.1 million for the nine-month period ended December 31, 2011, an increase of 844%. The growth of the Company's originations volumes is expected to continue as the origination team develops a broader base of vendor and direct customer relationships and the Company's brand awareness in the market improves. In order to support this growth and pursue acquisitive opportunities, additional investments were made in an industry leading management team and operating assets.

The Company believes that the necessary start up costs associated with its investments in a senior management team and infrastructure have lowered near term earnings. While the Company also expects that its acquisitive growth strategy will dramatically improve operating results going forward, recently adopted IFRS rules will and have required the Company to expense most acquisition-related costs in the period in which these costs are incurred rather than capitalizing such costs as part of the acquired assets. These accounting rules have negatively affected the Company's current period earnings. Once the Company's rapid growth stage is complete, we expect to be a profitable independent lease financing company and believe that our anticipated declining cost of funds and economies of scale will result in significant increases in net income.

The Company increased its capitalization by raising a total of $234.2 million net of issuance issue costs, during the nine-month period ended December 31, 2011 from two separate equity private placements and increased its term funding facilities to $195 million as at December 31, 2011 from $80 million as at March 31, 2011. These initiatives have resulted in increasing the Company's available liquidity to $328.0 million as at December 31, 2011 from $58.7 million as at March 31, 2011.

Results of Operations - Nine Months Ended December 31, 2011

Interest income

Interest income on finance receivables was $9.3 million for the nine-month period ended December 31, 2011, an increase of $7.8 million or 520% compared to $1.5 million for the financial year ended March 31, 2011. Overall interest income on finance receivables showed substantial growth, reflecting increased origination volumes and the purchase of financial assets in the Alter Moneta acquisition. Average outstanding assets increased from $17.8 million during the year ended March 31, 2011 to $168.1 million for the nine-month period ended December 31, 20111.

The Company's origination volume was $119.7 million during the nine-month period ended December 31, 2011, an increase of $73.1 million, compared to $46.6 million during the financial year ended March 31, 2011, representing an annualized increase of 210%. Continued origination growth is expected as the Company continues to expand its origination platform, continues its expansion into new vertical markets such as healthcare and golf equipment, and develops a broader base of vendor and direct customer relationships along with improved brand awareness in the market.

Average yield on finance receivables for the nine-month period ended December 31, 2011 was 7.40% compared to 8.62% for the financial year ended March 31, 2011. The decrease in average yields was primarily related to the purchase of the Alter Moneta asset portfolio and a change in the mix of receivables as the Company added new verticals in golf equipment and healthcare equipment where yields are lower. However, this lower yield has been offset by a reduction in the Company's cost of borrowing. Overall, average yield spreads continue to meet the Company's expectations.

Interest Expense

Interest expense was $3.3 million for the nine-month period ended December 31, 2011, an increase of $2.5 million or 312% compared to $0.8 million for the financial year ended March 31, 2011. The increase was primarily the result of an increase in the average outstanding debt of $119.6 million for the nine-month period ended December 31, 2011 compared to $16.0 million for the year ended March 31, 2011 as the Company's secured borrowings increased to sustain the growth in origination volumes.

The Company's annualized average cost of borrowing has decreased from 4.97% for the financial year ended March 31, 2011 to 3.64% for the nine-month period ended December 31, 2011. The decrease in annualized average cost of borrowing reflects the lower interest rates associated with the term funding facilities compared to previous borrowing rates, and the terms of the Canadian trust facility financing the Alter Moneta acquisition, which has lower rates than our the term funding facilities.

Operating Expenses

Operating expenses were $6.3 million for the nine-month period ended December 31, 2011, an increase of $4.2 million or 201% compared to $2.1 million for the financial year ended March 31, 2011. This increase reflects the additional investments made by the Company in its infrastructure and labour force as it positions itself for future growth. Additional one-time costs related to the acquisition and integration of the assets acquired from Alter Moneta also contributed to the increase during the period.  Operating expenses as a percentage of average finance assets were 5.02% for the nine-month period ended December 31, 2011, a marked improvement compared to 11.82% for the financial year ended March 31, 2011, reflecting the growing asset level and its impact on fixed operating costs. It is expected that these costs as a percentage of average assets will continue to decline in the future as the Company continues to expand its operations and as fixed operating costs become absorbed by a larger average earning asset base.

