Clarke Inc. · TSX:CKI
Clarke — Beacon Securities 17th Annual Atlantic Canadian Investment Seminar 2007
48 slides from Clarke's conference presentation, Sep 13, 2007
Slide 1: Beacon Securities 17th Annual Atlantic Canadian Investment Seminar
Beacon Beacon Securities Securities Limited Limited th Annual 17th 17 Annual Atlantic Atlantic Canadian Canadian Investment Investment Seminar Seminar Seizing opportunities beneath the surface Neil Morley, Chief Financial Officer • Matthew Towns, Director of Research September 13-15, 2007 focus. val
Slide 2: Caution Regarding Forward Looking Statements
Caution Regarding Forward Looking Statements This presentation may contain forward-looking statements related to expected future events and financial and operating results of Clarke that involve risks and uncertainties. Forward-looking statements, which include the use of words such as “expect”, “an
Slide 3: Agenda
Agenda 1. 1. Clarke Clarke –– Yesterday Yesterday 2. 2. Clarke Clarke -- Today Today 3. 3. Financial Financial Review Review 4. 4. Investment Investment Review Review 5. 5. Outlook Outlook focus. value. growth.
Slide 4: What Clarke Was
What Clarke Was ø Largest Canadian-based intermodal marketer in North/South freight segment ø CN’s largest intermodal strategic partner ø Adopted an expensive, non-capital intensive strategy using leasing and independent brokers for road transport business ø Revenue driven vs. bottom line oriented ø
Slide 5: What We Changed
What We Changed ø Complete revamp of executive team ø Significant board changes ø Ownership interest aligns board with public shareholders ø Relentless focus on creating shareholder value ø Investing in underperforming or undervalued assets or companies ø Becoming actively involved where management
Slide 6: Clarke Culture: Defined Approach to Selecting and Managing Investments
Clarke Culture: Defined Approach to Selecting and Managing Investments Approach to making and managing investments defined by our President and CEO, George Armoyan ø Selecting investments ø Strong preference for businesses with tangible assets ø Proven ability to identify turnaround opportunities ø
Slide 7: Investment - Key Engine of Growth
Investment - Key Engine of Growth EBITDA from continuing operations 2005 2006 22.9 22.4 0 3.9 0.6 1.3 1.3 8.7 $ millions Freight Transportation Segment 8% Warehouse Segment Investment Segment Other focus. value. growth.
Slide 8: Clarke Inc… Not Just A Trucking Company Anymore
CLARKE INC… Not Just A Trucking Company Anymore Clarke Inc. is now an activist, catalyst investment company with a wide variety of business investments in such areas as Transportation, Real Estate and Information Technology. FREIGHT FREIGHTTRANSPORTATION TRANSPORTATIONSERVICES SERVICES CORPORATE COR
Slide 9: Results of Our Investment Strategy
Results of Our Investment Strategy Share Price Performance Since IPO $12.00 November 2006 $115.0 million convertible debenture offering $10.00 December 2005 December 2001 $70.0 million convertible George Armoyan is $8.00 debenture offering Share Price (C$) appointed to the Board of Directors August
Slide 10: Financial Review
Seizing opportunities beneath the surface Financial Review Fiscal 2006 In Review focus. value. growth.
