Q1 2020 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Power Corporation of candidates first quarter 2020 earnings Conference call. At this time, all participants are not listen only mode. After the speakers presentation Dolby a question answer session.
Question. During this session you'll need to press star one on your telephone please be advised the today's conference is being recorded.
If you require any further speech. Please press star followed by zero.
I'd like to hit the corporate talk to your first speaker today, Mr., Jeffrey or President and Chief Executive Officer. Thank you. Please go ahead Sir.
Thank you operator, and welcome ladies and gentlemen, too.
<unk> corporations first quarterly analyst and Investor call, it's our pleasure to be here, a with you and thank you for joining us I'm just as part of our ongoing efforts to enhance our communication and our Investor relations outreach generally so we're really pleased to tick to kick this off with this.
This call.
You got on the next slide that typical disclaimer in terms of forward looking statements statements about cobot 19, and non IRS measures you can read that at your leisure I'm. So today joining me on the call is a great Krysiak executive Vice President and Chief Financial Officer apparel.
Corporation, the two of our.
Our together in Montreal, but you'll be piece to now we are a suitable distance away from each other also on the phone and especially in a five.
He is joining us from France and the early evening there. Thank you just me that's you're saying, it's vice chairman of Perjeta Holdings. It's also <unk> director of group. It looks a lot about which is GBL and he is the founder and the person who's a driven the growth of a cigar Europe, our private equity business in Europe for the past 20 years and you won't be.
Making comments during the presentation, but depending on the questions that we may have keys available for questions.
Oh I'm Gonna then turn quickly to the Q1 highlights and on the page in front of view, which is page six.
The point out that great West life to why G.M., Perjeta and GBL first all being public companies have had their quarterly results released last week. They have each got their own investor relations programs, Great West Tonight G.M. have their own conference calls following their releases its not our intention.
In today's presentation to focus on or public companies.
We they were not trying to duplicate the work that they have done and the disclosure they've already made we're going to be focusing rather on.
What's going on at power other assets our strategy overall it was not to say, we wouldn't entertain questions on great West life right, Jim depending on the specificity, we might refer you back to their management, but really the point of our calls here is to augment and add to what our public operating companies are already doing not duplicated so have.
He said that I'll move on to the next page, which is page seven and just talk about the quarter. It was a you know obviously a very different corridor with lots of events. We started the quarter off very much focused on the reorganization and on the vote and.
Reorganization that was announced in December was completed on February 13th.
We then tried to follow up quickly with one of the elements that we talked about in the reorganization, we launched our normal course issuer bid.
I'm not long after that we followed up the power financial Powercore reorganization announcement with another announcement intended to simplify the structure of the power group by the Perjeta and GBL reorganization and what by the time, we've got to that announcement, we were well into a coke.
19, and the a and it's starting to impact financial markets and in fact Coincidently have the same day the World Health organization declared a global pandemic on that day.
So just everything kind of changing as we tailed off in the quarter and then a and then as I mentioned last week.
We had the public companies report and also talk about some of the impacts of Cobot 19. So that's the high level on on what was an incredibly busy quarter and to talk about the financial highlights themselves I'm going to turn it over to Greg Kruczek. Thanks, Jeff Good afternoon, I'm on page eight and hopefully you can hear me clearly.
Starting off with earnings net earnings per share or 36 cents compared to 63 in Q1 2019, certainly reflects the impact of the cobot 19, or a crisis across our group of companies.
Adjusted earnings adjusted earnings per share 62 cents per share a in the quarter compared with 54 cents a the difference between not an adjusted is entirely.
The cobot related reserve strengthening or at least our share of it that was done at great West life, a when they announced their ROE results in the quarter you're of course aware that the board of directors of now declared a quarterly dividend of 44.75 cents, a which is up.
10.5% from last year and you also recall that we advance the payment dates by too much.
Let's go to page nine.
On page nine you can see or adjusted earnings sender net earnings here Itemized adjusted was EPS was up 14.8% a driven by increased comping a contributions from per se. So you'll see it's a there were eight cents in the quarter their contribution.
They sold their remaining a position in a a total should be ill and that contributed.
Almost $70 million gross to a PCC in the quarter.
The second item or driving the increase was the contribution from our investment platforms. So we got a nickel from the investment platforms versus a loss of four cents in the prior period.
Basically from two places to power Pacific ER, which realized gains on its a share trying to ishare portfolio and also in a cigar Europe on the sale of one of its portfolio investments quarter.
When we when we're looking at the results for the quarter I'd, just remind people who are on the line.
That's a we issued a number of shares a in connection with the reorganization and so where average share count is at the bottom of the table.
C 560 during the quarter versus 466, so just when you're trying to interpret results keep that in mind.
Also point you to the highlighted in Blue here are the actuarial assumptions and the market related impacts, which I said in the previous page driven by Cobot 19.
Impact.
In its entirety quite frankly.
Let's go introduced the concept of base earnings, which is basically adjusted net earnings for Us and.
Those two adjustments are actuarial assumptions.
Market related impacts.
This is generally speaking consistent with the industry practice and just wanted to make sure that everybody's focused on those and understood. Those adjustments since they were just adopted in this quarter that I go to page 10.
