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AGF Management Limited Reports Second Quarter 2020 Financial Results

June 24, 2020

TORONTO, June 24, 2020 (GLOBE NEWSWIRE) --

  • Reported assets under management of $36.3 billion
  • Private alternatives AUM increased 5.4% in the quarter to $2.9 billion
  • Reported diluted EPS of $0.07 for the second quarter of 2020

AGF Management Limited (AGF or the Company) (TSX: AGF.B) today announced financial results for the second quarter ended May 31, 2020.

AGF reported total assets under management (AUM) of $36.3 billion compared to $38.3 billion in the same period in 2019. Average daily mutual fund AUM decreased to $17.4 billion compared to $19.2 billion in the same period in 2019 driven by recent market volatility. Ending mutual fund AUM was $18.3 billion. AUM related to AGF’s private alternative business increased 31% to $2.9 billion compared to $2.2 billion in the same period of 2019. 

In an uncertain environment AGF’s mutual funds held up well against the industry, reporting net redemptions of $93.0 million compared to net redemptions of $498.0 million in Q2 2019. Excluding net flows from institutional clients invested in mutual funds, net redemptions were $169.0 million in the comparative period of 2019. Eight of ten AGFiQ ETFs listed in Canada have outperformed their peers year-to-date1. Further, four of six ETFs listed in the U.S. have also outperformed peers year-to-date2.  On the private alternative side, InstarAGF announced the final close of InstarAGF Essential Infrastructure Fund II (Fund II) with USD$1.2 billion in assets.  Fund II follows InstarAGF’s Essential Infrastructure Fund I, which closed in 2017 with C$740.0 million in assets.

“During a challenging quarter, we continued to execute against our strategy and stated goals,” said Kevin McCreadie, Chief Executive Officer and Chief Investment Officer, AGF. “We announced significant progress in the merger between Smith & Williamson and Tilney with a revised transaction structure and we saw continued growth in the private alternatives space as market dynamics continue to drive assets into differentiated products that provide negative correlation, enhance returns and increase income levels.”

Business Highlights:

  • On June 1, AGF confirmed that a revised transaction structure has been agreed for the proposed merger between Tilney and Smith & Williamson (S&WHL).
  • InstarAGF Asset Management Inc. announced the final closing of Fund II, with approximately USD$1.2 billion in aggregate equity commitments.
  • AGF is a finalist at the annual Wealth Professional Awards in four categories: CEO of the Year, Fund Provider of the Year, Employer of Choice and ETF Champion of the Year.
  • During the quarter, AGF announced a number of changes and enhancements to its product suite, including fund mergers, a decrease in risk ratings and a name change.
  • AGF has been hosting a weekly market call since the week of March 15th with consistent attendance of over 750+ attendees and a steady growth of institutional attendees week-over-week.
  • Nearly all of AGF’s global staff worked from home this quarter with no interruptions to business operations. AGF employees have proven they can effectively work from home and their engagement remains high as they have embraced technology, finding efficiency and benefits in this environment.

“Through this time of great uncertainty, we remain focused on providing the best possible stewardship of the investments entrusted to our care and to providing an exceptional client experience strengthened by our digital transformation initiatives. Looking ahead, our executive team has turned our attention to refining our back-to-office plan and have identified a number of guiding principles to ensure our employee physical and mental health continues to guide our decision-making processes,” added McCreadie.

For further information on AGF’s pandemic response plan statement visit AGF.com.

Financial Highlights:

