MANAGEMENT'S REPORT
The accompanying consolidated financial statements of Clairvest Group Inc. were prepared by management, which is responsible for the integrity and fairness of the financial information presented. These consolidated financial statements are prepared in accordance with International Financial Reporting Standards. The financial information contained elsewhere in the annual report has been reviewed to ensure consistency with the consolidated financial statements.
Management maintains a system of internal accounting controls designed to provide reasonable assurance that assets are safeguarded, that transactions are properly authorized and that financial records are properly maintained to facilitate the preparation of consolidated financial statements in a timely manner. Under the supervision of management, an evaluation of the effectiveness of the Company's internal control over financial reporting was carried out for the year ended March 31, 2024. Based on that evaluation, management concluded that the Company's internal control over financing reporting was effective for the year ended March 31, 2024.
The Board of Directors carries out its responsibility for the consolidated financial statements in this annual report principally through its Audit Committee. The Audit Committee, which comprised three non-management Directors during the year ended March 31, 2024, meets periodically with management and with external auditors to discuss the scope and results with respect to financial reporting of the Company. The Audit Committee has reviewed the consolidated financial statements with management and with the independent auditors. The consolidated financial statements have been approved by the Board of Directors on the recommendation of the Audit Committee.
Ernst & Young LLP, appointed external auditors by the shareholders, have audited the consolidated financial statements and their report is included herewith.
Ken Rotman | Daniel Cheng |
Chief Executive Officer | Chief Financial Officer |
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INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF CLAIRVEST GROUP INC.
OPINION
We have audited the consolidated financial statements of Clairvest Group Inc. and its subsidiaries [the "Company"], which comprise the consolidated statements of financial position as at March 31, 2024 and 2023, and the consolidated statements of comprehensive income, consolidated statements of changes in shareholders' equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at March 31, 2024 and 2023, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards ["IFRSs"].
BASIS FOR OPINION
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the consolidated financial statements of the current period. These matters were addressed in the context of the audit of the consolidated financial statements as a whole, and in forming the auditor's opinion thereon, and we do not provide a separate opinion on these matters. For the matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report, including in relation to this matter. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matter below, provide the basis for our audit opinion on the accompanying consolidated financial statements.
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INDEPENDENT AUDITOR'S REPORT
Key audit matter | How our audit addressed the key audit matter |
Fair value measurement of corporate investments based on unobservable inputs
The Company describes its critical accounting estimates, assumptions and judgment in relation to the fair value measurement of financial instruments in note 2 to the consolidated financial statements. As disclosed in note 18 to the consolidated financial statements, the Company has corporate investments of $870.7 million recorded at fair value. Of these, $787.6 million relates to corporate investments where fair value is based on unobservable inputs and are classified as Level 3 financial instruments within the fair value hierarchy.
Auditing the fair value of Level 3 corporate investments requires the application of significant auditor judgment in assessing the valuation techniques and unobservable inputs utilized by the Company. Certain valuation inputs used to determine fair value that may be unobservable include the multiple of earnings before interest, taxes, depreciation and amortization ["EBITDA"] or revenue and the estimated adjusted EBITDA or revenue. The use of different valuation techniques and assumptions could produce significantly different estimates of fair value.
Our audit procedures included, among others, evaluating the Company's valuation techniques and testing the significant inputs and assumptions utilized by the Company, including related disclosures. With the assistance of our valuation specialists, we evaluated the Company's valuation techniques and assessed whether these valuation techniques were reasonable based on the characteristics of the investee company, such as the operations, industry sector and market activity. We also assessed whether the unobservable inputs and assumptions identified by the Company are relevant and provided a reasonable basis for the fair value measurement.
The most significant and judgmental unobservable inputs impacting the fair value measurement are the multiple of EBITDA or revenue and the estimated adjusted EBITDA or revenue for the relevant investee company. Our audit procedures included, among others:
- Where the multiple of EBITDA or revenue is based on public guideline companies, we reviewed business descriptions of guideline companies selected by management and evaluated if they were reasonable based on the business of the investee company. Where applicable, we performed an independent search for additional guideline companies to benchmark and incorporate trends in the broader industry that impact the fair value measurement.
