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Press release from CNW Group

GMP Capital Inc. Reports Third Quarter 2011 Results

Friday, November 04, 2011

GMP Capital Inc. Reports Third Quarter 2011 Results06:00 EDT Friday, November 04, 2011For further information about GMP Capital Inc., our results for third quarter 2011 and the meaning of certain references, this quarterly earnings release should be read in conjunction with our Third Quarter 2011 Financial Statements and Management's Discussion and Analysis for the three and nine months ended September 30, 2011, which can be accessed on our website at gmpcapital.com and on sedar.com. Unless otherwise indicated, all dollar amounts are expressed in Canadian dollars and have been taken from our Third Quarter 2011 Financial Statements prepared in accordance with International Accounting Standard 34: Interim Financial Reporting using the policies we expect to apply in our annual financial statements for the year ending December 31, 2011, prepared in accordance with International Financial Reporting Standards ("IFRS").TORONTO, Nov. 4, 2011 /CNW/ - GMP Capital Inc. ("GMP") (TSX: GMP) today reported a net loss of $4.6 million ($0.09 loss per basic share) in third quarter 2011 compared with net income of $23.1 million ($0.32 per basic share) in third quarter 2010.  GMP recorded revenue of $46.3 million for the third quarter ended September 30, 2011, representing a 55% decrease compared with the same period a year ago, reflecting the challenging business and capital markets environment which persisted in the quarter. This quarter's results were significantly affected by the unfavourable market environment and also reflect a $5.0 million (pre-tax) charge recorded in connection with a previously announced executive management retirement."Third quarter 2011 marked disappointing results for the firm.  Global economic uncertainty intensified this quarter resulting in a significant contraction in overall business activity in our Capital Markets segment," said Harris Fricker, Chief Executive Officer, GMP.  "Heightened equity market volatility together with declining global equity market valuations and lower investor confidence resulted in weaker investment banking revenue, unrealized losses in principal activities and reduced trading volumes.   Despite these challenges, our partners at Richardson GMP Limited continued to build on their current momentum delivering positive results again this quarter while GMP Investment Management L.P. continued to grow its fee income and net new assets under management."FINANCIAL HIGHLIGHTSThird Quarter 2011 vs. Third Quarter 2010Net loss of $4.6 million compared with net income of $23.1 millionNet loss per basic share of $0.09 compared with earnings per basic share of $0.32Revenue of $46.3 million compared with $102.8 millionAnnualized ROE1 of negative 9.1% compared with 31.5%1First NINE MONTHS 2011 vs. First NINE MONTHS 2010Net income of $26.7 million compared with a net loss of $14.8 millionEarnings per basic share of $0.28 compared with a net loss per basic share of $0.25Revenue of $229.2 million compared with $300.2 millionAnnualized ROE1 of 8.8% compared with negative 8.4%Excluding the impacts of one-time cash redemption costs recorded in connection with the redemption of our long-term debt in the first quarter of 2011, first nine months 2011 adjusted net income1 was $30.6 million; adjusted earnings per basic share1 was $0.34; and adjusted ROE1 was 10.5%Excluding the impacts of the goodwill and intangible asset impairment charge recorded in the first quarter of 2010, first nine months 2010 adjusted net income1 was $61.3 million; adjusted earnings per basic share1 was $0.83; and adjusted ROE1 was 22.7%Commenting further, Mr. Fricker said, "As a result of the financial uncertainty gripping the industry we have focused our priorities on cost reduction measures aimed at ensuring our discretionary expenditures remain commensurate with lower levels of business activity.  We believe the current dislocation in the market will provide opportunities to expand and further strengthen our franchise.  We will continue to explore opportunities to grow our businesses responsibly, where it makes sense, adding capabilities which are complementary to our core domestic securities operations.  GMP remains fundamentally strong with a solid capital position and a resilient franchise to weather the current financial storm and, we believe, we are well positioned to benefit when markets return to more normal levels of activity."THIRD QUARTER 2011 BUSINESS HIGHLIGHTSCapital MarketsOperating loss1 of $3.8 million compared with operating earnings1 of $36.4 million in third quarter 2010 reflecting a significant decline in business activity.Revenue of $37.9 million, a decrease of 59% compared with third quarter 2010 due to a significant decline in investment banking revenue, losses recorded in client facilitation and principal activities and lower commissions.Capital Markets Highlights:GMP Securities L.P. ranked sixth in Canada for equity block trading volumes, achieving a market share of 6.7%;2 andGMP Securities L.P. participated in 38 underwriting transactions completed in Canada helping raise approximately $4.3 billion on behalf of clients.3Wealth ManagementWealth Management is comprised of GMP's non-controlling ownership interest in Richardson GMP Limited ("Richardson GMP") and also includes dividend revenue recognized on our investment in Richardson GMP preference shares following dividend declarations made by Richardson GMP from time to time.  Wealth Management reported operating earnings1 of $1.6 million compared with an operating loss1 of $0.1 million in third quarter 2010.  