Year End Results
Canadian Company Press Release
TFC.A 2000-02-10 (provided courtesy of BCE Emergis E-News Services.)
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Trilon Reports 18% Increase In Earnings Per Share
Toronto, Ontario--
Fee revenues increased by 45% as Trilon continues to build its
client base
Trilon Financial Corporation today reported net income of $357
million for the year ended December 31, 1999 or $2.02 per share,
up from $179 million in 1998. This included $150 million or $0.92
per share representing the portion of the deferred credit
established upon the sale of investments in 1997, which is no
longer required. Income before the deferred investment gain was
$207 million or $1.10 per share after providing for preferred
share dividends, an 18% increase over the $0.93 per share earned
in 1998.
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HIGHLIGHTS
* Earnings before deferred investment gains were $207 million
for the year ended December 31, 1999, 16% higher than in the
same period of 1998.
* Fee revenue increased by 45% in 1999 compared to 1998 and
now comprise 22% of consolidated revenue.
* Successfully launched the first of several planned new
services, using the latest web-based technologies which
generated $8 million of revenue in the first year.
* Royal LePage was privatized allowing Trilon to realize
synergies in bringing its business units closer together.
* Trilon renewed its normal course issuer bid to repurchase up
to 5.5 million class A shares.
* Quarterly dividends were increased by 17% to $0.14 per share
effective with the December 31, 1999 payment.
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Commentary
George E. Myhal, President and Chief Executive Officer,
commented:
"We continue to expand and diversify the company's earnings base.
In particular, fee revenues have risen steadily to $80 million,
up 45% from 1998. This growth in fee revenue reflects the
expansion underway in our advisory businesses and corporate
service activities."
Investment Banking
Investment banking contributed $48 million, compared to $36
million last year due to increased revenues from the expansion of
Trilon's international brokerage operations and capital markets
activities. During the year, Trilon participated in 43
underwritings which helped our clients raise in excess of $51.7
billion. Additionally, Trilon advised Summit REIT on its
successful acquisition of Avista REIT. Trilon also provided
Summit REIT bridge financing to enable them to complete the
acquisition.
Trilon also assisted Nexfor Inc. and Great Lakes Power Inc. in
the formation of Great Lakes Hydro Income Fund. This initiative
brought together two solid companies to surface the hidden value
of Nexfor's hydro-electric power assets and expand Great Lakes'
activities in the power generation sector. The Fund successfully
raised $175 million of long-term permanent capital through an
initial public offering of trust units in a difficult capital
market environment, attesting to the quality of the assets and
the financial structure.
Merchant Banking
Merchant banking operations contributed $69 million to earnings
compared to $52 million last year. This increase was due to the
higher average level of merchant banking loans outstanding and
improved average interest rates realized. During the fourth
quarter, Trilon arranged US$40 million of senior secured
financing for Queensway Financial Holdings Limited, a property
and casualty insurance company. In addition to its usual fees and
interest return, Trilon also earned 500,000 five year common
share purchase options of Queensway, exercisable at $3.65 per
share.
Northgate Exploration Limited ("Northgate"), a junior gold mining
company in which Trilon has a 34% direct and indirect ownership
interest, has agreed to purchase the Kemess mine for
approximately US $180 million. Trilon has agreed to provide up to
US $145 million in bridge financing for Northgate to enable it to
close this purchase. The proceeds from this sale will be used by
Royal Oak's receiver to repay secured debt, including all project
loans previously provided by Trilon to Royal Oak.
Northgate is in the process of arranging a long-term project loan
and other equity financing to repay Trilon's bridge loan.
Northgate has substantially improved the mine's operations and
resolved numerous outstanding operational issues. The mine
generated positive cash flow during the most recent quarter, and
is on track to meet its original design specifications in 2000.
In addition to the fees earned, Trilon continues to own a 1.62%
royalty interest in the mine's revenue and will also participate
in Northgate's future success through its ownership interest in
Northgate.
Brokerage Services
This business segment includes Trilon's securities and property
brokerage services. The latter are distributed to individual and
corporate clients under the Royal LePage name through 8,000 sales
agents.
Brokerage services contributed $10 million on $78 million in net
revenues, compared to $4 million on revenues of $99 million last
year. Residential property resale markets were strong as
transaction volumes increased by 7% in 1999 over the prior year.
Trilon benefited from this market strength by converting 14
corporate owned offices to franchises. In addition, 33
competitive franchises were established. Royal LePage continues
to expand the number and quality of services that it offers
agents and franchisees, and is at the forefront of applying
technology to assist its agents and customers. This new momentum
has helped Royal LePage to expand its residential market share to
23%.
