Net Income of
FFO of
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 Ended | |||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||
| Net income1 | $ | 704 | $ | 1,664 | $ | 5,929 | $ | 6,594 | |||||
| Per |
0.36 | 0.62 | 2.93 | 2.65 | |||||||||
| Funds from operations2,3 | $ | 1,108 | $ | 790 | $ | 4,600 | $ | 4,070 | |||||
| Per |
1.09 | 0.77 | 4.56 | 4.01 | |||||||||
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 8 and a reconciliation of net income to FFO on page 5.
Net income was
Funds from operations (“FFO”) were
Fee related earnings (“FRE”) before performance fees for the quarter totaled
Dividend Declaration
The Board declared a quarterly dividend of
Operating Highlights
We raised
We held a successful first close for our latest flagship infrastructure fund, raising
We continue to make significant progress on our non-flagship strategies. During the quarter, we held the first close of our Special Opportunities program for
Annualized fees and target carried interest now stand at a run-rate of
Fee related earnings, before performance fees, increased by 22% over the last twelve month period, attributable to private fund capital raised. We expect these revenues to continue to grow as we realize a full year of contributions from the capital raised. Fee revenues also increased as a result of higher incentive distributions from our listed partnerships. In the quarter, listed partnership fee revenues increased due to unit price appreciation at our listed partnerships.
We realized
Cash available for distribution and/or reinvestment has grown to
Cash available for distribution provides insight into the free cash flow generated by our asset management activities and invested capital. This cash flow has doubled over the past five years, and we expect it to continue to grow significantly from the contribution from our latest round of private fund flagship fundraising, and as we begin to realize significant carried interest from our earlier vintages of private funds.
We deployed
During the quarter, our private equity business closed the acquisitions of Clarios, formerly Johnson Controls Power Solutions, and Healthscope, the second largest private hospital operator in
At the end of the quarter, we had
CONSOLIDATED BALANCE SHEETS
| Unaudited (US$ millions) |
June 30 | December 31 | ||||
| 2019 | 2018 | |||||
| Assets | ||||||
| Cash and cash equivalents | $ | 7,447 | $ | 8,390 | ||
| Other financial assets | 7,507 | 6,227 | ||||
| Accounts receivable and other | 17,693 | 16,931 | ||||
| Inventory | 9,761 | 6,989 | ||||
| Assets classified as held for sale | 3,985 | 2,185 | ||||
| Equity accounted investments | 35,418 | 33,647 | ||||
| Investment properties | 84,895 | 84,309 | ||||
| Property, plant and equipment | 79,127 | 67,294 | ||||
| Intangible assets | 25,496 | 18,762 | ||||
| Goodwill | 11,816 | 8,815 | ||||
| Deferred income tax assets | 3,191 | 2,732 | ||||
| Total assets | $ | 286,336 | $ | 256,281 | ||
| Liabilities and equity | ||||||
| Corporate borrowings | $ | 7,060 | $ | 6,409 | ||
| Accounts payable and other | 32,595 | 23,989 | ||||
| Liabilities associated with assets classified as held for sale | 2,325 | 812 | ||||
| Non-recourse borrowings of managed entities | 123,371 | 111,809 | ||||
| Deferred income tax liabilities | 13,752 | 12,236 | ||||
| Subsidiary equity obligations | 4,104 | 3,876 | ||||
| Equity | ||||||
| Preferred equity | 4,146 | 4,168 | ||||
| Non-controlling interests in net assets | 72,324 | 67,335 | ||||
| Common equity | 26,659 | 25,647 | ||||
| Total equity | 103,129 | 97,150 | ||||
| Total liabilities and equity | $ | 286,336 | $ | 256,281 | ||
CONSOLIDATED STATEMENTS OF OPERATIONS
| Unaudited For the periods ended June 30 (US$ millions, except per share amounts) |
Three Months Ended | Six Months Ended | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Revenues | $ | 16,924 | $ | 13,276 | $ | 32,132 | $ | 25,907 | |||||||
| Direct costs | (13,385 | ) | (10,781 | ) | (24,970 | ) | (20,872 | ) | |||||||
| Other income and gains | 889 | 95 | 921 | 437 | |||||||||||
| Equity accounted income | 1,003 | 342 | 1,347 | 630 | |||||||||||
| Expenses | |||||||||||||||
| Interest | (1,833 | ) | (1,066 | ) | (3,449 | ) | (2,103 | ) | |||||||
| Corporate costs | (23 | ) | (24 | ) | (49 | ) | (51 | ) | |||||||
| Fair value changes | (1,398 | ) | 833 | (1,229 | ) | 1,405 | |||||||||
| Depreciation and amortization | (1,234 | ) | (672 | ) | (2,268 | ) | (1,342 | ) | |||||||
| Income tax | (239 | ) | (339 | ) | (475 | ) | (492 | ) | |||||||
| Net income | $ | 704 | $ | 1,664 | $ | 1,960 | $ | 3,519 | |||||||
| Net income attributable to: | |||||||||||||||
shareholders |
$ | 399 | $ | 680 | $ | 1,014 | $ | 1,537 | |||||||
| Non-controlling interests | 305 | 984 | 946 | 1,982 | |||||||||||
| $ | 704 | $ | 1,664 | $ | 1,960 | $ | 3,519 | ||||||||
| Net income per share | |||||||||||||||
| Diluted | $ | 0.36 | $ | 0.62 | $ | 0.94 | $ | 1.43 | |||||||
| Basic | 0.37 | 0.64 | 0.96 | 1.46 | |||||||||||
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 | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Net income | $ | 704 | $ | 1,664 | $ | 5,929 | $ | 6,594 | |||||||
| Realized disposition gains in fair value changes or prior periods | 7 | 95 | 1,169 | 980 | |||||||||||
| Non-controlling interests | (1,863 | ) | (1,294 | ) | (6,724 | ) | (5,688 | ) | |||||||
