Canaccord Genuity Group Inc. reports first quarter fiscal 2015 results

Excluding significant items, first quarter diluted earnings per share of $0.20 driven by significant increases in Canadian and US investment banking revenues (1)

(All dollar amounts are stated in Canadian dollars unless otherwise indicated)

TORONTO, Aug. 5, 2014 /CNW/ - In the first quarter of fiscal 2015, the quarter ended June 30, 2014, Canaccord Genuity Group Inc. (Canaccord, the Company, TSX: CF, LSE: CF.) generated $245.6 million in revenue. Excluding significant items(1) (a non-IFRS measure), the Company recorded net income of $24.0 million or net income of $20.0 million attributable to common shareholders(2) ($0.20 per diluted common share). Including all expense items, on an IFRS basis, the Company recorded net income of $18.9 million or net income attributable to common shareholders(2) of $15.1 million (earnings per diluted common share of $0.15).

"Our fiscal first quarter results were characterized by the positive momentum in our Canadian capital markets business that started in the second half of fiscal 2014", said Paul Reynolds, President and CEO of Canaccord Genuity Group Inc. "During the quarter, we made continued progress growing all of our businesses, reflecting the impact of our diversification strategy and the differentiated global service we provide."

First quarter of fiscal 2015 vs. first quarter of fiscal 2014

  • Revenue of $245.6 million, an increase of 31% or $58.4 million from $187.2 million
  • Excluding significant items, expenses of $215.9 million, up 24% or $41.4 million from $174.5 million(1)
  • Expenses of $222.3 million, an increase of 25% or $44.2 million from $178.1 million
  • Excluding significant items, diluted earnings per common share (EPS) of $0.20 compared to diluted EPS of $0.09(1)
  • Excluding significant items, net income of $24.0 million compared to net income of $11.8 million(1)
  • Net income of $18.9 million compared to net income of $7.9 million
  • Diluted EPS of $0.15 compared to diluted EPS of $0.06

First quarter of fiscal 2015 vs. fourth quarter of fiscal 2014

  • Revenue of $245.6 million, down 3 % or $8.1 million from $253.7 million
  • Excluding significant items, expenses of $215.9 million, down 1% or $1.9 million from $217.8 million(1)
  • Expenses of $222.3 million, an increase of $0.6 million from $221.7 million
  • Excluding significant items, diluted EPS of $0.20 compared to diluted EPS of $0.25(1)
  • Excluding significant items, net income of $24.0 million compared to net income of $29.1 million (1)
  • Net income of $18.9 million compared to net income of $25.9 million
  • Diluted EPS of $0.15 compared to diluted EPS of $0.22

Financial condition at end of first quarter fiscal 2015 vs. fourth quarter fiscal 2014

  • Cash and cash equivalents balance of $273.9 million, down $90.4 million from $364.3 million
  • Working capital of $435.1 million, down $34.3 million from $469.4 million
  • Total shareholders' equity of $1.12 billion, down $45.4 million from $1.17 billion
  • Book value per diluted common share of $8.70, down $0.35 from $9.05(3)
  • On August 5, 2014, the Board of Directors approved a quarterly dividend of $0.05 per common share payable on September 10, 2014 with a record date of August 29, 2014
  • On August 5, 2014, the Board of Directors also approved a cash dividend of $0.34375 per Series A Preferred Share payable on September 30, 2014 with a record date of September 19, 2014, and a cash dividend of $0.359375 per Series C Preferred Share payable on September 30, 2014 to Series C Preferred shareholders of record as at September 19, 2014

SUMMARY OF OPERATIONS

Corporate

  • On May 23, 2014, Canaccord Genuity announced that Peter Brown stepped down as a Director and Honorary Chairman
  • On June 20, 2014, Canaccord Genuity was added to the S&P/TSX Composite Index, the S&P/TSX Composite Dividend Index and the S&P/TSX High Beta Index
  • On June 24, 2014 Canaccord Genuity announced the nomination of Kalpana Desai as an Independent Director for election at the upcoming annual general meeting of shareholders
  • During the quarter, the Company purchased and cancelled 264,200 of its common shares under the terms of its normal course issuer bid (NCIB)
  • On August 5, 2014, the Board of Directors approved the filing of an application to renew the NCIB to provide for the ability to purchase, at the Company's discretion, up to a maximum of 5,100,049 common shares through the facilities of the TSX during the period from August 13, 2014 to August 12, 2015. The purpose of any purchases under this program is to enable the Company to acquire shares for cancellation. The maximum number of shares that may be purchased represents 5.0% of the Company's outstanding common shares.