- Where the multiple of EBITDA or revenue is based on a multiple at which the Company invested in the investee company, on follow-on investments or financings, or on partial realization in the investee company, we re- calculated the multiple using the transaction details and assessed whether the transaction continued to be representative of fair value.
- We assessed the estimated adjusted EBITDA or revenue based on recent financial information of the investee company, including the most recent audited financial statements, where applicable.
- Our assessment of the multiple of EBITDA or revenue and estimated adjusted EBITDA or revenue was also based on certain qualitative factors, including the size and stage of the investee company, nature of business of guideline companies compared to the investee company, developments of the investee company, current economic environment and any relevant subsequent events.
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INDEPENDENT AUDITOR'S REPORT
OTHER INFORMATION
Management is responsible for the other information. The other information comprises:
- Management's Discussion and Analysis
- The information, other than the consolidated financial statements and our auditor's report thereon, in the Annual Report
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED FINANCIAL STATEMENTS
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
AUDITORS' RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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INDEPENDENT AUDITOR'S REPORT
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's report is Gregory Murphy.
Toronto, Canada
June 26, 2024
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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at March 31
$000s | 2024 | 2023 | ||
ASSETS | ||||
Cash and cash equivalents (notes 3 and 14) | $ | 145,138 | $ | 217,870 |
Temporary investments (note 3) | 185,055 | 172,962 | ||
Accounts receivable and other assets (note 10(g)) | 47,809 | 65,727 | ||
Loans receivable (note 10(f)) | 13,668 | 24,350 | ||
Income taxes recoverable | 21,496 | 1,142 | ||
Carried interest from Clairvest Equity Partners III and IV (note 7) | 52,188 | 49,314 | ||
Corporate investments (note 5) | 870,660 | 891,709 | ||
Fixed assets (note 8) | 6,125 | 6,577 | ||
$ | 1,342,139 | $ | 1,429,651 | |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Liabilities | ||||
Accounts payable and accrued liabilities (notes 10(i) and 16(e)) | $ | 16,232 | $ | 13,834 |
Income taxes payable | - | 25,201 | ||
Derivative instruments liability (note 15) | 2,622 | 7,077 | ||
Accrued compensation expense (notes 13 and 16(b)) | 14,581 | 17,024 | ||
Share-based compensation (note 13) | 53,302 | 74,269 | ||
Management participation from Clairvest Equity Partners III and IV (note 7) | 41,506 | 38,365 | ||
Deferred income tax liability (note 11) | 37,599 | 36,154 | ||
$ | 165,842 | $ | 211,924 | |
Contingencies, commitments and guarantees (note 16) | ||||
Shareholders' equity | ||||
Share capital (note 12) | $ | 78,762 | $ | 80,642 |
Retained earnings | 1,097,535 | 1,137,085 | ||
1,176,297 | 1,217,727 | |||
$ | 1,342,139 | $ | 1,429,651 |
See accompanying notes
On behalf of the Board:
B. JEFFREY PARR | MICHAEL BREGMAN |
Vice Chairman | Chairman |
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the years ended March 31
$000s (except per share information) | 2024 | 2023 | ||
REVENUE | ||||
Net investment loss (notes 4 and 5) | $ | (19,385) | $ | (62,150) |
Distributions and interest income (notes 5, 6 and 10) | 32,778 | 160,941 | ||
Carried interest from Clairvest Equity Partners III and IV (note 7) | 3,700 | 14,258 | ||
Dividend income | 2,833 | 2,295 | ||
Management fees (note 6) | 12,486 | 12,409 | ||
Advisory and other fees (note 10(h)) | 4,239 | 2,430 | ||
36,651 | 130,183 | |||
EXPENSES | ||||
Employee compensation and benefits (notes 13 and 16(b)) | 34,797 | 15,496 | ||
