Earnings Release TORONTO, Feb. 13, 2020 (GLOBE NEWSWIRE) -- Fairfax India Holdings Corporation (TSX: FIH.U) announces fiscal year 2019 net earnings of $516.3 million ($3.30 net earnings per diluted share), compared to fiscal year 2018 net earnings of $96.4 million ($0.63 net earnings per diluted share), reflecting increased net unrealized and realized gains on investments, partially offset by increased tax expense and performance fees. The company's book value per share increased by 21.9% to $16.89 at December 31, 2019 from $13.86 at December 31, 2018, representing a compound annual growth rate of 11.2% (11.7% prior to the performance fee described below) from the initial public offering price of $10.00 per share.
Highlights for 2019 (with comparisons to 2018 except as otherwise noted) included the following:
- Net change in unrealized gains on investments of $530.4 million, principally from an increase in the fair value of the company's investments in the private companies Bangalore International Airport ("BIAL") ($751.5 million) and Sanmar common shares ($23.1 million) and an increase in the market prices of the company's investments in the public companies CSB Bank ($60.9 million) and Fairchem ($33.4 million), partially offset by a decrease in the market prices of the company's investments in the public companies IIFL Finance ($196.0 million) and IIFL Securities ($40.9 million) and a decrease in the fair value of the company's investment in the private company NCML ($41.6 million).
- As announced on December 16, 2019 the company entered into an agreement to sell an interest in Anchorage Infrastructure Investments Holdings Limited (“Anchorage”) of approximately 11.5% on a fully-diluted basis for gross proceeds of approximately 9.5 billion Indian rupees (approximately $133 million at period end exchange rates). As part of the transaction, the company will restructure its interest in BIAL such that a portion of such interest will be held through Anchorage. The transaction is subject to customary closing conditions, including various third-party consents, and is expected to close in the first half of 2020. The net change in unrealized gains on BIAL of $751.5 million are supported by positive operational developments and the finalization of BIAL's real estate development plan.
- On December 21, 2019 the company completed its previously announced transaction with Sanmar and recorded net realized gains on investments of $156.5 million ($107.8 million of which has been recognized as net unrealized gains in prior years). As part of the transaction, Sanmar redeemed $300.0 million (19.9 billion Indian rupees at transaction exchange rates) principal amount of Sanmar bonds held by the company, plus accrued interest at an effective annual interest rate of 13.0%, for net cash consideration of $425.5 million (30.3 billion Indian rupees at transaction exchange rates). The company re-invested $198.0 million (14.1 billion Indian rupees at transaction exchange rates) of the cash consideration received from the bond sale in the purchase of Sanmar common shares. Following this equity investment, the company’s equity interest in Sanmar increased to 42.9%.
- In accordance with the Investment Advisory Agreement, which provides for the payment of a performance fee of 20% of the increase in book value per share in excess of a hurdle rate of 5% per annum, a performance fee of $47.9 million was accrued to the benefit of Fairfax Financial Holdings for the period from January 1, 2018 to December 31, 2019. The performance fee, if any, will only be finally determined by December 31, 2020 at the end of the three year measurement period.
- On December 31, 2019 the company repaid a $50.0 million secured revolving credit facility with a Canadian bank.
- At December 31, 2019 common shareholders' equity was $2,577.9 million, or book value per share of $16.89, compared to $2,117.9 million, or book value per share of $13.86, at December 31, 2018, an increase of 21.9% (an increase of 24.2% prior to accounting for the performance fee recorded in 2019), primarily related to the fiscal year 2019 net earnings, partially offset by unrealized foreign currency translation losses as a result of the weakening of the Indian rupee relative to the U.S. dollar.
There were 152.6 million and 153.3 million weighted average common shares outstanding during the fourth quarters of 2019 and 2018 respectively. At December 31, 2019 there were 122,631,481 subordinate voting shares and 30,000,000 multiple voting shares outstanding.
Unaudited consolidated balance sheets, earnings and comprehensive income information follow and form part of this news release.
In presenting the company’s results in this news release, management has included book value per basic share. Book value per basic share is calculated by the company as common shareholders' equity divided by the number of common shares outstanding.
Fairfax India is an investment holding company whose objective is to achieve long term capital appreciation, while preserving capital, by investing in public and private equity securities and debt instruments in India and Indian businesses or other businesses with customers, suppliers or business primarily conducted in, or dependent on, India.