Net Income of
FFO of
Bruce Flatt, CEO of
Operating Results
| Unaudited For the periods ended December 31 (US$ millions, except per share amounts) |
Three Months Ended | Years Ended | |||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||
| Net income1 | $ | 1,638 | $ | 3,028 | $ | 5,354 | $ | 7,488 | |||
| Per Brookfield share2 | 0.74 | 1.87 | 2.60 | 3.40 | |||||||
| Funds from operations2,3 | $ | 1,204 | $ | 1,356 | $ | 4,189 | $ | 4,401 | |||
| Per Brookfield share2,3 | 1.13 | 1.35 | 4.07 | 4.35 | |||||||
- Consolidated basis – includes amounts attributable to non-controlling interests.
- Excludes amounts attributable to non-controlling interests.
- See Basis of Presentation on page 9 and a reconciliation of net income to FFO on page 6.
Net income and funds from operations (“FFO”) were
Fee-related earnings, before performance fees, contributed $1.2 billion to FFO in 2019, a 41% increase from the prior period. This reflects strong fundraising in our private funds, as well as unit price appreciation across our listed partnerships and the contribution of one quarter of fee-related earnings from Oaktree. Fee-related earnings in 2018 included $278 million of performance fees whereas we recorded no performance fees in 2019.
Our operating FFO from invested capital benefited from the strong performance of the underlying businesses as well as acquisitions, which more than offset the impact of dispositions made during the year. Total FFO decreased as the prior year included higher disposition gains primarily within our real estate and infrastructure businesses.
Three-for-Two Stock Split
The Board of Directors approved a three-for-two stock split of the company’s outstanding Class A Shares. The split will be implemented by way of a stock dividend whereby shareholders will receive one-half of a Brookfield Class A Share for each Class A and Class B Share held (i.e. one additional share for every two shares held). The stock dividend will be payable on April 1, 2020 to shareholders of record at the close of business on February 28, 2020. Fractional shares will be paid in cash based on the closing price of the Class A Shares on the Toronto Stock Exchange on the record date.
Brookfield’s Class A Shares will trade on a “due bill” basis from the opening of business on Thursday, February 27, 2020 (one day before the record date) until Wednesday, April 1, 2020 (the payment date), inclusively. Class A Shares trading with due bills will carry the right to receive the additional shares to be issued in connection with the stock dividend. Accordingly, ex-dividend (post-split) trading in the Class A Shares will commence on the Toronto Stock Exchange and New York Stock Exchange at the opening of business on Thursday, April 2, 2020.
Appointment of Nicholas Goodman as Chief Financial Officer
The Board of Brookfield Asset Management is pleased to announce the appointment of Nicholas Goodman as Chief Financial Officer. Mr. Goodman joined
Mr. Goodman succeeds Brian Lawson as Chief Financial Officer. Mr. Lawson will continue to serve as a director of
Appointment of Howard Marks to Board of Brookfield Asset Management
The Board of Brookfield Asset Management approved the appointment of Howard Marks, co-Chairman of Oaktree Capital Group, to the Board. Mr. Marks, who founded Oaktree in 1995, has been a leader in the alternative asset management industry for decades. To facilitate Mr. Marks’ appointment to the Board, Robert Harding, who has been with
Dividend Declaration
The Board declared a quarterly dividend of
Operating Highlights
Assets under management and fee-bearing capital grew during the year to
AUM and fee-bearing capital growth includes the acquisition of a 61.2% interest in Oaktree Capital Management in September 2019. In addition, the capitalization of our listed partnerships grew by 34%, reflecting unit price growth from strong performance across each of the businesses. Fee-bearing capital from our existing private fund strategies grew by 33% as we raised significant capital across our strategies and enhanced our distribution capabilities through new channels.