Wealth Management's third quarter 2011 performance reflects Richardson GMP's improved operating results and $1.5 million in dividend revenue recorded following dividend declarations by Richardson GMP during third quarter 2011.Richardson GMP Highlights (100% basis):Operating earnings1 were $1.2 million compared with $0.3 million in third quarter 2010 due primarily to stronger revenue generation;Revenue of $36.3 million, an increase of 12% compared with third quarter 2010 primarily due to higher investment management and fee income; andDespite net market depreciation, primarily in equity assets, assets under administration ("AUA")1 were $12.9 billion as at September 30, 2011, with $0.3 million in net new assets added in third quarter 2011.Alternative InvestmentsOperating loss1 of $1.2 million compared with operating earnings1 of $1.4 million in third quarter 2010, largely reflects lower revenue generation.Revenue of $2.7 million, a decrease of 55% compared with third quarter 2010, primarily due to unrealized losses recorded on GMP's investment in the GMP Diversified Alpha Fund and the GMPIM Equity Opportunities Fund and lower investment management and fee income at EdgeStone Capital Partners, L.P. These decreases were partly offset by higher fee income generated by GMP Investment Management L.P. ("GMP Investment Management") in third quarter 2011 due to higher assets under management ("AUM").1GMP Investment Management Highlights:AUM1 of $576 million as at September 30, 2011, representing a 73% increase compared with the same period last year.DIVIDENDS On November 3, 2011, the Board of Directors declared a quarterly cash dividend of $0.10 per common share, and a quarterly cash dividend of $0.3438 per Cumulative 5-Year Rate Reset Preferred Share, Series B, each payable on December 31, 2011, to the respective shareholders of record at the close of business on December 9, 2011.NORMAL COURSE ISSUER BID ACTIVITYDuring the three months ended September 30, 2011, GMP purchased for cancellation 577,682 common shares under its normal course issuer bid for an aggregate cost of $4.4 million.CONFERENCE CALLGMP executives will host a conference call and live audio webcast today at 10:00 a.m. (ET) to discuss GMP's third quarter results.  The call may be accessed by dialing 416-644-3416 or toll free at 1-800-814-4860. The link to the live audio webcast will be accessible at gmpcapital.com.  A replay of the conference call can be accessed by telephone until Friday, November 11, 2011, by dialing 416-640-1917 or 1-877-289-8525 (toll free) and entering access code 4473330#.NON-GAAP MEASURESConsistent with our management framework, we use certain measures to assess our financial performance which are not generally accepted accounting principle measures ("GAAP") under IFRS. These measures do not have any standardized meaning prescribed by GAAP, and are therefore unlikely to be comparable to similar measures presented by other issuers. Non-GAAP earnings measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of GMP's performance, liquidity, cash flows and profitability.Operating earnings (loss)GMP uses "operating earnings (loss)" as a supplement to net income (loss) to assess the operating performance of its business segments and its corporate segment and also to assess GMP's overall performance. Operating (loss) earnings represents "(loss) income before income taxes" excluding "Impairment charge" as set out in the unaudited interim consolidated statements of operations for the three and nine months ended September 30, 2011, prepared in accordance with IFRS.Return on Common EquityGMP evaluates the performance of its consolidated operations using annualized return on common equity ("ROE"). Our ROE calculation is based on net income (loss) available to common shareholders divided by total average common shareholder equity for the period, which are measures derived from information contained in our Third Quarter 2011 Financial Statements, which were prepared in accordance with IFRS.Assets under Administration/ManagementAUA is a measure of client assets reported at market value that is used by management in assessing the performance of GMP's Wealth Management segment. AUM is a measure of client assets reported at market value that is used by management in assessing the performance of GMP Investment Management and EdgeStone.Adjusted measures exclude:(i)     from first nine months 2011 financial results, the impact of the one-time redemption costs recorded in connection with the redemption of all of the outstanding senior unsecured notes issued by Griffiths McBurney L.P., an indirect, wholly-owned subsidiary of GMP, that was completed during first quarter 2011; and(ii)     from first nine months 2010 financial results, the impact of goodwill and intangible asset impairment charges recorded during first quarter 2010.Management believes excluding such charges from these measures is more reflective of ongoing operating results and will provide readers with a better understanding of how management views GMP's core performance. These adjusted measures should also improve the comparability of GMP's financial results for first nine months 2011 with the corresponding prior period.The following table provides a reconciliation of GMP's adjusted measures:Non-GAAP measures      For the nine months ended September 30, 2011 For the nine months ended September 30, 2010($000, except per share and percentage amounts) As reported IFRSRedemption CostsAdjusted IFRS As reported IFRSImpairment ChargesAdjusted IFRSIncome before income taxes 36,6425,46642,108 9,01780,46489,481Income tax 9,913(1,558)11,471 23,809(4,399)28,208Net income (loss) 26,7293,90830,637 (14,792)76,06561,273         Net income (loss) attributable:         GMP Capital Inc. Shareholders 22,9133,90826,821 (17,603)76,06558,462 Non-controlling interests 3,816-3,816 2,811-2,811         Net income (loss) attributable to GMP Capital Inc. shareholders22,9133,90826,821 (17,603)76,06558,462Dividend declared on Series B Preferred Shares (3,803)-(3,803) ---Net income (loss) attributable to common shareholders 19,1103,90823,018 (17,603)76,06558,462         Weighted-average number of common shares - Basic 67,539 67,539 70,579-70,579Basic earnings (loss) per common share $0.28$0.06$0.34 ($0.25)$1.08$0.83Weighted-average number of common shares - Diluted 74,288 74,288 75,914 75,914Diluted earnings (loss) per common share1 $0.26$0.05$0.31 ($0.25)$1.00$0.77Average common equity 289,704 292,961 280,633 344,020Return on common equity 8.8% 10.5% (8.4%) 22.7%In case of a net loss, the effect of common share options and warrants potentially exercisable and the impact of shares pledged on share purchase loans and other common shares subject to vesting conditions under stock-based compensation programs on diluted net loss per common share will be anti-dilutive; therefore, basic and diluted net loss per common share will be the same.FORWARD-LOOKING STATEMENTSThis press release contains "forward-looking statements" as defined under applicable Canadian securities laws.  