In page 10, more on page 10, I should say.
We have a the PCC NAV and discount a draw your attention to the dark Blue line and how its traveled since December.
15th so to.
Today quite frankly and.
During the period from the beginning of 2015 to the end of 2019 the discount averaged.
34%.
In the a once the.
Transaction was announced reorganization was announced the dividend a decrease the decreased to 21%. However, as we all know when a matter of days after that cobot 19 emerged as a full blown crisis in the New York the market's reacted and so did the discounts globally.
Oh, that's a mini holding companies.
No and when I look at the call out at or I should point you to the call. It I should say.
You can see the positive market reaction to the announcement, a and then on the close when it dropped to 21% prior to as I said cobot 19, becoming a new reality.
With that I'd turn it back to Jeff. Thank you, Greg So I'm on page 11.
Just a worried about the group's responses to covert 19 like many other companies and certainly many other financial institutions, we were really consumed with it from an operational point of view and the first.
Order a business was making sure our employees were safe and we really undertook a very rapid.
Transition to work from home mode, or two or work from home mode.
Which was accomplished over the course of a couple of weeks I.
I think across most of our businesses, we're at 98 or 99% working from home you think about some of the size of our businesses, we've got call centers with hundreds and hundreds of people in them and.
And even our call centers are functioning.
At home. This is something that would not have been possible two years ago, but a lot of the investments we've been making and digitalization allowed it and then of course like many other companies digitalization a adoption has just been forced to be picked up by all of our people, including our advisors.
As a consequence, but lots of focus there.
The middle column clients, we really.
Service levels are up a we haven't had a deterioration our advisors a both those that are associated with our group and those that are third party advisors have been active with their clients. So it's been really wonderful to see our.
Our groups also as many other companies are very involved in our communities and we spent a lot of time focusing on how we can help situation not just in Canada, but where we operate elsewhere, both with our money and in many cases with People's time.
And we continue to be focused on that so it's been very very consuming for us and for all of our management teams and like to thank all our people in our employees for their efforts that they've made.
I'll turn that into page 12.
We go into the covert 19, both at power Corp, and within our group companies in a very strong position.
There are companies right across the border well capitalized we have strong liquidity you see some of the numbers. Therefore for power Corp. itself, there's no material debt maturities coming up at power for many many years and at our holding companies or excuse me our operating companies other debt structures are well very long debt structure is nothing coming up in the.
Coming years.
We did suspend DNC IB program at the end of March in light of the market activity, We've got a conservative prudent approach to risk management.
Which has served us well and so under the circumstances, we did stop that program and it's just we're continuing to look at it but it's not active at this at this point.
I'll go into this covert 19 situation in a very very strong position.
Page 13, I'm going to turn that and say that while we spent a lot of time adjusting to cope with 19. It doesn't mean that we haven't spent most of our time focusing on looking forward and our strategy and working on putting our strategy in place remains our where we spend a lot of energy. This is a repeat slide not exactly but it's almost a direct reps right.
Print from a slide that we had in our December 13th.
Deck, when we announced the reorganization and as we went out and spoken many investors in the following a weeks and months. This fight with these points were made and.
All of the benefits we believe from the reorganization are still there having many been realized but many that are kind of keep us busy for the upcoming several years.
With that I'll turn to page 14.
Just to a bit of a scorecard on some of the things we announced in our December 19th announcements and just going through it correctly. The transaction was approved demeritt family did invest as part of the reorganization and purchased 6 million participating preferred shares.
Paul and Andre step down and their roles in their continuing stepped out of the roles as CEO on a continuous chairman and Deputy Chairman I became CEO effective.
February 13th.
I don't want to put a stock chart up in terms of my yet.
All of months his tenure as CEO I think that was just about the peak of aftermarket, but anyway thats that change was made that we've talked about the dividend already in the buyback purchased 7.4 million shares today's announcement as a further step on our Investor relations.
And our call here is a further step in our Investor Relations plans.
We are working on our plan to reduce our expenses by 50 million and we've been very busy on our strategy going forward to refine our strategy into being focused on financial services I think on page 15, I've made just about all of the points already on that page. We did at the annual meeting this morning approved.
Cash settled stars for the option program, which makes it a little bit more efficient from a cash point of view in terms of.
Not a funds you need to use from an anti be to neutralize the effect of option grants.
At that point is there for you to take note up.
On page 16.
I mentioned, we've got about 35% of our targeted $50 million already done and we don't see any reason why we won't achieve that within the time period.
We stated when we announced the reorganization.
I'm going to turn then.
As we turn to page 17 and pass it back to Greg to describe the announcement that we did on March 11th.
With respect to reorganizing purchase and GBL Greg.
Certainly thank you.
Just for those of you on the call apart Franco which announced the transaction as jointly owned by the Demaray in for families.
And that transaction was announced in March and offer of 0.93, you should be able share for each pars perjeta sure held.
Our colleague sharply on the phone is has overseen this project and at this point to.
The transaction is subject to the acceptance of the parsley is our shareholders representing at least 90% of the vote.
And it is expected to upon that.
Hurdle being crossed that.
