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Brookfield Asset Management Inc
Symbol BAM
Shares Issued 981,054,526
Close 2015-11-06 C$ 45.81
Market Cap C$ 44,942,107,836
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Brookfield Asset earns $845-million (U.S.) in Q3 2015

2015-11-06 07:07 ET - News Release

Mr. Bruce Flatt reports

BROOKFIELD ASSET MANAGEMENT REPORTS THIRD QUARTER 2015 RESULTS

Brookfield Asset Management Inc. has released its financial results for the quarter ended Sept. 30, 2015 (all amounts are in U.S. dollars).

"Our businesses are performing well and we are expanding our global real asset management franchise with the planned launch of Brookfield Business Partners, as well as major developments and significant transactions across all our platforms," said Brookfield chief executive officer Bruce Flatt. "Our clients continue to allocate significant capital to real assets, and we are using our global scale and value approach to invest in attractive opportunities on their behalf."

  • Net income increased to $5.2-billion on a last-12-month (LTM) basis and totalled $845-million, or 26 cents per share, during the third quarter. Net income for the nine months was $3.5-billion. Net income continues to benefit from favourable operating results and increases in the value of commercial property assets, although gains in the third quarter were lower than those experienced in the third quarter of 2014.
  • Funds from operations for Brookfield shareholders during the quarter totalled $501-million, or 48 cents per share, representing 10-per-cent growth excluding realized disposition gains and carried interests. The company experienced favourable operating results across virtually all of its businesses, reflecting the contribution from recent acquisitions and other growth initiatives, and improved pricing and volumes at many operations. The company's share of disposition gains on the sale of mature assets was $88-million in the quarter, resulting in the realization of $15-million of accumulated carried interest. The comparative quarter in 2014 included $202-million of disposition gains.
  • Fee-bearing capital increased by $10.4-billion year over year. This contributed to a 24-per-cent increase in fee-related earnings, which were $126-million in the quarter and $464-million on an LTM basis. In addition to the launch of Brookfield Business Partners, the company is also currently raising five funds with a target of $23-billion of committed capital.
  • The company committed or deployed $5-billion to new investments, including a 20-per-cent economic interest in a high-quality rail and port logistics business in Australia, a property portfolio in Germany, a U.S. self-storage business, and a portfolio of U.S. hydroelectric assets.

                               FINANCIAL RESULTS
               (In millions of U.S. dollars, except per share)

                                                              Last 12 months
                  Three months ended   Nine months ended               ended
                            Sept. 30,           Sept. 30,           Sept. 30,
                      2015      2014      2015      2014      2015      2014
Funds from
operations        $    501  $    564  $  1,578  $  1,625  $  2,113  $  2,655
Per Brookfield
share                 0.48      0.55      1.52      1.59      2.05      2.65
Net income        $    845  $  1,109  $  3,482  $  3,510  $  5,181  $  4,360
Per Brookfield
share                 0.26      0.73      1.60      2.05      2.67      2.77

Operating highlights

The company continues to expand its listed and private funds.

Fee-bearing capital increased by $10.4-billion over the last 12 months; net inflows of $15.1-billion included $9.7-billion of new commitments to private funds, $2.9-billion of new capital in listed partnerships and $2.6-billion of net new mandates within public securities portfolios. The company distributed $3.0-billion to its listed and private fund partners through dividends and asset sales. The company continues to earn additional fees on a higher level of fee-bearing capital, and annualized fee base and target carried interest are now $1.4-billion.

The company is moving forward with new flagship and specialized private funds. The company launched an additional $10-billion of private funds during the quarter, bringing its current financing target to $23-billion for five funds. The company has already raised $8-billion of this capital and it hopes to complete its financing efforts over the next 12 to 24 months.

The company recently announced that it intends to spin off to shareholders a portion of a listed issuer called Brookfield Business Partners (BBP), which will initially own the business services and industrial operations of the company's private equity business. The company expects BBP will provide an attractive opportunity for investors and complement its publicly traded property, renewable energy and infrastructure real asset strategies.

The company announced or completed acquisitions over the last 12 months that will deploy $18-billion of capital and continued to raise funds by selling mature assets.

During the quarter, the company's property group announced plans to acquire a portfolio of retail and office buildings in Berlin for 1.3 billion euros, made a cornerstone investment in a U.S. self-storage business, and sold a number of properties at attractive valuations including office buildings in Toronto and Shanghai. Subsequent to quarter-end, the company agreed to sell partial interests in a London office building and its $8.6-billion Manhattan West office and residential development in New York to institutional investors.