Capital Markets

  • Canaccord Genuity led or co-led 50 transactions globally, raising total proceeds of C$4.0 billion(4) during fiscal Q1/15
  • Canaccord Genuity participated in 115 transactions globally, raising total proceeds of C$11.3 billion(4)  during fiscal Q1/15
  • Canaccord Genuity participated in the following significant investment banking transactions during fiscal Q1/15:
    • US$828.7 million for Abengoa Yield on the NASDAQ
    • £352.0 million for Zoopla Property Group PLC on the LSE
    • US$316.8 million for 3D Systems, Inc. on the NYSE
    • £294.0 million for Polypipe Group PLC on the LSE
    • C$289.8 million for Callidus Capital Corp. on the TSX
    • £194.3 million for Cambian Group on the LSE
    • €180.0 million for SLM Solutions AG on the FSE
    • C$178.3 million for Pure Industrial Real Estate Trust on the TSX
    • C$172.6 million for Bellatrix Exploration Ltd. on the TSX and NYSE
    • £154.4 million for OneSavings Bank PLC on the LSE
    • C$125.0 million for Canacol Energy Ltd. on the TSX
    • £120.8 million for Game Digital PLC on the LSE
    • AUD$120.0 million for Greencross Limited on the ASX
    • C$115.7 million for Kinaxis Inc. on the TSX
    • C$115.1 million for Artis Real Estate Investment Trust on the TSX
    • C$115.0 million for Lumenpulse Inc. on the TSX
    • £100.0 million for Volution Group PLC on the LSE
    • US$90.5 million for ePlus, Inc. on the NASDAQ
    • £79.3 million for Patisserie Holdings PLC on AIM
    • AUD$67.2 million for TFS Corporation Limited on the ASX
    • US$62.0 million for SCYNEXIS, Inc.  on the NASDAQ
    • US$57.5 million for Abraxas Petroleum on the NASDAQ
    • US$56.1 million for Radius Health, Inc. on the NASDAQ
    • C$50.7 million for American Hotel Income Properties REIT LP on the TSX
    • £50.0 million for HICL Infrastructure Company Limited on the LSE
    • £41.5 million for River & Mercantile Group on AIM
    • AUD$33.6 million for iBuy Group Limited on the ASX
    • C$31.3 million for Merus Labs International Inc. on the TSX
    • C$28.8 million for Mosaic Capital Corporation on the TSX-V
    • £26.0 million for EKF Diagnostics on the LSE
    • AUD$25.0 million for Rubik Financial Limited on the ASX
    • £24.0 million for Rathbones on the LSE
    • C$22.8 million for Transeastern Power Trust on the TSX
    • US$22.5 million for Hydrogenics Corporation on the NASDAQ
    • C$20.7 million for MBAC Fertilizer Corp. on the TSX
    • AUD$20.4 million for Tiger Resources Limited on the ASX
    • US$20.0 million for Venaxis, Inc. on the NASDAQ
  • In Canada, Canaccord Genuity participated in raising $342.8 million for government and corporate bond issuances during fiscal Q1/15
  • Canaccord Genuity generated advisory revenues of $32.7 million during fiscal Q1/15, a decrease of 9% compared to the same quarter last year
  • During fiscal Q1/15, Canaccord Genuity advised on the following M&A and advisory transactions:
    • Yamana Gold on the C$3.9 billion joint acquisition with Agnico Eagle of Osisko Mining Corporation
    • Iridium Communications on the amendment of its US$1.8 billion Coface export financing
    • Jaguar Mining Inc. on its US$315.0 million recapitalization
    • Viewpoint Construction Software on its recapitalization
    • Chalet Bidco Limited on debt financing supporting the acquisition of Ogier Fiduciary Services Limited
    • AIB, RBS and Santander on their disposal of Morethan Hotels Group to Somerston Capital and Lone Star
    • Gaucho on the refinancing of its debt facilities
    • HgCapital on its disposal of Americana International Limited
    • Minova Insurance Holdings on its fundraise from Capital Z Partners Management
    • EKF Diagnostics on its acquisition of DiaSpect Medical AB
    • EKF Diagnostics on its acquisition of Selah Genomics
    • Photomedex, Inc. on its acquisition of LCA-Vision Inc.

