Brookfield Asset Management Inc. (NYSE: BAM, TSX: BAM.A, Euronext:
BAMA), a leading global alternative asset manager, today announced
financial results for the quarter ended June 30, 2018.
Bruce Flatt, CEO of Brookfield, stated, "We
continue to see strong interest from institutional investors in our
real assets strategies, as evidenced by the closing of $11
billion of capital to date for our most recent flagship real
estate fund. We ended the quarter with record liquidity of $33
billion, and we continue to find attractive opportunities to invest
this capital including the recent privatization of GGP, the
acquisition of a major gas gathering infrastructure system, and the
successful acquisition of Westinghouse Electric."
Operating Results
UnauditedFor the periods ended June 30(US$ millions,
except per share amounts) |
Three Months Ended |
|
Last Twelve Months |
2018 |
|
2017 |
|
|
2018 |
|
2017 |
|
Net income1 |
$ |
1,664 |
|
$ |
958 |
|
|
$ |
6,594 |
|
$ |
3,594 |
|
Per
Brookfield share2,3 |
0.62 |
|
0.19 |
|
|
2.65 |
|
1.29 |
|
Funds from
operations2,4 |
$ |
790 |
|
$ |
1,026 |
|
|
$ |
4,070 |
|
$ |
3,597 |
|
Per Brookfield share2,3,4 |
0.77 |
|
1.01 |
|
|
4.01 |
|
3.55 |
|
1. Consolidated basis – includes amounts
attributable to non-controlling interests2.
Excludes amounts attributable to non-controlling
interests3. Per share amounts are inclusive
of dilutive effect of mandatorily redeemable preferred shares
issued in a consolidated subsidiary4. See
Basis of Presentation on page 3 and a reconciliation of net income
to FFO on page 8
Net income reached $1.7 billion in the quarter
and $6.6 billion for the last twelve months, both significant
increases over the comparable periods. The increase in the quarter
reflects contributions from recent acquisitions across each of our
businesses, transaction gains and strengthening valuations for a
number of our assets.
Second quarter funds from operations (“FFO”) was
$790 million, including $132 million of disposition gains.
Excluding disposition gains, second quarter FFO was $658 million,
17% higher than the comparable period. Fee related earnings
continue to increase as a result of the growth in fee bearing
capital from our private funds and higher performance fee income
from Brookfield Business Partners ("BBU"). FFO from invested
capital increased 26% over the comparable period reflecting
contributions from recent acquisitions, additional home sales in
our North American residential business, and improved performance
by businesses owned within our private equity operations.
Disposition gains included the sale of a 13% interest in our
graphite electrode manufacturing operations and the sale of our
interest in a real estate brokerage business.
Dividend Declaration
The Board declared a quarterly dividend of
US$0.15 per share (representing US$0.60 per annum), payable on
September 28, 2018 to shareholders of record as at the close of
business on August 31, 2018. The Board also declared the regular
monthly and quarterly dividends on its preferred shares.
Operating Highlights
Fee bearing capital surpassed $129 billion, a
10% increase over June 2017, led by our private funds.
We are progressing well in our plan to double
private fund fee bearing capital in the next five years. During the
quarter we continued to raise capital for our third real estate
flagship fund, which is already over $11 billion. The
fundraising environment remains strong and we are seeing a wide
range of interest from predecessor fund investors, new investors,
and investors from our other fund products. We expect this trend to
continue, as the industry shift towards investors consolidating
their holdings into larger asset managers who offer a breadth of
products.
Our current private equity flagship fund is over
90% committed and invested. Fundraising for its successor fund is
well underway having launched in the first quarter, and we
anticipate a first close later in the year. Our latest
infrastructure flagship fund is over 75% committed and invested,
and we expect to launch fundraising later this year.
Annualized fees and target carry now stand at
$2.6 billion, up 20% from June 2017.
Fee related earnings increased by 48% to $1.1
billion over the last twelve-month period, attributable to stronger
market valuations of our listed partnerships and higher incentive
distributions from our listed partnerships. In the quarter, private
funds fees increased due to higher fee bearing capital from our
latest real estate flagship fund and further investors in our
open-end real estate core and credit strategies.
