Founders Advantage Capital Corp.
TSX VENTURE : FCF

Founders Advantage Capital Corp.

January 24, 2017 17:03 ET

Founders Advantage Capital Corp. Reports on Transition Year; Outlines 2017 Investee Guidance; Provides Investee Updates; and Details on Analyst Coverage

CALGARY, ALBERTA--(Marketwired - Jan. 24, 2017) - Founders Advantage Capital Corp. (TSX VENTURE:FCF) (the "Corporation" or "FAC") is pleased to provide the following corporate update following its first financial year with its new investment model and management team. The last twelve months have been transformational for the Corporation as it accomplished the following key milestones:

  • Adopted a new investment model and secured a new management team led by Stephen Reid;
  • Completed two (2) acquisitions and announced a third pending acquisition for aggregate consideration of $120 million;
  • Completed two (2) equity offerings for gross proceeds of $60 million;
  • Obtained a credit facility for $22 million with Alberta Treasury Branches;
  • Implemented a dividend policy commencing March, 2017; and
  • Research coverage initiated by three (3) investment dealers.

The Corporation's President and Chief Executive Officer, Stephen Reid, commented: "In our first year of operations, our team accomplished many of our initial corporate objectives but we remain highly motivated to continue to execute on our business plan by completing additional accretive acquisitions."

2017 Investee EBITDA Guidance

As previously announced, the Corporation has acquired a 60% interest in both Dominion Lending Centres ("DLC") and Club16 Limited Partnership ("Club16") and has announced its intention to acquire a 52% interest in Impact Communications ("Impact") in March, 2017. The following table summarizes the 2017 anticipated annual EBITDA for the Corporation's investees (all amounts set out below are considered forward-looking financial information and are subject to the cautionary statement included in this press release):

Investee FAC Interest Anticipated Investee EBITDA for 2017 FAC's Interest of Anticipated Investee Annual EBITDA(1)
DLC 60% $18.0 million - $19.0 million $10.8 million - $11.4 million
Club16 60% $7.0 million - $7.5 million $4.2 million - $4.5 million
Impact 52% $4.0 million - $4.4 million $2.0 million - $2.3 million
Total $17.0 million - $18.2 million(2)
Note:
(1) The amounts shown reflect FAC's ownership percentage multiplied by the investee's anticipated annual EBITDA for 2017.
(2) Prior to FAC's corporate expenses, including interest and G&A. Assumes FAC ownership for a full financial year.

In addition to focusing on investees with stable historical EBITDA and significant free cash flow generation, the Corporation intends on building a portfolio of investments in entities with expected annual organic growth exceeding 15%.

As DLC, Club16 and Impact have strong free cash flow generation, the Corporation intends on optimizing distributable cash from such investee entities in 2017.

Investee Update

On June 3, 2016, the Corporation acquired a 60% interest in DLC, the largest mortgage brokerage franchisor in Canada. For 2017, DLC intends on continuing to expand its network of mortgage brokers and franchisees as well as integrating Marlborough Stirling Canada (which it acquired a 70% interest in December, 2016) into its operations. DLC anticipates that its funded mortgage volumes will continue to increase in 2017 and expects its 2017 EBITDA to be approximately $18.0 million to $19.0 million.

On December 20, 2016, the Corporation acquired a 60% interest in Club16 which owns thirteen (13) fitness clubs in the Greater Vancouver area. For 2017, Club16 intends on transitioning one of its clubs to a larger location and also plans on expanding one of its clubs. Both of these initiatives are expected to have a positive impact on the number of Club16 memberships. Club16 anticipates that its membership revenues will continue to increase in 2017 and expects its 2017 EBITDA to be approximately $7.0 million to $7.5 million.

On December 22, 2016, the Corporation announced its intention to acquire a 52% interest in Impact, a manufacturer and distributor of two-way radios and accessories, which is expected to close in March, 2017. In the event the Impact transaction is completed, Impact is expected to have an annual EBITDA of approximately $4.0 million to $4.4 million.

The Corporation anticipates completing additional acquisitions in 2017. For additional information, please refer to the Investor Presentation available on the Corporation's website at www.advantagecapital.ca.

