Input Capital Corp. Announces FY2020 Year End Results
REGINA, SK, Dec. 8, 2020 /CNW/ - Input Capital Corp. ("Input", "Company", "we", "our") (TSXV: INP) (US: INPCF) has released its audited year end results for the fiscal year ended September 30, 2020. All figures are presented in Canadian dollars.
"Our primary objective up to the year end was to remain focussed on the maximization of Book Value on a per share basis as we shrink our book of streaming contracts. In light of having suspended new capital deployment last year, this means we continued to reduce our operating expenses while serving our ongoing clients, and continued to buy back shares when we had the opportunity to do so at a significant discount to Book Value," said Doug Emsley, President & CEO.
"Since we started this strategy about 18 months ago, we have reduced our outstanding share count by about 38% and increased Book Value from $1.16 per share to $1.33 per share while also paying out a dividend of $0.01 each quarter."
FY2020 FULL YEAR HIGHLIGHTS
- Adjusted crop revenue* of $24.037 million on the delivery of 54,597 canola equivalent metric tonnes ("MT" or "tonnes") at an average price of $440.26 per MT;
- Adjusted net loss* of $1.909 million, or ($0.03) per share. This is down from adjusted net income of $3.679 million, or $0.05 per share, during the previous fiscal year, due to a realized loss on a mortgage reported in Q1, and a non-cash increase in DSU expenses due to a high closing share price right at the end of the fiscal year;
- During the fiscal year, we bought back 2,804,604 shares at an average price of $0.73 per share and we completed a Substantial Issuer Bid ("SIB") which bought back another 7.4 million shares at $0.70 per share;
- We repaid our entire debt outstanding with HSBC Bank Canada and closed our credit facility with them. This will save us over $400,000 per year in interest, standby fees and other fees;
- Over the course of the year, we paid a quarterly dividend of $0.01 per share, or $0.04 per share annualized;
- On August 12, 2020, we received an offer to purchase the entire company for $1.75 per share. After getting shareholder and court approval for the sale, subsequent to the end of fiscal year, the purchaser was not able to complete the transaction; and
- Finished the fiscal year with:
- Cash and cash equivalents of $27.234 million;
- Total crop interests and other financial assets of $14.471 million;
- Loans and mortgages receivable of $29.682 million;
- Multi-year active streaming contracts with 85 farm operators;
- Total shareholders' equity of $71.028 million; and
- Long-term debt of $7.748 million.
KEY PERFORMANCE INDICATORS FOR THE COMPARABLE PERIODS ARE SUMMARIZED BELOW:
Fiscal Year ended
CAD millions, unless otherwise noted
Adjusted crop revenue
Adjusted total revenue
Corporate admin expense
Adjusted net income (loss)
Adjusted net income per share (basic)
Adjusted EBITDA per share (basic)
Ending canola reserves (MT)
Total capital deployed in period
Active streaming clients
FY2019 Q4 HIGHLIGHTS
- Adjusted crop revenue* of $0.924 million on the delivery of 2,195 canola equivalent metric tonnes ("MT" or "tonnes") at an average price of $420.96 per MT;
- Adjusted net income* of $0.463 million, or $0.01 per share. This is down from $0.571 million, or $0.01 per share, over the same three-month period last year.
REVENUE & NET INCOME
For the fiscal year ended September 30, 2020, we generated adjusted crop revenue of $24.037 million on adjusted crop volume of 54,597 MT.
Adjusted crop revenue for the fiscal year ending September 30, 2020 represents a 38.3% decline in volume compared to the previous fiscal year, when we sold 88,487 MT of canola equivalent for adjusted crop revenue of $42.879 million. This translates into a crop margin of $1.173 million for the most recent year compared to $3.026 million for the previous year. The decrease in volume is due to the change in the mix of our business in favour of mortgage streams, and a significant reduction in the number of marketing streams which remain in place as a result of an offer made by us to our clients to exit early from their marketing stream contracts. Mortgage streams require fewer canola tonnes to service them than do capital streams, and marketing streams represented a lot of tonnes and revenue, but very small margins for the amount of work required to manage them.
During the fiscal year, we also generated interest margin of $2.917 million compared to $3.745 million in the previous year.
For the quarter ended September 30, 2020, we generated adjusted crop revenue of $0.924 million on adjusted crop volume of 2,195 MT.
Adjusted crop revenue for the quarter represents a 14% decrease in quarterly volume over the comparable quarter one year ago, when we sold 2,551 MT of canola equivalent for adjusted crop revenue of $1.077 million. This result is because of timing associated with harvest activities and crop deliveries in September.
During the period, the Company generated interest margin of $0.557 million compared to $0.983 million in the comparable quarter one year ago, due to a combination of mortgage buyouts reducing the size of our book, as well as a reduction in our own financing costs as a result of paying off our revolving credit facility with HSBC.
Capital Deployment and streaming contract portfolio
Year Ended September 30, 2020
We have not deployed new capital for several quarters and do not plan to do so unless we acquire a scalable source of mortgage financing.
As of September 30, 2020, our active streaming portfolio consisted of 85 geographically diversified streams, distributed as follows:
Sept 30, 2020
June 30, 2020
Sept 30, 2019
Year Over Year
Key balance sheet items are summarized below:
Statements of Financial Position
Crop interests and other financial assets (liabilities)
Loans and mortgages receivable
Total shareholders' equity
Common shares outstanding
Book value per share
Revolving credit facility
UPDATE ON NORMAL COURSE ISSUER BID
During the fiscal year, we bought back 2,804,604 shares at an average price of $0.73 per share as part of our ongoing share buyback activity under our active Normal Course Issuer Bid. Our Book Value is now $1.33 per share, up from $1.26 per share a year ago. During that time, we also paid out $0.04 per share in dividends.
