SOURCE: Clairvest Group Inc.

Clairvest Group Inc.

November 11, 2014 18:43 ET

Clairvest Reports Fiscal 2015 Second Quarter Results

TORONTO, ON--(Marketwired - November 11, 2014) - Clairvest Group Inc. (TSX: CVG) today reported results for the quarter and six months ended September 30, 2014. (All figures are in Canadian dollars unless otherwise stated)

Highlights

  • September 30, 2014 book value was $431.6 million or $28.52 per share versus $405.2 million or $26.78 per share at June 30, 2014
  • Net income for the quarter and for the six months ended September 30, 2014 was $26.4 million or $1.74 per share and $35.9 million or $2.37 per share, respectively
  • At September 30, 2014, cash or near cash of $220.4 million, presented on a Non-GAAP basis, represented 51.1% of the September 30, 2014 book value, or $14.56 per share 
  • Clairvest and Clairvest Equity Partners III ("CEP III") completed the sale of KUBRA Data Transfer Limited. ("KUBRA") and realized a 13.5 times return on investment
  • Following a recapitalization of Light Tower Rentals Inc. ("Light Tower Rentals"), Clairvest and CEP III received US$151.3 million in pre-tax proceeds which is equivalent to a 4.7 times return on investment and retained a 27.6% ownership interest in Light Tower Rentals
  • Following the realization events of KUBRA and Light Tower Rentals Clairvest received $16.6 million in carried interest from CEP III
  • Clairvest completed the final closing of Clairvest Equity Partners V ("CEP V") at $600 million. At September 30, 2014, Clairvest and the CEP Funds had $903.6 million of capital available for future acquisitions

Clairvest's book value was $431.6 million or $28.52 per share at September 30, 2014, compared with $405.2 million or $26.78 per share at June 30, 2014. The increase in book value per share for the quarter was attributable to net income for the quarter of $26.4 million, or $1.74 per share. For the six months ended September 30, 2014, net income was $35.9 million or $2.37 per share. 

As previously announced, Clairvest and CEP III completed the sale of KUBRA in August 2014. KUBRA, a business process outsourcing company focused on the distribution of household bills on behalf of its customers, was the first investment made by CEP III in 2006, where Clairvest and CEP III made an aggregate investment of $13.0 million into KUBRA. Over the life of the investment, Clairvest and CEP III realized proceeds equal to 13.5 times invested capital and an internal rate of return of over 40% over eight years. For the quarter ended September 30, 2014, Clairvest recorded a net realized gain on the sale of KUBRA of $16.7 million on a non-GAAP basis.

Also in August 2014, Light Tower Rentals, an oilfield equipment rental company operating in major oil and gas drilling basins in the United States, finalized its recapitalization by adding a group of institutional equity investors, following a US$330 million bond offering which was completed in July 2014. As part of the transactions Light Tower Rentals redeemed 41,764,144 common shares from Clairvest and CEP III for pre-tax proceeds of US$151.3 million, which is equivalent to a 4.7 times return on investment. Subsequent to the redemptions Clairvest and CEP III continue to have a 27.6% ownership in Light Tower Rentals. Consistent with its beneficial ownership, Clairvest realized 25% of this amount, or US$37.8 million [C$40.7 million]. Clairvest continues to own 3,985,604 common shares of Light Tower Rentals representing a 6.9% ownership interest on a fully-diluted basis. For the quarter ended September 30, 2014, Clairvest recorded a $6.7 million net realized gain and a $2.4 million unrealized gain on its investment in Light Tower Rentals.

Following the realization events of KUBRA and Light Tower Rentals, CEP III paid carried interest totaling $33.3 million to its general partner, $16.6 million of which was ultimately paid to Clairvest. For the quarter ended September 30, 2014, Clairvest recorded an $8.1 million increase in net carried interest income from the CEP Funds. 

In July 2014, Clairvest completed the fundraising of the CEP V fund pool, which is comprised of $180 million of Clairvest commitment alongside $420 million from third party investors. This new capital will provide Clairvest with greater scale and is expected to generate an annual increase in net management fees and priority distributions over the next few years. As a result of this new capital pool and the realizations achieved during the quarter, at September 30, 2014 Clairvest had $903.6 million of capital available for future acquisitions through treasury funds, credit facilities and uncalled capital in the CEP Funds. With the available funds, Clairvest has ample liquidity to support its investee companies as appropriate and to continue its active pursuit of new investment opportunities to enhance shareholder value. 

"This was a very strong quarter for Clairvest. We closed CEP V at the hard cap limit of $600 million in under 5 months and were materially oversubscribed. In addition, we realized excellent value from our investments in KUBRA and Light Tower Rentals, delivering superior returns to our shareholders," said Jeff Parr, Co-CEO of Clairvest. "With over $900 million in capital available, our team is hard at work identifying unique investment opportunities to continue to grow our portfolio."

The following tables reconcile the financial results reported in accordance with IFRS to Non-GAAP financial results. Non-GAAP financial information is provided to aid investors in better understanding the company's performance.