Commercial brokerage activity was down slightly from the prior
year, particularly in respect of investment sales. Leasing
activity remained strong for most of the year. Several new
national account relationships were established during the year,
which will contribute to revenues in the future.
Investment Management
Investment management operations contributed $25 million in 1999,
up from $22 million in the prior year. The increase was due to a
higher average level of assets invested in this segment.
Trilon made a significant step towards increasing assets under
management during the quarter through the formation of a new
fund, Diversified Canadian Financial Corp., an innovative
preferred share securitization, which will be marketed through an
initial public offering in early 2000. This fund will own a
diversified portfolio of $300 million of preferred shares,
financed in part through $200 million of publicly held senior
preferred shares to be issued by Diversified Canadian. These
senior preferred shares have been rated investment grade by the
Canadian Bond Rating Service and should represent an attractive
investment for retail investors.
Corporate Services
This business segment currently includes Trilon's relocation
services provided to corporate and government clients and
property appraisals provided primarily to financial institutions.
With the continued growth in outsourcing by governments,
institutions and corporations, Trilon believes that revenues from
this business segment will grow significantly in the future.
Corporate services revenues for 1999 were $39 million, up 116%
from the prior year. The segment contribution was $7 million
compared to $4 million last year.
Revenue growth has benefited from the increase in relocation
volumes from Federal Government relocation contracts obtained in
December 1998. During the year, the relocation services group
processed over 12,000 moves without service interruption as it
absorbed the Federal Government contracts.
During the year, Trilon's property appraisal business unit,
Canadian Appraisal Performance System, rolled out its new
appraisal management system. This state-of-the-art online
web-based system provides residential appraisal information to
financial institutions in less time and at a lower cost than
previous paper-based systems. The Canadian Imperial Bank of
Commerce has implemented the program nationally and other clients
are currently in the pilot stage. Revenues for the first year of
operation were $8 million, and are expected to increase
significantly in 2000.
Commercial Financing
Commercial financing operations contributed $71 million, down
from $80 million last year as capital was redeployed to higher
yielding business segments.
Net of bank and preferred share financing, Trilon's capital
supporting this business is $531 million, down from $712 million
in the prior year. The average rate of return on this capital was
8.0% per annum. This represents solid performance given that the
commercial financing portfolio includes only high quality loans,
debentures and preferred shares and lower yielding highly-liquid
financial assets. Trilon will endeavour to maintain these returns
in 2000 without incurring additional financial leverage and risk.
Dividend
The Board of Directors declared a quarterly dividend of $0.14 per
common share payable on March 31, 2000 to holders of record on
March 10, 2000 and the regular dividends on each of the Class I,
II and III preferred shares.
Outlook
Trilon is well positioned for continued profitable growth. With
its customer focus, expanding product offerings, strong financial
position, expanded market presence and results oriented approach
to business, Trilon has all the necessary prerequisites for
continued success.
Trilon Financial Corporation is a Canadian financial services
company that provides a broad range of financial and management
services. Trilon also invests its own capital together with its
clients to assist them in implementing their business plans.
Trilon's clients include governments, institutions, corporations
and high net-worth individuals.
This news release contains certain forward-looking statements
that reflect the current views and/or expectations of Trilon
Financial Corporation with respect to its performance, business
and future events. Such statements are subject to a number of
risks, uncertainties and assumptions. Actual results and events
may vary significantly.
- 30 -
For more information:
Mr. George Myhal
President and Chief Executive Officer
416-363-0061
gmyhal@trilon.ca
Mr. John Tremayne
Managing Partner and Chief Financial Officer
416-363-0061
jtremayne@trilon.ca
The conference call can be accessed on February 10, 2000 at 11:00
a.m. EST at 1-888-740-1975 or by replay by dialing 416-626-4100
and entering the reservation #14403252.
