CI Financial reports first quarter results for 2020

  • EPS of $0.55 for the quarter; adjusted EPS of $0.58
  • Excluding impact from marketable securities, adjusted EPS was $0.63, compared to $0.64 in Q4 and $0.55 in Q1-2019
  • SG&A expenses down $11.1 million or 9% compared to Q1-2019
  • Repurchased 5.3 million shares during the quarter at a cost of $104 million
  • Reduced debt outstanding by $119 million since the start of Q2-2020
  • Executed against strategic priority of modernizing asset management by announcing strategic partnerships with DoubleLine and Adams Street, and closing WisdomTree Canada ETF acquisition
  • Executed against strategic priorities of expanding wealth management and globalizing our business by announcing strategic investment in The Cabana Group and closing the Surevest transaction
  • Supporting Canadians struggling during COVID through Be Well-Advised program and financial donations to support people in need

 

TORONTO (May 6, 2020) − CI Financial Corp. (“CI”) (TSX: CIX) today released unaudited financial results for the quarter ended March 31, 2020.

 

“CI has successfully transitioned to the current environment due to our extensive pandemic preparation and early adoption of measures to protect employees and business partners,” said Kurt MacAlpine, CI Chief Executive Officer. “Today, over 97% of our employees are working from home and, after eight weeks, we continue to operate efficiently and effectively, including achieving high levels of service and engagement with advisors and clients. I continue to be very impressed with how well our employees are performing during these challenging times and I thank them for their hard work and dedication.

 

“As a result, we have not paused in the execution of our strategic priorities and have made significant progress in the three areas of modernizing our asset management business, expanding our wealth management platform and globalizing our company,” Mr. MacAlpine said. “This includes closing the acquisition of WisdomTree Canada’s ETF business, the continued growth of our U.S. RIA business through the purchase of a majority interest in Surevest and making a strategic investment in The Cabana Group, along with establishing relationships with DoubleLine Capital and Adams Street Partners that will result in compelling and innovative new products for the CI lineup.

 

“In addition to these important developments, we are moving ahead on a number of projects to enhance our operations across the company in areas that include sales, marketing and investment management,” Mr. MacAlpine said.

 

“On the financial side of the business, our results benefited from outstanding cost discipline, where we reduced our selling, general and administrative expenses by $11.1 million or 9% compared to the same quarter a year ago, while continuing to invest in our strategic growth initiatives.”

 

Financial results

 

CI reported quarterly adjusted earnings per share of $0.58 for the first quarter of 2020, compared to $0.66 for the fourth quarter of 2019 and $0.58 for the first quarter of 2019. Adjusted earnings exclude a restructuring provision of $6.2 million ($8.5 million before taxes) in the first quarter of 2020. Adjusted net income for the quarter ended March 31, 2020 included a $12.6 million unrealized loss on the value of investments ($11.0 million after-tax), compared to a gain of $3.0 million ($2.6 million after-tax) in the fourth quarter of 2019 and a gain of $8.4 million ($7.3 million after-tax) in the first quarter of 2019. Excluding gains and losses on investments, CI’s adjusted earnings per share were $0.63 for the quarter ended March 31, 2020, $0.64 per share for the quarter ended December 31, 2019, and $0.55 per share for the quarter ended March 31, 2019.

 

Selling, general and administrative (“SG&A”) expenses for the first quarter of $115.0 million, which includes SG&A increases associated with closing Surevest LLC and WisdomTree Canada, were up 1% from $113.8 million in the fourth quarter of 2019 and down 9% from $126.1 million in the first quarter of 2019.

 

CI generated $143.7 million in free cash flow during the quarter ended March 31, 2020, down from $168.3 million in the quarter ended December 31, 2019 and up from $143.5 million in the quarter ended March 31, 2019. Free cash flow for the quarter ended December 31, 2019 included a $12.3 million reversal of deferred tax expense recoveries. Excluding the reversal, free cash flow was $156.0 million for the quarter ended December 31, 2019.