These statements include, but are not limited to, statements concerning our 2011 objectives, our strategies to achieve those objectives, as well as statements made with respect to management's beliefs, estimates, projections and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "should", "plans" or "continue", or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management.These forward-looking statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those described in this press release. GMP's primary business activities are both competitive and subject to various risks. These risks include market, credit, liquidity, operational and legal and regulatory risks and other risk factors including, without limitation, variations in the market value of securities, the volatility and liquidity of equity trading markets, the volume of new financings and mergers and acquisitions ("M&A"), competition in the marketplace for suitable investments, sustainability of fees, nature and type of portfolio company investments, ability to realize carried interest entitlements and dependence on key personnel. Other factors, such as general economic conditions, including interest rate and exchange rate fluctuations, may also have an effect on GMP's results of operations. Many of these risks and uncertainties can affect our actual results and could cause our actual results to differ materially from our current expectations,  see the "Risk Management" section in the 2010 Annual MD&A, the "Risk Management" and "Risk Factors" sections in the Third Quarter 2011 MD&A and "Risk Factors" in GMP's annual information form dated March 1, 2011. In addition, GMP may not realize the anticipated benefits from its acquisition of Miller Tabak Roberts Securities, LLC ("MTR"), due to a variety of factors including, without limitation, the inability to effectively integrate MTR into its operations, failure to retain key MTR employees, failure to maintain or develop key client relationships and the impact of the economy and its potential negative effects on the areas where MTR conducts its business. Material assumptions or factors underlying the forward-looking statements contained in this press release are set out in the "Business Environment and Market Outlook" section in the Third Quarter 2011 MD&A and include, without limitation, volatile capital markets, continued concerns of a global recession and the threat of sovereign debt defaults by certain European countries. Although forward-looking information contained in this press release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. Certain statements included in this press release may be considered a "financial outlook" for purposes of applicable Canadian securities laws, and as such the financial outlook may not be appropriate for purposes other than this press release. The forward-looking statements contained in this press release are made as of the date of this press release, and should not be relied upon as representing GMP's views as of any date subsequent to the date of this press release.Except as required by applicable law, management and the board of directors of GMP undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. ABOUT GMP CAPITAL INC.GMP Capital Inc. ("GMP") is a leading independent diversified financial services firm headquartered in Toronto, Canada, providing a wide range of financial products and services to a client base that includes corporate clients, institutional investors and high-net-worth individuals in three integrated reporting segments.  The Capital Markets segment provides investment banking, including advisory and underwriting services, institutional sales and trading and research through offices located in Toronto, Montreal, Calgary, New York, Miami, Dallas, London, Perth and Sydney.  The Capital Markets segment conducts its business through the following operating entities: GMP Securities L.P., Miller Tabak Roberts Securities, LLC, Griffiths McBurney Corp., GMP Securities Europe LLP and GMP Securities Australia Pty Limited. Wealth Management consists of GMP's non-controlling ownership interest in Richardson GMP Limited, a full-service independent firm focused on providing exclusive and comprehensive wealth management and investment services delivered by an experienced team of investment professionals. The Alternative Investments segment consists of the investment management and advisory services and alternative investment products provided by GMP Investment Management L.P. and EdgeStone Capital Partners, L.P. GMP is listed on the Toronto Stock Exchange under the symbol "GMP". For further information, please visit our corporate website at gmpcapital.com.______________________________________ 1Represents a non-GAAP measure.  This measure does not have any standardized meaning prescribed by generally accepted accounting principles ("GAAP") and is therefore unlikely to be comparable to similar measures presented by other issuers.  This data should be read in conjunction with the "Non-GAAP Measures" section at the end of this press release.2 Source: CanadaEquity.com as at October 13, 2011.3 Source: FPinfomart as at October 13, 2011.   For further information: GMP Capital Inc. Rocco Colella, Director, Investor Relations 145 King Street West, Suite 300, Toronto, Ontario M5H 1J8 Tel: (416) 941-0894; Fax: (416) 943-6175 rcolella@gmpcapital.com or investorrelations@gmpcapital.com