Blue Sky ceased its strategic agreement with Canadian Pension Investment Board

Diversified fund manager, Blue Sky Alternative Investments Limited (ASX: BLA) has notified that it has agreed to terminate its strategic agreement with Canada’s Public Sector Pension Investment Board (‘PSP Investments’) effective 31 March 2019.

Since December 2017, the Company’s real assets division, Blue Sky Water Partners Pty Limited, had assisted PSP Investments to deploy capital across a variety of agricultural investments. Going forward, PSP Investments is intending to manage those investments directly with its local operating partners.

Blue Sky Water Partners continues to handle water and agricultural assets including its Water Fund and Strategic Australian Agriculture Fund which declared a final close as at 31 December 2018. As at 31 December 2018, Blue Sky’s real assets division managed $1.1 billion, up from $991 million at 30 June 2018.  Blue Sky Water Partners is expecting to continue to grow its funds under management leveraging its track record and various partnerships in Australia’s irrigated agricultural industries. 

After discontinuing the strategic agreement, the Real Assets division now anticipates the continuation of handling more than $900 million in water entitlements and agricultural assets. The effect of the termination of the strategic partnership would set-off realisation of associated BLA co-investment and is not considered material to Blue Sky’s earnings.

After the appointment of a new Board of Directors, which includes an Executive Chair, and other key executives in December 2018, Mr Kim Morison resumed his prior role (held since 2010) as Managing Director of Real Assets, having acted as Blue Sky’s interim Managing Director since April 2018.

On 12 February 2019, BLA announced an update on its expected underlying earnings before tax, cash position, net tangible assets, and Fee- Earning Assets Under Management for the first half of the 2019 financial year to 31 December 2018.

Blue Sky is finalising its underlying financial results to be released to the market on 27 February 2019. The Company anticipates an underlying H1 FY19 loss before tax of between $28 million to $32 million, subject to final review by the Company’s auditors and Board approval.

The result includes:

  • ~ $7 million of valuation adjustments to carrying values of Blue Sky’s balance sheet investments in funds, including in student accommodation.
  • ~ $7 million of recommended impairments to working capital loans provided to certain private equity and private real estate development funds.
  • ~ $4 million due to the reimbursement of investment trusts where third-party expenses were incorrectly charged, due to inconsistencies with the application of expense recovery in line with terms of each investment trust (as announced on 28 September 2018).
  • ~ $8 million due to restructuring costs, including external service providers, staff redundancies, terminations, and retention incentives (compared with approximately $6 million forecast in an announcement on 12 June 2018)
  • a positive impact of $2.5 million from the reversal of employee share option expenses incurred in prior periods, principally resulting from staff terminations in the first half.

Blue Sky’s cash position at 31 December 2018 is expected to be $54.8 million (on an unaudited basis). Net Tangible Assets is projected to be $102 million – $106 million. The company has managed $3.0 billion in Fee-Earning Assets Under Management (FEAUM) as compared to $3.4 billion at 30 June 2018 primarily attributable to the closure of the hedge fund and retirement living business units. The company reported $2.8 billion Funds Under Management (FUM) at 31 December 2018.

On 24 January 2019, Blue Sky Alternative Investments Limited announced the appointment of Andrew Werro as the Company’s permanent Chief Risk Officer. This followed upon selection of Elizabeth Walker as Blue Sky’s new CFO on 24 December 2018.

At the closure of day’s trading session (as at 13 February 2019) the stock price stood at A$0.860, down by 5.495 % or 0.050 points with a market capitalization of A$70.72.


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