Clarke Inc. Reports 2015 Fourth Quarter and Year End Results and Declares Quarterly Dividend

HALIFAX, Feb. 24, 2016 /CNW/ - Clarke Inc. ("Clarke" or the "Company") (TSX: CKI) today announced its results for the three months and year ended December 31, 2015.

The following were certain key events during 2015:

  • The Company repurchased 3,866,802 of its common shares ("Common Shares") at an average purchase price of $10.34 per Common Share pursuant to two substantial issuer bid and its normal course issuer bid. All of the repurchases were completed at a discount to the Company's book value per share.
  • The Company completed the sale of its container vessel, the MV Shamrock, for net proceeds of US$4.6 million (Cdn. $5.6 million).
  • Each of Holloway Lodging Corporation ("Holloway") and Terravest Capital Inc. ("Terravest") repaid in full their loans owing to Clarke. The repayments totalled $35.0 million.
  • The Company entered into a loan agreement to advance up to US$2.8 million to fund the construction of a 17-unit townhome development in Atlanta, Georgia. During the year this loan was partially funded. Clarke has a further interest in this development by way of a separate royalty agreement linked to the sale of each townhome.

Results for the Year Ended December 31, 2015

During 2015, the Company's book value per share decreased by $0.36 or 2.9%, mainly as a result of unrealized losses on our investment holdings and dividends of $0.40 per share paid to shareholders, offset by the accretive effect of repurchasing shares below book value. Our book value per share at the end of the year was $12.21 while our share price was $9.86.

Net loss attributable to equity holders of the Company for the year ended December 31, 2015 was $11.1 million compared with net income of $102.6 million in 2014. The significant net income earned for the year ended December 31, 2014 was due to the sale of the Company's freight transport business and its interest in Gestion Jerico, which resulted in gains on sale of $71.1 million. During the year ended December 31, 2015, the Company had unrealized losses on its investments of $15.5 million compared to unrealized gains of $46.6 million in 2014. The Company had realized gains on its investments of $0.8 million for the year ended December 31, 2015 compared with realized losses of $17.4 million in 2014.

Results for the Fourth Quarter 2015

Fourth quarter revenue increased as a result of an increase in the fair value of the Company's portfolio of publicly-traded securities. Net realized and unrealized gains on investments for the fourth quarter of 2015 were $6.1 million compared to losses of $9.4 million for the same period in 2014. Interest income for the fourth quarter of 2015 was $0.5 million compared to $1.2 million for the same period in 2014 mainly due to the reduction of loans receivable and sales of publicly-traded debentures in 2015. Expenses during the fourth quarter decreased by $1.1 million compared to the same period in 2014 mainly due to a decrease of corporate overheads. The Company had income from continuing operations of $6.6 million in the fourth quarter of 2015 compared to a loss of $6.4 million in the same period in 2014. This again was largely driven by the increase in unrealized gains on investments during the period. Comprehensive income for the fourth quarter was $9.3 million compared to a comprehensive loss of $6.8 million for the same period in 2014.

For the three months ended December 31, 2015, Clarke's basic EPS was $0.42, compared to a basic loss per share of $0.33 for the same period in 2014.

First Quarter Dividend

Clarke also announced today that its Board of Directors declared a quarterly dividend of $0.10 per Common Share payable on April 8, 2016 to shareholders of record at the end of business on March 31, 2016.

Outlook

As a result of our various investment sales in recent years, Clarke eliminated substantially all of its debt and built a cash balance of $79.1 million at the beginning of 2015. During the year, Clarke deployed $99.0 million of cash, consisting of $44.9 million of investment purchases, $40.0 million of share repurchases, $7.0 million of dividends paid to shareholders and $7.1 million in loan advances while also receiving $45.6 million in loan repayments and $7.5 million on the sale of investments. At December 31, 2015, our cash balance was $42.1 million representing 27% of Clarke's market capitalization.

During the year, the market value of our securities portfolio declined $15.5 million. This can be attributed to lower securities prices for Holloway ($7.0 million) and our energy basket ($12.9 million) offset by an increase in Terravest's share price ($5.0 million). We believe the securities we own remain undervalued.

Most of the companies we have invested in are exposed to the oil and gas industry in some manner. In the case of our energy basket companies, this exposure is complete whereas in the case of other companies such as Holloway and Terravest, this exposure is partial only. Given the state of the oil and gas industry, we expect many of these companies' share prices to remain depressed for some time and we would not be surprised to see them fall farther. However, this situation is transitory in nature in our view as the amount of oil the world needs simply cannot be produced indefinitely at recent prices without bankrupting the producing entities. Therefore, we look at the year past as a time of planting investment seeds that will offer rewards in coming years.

