TORONTO, CANADA – April 2, 2018 – Difference Capital Financial Inc. (“DCF” or the “Company”) (TSX:DCF) (TSX:DCF.DB), today reported its financial results for third quarter ended December 31, 2017.
Full Year and Fourth Quarter 2017 Financial Highlights
- The portfolio produced a gross gain of $5.5 million for the fourth quarter and $4.8 million for the full year 2017, primarily driven by write-ups in U.S. real estate and Thunderbird Entertainment Inc. (“Thunderbird”) investments plus mark-to-market gains on publicly traded positions, partially offset by fair value losses on a few private positions. Also included in, and partially offsetting, the full year gain was an unrealized loss on foreign exchange of $0.8 million.
- Net asset value per share as of December 31, 2017 is $7.74. This compares to $7.04 at September 30, 2017, and $7.89 at December 31, 2016.
- Net income for the fourth quarter was $4.0 million or $0.69 per share and net loss for 2017 was $1.2 million or $0.20 per share compared to a net loss of $6.2 million or $1.06 per share for fourth quarter of 2016 and a loss of $12.9 million or $2.20 per share for the year 2016.
- Cash at the end of December 31, 2017 was approximately $9.3 million.
2018 Dispositions and Cash Resources
- As announced on March 28, 2018, the Company sold its indirect stake in the 618 acre undeveloped land known as the Eagle in Rancho Mirage, California for initial gross proceeds of approximately $14.3 million.
- The Company also sold its common and preferred shares in Thunderbird in March 2018, generating net proceeds of $5.75 million.
- Consolidated cash, cash equivalents, and distributions receivable as at today’s date stand at $26.2 million. This compares to the outstanding maturity value of the Company’s 8% July 31, 2018 unsecured convertible debentures (the “Debentures”) of $29.2 million.
|(figures are in $’000 except per share amounts and shares outstanding)||Q4 2017||FY 2017||Q4 2016||FY 2016|
|Net realized gain (loss) on investments and marketable securities||$5,201||3,202||(4,566)||(6,639)|
|Total Portfolio Contribution||5,499||4,813||(4,116)||(5,098)|
|Total expenses and financing costs||(1,472)||(5,994)||(2,128)||(7,836)|
|Net income (loss)||4,027||(1,811)||(6,244)||(12,934)|
|Earnings (loss) per share||$0.69||($0.20)||($1.06)||($2.20)|
|Net asset value||45,038||46,228|
|Net asset value per share¹||$7.74||$7.89|
The Company’s portfolio strategy of investing in later-stage private growth companies was partially predicated on an occasional initial public offering (“IPO”) window opening up to facilitate dispositions. While 2017 saw a better market than 2016 for IPOs in general industries, the number of IPOs in our focus segments of technology and media was very limited. This may be due to prevailing public market conditions, but also the significant availability of private capital that enables growth companies to stay private longer.
Management continues to believe that a number of the Company’s private investments are well positioned for potential liquidity events in the next few years. Several of our investments have attracted significant investment from global investors and are well capitalized to pursue their growth plans.
Net loss for the year ended December 31, 2017 was $1.2 million, or $0.20 per share compared to a net loss of $12.9 million, or $2.20 per share for the year ended December 31, 2016.
For the year ended December 31, 2017, the Company had a net gain on investments of $3.2 million. This gain was comprised of write-ups in the Company’s US real estate investment of $2.5 million, Thunderbird private investment of $0.6 million and mark-to-market gains of about $4.0 million on publicly listed positions, including Mogo Technologies Inc. These gains were offset by fair value losses of about $3.2 million on a few private company investments and an unrealized loss on foreign exchange of $0.8 million. In addition, other income (dividends and coupons) from the portfolio was $1.6 million for the year, resulting in a total portfolio contribution of $4.8 million in 2017.
For the fourth quarter ended December 31, 2017, the Company had a net gain on investments of $5.2 million. This gain was comprised primarily of write-ups in the Company’s U.S. real estate investment of $3.3 million, Thunderbird private investment of $0.6 million, and mark-to-market gains of about $2.9 million on publicly listed positions, including Mogo Technologies Inc. These gains were offset by fair value losses of about $1.6 million on private company investments. In addition, other income (dividends and coupons) from the portfolio was $0.3 million for the year, resulting in a total portfolio contribution of $5.5 million in the quarter.
Total expenses for the year ended December 31, 2017 were $6.0 million, compared to $7.8 million for the year ended December 31, 2016. The significant components of expenses were as follows:
- Financing costs for the year ended December 31, 2017 were $3.2 million compared to $3.6 million in 2016, as the Company continued to take steps to reduce its Debentures outstanding.
- Compensation expense for the year ended December 31, 2017 was $1.3 million versus $2.9 million in 2016 as head count was down in 2017, as was the non-cash expense for options issued in 2016.
We continue to believe our $67 million portfolio of late stage private and early stage public technology, media and healthcare companies is well positioned for growth and liquidity events. Technology investments like Mogo Technologies, Vision Critical, Vena Solutions, Ethoca, and Hootsuite are all seeing strong growth and are well-funded. Our media investments like Blue Ant Media are well positioned in a rapidly digitizing media market, and our medical device companies like Cardiac Dimensions and Brainscope are well along the path of commercialization.
As we look ahead to the remainder of 2018, we are primarily focused on the overall liquidity of the balance sheet. We will continue to seek opportunities to prudently monetize investments and generate cash, and refinance a portion of our debt if necessary, to meet our Debenture repayment obligations. We are not expecting any immediate IPO exits or M&A trade sales from our portfolio, however, secondary sales remain a possibility.
Following the recent sales of our U.S. real estate investment and Thunderbird securities, our consolidated cash, cash equivalents and distributions receivable is currently $26.2 million. We are working towards being in a position to fully pay for all maturing Debentures and anticipate redeeming a significant proportion of the Debentures prior to maturity. The final determination with respect to any such redemptions, the timing, and the amounts thereof, will be made in due course and announced in a dedicated press release at such time.
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 https://www.differencecapital.com and on SEDAR at https://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,” “will seek,” “towards,” 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.
Chief Executive Officer
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