Transaction costs

Transaction costs consist of one-time non-recurring legal, accounting, banking and direct specific compensation expenses incurred by the Company during the nine-month period ended December 31, 2011 in connection with the Alter Moneta acquisition. Under IFRS accounting rules, these one time costs, which would have been previously capitalized as additional goodwill under Canadian GAAP, are now expensed directly to the income statement.

Results of Operations - Three-Month Periods ended December 31, 2011 and September 30, 2011

The following table sets forth a summary of the Company's results of operations for the three-month periods ended December 31, 2011 and September 30, 2011:

(in 000's for stated values, except per unit amounts) Three-month 
period ended
December 31,
2011
Three-month
period ended
September 30,
2011
  $ $
Total revenue 5,455 3,720
Financial expenses 2,390 1,477
Net financial income 3,065 2,243
Operating expenses 3,225 1,911
Net operating (loss) / income from operations before share-based compensation (160) 332
Share-based compensation 506 304
Net operating (loss) / income from operations (666) 28
Transaction costs 2,943 3,014
Net loss before taxes (3,609) (2,986)
Tax expense (recovery) (391) (1,082)
Net loss for the period (3,218) (1,904)
Basic and diluted loss per share ($0.06) ($0.08)

ELEMENT FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
[in thousands of Canadian dollars]
  As at As at
  December 31, March 31,
  2011 2011
  $ $
     
ASSETS    
Cash         151,086               4,116
Restricted funds           19,678               3,686
Finance receivables         231,537             37,586
Notes receivable             5,422                  426
Accounts receivable and other assets             4,739               1,206
Equipment, licenses and leasehold improvements             1,194                    53
Deferred income taxes             1,473                   —
Goodwill             1,586                   —
          416,715             47,073
     
LIABILITIES AND SHAREHOLDERS' EQUITY  
Liabilities    
Bank indebtedness                   —               1,362
Accounts payable and accrued liabilities             5,857                  660
Advances from shareholders                   —               3,800
Secured borrowings         172,517             33,250
Total liabilities         178,374             39,072
     
Shareholders' equity    
Share capital         243,637               9,445
Contributed surplus             2,625                  406
Deficit            (7,921)             (1,850)
Total shareholders' equity         238,341               8,001
          416,715             47,073

ELEMENT FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
[in thousands of Canadian dollars]
  Nine-month  
  period ended Year ended
  December 31, March 31,
  2011 2011
  $ $
     
NET INTEREST REVENUE    
Interest income - finance receivables 9,329 1,533
Interest expense 3,269 794
  6,060 739
Provision for credit losses 100 21
  5,960 718
Amortization of lease origination costs 644 41
Amortization of deferred financing costs 466 88
  4,850 589
Other revenue    
Syndication fees 17 117
Administrative and other fees 435 78
Other interest income 605
  1,057 195
  5,907 784
     
OPERATING EXPENSES    
Salaries and benefits 4,806 972
Share-based compensation 1,159 131
Management fees 301
General and administrative expenses 1,529 829
  7,494 2,233
Loss from operations (1,587) (1,449)
Transaction costs 5,957
Loss before income taxes (7,544) (1,449)
Deferred income taxes (1,473)
Net loss for the period (6,071) (1,449)
     
Basic and diluted loss per share $(0.18) $(0.37)

ELEMENT FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
[in thousands of Canadian dollars]
  Share
capital
Contributed
surplus
Deficit Total
  $ $ $ $
         
Balance, April 1, 2010 780 (401) 379
Net loss for the period (1,449) (1,449)
Shares issued 8,665 8,665
Share-based compensation        
  Employee stock options 132 132
  Non-employee stock options 274 274
Balance, March 31, 2011 9,445 406 (1,850) 8,001
Net loss for the period (6,071) (6,071)
Shares issued 234,192 234,192
Share-based compensation        
  Employee stock options 1,159 1,159
  Non-employee stock options 571 571
  Warrants 489 489
Balance, December 31, 2011 243,637 2,625 (7,921) 238,341