The Company repurchased 3,866,802 Common Shares in 2015 at an average cost of $10.34 per share and at a total cost of $40.0 million. All of these shares were repurchased at less than our book value per share and less than management's view of our intrinsic value per share. As we believe that our investment holdings will appreciate in value in coming years (particularly as the oil and gas markets normalize), we believe that these repurchases will benefit shareholders.

We continue to see limited investment opportunities outside of the oil and gas industry due to generally high valuations, although valuations appear to have moderated somewhat in recent months. We remain on the lookout. We will remain disciplined in deploying our capital as that capital retains option value while it is in our hands.

Other Information

Further information about Clarke, including Clarke's Consolidated Financial Statements and Management's Discussion & Analysis for the year ended December 31, 2015, is available at www.sedar.com and www.clarkeinc.com.

Highlights of the consolidated financial statements for the three months and year ended December 31, 2015 compared to the three months and year ended December 31, 2014 are as follows:

 






 

(in millions, except per share amounts)

Three 

 months ended 

December 31, 

 2015 

Three  

 months ended  

 December 31,   2014  

$  

 

Year ended 

December 31,   2015 

 

Year ended 

 December 31,  2014 

Realized and unrealized gains (losses) on investments

6.1

(9.4)

(14.7)

29.3

Dividend income

1.0

1.0

3.7

6.6

Interest income

0.5

1.2

2.7

4.1

Revenue and other income*

1.7

2.0

8.9

15.7

Income (loss) from continuing operations

6.6

(6.4)

(11.1)

43.2

Income (loss) from discontinued operations attributable to equity holders of the Company**

(0.2)

59.4

Net income (loss) attributable to equity holders of the Company

6.6

(6.6)

(11.1)

102.6

Comprehensive income (loss) attributable to equity holders of the Company

9.3

(6.8)

(8.8)

99.5

Basic EPS - continuing operations

0.42

(0.32)

(0.66)

2.23

Diluted EPS - continuing operations

0.42

(0.32)

(0.66)

5.29

Basic EPS - net income (loss)

0.42

(0.33)

(0.66)

1.85

Diluted EPS - net income (loss)

0.42

(0.33)

(0.66)

4.30

Total assets

198.9

256.5

198.9

256.5

Long-term financial liabilities

1.7

2.4

1.7

2.4

Cash dividends declared per share

0.10

0.10

0.40

0.50

Book value per share

12.21

12.57

12.21

12.57

*Revenue and other income includes pension recovery/expense, gains on sale of fixed assets, foreign exchange gains/losses, gains on convertible debenture redemptions and repurchases and service revenue.
**Income from discontinued operations includes the results and the gain on sale of the freight transport business and Gestion Jerico.

About Clarke

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

Cautionary Statement Regarding Use of Non-IFRS Accounting Measures

This press release makes reference to the Company's book value per share as a measure of the performance of the Company as a whole. Book value per share is measured by dividing shareholders' equity at the date of the statement of financial position by the number of Common Shares outstanding at that date. Clarke's method of determining this amount may differ from other companies' methods and, accordingly, this amount may not be comparable to measures used by other companies. This amount is not a performance measure as defined under IFRS and should not be considered either in isolation of, or as a substitute for, net earnings prepared in accordance with IFRS.

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", "believes", or equivalents or 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 or expected performance of the Company's investee companies, the future price and value of securities held by the Company, changes in these securities holdings, the future price of oil and value of securities held in the Company's energy basket, changes to the Company's hedging practices, currency fluctuations and requirements for additional capital. 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. Such risks and uncertainties include, among others, the Company's investment strategy, legal and regulatory risks, general market risk, potential lack of diversification in the Company's investments, interest rates, foreign currency fluctuations, the sale of Company investments, the fact that dividends from investee companies are not guaranteed, reliance on key executives, commodity market risk, risks associated with investment in derivative instruments and other factors. With respect to the Company's investment in a ferry operation, such risks and uncertainties include, among others, weather conditions, safety, claims and insurance, labour relations, and other factors.

Although the Company has attempted to identify important factors that could cause actions, events or results not to be as 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: Michael Rapps, President and CEO, at (416) 855-1925 or Andrew Snelgrove, CFO, at (902) 442-3987.

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