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AGF Management Limited Reports Second Quarter 2021 Financial Results

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·13-min read
In this article:
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  • Mutual fund gross sales of $1.1 billion for the second quarter of 2021, an improvement of 108% year-over-year

  • Mutual fund net sales of $408 million for the quarter

  • Total assets under management and fee-earning assets1 of $40.8 billion

  • Dividend increase to $0.09 from $0.08 per share

TORONTO, June 30, 2021 (GLOBE NEWSWIRE) -- AGF Management Limited (AGF or the Company) (TSX: AGF.B) today announced financial results for the second quarter ended May 31, 2021.

AGF reported total assets under management and fee-earning assets1 of $40.8 billion compared to $35.8 billion as at May 31, 2020.

“While the pandemic persisted through another quarter, we continued to gain sales momentum and expand our client base and reach into new markets,” said Kevin McCreadie, Chief Executive Officer and Chief Investment Officer, AGF. “Further, we remain uniquely positioned to continue to redeploy capital against our strategic growth strategy delivering value to our shareholders by further diversifying our assets and revenue streams as we focus on new relationships and capital opportunities within our private alternatives business.”

“In recognition of our strong results, robust financial position, and confidence in the future of our business, AGF’s Board of Directors has approved to increase the quarterly dividend by 12.5%," added McCreadie.

AGF’s mutual funds net sales improved $501 million year-over-year, with total net sales of $408 million in Q2 2021, compared to net redemptions of $93 million in Q2 2020. Excluding net flows from institutional clients invested in mutual funds, retail mutual fund net sales were $431 million for the quarter compared to net redemptions of $93 million in the comparative period of 2020. AGF mutual fund gross sales for the quarter totaled $1,060 million, a 108% improvement over prior year. While industry net sales were down 17% versus Q1 2021, AGF’s mutual fund net sales are up 6% versus Q1 2021.

Mutual fund sales momentum continued into June with AGF reporting mutual fund net sales of $76 million as at June 28, 2021 compared to net redemptions of $32 million for the same time last year. Mutual fund gross sales were up 87% year-over-year.

“We are seeing the results of taking a vehicle agnostic approach, in particular with accelerating sales into fee-based series and separately managed accounts as well as interest in the launch of our innovative private alternative offerings,” said Judy Goldring, President and Head of Global Distribution, AGF.

Key Business Highlights:

  • As part of its extended partnership with SAF Group, AGF is operationally ready with private credit offerings for both Canadian institutional investors and retail clients with the AGF SAF Private Credit Limited Partnership and AGF SAF Private Credit Trust with first close expected in Q3 2021.

  • Subsequent to the end of our fiscal quarter, one of AGF’s long-term private alternative investments, managed by SAF, was fully monetized, with a final cash distribution of $5.9 million received. The long-term investment had a carrying value of $5.8 million as at May 31, 2021. In addition, AGF through its joint venture ownership interest in the manager received $2.4 million of carried interest, of which $0.2 million was recorded as an asset in investment in joint ventures as at May 31, 2021 and the remainder will be recorded as income in the third quarter.

  • AGF announced a definitive agreement with Instar Group Inc. (Instar) to conclude their joint venture relationship in InstarAGF Asset Management Inc. (InstarAGF) following the establishment of its two flagship funds, InstarAGF Essential Infrastructure Fund I and II (together, the InstarAGF Funds). AGF will retain its economic interest in the InstarAGF Funds including an upcoming third fund (Fund III) managed by Instar, which AGF has agreed to support with an anticipated US$50 million capital commitment.

  • AGF’s joint venture with WaveFront Global Asset Management Corp., AGFWave Asset Management Inc. (AGFWave), brought its first new strategy, the Hwabao China New Era Infrastructure mandate to market with its strategic partners, Hwabao WP Fund Management and J Royal Asset Management, with a focus on targeting eligible investors in China and institutions globally looking for access to the Chinese market. The new innovative mandate – integrating traditional and new infrastructure – brings together AGF’s and Hwabao’s quantitative investing capabilities for these rapidly growing markets providing diversified access to China's robust and growing digital economy and carbon neutrality pledge.

  • At the 2021 Wealth Professional Awards, AGF was named Digital Innovator of the Year and Employer of Choice. These honours speak directly to two key drivers of AGF’s success over the past year: accelerating digital transformation and employee engagement.

“Over the last year, we have been committed to hearing directly from our employees through a series of surveys to better understand our employee population as it relates to our culture, diversity and inclusion,” added Goldring. “We prioritized employee mental health, focused on keeping engagement high and have experienced a positive shift in our culture that enables all stakeholders to succeed, earning us industry recognition.”

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

Financial Highlights:

“We delivered strong mutual fund sales again this quarter that will generate revenue going forward, as we continue to see an increase in success-based expenses, the expense management discipline we have put in place has allowed our core expenses and operations to hold steady,” added McCreadie.