RENEWAL OF NORMAL COURSE ISSUER BID
Input's board of directors has approved the renewal of our Normal Course Issuer Bid ("NCIB" or "the Bid") when the current approval expires later this month because we believe that the Shares have been trading in a price range which does not adequately reflect their value and that the purchase of the Shares under the Bid will enhance shareholder value in general.
Subject to, and only upon receipt of approval by TSX Venture Exchange, the Bid will commence on December 18, 2020 and continue until the earlier of December 17, 2021 and the date by which Input has acquired the maximum Shares which may be purchased under the Bid. The Bid will be made through the facilities of the TSX Venture Exchange, or such other "designated exchange" as that term is defined by applicable Canadian securities laws, and the purchase and payment for the Shares will be made in accordance with TSX Venture Exchange requirements, or such other designated exchange, at the market price of the Shares at the time of acquisition. All Shares purchased by Input under the Bid will be cancelled.
Canola prices have risen strongly over the last year, from about $445/MT at the start of the fiscal year to about $535/MT at the end of the fiscal year, and yet higher since then. It appears that the market has firmed up as a result of increased demand from European and Asian markets, including China, in spite of the fact that the previously discussed trade issues with China have not been formally resolved. This is also true of several other agricultural commodities, and there are anecdotal reports of countries increasing purchases in a face of supply uncertainties related to COVID-19.
Shareholders should bear in mind that while lower (or higher) canola prices do have an impact on the profitability of our business, the effect is moderate, and we have a significant margin of safety. Every one of our contracts remains profitable, generating positive gross margins, at today's prevailing canola prices. In fact, the price of canola could fall below the marginal cost of production of our farm clients, and our canola margins would remain positive.
The ongoing effects of the COVID-19 pandemic and uncertainty within international markets could impact the Company's financial performance for the year ended September 30, 2021 and, possibly, beyond. The financial impact will be dependent on the spread and duration of the pandemic and on related restrictions and government advisories. While we have not seen any material impact on our business to date, given the balance of uncertainties, the financial impact on the Company, if any, cannot be determined with any certainty. To date, it would appear that COVID-19 may have indirectly had a positive impact on canola prices and our bottom-line results.
Our operational focus is on profitably managing the contracts that we currently have with existing clients. We plan to continue to distribute capital to shareholders via the dividend and through NCIB activity at appropriate price levels, reduce our debt while maintaining solid liquidity, and focus on maximizing Book Value per Share.
Subsequent to the year-end, we announced that we had entered into a non-binding term sheet (the "Term Sheet") with SRG Security Resource Group Inc. ("SRG") outlining the principal terms and conditions on which we would be prepared to purchase 100% of the common shares of SRG, a Canadian provider of cyber security and physical protective security services (the "Proposed Acquisition"). The Term Sheet has been accepted by SRG and a majority group of shareholders holding approximately 78% of the common shares of SRG. The Proposed Acquisition as contemplated by the Term Sheet remains subject to, among other conditions, the completion of due diligence to Input's satisfaction and the negotiation and execution of a definitive share purchase agreement, which is expected to contain customary covenants, representations, warranties, indemnities and closing conditions, including the approval of the TSX Venture Exchange.
NEITHER TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
Input is an agriculture commodity streaming company with a focus on canola, the largest and most profitable crop in Canadian agriculture. The Company has developed several flexible and competitive forms of financing which help western Canadian canola farmers solve working capital, mortgage finance and canola marketing challenges and improve the financial position of their farms. Under a streaming contract, Input has provided capital in exchange for a stream of canola via multi-year fixed-volume canola purchase contracts. As of May 2019, Input postponed capital deployment operations in light of canola trade uncertainties and the effect of this uncertainty on capital availability.
Forward Looking Statements
This release includes forward-looking statements regarding Input and its business. Such statements are based on the current expectations and views of future events of Input'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 may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting Input, including risks regarding the agricultural industry, economic factors and the equity markets generally and many other factors beyond the control of Input. 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. 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 Input undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Input measures key performance metrics established by management as being key indicators of the Company's strength, using certain non-IFRS performance measures, including:
- Adjusted Crop Revenue, Adjusted Crop Volume and Adjusted Crop Margin;
- Adjusted Total Revenue;
- Adjusted Net Income (Loss), Adjusted Net Income (Loss) per share, Adjusted EBITDA, Adjusted EBITDA per share, and;
- Book Value per share.
The Company uses these non-IFRS measures for its own internal purposes. These non-IFRS measures do not have any standardized meaning prescribed by IFRS, and these measures may be calculated differently by other companies. The presentation of these non-IFRS measures is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The Company provides these non-IFRS measures to enable investors and analysts to understand the underlying operating and financial performance of the Company in the same way as it is frequently evaluated by Management. Management will periodically assess these non-IFRS measures and the components thereof to ensure their continued use is beneficial to the evaluation of the underlying operating and financial performance of the Company. For more detailed information, please refer to Input's Management Discussion and Analysis available on the Company's website at investor.inputcapital.com and on SEDAR at www.sedar.com.
SOURCE Input Capital Corp.