The transaction will close.
Sometime in the fourth quarter of 2020.
[music].
The proposed transactions going to deliver significant benefits.
Including a 16% implied premium.
In addition to that.
Termination of the dual holdco structure of course.
And.
Double digit.
Dividend per share accretion accretion pardon me.
And an increase float well go to page 18, and here, we have a pictorial of the current structure and the simplified pro forma and post the completion of the transaction.
We certainly will have simplified structure significantly.
You can see in the right panel here.
And you will see or interest of 28% there along with that interest we'll have that economic interest we will have a de facto control position with.
Approximately 43%.
Voting interest.
No I will go to slide 19.
Which again is a bit of a set up and a refresher for those on the phone too.
Familiarize themselves with so what is in the portfolio.
Certainly joslyn can add some color to any questions you might have on that portfolio, but I would say that.
Yeah, and Galyen and his team.
Have made significant changes to the historical composition of this portfolio.
The last energy holding was sold as I mentioned earlier on in January the total position and certainly it is a.
Yesterday conscious portfolio.
You can see from the holdings.
I would turn it back you Jeff Okay, great. Thank you.
Moving right along here to page 20.
You can see that in the last couple of quarters with the reorganization that we announced regarding power financial Power Corp, and then the purchases GBL reorganization, we will have succeeded in simplifying the corporate structure apparel quite significantly.
So we're very pleased with that and all part of our ongoing strategy to make the company easier to understand and value. In this these are couple of important steps.
Then I will move along to another important step which is at the the development of our investment platforms. So I'll turn to page 21.
I've got a couple of slides on our investment platforms. So they operate in different asset classes and the principles along the top of this page 21 are the key then we're going to be operating where we think we can create a competitive advantage, where we can raise third party capital.
Where we do have an objective to be profitable as an asset manager the GP level. If I can use that term within a reasonable time period and increase the returns we have on our seed capital and then we're also looking to realize synergies with our operating companies both for the distribution to their clients and for their own balance sheet needs.
Platforms are organized into two groups cigar holdings, which has a multi strategy alternative asset manager and I will talk a bit about that on the next page as well as cigar Europe, which I mentioned earlier, just laying the fave has built up to European Midcap private equity business and Paul three.
Paul Demeritt three is overall looking after cigar holdings.
Power sustainable capital is power Pacific and power energies to power Pacific is our team in China, They have been managing 100% power capital.
Powers own capital and that goes back to I think about 2005 or six I may have that wrong. When we initially got acuity license thinking about $700 million of our money, we didn't put anywhere near that amount in they've had a great long term track record and then power energy, which we've been at for almost a decade.
Very experienced team and good assets.
There are so and that Olivier demeritt his son of Andre is.
Overall looking after Paris tangible capital so our alternative asset businesses are laid out in these two groups.
Over to the next page.
Centrally you've got currently at $3.7 billion in AUM in those platforms.
And another 1.9 billion, which has not.
In under management at this point, but which is committed by investors to go into the funds.
The existing 3.7, you see in the bullet the top of the page 2.1 billion is power cap powers own capital of the 1.9 billion that is in unfunded commitments three quarters of it is coming from third party and so there is at the minority of power Corrupts capital you see a breakdown of that on that right.
And side lower right hand side as you go through cigar holdings cigar Europe, the private equity business in Europe, you can see in the dark blue at the bottom as power corrupts on capital and then that lighter Blue is other People's capital same thing with cigar credit for test three our Fintech adventure and cigar healthcare royalty.
Yes.
Those are majority third party capital the numbers look small for potash three and cigar healthcare.
That theres far greater commitments in though so those of what's been invested to date, but the investor commitments are larger than the amounts shown there and then power sustainable capital, which was really part of our diversification strategy in asset classes. We felt we had great teams in a reason to win in those are all its all power corp. money a lot of work in the last.
Three four months has been to reorient those teams and focus on a strategy to have their businesses.
Be much more a growing based upon third party capital then frings freeing up some of the capital.
Hi Power Corp has underneath it so important part of the future our invest or alternative asset management platforms, and we're spending a lot of time energy ensuring that they continue to grow and succeed I'll just finish up with a quick couple of quick slides just to complete the story on our assets, China AMC, we own 13.8% of that company has does.
GM.
And they continue to be very successful the Chinese equity market has done well by the way and this company continues to succeed.
And they have grown their assets under management and they actually had a very strong first quarter business is going very well, we're very pleased with our position in China AMC.
And flipping forward to page 24, we also have just to complete the portfolio a standalone businesses and these are these are strong business is strong management teams. We've got good partnerships with.
With the people that are in these businesses, they're not standalone businesses are not part of the strategy going forward and we will be looking to realize value over time with these businesses, but.
We're very pleased with our partnerships with the entrepreneurs, who are running them and we havent you see at the bottom of the page about 660 million of our in a b is tied up in these businesses.
So that's a quick run through.
Our business and the presentation and as summarized on page 25.
We have been very focused on covert 19, but still focused on moving it forward busy on the purchase that GBL restructuring and.
Okay, and continuing to develop our strategy going forward just before I open up for questions. A technical note on page 26, you may not care, but you, but just so that we can generally make it where there was a tax filing.
