CI Financial reports second quarter 2018 results, announces intention to repurchase as much as $1 billion in shares under new capital allocation strategy
- Earnings per share of $0.61, up 3% over previous quarter.
- Free cash flow totals a record $330 million for the first six months.
- Average assets under management just below $140 billion, near record highs.
- New capital allocation strategy allows for significant increase in share repurchases.
TORONTO (August 9, 2018) – CI Financial Corp. (“CI”) today released unaudited financial results for the quarter ended June 30, 2018, and announced a new capital allocation strategy that provides the company with increased flexibility to take advantage of market opportunities, including repurchasing up to $1 billion in shares over the next 12 to 18 months.
Second quarter 2018 results
Earnings Per Share
Free Cash Flow2
Average Assets Under Management
1 All results are net of non-controlling interest, and reported in Canadian dollars.
2 Free cash flow is not a standardized measure prescribed by IFRS; however, CI believes that this financial measure provides information that is useful to investors in understanding CI’s performance and facilitates a comparison of quarterly and full-year results from period to period. This non-IFRS measure and reconciliation to IFRS, is included in Management’s Discussion and Analysis available at www.cifinancial.com.
“These are strong results, showing that we have been able to increase CI’s profitability and maintain the efficiency of our operations in the face of industry headwinds and redemptions,” said Chief Executive Officer Peter W. Anderson. “Assets under management at the end of June of $138 billion represent an increase of $17 billion from a year ago, and total fee-earning assets have gained $21 billion to $182 billion. CI continues to generate a high level of free cash flow, which reached $330 million for the first six months of the year, a record for the company.
“We continue to make the necessary investments to ensure our business is well positioned as a strong competitor in the Canadian marketplace today and in the future. Most recently, CI Investments announced enhancements to its preferred pricing program and management fee reductions on selected funds that will increase the competitiveness of our products,” Mr. Anderson said.
CI reported net income of $159.9 million ($0.61 per share) for the second quarter of 2018, up 1% from $159.0 million ($0.59 per share) for the first quarter of 2018, or 3% on a per share basis.
Average assets under management were $139.5 billion for the quarter ended June 30, 2018, up 14% from the quarter ended June 30, 2017 and down 2% from the quarter ended March 31, 2018. The year-over-year increase was primarily due to strong market performance over the past 12 months and the acquisition of Sentry Investments Corp. on October 2, 2017. At June 30, 2018, CI’s assets under management were $138.2 billion, up $17.1 billion from $121.1 billion at June 30, 2017.
CI’s Canadian business, excluding products closed to new investors, had $3.0 billion in gross sales and $2.6 billion in net redemptions for the quarter ended June 30, 2018. CI’s international business had $60 million in net sales in the second quarter, up $94 million from the same quarter last year. CI’s closed business, comprised primarily of segregated fund contracts that are not available to new investors, had $286 million in net redemptions for the quarter.
Selling, general and administrative (SG&A) expenses for the second quarter of 2018 were $129.7 million, down from $135.2 million in the first quarter of 2018, and up from $111.6 million in the same quarter of 2017. The increase in SG&A from the same quarter last year was primarily due to the additions of Sentry and BBS Securities Inc., as well as strategic investments in CI’s business.
CI generated $163.0 million in free cash flow during the quarter ended June 30, 2018, compared to $166.9 million in the first quarter of 2018 and $154.8 million in the same period of 2017. CI repurchased $152.7 million of shares and paid $93.5 million in dividends during the second quarter of 2018. As of July 31, 2018, CI had 259,681,451 shares outstanding.
Capital allocation strategy
CI also announced today that its Board of Directors has unanimously approved a new capital allocation strategy that will allow CI to deploy its free cash flow to pursue the best available growth opportunities as market and industry conditions change, including repurchasing up to $1 billion in shares over the next 12 to 18 months under its normal course issuer bid. This would follow the $559 million in share repurchases that CI made in the 12 months ending June 30, 2018.
CI generates significant free cash flow in excess of the amount needed to finance its business operations. CI’s practice has been to return substantially all of its free cash flow to its shareholders through a combination of dividends and share repurchases. This practice is not changing. Under the new strategy, CI will re-allocate a greater portion of its cash flow to share repurchases.
“CI is in a very strong position financially, with robust free cash flow of approximately $650 million a year,” Mr. Anderson said. “With this change, we will have increased flexibility to invest our free cash flow in the best available opportunities to the benefit of our company and its shareholders. Today, we strongly believe that the best use of free cash flow is to aggressively buy back CI shares because they offer such compelling value. Each share bought back is accretive to earnings.”
“This strategy also allows us to pivot to pursue other attractive opportunities as they become available, which may include debt reduction, acquisitions or other investments in our business,” Mr. Anderson said. “We are confident this increased flexibility will produce greater long-term value for CI and contribute to continued strong performance.”
Under the new capital allocation strategy, the Board has set an annual dividend rate of $0.72 per share, to be paid quarterly for the next six quarters. The quarterly dividend represented a yield of 3.1% on CI’s closing share price of $22.98 on August 8, 2018, a yield that is in line with the current yield of the S&P/TSX Composite Index. The first quarterly dividend of $0.18 per share will be payable on October 15, 2018 to shareholders of record on September 30, 2018.
INFOR Financial Inc. acted as capital markets advisor to CI in respect of the initiatives announced today.
For detailed financial statements for the quarter ended June 30, 2018, 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.
Analysts’ conference call
CI will hold a conference call with analysts today at 8:30 a.m. Eastern Time, led by Chief Executive Officer Peter Anderson and Chief Financial Officer Douglas Jamieson. The call and a slide presentation will be accessible through a webcast available by clicking here or by visiting www.cifinancial.com. Investors may listen to the discussion by dialling 1-888-204-4368 or (647) 484-0478.
A replay of the call will be available until August 23, 2018 at 1-800-408-3053 or (905) 694-9451 (Passcode: 5698782#). The webcast will be archived in the Financial Information section of www.cifinancial.com.
CI Financial Corp. (TSX: CIX) is an independent, Canadian-owned wealth management company. CI’s primary operating businesses are CI Investments Inc., one of Canada’s largest investment managers, advisory businesses Assante Wealth Management and CI Private Counsel LP, Grant Samuel Funds Management of Australia, BBS Securities Inc., and First Asset Investment Management, a leader in providing actively managed exchange-traded funds to the Canadian marketplace. Further information is available at www.cifinancial.com.
This press release contains forward-looking statements with respect to CI and its products and services, including its business operations and strategy and financial performance and condition. Although management believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, including interest rates, business competition, changes in government regulations or in tax laws, and other factors discussed in materials filed with applicable securities regulatory authorities from time to time.
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CI Financial Corp.