Accord Financial Corp. (TSX – ACD) today released its financial results for the quarter ended June 30, 2024. The financial figures presented in this release are reported in Canadian dollars and have been prepared in accordance with International Financial Reporting Standards.
Summary of Financial Results
| Three Months Ended June 30 |
||||
|---|---|---|---|---|
| 2024 | 2023 | |||
| $ | $ | |||
| Average funds employed (millions) | 428 | 455 | ||
| Revenue (000s) | 19,957 | 17,933 | ||
| Net earnings (loss) attributable to shareholders (000s) | (1,149) | (263) | ||
| Adjusted net earnings (loss) (000s) (note) | (764) | (166) | ||
| Earnings (loss) per common share (basic and diluted) | (0.13) | (0.03) | ||
| Adjusted earnings per common share (basic and diluted) | (0.09) | (0.02) | ||
| Book value per share (June 30) | $ 9.78 | $ 11.79 | ||
Commenting on the second quarter results, the Company’s President and CEO, Mr. Simon Hitzig, stated: “With inflation cooling and the rate cycle turning the corner, SMEs are seeing a path back to normalcy. But from a credit standpoint, prudence remains the watchword.”
Accord’s finance receivables and loans (“portfolio”) closed at $431 million on June 30, 2024, down from $479 million on June 30, 2023, and $477 million at the start of the year, as the Company has carefully controlled its credit exposures and leverage since the start of 2024. Average funds employed in the second quarter were $428 million compared to $455 million in the same period last year. Despite the year-over-year decline in average funds employed, higher average yields drove second quarter revenue to $20.0 million, and first half revenue up to $40.6 million compared to $36.4 million in the same period last year.
While second quarter and first half revenue compare favorably to last year, increasing expenses outpaced top line gains. Interest expense increased, including amendment fees incurred in the first quarter, which are amortized over the remaining term of the bank facility (through July 2025). The provision for credit losses also rose to $3.4 million in the quarter, pushing the Company to an operating loss. Within the provision, $1.1 million represents a non-cash increase in the allowance for losses, which now stands at $10.6 million.
The increased expenses, partly offset by a reduction in overhead, led to a second quarter net loss attributable to shareholders of $1.1 million, down from a net loss of $263,000 in the same quarter last year. Year-to-date net loss attributable to shareholders was $517,000. Adjusted earnings year-to-date remain positive, coming in at $768,000, or 9 cents per common share. Book value per common share edged down slightly to $9.78, compared to $9.80 at the start of the year.
Commenting further Mr. Hitzig noted, “The results reflect two challenges. First, as reported earlier in the year, the Company is working with a less favorable bank facility, which is the main source of funds for new loans. Second, the difficult business environment is weighing on companies in our core market segments, leading to an increased provision for credit losses.” Mr. Hitzig added, “Despite the headwinds, we made progress in the quarter, establishing two new, more cost-competitive, financing arrangements outside of the bank syndicate. And we continue to focus on strategic initiatives within our control, including the potential to divest one or more non-core subsidiaries, to generate capital to support portfolio growth and unlock shareholder value.”
About Accord Financial Corp.
Accord Financial is North America’s most dynamic commercial finance company providing fast, versatile financing solutions including asset-based lending, factoring, inventory finance, equipment leasing, 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 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, adjusted net loss, and adjusted EPS/LPS. The Company derives these measures from amounts presented in its IFRS prepared financial statements. Adjusted net earnings (loss) comprise shareholders’ net earnings before goodwill impairment, net single account loss (in 2023), professional fees related to bank negotiations (2024), stock-based compensation, business acquisition expenses (primarily amortization of intangible assets) and restructuring expenses. Adjusted EPS/LPS (basic and diluted) is adjusted net earnings (loss) divided by the weighted average number of common shares outstanding (basic and diluted) in the period. Management believes adjusted net earnings (loss) 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 (loss) to adjusted net earnings (loss):
Three Months Ended
June 302024 2023 $’000 $’000 Shareholders’ net earnings (loss) (1,149) (263) Adjustments, net of tax: Costs associated with single account write-off 340 — Restructuring and other expenses 45 97 Adjusted net earnings (loss) (764) (166) - 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 financial position of the Company, and the duration of the suspension of the quarterly dividend announced in November 2023. 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 including the ability of the Company to reinstate dividends and those risks 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.