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May 14, 2019

Aeroplan sale boosts Aimia's first-quarter profit to $1.05B

Aeroplan

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MONTREAL -- Aimia Inc. (AIM.TO) is seeking to seize on targeted advertising trends and buy up smaller rewards firms in order to reach adjusted profitability in 2020 as it looks to the future without the Aeroplan loyalty program.

Rife with cash from the program's sale to Air Canada in January, the company's expressed confidence in future earnings due to the global potential of rewards programs and in spite of the recent loss of "a bunch of contracts" from Fortune 500 companies, chief executive Jeremy Rabe said.

"Longer term, this is an industry that's growing at over 20 per cent per year...and expected to continue," Rabe said on a conference call with investors Tuesday.

The shift away from mass media advertising and toward "more direct, targeted, personalized marketing methods" online bodes well for loyalty solutions companies like Aimia, he said.

"Companies, I think, realize that it may not make sense for them to develop their own technology," Rabe added. "That's where we're also seeing a strong appetite for outsourcing."

Some analysts wondered whether Aimia's goal of merely tipping adjusted earnings back into the black next year was suitably aggressive, with BMO Capital Markets' Tim Casey saying it is "not a terribly ambitious target."

Rabe said bolt-on acquisitions also offer a key path to profitability, "in most cases integrating those directly into our existing loyalty solutions business."

Last quarter Aimia signed a new fee-for-service contract with HSBC, its main partner in Air Miles Middle East, through 2022.

Restructuring saw the number of Aimia employees fall by one-third year over year to 590 from 890 as of March 31.

The Montreal-based company reported a record profit of $1.05 billion in its latest quarter as it completed the sale of its Aeroplan business, which wrapped up Jan. 10.

Profits amounted to $6.85 per diluted share for the three months ended March 31 compared with a profit of $21.4 million or 11 cents per diluted share a year ago, Aimia said.

Its loss from continuing operations totalled $3.2 million or five cents per diluted share compared with a loss of $9.2 million or nine cents per diluted share in the same quarter last year.

Revenue fell to $34.7 million compared with $45 million in the first three months of 2018.

The company's other assets include Air Miles Middle East, a stake in the Club Premier program in Mexico that it jointly controls with Aeromexico, and an investment with Air Asia in a travel technology company that operates BIG Loyalty.