ELEMENT FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
[in thousands of Canadian dollars]
  Nine-month  
  period ended Year ended
  December 31, March 31,
  2011 2011
  $ $
     
OPERATING ACTIVITIES    
Net loss for the period             (6,071)             (1,449)
Items not affecting cash    
  Employee stock options               1,159                  131
  Amortization of equipment, licenses and leasehold improvements                253                    16
  Amortization of deferred lease costs                   644                    83
  Amortization of deferred financing costs                   466                    88
  Provisions for credit losses                   100                    21
  Deferred income taxes             (1,473)                     —
               (4,922)               (1,110)
Changes in non-cash operating working capital items    
  Accounts receivable and other assets             (3,327)            (1,192)
  Accounts payable and accrued liabilities               5,089                  481
Cash used in operating activities              (3,160)               (1,821)
     
INVESTING ACTIVITIES    
Business acquisition         (160,180)                    —
Increase in restricted funds           (15,992)            (2,752)
Investment in finance receivables           (37,265)          (32,595)
Purchase of equipment and leasehold improvements                (328)                 (57)
Increase in notes receivable             (4,996)               (426)
Deferred financing costs incurred                (995)               (606)
Cash used in investing activities         (219,756)             (36,436)
     
FINANCING ACTIVITIES    
Bank indebtedness             (1,362)               1,039
Advances from shareholders             (3,800)               3,610
Issuance of capital           234,681               8,665
Proceeds from secured borrowings           140,367             28,663
Cash provided by financing activities           369,886               41,977
     
Net increase in cash during the period           146,970               3,720
Cash, beginning of period               4,116                  396
Cash, end of period           151,086                 4,116

About Element Financial Corporation

Element Financial Corporation is an independent finance company that originates, manages and funds equipment leases. Element Financial Corporation operates in two specific segments of the equipment finance market through Element Capital, a business unit operating in the large ticket equipment leasing segment and Element Finance that, currently originates equipment finance assets within specific segments of the mid-ticket equipment finance market through its four specialized groups: manufacturing and industrial, transportation and construction, healthcare and golf equipment, each of which has national scope and coverage.

Forward Looking Statements

This release includes forward-looking statements regarding Element and its business. Such statements are based on the current expectations and views of future events of Element's management. In some cases the forward-looking statements can be identified by words or phrases such as "may", "will", "expect", "plan", "anticipate", "intend", "potential", "estimate", "believe" or the negative of these terms, or other similar expressions intended to identify forward-looking statements. The forward-looking events and circumstances discussed in this release, including Element's intention to increase its market share, expand strategic vendor relationships, establish a presence in additional equipment verticals, and assess potential acquisition opportunities,  may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting the Company, including risks regarding the equipment finance industry, economic factors and the equity markets generally and many other factors beyond the control of Element. No forward-looking statement can be guaranteed. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statement or information. Readers are referred to the specific risk factors relating to and affecting the Company's business and operations as filed by the Company pursuant to applicable securities laws. Accordingly, readers should not place undue reliance on any forward-looking statements or information. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Element undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. 

 

 

SOURCE Element Financial Corporation

For further information:

Investor Contact: Jim More
Vice Chairman & Senior Executive Vice President   
(416) 386-1067 ext. 219
Jmore@elementfinancial.ca

Profil de l'entreprise

Element Financial Corporation

Renseignements sur cet organisme


FORFAITS PERSONNALISÉS

Jetez un coup d’œil sur nos forfaits personnalisés ou créez le vôtre selon vos besoins de communication particuliers.

Commencez dès aujourd'hui .

ADHÉSION À CNW

Remplissez un formulaire d'adhésion à CNW ou communiquez avec nous au 1-877-269-7890.

RENSEIGNEZ-VOUS SUR LES SERVICES DE CNW

Demandez plus d'informations sur les produits et services de CNW ou communiquez avec nous au 1‑877-269-7890.