Subsequent to year end, we held the final close of our fourth flagship infrastructure fund, which reached a total fund size of
Based on strong investor demand, the fund attracted total capital commitments exceeding the original fundraising target. Over the last 24 months, we have raised approximately
Annualized fee revenues and target carried interest now stand at a run-rate of
Annualized fee revenues and annualized fee-related earnings are now
We remain focused on recycling capital across the business and returning capital to our investors. During 2019, we successfully realized
We invested
We invested approximately
We have approximately
At the end of the year, we had
CONSOLIDATED BALANCE SHEETS
| Unaudited (US$ millions) |
December 31 |
December 31 |
||||
| 2019 |
2018 |
|||||
| Assets | ||||||
| Cash and cash equivalents | $ | 6,778 | $ | 8,390 | ||
| Other financial assets | 12,468 | 6,227 | ||||
| Accounts receivable and other | 18,469 | 16,931 | ||||
| Inventory | 10,272 | 6,989 | ||||
| Assets classified as held for sale | 3,502 | 2,185 | ||||
| Equity accounted investments | 40,698 | 33,647 | ||||
| Investment properties | 96,686 | 84,309 | ||||
| Property, plant and equipment | 89,264 | 67,294 | ||||
| Intangible assets | 27,710 | 18,762 | ||||
| Goodwill | 14,550 | 8,815 | ||||
| Deferred income tax assets | 3,572 | 2,732 | ||||
| Total Assets | $ | 323,969 | $ | 256,281 | ||
| Liabilities and Equity | ||||||
| Corporate borrowings | $ | 7,083 | $ | 6,409 | ||
| Accounts payable and other | 43,077 | 23,989 | ||||
| Liabilities associated with assets classified as held for sale | 1,690 | 812 | ||||
| Non-recourse borrowings in entities that we manage | 136,292 | 111,809 | ||||
| Deferred income tax liabilities | 14,849 | 12,236 | ||||
| Subsidiary equity obligations | 4,132 | 3,876 | ||||
| Equity | ||||||
| Preferred equity | 4,145 | 4,168 | ||||
| Non-controlling interests in net assets | 81,833 | 67,335 | ||||
| Common equity | 30,868 | 25,647 | ||||
| Total Equity | 116,846 | 97,150 | ||||
| Total Liabilities and Equity | $ | 323,969 | $ | 256,281 | ||
CONSOLIDATED STATEMENTS OF OPERATIONS
| Unaudited For the periods ended December 31 (US$ millions, except per share amounts) |
Three Months Ended | Years Ended | |||||||||||||
| 2019 |
2018 | 2019 |
2018 | ||||||||||||
| Revenues | $ | 17,819 | $ | 16,006 | $ | 67,826 | $ | 56,771 | |||||||
| Direct costs | (13,848 | ) | (12,680 | ) | (52,728 | ) | (45,519 | ) | |||||||
| Other income and gains | 313 | 585 | 1,285 | 1,166 | |||||||||||
| Equity accounted income | 737 | 408 | 2,498 | 1,088 | |||||||||||
| Expenses | |||||||||||||||
| Interest | (1,852 | ) | (1,477 | ) | (7,227 | ) | (4,854 | ) | |||||||
| Corporate costs | (26 | ) | (28 | ) | (98 | ) | (104 | ) | |||||||
| Fair value changes | 4 | 257 | (831 | ) | 1,794 | ||||||||||
| Depreciation and amortization | (1,309 | ) | (927 | ) | (4,876 | ) | (3,102 | ) | |||||||
| Income tax | (200 | ) | 884 | (495 | ) | 248 | |||||||||
| Net Income | $ | 1,638 | $ | 3,028 | $ | 5,354 | $ | 7,488 | |||||||
| Net income attributable to: | |||||||||||||||
shareholders |
$ | 846 | $ | 1,884 | $ | 2,807 | $ | 3,584 | |||||||
| Non-controlling interests | 792 | 1,144 | 2,547 | 3,904 | |||||||||||
| $ | 1,638 | $ | 3,028 | $ | 5,354 | $ | 7,488 | ||||||||
| Net income per share | |||||||||||||||
| Diluted | $ | 0.74 | $ | 1.87 | $ | 2.60 | $ | 3.40 | |||||||
| Basic | 0.76 | 1.91 | 2.66 | 3.47 | |||||||||||
SUMMARIZED FINANCIAL RESULTS
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
| Unaudited For the periods ended December 31 (US$ millions) |
Three Months Ended | Years Ended | |||||||||||||
| 2019 |
2018 | 2019 |
2018 | ||||||||||||
| Net income | $ | 1,638 | $ | 3,028 | $ | 5,354 | $ | 7,488 | |||||||
| Realized disposition gains in fair value changes or prior periods | 192 | 543 | 621 | 1,445 | |||||||||||
| Non-controlling interests | (1,955 | ) | (1,844 | ) | (7,161 | ) | (6,015 | ) | |||||||
| Financial statement components not included in FFO | |||||||||||||||