People, we're being asked to do in the context. The reorganization at originally had a June 13th date on it.
Like many things with respect to taxes and Cobot 19, that's an extended to October 31st. So just so you habit of use US occasion, let people know and with that operator I'm going to finish the that's the thermal part of the presentation over and we would now be pleased to open up the microphones.
For questions.
Thank you as a reminder to ask the question. Please press star followed by the number one on your telephone keypad to withdraw your question. Please press the pound key well pause for just a moment to compile the kuni roster.
Your first question comes from Jeff Bond from RBC capital markets. Your line is open.
Hi, good afternoon.
First question was if we look back at the past year in a bit.
Great less.
Business over the substantial issuer bids.
Collapse the structure between power power and now trying to do that with our Jason.
I'm looking forward, how would you describe the opportunities to further simplify the structure surface value free up trapped capital.
Within the complex in.
Kind of the timing and complexity doing that.
Thank you, Jeff and thanks for your question. So I could answer that question first of all from a power Corporation point of view and it we have collapse the structure. So simplification of the power level is probably done but realizing value both from a realization point of view and communicating.
Value are two different things and there's lots of opportunities for us to do that so if you think about what we really announced by focusing our investment platforms on third party capital, what we're really saying as we're trying to grow our earnings getting a return on the seed capital, but not put as much capital.
Into those platforms and free some of that.
Hopefully to distribute to shareholders and with respect to looking at the Standalone businesses, while we're going to be smart about how we realize and when we realize value. That's not part of the strategy is going long term. So theres an opportunity at power Corp to transition to a simpler business model a simpler business model to understand.
And any and a lighter capital model that hopefully has higher returns. So that's what the game plan is and then up to us.
To be able to effectively communicate that to the analyst community the investor community and show, how we're thinking about creating value and hopefully.
Demonstrating that as we as we move forward and I think that the timeline for that can happen over the next couple of years I think covert 19 in the financial markets. Obviously puts some strain on that if you're out trying to raise third party capital and your third and your alternative asset funds or you're ultimately trying to dispose of some businesses.
The current environment is not conducive to that so.
So there you could certainly say the environment might delay.
The timing somewhat that we'll have to see how all things unravel here or unfold here, but it doesn't in any way.
Change our strategy, our optimism on our ability to to affect the strategy. The final thing I'll say and answering your question is from the great West life IBM GBL perspective, I think there they communicate the strategy, they're engaging in their strategy and there's continued efforts to try and explain to them.
Market more effectively.
Where they see value creation, and we still got some work to do there.
And.
That but that is very much a.
Work in progress, but hopefully that adds to value as well if you remember in the presentations, we made too as we went around with respect to the reorganization and we did at our ATM I'm sure you were all listening attentively. This morning, we have three leavers that we're really looking at the first lever is the operating companies the public.
Companies with their own organics growth strategies. The second lever is at the operating companies.
Using M&A be it making acquisitions are selling assets. We don't think have a return potential like the U.S. life insurance business and the third lever is what we can do at the holding company levers level excuse me, which are the things that we were just talking about here with the reorganization. So we're pulling on all three levers, Jeff and and hopefully were.
That is going to translate into very good value creation.
Okay.
And then theres been some discussions.
Regarding European regulators might look to limit the insurer ability to pay dividends and therefore have an impact on great west from your perspective not being.
Sarah upgrade less that Youre seeing on the board and how are being the controlling shareholder.
You think about their ability.
To to handle if there is a ban on dividends coming out of Europe, and if it happens.
Also from the power.
Level, how we should think about the resources that you have to handle if there is a temporary cash flow destruction.
To your dividend is great west, where it's needed to reduce Theres you mentioned the liquidity.
During your presentation I don't know you can have a base level liquidity that you'd like to not want to go below.
Yes.
Good question, obviously very topical I'll start where you started with the regulatory environment.
With respect to great West.
No regulators.
With the exception of the Central Bank of Ireland have said anything to say you can't pay dividends Central Bank of Ireland has said that it's not material part of our operations a good part, but it's not material in the overall scheme of things for great West.
Other regulators all regulators have been in touch with financial institutions to say you know be careful then be prudent.
Yes, we certainly said they don't want to see buybacks or dividend increases, but we haven't had any regulators come right out and say they don't want to have us pay dividends, the I hope which has the.
International.
Insurance body is not a regulator that regulates our businesses, it's an influencer and they did come up and make a statement, which a lot of people paid attention to from the financial markets, but the.
Insurance companies haven't followed that where we operate so they came up said shouldn't be paying dividends I don't I'm not aware of the single UK company that has followed it there might be there might be somebody I want to make that blanket statement, but the base major companies have not followed it was the suggestion. If you will regulator there is the PR a potential regulatory authority and they have not.
Put a ban on dividends so just to get it straight at this point.
There is we don't have a situation, where the regulators where they're at preventing dividends.
[music].
From a power Corp perspective, if in the future the circumstances, where did deteriorate in a material way financially and economically such that great West life have to take action or I Gms take action or anywhere else.