Share-based compensation expenses (recovery) (note 13) | (5,367) | 28,578 | ||
Administration and other expenses | 4,908 | 12,634 | ||
Finance and foreign exchange expenses (recovery) | 1,932 | (1,577) | ||
Management participation from Clairvest Equity Partners III and IV (note 7) | 3,554 | 11,368 | ||
39,824 | 66,499 | |||
Income (loss) before income taxes | (3,173) | 63,684 | ||
Income tax expense (note 11) | 180 | 11,315 | ||
Net income (loss) and comprehensive income (loss) for the year | $ | (3,353) | $ | 52,369 |
Basic and fully diluted net income (loss) and comprehensive income (loss) per | $ | (0.23) | ||
share (note 12) | $ | 3.48 |
See accompanying notes
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the years ended March 31
Total | ||||||
shareholders' | ||||||
$000s | Share capital | Retained earnings | equity | |||
As at April 1, 2023 | $ | 80,642 | $ | 1,137,085 | $ | 1,217,727 |
Changes in shareholders' equity | ||||||
Net loss and comprehensive loss for the year | (3,353) | (3,353) | ||||
Dividends declared ($0.8105 per share) | (12,177) | (12,177) | ||||
Purchase and cancellation of shares (note 12) | (1,880) | (24,020) | (25,900) | |||
As at March 31, 2024 | $ | 78,762 | $ | 1,097,535 | $ | 1,176,297 |
As at April 1, 2022 | $ | 80,794 | $ | 1,098,293 | $ | 1,179,087 |
Changes in shareholders' equity | ||||||
Net income and comprehensive income for the year | 52,369 | 52,369 | ||||
Dividends declared ($0.7833 per share) | (11,789) | (11,789) | ||||
Purchase and cancellation of shares (note 12) | (152) | (1,788) | (1,940) | |||
As at March 31, 2023 | $ | 80,642 | $ | 1,137,085 | $ | 1,217,727 |
See accompanying notes |
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CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended March 31
$000s | 2024 | 2023 | ||
OPERATING ACTIVITIES | ||||
Net income (loss) and comprehensive income (loss) for the year | $ | (3,353) | $ | 52,369 |
Add (deduct) items not involving a current cash outlay: | ||||
Amortization of fixed assets | 1,306 | 1,170 | ||
Share-based compensation (recovery) | (5,367) | 28,578 | ||
Deferred income tax expense (recovery) | 1,445 | (23,107) | ||
Net investment loss | 19,385 | 62,150 | ||
Carried interest and management participation from Clairvest Equity Partners III and IV | 267 | (2,450) | ||
Non-cash items relating to foreign exchange forward contracts | (384) | 13,294 | ||
Non-cash items relating to corporate investments | 3,018 | (6,978) | ||
16,317 | 125,026 | |||
Adjustments for: | ||||
Net cost on acquisition of temporary investments | (8,691) | (49,096) | ||
Net loans repaid by acquisition entities or the CEP Funds (note 10(f)) | 10,682 | 23,305 | ||
Cost of settlement of realized foreign exchange forward contracts | (4,071) | (2,995) | ||
Investments made in investee companies or acquisition entities | (40,770) | (91,296) | ||
Distribution or return of capital from investee companies or acquisition entities | 36,014 | - | ||
Settlement of share-based compensation liability | (15,600) | (16,317) | ||
(22,436) | (136,399) | |||
Net change in non-cash working capital balances related to operations (note 14) | (27,682) | 25,007 | ||
Cash provided by (used in) operating activities | (33,801) | 13,634 | ||
INVESTING ACTIVITIES | ||||
Purchase of fixed assets | (854) | (452) | ||
Cash used in investing activities | (854) | (452) | ||
FINANCING ACTIVITIES | ||||
Cash dividends paid | (12,177) | (11,789) | ||
Purchase and cancellation of shares (note 12) | (25,900) | (1,940) | ||
Cash used in financing activities | (38,077) | (13,729) | ||
Net decrease in cash during the year | (72,732) | (547) | ||
Cash and cash equivalents, beginning of year | 217,870 | 218,417 | ||
Cash and cash equivalents, end of year (note 14) | $ | 145,138 | $ | 217,870 |
SUPPLEMENTAL CASH FLOW INFORMATION | ||||
Interest received | $ | 20,959 | $ | 11,262 |
