Bruce Flatt, CEO of
Operating Results
| Unaudited For the periods ended June 30 (US$ millions, except per share amounts) |
Three Months Ended | Last Twelve Months | |||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||
| Net income1 | $ | 1,664 | $ | 958 | $ | 6,594 | $ | 3,594 | |||||
| Per |
0.62 | 0.19 | 2.65 | 1.29 | |||||||||
| Funds from operations2,4 | $ | 790 | $ | 1,026 | $ | 4,070 | $ | 3,597 | |||||
| Per |
0.77 | 1.01 | 4.01 | 3.55 | |||||||||
1. Consolidated basis – includes amounts attributable to non-controlling interests
2. Excludes amounts attributable to non-controlling interests
3. Per share amounts are inclusive of dilutive effect of mandatorily redeemable preferred shares issued in a consolidated subsidiary
4. See Basis of Presentation on page 3 and a reconciliation of net income to FFO on page 8
Net income reached
Second quarter funds from operations (“FFO”) was
Dividend Declaration
The Board declared a quarterly dividend of
Operating Highlights
Fee bearing capital surpassed
We are progressing well in our plan to double private fund fee bearing capital in the next five years. During the quarter we continued to raise capital for our third real estate flagship fund, which is already over $11 billion. The fundraising environment remains strong and we are seeing a wide range of interest from predecessor fund investors, new investors, and investors from our other fund products. We expect this trend to continue, as the industry shift towards investors consolidating their holdings into larger asset managers who offer a breadth of products.
Our current private equity flagship fund is over 90% committed and invested. Fundraising for its successor fund is well underway having launched in the first quarter, and we anticipate a first close later in the year. Our latest infrastructure flagship fund is over 75% committed and invested, and we expect to launch fundraising later this year.
Annualized fees and target carry now stand at
Fee related earnings increased by 48% to
Carried interest generation is tracking ahead of the
We progressed several significant transactions across our businesses globally, including shareholder approval to acquire the remaining 66% interest in GGP.
In July, in our real estate operations, we received approval to acquire the other shares of GGP that we did not own for approximately $15 billion. We will soon own 100% of a leading
We entered into a strategic alliance with AT&T to acquire their data center co-location assets for
We agreed to acquire 100% of a leading western Canadian natural gas gathering and processing business for
We continue to lock in gains and return profits and capital to our clients. As one example, in July, we announced the sale of a self-storage portfolio from our second real estate flagship fund for
We’ve been actively accessing capital markets and refinancing debt across many of our businesses at attractive long-term, fixed interest rates.
Earlier this year, we completed an IPO of our graphite electrode business called GrafTech and sold 13% of the company to new shareholders. Shortly afterwards, we refinanced
We completed a
We are currently generating over
We have flexibility to use this capital in several ways. One area is to invest in new strategies directly on our balance sheet while we build up a track record prior to investing our client’s capital. Credit has been a particular area of focus and this will continue. As our cash resources grow we continue to look further to shrinking the shares outstanding at
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 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 make reference to cash flows before common share dividends that is Available for distribution or reinvestment. It is the sum of our Asset Management segment FFO and distributions received from our ownership of listed investments, net of Corporate activities FFO 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.