Or the regulators change their stance and we ended up at the power Corp level with a diminution of the dividend stream, we get from the from the subs, we'd look at that situation and deal with it at the time, we certainly have a lot of liquidity to deal with it if it were for a short period of time, if we thought it was going to be for an extended period of time like a few.
[music] years and it was material then we would be looking at our cash resources in our other assets, but the board I'm sure. It would be looking at our dividend in that circumstance, but it's hard for me Jeff to get into speculating at a hypothetical situations as to when we would or when we wouldn't I mean, the board would look at it.
In the future at that time, there's nothing I see today as we speak that create that causes me concern that under the current circumstances were going to have any of those issues.
It's really hard for me to speculate about what circumstances in the future might give rise to the board changing their their position on that I don't know if that answers your question or not.
That's helpful and it's kind of get a better sense, how you're thinking about and just my last question was going back to when you did the announcement option structure and it was.
I think an intent to the time too.
Repurchase and make your preferred shares and is that still the plan or is that says what's happened with markets incumbent 19.
Altered your thinking around that.
Yes, we still the plan, but what's happening with covert 19 were not a we're not jumping on on that right. At this point, it's something we need to need to focus on.
But that is still the intent to.
Execute on that but at this point, we're quite cautious of what's going on in the markets in our and being prudent with our liquidity.
Okay.
Thank you.
Your next question comes from Tom Mackinnon from BMO capital markets. Your line is open.
Yes, thanks very much.
Two questions maybe the first one perhaps for Jeff when you had talked about the.
The when you collapses structure, you talked about a corporate strategy that m. sites and essential services seem to be that you going to sharpish sharpen your focus here.
That was through a building up some of the financial services assets you had.
Maybe some capital raises there, but also looking to divest some of the.
I.
We'll call them noncore, some some standalone assets as well that we that weren't financial services assets. So.
It just especially in this cobot environment, perhaps there are some assets out there that.
Could look attractive.
Yes.
Just given the volatility we see in the market in it.
I mean strategy, sometimes have to change to some extent as the markets change have you.
Is that still when is that in the cards at all or what are your comments with respect to that and then well and maybe you can also elaborated on how you deal you trying to perhaps.
Sell some other standalone assets that aren't financial services in this environment.
Okay. Good question. Thank you Tom.
In terms of that your comment on our basic strategy I wouldn't say, it's shrinking our way to financial services I I would never put that tagline on it and keep you out of our marketing Department.
The what I would say is the following is that we I think at power Corp. In order to create value at the power Corp level I'm not talking about great West life, and Jim et cetera, Powerpoint level in order to be successful I think we need to be much more focused and in order to be able to translate it and articulate our strategy in a way the market understands and valley.
Yes, we need to be much more focused so the alternative asset management platforms, which were in many cases built for diversification purposes are now being re tuned into being alternative asset management businesses and I think that means we'll have a lighter capital commitment to them.
Still grow our earnings if they're very successful will still be putting seed capital into them and we expect them to be a source of growth as we move forward. It's not a shrinking there may be some initial capital taken out as third party investors come in on the in particular on the power sustainable capital side, but the intent is that if we're successful those will grow and have new store.
Energies and will be growing our earnings and putting more capital into them. The other and that is it at power Corp up to I wasn't sure if you're trying to jump in there the.
I heard something on the line so thats it at power Corp. I'll come back to your last part of the question on a on the other assets now to your second part of your question about taking advantage of situation and that being a switch and our strategy I would see that where that would play itself out is in fact through the our operating businesses the public companies.
And our and our asset management platforms that power and there were just not it's a great west life for GM. When they are in the market, they're looking at various acquisition targets and they are very much of a mindset that if we can take advantage of this situation and acquire some assets that we've been buying and looking forward. If we can do that well.
Very much be trying to do that so very much along your point and within the asset management.
At platforms that power itself.
<unk>, they've got funding and they've got commitments and I have no doubt they'll be looking at this opportunity to see if they can't acquire more assets at attractive prices and take advantage of the situation. So.
There's not contradict contradictory to what you're saying we are very much onpoint and pretty much aligned with what you're saying the other assets. The last part of your question. The other assets at power that are not on strategy I think we're trying to.
Walk a fine line there we have good businesses good partners and we want to continue we don't do anything that hurts the value of those businesses as they pursue their growth strategies, but we will be looking too.
Ultimately to realize value for them over the next few years I think covert 19 on that and the financial markets on that regard.
Probably slows us down a bit right because you've got.
Markets that are cut or dislodged and and less healthy situations, if thats, what youre trying to do.
I don't know if that answers your question I think I answered all the points you had but.
Please follow up if you don't think it did.
No that was good.
And maybe as a follow up for Greg.
Perjeta they reported under half for ethanol and and then you could slip the results into is 39.
I was.
Wondering when the power corporation going to adopt our asinine and why hasn't it.
Good question Tom.
Nickel in nature for sure but.
The adoption by power Corp will happen when life Coke.
Adopts it and as you may know.
The insurance companies got to buy on adopting it and given that it's going to be a much more complicated.
Issue.
The insurance companies generally speaking and of course are great bigger component of earnings are driven by life go currently.