The company's renewable energy group agreed to acquire two U.S. hydroelectric facilities for $860-million located in the Northeastern United States. The infrastructure group acquired a $1.2-billion initial interest in the leading Australian rail and port logistics company, and is proceeding with an offer to acquire the remaining portion, as well as transportation assets in Brazil. The company also sold an electrical transmission system in the Northeastern U.S. to finance future growth initiatives.

The company holds approximately $6-billion of liquidity across its business and an additional $8-billion of capital to invest for clients.

Operating results were favourable across virtually all the company's major businesses, increasing cash flows and the value of its assets.

Fee-bearing capital increased across all investment categories over the last 12 months, which contributed to an 18-per-cent growth in fee revenues to $229-million during the quarter. Increases in private fund commitments and capital invested over the last 12 months contributed to a 20-per-cent increase in base management fees. Fee-related earnings, which includes both fee revenues and all directly attributable costs, increased by 24 per cent to $126-million. In addition, the company realized $15-million of carried interest from the sale of assets.

The property business generated $214-million of FFO and benefited from the contribution from assets acquired over the last 12 months, including the investment in Canary Wharf, the United Kingdom resort property operator and a multifamily portfolio in the U.S. As well, office and retail operations had positive same-store growth due to rent commencing on new leases in the New York office portfolio and rising lease rates in the core office and retail portfolio. The company continues to sell interests in mature assets at strong valuations and recorded $56-million of disposition gains.

The renewable energy business produced FFO of $48-million. Water levels continue to be well below historic averages, although the company is benefiting from generation within its recently acquired facilities. The company also took advantage of the lower inflows in the quarter and performed the majority of its sustaining capital and asset optimization work. The company disposed of a 102-megawatt wind portfolio in California and two hydroelectric assets in Brazil, generating $25-million of disposition gains, enabling the company to recycle capital to finance growth initiatives.

The infrastructure group benefited from the contribution from the company's newly acquired telecom infrastructure business, in addition to growth initiatives across the business which more than offset the impact of foreign currency variation. FFO from the infrastructure group increased to $71-million. The U.K. distribution business generated record connections activity in utilities operations and the majority of transport operations benefited from tariff growth, as well as volume increases and cost savings in the rail and logistics businesses. Infrastructure operations continue to achieve strong, predicable growth, generating a 13-per-cent increase in FFO on a same-store basis, prior to the impact of changes in foreign currency rates.

The private equity businesses generated FFO of $125-million, including $46-million from the North American residential development business. The company continues to benefit from an increase in housing sales in the U.S., offset to some degree by slower results in Canada and Brazil. The industrial and business services operations generated $70-million of FFO, representing a 27-per-cent increase over the prior year due to FFO generated from recent acquisitions and the expansion of the construction business. The company completed the sale of a forest products business in the same quarter a year ago and realized a $191-million gain at that time; no dispositions were completed in the current quarter.

Dividend declaration

The board declared a quarterly dividend of 12 U.S. cents per share (representing 48 U.S. cents per annum), payable on Dec. 31, 2015, to shareholders of record as at the close of business on Nov. 30, 2015. The board declared all of the regular monthly and quarterly dividends on its preferred shares.

Information on dividends can be found on the company's website under investors/stock and dividend information.

                   CONSOLIDATED STATEMENTS OF OPERATIONS
              (In million of U.S. dollars, except per share) 
                                                               
                                      Three months ended   Nine months ended
                                                Sept. 30,           Sept. 30,
                                          2015      2014      2015      2014

Revenues                              $  5,056  $  4,659  $ 14,375  $ 13,670
Direct costs                            (3,740)   (3,467)  (10,341)   (9,686)
                                         1,316     1,192     4,034     3,984
Other income and gains                     133        (7)      145       190
Equity accounted income                    304       350     1,174       969
                                         1,753     1,535     5,353     5,143
Expenses
Interest                                  (691)     (645)   (2,117)   (1,910)
Corporate costs                            (25)      (27)      (83)      (93)
                                         1,037       863     3,153     3,140
Fair value changes                         389       637     1,572     2,348
Depreciation and amortization             (436)     (353)   (1,265)   (1,100)
Income tax                                (145)      (38)       22      (878)
Net income                            $    845  $  1,109  $  3,482  $  3,510
Net income attributable to
Brookfield shareholders               $    289  $    734  $  1,663  $  2,060
Non-controlling interests                  556       375     1,819     1,450
                                      $    845  $  1,109  $  3,482  $  3,510
Net income per share
Diluted                               $   0.26  $   0.73  $   1.60  $   2.05
Basic                                     0.27      0.75      1.65      2.10

We seek Safe Harbor.

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