Distributions received (notes 5 and 10) | $ | 52,571 | $ | 150,257 |
Income taxes paid | $ | 44,286 | $ | 5,866 |
Interest paid | $ | 776 | $ | 770 |
See accompanying notes
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024 and 2023 (tabular dollar amounts in thousands, except per share information)
1. NATURE OF ACTIVITIES
Clairvest Group Inc. ("Clairvest" or the "Company") is a private equity management firm that specializes in partnering with management teams and other stakeholders of both emerging and established companies. The Company's shares are traded on the Toronto Stock Exchange ("TSX") under the symbol CVG. The Company, which operates in only one business segment, actively seeks to form mutually beneficial investments with entrepreneurial businesses. As at March 31, 2024, Clairvest invests its own capital, and that of third parties, through the following Clairvest Equity Partnerships (the "CEP Funds"):
Clairvest Equity Partners III Limited Partnership ("CEP III")
Clairvest Equity Partners IV Limited Partnership ("CEP IV")
Clairvest Equity Partners IV-A Limited Partnership ("CEP IV-A")
Clairvest Equity Partners V Limited Partnership ("CEP V")
CEP V HI India Investment Limited Partnership ("CEP V India")
Clairvest Equity Partners V-A Limited Partnership ("CEP V-A")
Clairvest Equity Partners VI Limited Partnership ("CEP VI")
Clairvest Equity Partners VI-A Limited Partnership ("CEP VI-A")
Clairvest Equity Partners VI-B Limited Partnership ("CEP VI-B")
Clairvest Equity Partners VII Limited Partnership ("CEP VII")
Clairvest Equity Partners VII-A Limited Partnership ("CEP VII-A")
Clairvest Equity Partners VII-B Limited Partnership ("CEP VII-B")
CEP III, CEP IV and CEP IV-A are collectively herein referred to as Clairvest Equity Partners III and IV. CEP V, CEP V India, CEP V-A, CEP VI, CEP VI-A, CEP VI-B, CEP VII, CEP VII-A and CEP VII-B are collectively herein referred to as Clairvest Equity Partners V, VI and VII.
Clairvest contributes financing and strategic expertise to support the growth and development of its investee companies in order to create realizable value for shareholders.
Clairvest is incorporated under the laws of the Province of Ontario. The Company's head office is located at 22 St. Clair Avenue East, Suite 1700, Toronto, Ontario, Canada, M4T 2S3.
2. MATERIAL ACCOUNTING POLICIES Basis of presentation
The consolidated financial statements of Clairvest are prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
The Company has consistently applied the same accounting policies throughout all periods presented in these consolidated financial statements, as if these policies had always been in effect.
These consolidated financial statements and related notes of Clairvest for the years ended March 31, 2024 and 2023 ("consolidated financial statements") were authorized for issuance by the Board of Directors on June 26, 2024.
The consolidated financial statements have been presented on a historical cost basis, except for certain financial instruments that have been measured at fair value. The consolidated financial statements have been prepared on a going concern basis and are presented in Canadian dollars, which is the functional currency of the Company, and all values are rounded to the nearest thousand dollars ($000s), except where otherwise indicated.
Basis of consolidation
The consolidated financial statements have been prepared in accordance with IFRS 10, Consolidated Financial Statements ("IFRS 10"), as issued by the IASB and include the accounts of the Company and its consolidated subsidiaries. As discussed under critical accounting estimates, assumptions and judgments, the Company has determined it meets the definition of an investment entity.
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Clairvest Group Inc. published this content on 26 June 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 June 2024 22:45:18 UTC.