Decision was made we'll wait and will adopt when life go does.
So.
Yes.
The reason.
The second question of win.
That's a good question I mean.
I don't know about.
39.
Because it may indeed change in terms of its timing because it was tied to high as 17 and 17 has got deferred cobot as affecting that then.
So I you. Your guess is as good as mine is when that might happen. It was originally scheduled I think for 23.
So.
It's not that far away, but that will be dependent upon how that plays out.
What in your opinion is a better better way to value the investment in Perjeta Andre <unk> for us nine or under I have for us 39.
You know I think you have to look at both.
Quite frankly, it and it depends on where you see the most value emerging.
If you see it through the capital appreciation or through dividends. Both those views I think are important and.
Certainly the way we report today.
I think you get a better view on the movements of.
The gains and if you will.
On the portfolio than you do under 39, but just lands on the line and he may have a view and <unk> and another view from a European point of view, which quite frankly is an important point of view because.
The certainly as it comes to the Nab valuation on our stock not component of it that will be driven by how its first interpreted by the European So jocelyn.
Hi, Greg So no.
Im not familiar with the with North American accounting rules, but the yeah fair. This nine doesn't have anything back on any the I would say at the touches on GBL levels were looking at two basic thing first say Navy and their de accounting.
Sarah It's nine doesn't have any impact and we're looking also at cash earnings which is.
Income statement, we got in Europe, so really cash and cash and.
The frustration I can't have.
As an executive and European group is that with the Ferris nine sometimes like.
We spoke about setting out they just sold and investment in March well the.
Nice profit, which was significant on that investment on that sale is not coming to the.
Result.
It goes directly into the equity accounts so.
I think nothing is perfect.
Okay. Thanks.
We kind of got the best to both worlds Tom you.
Just one how's it.
Going through OCI, and we Havent going through the profit comes through of course, and our financial statement.
Thanks.
Thank you.
Are there other questions.
Operator.
Hello.
The operator.
Just hang on if you can hear me, ladies and gentlemen.
Seem to have lost the operator, which as a.
Unfortunate thing, but her audio seem to have cut off she's just returning to the call right now okay. Thank you very much so.
Just please standby if you can all Harris, we're going to.
At our operator back then we can answer your questions.
I don't know whether she left because of the length of time that Tom and Greg.
And just I spent talking about accounting policies.
Possible, but the operator.
Acted to that discussed.
Sure. Thanks are you still here are you still on the line yeah, absolutely there and there are new get them. Their excuse me. This is the operator can you hear me, yes, we can hear your thank you already Dennis I'm. So sorry about that your next question comes from Paul will then from CBC. Your line is open.
Thank you Paul here now.
I must dropped off there with the accounting discussion, but [laughter].
Anyway, so I.
I wanted to go back to see comment Jeff you made about becoming more capital light and then I think you you put something in there, but hopefully returning capital to shareholders I.
I don't want to put words in your most I guess, one I understand that last piece of your commentary a little bit side or is the idea as you dispose of the.
For time that you'd be continuing to buy back stock.
My reading into that correctly.
Yes, okay.
Okay.
So having said Paul Paul can I, just say one thing you know as as normal you're going to make decisions in the future, but the plan a would be as we're focusing the power corp, corporate balance sheet, but the excess capital. That's created would be used to do buyback involve a sudden theres a great big acquisition that our Saab and.
Great with like needs to raise capital and we got to putting money to help support that issue I'm, not saying, we wouldn't do that but but those things come sporadically as you know when they're larger.
Acquisitions like that so our plan a is to continue to were returned capital I understood understood.
So having said that and I appreciate your comments on being conservative around correct.
But I mean, my commentary relative to that would be there's probably no better time, the repurchasing your stock than today.
Look at your balance sheet highlight no debt maturities until 2033, you don't have a lot of liquidity needs at the power Corp level. So I'm just.
I am I'm kind of curious what you're being.
Serve it of about like why do you feel the need to keep that cash on balance sheet.
I think it's just simply the uncertainty with respect to understanding where the health and therefore, the economic situation develops and nobody out there that understands how long were in this and.
And how long it could go on for and there is over the upcoming months, we'll see how it's going to play out the difference in the stock price power Corp.
In a year from now were three years from now based upon what we might be able to buy back over the next.
You know immediate period of time is a rounding error.
Versus not having the liquidity go in case, you get into a scenario where things go down, but that's basically it I agree with you. It's on one hand, very tempting to Gemma and buy more shares at this point.
And I will go back to the answer that I gave to Tom Mackinnon. His question. That's certainly our companies are looking at how they can deploy their capital if they can take advantage of it but at the margin.
As we wait to see how the situation unfolds, we just decided would be prudent to suspend the buyback for the time being.
I hope that answers your question true yet.
I I got it.
Last question from me.
If you were to see a continued.
Dislocation of valuations for your.
Major operating subs, so GW in height.
And you felt more comfortable about the macro environment.
Would you consider increasing your proportional ownership in those businesses.
That's too hypothetical to answer.
No not trying to be evasive, but it would depend on still much why the valuation was deteriorating and if it was deteriorating because.
Pardon me.
