AGF Management Limited Reports Fourth Quarter and Fiscal Year 2020 Financial Results

TORONTO, Jan. 27, 2021 (GLOBE NEWSWIRE) —

  • Reported mutual fund net sales of $88 million for the fourth quarter, a $269 million improvement over prior year 
  • Completed the sale of Smith & Williamson, receiving $250.4 million in proceeds, resulting in a strengthened balance sheet, with $94 million in cash and no debt as at November 30, 2020 
  • Returned $45.6 million to shareholders in the quarter through the completion of a substantial issuer bid and quarterly dividend payment 
  • Reported diluted EPS of $1.43 for the fourth quarter of 2020, including the gain on sale of Smith & Williamson 
  • Adjusted diluted EPS was $0.19, including $0.08 from private alternatives

AGF Management Limited (AGF or the Company) (TSX: AGF.B) today announced financial results for the fourth quarter and fiscal year ended November 30, 2020.

AGF reported total assets under management (AUM) of $38.8 billion compared to $37.0 billion as at August 31, 2020 and $38.8 billion as at November 30, 2019.

AGF’s mutual fund net sales totaled $88 million in Q4 2020, compared to net redemptions of $181 million in Q4 2019. Excluding net flows from institutional clients invested in mutual funds, retail mutual fund net sales were $66 million for the quarter compared to net redemptions of $181 million in the comparative period of 2019. Mutual funds improved 37% year-over-year outpacing the industry year-over-year improvement of 21%(1). Sales momentum has continued into Q1 2021.

“During this challenging year, we have been committed to demonstrating our value by remaining close to our clients, keeping the lines of communication open and providing valuable insights and resources to help them navigate the ever-changing market environment,” said Judy Goldring, President and Head of Global Distribution, AGF. “This approach has strengthened existing relationships and helped us develop new ones, while improving our sales activity and positioning us well for 2021.”

During 2020, AGF continued to execute against its long-term strategy and stated goals, while realizing the culmination of many years’ efforts with the close of the merger of Smith & Williamson (S&WHL) and Tilney.

The Company used a portion of the proceeds from the sale of S&WHL to fully repay its long-term debt to achieve immediate interest expense savings. In addition, $40.0 million of the proceeds were used to return capital to shareholders through the completion of a substantial issuer bid (SIB) on November 6, 2020, where AGF purchased for cancellation 7,017,542 Class B non-voting shares at a price of $5.70 per share.

AUM related to AGF’s private alternatives increased 8.9% to $2.8 billion compared to $2.6 billion in the same period of 2019. During the quarter, AGF entered into a definitive option agreement with SAF Group, which grants AGF the right to acquire management contracts of select SAF funds, and any new private credit funds, exercisable until September 2021. The option agreement creates a path forward to a private credit capability that is well-positioned to capitalize on the expected growth in private debt investments. In June 2020, InstarAGF Asset Management Inc. announced the final closing of the InstarAGF Essential Infrastructure Fund II, with approximately USD$1.2 billion in aggregate equity commitments.

“We could not have imagined the impact of the pandemic or prepared for the challenges of 2020,” said Kevin McCreadie, Chief Executive Officer and Chief Investment Officer, AGF. “Yet, in spite of all that was happening, we delivered strong relative investment performance and we made significant progress against our strategic priorities, while continuing to be prudent and practice expense discipline.”

“In 2021, we will continue to focus on organic growth and responding to evolving investor demands for trends like alternatives, sustainable investing and the shift to a vehicle agnostic approach,” added McCreadie.

Key Business Highlights:

  • On September 1, 2020, AGF sold its 28.0% interest in S&WHL achieving one of its key strategic goals in realizing the value of its long-term investment. The sale of S&WHL significantly improved the strength of the Company’s statement of financial position. As at November 30, 2020, AGF had $94.0 million in cash and no debt on its statement of financial position, providing the financial strength and liquidity to execute on its future growth plans.
  • In September 2020, AGF accelerated the firm’s commitment to private alternatives through an expanded partnership with the SAF Group. Early this year, AGF and SAF expect to bring to market offerings with varying liquidity and return profiles designed to meet the needs of its respective target segments of the investor market. This will include a direct lending private credit strategy with a focus on originating, structuring and lending to middle and lower middle market companies, primarily in Canada and the United States.
  • AGF and WaveFront Global Asset Management launched AGFWave to deliver investment management capabilities to China and South Korea.
  • AGF is a signatory to the United Nations supported Principles for Responsible Investment (PRI) as a sustaining member of the Responsible Investment Association. In 2020, AGF reinforced its commitment to furthering responsible and sustainable investing practices across the organization with new dedicated investment management hires and a new industry membership focused on enhancing sustainability research.
  • AGF aims to deliver consistent and repeatable investment performance with a target of 50% over one year and 40% over three years when looking at AGF’s mutual fund gross returns (before fees) relative to peers within the same category. As at November 30, 2020, AGF’s average percentile over the past one year was 41% (above target) and the average percentile over the past three years was 53% (below target).
  • During 2020, AGF received honours from the FundGrade A+® Awards, Lipper Fund Awards and Wealth Professional Awards.

