Mr. Bruce Flatt reports
BROOKFIELD ASSET MANAGEMENT REPORTS SECOND QUARTER 2016 RESULTS
Brookfield Asset Management Inc. has released its financial results for the quarter ended June 30, 2016.
All currency figures in this release are in U.S. dollars.
Bruce Flatt, chief executive officer of Brookfield, stated: "Our diversified real asset strategies are performing well and we continue to see growing demand from investors, as evidenced by the closing on a record $27-billion of capital for our most recent series of flagship funds. We deployed $16-billion of capital during the last 12 months, and we expect to see continued opportunities for investment."
FINANCIAL RESULTS
(In millions, except per-share amounts)
Three months ended Last 12 months ended
June 30, June 30,
2016 2015 2016 2015
Net income (1) $584 $1,199 $3,252 $5,445
Per Brookfield
share (2) 0.15 0.62 1.30 3.14
Funds from
operations (2) (3) 637 520 2,822 2,176
Per Brookfield
share (2) (3) 0.62 0.50 2.76 2.12
Notes
(1) Consolidated basis -- includes amounts attributable to non-controlling
interests.
(2) Excludes amounts attributable to non-controlling interests.
(3) See basis of presentation on the company's website.
Net income for the second quarter of 2016 totalled $584-million or 15 cents per share, and was $3.3-billion on a last-12-month basis. Net income declined from the prior period largely because the prior period included a higher level of valuation gains within the company's property operations. The company recorded a positive contribution from earnings on new investments and operational improvements, including income from recently signed leases in its property group and rising rates and volumes in its infrastructure operations. The company's renewable power operations experienced lower water levels in North America and lower pricing in Brazil.
Funds from operations (FFO) for the second quarter of 2016, which exclude unrealized valuation gains, totalled $637-million or 62 cents per share, and was $2.8-billion on a last-12-month basis. Fee-related earnings increased 50 per cent to $191-million, from strong client inflows over the last 12 months. FFO from invested capital increased by 56 per cent and included the contribution from new investments across the company's portfolio and operating improvements noted in the preceding paragraph. The company sold interests in core office properties and a United Kingdom energy distribution business, generating $123-million of disposition gains. This compares with realized disposition gains of $171-million in the prior period.
Dividend declaration
The board declared a quarterly dividend of 13 U.S. cents per share (representing 52 U.S. cents per annum), payable on Sept. 30, 2016, to shareholders of record as at the close of business on Aug. 31, 2016. The board also declared all of the regular monthly and quarterly dividends on its preferred shares.
Operating highlights
The company achieved record fundraising for its flagship private funds.
The company completed fundraising for its most recent series of flagship private funds. Nearly 250 clients committed to these three funds, which represent $27-billion of investible capital. The company has already invested more than half of its $9-billion property fund and has commenced deploying capital in its $14-billion infrastructure fund and $4-billion private equity fund. The company also continues to raise four additional funds, including an open-ended real estate fund and three niche funds, targeting $3-billion of client commitments.
Fee-bearing capital increased by 15 per cent to $108-billion over the last 12 months.
The company's annualized run rate of total fees and carry is now more than $2.0-billion based on current funds under management, up from $1.6-billion last quarter-end and $1.4-billion last year. Strong capital inflows increased annualized fee revenues by 24 per cent to $1.2-billion. Recent private fund commitments increased carry eligible fee-bearing capital by 74 per cent to $39-billion, increasing the company's annualized target carried interest to $830-million.
The company completed the launch of Brookfield Business Partners, its fourth listed partnership, which is now listed on both the Toronto Stock Exchange and New York Stock Exchange. The company is now focused on enhancing the value of this business. The company's renewable power partnership issued $670-million of equity during the quarter, increasing its capital base in line with the continued expansion of its operations. In the company's infrastructure partnership, strong double-digit growth in FFO enabled it to announce a 3.5-per-cent interim increase in its distribution to unitholders.
Over the last 12 months the company announced or completed acquisitions that will deploy $16-billion of capital, including $3-billion in the current quarter. The company also continued to raise capital by selling mature assets.
The company continues to deploy capital across its real asset strategies, targeting investments which benefit from its competitive advantages. The company invested or committed to invest $2-billion of fund capital during the quarter and has $18-billion of undrawn fund capital available. This is on top of the company's $6-billion of core liquidity.
