Expenses are increasing faster than the size of the portfolio at Investissement Québec (IQ), which is beginning to speak of a “plateau” after the meteoric growth of its administrative costs and workforce in recent years.
Within the investment arm of the Quebec government, these total administration costs amounted to $263 million during the fiscal year that ended March 31. This is an annual increase of 12%.
The growth in the workforce of the Crown corporation – which manages Quebec’s aid programs in addition to providing business support – largely explains this jump. It climbed by 6% in 2023, to almost 1,300 people.
“We have experienced significant growth since 2019, we have really reached a plateau today I would say,” explained IQ President and CEO Bicha Ngo on Tuesday during the presentation of the annual report. “We are trying to find ways to do things more efficiently and to optimize our structure as well.”
Mme Ngo, who succeeded Guy LeBlanc as head of the organization last February, did not, however, offer concrete examples of what would be put in place to limit the growth in expenses and the number of employees.
The IQ annual report is usually released before the start of summer. Exceptionally this year, the former Minister of Economy, Innovation and Energy Pierre Fitzgibbon had postponed its publication.
Despite this marked growth in spending, the size of the portfolio of the investment arm of the Quebec government has stagnated in 2023-2024, at 7.5 billion.
This did not prevent the state-owned company from returning to profitability last year thanks to a net profit of 123 million, but this result nevertheless remains far from the government forecast of 216 million which appeared in the budget tabled by the Minister of Finance, Eric Girard, last March.
Big growth
The organization has more than doubled in size following the reform put forward by former Minister Fitzgibbon. The Legault government has given it the mandate to increase Quebec exports and support businesses in their transformation projects.
IQ has absorbed employees from the Ministry of Economy, among others.
PHOTO ALAIN ROBERGE, LA PRESSE ARCHIVES
Bicha Ngo has been President and CEO of Investissement Québec since 1er last February.
In a videoconference, the management of the state-owned company argued that its activities were not solely related to its portfolio. Some mandates come from the Ministry of the Economy and IQ must have “the team in place” to carry them out, it was argued.
Fees for managing IQ’s equity totaled $110 million, while expenses related to agent activities – investments by the Quebec government – amounted to $153 million.
Still, in organizations that offer financing services, the current trend is to reduce expenses in a context of economic slowdown. This is the opinion of Michel Magnan, professor and holder of the Stephen A. Jarislowsky Chair in Governance at the John Molson School of Business (Concordia University).
There has been some economic slowdown. In organizations, there has been a realization that there needs to be a paradigm shift. But there is often a delay [entre le ralentissement et les changements apportés].
Michel Magnan, Professor and Stephen A. Jarislowsky Chair in Governance at the John Molson School of Business
Mr. Magnan agrees that IQ has a multi-faceted mission, including stimulating economic development. There are therefore elements that can justify a discrepancy between the size of the organization and that of its portfolio.
The fact remains that Quebec expects positive results.
“The government has an interest in these companies being profitable and efficient,” says Mr. Magnan. “It must have some concern. The question still arises.” [sur les dépenses]. »
Other highlights at IQ:
Less green than expected
After delivering a negative return of 4.8% in 2022-2023, IQ returned to positive territory last year with a return of 2.6%, which translates to a net profit of 123 million. However, this performance is below the expectations of the Legault government, which was counting on a net profit of 216 million. The collapse of the Renard diamond mine in Northern Quebec, which counted IQ among its shareholders, weighed on the performance, among other things. Over five years, the organization’s return stands at 5.1%.
More risks
The reform of the Quebec government’s investment arm means that it is taking more risks. In 2023-2024, equity investments and the venture capital segment represented nearly 40% of the organization’s total portfolio. “This compares to 15-17% four or five years ago,” said Mr.me Ngo. Really, IQ, we are ready to take more risks, but we are partners with companies. We participate in the equity capital of companies. » The return on the equity portfolio was 8.2% last year, but in terms of venture capital, the year ended with a negative return of 1.8%.
Millionaires
Together, IQ’s top five executives saw their total compensation, which includes base salary, bonuses and other benefits, rise to $4.5 million. Mme Ngo was given a salary of 1.1 million. This is a slight decrease compared to the 4.7 million obtained by the five bosses of the financial arm of the State last year.
Already a meeting
Will Mr. Fitzgibbon’s departure change the dynamics of the relationship between IQ and the Legault government? Listen to Mr.me Ngo, she does not expect a big stir. “We work with the government in place,” she said. “We work with the minister who is appointed by the prime minister. And I had the chance to speak to Mme [Christine] Fréchette last week following her appointment. I am very much looking forward to working with her and developing a relationship.”
Learn more
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- 1224
- Financial interventions carried out by Investissement Québec in 2023-2024
investment Quebec
- 1.5 billion
- Value of financial interventions by the state company
investment Quebec