Aimia profits drop as it pivots away from loyalty programs, toward investment

MONTREAL — Aimia Inc. propped up a slumping bottom line last quarter through its holdings in airline loyalty programs, which generated profits despite the near-collapse of the travel industry amid the COVID-19 pandemic.

Net earnings fell by more than two-thirds in its second quarter as Aimia began to unfurl its new strategy as an investment holdings firm — bolstered by the proceeds of its $516-million sale of Aeroplan to Air Canada last year — after veering away from loyalty program management.

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Aimia's 48.9 per cent stake in PLM, which operates Aeromexico's Club Premier rewards program, and 20 per cent share of AirAsia's Big Loyalty program operator Biglife amounted to $25.8 million in profit.

In June, Aimia closed a deal to spin off its money-losing Loyalty Solutions business in a merger with Waterloo, Ont.-based tech company Kognitiv Corporation.

The new venture — called Kognitiv, in which it has a 49.3 per cent stake — "has yet to reach profitability," said Aimia president Michael Lehmann, but the company expects it will start to make money next year.

In May, Aimia paid $76.2 million to scoop up an 11 per cent stake new in Clear Media Ltd., one of China's largest outdoor advertising firms.

Controlling shareholder Ever Harmonic Global Ltd. will likely to start to digitize Clear Media's 58,000 display panels — mostly bus shelter ads — across two-dozen cities in China to swell its advertising revenue ahead of the 2022 Winter Olympics in Beijing, where it has more than 70 per cent market share, Lehmann said.

"The economic recovery within China does appear to be underway. The typical patterns are once corporations are confident consumers are back and spending, they come back and engage on the marketing and advertising front, and we're starting to recognize that now," he said.

Shares of Clear Media have been suspended from trading on Hong Kong's stock exchange as part of a plan to privatize the company, though not yet delisted. New majority stakeholder Ever Harmonic has 40 per cent ownership by Clear Media CEO Han Zi Jing and 30 per cent ownership by Ant Financial, a company controlled by Jack Ma, co-founder of Chinese e-commerce giant Alibaba Group.

One-third of the 58.8 million shares Aimia acquired in Clear Media were previously held by clients of Mittleman Investment Management, whose parent company Aimia bought in a US$5-million deal that closed in June and saw co-founder Phil Mittleman become Aimia's CEO earlier in the year.

Aimia said Mittleman Brothers had US$148 million under management as of June 30, a more than 50 per cent drop from three months earlier.

Aimia said Tuesday it earned $14.4 million in its latest quarter, down from $43.5 million in the same quarter last year.

Profits at the Montreal-based company amounted to 12 cents per share for the quarter ended June 30 compared with a profit of 29 cents per share a year ago.

Aimia's profit from continuing operations totalled $6.1 million or three cents per share for the quarter, down from $34.7 million or 22 cents per share in the same quarter a year ago. After the end of the quarter, Aimia received the remaining funds held in restricted cash of $66.9 million in accordance with the terms of the purchase agreement related to the Aeroplan sale, as well as $2.3 million from the general escrow account related to the Aeroplan transaction.

This report by The Canadian Press was first published Sept. 15, 2020.

Companies in this story: (TSX:AIM, TSX:AC)

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