Chesswood Group Ltd T.CHW

Chesswood Q2 Earnings

[419lornestreet9]

Out and looks good. FCF of $8.1MM is their highest since Q4 2017, which had a tax benefit from the Trump tax reforms. Basically, highest ever and poised to move even higher. Details (F/S and MD&A) have not been released yet, but stock should move higher tomorrow. This should not be a $200MM market cap company.


CHESSWOOD ANNOUNCES STRONG SECOND QUARTER 2021 RESULTS TORONTO, August 3, 2021 – Chesswood Group Limited (“Chesswood” or the “Company”) (TSX: CHW), a publically traded North American commercial equipment finance provider for small and medium-sized businesses, today reported its results for its second quarter ended June 30, 2021. Q2 2021 Highlights Gross finance receivables at quarter end of $1.24 billion, up 33% from Q1 2021 Earnings growth of 8% quarter over quarter to $0.40 per fully diluted share (despite a $2.2 million non-cash charge associated with the merger between Blue Chip and Vault Credit Corporation) Strong free cash flow generation of $8.1 million, or $0.45 per fully diluted share, in the quarter Record portfolio collections resulting in net portfolio recoveries of $1 million Closed the merger with Vault Credit Corporation creating one of Canada’s largest independent equipment finance companies “The second quarter of 2021 was further evidence of the momentum we have built across each of our business units. We saw strength in originations continue throughout Q2 along with exceptional portfolio performance” said Chesswood CEO Ryan Marr. “Our net recoveries in the quarter demonstrate the credit discipline of our portfolio team in addition to the refined collections process developed over the 30+ years of being in business.” “In addition, we closed the merger of Blue Chip Leasing (“Blue Chip”) and Vault Credit Corporation (“VCC”), creating one of Canada’s largest independent equipment finance organizations. We are excited to be working with the talented people at VCC and welcome them to the Chesswood family.” Summary of Second Quarter Results The Company reported consolidated net income of $7.8 million in the three months ended June 30, 2021 compared to net income of $1.4 million in the same period in 2020, an increase of $6.4 million year-over-year. Other than one-time charges taken in Q2 2020, better portfolio performance and strong collections are responsible for the improvement in net income. On a constant currency basis, net income would have been $1.8 million higher for the quarter (or $0.11 per share). The U.S. Equipment Finance segment (Pawnee Leasing and Tandem Finance) reported interest revenue on leases and loans of $21.6 million and ancillary and other income of $2.0 million, a total decrease of $2.5 million year on year. The decrease is a result of an increasing weighting of prime receivables and a decrease in the foreign exchange rate. The Canadian Equipment Finance segment reported interest revenue on leases and loans of $5.4 million and ancillary and other income of $1.4 million, a total increase of $3.0 million year on year. The increase is a result of a larger portfolio of receivables in our Canadian operations due to the merger of Blue Chip and VCC. Overall operating costs were up $3.9 million year over year to $13.5 million. Operating expenses were up primarily due to the merger and supporting growth in the U.S. segment, resulting in an increase in average fulltime employees for the period. Free cash flow for the period was $8.1 million, up $4.3 million from Q2 2020. The increase in free cash flow is mainly the result of net recoveries in the period, compared to net charge-offs in Q2 2020. There were also no restructuring costs, compared to $5.8 million in the second quarter of 2020 related to COVID. In addition to these items, on a constant currency basis, free cash flow would have been $1.4 million higher for the quarter. Outlook The origination pipeline remains strong as we move into Q3 for both our U.S. and Canadian business units. We see additional opportunities to enhance our balance sheet and improve our cost of funds in the second half of the year. Interest rates remain low, providing us an opportunity to further reduce funding costs. We continue to look for organic and inorganic opportunities for expansion in the Canadian and U.S. market

[Nashville35]

agree.  all looks pretty good.  continue to move Pawnee to more prime receivables , which pressures interest margin n/t but ultimately good for the stability of the business over the biz cycle.   the big story is growth in the loan book and op leverage , as well as mgmt pointing to more inorganic opportunities and ability to further lower cost of funds in the future.  

[Nashville35]

dividend policy is up to 40 percent of cash earnings, which would be $0.06 per share/month  in the latest quarter.  likely not to make changes until closer to year end but comforting nonetheless.  current div is $0.03 per month.

[419lornestreet9]

curious if anyone saw an RBC analyst update. Both Cormark and Raymond James bumped their price targets by $1.50. RBC is the only sector perform/neutral rating.