Net Income of
Announces 7% Dividend Increase
Bruce Flatt, CEO of
Operating Results
| Unaudited For the years ended December 31 (US$ millions, except per share amounts) |
Three Months Ended | Years Ended | |||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net income1 | $ | 2,083 | $ | 97 | $ | 4,551 | $ | 3,338 | |||||||
| Per Brookfield share2 | 1.02 | 0.14 | 1.34 | 1.55 | |||||||||||
| Funds from operations2,3 | $ | 1,301 | $ | 1,014 | $ | 3,810 | $ | 3,237 | |||||||
| Per Brookfield share2,3 | 1.28 | 1.00 | 3.74 | 3.18 | |||||||||||
1. Consolidated basis - includes amounts attributable to non-controlling interests
2. Excludes amounts attributable to non-controlling interests
3. See Basis of Presentation on page 3 and a reconciliation of net income to FFO on page 9
Net income and funds from operations (“FFO”) both increased significantly in 2017. Net income totaled
Operating results benefited from a 26% increase in the fee related earnings from our asset management activities as well as the impact of improved pricing and volumes across our operations. The increase in fee related earnings came as a result of new private funds, growth in the capitalization of our listed issuers and increased performance fees. The increased contribution from our invested capital reflects improved results across our businesses, in particular higher generation with our renewable power operations, the contribution from completed development projects and redeployment of capital into a number of significant acquisitions.
Dividend Declaration
The Board declared a quarterly dividend of
Operating Highlights
Our fee bearing capital reached
During late 2017 and early 2018, we raised initial capital for our third flagship real estate fund, which we expect will be meaningfully larger than its predecessor. In addition, our latest flagship private equity fund, BCP IV, is over 80% invested or committed and, as a result, we will launch fundraising for the next fund in this series in the first half of 2018. Our latest flagship infrastructure fund, BIF III, is advancing well and is approximately 50% invested or committed.
We held closes of four credit funds including the final close for our first infrastructure credit fund, Brookfield Infrastructure Debt I ("BID I"), which raised
We made progress on our fundraising efforts in the high net worth space, raising over
The capitalization of our listed issuers increased by 23% over the prior year. This was the result of strong unit price performance, supported by robust growth in the underlying businesses, leading to distribution increases and higher market capitalization of those entities.
The expansion in fee bearing capital has increased the earning potential of our asset management franchise with annualized fees and target carry now at
Annualized fees increased by 26% to
Our private funds generated unrealized carried interest of
We generated unrealized carried interest across our various funds based on fund profits from yield and capital appreciation. Contributing significantly to unrealized carried interest was GrafTech, our graphite electrode manufacturing operations held within BCP IV, following significant pricing increases that were secured with long-term contracts. Also, in December, our real estate business completed the sale of its European logistics business, Gazeley, for a gross multiple of capital of 4.5 times and a 47% gross IRR, generating significant unrealized carried interest in BSREP I.
Realized carried interests in 2017 were
As a result of strong growth in FFO per unit, BIP, BPY and BEP all increased their distributions within their targeted 5% to 9% range, while BBU's unit price increased significantly in 2017.
This year FFO earned from our listed issuers benefited from organic growth and from the capital we deployed globally in both development projects and new businesses. We invested
We continue to maintain strong liquidity and a robust balance sheet with core liquidity and dry powder of
We finished the year with
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 Annualized Fees and Target Carry, which we use to illustrate potential future performance based on our current level of fee bearing capital and the associated fee rates. Annualized fees include the following components:
- Listed partnership and private funds management fees, including fees to be earned on period end fee bearing capital and private fund fee bearing capital committed subsequent to period-end but prior to the date of publication.
- Incentive distributions from our listed partnerships, based on the most recent quarterly distributions declared.
- Performance fees, including fees earned from BBU assuming 10% annual unit price appreciation above the hurdle rate as well as performance fees from our public securities business based on the two-year historical average.
- Transaction and advisory fees, based on the two-year historical average, as timing and size of when these types of fees are earned fluctuate based on types and size of the related transaction, as well as specific agreements with investors in the related transactions.
Target Carry reflects our estimate of the carried interest earned on a straight-line basis over the life of a fund, assuming target returns are achieved.
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 provide additional information on the determination of FFO and reconciliation between FFO and net income attributable to
Additional Information
The Letter to Shareholders and the company’s Supplemental Information for the three months ended December 31, 2017 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 year ended December 31, 2017, which have been prepared using IFRS, as issued by the IASB. The amounts have not been audited by Brookfield’s external auditor.