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
CONSOLIDATED BALANCE SHEET
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December 31 December 31
Millions 1999 1998
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ASSETS
Cash and equivalents $8 $8
Securities 1,769 1,605
Loans 1,404 1,546
Other assets 205 185
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$3,386 $3,344
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LIABILITIES
Accounts payable and other $124 $57
Borrowings 601 536
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725 593
DEFERRED CREDITS
AND MINORITY INTERESTS 66 401
SHAREHOLDERS' EQUITY 2,595 2,350
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$3,386 $3,344
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CONSOLIDATED STATEMENT OF INCOME
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Three months ended Year ended
December 31 December 31
millions, except per
share amounts 1999 1998 1999 1998
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REVENUES
Fees $13 $8 $80 $55
Commissions 21 24 61 78
Interest and other income 55 57 220 193
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$89 $89 $361 $326
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EXPENSES
Operating $27 $38 $115 $117
Interest 7 9 35 26
Tax and other provisions (1) (7) 4 4
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$27 $40 $154 $147
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Income before deferred
investment gain $54 $49 $207 $179
Deferred investment gain 150 - 150 -
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$204 $49 $357 $179
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PER COMMON SHARE
Net income before gains $0.29 $0.25 $1.10 $0.93
Net income $1.21 $0.25 $2.02 $0.93
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CONSOLIDATED STATEMENT OF CASH FLOWS
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Year ended December 31
millions 1999 1998
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CASH FROM OPERATIONS $215 $192
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CASH FROM (USED IN)
FINANCING ACTIVITIES
Borrowings 65 226
Shares issued (3) 1
Dividends
- Preferred (27) (28)
- Class A and B (82) (68)
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TOTAL CASH FROM (USED IN)
FINANCING ACTIVITIES (47) 131
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CASH FROM (USED IN)
INVESTING ACTIVITIES
Securities (234) 65
Loans 119 (506)
Other (53) (8)
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TOTAL CASH FROM (USED IN)
INVESTING ACTIVITIES (168) (449)
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Increase (decrease) in cash and
equivalents - (126)
Cash and equivalents, beginning
of period 8 134
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CASH AND SHORT-TERM
INVESTMENTS, END OF PERIOD $8 $8
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SEGMENTED FINANCIAL STATEMENTS
(unaudited)
SEGMENTED BALANCE SHEET
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December 31 December 31
millions 1999 1998
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ASSETS
Investment banking $367 $504
Merchant banking 732 733
Brokerage services 166 43
Investment management 269 247
Corporate services 47 17
Commercial financing 531 714
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TOTAL ASSETS $2,112 $2,158
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LIABILITIES
Accounts payable and other $38 $19
DEFERRED CREDITS 66 376
COMMON SHAREHOLDERS' EQUITY 2,008 1,763
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TOTAL LIABILITIES AND COMMON
SHAREHOLDERS' EQUITY $2,112 $2,158
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SEGMENTED STATEMENT OF INCOME
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Three months ended Year ended
December 31 December 31
millions 1999 1998 1999 1998
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INCOME
Investment banking $9 $7 $48 $36
Merchant banking 17 21 69 52
Brokerage services 2 (1) 10 4
Investment management 6 6 25 22
Corporate services 2 2 7 4
Commercial financing 21 10 71 80
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57 45 230 198
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EXPENSES
Unallocated costs 10 4 50 47
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Income to common shareholders
before investment gain 47 41 180 151
Investment gain 150 - 150 -
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NET INCOME TO COMMON
SHAREHOLDERS $197 $41 $330 $151
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OTHER INFORMATION
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1999
Q4 Q3 Q2 Q1
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INCOME ($millions)
Before investment gains 54 53 51 49
Net income 204 53 51 49
PER CLASS A AND B SHARE ($)
Earnings before gains 0.29 0.28 0.27 0.26
Earnings after gains 1.21 0.28 0.27 0.26
Dividends 0.14 0.12 0.12 0.12
Book value 12.36 11.28 11.12 10.98
Market price
Period end 9.00 9.85 10.10 11.75
High 9.85 10.75 11.50 12.10
Low 8.60 9.35 9.80 10.90
CLASS A AND B SHARES
OUTSTANDING (millions)
As at quarter end 162.5 162.9 162.9 162.9
Average 162.8 162.9 162.9 162.6
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OTHER INFORMATION
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1998 1997
Q4 Q3 Q2 Q1 Q4
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INCOME ($millions)
Before investment gains 49 45 44 41 28
Net income 49 45 49 41 528
PER CLASS A AND B SHARE ($)
Earnings before gains 0.25 0.24 0.23 0.21 0.15
Earnings after gains 0.25 0.24 0.23 0.21 3.25
Dividends 0.12 0.10 0.10 0.10 0.10
Book value 10.85 10.73 10.57 10.45 10.39
Market price
Period end 11.00 9.60 11.40 13.35 11.50
High 11.85 12.75 13.80 13.80 11.70
Low 8.70 9.00 11.00 10.40 9.60
CLASS A AND B SHARES
OUTSTANDING (millions)
As at quarter end 162.5 162.5 162.5 162.4 161.7
Average 162.5 162.5 162.5 161.8 161.4
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