You know the world was looks like it was really uncertain. How this could go and we might be into a much more protracted.
Downturn and that that would affect financial markets and and then there's shares are down for that we might be in a conservative mode as well in that time, and so I am really not trying to be evasive.
I I'm, just saying I don't know, how we would act it would depend on the circumstances.
But generally you havent seen us acquire a lot of shares of our sub we've been more were Tom was in terms of when things get bad how can we open the companies.
Take advantage of the circumstance by making some acquisitions and then depending on the size. You then say what do they might they need some equity depending on how big that is and do you want to really do you want to have your dry powder to be able to do that that's those are the discussions we have when we're in those circumstances and so I'm, giving you probably more than you need.
If you don't know how we would act.
On a deteriorating situation.
But that gives me what I need to know.
Thanks for your time and thanks, Thanks for hosting the conference call and taking cash.
Thank you and thanks for participating.
Your next question comes from Jeff Kwan from RBC Capital. Your line is open.
Hi, just had one follow up just thinking.
All these governments that are doing these massive fiscal spending.
Trying to eventually when the day comes trends sixties.
Deficits.
Increasing taxes may be an inevitable way to try and deal with that.
So in that context does that.
Influence at all any thinking on timing of any sort of simplification.
Or other opportunities such that you might consider pursuing.
In the near to medium term.
Looking at Greg here, unless you got not for me.
I think about when this started it was obvious.
When it first started but it's been obvious for some time that we're going to end up with governments, having a higher level of debt and it's a question of whether it's kind of 15% of GDP or 30% of GDP or whatever number you can speculate on.
And then companies are going to have some some sectors are going to have higher levels of debt. So theres more there's more debt being created I don't think it affects our corporate actions.
You then you get into speculation about how to that.
What impact does that have on the economy going forward higher taxes does it mean more inflation or does it mean lower interest rates because governments will be and my and monetary authorities will be unwinding or taken on lot of a paper.
And that's what happened after the end of the great financial recession, and everybody was waiting for inflation to come back and of course, just went the other way. So we speculate about what does it due to interest rates going forward, but I don't think it has an impact on that I can think of on how we would do other steps in our reorganization Gregory.
Jeff.
Not quite sure what you're envisioning, but within the current framework of.
Taxation in this this country in North America.
Certainly the governments will all be looking to raise the taxes and tax revenues the.
You know when and if you use the same mechanisms that they've used in the past them and perhaps we're going to face higher tax rates are rates of taxation.
Within that structure I don't see anything that would say.
Josh.
Lets free up and do this tomorrow because.
And we're going to have a significantly adverse consequences. If we don't do it I don't see it but then again I'm not that visioning, perhaps what you might be envisioning.
Okay. Thank you.
Thanks, Jeff.
Your next question comes from Grand writing from TD Securities. Your line is open.
Hi, good afternoon.
Hi.
Just I wanted to drill down on the investment platform, a little bit because small bringing in third party.
Seems to be a focus is there any target or what are you thinking of in terms of what would be.
Reasonable cadence for bringing in third party capital.
Each of the of the.
The two platforms internally or in the midst of kind of building out their multiyear plans, which.
Been actually went to the board with a yesterday I'm not going to comment on what their objectives are at this point. It's a good it's a fair question I'm not I'm not ready to comment on it at this point.
The.
Cigar holdings has been added for awhile.
And you know each of cigar Europe, the credit partners venture and health care of all.
Got plans to go out and raise additional funds and they've been successful that raising funds in the last year two years, so I see that and haste continuing the.
Power Pacific and power energy is more of a pivot because they were set up to be funded by power Corp. So just kind of their recent.
Their reorienting themselves and entering into dialogues with third parties to get third party funding in its just beginning and so it's a little early for me to speculate on how successful they are going to be.
I'm.
I'm sounding evasive, but I don't I don't have a number that I can I can give to you what I'd rather.
Do and what we will commit to doing is following up and each call as to where they sit and what progress made on the third party funding that maybe the best way I can do it rather than put a number on the table at this point. So good question Graham sorry don't have a more specific answer for you. The only thing right Yeah, Greg Graham Graham the only thing I'd add to that is.
It certainly oh, the cigar holdings platform has been and has been raising capital quite successfully over the last two years. So most most of what you see there and third capital on the.
Non European.
Cigar holding platforms has been raised.
In the last couple of years and it's not the blue like I said earlier, if you're on page 22, it's not the blue in the individual boxes that understates it because it's the gray on the box on the left side the uncommitted the unfunded commitments a lot of that is through.
The scar holdings platforms that money has been committed to and raised it just doesn't show up in the dark Lukas haven't spent that yet, yes, and we can certainly and bundle that we could do and put it on to slide but that slides a little complicated right now.
My tapped out another okay, well do that.
How about on the next call.
Okay Fair enough and do you have separate teams that are out there focusing on the different strategies or is it really fine.
One sales or distribution team focusing on everything.
Yeah, well, we've got we've got two teams for cigar one for scar holdings and one for.
Power sustainable and in fact within that you know cigar you Europe again was definitely on the phone has been doing fundraising for 20 years. So.
So they they.