| Financial statement components not included in FFO | |||||||||||||||
| Equity accounted fair value changes and other non-FFO items | (379 | ) | 283 | 540 | 1,109 | ||||||||||
| Fair value changes | 1,398 | (833 | ) | 840 | (1,817 | ) | |||||||||
| Depreciation and amortization | 1,234 | 672 | 4,028 | 2,575 | |||||||||||
| Deferred income taxes | 7 | 203 | (1,182 | ) | 317 | ||||||||||
| Funds from operations1,2 | $ | 1,108 | $ | 790 | $ | 4,600 | $ | 4,070 | |||||||
SEGMENT FUNDS FROM OPERATIONS
| Unaudited For the periods ended June 30 (US$ millions, except per share amounts) |
Three Months Ended | Last Twelve Months Ended | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Asset management | $ | 400 | $ | 241 | $ | 1,436 | $ | 1,177 | |||||||
| Real estate | 316 | 206 | 1,707 | 1,663 | |||||||||||
| Renewable power | 69 | 66 | 385 | 304 | |||||||||||
| Infrastructure | 62 | 86 | 431 | 605 | |||||||||||
| Private equity | 326 | 282 | 960 | 505 | |||||||||||
| Residential | 18 | 14 | 64 | 53 | |||||||||||
| Corporate | (83 | ) | (105 | ) | (383 | ) | (237 | ) | |||||||
| Funds from operations1,2 | $ | 1,108 | $ | 790 | $ | 4,600 | $ | 4,070 | |||||||
| Per share3 | $ | 1.09 | $ | 0.77 | $ | 4.56 | $ | 4.01 | |||||||
1. Non-IFRS measure – see Basis of Presentation on page 8.
2. Excludes amounts attributable to non-controlling interests.
3. 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 June 30 (US$ millions, except per share amounts) |
Three Months Ended | Last Twelve Months Ended | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Net income | $ | 704 | $ | 1,664 | $ | 5,929 | $ | 6,594 | |||||||
| Non-controlling interests | (305 | ) | (984 | ) | (2,868 | ) | (3,783 | ) | |||||||
| Net income attributable to shareholders | 399 | 680 | 3,061 | 2,811 | |||||||||||
| Preferred share dividends | (38 | ) | (38 | ) | (150 | ) | (150 | ) | |||||||
| Dilutive effect of conversion of subsidiary preferred shares | (5 | ) | (34 | ) | (56 | ) | (67 | ) | |||||||
| Net income available to common shareholders | $ | 356 | $ | 608 | $ | 2,855 | $ | 2,594 | |||||||
| Weighted average shares | 955.5 | 957.1 | 955.9 | 958.6 | |||||||||||
| Dilutive effect of the conversion of options and escrowed shares using treasury stock method1 | 22.8 | 18.1 | 19.4 | 19.6 | |||||||||||
| Shares and share equivalents | 978.3 | 975.2 | 975.3 | 978.2 | |||||||||||
| Diluted earnings per share2 | $ | 0.36 | $ | 0.62 | $ | 2.93 | $ | 2.65 | |||||||
1. Includes management share option plan and escrowed stock plan.
2. 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 June 30 (US$ millions) |
Three Months Ended | Last Twelve Months Ended | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Fee related earnings | $ | 263 | $ | 239 | $ | 1,048 | $ | 1,084 | |||||||
| Distributions from investments | 389 | 362 | 1,718 | 1,458 | |||||||||||
| Other invested capital earnings | |||||||||||||||
| Corporate interest expense | (86 | ) | (80 | ) | (338 | ) | (294 | ) | |||||||
| Corporate costs and taxes | (36 | ) | (42 | ) | (157 | ) | (108 | ) | |||||||
| Other wholly owned investments | (30 | ) | 7 | 3 | 101 | ||||||||||
| (152 | ) | (115 | ) | (492 | ) | (301 | ) | ||||||||
| Preferred share dividends | (38 | ) | (38 | ) | (150 | ) | (150 | ) | |||||||
| Cash available for distribution and/or reinvestment before realized carried interest | 462 | 448 | 2,124 | 2,091 | |||||||||||
| Realized carried interest, net3 | 137 | 2 | 388 | 93 | |||||||||||
| Cash available for distribution and/or reinvestment | $ | 599 | $ | 450 | $ | 2,512 | $ | 2,184 | |||||||
3. Non-IFRS measure – see Basis of Presentation on page 8.
Additional Information
The Letter to Shareholders and the company’s Supplemental Information for the three months ended June 30, 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 quarter ended June 30, 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 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.
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 $385 billion in assets under management. The company has a 120-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:
| 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 Generated or 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 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.
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 press 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: investment returns that are lower than target; 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
Due to various risks, uncertainties and changes (including changes in economic, operational, political or other circumstances) beyond Brookfield’s control, the actual performance of the funds could differ materially from the target returns set forth herein. In addition, industry experts may disagree with the assumptions used in presenting the target returns. No assurance, representation or warranty is made by any person that the target returns will be achieved, and undue reliance should not be put on them.
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 news release does not constitute an offer or solicitation to buy or sell any
Source: Brookfield Asset Management Inc
| Title | Document |
|---|---|
English |
|
Q2 2019 Letter to Shareholders |
|
Q2 2019 Supplemental Information |
|
Q2 2019 Transcript |