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Press release from CNW Group

GMP Capital Inc. reports second quarter 2013 results

Friday, August 09, 2013

GMP Capital Inc. reports second quarter 2013 results

06:00 EDT Friday, August 09, 2013

For further information about GMP Capital Inc., our results for second quarter 2013 and the meaning of certain references, this earnings release should be read in conjunction with our unaudited interim condensed consolidated financial statements as at and for the three and six months ended June 30, 2013 (Second Quarter 2013 Financial Statements), and our management's discussion and analysis for the three and six months ended June 30, 2013 (Second Quarter 2013 MD&A), which can be accessed on our website at gmpcapital.com and on SEDAR at sedar.com. Unless otherwise indicated, all dollar amounts are expressed in Canadian dollars and have been taken from our Second Quarter 2013 Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS).

TORONTO, Aug. 9, 2013 /CNW/ - GMP Capital Inc. (GMP) (TSX: GMP) today reported revenue of $60.3 million in second quarter 2013, down 3.8% compared with the same period a year ago.  GMP recorded net income of $4.8 million, a net loss attributable to common shareholders of $3.5 million and a diluted loss per share of $0.05 in second quarter 2013 compared with a net loss of $0.4 million, a net loss attributable to common shareholders of $4.1 million and a diluted loss per share $0.06 in second quarter 2012.

"Market conditions remained challenging for the quarter driven by very low levels of activity in the resource sectors. That said, the resilience of our business is reflected in the performance of our non-resource investment banking franchise, the growth in our U.S. fixed income operations and the ongoing evolution of our wealth management business," said Harris Fricker, Chief Executive Officer, GMP.

FINANCIAL HIGHLIGHTS

Second Quarter 2013 versus Second Quarter 2012

  • Revenue of $60.3 million compared with $62.7 million
  • Net income of $4.8 million compared with a net loss of $0.4 million
  • Diluted loss per share of $0.05 compared with $0.06
  • Return on common equity (ROE)1 was negative 5.7% compared with negative 6.8%
  • Excluding specified items1, GMP recorded a net loss of $0.3 million, diluted loss per share of $0.02 and ROE of negative 2.5% compared with net income of $1.3 million, diluted loss per share of $0.04 and ROE of negative 3.9%
  • Completed the sale of the majority of the advisory contracts related to certain assets under management for cash consideration of $10.8 million. The positive impact to second quarter 2013 net income attributable to common shareholders was $4.2 million.

First Half 2013 versus First Half 2012

  • Revenue of $109.2 million compared with $128.8 million
  • Net income of $4.4 million compared with a net loss of $0.2 million
  • Diluted loss per share of $0.08 compared with $0.10
  • ROE1 was negative 4.0% compared with negative 5.2%
  • Excluding specified items1, net income was $0.8 million, diluted loss per share of $0.02 and ROE of negative 1.1% compared with net income of $5.8 million, a diluted loss per share of $0.01 and ROE of negative 0.4%

Commenting further, Mr. Fricker said, "We believe that we have now substantially completed the personnel and operational changes needed to sustain the business through the downturn and to position it for out-performance in more normalized markets."

1. Considered to be a non-GAAP financial measure. This measure does not have any standardized meaning prescribed by generally accepted accounting principles (GAAP) under IFRS 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 and the "Presentation of Financial Information and Non-GAAP Measures" section in the Second Quarter 2013 MD&A.

