AGF Management Limited (AGF.B)

Q3 2011 Earnings Call

September 28, 2011 11:00 am ET

Executives

Blake Charles Goldring - Chairman and Chief Executive Officer

Robert J. Bogart - Chief Financial Officer, Executive Vice President and Member of Executive Committee

Analysts

Geoffrey Kwan - RBC Capital Markets, LLC, Research Division

Scott Chan - Canaccord Genuity, Research Division

Paul Holden - CIBC World Markets Inc., Research Division

Doug Young - TD Newcrest Capital Inc., Research Division

Presentation

Operator

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Ladies and gentlemen, thank you for standing by. Welcome to AGF's Third Quarter 2011 Financial Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded, Wednesday, September 28, 2011. Your speakers for today are Mr. Blake C. Goldring, Chairman and Chief Executive Officer of AGF Management Limited; and Mr. Robert J. Bogart, Executive Vice President and Chief Financial Officer of AGF Management Limited.

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Today's call and accompanying presentation may include forward-looking statements. Such forward-looking statements are given as of the date of this call and involve risks and uncertainties. A number of factors and assumptions were applied in the formulation of such statements, and actual results could differ materially. For additional information regarding such forward-looking statements, factors and assumptions, AGF directs you to the caution regarding forward-looking statements which is contained on Page 2 of the presentation, AGF's MD&A for the 3 and 9 months ended August 31, 2011, and AGF's most recent annual information form.

I will now turn the call over to Mr. Bogart. Please go ahead, Mr. Bogart.

Robert J. Bogart

Thank you, operator. Good morning, everyone. I'm Bob Bogart, CFO of AGF Management Limited. It's a pleasure to have you join us today for our third quarter results for fiscal '11. Please note that the slides today supporting today's call and webcast can be found in the Investor Relations section of agf.com.

Today, Blake Goldring, Chairman and CEO, and I will discuss AGF's third quarter results. Also joining us on the call and available to answer questions is Mario Causarano, President and COO of AGF Trust.

Moving to Slide 4, I'll now turn the call over to Blake.

Blake Charles Goldring

Thank you, Bob, and welcome, everyone listening to today's conference call. Since our last update in June, the global economic environment has continued to deteriorate. Over the summer, the European sovereign debt crisis intensified, U.S. economy continued to falter and investor confidence in the ability of policymakers to respond and enact measurable change was very low. In response to these uncertainties in Europe and the U.S., global equity and commodity prices have fallen significantly and financial market volatility has increased.

In fact, the VIX Index, which measures market volatility, recently edged closer to Level C during the financial crisis and subsequent volatility in 2010. Against this backdrop, we believe we are well-positioned, though, to address the cycle of volatility and continue to deliver value to our shareholders.

Let me give you some of the highlights from the third quarter. Investment management assets under management increased 13.6% to $48.4 billion from a year ago, driven by the acquisition of Acuity. Since our last update in June, the Acuity fund mergers have been approved by the regulators, and the majority of fund mergers took effect on August 26, 2011. We've completed the back-office integration of the Acuity operations and are on track to deliver the cost synergies. Consolidated revenue was up 17% and EBITDA was up 18% in the quarter.

Our Retail business continues to trend positively on gross sales with year-to-date gross sales up 15% compared to last year. However, net redemptions continue in the retail space, and I'll speak to that little bit in a minute. Our Institutional business generated excellent growth this quarter, and we have met organic growth in this business line on a year-to-date basis.

Our free cash flow remains strong, with a 6.1% increase compared to the third quarter of 2010. At AGF Trust, loan assets are stabilizing and we continue to expand our mortgage programs in both the broker and advisor channels, which are expected to drive gradual increases in new originations.

Turning to Slide 5, as our stakeholders know, we're one of the largest independent wealth management firms in Canada. Our assets under management have increased 13.6% to $48.4 billion year-over-year, primarily because of the acquisition of Acuity. However, we're confident that we continue to grow our assets organically as well. As you can see from this slide, we've had growth across all 3 client segments, Retail, Institutional and High-net-worth, in comparison to Q3 2010. We consider diversification to be one of our strengths and essential to being a successful investment management firm.

Turning to Slide 6. There are positive trends within our Retail sales, with gross sales growth year-over-year driven by the acquisition of Acuity. Our gross sales growth in the past quarter was 8.1% in Q3 2011 compared to the same period last year and almost 15% year-to-date. As I mentioned, our Retail redemptions are not where we want them to be. The equity markets have experienced great volatility and the crisis in confidence that I spoke about in Europe and of course, certainly, the United States, combined with the strong Canadian dollar, these have all been headwinds on the Retail side of our business. As you know, we have a lot of our assets in the equity side and a great component of our assets in foreign equities as well.

We have announced several changes in the quarter in our investment management organizations, namely Martin Hubbes has taken on the additional responsibilities of Executive Vice President, Investments, in addition to his CIO role. In his new capacity, he will provide direct leadership to AGF's investment management team currently based in Toronto, Dublin, Singapore, and work closely and collaboratively with AGF's investment management team at Highstreet.

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