 

Average assets under management were $127.2 billion for the quarter ended March 31, 2020, down 3% from the quarter ended December 31, 2019 and down 1% from the quarter ended March 31, 2019. At March 31, 2020, CI’s ending assets under management were $111.1 billion, compared with $131.7 billion at December 31, 2019 and $130.9 billion at March 31, 2019. Assets under administration were $44.6 billion on March 31, 2020, down 12% when compared with December 31, 2019 and down 4% when compared with the prior-year quarter-end. CI’s assets under administration include the assets of Assante Wealth Management (Canada) Limited, CI Private Counsel LP, WealthBar Financial Services Inc., Virtual Brokers, and Surevest LLC.

 

CI reported $2.7 billion in overall net redemptions for the first quarter of 2020. CI’s Canadian retail business, excluding products closed to new investors, had $1.3 billion in net redemptions, representing an increase in redemptions of $0.8 billion over the fourth quarter of 2019 and an improvement of $0.4 billion over the first quarter of 2019. CI’s Canadian institutional business posted net redemptions of $0.8 billion, representing an improvement of $0.7 billion from the fourth quarter of 2019 and an increase of $0.6 billion from the first quarter a year ago. CI’s international business had net redemptions of $0.4 billion for the first quarter of 2020, while CI’s closed business, comprised primarily of segregated fund contracts that are no longer available for sale, had $0.3 billion in net redemptions for the quarter.

 

Capital Allocation

 

In the first quarter of 2020, CI repurchased 5.3 million shares at a cost of $104.2 million and paid $40.0 million in dividends ($0.18 per share). CI did not repurchase additional shares in the month of April 2020, ending the month with 217,569,337 shares outstanding. During the month of April, CI repaid debt of $119 million.

 

The Board declared a quarterly dividend of $0.18 per share, payable on October 15, 2020, to shareholders of record on September 30, 2020. The annual dividend rate of $0.72 per share represented a yield of 5.2% on CI’s closing share price of $13.86 on May 5, 2020.

 

Business highlights

 

  • During the quarter, CI successfully implemented a pandemic response plan and technology solutions that allowed the firm, its companies and affiliated advisors to continue operating at a high level and providing service to clients. More than 95% of corporate employees were working from home by mid-March, with CI taking additional steps to protect employees whose duties require them to attend our offices. • CI announced a sub-advisory relationship in February with DoubleLine Capital LP (“DoubleLine”), one of the world’s leading asset managers and a firm known for its fixed-income expertise. DoubleLine will manage new income mandates to be offered by CI and launched as both mutual funds and exchange-traded funds. • On February 19, CI completed its acquisition of WisdomTree Asset Management Canada, Inc., adding 14 Toronto Stock Exchange-listed ETFs with approximately $1 billion in assets under management to CI’s ETF lineup.
  • CI completed the acquisition of a majority interest in Surevest LLC, a registered investment advisor (RIA) that offers wealth management services to high-net-worth investors through offices in Phoenix and Los Angeles.
  • In January, CI Investments received 38 FundGrade A+® Awards, which are presented annually by Fundata Canada Inc. to acknowledge Canadian investment funds that have maintained an exceptional performance rating over the entire previous calendar year. Winning funds included five CI mutual funds and pools, eight CI First Asset exchange-traded funds, and 25 segregated funds managed by CI. Of those segregated funds, 16 invest in underlying CI mutual funds.

 

Following quarter-end:

  • CI announced a partnership with Adams Street Partners, LLC (“Adams Street”), a leader in private markets investment management with offices around the world. Adams Street will be developing investment solutions exclusively for CI that provide Canadian investors access to private equity and private credit investments globally.
  • CI agreed to make a strategic investment in The Cabana Group (“Cabana”) of Fayetteville, Arkansas, an RIA with US$1.1 billion in assets under management (as of April 17, 2020). Cabana offers its own lineup of risk-managed portfolios and has an exceptional track record of growth, being ranked by Financial Advisor magazine as the fastest-growing RIA in the U.S. in 2018 and the second fastest-growing in 2019.
  • To help Canadians affected by the financial impact of the pandemic, CI and Assante launched the Be Well-Advised program in which advisors will donate their time and expertise to provide free advice to Canadians experiencing financial hardship. In addition, CI has made donations through the Second Harvest organization, which assists food-insecure individuals.