SECOND QUARTER 2013 BUSINESS SEGMENT HIGHLIGHTS

Capital Markets

  • Revenue of $45.4 million - a decrease of 19.5% compared with second quarter 2012 largely due to lower investment banking revenue, primarily due to lower advisory revenue, amid ongoing challenging market conditions in the Canadian mid-market resource sectors.  Additionally, second quarter 2012 was bolstered by a significant advisory transaction recorded in our industrials and special situations sector.  Partly offsetting this decrease was higher returns on principal transactions, and higher commission revenue.  Higher returns from principal transactions reflect lower losses on client facilitation trading,  an increase in net gains on client-related fixed income trading activity and lower losses on security positions acquired in connection with investment banking mandates.
  • Improving revenue diversification:
  • 46.5% of investment banking revenue generated in second quarter 2013 in non-resource sectors
  • 48.8% year-over-year increase in fixed income client trading revenue in our U.S. operations
  • Expenses of $51.3 million - a decrease of 3.8% compared with second quarter 2012 primarily due to a 24.3% decrease in variable compensation, commensurate with lower revenue generation, as well as a year-over-year decrease in share-based compensation expense.  Second quarter 2013 expenses included $7.1 million in pre-tax restructuring charges.  Excluding restructuring charges in both periods, fixed salaries and benefits decreased 11% or $0.9 million year-over-year reflecting the benefits from operating efficiencies introduced earlier this year.
  • Loss before income taxes of $5.9 million in second quarter 2013 compared with income before income taxes of $3.1 million in second quarter 2012.
  • Excluding specified items1, income before income taxes was $2.1 million compared with $5.8 million in second quarter 2012.

GMP Securities L.P. highlights:

  • Participated in 39 underwriting transactions completed in Canada during second quarter 2013, valued at $3.2 billion, of which we led or co-led 13 of these transactions valued at $0.9 billion. Source: FPinfomart.
  • Ranked fifth in the dollar value of common equity underwriting transactions completed in Canada during second quarter 2013 for which we were lead or co-lead. Source: FPinfomart.
  • Advised on five advisory transactions completed in second quarter 2013, valued at $1.1 billion.
  • Despite challenging markets, GMP proudly supported businesses and the local communities in Calgary by donating 100% of all agency trading commission dollars generated on June 26, 2013, to support the Canadian Red Cross Alberta Floods Fund.

Wealth Management

  • The Wealth Management segment consists of GMP's non-controlling ownership interest in Richardson GMP Limited (Richardson GMP) and commencing in 2013, this segment also includes the financial results of our asset management business, CQI Capital Management L.P. (CQI), formerly GMP Investment Management L.P.
  • Wealth Management reported income before income taxes of $10.5 million in second quarter 2013 compared with a loss before income taxes of $1.9 million in second quarter 2012, driven largely by cash proceeds of $10.8 million received from the sale of certain advisory contracts to Fiera Capital Corporation which was completed on April 30, 2013.
  • Excluding specified items1, net loss before income taxes was $0.7 million compared with $1.9 million in second quarter 2012.

Richardson GMP highlights:

  • Revenue of $39.1 million - an increase of 12% compared with second quarter 2012 primarily due to higher investment management and fee income commensurate with increased average assets under administration (AUA)1.
  • Earned adjusted net income2 of $3.9 million in second quarter 2013 - up $2.8 million compared with second quarter 2012.
  • Ended second quarter 2013 with AUA of $14.7 billion, up $1.0 billion or 7% compared with second quarter 2012, and 116 investment advisory teams, up from 111 teams in the same period a year ago.

2. Considered to be a non-GAAP financial measure. This measure does not have any standardized meaning prescribed by generally accepted accounting principles (GAAP) under IFRS and is therefore unlikely to be comparable to similar measures presented by other issuers.  This data should be read in conjunction with the "Supplemental Information" section at the end of this press release and in the Second Quarter 2013 MD&A.

CQI highlights:

  • Completed the sale of the majority of the advisory contracts related to certain assets under management for cash consideration of $10.8 million.
  • Launched the CQI Income Opportunities Fund, a North American income fund aimed at offering stable returns with lower volatility and a view toward wealth preservation.

DIVIDENDS

On August 8, 2013, the board of directors of GMP declared a quarterly cash dividend of $0.05 per common share, and a quarterly cash dividend of $0.3438 per Cumulative 5-Year Rate Reset Preferred Share, Series B, each payable on September 30, 2013, to the respective shareholders of record on September 10, 2013.