Carried interest generation is tracking ahead of
the $8 billion plan we laid out at our recent investor day, as most
of our funds are performing in line with plan, with exceptional
performance by certain investments leading to higher than expected
returns. We generated over $1.4 billion of carried interest in the
last twelve-month period bringing our unrealized carried interest
balance to $2.5 billion, or $1.7 billion net of costs; none of this
is currently recorded in our accounts.
We progressed several significant transactions
across our businesses globally, including shareholder approval to
acquire the remaining 66% interest in GGP.
In July, in our real estate operations, we
received approval to acquire the other shares of GGP that we
did not own for approximately $15 billion. We will soon
own 100% of a leading U.S. retail business with
123-million-square-foot of retail space across 125 properties in
major U.S. cities. We acquired Saeta Yield, a European renewable
power company with 1,000 MW of operating wind and solar capacity,
with stable cash flows and an average contract life of
approximately 14 years.
We entered into a strategic alliance with
AT&T to acquire their data center co-location assets for $1.1
billion. This transaction represents a significant milestone in
establishing our presence in the data infrastructure space, and
enables our infrastructure business to launch a broader data center
platform.
We agreed to acquire 100% of a leading western
Canadian natural gas gathering and processing business for $3.3
billion. The pipelines span 3,550 kilometers, and cash flows are
underpinned by long-dated contracts. The investment also provides
opportunities for continued development in western Canada,
particularly in the Montney Basin.
We continue to lock in gains and return profits
and capital to our clients. As one example, in July, we
announced the sale of a self-storage portfolio from our second
real estate flagship fund for $1.3 billion, or $540 million of
equity net of debt, only two years after acquisition for a 2.6x
multiple of capital.
We’ve been actively accessing capital markets
and refinancing debt across many of our businesses at attractive
long-term, fixed interest rates.
Earlier this year, we completed an IPO of our
graphite electrode business called GrafTech and sold 13% of the
company to new shareholders. Shortly afterwards, we refinanced $750
million of our debt investment at attractive rates and distributed
the proceeds to our fund investors.
We completed a R$5.2 billion financing of our
natural gas pipeline business in Brazil. We issued five-year bonds
at approximately 7% in the local market, and the proceeds were
distributed to shareholders.
We are currently generating over $2 billion of
free cash at the corporate level on an annual basis, with few
capital requirements, and the amount is growing rapidly.
We have flexibility to use this capital in
several ways. One area is to invest in new strategies directly on
our balance sheet while we build up a track record prior to
investing our client’s capital. Credit has been a particular area
of focus and this will continue. As our cash resources grow we
continue to look further to shrinking the shares outstanding at
Brookfield over time through repurchases.
Basis of Presentation
This news release and accompanying financial
statements are based on International Financial Reporting Standards
(“IFRS”), as issued by the International Accounting Standards Board
(“IASB”), unless otherwise noted.
We make reference to Funds from Operations
(“FFO”). We define FFO as net income attributable to shareholders
prior to fair value changes, depreciation and amortization, and
deferred income taxes, and include realized disposition gains that
are not recorded in net income as determined under IFRS. FFO also
includes the company’s share of equity accounted investments’ FFO
on a fully diluted basis. FFO consists of the following
components:
- FFO from Operating Activities represents the company’s share of
revenues less direct costs and interest expenses; excludes realized
carried interest and disposition gains, fair value changes,
depreciation and amortization and deferred income taxes; and
includes our proportionate share of FFO from operating activities
recorded by equity accounted investments on a fully diluted basis.
We present this measure as we believe it assists in describing our
results and variances within FFO.
- Realized Carried Interest represents our contractual share of
investment gains generated within a private fund after considering
our clients minimum return requirements. Realized carried interest
is determined on third-party capital that is no longer subject to
future investment performance.
- Realized Disposition Gains are included in FFO because we
consider the purchase and sale of assets to be a normal part of the
company’s business. Realized disposition gains include gains and
losses recorded in net income and equity in the current period, and
are adjusted to include fair value changes and revaluation surplus
balances recorded in prior periods which were not included in prior
period FFO.
