Element also increased its forecast for 2020 after-tax adjusted operating income per share, reflecting its confidence in actioning the $150 million of planned transformation benefits and the favourable impact of its actions to strengthen its balance sheet through syndication.
On a consolidated basis, the company reported net income of $80.5 million or $0.16 per share for Q1 2019, compared to net income of $41.1 million or $0.07 per share in Q4 2018 and $21.8 million or $0.03 per share in Q1 2018.
“Our intense focus on transforming our core business continues to create value by strengthening our competitive position, improving our service offering and keeping us on track to deliver the previously communicated profitability gains,” said Jay Forbes, Element president and CEO. “By deleveraging our balance sheet through a greater degree of syndication, we accelerate our ability to access lower-cost capital, enhance our return on equity, and manage client concentration limits.”
Element’s transformation under its strategic plan continues to proceed ahead of schedule. The company had actioned a cumulative $70 million of run-rate profit improvements as of March 31, 2019, keeping the program well on track to action $100 million of profit improvement initiatives by the end of the year. Initiatives actioned to date will also improve Element’s adjusted operating income by approximately $52 million in 2019, with $11.4 million of such improvement delivered in Q1.
Other Q1 highlights included:
Core fleet assets under management growth of 7% from Q1 2018 driven by wins in all geographies, including key clients in the U.S. and Canada and significant, broad-based growth in Mexico, Australia and New Zealand
Broadened approach to syndication to accelerate deleveraging, evolve the capital structure and manage client concentration limits while continuing to fund growth, including one large, rapidlygrowing client
Sustainable revenue from regular syndication activity results in an increase to 2020 after-tax adjusted operating income per share guidance to $1.00-1.05 (from $0.90-0.95)
Subsequent to quarter, and in line with previously communicated expectations, completed a successful $172.5 million convertible debenture issuance, and generated $97.2 million from the sale of ECAF notes
The proceeds of the convertible debenture issue (together with proceeds from the repatriation of stranded equity in an older ABS facility and the sale of the company’s Minnesota real estate) will be used to fund a portion of the redemption of the $345 million of 5.125% convertible debentures maturing on June 30, 2019. The proceeds from the sale of our ECAF interest along with cash raised from the disposition of 19th Capital assets will be used to reduce the refinancing requirement of the 2020 convertible debt maturity.
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