GMP APPOINTS NEW DIRECTOR

GMP is pleased to announce that the board of directors appointed Fiona L. Macdonald as an independent director, effective August 8, 2013.  Ms. Macdonald is currently the Executive Compensation Practice Leader, Canada and US West for Towers Watson. She has more than 20 years experience in the area of executive and director compensation strategies. Ms. Macdonald holds both a BA in International Relations, as well as an MBA, from the University of British Columbia and is a graduate of the Institute of Corporate Directors program.  GMP's board is now comprised of 10 directors, including seven independent directors.

NORMAL COURSE ISSUER BID ACTIVITY

During the three months ended June 30, 2013, GMP purchased for cancellation 252,000 common shares under its normal course issuer bid for an aggregate cost of $1.5 million.

CONFERENCE CALL

GMP executives will host the call followed by a question-and-answer session for analysts and institutional investors.  Interested parties are invited to access the quarterly call on a listen-only basis by dialing 416-644-3414 or 1-800-814-4859 (toll free) or via live audio webcast at http://www.gmpcapital.com/investor. A recording of the conference call will be available until Friday, August 16, 2013, by dialing 416-640-1917 or 1-877-289-8525 (toll free) and entering access code 4624682#. The webcast will be archived at http://www.gmpcapital.com/investor.

NON-GAAP MEASURES

Consistent with GMP's management framework, management uses certain measures to assess GMP's financial performance, which are not generally accepted accounting principle (GAAP) measures 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 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. For further information, refer to the "Presentation of Financial Information and Non-GAAP Measures" section in the Second Quarter 2013 MD&A.

The table below provides a reconciliation of GMP's reported results to its adjusted measures:

  Three months ended June 30 Six months ended June 30
($000, except as otherwise noted) 2013 2012 2013 2012
Reported Results        
Income (loss) before income taxes 3,531 (809) 3,188 (942)
Income tax benefit (1,249) (433) (1,170) (777)
Net income (loss) 4,780 (376) 4,358 (165)
Net loss attributable to common shareholders (3,492) (4,087) (4,968) (6,375)
Reported Measures        
Net loss per common share (dollars):        
  Basic (0.05) (0.06) (0.08) (0.10)
  Diluted ¹ (0.05) (0.06) (0.08) (0.10)
ROE ² (5.7)% (6.8)% (4.0)% (5.2)%
Pre-Tax Impact of Adjusting Items        
  Retention shares 879 1,758 1,877 3,502
  Restructuring costs 7,769 968 9,145 5,382
  AUM sale transaction (11,843) (11,843)
Impact of adjusting items on income (loss) before income taxes (3,195) 2,726 (821) 8,884
After-Tax Impact of Adjusting Items:        
  Retention shares 490 981 1,048 1,956
  Restructuring costs 5,723 714 6,718 3,968
  AUM sale transaction (11,310) (11,310)
Impact of adjusting items on net income (loss) (5,097) 1,695 (3,544) 5,924
Adjusted Results ²        
Income before income taxes 336 1,917 2,367 7,942
Net income (317) 1,319 814 5,759
Net loss attributable to common shareholders (1,507) (2,392) (1,430) (451)
Adjusted Measures ²        
Net loss per common share (dollars):        
  Basic (0.02) (0.04) (0.02) (0.01)
  Diluted ¹ (0.02) (0.04) (0.02) (0.01)
ROE (2.5)% (3.9)% (1.1)% (0.4)%

1. In the case of a net loss, the effect of Common Share options and warrants on diluted net loss per common share will be anti-dilutive; therefore, basic and diluted net loss per common share will be the same.

2. Return on common equity, adjusted results and adjusted measures are considered to be non-GAAP financial measures. These measures do not have any standardized meaning prescribed by GAAP under IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. The table above outlines our adjusted results and adjusted measures with their closest GAAP counterparts.

SUPPLEMENTAL INFORMATION

The following supplemental information reflects how management of Richardson GMP assesses the financial performance of Richardson GMP.

