- Earnings per share of $0.56 for the quarter; comparable selling, general and administrative (“SG&A”) expenses down $17.9 million from Q2-2019
- Repurchased 2.7 million shares at a cost of $46.5 million and paid $39.0 million in dividends ($0.18 per share)
- Continued modernization of asset management business with launch of CI DoubleLine income funds and other mandates; became the first company to achieve $2 billion in AUM in growing liquid alternatives market
- Wealth management assets reached record high of $53.9 billion at quarter-end following the acquisitions of One Capital Management and Cabana Group
- Following quarter-end, announced acquisitions of Canadian advisory firm Aligned Capital and U.S. wealth firm Balasa Dinverno Foltz LLC (“BDF”); will boost CI’s wealth assets to approximately $74 billion
- Wealth transactions announced to date will result in the addition of $25 billion in new advisor assets this year vs. additions of $1 billion in fiscal 2019
TORONTO (August 6, 2020) − CI Financial Corp. (“CI”) (TSX: CIX) today released unaudited financial results for the quarter ended June 30, 2020.
“We have made tremendous strides in executing on our strategic priorities in just a few months,” said Kurt MacAlpine, CI Chief Executive Officer.
“We have announced two key acquisitions this week alone that will significantly boost our scale in wealth management – Aligned Capital Partners in Canada and BDF in the U.S. Combined with our other American acquisitions and the strong growth of Assante and CI Private Counsel, we have added $25 billion in new advisor assets for the year-to-date, compared to additions of $1 billion in 2019,” Mr. MacAlpine said.
“We have achieved strong initial momentum against our strategic priority of globalizing the company, as our U.S. acquisitions will hold a combined $14.7 billion in assets when all transactions are completed. Our total wealth assets will reach approximately $74 billion – a 58% increase over a year ago. This success has been driven by CI’s unique value proposition for advisors, who appreciate the opportunity for synergies, and our client-first approach, financial strength and strategic focus on wealth management. I expect this momentum to continue.
“We continue to modernize our asset management business, providing innovative solutions that are well-tuned to the needs of today’s investors,” Mr. MacAlpine said. “These include the launch of three mandates managed by ‘Bond King’ Jeffrey Gundlach of DoubleLine Capital, one of the world’s top investment managers. We’re also building on our leadership in liquid alternative funds, where we became the first Canadian company to manage $2 billion in assets in this new and growing market.
“It’s important to note that we are executing these important strategic initiatives while carefully managing our costs – having reduced comparable SG&A expenses by $17.9 million versus the same quarter a year ago.
“Additionally, our firm continues to perform at a very high level during the current COVID-19 pandemic, providing excellent support and service to our clients.”
CI reported earnings per share of $0.56 for the second quarter of 2020, compared to $0.55 in the previous quarter and $0.47 in the second quarter of 2019. CI also reported adjusted earnings per share1 of $0.56 for the second quarter of 2020, compared to $0.58 for each of the first quarter of 2020 and the second quarter of 2019. Adjusted earnings exclude restructuring provisions of $6.2 million ($8.5 million before taxes) and $26.6 million ($35.0 million before taxes) in the first quarter of 2020 and second quarter of 2019, respectively.
SG&A expenses for the second quarter were $109.0 million, a decline of 5% from $115.0 million in the first quarter and a decline of 14% from $124.8 million in the second quarter of 2019. This reduction was achieved despite the addition of expenses from CI’s acquisitions in the first half of this year. Comparable SG&A expenses, which exclude expenses of The Cabana Group, LLC, One Capital Management, LLC, Surevest, LLC, and the WisdomTree Canada business, were $106.9 million, down $17.9 million or 14% over the second quarter of 2019.
CI generated $128.3 million in free cash flow1 during the quarter ended June 30, 2020, compared to $143.7 million in the quarter ended March 31, 2020 and $146.5 million in the quarter ended June 30, 2019.
At June 30, 2020, total ending assets under management were $125.6 billion, an increase of $14.5 billion or 13% from March 31, 2020 and a decline of 3% from June 30, 2019. Core assets under management were $121.3 billion at June 30, 2020, representing a 9% increase from three months earlier and a decline of 7% year over year. Core assets under management exclude assets under management in CI’s recently acquired U.S. wealth management businesses. Total average assets under management were $120.1 billion for the second quarter and core average assets under management were $118.4 billion. This compares to total and core average assets under management of $127.2 billion for the first quarter of 2020 and $130.8 billion for the second quarter of 2019.