| Equity accounted fair value changes and other non-FFO items | 91 | 222 | 143 | 1,284 | |||||||||||
| Fair value changes | (4 | ) | (257 | ) | 831 | (1,794 | ) | ||||||||
| Depreciation and amortization | 1,309 | 927 | 4,876 | 3,102 | |||||||||||
| Deferred income taxes | (67 | ) | (1,263 | ) | (475 | ) | (1,109 | ) | |||||||
| Funds from operations1,2 | $ | 1,204 | $ | 1,356 | $ | 4,189 | $ | 4,401 | |||||||
SEGMENT FUNDS FROM OPERATIONS
| Unaudited For the periods ended December 31 (US$ millions, except per share amounts) |
Three Months Ended | Years Ended | |||||||||||||
| 2019 |
2018 | 2019 |
2018 | ||||||||||||
| Asset management | $ | 529 | $ | 393 | $ | 1,597 | $ | 1,317 | |||||||
| Real estate | 348 | 677 | 1,185 | 1,786 | |||||||||||
| Renewable power | 66 | 114 | 333 | 328 | |||||||||||
| Infrastructure | 105 | 95 | 464 | 602 | |||||||||||
| Private equity | 189 | 212 | 844 | 795 | |||||||||||
| Residential | 87 | 52 | 125 | 49 | |||||||||||
| Corporate | (120 | ) | (187 | ) | (359 | ) | (476 | ) | |||||||
| Funds from operations1,2 | $ | 1,204 | $ | 1,356 | $ | 4,189 | $ | 4,401 | |||||||
| Per share3 | $ | 1.13 | $ | 1.35 | $ | 4.07 | $ | 4.35 | |||||||
- Non-IFRS measure – see Basis of Presentation on page 9.
- Excludes amounts attributable to non-controlling interests.
-
Per share amounts are inclusive of dilutive effect of mandatorily redeemable preferred shares held in a consolidated subsidiary.
EARNINGS PER SHARE
| Unaudited For the periods ended December 31 (US$ millions, except per share amounts) |
Three Months Ended | Years Ended | |||||||||||||
| 2019 |
2018 | 2019 |
2018 | ||||||||||||
| Net income | $ | 1,638 | $ | 3,028 | $ | 5,354 | $ | 7,488 | |||||||
| Non-controlling interests | (792 | ) | (1,144 | ) | (2,547 | ) | (3,904 | ) | |||||||
| Net income attributable to shareholders | 846 | 1,884 | 2,807 | 3,584 | |||||||||||
| Preferred share dividends | (39 | ) | (37 | ) | (152 | ) | (151 | ) | |||||||
| Dilutive effect of conversion of subsidiary preferred shares | (39 | ) | (18 | ) | (74 | ) | (105 | ) | |||||||
| Net income available to common shareholders | $ | 768 | $ | 1,829 | $ | 2,581 | $ | 3,328 | |||||||
| Weighted average shares | 1,007.1 | 957.6 | 968.6 | 957.6 | |||||||||||
| Dilutive effect of the conversion of options and escrowed shares using treasury stock method1 | 26.7 | 18.2 | 23.7 | 19.8 | |||||||||||
| Shares and share equivalents | 1,033.8 | 975.8 | 992.3 | 977.4 | |||||||||||
| Diluted earnings per share2 | $ | 0.74 | $ | 1.87 | $ | 2.60 | $ | 3.40 | |||||||
- Includes management share option plan and escrowed stock plan.
-
Per share amounts are inclusive of dilutive effect of mandatorily redeemable preferred shares held in a consolidated subsidiary.
CASH AVAILABLE FOR DISTRIBUTION AND/OR REINVESTMENT
| Unaudited For the periods ended December 31 (US$ millions) |
Three Months Ended | Years Ended | |||||||||||||
| 2019 |
2018 | 2019 |
2018 | ||||||||||||
| Fee-related earnings3, excluding performance fees | $ | 362 | $ | 227 | $ | 1,169 | $ | 851 | |||||||
| Our share of Oaktree’s distributable earnings | 42 | — | 42 | — | |||||||||||
| Distributions from investments | 404 | 440 | 1,598 | 1,698 | |||||||||||
| Other invested capital earnings | |||||||||||||||
| Corporate interest expense | (88 | ) | (82 | ) | (348 | ) | (323 | ) | |||||||
| Corporate costs and taxes | (53 | ) | (57 | ) | (135 | ) | (163 | ) | |||||||
| Other wholly owned investments | 32 | 54 | (36 | ) | 41 | ||||||||||
| (109 | ) | (85 | ) | (519 | ) | (445 | ) | ||||||||
| Preferred share dividends | (39 | ) | (37 | ) | (152 | ) | (151 | ) | |||||||
| Add back: equity-based compensation | 24 | 21 | 87 | 84 | |||||||||||
| Cash available for distribution and/or reinvestment before carried interest and performance fees | 684 | 566 | 2,225 | 2,037 | |||||||||||
| Realized carried interest, net3,4 | 125 | 166 | 386 | 188 | |||||||||||
| Performance fees | — | — | — | 278 | |||||||||||
| Cash available for distribution and/or reinvestment | $ | 809 | $ | 732 | $ | 2,611 | $ | 2,503 | |||||||