For further information on AGF’s pandemic response plan statement visit AGF.com.

Financial Highlights:

    • EBITDA before commissions for the three and twelve months ended November 30, 2020 was $137.0 million and $251.1 million. EBITDA before commissions includes the pre-tax gain on sale of S&WHL of $104.4 million and the S&WHL special distribution received in Q3 2020 of $32.5 million. Adjusted EBITDA before commissions2 for the three and twelve months ended November 30, 2020 was $31.6 million and $113.2 million, compared to $35.8 million and $125.0 million in prior year comparative periods.
    • The Company received total cash from the sale of S&WHL of $296.2 million, including $250.4 million in proceeds from the sale of S&WHL, net of currency hedge and excluding tax and one-time expenses, and interim dividends and a special distribution totaling $45.8 million. Net cash received on the sale, after tax and one-time item expenses, was $231.4 million, resulting in a gain on the transaction of $94.4 million. With proceeds fully received, AGF no longer has an interest in or association with S&WHL.
    • AGF’s interest in private alternative managers generated EBITDA of $1.6 million and $2.9 million for the three and twelve months ended November 30, 2020 (2019 − $0.1 million and $0.3 million). The increase includes $1.0 million of carried interest revenue recognized in the fourth quarter of 2020 related to one of AGF’s private alternative funds which has exceeded its performance threshold.
    • Selling, general and administrative costs were $174.7 million for the twelve months ended November 30, 2020, compared to $184.5 million (adjusted for IFRS 16) in 2019. The reduction in costs was attributable to the Company’s continued focus on cost control combined with lower travel and entertainment costs as a result of the ongoing pandemic.
    • Adjusted net income for the three and twelve months ended November 30, 2020 was $15.0 million ($0.19 adjusted diluted EPS) and $46.0 million ($0.59 adjusted diluted EPS), compared to $19.4 million ($0.24 adjusted diluted EPS) and $56.7 million ($0.71 adjusted diluted EPS) in prior year comparative periods.
Three months endedYears ended
 November 30,  August 31,  November 30,  November 30,  November 30, 
(in millions of Canadian dollars, except per share data) 20201  20201  2019  20201  2019 
Income
Management, advisory, and administration fees
 and deferred sales charges$97.5$94.9$102.4$380.7$393.3
Share of profit of joint ventures1.60.60.12.90.3
Share of profit of associate (S&WHL) – –7.8 –24.6
Dividend income, net of currency
 hedge (S&WHL) –41.3 –45.8 –
Gain on sale of assets classified as held for sale,
 net of currency hedge (S&WHL)104.4 – –104.4 –
Fair value adjustments and other income5.91.94.210.118.5
Total Income209.4138.7114.5543.9436.7
Selling, general and administrative43.146.145.4174.7189.2
EBITDA before commissions2137.062.638.7251.1110.0
Adjusted EBITDA before commissions231.630.135.8113.2125.0
Net income110.447.322.2173.947.9
Adjusted net income215.014.819.446.056.7
Diluted earnings per share1.430.600.282.220.60
Adjusted diluted earnings per share20.190.190.240.590.71
Free cash flow29.915.518.346.152.8
Dividends per share0.080.080.080.320.32
Long-term debt –194.3207.3 –207.3
(end of period)Three months endedYears ended
 November 30,  August 31,  November 30,  November 30,  November 30, 
(in millions of dollars) 2020  2020  2019  2020  2019 
Mutual fund Assets Under Management (AUM)3
(including retail pooled funds)$20,322$19,232$19,346$20,322$19,346
Institutional, sub-advisory and ETF accounts AUM9,6389,25210,7559,63810,755
Private client AUM6,0435,7736,1006,0436,100
Private alternatives AUM42,8102,7552,5802,8102,580
Total AUM, including private alternatives AUM38,81337,01238,78138,81338,781
Net mutual fund sales (redemptions)388(22)(181)(371)(886)
Average daily mutual fund AUM319,48718,87919,01518,80418,908
1Refer to Note 3 in the 2020 Consolidated Financial Statements for more information on the adoption of IFRS 16.
2EBITDA before commissions (earnings before interest, taxes, depreciation, amortization and deferred selling commissions), adjusted EBITDA before commissions, adjusted net income, adjusted diluted earnings per share and Free Cash Flow are not standardized measures prescribed by IFRS. The Company utilizes non-IFRS measures to assess our overall performance and facilitate a comparison of quarterly and full-year results from period to period. They allow us to assess our investment management business without the impact of non-operational items. These non-IFRS measures may not be comparable with similar measures presented by other companies. These non-IFRS measures and reconciliations to IFRS, where necessary, are included in the Management’s Discussion and Analysis available at www.agf.com.
3Mutual fund AUM includes retail AUM, pooled fund AUM and institutional client AUM invested in customized series offered within mutual funds.
4Represents fee-earning committed and/or invested capital from AGF and external investors held through joint ventures. AGF’s portion of this AUM is $188.7 million. Of the $2.8 billion of AUM, 19% are non-fee earning assets.