Total wealth management assets as of June 30, 2020 were $53.9 billion, which represents a record for CI and an increase of $9.3 billion or 21% over March 31, 2020 and $6.5 billion or 14% over the same quarter a year ago. Wealth management assets include the assets of Assante Wealth Management (Canada) Limited, CI Private Counsel LP, WealthBar Financial Services Inc. and Virtual Brokers in Canada, and One Capital Management, The Cabana Group and Surevest in the United States.
CI reported overall net redemptions of $1.9 billion in the second quarter. CI’s Canadian retail business, excluding products closed to new investors, had $1.0 billion in net redemptions, representing an improvement in net redemptions of $0.3 billion over the first quarter of 2020, and an improvement of $0.9 billion over the second quarter of 2019. CI’s Canadian institutional business posted net redemptions of $0.8 billion, which was driven by an institution transitioning a $0.6 billion mandate to its in-house investment team. The fees associated with this mandate were low and will have minimal impact on CI’s earnings. The institutional sales results represent no change compared to the first quarter of 2020 and an increase in redemptions of $0.4 billion from the second quarter a year ago. CI’s international business flows were flat for the second quarter of 2020. CI’s closed business, comprised primarily of segregated fund contracts that are no longer available for sale, had $0.2 billion in net redemptions for the quarter.
In the second quarter of 2020, CI repurchased 2.7 million shares at a cost of $46.5 million and paid $39.0 million in dividends ($0.18 per share). For the month of July 2020, CI repurchased a further 2.2 million shares, ending the month with 212,600,025 shares outstanding.
The Board declared a quarterly dividend of $0.18 per share, payable on January 15, 2021, to shareholders of record on December 31, 2020. The annual dividend rate of $0.72 per share represented a yield of 3.8% on CI’s closing share price of $18.95 on August 5, 2020.
During the quarter, CI completed an offering of debentures with an aggregate principal amount of $450 million. Given that CI has $450 million of debentures maturing in December, this ensures sufficient liquidity for the company in a period of market uncertainty. The newly issued debentures bear interest at a rate per annum of 3.759% and will mature on May 26, 2025. CI used a portion of the proceeds to repurchase $30 million and $26 million of the maturing debentures in June and July, respectively.
- During the quarter, CI acquired interests in three U.S. RIAs:
- CI purchased a strategic interest in Congress Wealth Management, LLC of Boston, a firm with US$2.3 billion in assets. The transaction was announced in May and closed on July 2;
- CI completed the acquisition of a strategic interest in The Cabana Group, LLC of Fayetteville, Arkansas, which has US$1.3 billion in assets under management and offers its own lineup of risk-managed portfolios; and
- CI completed the acquisition of a majority stake in One Capital Management, LLC (“OCM”) of Village, California, with approximately US$1.9 billion in assets. In addition to its well-developed specialized practices serving first responders and members of the sports and entertainment industries, OCM has a robust cross-border service.
- CI increased its ownership of WealthBar Financial Services Inc. (“WealthBar”) to 100% by acquiring the remaining 25% minority interest. This will facilitate the combination of WealthBar with Virtual Brokers, CI’s discount broker, to create an integrated online investment platform to be called CI Direct Investing.
- CI Investments became Canada’s Number 1 provider of liquid alternative – or “liquid alt”–investment solutions and the first to exceed $2 billion in assets under management in this category (as reported by the Canadian Association of Alternative Strategies and Assets as of June 30, 2020). CI launched its first liquid alt funds just 20 months earlier.
- CI Investments launched three income mandates sub-advised by DoubleLine Capital LP, one of the world’s leading asset managers and a firm known for its fixed-income expertise. These mandates, offered as mutual funds and ETFs, have been well received by advisors and investors.
- CI Investments launched CI Global Longevity Economy Fund, which focuses on companies benefiting from changes in consumer behaviour, technology and health care resulting from the trend towards longer, healthier lifespans. This mandate, launched as a mutual fund and an ETF, is actively managed by Signature Global Asset Management, a division of CI, using insights and research from Dr. Joseph Coughlin, Founder and Director of the Massachusetts Institute of Technology AgeLab.
- CI Investments’ other fund launches during the quarter included:
- CI Marret Alternative Enhanced Yield Fund, CI’s fourth entry in its very successful lineup of liquid alt funds; and
- Three mandates focused on real assets to meet growing investor demand for these asset classes: CI Global Infrastructure Private Pool, CI Global REIT Private Pool and CI Global Real Asset Private Pool.
- CI teamed with Adams Street Partners, LLC, a leader in private markets investment management with offices around the world, to develop investment solutions exclusively for CI that provide exposure to global private equity and private credit investments.