Slide 11: Annual Highlights
Annual Highlights Fiscal Fiscal 2006 2005 SALES REVENUE $182.6 $199.0 REALIZED GAINS & INVESTMENT INCOME $ 25.6 $ 2.4 EBITDA $ 34.9 $ 26.1 INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY IN $ 23.4 $ 13.4 EARNINGS OF SIGNIFICANTLY INFLUENCED INVESTMENTS ($ MILLIONS) focus. value. gro
Slide 12: Per Share Results
Per Share Results Fiscal Fiscal 2006 2005 EPS from continuing operations Basic EPS $ .67 $ .66 Basic EPS (excluding impact of sale of ATS) $ .67 $ .49 Diluted EPS $ .57 $ .66 Diluted EPS (excluding impact of sale of ATS) $ .57 $ .49 Basic EPS $ .67 $ .69 Diluted EPS $ .57 $ .69 Note: figures adjuste
Slide 13: Investment Segment: Key to Delivering Value
Investment Segment: Key to Delivering Value ø Simply stated, our investment strategy is driving our success ø Portfolio increased by 276% ø Market value of $179.6 million at end of 2006, vs. $47.7 million at end of 2005 ø Diversified portfolio - driven by value ø 68.7% industrials at end of 2006, vs
Slide 14: Investment Portfolio
Investment Portfolio Marketable Securities 200 180 160 140 120 $ millions 100 80 60 40 20 0 2005 2006 Market Value Book Value Investment and other income (including securities gains) focus. value. growth.
Slide 15: Financial Summary 2006 vs. 2005
Financial Summary 2006 vs. 2005 Revenue Segmentation EBITDA Segmentation 64% 86% 11% 2006 2006 Total 2% Total $208.2M $34.9M 11% 1% 25% 0% 95% 87% 2005 2005 Total Total $201.4M $26.1M 5% 4% 5% 1% 3% 0% Freight Transportation Segment 8% Warehouse Segment Investment Segment Other focus. value. growth.
Slide 16: 2006: An Excellent Year
2006: An Excellent Year ø 33% return on investment, including dividends ø Outstanding performance in investment division more than compensated for challenges in warehouse and transport segments ø Solid position going forward, with investment strategy well established and results showing success ø St
Slide 17: Second Quarter Results
Second Quarter Results For First 6 Months of 2007 focus. value. growth.
Slide 18: Per Share Results
Per Share Results YTD YTD June June 2007 2006 Basic EPS $ 1.56 $ 0.35 Diluted EPS $ 0.89 $ 0.30 Weighted-average common shares outstanding 25,690 26,122 (‘000) Weighted-average diluted common shares 50,565 37,934 outstanding (‘000) focus. value. growth.
Slide 19: Financial Summary June '06 vs. June '07
Financial Summary June ‘06 vs. June ‘07 Revenue Segmentation EBITDA Segmentation 60% 83% 0% June 2007 June 2007 Total Total $65.6M $152.3M 0% 9% 36% 8% 4% 84% 75% 7% June 2006 June 2006 Total Total $101.0M $16.5M 3% 18% 12% 0% 1% Freight Transportation Segment 8% Warehouse Segment Investment Segment
Slide 20: Increasing Shareholder Liquidity and Value
Increasing Shareholder Liquidity and Value ø Second 2-for-1 Stock Split in 2 years ø Aggregate purchases under Normal Course Issuer Bids (“NCIBs”) at June 30, 2007: ø NCIB to repurchase Clarke’s common shares – 641,800 shares repurchased under this NCIB ø NCIB to repurchase Clarke’s 2012 Debentures
Slide 21: Investment Review
Seizing opportunities beneath the surface Investment Review focus. value. growth.
Slide 22: Our Investment Strategy
Our Investment Strategy øStrategic Investments ø Undervalued or underperforming companies ø Our involvement at Board level can improve performance and uncover value for shareholders øOpportunistic Investments ø Currently undervalued by market ø Potential for above average return on investment when c
Slide 23: Market Value of Marketable Securities
Market Value of Marketable Securities 300 250 200 $ millions 150 100 50 0 05 06 07 7 6 5 5 6 6 -0 -0 p-0 c-0 p-0 c-0 n- n- n- ar ar De De Ju Ju Ju Se Se M M focus. value. growth.