Have been the team has been there for a long time and it's been different folks that have been focused on the credit than the and the protest Sri in the cigar health care and Paul three and his group have been very active on that.
So theres so there is.
Different teams here.
But that are involved in it.
Adjusted to justify anything you want to add to that maybe just fine wants to jump in on that if he's got anything to add to it.
The only thing I would add does that in Europe. It's different first of all 20 years ago, when we'd love to fund we were alone. So we were raising the capital allow ourselves so the partners.
Of the fun.
We're just doing.
Doing it themselves.
Year, what you're doing in Montreal as the with the.
We tweak that this different more and more.
There is a dictator.
I mean comes I got holding and also formed by were sustainable capital that is.
Putting a team to get or what we did various fund two to two to two to support that definitely but yes.
Okay.
Yeah, good point, so inch and cigar Europe. It was the investors themselves really aren't who were originally out doing a lot of it and we've got a little bit more dedicated resources just to fund raising in terms of these platforms I think as your your point and not to not to contradict a short slam because that is the case, but in certain circumstances like the royalty fund.
You do have season.
Teams, there that that have their own networks, and we will certainly help out significantly and that capital raising activities. So, yes, and I just want to add not to not to beat a dead horse, but I mean, theres no institutional fund raising whether it's in non illiquid alternatives alternatives are in long only type mandates that ultimate.
Lastly, you don't get the investors in front of institutional the.
Folio managers in front of the institutional investors before they make a decision.
For sure.
Fair enough Okay. My thanks.
And your question there thanks.
Oh, that's it's like let's get it was a thorough answer what about.
Presume, it's primarily institutional money that you're targeting but is there any strategy to go after high net worth capital with the yes, there's some high net worth capital already in there and and you can you can bet that that's part of the strategy.
Okay, I have a family that.
But controls this company right they know a few people.
That's fair enough.
And what sort of returns or you're targeting I know in previous Mgms, you've put up some IR is that youve generated.
A reasonable proxy or do you guys have a formal hurdle rate trying to to reach.
We need to come back more comprehensively bit obviously, you've got you know between a credit fund and then between renewable energy and then Chinese equities and then private equity in the mid market in.
You got returns that are into from high single digits, all the way well into double digits, depending on the strategy. Just let me just quickly what are your targeted returns and when you're looking at the private equity in your business in Europe.
Historically I would say since we started so I got to Europe, we've done today for investment.
So out of those 34.
We saw Tim now 25 of them and we've returned an average of two.
2.6 times, many multiple and now were objective historically has been to a two to two to do.
To return 10 of our around 20 points.
That'd be on a gross basis I assume.
Yeah absolutely.
<unk> grams that help.
Yes.
That helps.
And then my last that was there was some loss on investments at the power financial level. So I assume I'm, assuming that's related to the wealth simple.
Investment.
Maybe we could.
So not a little bit just the growth there continues to be very impressive.
But operating losses assist despite the increase scale in a way can you share with us what's the plan or the outlook for that business in terms of breaking even.
Yeah, So maybe ill start and then I'll, let Jeff add onto it.
So its power financial level really it is a well simple and.
And our investments in the portfolio funds to the extent that we have money in the book Portage funds and.
You're right that.
It's not running at a breakeven just yet, but it's got line of sight on breakeven nuts, we don't put those numbers and the public domain.
Currently.
However, having said that.
I would say.
Well simple.
In terms of its metrics in terms of assets under management.
And it's a client.
Client acquisitions have been.
As you noted.
They have been.
Enviable quite frankly and during this latest period of time.
Full three were here he would tell you that.
Their acquisition of their brokerage platform has enabled them to a.
Attract.
Look.
Clients through this period of time and they've had some very successful months through this cobot period.
And the business and itself.
Along with the not only.
Brokerage for platform, but also they acquired a tax prep business.
That they had started.
Last quarter.
So the cross selling that's going on between their savings vehicles that are tux business in there.
They're brokerage business.
Has really done well through this particular period of time, so I can give you that color.
I can't give you any number but yes, the only thing I would add to what you said Greg.
Is that when they when we track and they track it internally.
Got it.
Still lot of money being spent on client acquisition and the metrics are different from public companies and it's a bit of rounding error for power right now, but the metrics would include you know you've got your ongoing client base and with cost to serve and you look at it that way and you get one answer in terms of their profitability, which is a very positive answer, but then spend money acquiring new clients and the.
When you look at that is with the caution you acquire new clients and with the lifetime expected lifetime value of those clients. So.
We will take your question here and see what would we can do to try and bring more forward, but we're not at a point here, where we're talking about its absolute or disclosing their numbers.
I don't know if that's helpful. Thank you.
I appreciate it I appreciate the increased disclosure at the call. Thank you.
[noise] operator.
There are no further questions at this time I will turn the call back over to Jeff or.
Okay. Thank you operator, and I just want to thank all of you for your participation in the call and and.
Well look forward to feedback that you haven't continue to try and hone how we present and come forward with different topics at different meetings to.
Hopefully have greater understanding on everybody's part about what were up two at power Corporation. So thanks for participating and have a very nice weekend.
Good. Thank you that's it operator, we'll end the call ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
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