For further information and detailed financial statements for the fourth quarter and fiscal year ended November 30, 2020, including Management’s Discussion and Analysis, which contains discussions of non-IFRS measures, please refer to AGF’s website at www.agf.com under ‘About AGF’ and ‘Investor Relations’ and at www.sedar.com.

Conference Call

AGF will host a conference call to review its earnings results today at 11 a.m. ET.

The live audio webcast with supporting materials will be available in the Investor Relations section of AGF’s website at www.agf.com or at https://edge.media-server.com/mmc/p/bnkee9rx. Alternatively, the call can be accessed toll-free in North America by dialing 1 (800) 708-4540 (Passcode #: 50044950).

A complete archive of this discussion along with supporting materials will be available at the same webcast address within 24 hours of the end of the conference call.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

AGF has investment operations and client servicing teams on the ground in North America, Europe and Asia. With over $39 billion in total assets under management, AGF serves more than 700,000 investors. AGF trades on the Toronto Stock Exchange under the symbol AGF.B.

AGF Management Limited shareholders, analysts and media, please contact:

Adrian Basaraba
Senior Vice-President and Chief Financial Officer
416-865-4203, [email protected]

Baoqin Guo
Vice-President, Finance
416-865-4228, [email protected]

Caution Regarding Forward-Looking Statements

This press release includes forward-looking statements about the Company, including its business operations, strategy and expected financial performance and condition. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as ‘expects,’ ‘estimates,’ ‘anticipates,’ ‘intends,’ ‘plans,’ ‘believes’ or negative versions thereof and similar expressions, or future or conditional verbs such as ‘may,’ ‘will,’ ‘should,’ ‘would’ and ‘could.’ In addition, any statement that may be made concerning future financial performance (including income, revenues, earnings or growth rates), ongoing business strategies or prospects, fund performance, and possible future action on our part, is also a forward-looking statement. Forward-looking statements are based on certain factors and assumptions, including expected growth, results of operations, business prospects, business performance and opportunities. While we consider these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risks, uncertainties and assumptions about our operations, economic factors and the financial services industry generally. They are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied by forward-looking statements made by us due to, but not limited to, important risk factors such as level of assets under our management, volume of sales and redemptions of our investment products, performance of our investment funds and of our investment managers and advisors, client-driven asset allocation decisions, pipeline, competitive fee levels for investment management products and administration, and competitive dealer compensation levels and cost efficiency in our investment management operations, as well as general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, taxation, changes in government regulations, unexpected judicial or regulatory proceedings, technological changes, cybersecurity, the possible effects of war or terrorist activities, outbreaks of disease or illness that affect local, national or international economies (such as COVID-19), natural disasters and disruptions to public infrastructure, such as transportation, communications, power or water supply or other catastrophic events, and our ability to complete strategic transactions and integrate acquisitions, and attract and retain key personnel. We caution that the foregoing list is not exhaustive. The reader is cautioned to consider these and other factors carefully and not place undue reliance on forward-looking statements. Other than specifically required by applicable laws, we are under no obligation (and expressly disclaim any such obligation) to update or alter the forward-looking statements, whether as a result of new information, future events or otherwise. For a more complete discussion of the risk factors that may impact actual results, please refer to the ‘Risk Factors and Management of Risk’ section of the 2020 Annual MD&A.

(1) Year-over-year improvement based on gross new money excluding money market funds.

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