Slide 24: Significant Investment Transactions – so far in '07
Significant Investment Transactions – so far in ‘07 ø Halterm Income Fund - $3.4 million gain ø Spectra Premium Industries Inc. - $0.9 million gain ø Entertainment One Income Fund - $6.4 million gain ø FPI - $5.7 million gain ø Versacold - $30.5 million gain ø Sobeys - $17.9 million gain focus. valu
Slide 25: Current Investments
Current Investments* Greater Clarke on Security Than 10% Board of Ownership Directors Art in Motion Income Fund Yes Yes Granby Industries Income Fund Yes Yes Oceanex Income Fund No No Royal Host REIT Yes Yes Shermag Inc. Yes Yes TerraVest Income Fund No Yes Amisco Industries Ltd. Yes No Clearwater S
Slide 26: Versacold Income Fund Case Study
Versacold Income Fund Case Study Factors influencing Clarke’s investment in Versacold: ø Significant real estate and other tangible assets ø Many real estate assets in Western Canada – real estate boom ø Initial investment in convertible debentures provided additional security ø Unit price languishi
Slide 27: Versacold Income Fund Case Study (cont'd)
Versacold Income Fund Case Study (cont’d) $14.00 May 2007 Clarke enters into a lock-up agreement to sell August 2006 all Versacold units at $12.25 per Unit for a pre- George Armoyan joins tax gain of approximately $30.5 million July 2006 $12.00 Clarke acquires $59.3 million of Versacold Board Versac
Slide 28: Clarke Inc.: A Success Story
Clarke Inc.: A Success Story 500% Clarke Inc. ø 33% return on investment in S&P/TSX Composite Index 2006 alone, including dividends 400% ø Stock up 73% over the last 300% year, up 305% over the last 5 years(1) 200% ø EBITDA increased by 34% at 100% end of 2006 vs. end of 2005, and by 298% in the fir
Slide 29: Trading Analysis
Trading Analysis Trading Performance Since IPO Trading Stats $12.00 Share Price (August 31) $ 9.54 Share Price (C$) $8.00 Total Shares Outstanding 28.6M Market Capitalization $272.7M $4.00 Total Debt $215.6M Cash & Cash Equivalents $135.2M $0.00 Mar-98 Aug-07 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-0
Slide 30: Clarke - Outlook
Seizing opportunities beneath the surface Clarke - Outlook focus. value. growth.
Slide 31: Outlook
Outlook One overriding principle: achieving profitable growth Strong position for success ø Bottom-line driven, activist, catalyst investor ø Invest in businesses and become actively involved to improve performance ø Significant track record capitalizing on turnaround opportunities ø Strong team, ag
Slide 32: Management & Board of Directors
Management & Board of Directors MANAGEMENT BOARD OF DIRECTORS George S. Armoyan Melinda Lee Hugh K. Smith David I. Matheson, Q.C. President & Chief Vice President, Chairman, Counsel, McMillan Binch, Executive Officer Investments Clarke Inc. Mendelsohn LLP March 2003 May 2006 February 2003 January 19
Slide 33: Clarke – Share Ownership
Clarke – Share Ownership Shareholder Description Shares * % Ownership Mr. Armoyan is the President and Secretary of Geosam Investments Ltd. 4,927,000 17.14% Geosam Investments Limited Michael Andlauer Clarke Inc. Board Member 3,441,276 11.97% Scotia Learning Centres Inc., a company controlled by Sco
Slide 34: Ripped from the Headlines….
Ripped from the Headlines…. Clarke Press Release Clarke Inc. Kicks Off 2007 with Investment Gains of Approximately $10 Million "We are always looking for investment prospects that will allow us to enhance shareholder value," said George Armoyan. "The approximately $10 million in gains that we have r
Slide 35: Ripped from the Headlines….
Ripped from the Headlines…. Clarke Press Release Clarke Inc. Reports Strong Fourth Quarter and Year End 2006 Results "Clarke is strongly focused on one overarching goal in all its business activities: uncovering and creating value for its shareholders. We are proud that we were able to deliver a sha
Slide 36: Ripped from the Headlines….
