Aeroplan parent, Aimia, says billings lower this year

Aeroplan parent, Aimia, says billings lower this year

MONTREAL — The operator of Aeroplan and other customer-loyalty programs for banks, retailers and other businesses says it has lowered some of its expectations for 2015 because of challenging economic conditions in Canada and Europe.

Aimia Inc. (TSX:AIM) says this year’s gross billings will less than expected and below what it generated last year.

The Montreal-based company had estimated in February that it would have gross billings of between $2.56 billion and $2.61 billion, but it now has lowered both the high and low end of the range by $100 million to below the 2014 level of $2.57 billion.

The company is leaving other parts of its 2015 guidance intact, including adjusted earnings margin, free cash flow and capital spending.

“Our two big, core businesses are in Canada and Europe and consumer confidence is low,” Aimia group chief executive Rupert Duchesne said in a TV interview Friday morning on the BNN business channel.

He said an accounting change was responsible for about half of the reduction in gross billings and “the rest, frankly, is due to a slowing economy in both of our major markets.”

Duchesne said a transition to TD Bank (TSX:TD) as its main Aeroplan Visa issuer, starting in January 2014, has gone well with a “really huge” seven per cent increase in the active card base and “a big increase in purchase volumes as well.”

Aimia would normally be cutting back on promotional activity at this point — with stability returning after TD replaced CIBC (TSX:CM) as its main Visa partner — but a change in government rules on credit cards will require a continued push, he said.

“What we need to do is get past this transition with respect to the credit cards. People are also looking at the European economies and worrying that we’ll see a further decline there. I don’t think we’re going to see a further decline.”

Duchesne also said it’s too early to tell whether there will be any job losses as a result of an internal reorganization at Aimia, which will now report its business on a product-line business rather than a geographic business.

Aimia said the simplified organizational structure will reduced annual annual expenses by $20 million

The lower gross billings estimate was announced in Aimia’s second quarter financial report, which showed its gross billings dropped by 6.6 per cent to $605.3 million and total revenue declined by 3.3 per cent to $436.9 million.

Net earnings improved to $32.6 million, or 17 cents per share, from the year-earlier loss of $18.8 million or 14 cents per share. Adjusted net earnings per common share improved to 54 cents from 17 cents.

Aimia says Canada accounted for more than half its gross billings during the quarter, but they fell to $343 million from $365.2 million in the comparable period of 2014.

It said the decline was driven by the financial sector due to reduced promotional campaigns and the decreases in the retail and other travel sectors.