Summary of Financial Results -- Unaudited

Financial Performance Measures Quarters ended
September 30
 Six months ended
September 30
2014  2013  2014  2013
($000's, except per share amounts) $  $  $  $
            
Net realized gains on corporate investments 23,448  -  31,152  -
Net changes in unrealized gains (losses) on corporate investments 277  15,171  3,066  16,628
Net investment gains (Non-GAAP) 23,725  15,171  34,218  16,628
IFRS Adjustments (1) (3,314)  3,437  (891)  5,906
Net investment gains (IFRS) 20,411  18,608  33,327  22,534
            
Net carried interest income (non-GAAP) 8,078  5,293  10,974  6,308
IFRS Adjustments (1) 8,078  5,293  10,974  6,308
Net carried interest income (IFRS) 16,156  10,586  21,948  12,616
            
Other income from treasury funds, investee companies and the CEP Funds (non-GAAP) 5,765  5,741  11,987  14,267
IFRS Adjustments (1) 3,100  (2,062)  211  (4,846)
Other income from treasury funds, investee companies and the CEP Funds (IFRS) 8,865  3,679  12,198  9,421
            
Total expenses, excluding income taxes (non-GAAP) 8,463  4,755  18,180  10,629
IFRS Adjustments (1) 9,758  6,820  13,467  7,832
Total expenses, excluding income taxes (IFRS) 18,221  11,575  31,647  18,461
            
Net income (Non-GAAP & IFRS) 26,362  18,925  35,903  23,328
            
Basic net income per share (non-GAAP and IFRS) 1.74  1.25  2.37  1.54
Fully diluted net income per share (non-GAAP and IFRS) 1.71  1.23  2.33  1.51
        
        
Financial Condition Measures  September
2014
 March
2014
($000's, except per share amounts)  $  $
       
Total assets (Non-GAAP)  474,435  439,961
IFRS Adjustments (1)  46,380  35,501
Total assets (IFRS)  520,815  475,462
       
Total cash, cash equivalents and temporary investments (Non-GAAP)  220,441  115,786
IFRS Adjustments (1)  (51,888)  (994)
Total cash, cash equivalents and temporary investments (IFRS)  168,553  114,792
       
Total corporate investments (Non-GAAP)  205,237  241,066
IFRS Adjustments (1)  74,292  2,963
Total corporate investments (IFRS)  279,529  244,029
       
Total liabilities (Non-GAAP)  42,843  40,501
IFRS Adjustments (1)  46,380  35,501
Total liabilities (IFRS)  89,223  76,002
       
Book value (Non-GAAP & IFRS) (2)  431,592  399,460
Book value per share (Non-GAAP & IFRS)  28.52  26.39

(1)IFRS adjustments: Under IFRS, the Company is required to fair value certain acquisition entities and wholly-owned holding entities instead of recording its share of the assets, liabilities, revenues and expenses of these entities. The Company is also required to recognize as revenue that portion of the carried interest from the CEP Funds which are allocated to the principals and employees of Clairvest through various limited partnerships. In addition, Clairvest is required to record a liability for any entitlements of limited partners of a partnership where the limited partners are not part of the consolidated group of the Company but where the partnership is required to be consolidated by the Company. Accordingly, that portion of the carried interest from the CEP Funds that is allocated to the limited partners of these partnerships ("MIP Partnerships") and the carried interest payable to MIP Partnerships by other partnerships which are consolidated by Clairvest (collectively, the "Management Entitlements") are recorded as an expense and a liability of the Company. The Non-GAAP measures are presented such that the assets, liabilities, revenues and expenses of these acquisition entities and wholly-owned holding entities are included as part of the Company's financial position and operating performance, and the Management Entitlements are on a net basis such that only that portion of the carried interest from the CEP Funds being allocated to Clairvest is reflected in income and as a receivable and the total fair value of corporate investments excludes that portion of partnership interests where Clairvest does not have beneficial ownership. The Company believes the Non-GAAP measures provide investors more insightful information regarding the Company's financial position and operating performance and such information is consistent with Management's evaluation of the business.
(2) Book value is a Non-GAAP measure calculated as the value of total assets less the value of total liabilities. The term book value does not have any standardized meaning according to GAAP and therefore may not be comparable to similar measures presented by other companies. There is no comparable GAAP measure presented in Clairvest's consolidated financial statements and thus no applicable quantitative reconciliation for such non-GAAP financial measure. The Company has calculated book value consistently for many years and believes that book value can provide information useful to its shareholders in understanding its performance, and may assist in the evaluation of its business relative to that of its peers.

Clairvest's second quarter fiscal 2015 financial statements and MD&A are available on the SEDAR website at www.sedar.com and on the Clairvest website at www.clairvest.com.

About Clairvest

Clairvest Group Inc. is a private equity investor which invests its own capital, and that of third parties through the Clairvest Equity Partners ("CEP") limited partnerships, in businesses that have the potential to generate superior returns. In addition to providing financing, Clairvest contributes strategic expertise and execution ability to support the growth and development of its investee partners. Clairvest realizes value through investment returns and the eventual disposition of its investments.

Forward-looking Statements

This news release contains forward-looking statements with respect to Clairvest Group Inc., its subsidiaries, its CEP limited partnerships and their investments. These statements are based on current expectations and are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Clairvest, its subsidiaries, its CEP limited partnerships and their investments to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include general and economic business conditions and regulatory risks. Clairvest is under no obligation to update any forward-looking statements contained herein should material facts change due to new information, future events or otherwise.

www.clairvest.com

Contact Information

  • Contact Information
    Maria Klyuev
    Director, Investor Relations and Marketing
    Clairvest Group Inc. 
    Tel: (416) 925-9270
    Fax: (416) 925-5753
    mariak@clairvest.com