We use FFO to assess our operating results and
the value of Brookfield’s business and believe that many
shareholders and analysts also find this measure of value to
them.
We note that FFO, its components, and its per
share equivalent are non-IFRS measures which do not have any
standard meaning prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies.
We make reference to Invested Capital. Invested
Capital is defined as the amount of common equity in our segments
and underlying businesses within the segments.
We also make reference to Unrealized Carried
Interest, which represents our share of fund profits if all of our
funds were wound up and liquidated at period end values. We
use this measure to gain additional insight into how investment
performance is impacting our ability to earn carried interest in
the future.
We make reference to cash flows before common
share dividends that is Available for distribution or reinvestment.
It is the sum of our Asset Management segment FFO and distributions
received from our ownership of listed investments, net of Corporate
activities FFO and preferred share dividends. This provides insight
into earnings received by the corporation that are available for
distribution to common shareholders or to be reinvested into the
business.
We provide additional information on key terms
and non-IFRS measures in our filings available at
www.brookfield.com.
Additional Information
The Letter to Shareholders and the company’s
Supplemental Information for the three months ended June 30,
2018 contain further information on the company’s strategy,
operations and financial results. Shareholders are encouraged to
read these documents, which are available on the company’s
website.
The attached statements are based primarily on
information that has been extracted from our financial statements
for the quarter ended June 30, 2018, which have been prepared
using IFRS, as issued by the IASB. The amounts have not been
audited by Brookfield’s external auditor.
Brookfield's Board of Directors have reviewed
and approved this document, including the summarized unaudited
consolidated financial statements prior to its release.
Information on our dividends can be found on our
website under Stock & Distributions/Distribution History.
Quarterly Earnings Call
Details
Investors, analysts and other interested parties
can access Brookfield Asset Management’s 2018 Second Quarter
Results as well as the Shareholders’ Letter and Supplemental
Information on Brookfield’s website under the Reports & Filings
section at www.brookfield.com.
The conference call can be accessed via webcast
on August 9, 2018 at 11:00 a.m. Eastern Time at
www.brookfield.com or via teleconference at 1-877-255-3077 toll
free in North America. For overseas calls please dial
1-647-252-4453, at approximately 10:50 a.m. Eastern Time. A
recording of the teleconference can be accessed at 1-800-585-8367
or 1-416-621-4642 (password: 3088275).
Brookfield Asset Management
Inc. is a leading global alternative asset manager with
over $285 billion in assets under management. The company has
more than a 115-year history of owning and operating assets with a
focus on real estate, renewable power, infrastructure and private
equity. Brookfield offers a range of public and private investment
products and services, and is co-listed on the New York, Toronto
and Euronext stock exchanges under the symbol BAM, BAM.A and BAMA,
respectively. For more information, please visit our website at
www.brookfield.com.
Please note that Brookfield’s previous audited
annual and unaudited quarterly reports have been filed on EDGAR and
SEDAR and can also be found in the investor section of its website
at www.brookfield.com. Hard copies of the annual and quarterly
reports can be obtained free of charge upon request.
For more information, please visit our website at
www.brookfield.com or contact:
Claire Holland
Communications & Media Tel: (416) 369-8236Email:
claire.holland@brookfield.com |
|
Linda Northwood
Investor Relations Tel: (416) 359-8647 Email:
linda.northwood@brookfield.com |
|
|
|
Forward-Looking Statements
Note: This news release contains
“forward-looking information” within the meaning of Canadian
provincial securities laws and “forward-looking statements” within
the meaning of Section 27A of the U.S. Securities Act of 1933, as
amended, Section 21E of the U.S. Securities Exchange Act of 1934,
as amended, “safe harbor” provisions of the United States Private
Securities Litigation Reform Act of 1995 and in any applicable
Canadian securities regulations. Forward-looking statements include
statements that are predictive in nature, depend upon or refer to
future events or conditions, include statements regarding the
operations, business, financial condition, expected financial
results, performance, prospects, opportunities, priorities,
targets, goals, ongoing objectives, strategies and outlook of
Brookfield and its subsidiaries, as well as the outlook for North
American and international economies for the current fiscal year
and subsequent periods, and include words such as “expects,”
“anticipates,” “plans,” “believes,” “estimates,” “seeks,”
“intends,” “targets,” “projects,” “forecasts” or negative versions
thereof and other similar expressions, or future or conditional
verbs such as “may,” “will,” “should,” “would” and “could.”