In its property business, the company acquired a portfolio of 5,600 student housing units in the U.K., a residential rental communities business in the U.S., 51 self-storage facilities to add to its operations in the U.S., and a portfolio of suburban office properties. In early July, the company also completed the privatization of a U.S. retail mall business. The company continues to execute its strategy of selling mature assets and recycling the capital into higher-yielding investments. Accordingly, the company's property partnerships commitment to these acquisitions was financed through proceeds received largely on the partial sale of office properties throughout the U.S. and Europe, which generated $1.5-billion of aggregate net proceeds since the beginning of the year.
The company's renewable power business completed the first mandatory tender offer to acquire an additional interest in its 3,000-megawatt Colombian hydroelectric portfolio, increasing its interest in the company to 84 per cent, and also completed the acquisition of a 296-megawatt hydroelectric portfolio in the northern United States.
In its infrastructure group, the company acquired a 57-per-cent interest in three toll roads in Peru totalling 115 kilometres. The company also successfully completed its tender offer to privatize the remaining interest in its Brazilian toll road business and is in advanced discussions to acquire a controlling stake in a regulated natural gas pipeline business in Brazil. Lastly, the company recently obtained the necessary approvals to acquire an Australian logistics business.
In its private equity operations, the company expanded its global facilities management operations with two tuck-in acquisitions and has built a record backlog in its constructions operations.
Basis of presentation
This news release and accompanying financial statements are based on international financial reporting standards (IFRS) unless otherwise noted and make reference to funds from operations (FFO).
The company defines FFO as net income attributable to shareholders prior to fair value changes, depreciation and amortization, and deferred income taxes, and includes 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 the company's proportionate
share of FFO from operating activities recorded by equity-accounted
investments on a fully diluted basis. The company presents this measure as it believes it assists in describing its results and variances within FFO.
- Realized carried interest represents the company's contractual share of investment
gains generated within a private fund after considering the company's 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 the company considers 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.
The company uses FFO to assess its operating results and the value of Brookfield's business and believes that many shareholders and analysts also find this measure of value to them.
The company notes 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 with similar measures presented by other companies.
The company provides additional information on the determination of FFO and reconciliation between FFO and net income attributable to Brookfield shareholders in its quarterly supplemental information and filings available at its website.
Additional information
The letter to shareholders and the company's supplemental information for the three months ended June 30, 2016, 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.
Information on the company's dividends can be found on the company's website under investors/stock and dividend information.
Quarterly earnings call details
Investors, analysts and other interested parties can access Brookfield Asset Management's 2016 second quarter results as well as the shareholder letter and supplemental information on Brookfield's website under the investors/financial reports section.
The conference call can be accessed via webcast on Aug. 12, 2016, at 11 a.m. Eastern Time at the company's website or via teleconference at 1-800-319-4610 toll-free in North America. For overseas calls please dial 1-604-638-5340, at approximately 10:50 a.m. Eastern Time. A recording of the teleconference can be accessed at 1-800-319-6413 or 1-604-638-9010 (password 00642 followed by the number sign).
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions of dollars, except per-share amounts)
Three months ended Six months ended
June 30, June 30,
2016 2015 2016 2015
Revenues $5,973 $4,923 $11,191 $9,319
Direct (costs) (4,330) (3,595) (7,978) (6,601)
Other income and
gains 31 12 66 12
Equity-accounted
income 435 603 587 870
(Expenses)
Interest (expenses) (815) (725) (1,582) (1,426)
Corporate (costs) (25) (29) (48) (58)
------ ------ ------ ------
1,269 1,189 2,236 2,116
Fair value changes 65 70 417 1,183
Depreciation and
amortization (loss) (516) (428) (997) (829)
Income tax (loss) (234) 368 (436) 167
------ ------ ------ ------
Net income 584 1,199 1,220 2,637
====== ====== ====== ======
Net income
attributable to
Brookfield
shareholders 185 645 442 1,374
Net income
attributable to
non-controlling
interests 399 554 778 1,263
------ ------ ------ ------
584 1,199 1,220 2,637
====== ====== ====== ======
Net income per share
Diluted 0.15 0.62 0.38 1.35
Basic 0.16 0.64 0.39 1.39
We seek Safe Harbor.
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