  • Management, advisory, administration fees and deferred sales charges were $108.6 million for the three months ended May 31, 2021, compared to $88.8 million in 2020. The increase in revenue is attributable to higher sales, increase in daily average mutual fund AUM and higher average revenue rate as a result of product mix.

  • The significant increase in mutual fund sales in the second quarter drove higher selling, general and administrative costs in the period associated with variable sales and investment performance-based compensation. Selling, general and administrative costs were $47.1 million for the three months ended May 31, 2021, compared to $40.2 million in 2020. In addition, the increase in the AGF.B share price during the quarter resulted in higher share-based compensation, which is marked to market. This increase in variable costs was partially offset by management’s continued focus on cost control.

  • EBITDA before commissions for the three months ended May 31, 2021 was $28.2 million, compared to $21.2 million in the prior year comparative period.

  • DSC commissions for the three months ended May 31, 2021 were $17.7 million, compared to $10.3 million in the prior year comparative period.

  • Net income for the three months ended May 31, 2021 was $5.0 million ($0.07 diluted EPS), compared to $5.3 million ($0.07 diluted EPS) in the prior year comparative period. The growth in mutual funds sales as well as the increase in the Company’s stock price in the current quarter resulted in an increase in variable sales compensation, DSC commissions and stock compensation, which were fully recognized in the period, resulting in a $0.12 negative impact to EPS compared to prior year.

Three months ended

Six months ended

May 31,

February 28,

May 31,

May 31,

May 31,

(in millions of Canadian dollars, except per share data)

2021

2021

20201

2021

20201

Income

Management, advisory, administration fees

and deferred sales charges

$

108.6

$

102.9

$

88.8

$

211.5

$

188.2

Share of profit of joint ventures

0.1

0.8

0.6

0.9

0.7

Other income from fee-earning arrangements

0.4

0.4

Dividend income (S&WHL)

4.5

Fair value adjustments and other income

0.4

3.6

(0.4

)

3.9

2.3

Total Income

$

109.5

$

107.3

$

89.0

$

216.7

$

195.7

Selling, general and administrative

47.1

48.0

40.2

95.1

85.5

Deferred selling commissions

17.7

15.5

10.3

33.3

22.8

EBITDA before commissions2

28.2

26.8

21.2

54.7

51.3

EBITDA

10.5

11.3

10.9

21.4

28.5

Net income

5.0

5.6

5.3

10.6

16.1

Diluted earnings per share

0.07

0.08

0.07

0.15

0.20

Free cash flow2

10.4

10.5

6.1

20.9

20.6

Dividends per share

0.08

0.08

0.08

0.16

0.16

Long-term debt

199.9

199.9


(end of period)

Three months ended

May 31,

February 28,

November 30,

August 31,

May 31,

(in millions of Canadian dollars)

2021

2021

2020

2020

2020

Mutual fund assets under management (AUM)3

$

22,290

$

21,394

$

20,322

$

19,232

$

18,259

Institutional, sub-advisory and ETF accounts AUM

9,713

9,403

9,638

9,252

9,591

Private client AUM

6,689

6,300

6,043

5,773

5,624

Private alternatives AUM4,5

134

142

227

178

173

Total AUM4

$

38,826

$

37,239

$

36,230

$

34,435

$

33,647

Private alternatives fee-earning assets4,5

1,983

2,012

2,038

2,029

2,115

Total AUM and fee-earning assets5

$

40,809

$

39,251

$

38,268

$

36,464

$

35,762

Net mutual fund sales (redemptions)3

408

385

88

(22

)

(93

)

Average daily mutual fund AUM3

22,011

21,118

19,487

18,879

17,386


1

Refer to Note 3 in the 2020 Consolidated Financial Statements for more information on the adoption of IFRS 16.

2

EBITDA before commissions (earnings before interest, taxes, depreciation, amortization and deferred selling commissions), 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.

3

Mutual fund AUM includes retail AUM, pooled fund AUM and institutional client AUM invested in customized series offered within mutual funds.

4

Total AUM and Private alternatives AUM have been reclassified and restated to exclude co-investment AUM for comparative purposes.

5

Fee-earning assets represents assets in which AGF has carried interest ownership and earns recurring fees but does not have ownership interest in the managers.

For further information and detailed financial statements for the second quarter ended May 31, 2021, 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/uekxsbo4. Alternatively, the call can be accessed toll-free in North America by dialing 1 (800) 708-4540 (Passcode #: 50170228).

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 nearly $41 billion in total assets under management and fee-earning assets, 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, InvestorRelations@agf.com

Baoqin Guo
Vice-President, Finance
416-865-4228, InvestorRelations@agf.com

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 Fee-earning assets represents assets in which AGF has carried interest ownership and earns recurring fees but does not have ownership interest in the managers.


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