Additional Information
The Letter to Shareholders and the company’s Supplemental Information for the three months ended June 30, 2018 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 quarter ended June 30, 2018, 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 2018 Second Quarter 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 August 9, 2018 at 11:00 a.m. Eastern Time at www.brookfield.com or via teleconference at 1-877-255-3077 toll free in
Brookfield Asset Management Inc. is a leading global alternative asset manager with over $285 billion in assets under management. The company has more than a 115-year history of owning and operating assets with a focus on real estate, 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) |
June 30 | December 31 | |||
| 2018 | 2017 | ||||
| Assets | |||||
| Cash and cash equivalents | $ | 5,913 | $ | 5,139 | |
| Other financial assets | 5,589 | 4,800 | |||
| Accounts receivable and other | 12,656 | 11,973 | |||
| Inventory | 6,560 | 6,311 | |||
| Assets classified as held for sale | 2,443 | 1,605 | |||
| Equity accounted investments | 30,025 | 31,994 | |||
| Investment properties | 58,437 | 56,870 | |||
| Property, plant and equipment | 55,698 | 53,005 | |||
| Intangible assets | 13,423 | 14,242 | |||
| Goodwill | 6,276 | 5,317 | |||
| Deferred income tax assets | 2,148 | 1,464 | |||
| Total Assets | $ | 199,168 | $ | 192,720 | |
| Liabilities and Equity | |||||
| Accounts payable and other | $ | 18,330 | $ | 17,965 | |
| Liabilities associated with assets classified as held for sale | 1,502 | 1,424 | |||
| Corporate borrowings | 6,424 | 5,659 | |||
| Non-recourse borrowings | |||||
| Property-specific mortgages | 70,638 | 63,721 | |||
| Subsidiary borrowings | 8,107 | 9,009 | |||
| Deferred income tax liabilities | 11,103 | 11,409 | |||
| Subsidiary equity obligations | 3,894 | 3,661 | |||
| Equity | |||||
| Preferred equity | 4,192 | 4,192 | |||
| Non-controlling interests in net assets | 50,597 | 51,628 | |||
| Common equity | 24,381 | 24,052 | |||
| Total Equity | 79,170 | 79,872 | |||
| Total Liabilities and Equity | $ | 199,168 | $ | 192,720 | |
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||
| Unaudited For the periods ended June 30 (US$ millions, except per share amounts) |
Three Months Ended | Six Months Ended | |||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||
| Revenues | $ | 13,276 | $ | 9,444 | $ | 25,907 | $ | 15,445 | |||||
| Direct costs | (10,781 | ) | (7,332 | ) | (20,872 | ) | (11,719 | ) | |||||
| Other income and gains | 95 | — | 437 | 265 | |||||||||
| Equity accounted income | 342 | 250 | 630 | 585 | |||||||||
| Expenses | |||||||||||||
| Interest | (1,066 | ) | (865 | ) | (2,103 | ) | (1,708 | ) | |||||
| Corporate costs | (24 | ) | (20 | ) | (51 | ) | (45 | ) | |||||
| Fair value changes | 833 | 213 | 1,405 | 9 | |||||||||
| Depreciation and amortization | (672 | ) | (613 | ) | (1,342 | ) | (1,112 | ) | |||||
| Income tax | (339 | ) | (119 | ) | (492 | ) | (244 | ) | |||||
| Net income | $ | 1,664 | $ | 958 | $ | 3,519 | $ | 1,476 | |||||
| Net income attributable to: | |||||||||||||
shareholders |
$ | 680 | $ | 225 | $ | 1,537 | $ | 188 | |||||
| Non-controlling interests | 984 | 733 | 1,982 | 1,288 | |||||||||
| $ | 1,664 | $ | 958 | $ | 3,519 | $ | 1,476 | ||||||
| Net income per share | |||||||||||||
| Diluted | $ | 0.62 | $ | 0.19 | $ | 1.43 | $ | 0.12 | |||||
| Basic | 0.64 | 0.20 | 1.46 | 0.12 | |||||||||
| SUMMARIZED FINANCIAL RESULTS RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS |
|||||||||||||
| Unaudited For the periods ended June 30 (US$ millions) |
Three Months Ended | Last Twelve Months Ended |
|||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||
| Net income | $ | 1,664 | $ | 958 | $ | 6,594 | $ | 3,594 | |||||
| Realized disposition gains in fair value changes or prior periods | 95 | 499 | 980 | 1,082 | |||||||||