Although we believe that our anticipated future
results, performance or achievements expressed or implied by the
forward-looking statements and information are based upon
reasonable assumptions and expectations, the reader should not
place undue reliance on forward-looking statements and information
because they involve known and unknown risks, uncertainties and
other factors, many of which are beyond our control, which may
cause the actual results, performance or achievements of Brookfield
to differ materially from anticipated future results, performance
or achievement expressed or implied by such forward-looking
statements and information.
Factors that could cause actual results to
differ materially from those contemplated or implied by
forward-looking statements include, but are not limited to: the
impact or unanticipated impact of general economic, political and
market factors in the countries in which we do business; the
behavior of financial markets, including fluctuations in interest
and foreign exchange rates; global equity and capital markets and
the availability of equity and debt financing and refinancing
within these markets; strategic actions including dispositions; the
ability to complete and effectively integrate acquisitions into
existing operations and the ability to attain expected benefits;
changes in accounting policies and methods used to report financial
condition (including uncertainties associated with critical
accounting assumptions and estimates); the ability to appropriately
manage human capital; the effect of applying future accounting
changes; business competition; operational and reputational risks;
technological change; changes in government regulation and
legislation within the countries in which we operate; governmental
investigations; litigation; changes in tax laws; ability to collect
amounts owed; catastrophic events, such as earthquakes and
hurricanes; the possible impact of international conflicts and
other developments including terrorist acts and cyber terrorism;
and other risks and factors detailed from time to time in our
documents filed with the securities regulators in Canada and the
United States.
We caution that the foregoing list of important
factors that may affect future results is not exhaustive. When
relying on our forward-looking statements, investors and others
should carefully consider the foregoing factors and other
uncertainties and potential events. Except as required by law,
Brookfield undertakes no obligation to publicly update or revise
any forward-looking statements or information, whether written or
oral, that may be as a result of new information, future events or
otherwise.
This release does not constitute an offer of any
Brookfield fund.
|
|
CONSOLIDATED BALANCE SHEETS |
|
Unaudited (US$ millions) |
June 30 |
|
December 31 |
2018 |
|
2017 |
Assets |
|
|
Cash and cash
equivalents |
$ |
5,913 |
|
$ |
5,139 |
Other financial
assets |
5,589 |
|
4,800 |
Accounts receivable and
other |
12,656 |
|
11,973 |
Inventory |
6,560 |
|
6,311 |
Assets classified as
held for sale |
2,443 |
|
1,605 |
Equity accounted
investments |
30,025 |
|
31,994 |
Investment