Analyst Coverage

The Corporation is pleased to report that research coverage on FAC has been initiated by three institutions to date, including Desjardins Capital Markets (initiated coverage on November 28, 2016), Clarus Securities Inc. (initiated coverage on December 6, 2016) and Canaccord Genuity (initiated coverage on January 17, 2017). Copies of the reports can be obtained directly from the analysts and their contact details can be found on our website at www.advantagecapital.ca. Any opinions, estimates, or forecasts regarding the Corporation's performance made by these analysts are theirs alone and do not represent opinions, forecasts, or predictions of FAC. The Corporation does not, by its reference herein, imply its endorsement of, or concurrence with, such information, conclusions, or recommendations.

About Founders Advantage Capital Corp.

The Corporation is listed on the TSX Venture Exchange as an Investment Issuer (Tier 1) and employs a permanent investment approach. The Corporation has developed an investment approach to create long-term value for its shareholders and partner entrepreneurs (investees) by pursuing majority interest acquisitions of cash flow positive middle-market privately held entities. The Corporation seeks to win mandates by appealing to the segment of the market which is not aligned with traditional private equity control, royalty monetizations or related structures. The Corporation's innovative platform offers disproportionate incentives (contractually) for growth in favour of our partner entrepreneurs. This unique platform is designed to appeal to entrepreneurs who believe in the growth of their businesses and who want the added ability to continue to manage the business with a long-term partner.

The Corporation's common shares are listed on the TSX Venture Exchange under the symbol "FCF".

For further information please refer to the Corporation's website at www.advantagecapital.ca.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

Non-IFRS Measures

EBITDA, or earnings before interest, income tax, depreciation and amortization, is a non-IFRS item as it does not have a standardized meaning under IFRS. Management uses EBITDA as a performance and valuation measure. EBITDA is not a substitute for, and should be used in conjunction with, IFRS financial measures. Other companies may calculate EBITDA differently and the Corporation cautions that EBITDA as calculated above may not be comparable to EBITDA as calculated by other issuers.

Non-IFRS measures should not be considered in isolation or construed as alternatives to their most directly comparable measure calculated in accordance with IFRS, or other measures of financial performance calculated in accordance with IFRS. The Non-IFRS measures are unlikely to be comparable to similar measures presented by other issuers.

Cautionary Statement Regarding Forward-Looking Financial Information

Certain statements in this document constitute forward-looking information under applicable securities legislation. Forward-looking information typically contains statements with words such as "anticipate", "believe", "estimate", "will", "expect", "plan", "schedule", "intend", "propose", or similar words suggesting future outcomes or an outlook. Forward-looking information in this document includes, but is not limited to:

  • The anticipated 2017 EBITDA for DLC, Club16 and Impact;
  • That the Corporation's investee entities will have annual organic growth exceeding 15%;
  • That the Corporation expects to complete additional acquisitions in 2017;
  • That the acquisition of Impact will be completed as disclosed;
  • The Corporation's ability to win potential acquisitions over competing sources of investment, including, but not limited to, private equity; and
  • That DLC, Club 16 and Impact will distribute cash to the Corporation as expected or at all.

Such forward-looking information is based on a number of assumptions which may prove to be incorrect. Assumptions have been made with respect to the following matters, in addition to any other assumptions identified in this document:

  • The Corporation being able to source and negotiate transactions on acceptable terms and in a timely manner;
  • That the Impact transaction closes as disclosed;
  • That the Board of Directors for each of the investee entities resolves to distribute cash as expected; and
  • That the business of DLC, Club16 and Impact will not suffer any material adverse changes.

Although the Corporation believes that the expectations reflected in such forward-looking information are reasonable, undue reliance should not be placed on them as the Corporation can give no assurance that such expectations will prove to be correct. Forward-looking information is based on expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Corporation and described in the forward-looking information. The material risks and uncertainties include, but are not limited to:

  • The Corporation not being able to complete the Impact transaction on acceptable commercial terms as contemplated;
  • The adequacy of the Corporation's existing resources to complete additional potential transactions;
  • The return for any acquisition not being as expected by the Corporation post-closing; and
  • Incremental risks associated with any additional investee company, as well as the risks associated with the industries in which additional investees operate.

The foregoing list of risks is not exhaustive. For more information relating to risks, see the section titled "Risk Factors" in the Corporation's current annual information form. The forward-looking information contained in this document is made as of the date hereof and, except as required by applicable securities law, the Corporation undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise.

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