Introductory comments for a webcast by Kurt MacAlpine, Chief Executive Officer, CI Financial:
Good afternoon and thank you for joining me today.
As I said in the press release announcing this webcast, the last few weeks have been unprecedented, with the coronavirus having a significant impact on our society, our economy, and the global financial markets.
For today’s call, I have three primary objectives:
- Provide you with an update on the robust pandemic plan that we have in place to protect the health of our employees and clients
- Discuss our company’s financial strength and how our business is performing during this difficult time
- And most importantly, answer any questions that you might have for me.
First, on the robust pandemic plan that we have in place to protect the health of our employees and our clients.
We formed a Pandemic Response Team in early February this year, well in advance of the first case of COVID-19 in Canada and well in advance of nearly all other Canadian companies.
We started several weeks ago by implementing social distancing and other preventative measures and by providing advice around employee travel. Currently we have 95% of our employees working from home, with the remaining 5% of our employees who need to be in person to perform their duties working across five different locations with no physical interaction between these locations.
The technology that we have in place has allowed us to transition swiftly and seamlessly to a remote working environment. For the small number of employees that must come into the office to perform their duties, we are providing them with transportation assistance and meals delivered safely onsite to prevent these employees for having to enter public places during their workday.
We have replaced all in-person meetings with online meetings or conference calls and we have rescheduled all training and events.
Additionally, we asked employees to postpone all travel plans. For anyone that has travelled recently or who lives with someone that has travelled recently, we have asked them to self-quarantine for 14 days after their return.
Given how fluid the situation currently is, we are continuously monitoring the actions and recommendations in Canada and globally and our pandemic response team is connecting multiple times a day to determine if additional measures are needed.
I would now like to spend a few minutes discussing our company’s financial strength and how our business is performing during this environment.
I will start with the financial strength of our business.
During this quarter, we have used our free cash flow to buy back 4.8 million shares at historically low prices, fund our dividend, and acquire the RIA (registered investment advisor) firms that we have already announced publicly.
Despite the market impact over the past few weeks, we run the business very efficiently and are still in a place where we are generating strong free cash flow.
Looking forward, we intend to use our free cash flow in the following three areas:
- We are likely to finish our annual normal course issuer bid within the next couple of weeks. Given the extraordinary current market environment, we have submitted a formal request to the TSX asking for temporary relief of NCIB buyback limits or to allow companies to renew their NCIBs early. We are in a privileged position to have strong cash flows in this environment and we believe strongly in our corporate strategy. We always want to do right by our investors, and we would be happy to buy stock from those who are looking to exit due to the current market conditions. During the financial crisis in 2008, the TSX did make temporary adjustments to the average daily volume NCIB limits and we are optimistic that they will respond favorably to our request for temporary relief both from the daily and the aggregate annual limits. If this request is granted, we will use some, but not all, of our free cash flow to buyback additional shares.
- We will also accumulate cash and pay down debt. As you may be aware, we have $450 million in debt coming due in December and you might have questions regarding our plans for refinancing it, in the extreme event the credit markets remain tight through the remainder of the year. It is extremely important to note that we do not need to access the credit markets to refinance it, as we already have a credit facility in place for $700 million, which is well above the $450 million that we have coming due at year-end. We will use most of our cash flow to pay down debt and decrease our leverage ratio.
- We will continue to execute against our strategic priorities and reposition the company for future growth.
I would now like to provide a brief update on our flows for the year-to-date, our sales activity, and our strategy. All the information I am about to share is as of March 20, 2020.
On the sales front, our gross sales for this year are 44% ahead of last year’s, which does not include our GSFM business in Australia.
Our retail gross sales are up 46% year-to-date. And while the company is still in net redemptions, our overall net flows have improved by 13% and our retail net flows have improved by 37%.
Our wholesale sales teams have done an incredible job communicating with advisors via conference calls, which we are hosting at least twice weekly for the foreseeable future, plus numerous one-on-one interactions to provide advisors with the information and insights they need to make the best decisions for their clients.
Within our Assante and Stonegate networks, we have seen much less emotion-based selling relative to other Advisor networks. I believe this is a testament to the quality of our Advisors and the robust financial planning process they have in place with their clients.
Our strategy to reposition the company is continuing. As you will recall, these plans fall under three strategic priorities – modernizing our asset management business, expanding our wealth management platform and globalizing the firm. As we continue to execute on this strategy, we are confident that CI will emerge from the downturn an even stronger, and more competitive company.
This presentation contains forward-looking statements concerning anticipated future events, results, circumstances, performance or expectations with respect to CI Financial Corp. (“CI”) and its products and services, including its business operations, strategy and financial performance and condition. Forward-looking statements are typically identified by words such as “believe”, “expect”, “foresee”, “forecast”, “anticipate”, “intend”, “estimate”, “goal”, “plan” and “project” and similar references to future periods, or conditional verbs such as “will”, “may”, “should”, “could” or “would”. These statements are not historical facts but instead represent management beliefs regarding future events, many of which by their nature are inherently uncertain and beyond management’s control. Although management believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements involve risks and uncertainties. The material factors and assumptions applied in reaching the conclusions contained in these forward-looking statements include that the investment fund industry will remain stable and that interest rates will remain relatively stable. Factors that could cause actual results to differ materially from expectations include, among other things, general economic and market conditions, including interest and foreign exchange rates, global financial markets, changes in government regulations or in tax laws, industry competition, technological developments and other factors described or discussed in CI’s disclosure materials filed with applicable securities regulatory authorities from time to time. The foregoing list is not exhaustive and the reader is cautioned to consider these and other factors carefully and not to place undue reliance on forward-looking statements. Other than as specifically required by applicable law, CI undertakes no obligation to update or alter any forward-looking statement after the date on which it is made, whether to reflect new information, future events or otherwise.