properties |
58,437 |
|
56,870 |
Property, plant and
equipment |
55,698 |
|
53,005 |
Intangible assets |
13,423 |
|
14,242 |
Goodwill |
6,276 |
|
5,317 |
Deferred income tax
assets |
2,148 |
|
1,464 |
Total Assets |
$ |
199,168 |
|
$ |
192,720 |
|
|
|
Liabilities and
Equity |
|
|
Accounts payable and
other |
$ |
18,330 |
|
$ |
17,965 |
Liabilities associated
with assets classified as held for sale |
1,502 |
|
1,424 |
Corporate
borrowings |
6,424 |
|
5,659 |
Non-recourse
borrowings |
|
|
Property-specific mortgages |
70,638 |
|
63,721 |
Subsidiary borrowings |
8,107 |
|
9,009 |
Deferred income tax
liabilities |
11,103 |
|
11,409 |
Subsidiary equity
obligations |
3,894 |
|
3,661 |
Equity |
|
|
Preferred
equity |
4,192 |
|
4,192 |
Non-controlling interests in net assets |
50,597 |
|
51,628 |
Common equity |
24,381 |
|
24,052 |
Total
Equity |
79,170 |
|
79,872 |
Total Liabilities and Equity |
$ |
199,168 |
|
$ |
192,720 |
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS |
|
UnauditedFor the periods ended June 30(US$ millions,
except per share amounts) |
Three Months Ended |
|
Six Months Ended |
2018 |
|
2017 |
|
|
2018 |
|
2017 |
|
Revenues |
$ |
13,276 |
|
$ |
9,444 |
|
|
$ |
25,907 |
|
$ |
15,445 |
|
Direct costs |
(10,781 |
) |
(7,332 |
) |
|
(20,872 |
) |
(11,719 |
) |
Other income and
gains |
95 |
|
— |
|
|
437 |
|
265 |
|
Equity accounted
income |
342 |
|
250 |
|
|
630 |
|
585 |
|
Expenses |
|
|
|
|
|
Interest |
(1,066 |
) |
(865 |
) |
|
(2,103 |
) |
(1,708 |
) |
Corporate
costs |
(24 |
) |
(20 |
) |
|
(51 |
) |
(45 |
) |
Fair value changes |
833 |
|
213 |
|
|
1,405 |
|
9 |
|
Depreciation and
amortization |
(672 |
) |
(613 |
) |
|
(1,342 |
) |
(1,112 |
) |
Income tax |
(339 |
) |
(119 |
) |
|
(492 |
) |
(244 |
) |
Net income |
$ |
1,664 |
|
$ |
958 |
|
|
$ |
3,519 |
|
$ |
1,476 |
|
|
|
|
|
|
|
Net income attributable
to: |
|
|
|
|
|
Brookfield shareholders |
$ |
680 |
|
$ |
225 |
|
|
$ |
1,537 |
|
$ |
188 |
|
Non-controlling interests |
984 |
|
733 |
|
|
1,982 |
|
1,288 |
|
|
$ |
1,664 |
|
$ |
958 |
|
|
$ |
3,519 |
|
$ |
1,476 |
|
|
|
|
|
|
|
Net income per
share |
|
|
|
|
|
Diluted |
$ |
0.62 |
|
$ |
0.19 |
|
|
$ |
1.43 |
|
$ |
0.12 |
|
Basic |
0.64 |
|
0.20 |
|
|
1.46 |
|
0.12 |
|
|
|
SUMMARIZED FINANCIAL RESULTSRECONCILIATION
OF NET INCOME TO FUNDS FROM OPERATIONS |
|
Unaudited For the periods ended June 30 (US$
millions) |
Three Months Ended |
|
Last Twelve Months Ended |
2018 |
|
2017 |
|
|
2018 |
|
2017 |
|
Net income |
$ |
1,664 |
|
$ |
958 |
|
|
$ |
6,594 |
|
$ |
3,594 |
|
Realized disposition
gains in fair value changes or prior periods |
95 |
|
499 |
|
|
980 |
|
1,082 |
|
Non-controlling
interests |
(1,294 |
) |
(1,103 |
) |
|
(5,688 |
) |
(3,544 |
) |
Financial statement
components not included in FFO |
|
|
|
|
|
Equity
accounted fair value changes and other non-FFO items |
283 |
|
241 |
|
|
1,109 |
|
543 |
|
Fair
value changes |
(833 |
) |
(213 |
) |
|
(1,817 |
) |
538 |
|
Depreciation and amortization |
672 |
|
613 |
|
|
2,575 |
|
2,135 |
|
Deferred
income taxes |
203 |
|
31 |
|
|
317 |
|
(751 |
) |
Funds from operations1,2 |
$ |
790 |
|
$ |
1,026 |
|
|
$ |
4,070 |
|
$ |
3,597 |
|