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 2017 Year End 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 February 15, 2018 at 11:00 a.m. Eastern Time at www.brookfield.com or via teleconference at 1-866-521-4909 toll free in
Brookfield Asset Management Inc. is a leading global alternative asset manager with approximately $285 billion in assets under management. The company has more than a 100-year history of owning and operating assets with a focus on property, renewable power, infrastructure and private equity.
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) 369-8236 Email: [email protected] |
Linda Northwood Investor Relations Tel: (416) 359-8647 Email: [email protected] |
|
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
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
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
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,
This release does not constitute an offer of any
CONSOLIDATED BALANCE SHEETS
| Unaudited (US$ millions) |
December 31 | December 31 | ||||
| 2017 | 2016 | |||||
| Assets | ||||||
| Cash and cash equivalents | $ | 5,139 | $ | 4,299 | ||
| Other financial assets | 4,800 | 4,700 | ||||
| Accounts receivable and other | 11,973 | 9,133 | ||||
| Inventory | 6,311 | 5,349 | ||||
| Assets classified as held for sale | 1,605 | 432 | ||||
| Equity accounted investments | 31,994 | 24,977 | ||||
| Investment properties | 56,870 | 54,172 | ||||
| Property, plant and equipment | 53,005 | 45,346 | ||||
| Intangible assets | 14,242 | 6,073 | ||||
| Goodwill | 5,317 | 3,783 | ||||
| Deferred income tax assets | 1,464 | 1,562 | ||||
| Total Assets | $ | 192,720 | $ | 159,826 | ||
| Liabilities and Equity | ||||||
| Accounts payable and other | $ | 17,965 | $ | 11,915 | ||
| Liabilities associated with assets classified as held for sale | 1,424 | 127 | ||||
| Corporate borrowings | 5,659 | 4,500 | ||||
| Non-recourse borrowings | ||||||
| Property-specific mortgages | 63,721 | 52,442 | ||||
| Subsidiary borrowings | 9,009 | 7,949 | ||||
| Deferred income tax liabilities | 11,409 | 9,640 | ||||
| Subsidiary equity obligations | 3,661 | 3,565 | ||||
| Equity | ||||||
| Preferred equity | 4,192 | 3,954 | ||||
| Non-controlling interests in net assets | 51,628 | 43,235 | ||||
| Common equity | 24,052 | 22,499 | ||||
| Total Equity | 79,872 | 69,688 | ||||
| Total Liabilities and Equity | $ | 192,720 | $ | 159,826 | ||
CONSOLIDATED STATEMENTS OF OPERATIONS
| Unaudited For the periods ended December 31 (US$ millions, except per share amounts) |
Three Months Ended | Years Ended | |||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||
| Revenues | $ | 13,065 | $ | 6,935 | $ | 40,786 | $ | 24,411 | |||||
| Direct costs | (10,635 | ) | (5,150 | ) | (32,388 | ) | (17,718 | ) | |||||
| Other income and gains | 944 | 91 | 1,180 | 482 | |||||||||
| Equity accounted income | 123 | 252 | 1,213 | 1,293 | |||||||||
| Expenses | |||||||||||||
| Interest | (968 | ) | (826 | ) | (3,608 | ) | (3,233 | ) | |||||
| Corporate costs | (26 | ) | (24 | ) | (95 | ) | (92 | ) | |||||
| Fair value changes | 280 | (488 | ) | 421 | (130 | ) | |||||||
| Depreciation and amortization | (590 | ) | (482 | ) | (2,345 | ) | (2,020 | ) | |||||
| Income tax | (110 | ) | (211 | ) | (613 | ) | 345 | ||||||
| Net income | $ | 2,083 | $ | 97 | $ | 4,551 | $ | 3,338 | |||||
| Net income attributable to: | |||||||||||||
shareholders |
$ | 1,046 | $ | 173 | $ | 1,462 | $ | 1,651 | |||||
| Non-controlling interests | 1,037 | (76 | ) | 3,089 | 1,687 | ||||||||
| $ | 2,083 | $ | 97 | $ | 4,551 | $ | 3,338 | ||||||
| Net income per share | |||||||||||||
| Diluted | $ | 1.02 | $ | 0.14 | $ | 1.34 | $ | 1.55 | |||||
| Basic | 1.05 | 0.15 | 1.37 | 1.58 | |||||||||
SUMMARIZED FINANCIAL RESULTS
| Unaudited For the periods ended December 31 (US$ millions, except per share amounts) |