 

Analysts’ conference call

 

CI will hold a conference call with analysts today at 9:00 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 by visiting www.cifinancial.com. Alternatively, investors may listen to the discussion by dialing 1-888-208-1711 or (647) 484-0478 (Passcode: 9691157). The webcast will be archived in the Financial Information section of www.cifinancial.com.

 

Financial highlights

 

As at and for the quarters ended

Change (%)

[millions of dollars, except share amounts]

Mar. 31, 2020 Dec. 31, 2019 Mar. 31, 2019

QoQ

YoY

Assets under management

111,065

131,741

130,944

(16)

(15)

Assets under administration

44,611

50,505

46,393

(12)

(4)

Total assets

155,675

182,246

177,338

(15)

(12)

Average assets under management

127,163

130,542

128,521

(3)

(1)

           

Management fees

422.6

447.3

442.4

(6)

(4)

Total revenues

499.3

534.7 526.8 (7) (5)
Selling, general & administrative 115.0 113.8 126.1 1 (9)
Trailer fees

130.4

138.1 136.4 (6) (4)
Net income 119.9 147.3 140.0 (19) (14)
Adjusted net income1 126.5 147.3

140.0

(14) (10)
Basic earnings per share 0.55

0.66

0.58 (17) (5)
Diluted earnings per share 0.54

0.65

0.58 (17) (7)
Adjusted earnings per share1 0.58

0.66

0.58 (12)  
           
Free cash flow1 143.7 168.3 143.5 (15)  

Return on equity2

36.6% 37.8% 37.7%    
Dividends paid per share

0.18

0.18

0.18

   
Dividend yield

5.2%

3.3% 3.9%    
           
Average shares outstanding

219,550,908

224,961,509

241,946,976

(2) (9)

Share price – High

25.81 22.24 19.44 16 33

Share price – Low

11.12 18.26 16.92 (39) (34)

Share price – Close

13.97 21.71 18.24 (36) (23)

Change in share price

(35.7%)

12.3%

5.6%    
Total shareholder return (34.8%) 13.2% 6.6%    
Market capitalization 3,026 4,815

4,384

(37) (31)
P/E ratio2 5.8 9.0 7.7 (36) (25)
           

Long term debt (including current portion)

1,745 1,604 1,529 9 14

Net debt1

1,464 1,383 1,268 6 15

Net debt to adjusted EBITDA1

1.86 1.56 1.50 19 24
 
 

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 March 31, 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 investorrelations@ci.com.

 

About CI Financial

 

CI Financial Corp. (TSX: CIX) is an independent company offering global asset management and wealth management advisory services. Its primary operating businesses are CI Investments Inc., Assante Wealth Management (Canada) Ltd., CI Private Counsel LP, GSFM Pty Ltd., WealthBar Financial Services Inc., BBS Securities Inc. and Surevest LLC. Further information is available at www.cifinancial.com.

 

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.

 

FundGrade A+® is used with permission from Fundata Canada Inc., all rights reserved. The annual FundGrade A+® Awards are presented by Fundata Canada Inc. to recognize the “best of the best” among Canadian investment funds. The FundGrade A+® calculation is supplemental to the monthly FundGrade ratings and is calculated at the end of each calendar year. The FundGrade rating system evaluates funds based on their risk-adjusted performance, measured by Sharpe Ratio, Sortino Ratio, and Information Ratio. The score for each ratio is calculated individually, covering all time periods from 2 to 10 years. The scores are then weighted equally in calculating a monthly FundGrade. The top 10% of funds earn an A Grade; the next 20% of funds earn a B Grade; the next 40% of funds earn a C Grade; the next 20% of funds receive a D Grade; and the lowest 10% of funds receive an E Grade. To be eligible, a fund must have received a FundGrade rating every month in the previous year. The FundGrade A+® uses a GPA- style calculation, where each monthly FundGrade from “A” to “E” receives a score from 4 to 0, respectively. A fund’s average score for the year determines its GPA. Any fund with a GPA of 3.5 or greater is awarded a FundGrade A+® Award. For more information, see www.FundGradeAwards.com. Although Fundata makes every effort to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Fundata.

 

For further information:

 

Investor Relations CI Financial

 

(416) 364-1145

 

investorrelations@ci.com

 

 

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