| Non-controlling interests | (1,294 | ) | (1,103 | ) | (5,688 | ) | (3,544 | ) | |||||
| Financial statement components not included in FFO | |||||||||||||
| Equity accounted fair value changes and other non-FFO items | 283 | 241 | 1,109 | 543 | |||||||||
| Fair value changes | (833 | ) | (213 | ) | (1,817 | ) | 538 | ||||||
| Depreciation and amortization | 672 | 613 | 2,575 | 2,135 | |||||||||
| Deferred income taxes | 203 | 31 | 317 | (751 | ) | ||||||||
| Funds from operations1,2 | $ | 790 | $ | 1,026 | $ | 4,070 | $ | 3,597 | |||||
| SEGMENT FUNDS FROM OPERATIONS | |||||||||||||
| Unaudited For the periods ended June 30 (US$ millions, except per share amounts) |
Three Months Ended | Last Twelve Months Ended |
|||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||
| Asset management | $ | 241 | $ | 231 | $ | 1,177 | $ | 889 | |||||
| Real estate | 206 | 661 | 1,663 | 1,899 | |||||||||
| Renewable power | 66 | 65 | 304 | 207 | |||||||||
| Infrastructure | 86 | 84 | 605 | 359 | |||||||||
| Private equity | 282 | 62 | 505 | 387 | |||||||||
| Residential | 14 | (30 | ) | 53 | 47 | ||||||||
| Corporate | (105 | ) | (47 | ) | (237 | ) | (191 | ) | |||||
| Funds from operations1,2 | $ | 790 | $ | 1,026 | $ | 4,070 | $ | 3,597 | |||||
| Per share3 | $ | 0.77 | $ | 1.01 | $ | 4.01 | $ | 3.55 | |||||
1. Non-IFRS measure – see Basis of Presentation on page 3
2. Excludes amounts attributable to non-controlling interests
3. Per share amounts are inclusive of dilutive effect of mandatorily redeemable preferred shares issued in a consolidated subsidiary
| EARNINGS PER SHARE | |||||||||||||
| Unaudited For the periods ended June 30 (US$ millions, except per share amounts) |
Three Months Ended | Last Twelve Months Ended |
|||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||
| Net income | $ | 1,664 | $ | 958 | $ | 6,594 | $ | 3,594 | |||||
| Non-controlling interests | (984 | ) | (733 | ) | (3,783 | ) | (2,197 | ) | |||||
| Net income attributable to shareholders | 680 | 225 | 2,811 | 1,397 | |||||||||
| Preferred share dividends | (38 | ) | (35 | ) | (150 | ) | (137 | ) | |||||
| Dilutive effect of conversion of subsidiary preferred shares | (34 | ) | — | (67 | ) | — | |||||||
| Net income available to common shareholders | $ | 608 | $ | 190 | $ | 2,594 | $ | 1,260 | |||||
| Weighted average shares | 957.1 | 958.6 | 958.6 | 958.8 | |||||||||
| Dilutive effect of the conversion of options and escrowed shares using treasury stock method1 | 18.1 | 20.0 | 19.6 | 15.7 | |||||||||
| Shares and share equivalents | 975.2 | 978.6 | 978.2 | 974.5 | |||||||||
| Diluted earnings per share3 | $ | 0.62 | $ | 0.19 | $ | 2.65 | $ | 1.29 | |||||
| CASH AVAILABLE FOR DISTRIBUTION | |||||||||||||
| Unaudited For the periods ended June 30 (US$ millions) |
Three Months Ended | Last Twelve Months Ended |
|||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||
| Asset management FFO2 | $ | 241 | $ | 231 | $ | 1,177 | $ | 889 | |||||
| Dividends received from listed investments | 344 | 315 | 1,342 | 1,197 | |||||||||
| Corporate activities FFO2 | |||||||||||||
| Financial assets earnings | 14 | 11 | 151 | 107 | |||||||||
| Corporate costs, cash taxes and other | (39 | ) | 5 | (94 | ) | (48 | ) | ||||||
| Corporate interest expense | (80 | ) | (63 | ) | (294 | ) | (250 | ) | |||||
| (105 | ) | (47 | ) | (237 | ) | (191 | ) | ||||||
| Preferred share dividends | (38 | ) | (35 | ) | (150 | ) | (137 | ) | |||||
| Available for distribution/reinvestment2 | $ | 442 | $ | 464 | $ | 2,132 | $ | 1,758 | |||||
1. Includes management share option plan and escrowed stock plan
2. Non-IFRS measure – see Basis of Presentation on page 3
3. Per share amounts are inclusive of dilutive effect of mandatorily redeemable preferred shares issued in a consolidated subsidiary
Source: Brookfield Asset Management Inc
| Title | Document |
|---|---|
English |
|
Q2 2018 Letter to Shareholders |
|
Q2 2018 Supplemental |
|
Q2 2018 Transcript |