Canaccord Genuity Wealth Management (Global)

  • Globally, Canaccord Genuity Wealth Management generated $64.1 million in revenue in Q1/15
  • Assets under administration in Canada and assets under management in the UK and Europe and Australia were $32.1 billion at the end of Q1/15(3)

Canaccord Genuity Wealth Management (North America)

  • Canaccord Genuity Wealth Management (North America) generated $32.4 million in revenue and, after intersegment allocations, recorded a net loss of $2.3 million before taxes in Q1/15
  • Assets under administration in Canada were $11.0 billion as at June 30, 2014, up 8% from $10.2 billion at the end of the previous quarter and up 18% from $9.3 billion at the end of fiscal Q1/14(3)
  • Assets under management in Canada (discretionary) were $1.3 billion as at June 30, 2014, up 5% from $1.2 billion at the end of the previous quarter and up 44% from $880 million at the end of fiscal Q1/14(3)
  • As at June 30, 2014, Canaccord Genuity Wealth Management had 163 Advisory Teams(5), a decrease of 10 Advisory Teams from June 30, 2013 and an increase of three from March 31, 2014

Canaccord Genuity Wealth Management (UK and Europe)

  • Wealth management operations in the UK and Europe generated $30.1 million in revenue and, after intersegment allocations, and excluding significant items, recorded net income of $5.1 million before taxes in Q1/15(1)
  • Assets under management (discretionary and non-discretionary) were $20.5 billion (£11.2 billion) (3)

Non-IFRS Measures

The non-International Financial Reporting Standards (IFRS) measures presented include assets under administration, assets under management, book value per diluted common share and figures that exclude significant items. Significant items include restructuring costs, amortization of intangible assets, and acquisition-related expense items, which include costs recognized in relation to both prospective and completed acquisitions. Book value per diluted common share is calculated as total common shareholders' equity divided by the number of diluted common shares outstanding and, commencing in Q1/14, adjusted for shares purchased under the NCIB and not yet cancelled, and estimated forfeitures in respect of unvested share awards under share-based payment plans.

Management believes that these non-IFRS measures will allow for a better evaluation of the operating performance of Canaccord's business and facilitate meaningful comparison of results in the current period to those in prior periods and future periods. Figures that exclude significant items provide useful information by excluding certain items that may not be indicative of Canaccord's core operating results. A limitation of utilizing these figures that exclude significant items is that the IFRS accounting effects of these items do in fact reflect the underlying financial results of Canaccord's business; thus, these effects should not be ignored in evaluating and analyzing Canaccord's financial results. Therefore, management believes that Canaccord's IFRS measures of financial performance and the respective non-IFRS measures should be considered together.

Selected financial information excluding significant items(1)

       
  Three months ended
June 30
Quarter-
over-quarter
(C$ thousands, except per share and % amounts) 2014 2013 change
Total revenue per IFRS $245,556 $187,231 31.2%
Total expenses per IFRS 222,268 178,118 24.8%
Significant items recorded in Canaccord Genuity      
  Amortization of intangible assets 1,741 1,702 2.3%
Significant items recorded in Canaccord Genuity Wealth Management      
  Amortization of intangible assets 2,240 1,889 18.6%
  Restructuring costs 783 n.m.
Significant items recorded in Corporate and Other      
  Restructuring costs 1,600 n.m.
Total significant items 6,364 3,591 77.2%
Total expenses excluding significant items 215,904 174,527 23.7%
Net income before taxes - adjusted $29,652 $12,704 133.4%
Income taxes  - adjusted 5,635 894 n.m.
Net income - adjusted $24,017 $11,810 103.4%
Earnings per common share - basic, adjusted $0.22 $0.10 120.0%
Earnings per common share - diluted, adjusted $0.20 $0.09 122.2%
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 4.
n.m.: not meaningful