- Following quarter-end:
- CI reached an agreement to acquire a majority interest in Aligned Capital Partners Inc. of Burlington, Ontario, a full-service investment advisory firm with approximately $10 billion in assets under administration. The firm supports over 200 financial advisors across Canada.
- CI agreed to acquire 100% ownership of Balasa Dinverno Foltz of Itasca, Illinois, an RIA with approximately US$4.5 billion (C$6.0 billion) in assets. The firm of 62 people operates from offices in the Chicago area.
- Three of the RIAs in which CI has or will soon acquire interests, as described above, were named to the 2020 FT 300 Top Registered Investment Advisors list: BDF, Congress and Surevest. The FT 300 is compiled by the Financial Times to highlight elite RIAs in the United States.
Analysts’ conference call
CI will hold a conference call with analysts today at 10:00 a.m. Eastern Time, led by Chief Executive Officer Kurt MacAlpine and Chief Financial Officer Douglas Jamieson. The call and a slide presentation will be accessible through a webcast, or investors may listen to the discussion by dialing 1-866-248-8441 or 647-792-1241 (Passcode: 1128230). A replay of the call will be available for one year following the presentation (Passcode: 1128230). The webcast will be archived in the Financial Information section of www.cifinancial.com.
|As at and for the quarters ended||Change (%)|
|[millions of dollars, except share amounts]||Jun. 30, 2020||Mar. 31, 2020||Jun. 30, 2019||QoQ||YoY|
|Core assets under management||121,286||111,065||129,827||9||(7)|
|U.S. assets under management||4,277||-||-||n/a||n/a|
|Total assets under management||125,563||111,065||129,827||13||(3)|
|Canadian wealth management||49,003||44,150||47,350||11||3|
|U.S. wealth management||4,872||461||-||957||n/a|
|Total wealth management assets||53,875||44,611||47,350||21||14|
|Core average assets under management||118,413||127,163||130,770||(7)||(9)|
|Average assets under management||120,104||127,163||130,770||(6)||(8)|
|Adjusted net income1||120.2||126.5||138.5||(5)||(13)|
|Basic earnings per share||0.56||0.55||0.47||-2||19|
|Diluted earnings per share||0.55||0.54||0.47||2||17|
|Adjusted earnings per share1||0.56||0.58||0.58||(3)||(3)|
|Free cash flow1||128.3||143.7||146.5||(11)||(12)|
|Return on equity2||35.4%||36.6%||37.8%|
|Dividends paid per share||0.18||0.18||0.18||-||-|
|Average shares outstanding||216,202,545||219,550,908||238,255,145||(2)||(9)|
|Share price – High||18.46||25.81||21.57||(28)||(14)|
|Share price – Low||10.53||11.12||17.96||(5)||(41)|
|Share price – Close||17.27||13.97||21.34||24||(19)|
|Change in share price||23.6%||(35.7%)||17.0%|
|Total shareholder return||24.9%||(34.8%)||18.0%|
|Long term debt (including current portion)||1,988||1,745||1,525||14||30|
|Net debt to adjusted EBITDA1||1.83||1.86||1.51||(2)||21|
1Free cash flow, net debt, adjusted net income, adjusted earnings per share and adjusted EBITDA are not standardized earnings measures prescribed by IFRS. Descriptions of these measures, as well as others, and reconciliations to the nearest IFRS measures, where necessary, are included in Management’s Discussion and Analysis available at www.cifinancial.com.
2Trailing 12 months, calculated using adjusted net income.
For detailed financial statements for the quarter ended June 30, 2020, including Management’s Discussion and Analysis, which contains discussions of non-IFRS measures, please refer to CI’s website at www.cifinancial.com under Financial Information, or contact firstname.lastname@example.org.
About CI Financial
CI Financial Corp. (TSX: CIX) is an independent company offering global asset management and wealth management advisory services. CI’s primary asset management businesses are CI Investments Inc. and GSFM Pty Ltd., and it operates in wealth management through Assante Wealth Management (Canada) Ltd., CI Private Counsel LP, WealthBar Financial Services Inc., BBS Securities Inc., The Cabana Group, LLC, Congress Wealth Management, LLC, One Capital Management, LLC and Surevest LLC.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.
The FT 300 assesses registered investment advisers based on desirable traits for investors and presents the FT 300 as an elite group, not a competitive ranking of one to 300. RIAs must complete an application to be considered. The formula the FT uses to grade advisers is based on six broad factors and calculates a numeric score for each adviser. Areas of consideration include AUM, asset growth, the company’s age, industry certifications of key employees, SEC compliance record and online accessibility.
This press release 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.
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