Three Months Ended | Years Ended | |||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||
| Asset management | $ | 362 | $ | 314 | $ | 970 | $ | 866 | |||||
| Property | 636 | 368 | 2,004 | 1,561 | |||||||||
| Renewable power | 93 | 26 | 270 | 180 | |||||||||
| Infrastructure | 91 | 103 | 345 | 374 | |||||||||
| Private equity | 32 | 126 | 333 | 405 | |||||||||
| Residential | 96 | 75 | 34 | 63 | |||||||||
| Corporate | (9 | ) | 2 | (146 | ) | (212 | ) | ||||||
| Funds from operations1,2 | $ | 1,301 | $ | 1,014 | $ | 3,810 | $ | 3,237 | |||||
| Per share | $ | 1.28 | $ | 1.00 | $ | 3.74 | $ | 3.18 | |||||
| Unaudited For the periods ended December 31 (US$ millions, except per share amounts) |
Three Months Ended | Years Ended | |||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||
| FFO from operating activities1,2 | $ | 837 | $ | 669 | $ | 2,420 | $ | 2,165 | |||||
| Realized carried interest3 | 46 | 149 | 74 | 149 | |||||||||
| Realized disposition gains1 | 418 | 196 | 1,316 | 923 | |||||||||
| Funds from operations1,2 | 1,301 | 1,014 | 3,810 | 3,237 | |||||||||
| Realized disposition gains not in income1 | (276 | ) | (179 | ) | (1,007 | ) | (732 | ) | |||||
| Fair value changes | 368 | (311 | ) | (216 | ) | (345 | ) | ||||||
| Depreciation and amortization | (256 | ) | (245 | ) | (895 | ) | (900 | ) | |||||
| Income tax | (91 | ) | (106 | ) | (230 | ) | 391 | ||||||
| Net income attributable to shareholders | $ | 1,046 | $ | 173 | $ | 1,462 | $ | 1,651 | |||||
| Per share | $ | 1.02 | $ | 0.14 | $ | 1.34 | $ | 1.55 | |||||
Notes:
1. Non-IFRS measure – see Basis of Presentation on page 3
2. Excludes amounts attributable to non-controlling interests
3. Excludes carried interest generated that is subject to future investment performance
EARNINGS PER SHARE
| Unaudited For the periods ended December 31 (US$ millions, except per share amounts) |
Three Months Ended | Years Ended | |||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||
| Net income | $ | 2,083 | $ | 97 | $ | 4,551 | $ | 3,338 | |||||
| Non-controlling interests | (1,037 | ) | 76 | (3,089 | ) | (1,687 | ) | ||||||
| Net income attributable to shareholders | 1,046 | 173 | 1,462 | 1,651 | |||||||||
| Preferred share dividends | (39 | ) | (33 | ) | (145 | ) | (133 | ) | |||||
| Net income available to common shareholders | $ | 1,007 | $ | 140 | $ | 1,317 | $ | 1,518 | |||||
| Weighted average shares | 959.2 | 959.0 | 958.8 | 959.0 | |||||||||
| Dilutive effect of the conversion of options and escrowed shares using treasury stock method1 | 24.2 | 18.3 | 21.2 | 17.6 | |||||||||
| Shares and share equivalents | 983.4 | 977.3 | 980.0 | 976.6 | |||||||||
| Diluted earnings per share | $ | 1.02 | $ | 0.14 | $ | 1.34 | $ | 1.55 | |||||
Notes:
1. Includes management share option plan and escrowed stock plan
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
| Unaudited For the periods ended December 31 (US$ millions) |
Three Months Ended | Years Ended | |||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||
| Net income | $ | 2,083 | $ | 97 | $ | 4,551 | $ | 3,338 | |||||
| Equity accounted fair value changes and other non-FFO items | 508 | 198 | 856 | 458 | |||||||||
| Fair value changes | (280 | ) | 488 | (421 | ) | 130 | |||||||
| Depreciation and amortization | 590 | 482 | 2,345 | 2,020 | |||||||||
| Deferred income taxes | 26 | 140 | 327 | (558 | ) | ||||||||
| Realized disposition gains in fair value changes or prior periods1 | 233 | 196 | 1,116 | 766 | |||||||||
| Non-controlling interests | (1,859 | ) | (587 | ) | (4,964 | ) | (2,917 | ) | |||||
| Funds from operations1,2 | $ | 1,301 | $ | 1,014 | $ | 3,810 | $ | 3,237 | |||||
Notes:
1. Non-IFRS measure – see Basis of Presentation on page 3
2. Excludes amounts attributable to non-controlling interests
Source: Brookfield Asset Management Inc
| Title | Document |
|---|---|
English |
|
Q4 2017 Letter to Shareholders |
|
Q4 2017 Supplemental |
|
Q4 2017 Recording |
|
Q4 2017 Transcript |