Ripped from the Headlines…. Beacon Securities Limited The Armoyan Effect - Increasing Shareholder Wealth Mr. Armoyan, through Clarke Inc, is known as an activist catalyst investor. He targets two kinds of companies; those for strategic investment, and those for opportunistic investment. Is there an
Slide 37: Ripped from the Headlines….
Ripped from the Headlines…. The Globe & Mail Successful contrarian turns sights on oil field services George Armoyan, CEO of Clarke Inc., is looking at trusts battered by the plunge in drilling activity and he has the cash to make a big move. “We have to try to make sure there’s not too much exubera
Slide 38: Ripped from the Headlines….
Ripped from the Headlines…. Clarke Press Release Clarke Inc. to Realize $17 million in Gain On Investment in Sobeys “This $17 million gain illustrates the benefit of the opportunistic arm of our investment strategy,” said George Armoyan. “Our investment in Sobeys is a perfect example of this strateg
Slide 39: Ripped from the Headlines….
Ripped from the Headlines…. Clarke Press Release Clarke Inc. Realizes $12.1 million in Gains on Investments at the beginning of Q2 "These gains illustrate our ongoing focus on creating value for our shareholders through strategic investments", said George Armoyan, "Clarke has a good track record on
Slide 40: Ripped from the Headlines….
Ripped from the Headlines…. The Halifax Herald Clarke Inc.’s easy money "We are pleased to have been directly involved in the strategic process that resulted in the Versacold takeover bid," Mr. Armoyan, also president and CEO of Clarke, said in a release Tuesday. "Clarke has once again acted as a ca
Slide 41: Ripped from the Headlines….
Ripped from the Headlines…. The Globe & Mail The Armoyan effect: Serial winning Clarke's biggest gain - about $17-million before taxes - will soon come from an unusual investment for him: an undisclosed two-month investment in grocery giant Sobey's Inc., which is now being privatized by Empire Co. L
Slide 42: Ripped from the Headlines….
Ripped from the Headlines…. The Globe & Mail Activist Armoyan moves on Granby Industries Income Fund Activist investor George Armoyan staged another successful proxy battle Wednesday by gaining control of the board at Granby Industries Income Fund. May 2007 focus. value. growth.
Slide 43: Ripped from the Headlines….
Ripped from the Headlines…. The Globe & Mail The Armoyan effect: Serial winning Oscar Belaiche of Toronto-based Goodman & Co. is a fan of Mr. Armoyan. "We have invested in his company and, at times, we have bought into some of his ideas." The portfolio manager has profited by following Mr. Armoyan i
Slide 44: Ripped from the Headlines….
Ripped from the Headlines…. Clarke Press Release Clarke Inc. stock split reflected in share price "We are pleased to have been able to split our stock twice in just over a year, on the strength of our continuing growth," said George Armoyan, President and CEO of Clarke. "We are firmly committed to c
Slide 45: Ripped from the Headlines….
Ripped from the Headlines…. Clarke Press Release Q2 2007 results: …stronger than any previous 12-month period in Clarke history "Our disciplined investment strategy is the cornerstone of our growth - in the second quarter of 2007, our Investment Segment delivered more than a thousand per cent increa
Slide 46: Ripped from the Headlines….
Ripped from the Headlines…. The Globe & Mail Armoyan buying oil and gas service shares Clarke Inc. has been taking advantage of market jitters to buy shares in oil and gas service companies, says chief executive officer George Armoyan, who is known to take positions in struggling companies and attem
Slide 47: Ripped from the Headlines….
Ripped from the Headlines…. Clarke Press Release Clarke Inc. announces investment in OFI Income Fund "At Clarke Inc., our investment team is always pursuing strategic and opportunistic investments that will continue to grow Clarke's business and profitability," said George Armoyan, President and CEO
Slide 48: Thank You
Thank You For more information about Clarke Inc.: ø Visit our website at www.clarkeinc.com focus. value. growth.
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