|
|
SEGMENT FUNDS FROM OPERATIONS |
|
UnauditedFor the periods ended June 30(US$ millions,
except per share amounts) |
Three Months Ended |
|
Last Twelve Months Ended |
2018 |
|
2017 |
|
|
2018 |
|
2017 |
|
Asset management |
$ |
241 |
|
$ |
231 |
|
|
$ |
1,177 |
|
$ |
889 |
|
Real estate |
206 |
|
661 |
|
|
1,663 |
|
1,899 |
|
Renewable power |
66 |
|
65 |
|
|
304 |
|
207 |
|
Infrastructure |
86 |
|
84 |
|
|
605 |
|
359 |
|
Private equity |
282 |
|
62 |
|
|
505 |
|
387 |
|
Residential |
14 |
|
(30 |
) |
|
53 |
|
47 |
|
Corporate |
(105 |
) |
(47 |
) |
|
(237 |
) |
(191 |
) |
Funds from operations1,2 |
$ |
790 |
|
$ |
1,026 |
|
|
$ |
4,070 |
|
$ |
3,597 |
|
Per
share3 |
$ |
0.77 |
|
$ |
1.01 |
|
|
$ |
4.01 |
|
$ |
3.55 |
|
1. Non-IFRS measure – see Basis of
Presentation on page 32. Excludes amounts
attributable to non-controlling interests3. Per
share amounts are inclusive of dilutive effect of mandatorily
redeemable preferred shares issued in a consolidated subsidiary
|
|
EARNINGS PER SHARE |
|
Unaudited For the periods ended June 30(US$ millions,
except per share amounts) |
Three Months Ended |
|
Last Twelve Months Ended |
2018 |
|
2017 |
|
|
2018 |
|
2017 |
|
Net income |
$ |
1,664 |
|
$ |
958 |
|
|
$ |
6,594 |
|
$ |
3,594 |
|
Non-controlling interests |
(984 |
) |
(733 |
) |
|
(3,783 |
) |
(2,197 |
) |
Net income attributable
to shareholders |
680 |
|
225 |
|
|
2,811 |
|
1,397 |
|
Preferred share
dividends |
(38 |
) |
(35 |
) |
|
(150 |
) |
(137 |
) |
Dilutive
effect of conversion of subsidiary preferred shares |
(34 |
) |
— |
|
|
(67 |
) |
— |
|
Net
income available to common shareholders |
$ |
608 |
|
$ |
190 |
|
|
$ |
2,594 |
|
$ |
1,260 |
|
|
|
|
|
|
|
Weighted average
shares |
957.1 |
|
958.6 |
|
|
958.6 |
|
958.8 |
|
Dilutive effect of the
conversion of options and escrowed shares using treasury stock
method1 |
18.1 |
|
20.0 |
|
|
19.6 |
|
15.7 |
|
Shares and share equivalents |
975.2 |
|
978.6 |
|
|
978.2 |
|
974.5 |
|
Diluted
earnings per share3 |
$ |
0.62 |
|
$ |
0.19 |
|
|
$ |
2.65 |
|
$ |
1.29 |
|
|
|
CASH AVAILABLE FOR DISTRIBUTION |
|
Unaudited For the periods ended June 30(US$
millions) |
Three Months Ended |
|
Last Twelve Months Ended |
2018 |
|
2017 |
|
|
2018 |
|
2017 |
|
Asset management
FFO2 |
$ |
241 |
|
$ |
231 |
|
|
$ |
1,177 |
|
$ |
889 |
|
Dividends received from
listed investments |
344 |
|
315 |
|
|
1,342 |
|
1,197 |
|
Corporate activities
FFO2 |
|
|
|
|
|
Financial
assets earnings |
14 |
|
11 |
|
|
151 |
|
107 |
|
Corporate
costs, cash taxes and other |
(39 |
) |
5 |
|
|
(94 |
) |
(48 |
) |
Corporate interest expense |
(80 |
) |
(63 |
) |
|
(294 |
) |
(250 |
) |
|
(105 |
) |
(47 |
) |
|
(237 |
) |
(191 |
) |
Preferred
share dividends |
(38 |
) |
(35 |
) |
|
(150 |
) |
(137 |
) |
Available
for distribution/reinvestment2 |
$ |
442 |
|
$ |
464 |
|
|
$ |
2,132 |
|
$ |
1,758 |
|
1. Includes management share option plan and
escrowed stock plan2. Non-IFRS measure – see
Basis of Presentation on page 33. Per share
amounts are inclusive of dilutive effect of mandatorily redeemable
preferred shares issued in a consolidated subsidiary
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