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Rewards company Aimia reports operating loss ahead of board overhaul

MONTREAL — Aimia Inc. continued to rely on investments in a pair of foreign loyalty programs to keep earnings in the black last quarter as it came off a tumultuous year of shareholder dissidence and litigation.

MONTREAL — Aimia Inc. continued to rely on investments in a pair of foreign loyalty programs to keep earnings in the black last quarter as it came off a tumultuous year of shareholder dissidence and litigation.

The loyalty rewards company, which sold Aeroplan to Air Canada early last year, saw operating expenses far outpace revenue despite shedding overhead costs.

However, the Montreal-based firm eked out a net profit of $4.9 million in the quarter ended Dec. 31, a notable improvement on its $126.2-million loss a year earlier.

"We put in place an ambitious plan to radically simplify our operating model," CEO Jeremy Rabe said Tuesday.

"We remain on track to deliver profitability in 2020."

Year over year, Aimia slashed operating expenses by nearly half last quarter as it cut its headcount by 70 more employees to 450 — down from 750 at the start of 2019 — and prepared to move its Montreal headquarters into a shared office space.

Still, operating expenses topped revenue by 58 per cent, leading to an operating loss of $20.4 million, an improvement from a loss of $63.7 million a year earlier.

A five per cent revenue drop to $35 million reflected client losses, lower customer spending and smaller one-time project revenues, partly offset by a few new clients, said analyst Drew McReynolds of RBC Dominion Securities.

Tipping the balance sheet back to black was Aimia's 48.9 per cent stake in PLM — which runs Aeromexico's Club Premier loyalty program — and its 20 per cent share of AirAsia's Big Loyalty program operator, Biglife.

PLM boosted gross billings and adjusted earnings by four per cent last quarter, delivering $4.8 million in distribution income to Aimia.

The results came in ahead of the company's annual general meeting this spring, when a mostly new slate of directors are poised for election as part of a board overhaul prompted by a group of dissident shareholders last year.

After a drawn-out fight over control of the company, the deal between Aimia and the rebellious investors last November marked a partial surrender to ringleader Charles Frischer, who had sought to overthrow half of its eight-member board, and to Philip Mittleman, its largest shareholder who was locked in a court battle with the firm.

"It was a big distraction for the company. I think going forward we're really excited to have that behind us," Rabe told analysts on a conference call Tuesday, noting the $2 million in "activism litigation" and related expenses last year.

All of the company’s directors excluding Rabe and Mittleman have confirmed they will not stand for election to the board at the company’s 2020 annual meeting, to be held on April 29.

The new board would hold nearly one-third of shares in the company, whose stock price has hovered below $4 for most of the past year after plunging from about $9 in May 2017.

Aimia sold its flagship Aeroplan rewards program to Air Canada in January 2019. The deal left it with significant cash on hand, but also questions about its future amid months of turmoil over its leadership.

"With the strategic direction of the company somewhat in flux pending approval of the newly reconstituted board, we remain on the sidelines pending further clarity as to the ultimate impact on our net asset value," McReynolds said.

"Given all of the moving parts around efforts to stabilize the core business and reduce stranded costs, we view Q4/19 results as largely in-line."

Aimia reported profits of 20 cents per share for the three months ended Dec. 31 compared with a loss of 86 cents per share in the fourth quarter of 2018 when it had more shares outstanding.

Revenue totalled $35 million, down from $36.8 million, while operating expenses dropped to $55.4 million from $100.5 million.

For the full year, Aimia's operating loss was cut almost in half to $73.2 million even though revenues were down 20 per cent to $134 million. It reported a $1.1 billion consolidated net profit or $8.80 per share, compared with a net loss of $72 million or 59 cents per share in 2018.

This report by The Canadian Press was first published Feb. 25, 2020.

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

Christopher Reynolds, The Canadian Press



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