  • ?Income for the three months ended May 31, 2020 was $89.0 million, compared to $109.8 million for the three months ended May 31, 2019. During the current period, no earnings from S&WHL were recognized, the investment is now accounted for as a held for sale asset, as compared to equity earnings of $6.5 million recorded in the three months ended May 31, 2019.
  • Selling, general & administrative (SG&A) for the three months ended May 31, 2020 declined $8.4 million or 17.3% to $40.2 million compared to $48.6 million in prior year comparative period.
  • Excluding the impact of the change in accounting related to S&WHL, EBITDA before commissions was $21.2 million for the three months ended May 31, 2020, compared to $22.7 million ($23.9 million adjusted for IFRS 16) for the same period in 2019.
  • Diluted earnings per share (EPS) for the three months ended May 31, 2020 was $0.07, compared to $0.14 ($0.15 adjusted for IFRS 16) for the comparative period in prior year.
  • Excluding the impact of the change in accounting related to S&WHL, EPS for the three months ended May 31, 2020 was $0.07 as compared to $0.06 ($0.07 adjusted for IFRS 16) for the three months ended May 31, 2019.
  • For the three months ended May 31, 2020, AGF declared an eight cent per share dividend on Class A Voting common shares and Class B Non-Voting shares payable on July 20, 2020 to shareholders on record as at July 10, 2020.
  • With the announcement of the final closing of Fund II, AGF’s private alternative AUM is $2.9 billion as at May 31, 2020, a 31% increase as compared to May 31, 2019.  AGF continues to focus on growing the alternative business, with a target of $5 billion in AUM by 2022. Since inception, AGF’s long-term seed investments in the alternative platform have produced gross internal rates of return in excess of 12%.
  • Based on the terms of the revised transaction structure for the sale of AGF’s ownership in S&WHL, the Company estimates that it will receive total cash of approximately £177 million (approximately C$297 million3), excluding tax and one-time expenses subject to closing adjustments. Net cash received after tax and one-time expenses will be approximately £164 million (approximately C$275 million3). Total cash includes dividends and distributions of up to £28 million (approximately C$47 million3) comprised of an interim dividend of £2.7 million (C$4.5 million) that was received on February 7, 2020, an interim dividend of approximately £5 million (approximately C$9 million3) payable on June 26, 2020 and, immediately before closing, an estimated special distribution of approximately £20 million (approximately C$33 million3). On closing, AGF is expected to receive cash proceeds of approximately £149 million (approximately C$250 million3) compared to a book value as at May 31, 2020 of $145.4 million. AGF has entered into a forward contract to secure AGF’s cash consideration at an exchange rate of 1.68. The forward contract expires on November 30, 2020. The revised transaction structure is subject to regulatory and shareholder approvals.
             
 (from continuing operations)Three months endedSix months ended
   May 31,  February 29,  May 31,  May 31,  May 31,  
 (in millions of dollars, except per share data) 2020  2020  2019  2020  2019  
             
 Income           
 Management, advisory, administration fees and           
 deferred sales charges$88.8 $99.4 $101.1 $188.2 $193.7  
 Share of profit of joint ventures 0.6  0.1  0.1  0.7  0.2  
 Share of profit of associate (S&WHL)  –   –  6.5   –  10.9  
 Dividend Income (S&WHL)  –  4.5   –  4.5   –  
 Fair value adjustments and other income (loss) (0.4) 2.7  2.1  2.3  10.0  
 Total Income 89.0  106.7  109.8  195.7  214.8  
             
 Selling, general and administrative 40.2  45.3  48.6  85.5  96.6  
             
 EBITDA before commissions4 21.2  30.2  29.2  51.3  42.1  
 Adjusted EBITDA before commissions4 21.2  30.2  30.4  51.3  58.8  
             
 Net income 5.3  10.8  11.5  16.1  11.3  
 Adjusted net income 5.3  10.8  11.7  16.1  22.8  
             
 Diluted earnings per share 0.07  0.13  0.14  0.20  0.14  
             
 Adjusted diluted earnings per share4 0.07  0.13  0.15  0.20  0.28  
             
 Free Cash Flow4 6.1  14.5  8.2  20.6  24.8  
 Dividends per share 0.08  0.08  0.08  0.16  0.16  
 Long-term debt 199.9  216.9  168.7  199.9  168.7  
             
             
 (end of period)Three months ended
   May 31,  February 29,  November 30,  August 31,  May 31,  
 (in millions of dollars) 2020  2020  2019  2019  2019  
             
 Mutual fund assets under management (AUM)5$18,259 $18,492 $19,346 $18,839 $18,725  
 Institutional, sub-advisory and ETF accounts AUM 9,591  10,313  10,755  10,391  11,712  
 Private client AUM 5,624  5,905  6,100  5,778  5,722  
 Private alternatives AUM6 2,862  2,716  2,580  2,413  2,179  
 Total AUM, including private alternatives AUM 36,336  37,426  38,781  37,421  38,338  
             
 Net mutual fund redemptions5 (93) (344) (181) (103) (498) 
 Average daily mutual fund AUM5 
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