3. Excludes our share of Oaktree’s fee-related earnings and carried interest.
4. Non-IFRS measure – see Basis of Presentation on page 9.
Additional Information
The Letter to Shareholders and the company’s Supplemental Information for the three months ended December 31, 2019, 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 statements contained herein are based primarily on information that has been extracted from our financial statements for the year ended December 31, 2019, 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 2019 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.
To participate in the Conference Call, please dial 1-866-688-9425 toll free in
Brookfield Asset Management Inc. is a leading global alternative asset manager with over $540 billion of assets under management across real estate, infrastructure, renewable power, private equity and credit. Brookfield owns and operates long-life assets and businesses, many of which form the backbone of the global economy. Utilizing its global reach, access to large-scale capital and operational expertise,
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:
| Communications & Media: Claire Holland Vice President, Branding & Communications Tel: (416) 369-8236 Email: [email protected] |
Investor Relations Linda Northwood Director, Investor Relations Tel: (416) 359-8647 Email: [email protected] |
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 issuers and entities.
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 make reference to Cash available for distribution and/or reinvestment, which is referring to the sum of our Asset Management segment FFO and distributions received from our ownership of investments, net of Corporate activities FFO, equity-based compensation 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.
Notice to Readers
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
Where this news release refers to “target carried interest” it is based on an assumption that existing funds meet their target gross returns. Target gross returns are typically ~20% for opportunistic funds; 10% to 15% for value add, credit and core funds. Fee terms vary by investment strategy and may change over time.
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: (i) investment returns that are lower than target; (ii) the impact or unanticipated impact of general economic, political and market factors in the countries in which we do business; (iii) the behavior of financial markets, including fluctuations in interest and foreign exchange rates; (iv) global equity and capital markets and the availability of equity and debt financing and refinancing within these markets; (v) strategic actions including dispositions; the ability to complete and effectively integrate acquisitions into existing operations and the ability to attain expected benefits; (vi) changes in accounting policies and methods used to report financial condition (including uncertainties associated with critical accounting assumptions and estimates); (vii) the ability to appropriately manage human capital; (viii) the effect of applying future accounting changes; (ix) business competition; (x) operational and reputational risks; (xi) technological change; (xii) changes in government regulation and legislation within the countries in which we operate; (xiii) governmental investigations; (xiv) litigation; (xv) changes in tax laws; (xvi) ability to collect amounts owed; (xvii) catastrophic events, such as earthquakes and hurricanes; (xviii) the possible impact of international conflicts and other developments including terrorist acts and cyberterrorism; (xix) the introduction, withdrawal, success and timing of business initiatives and strategies; (xx) the failure of effective disclosure controls and procedures and internal controls over financial reporting and other risks; (xxi) health, safety and environmental risks; (xxii) the maintenance of adequate insurance coverage; (xxiii) risks specific to our business segments including our real estate, renewable power, infrastructure, private equity, and residential development activities; and (xxiv) 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 and other factors could also adversely affect its results. Investors and other readers are urged to consider the foregoing risks, as well as other uncertainties, factors and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such forward-looking information. Except as required by law, the corporation 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.
Past performance is not indicative nor a guarantee of future results. There can be no assurance that comparable results will be achieved in the future, that future investments will be similar to the historic investments discussed herein (because of economic conditions, the availability of investment opportunities or otherwise), that targeted returns, diversification or asset allocations will be met or that an investment strategy or investment objectives will be achieved.
Target returns set forth in this news release are for illustrative and informational purposes only and have been presented based on various assumptions made by
Certain of the information contained herein is based on or derived from information provided by independent third-party sources. While
Source: Brookfield Asset Management Inc
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