TORONTO, ON--(Marketwired - March 08, 2017) - Difference Capital Financial Inc. ("DCF" or the "Company") (
Full Year 2016 Financial Highlights
(figures are in $000 except per share amounts and shares outstanding) | Q4 2016 | FY 2016 | Q4 2015 | FY 2015 | ||||
Net realized gain (loss) on investments and marketable securities | ($2,544) | ($16,507) | $1,983 | ($25,269) | ||||
Net change in unrealized gain (loss) on investments and marketable securities | (2,022) | 9,868 | (716) | 38,171 | ||||
Net gain (loss) on investments and marketable securities | (4,566) | (6,639) | 1,267 | 12,902 | ||||
Other income | 450 | 1,541 | 1,015 | 3,695 | ||||
Total expenses | (2,128) | (7,836) | (2,225) | (14,452) | ||||
Net income (loss) | (6,244) | (12,934) | 57 | 2,145 | ||||
Basic and fully diluted earnings (loss) per share | ($1.05) | ($2.20) | $0.00 | $0.30 | ||||
FY 2016 | FY 2015 | |||||||
Total assets | 75,649 | 93,066 | ||||||
Total liabilities | 29,421 | 34,190 | ||||||
Net asset value | 46,228 | 58,876 | ||||||
Shares outstanding* | 5,858,637 | 5,872,397 | ||||||
Net asset value per share* | $7.89 | $10.03 | ||||||
Share price* | $4.15 | $4.85 | ||||||
* Data prior to November 30, 2016 have been adjusted to reflect the five-for-one share consolidation | ||||||||
2016 Review
Our portfolio strategy of investing in later-stage private growth companies was partially predicated on an occasional initial public offering ("IPO") window opening up. 2016 was not a particularly good year for the IPO market amid heightened political and economic uncertainty, market volatility, ongoing strength of the private capital market, and a number of IPO capable candidates waiting for better internal metrics. It was the weakest IPO showing in at least 20 years according to a report by PricewaterhouseCoopers. The slow IPO market was somewhat offset by an active mergers and acquisitions ("M&A") market, accelerated in Canada due to the strength of the U.S. dollar relative to the Canadian dollar.
The Company benefited from this positive M&A market through the exits of Quickplay Media Inc. ("Quickplay"), BTI Systems Inc. ("BTI"), Embotics Corporation and a few smaller positions. In addition, the Company has begun the sale process of its Rancho Mirage real estate investment that could conclude in 2017.
The Company continued to prudently manage its liquidity and de-lever its balance sheet during 2016. The Company repurchased an aggregate principal amount of $5.6 million of its outstanding Debentures, resulting in a cumulative to-date repurchase of $26.5 million, or 47%, of the original $56.1 million principal amount of Debentures issued, leaving $29.6 million Debentures currently outstanding. Management and the Board remain committed to dealing with the remaining Debentures in a manner that is non-dilutive to shareholders. The Debentures mature on July 31, 2018.
2017 Outlook
As we look ahead to 2017, we are cautiously optimistic that the IPO market will return. Markets are healthy; the few 2016 U.S. technology IPOs performed well; demand for new growth names remains high; private capital is getting a little harder to find; and, most importantly, a number of IPO candidates are getting the metrics needed, with sales and profits at levels that should make them attractive to a large number of institutional investors.
While IPOs could finally return in 2017, we also expect M&A activity to remain healthy. We think these trends will continue to be supported by the weak Canadian dollar, recognition that Canada is a good location for R&D, and the vast amount of cash available to big U.S. technology companies.
Full-Year 2016 Financial Results
Net loss for the year ended December 31, 2016 was $12.9 million, or $2.20 per share, compared to a net income of $2.1 million, or $0.30 per share, for the year ended December 31, 2015.
For the year ended December 31, 2016, the Company recorded $16.5 million of net realized capital losses. The realized capital losses were primarily attributed to the dispositions and write-offs of the following investments: iPowow! Inc. ("iPowow") ($5.5 million), Crailar Technologies Inc. ("Crailar") ($5.0 million), Kalina Power Ltd. ("Kalina") ($3.0 million), and three other investments ($4.5 million). The Company had previously marked down these investments and thus there was minimal impact to net income other than an accounting reclassification of previously recorded unrealized losses to realized losses. These losses were offset by realized gains on dispositions of Quickplay ($2.5 million) and BTI ($0.4 million).
For the year ended December 31, 2015, net realized capital losses on investments were $25.3 million. The realized capital losses were primarily attributed to the dispositions of the WG Limited ("World Gaming") and Lignol Energy Corporation ("Lignol") assets, which resulted in $18.3 million and $13.0 million of losses, respectively. These losses were reduced by capital gains realized on the dispositions of securities of Aurinia Pharmaceuticals Inc. ($2.8 million), Chieftain Residential LP ($2.4 million), and Infraredx, Inc. ($1.4 million).
For the year ended December 31, 2016, the Company recorded $9.9 million of unrealized gain on investments and marketable securities. The significant changes in unrealized gain of the Company's investment portfolio during the year were primarily due to the following:
For the year ended December 31, 2015, the Company recorded $38.2 million of unrealized gain on investments and marketable securities. The significant changes in unrealized gain of the Company's investment portfolio during the year were primarily due to the reversal of unrealized loss previously recorded on World Gaming ($25.6 million) and Lignol ($17.5 million) investments that were realized when these assets were sold in 2015.
Other income decreased to $1.5 million for the year ended December 31, 2016 from $3.7 million for the same period in 2015. The decrease in other income was primarily due to lower interest and dividend income of $1.3 million, down from $2.5 million in 2015, due to smaller holdings of convertible debentures and debentures.
Total expenses for the year ended December 31, 2016 were $7.8 million, compared to $14.5 million for the year ended December 31, 2015. The significant components of expenses were as follows:
Please refer to the section regarding forward-looking statements which form an integral part of this release. These results, along with the audited financial statements and the company's MD&A, are available on the company's website at www.differencecapital.com and on SEDAR at www.sedar.com.
About Difference Capital Financial Inc.
Difference Capital Financial Inc. invests in and advises growth companies. We leverage our capital market expertise to help unlock value in technology, media and healthcare companies as they approach important milestones in their business lifecycle.
Caution Regarding Forward-Looking Statements
Certain statements contained in this press release may be deemed "forward-looking statements." Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects," "plans," "anticipates," "believes," "intends," "estimates," "projects," "potential," "scheduled," and similar expressions, or that events or conditions "will," "would," "may," "could" or "should" occur. Although DCF believes that the expectations reflected in those forward-looking statements are reasonable, no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release. DCF undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise, other than as required by applicable law.
1 Net asset value ("NAV") is a non-IFRS financial measure and is calculated by subtracting the aggregate fair value of the liabilities of the Company from the aggregate fair value of its assets. Net asset value per share is calculated by dividing NAV by the number of common shares outstanding as at the measurement date. The term net asset value per share does not have any standardized meaning according to IFRS and therefore may not be comparable to similar measures presented by other companies.
Contact Information:
Contact Information
Henry Kneis
Chief Executive Officer
(416) 649-5090
www.differencecapital.com