Supplemental Financial Information - Richardson GMP

Richardson GMP's management assesses performance on both a reported and an adjusted basis and considers both basis to be useful in assessing underlying, ongoing business performance. Presenting results on both basis also permits readers to assess the impact of specified items on financial results. Richardson GMP's management uses certain measures to assess the financial performance of Richardson GMP that are not GAAP measures 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 measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of Richardson GMP's performance, liquidity, cash flows and profitability.  Richardson GMP's management believes adjusting certain results by excluding the impact of the specified items is more reflective of ongoing financial performance and cash generating capabilities and provides readers with an enhanced understanding of how management views Richardson GMP's core performance.  For further information, refer to the "Supplemental Information" section in the Second Quarter 2013 MD&A.

The following table sets forth an overview of the consolidated financial results of Richardson GMP for the periods indicated, on a 100% basis; noting, however, that GMP owns a 32.3% non-controlling interest of Richardson GMP as at June 30, 2013.

($000, except as otherwise noted) Three months ended   % Six months ended   %
June 30 increase/ June 30 increase/
 2013   2012   (decrease)      2013 2012 (decrease)
Revenue 39,119   35,050   12 % 77,643   73,914   5 %
Expenses 37,882   36,576   4 % 74,462   75,185   (1)%
Employee compensation and benefits 24,837   22,931   8 % 49,953   48,073   4 %
Non-compensation expenses 13,045   13,645   (4)% 24,509   27,112   (10)%
Net income (loss) - reported 1,237   (1,526) n.m. 3,181   (1,271) n.m.
Impact of adjusting items:            
Interest 400   400   —   797   800   —  
Depreciation and amortization 852   937   (9)% 1,691   2,001   (15)%
Share-based compensation 257   120   114 % 461   590   (22)%
Transition assistance loan amortization 1,127   1,154   (2)% 2,250   2,265   (1)%
Net income - adjusted1 3,873   1,085   n.m. 8,380   4,385   91 %
Number of advisory teams 116   111   5 %      
AUA at period-end ($ millions)1 14,694   13,712   7 %      

n.m. = not meaningful

1. Considered to be a non-GAAP financial measure. This measure does not have any standardized meaning prescribed by GAAP under IFRS and is therefore unlikely to be comparable to similar measures presented by other issuers.

FORWARD-LOOKING INFORMATION
This press release contains "forward-looking information" as defined under applicable Canadian securities laws.   This information includes, but is not limited to, statements concerning our 2013 objectives, our strategies to achieve those objectives, as well as statements made with respect to management's beliefs, plans, estimates, projections and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking information 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 information reflects management's current beliefs and is based on information currently available to management.

Forward-looking information is not a guarantee of future performance and is 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: variation in the market value of securities, volatility and liquidity of equity and fixed income trading markets, volume of new financings and mergers and acquisitions (M&A), dependence on key personnel and sustainability of fees. 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 GMP's actual results and could cause its actual results to differ materially from those expressed or implied in any forward-looking information disclosed by management or on its behalf.  For a description of additional risks that could cause our actual results to materially differ from our current expectations, see "Risk Management" in the 2012 Annual MD&A and the Second Quarter 2013 MD&A and "Risk Factors" in GMP's 2013 Annual Information Form dated March 13, 2013. These risks and uncertainties are not the only ones facing GMP together with its consolidated operations controlled by it and its predecessors (GMP Group).  Additional risks and uncertainties not currently known to us or that we currently consider immaterial may also impair the operations of the GMP Group.  Material assumptions or factors underlying the forward-looking information contained in this press release are set out in the "Business Environment and Market Outlook" section of the Second Quarter 2013 MD&A and include, without limitation: continued economic recovery in the U.S., slow growth and weak demand for commodities in emerging markets including China, subdued Canadian capital markets activity.  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 this forward-looking information. 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 information contained in this press release is 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 GMP's Board of Directors undertake no obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

ABOUT 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 global client base that includes corporate clients, institutional investors and high-net-worth individuals in two 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., GMP 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 and the investment management and alternative investment products provided by CQI Capital Management L.P.  Richardson GMP Limited is a full-service independent firm focused on providing exclusive and comprehensive wealth management and investment services delivered by an experienced team of investment professionals. GMP is listed on the Toronto Stock Exchange under the symbol "GMP". For further information, please visit our corporate website at gmpcapital.com.

 

SOURCE: GMP Capital Inc.

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

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