Fellow Shareholders:

Our solid results this quarter reflect the impact of our diversification strategy and the ongoing strength of our global platform. For the first three months of fiscal 2015, Canaccord Genuity Group earned $245.6 million in revenue, an increase of 31% compared to the same period last year.

While the strength of our global business and diversified revenue streams were the main drivers of our revenue growth, the impact of foreign currency translation, particularly the US dollar and British pound, further supported our revenue growth for the period.

We continue in our efforts to realize cost synergies across our global business. Despite higher expenses related to increased business activity and the occurrence of one-time costs associated with certain restructuring charges, our expenses as a percentage of revenue during the quarter decreased by 4.6% compared to the same period last year.

Canadian capital markets revenue increases 77% year-over-year

Driven by robust performance on the TSX, we are experiencing a welcome recovery in financing and advisory activity in Canada. On a year-over-year basis, our Canadian capital markets division experienced a 162% increase in investment banking revenue and a 166% increase in advisory fees, resulting in revenue of $58.2 million, an overall increase of 77% over the same period last year.

In addition to an improved market environment, the growth in our financing and advisory businesses is attributable to the long-standing relationships and track record of success we have historically achieved for our clients in the region. Our position as the leading Canadian independent firm for M&A advisory was reflected in our engagement by Yamana Gold on the C$3.9 billion acquisition of Osisko Mining Corporation. Another example of our strong market position and differentiated global service level was demonstrated in our role as lead advisor and bookrunner to long time client, Amaya Gaming Group in a significant transaction that closed on August 1st.

Increased financing activity in all regions

During the first fiscal quarter, Canaccord Genuity participated in 115 transactions globally, raising a total of $11.3 billion. By establishing consistent advisory and equity transaction leadership across our capital markets businesses, we have increased our market share and continue to improve our relevance to clients in all regions.

Our global capital markets division generated revenue of $179.2 million during the first quarter, an increase of 37% compared to the same period last year. While financing activities increased across all regions, our US and Canadian capital markets divisions were the largest contributors during the quarter, with 35% and 32% of total global capital markets revenues, respectively.

Through our integrated approach to leadership in the Asia-Pacific region, we continue to gain market share and broaden our reach into additional sectors. For the fiscal first quarter, this region contributed 8% of total Canaccord Genuity revenues, doubling its contribution from 4% during the first quarter of last year.

Global assets under administration and management increase 24%

Further reflecting improved market conditions, our Canadian wealth management division increased revenues by 22% to $32.4 million and increased assets under administration to $11 billion, an improvement of 18% compared to the first quarter of last year. We continue to focus on growing our share of fee-based and discretionary managed accounts with existing Advisory Teams and through targeted recruitment. As a result of these initiatives, we have successfully increased Canadian assets under management by 44% year over year to $1.3 billion.

The momentum we are building in our Canadian wealth management division and the impact of strategic and operational changes led to a 56% reduction in year-over-year losses for this business.

Assets under management in our UK and Europe wealth management operations increased to $20.5 billion, an improvement of 27% over the same period last year.

We are committed to growing our global wealth management operations and we have begun to invest strategically in advancing the scale and scope of this business. The Canadian launch of our proprietary Global Portfolio Solutions (GPS) product is expected later in the fiscal year.  In the UK, the November, 2014 projected launch of a new front- and back- office system will provide the necessary infrastructure for continued growth in the region.

A stronger business for all stakeholders

Monday, June 30 marked the ten-year anniversary of Canaccord Genuity's initial public offering on the Toronto Stock Exchange. Over the past decade, we have worked hard to grow from our roots as a Canadian brokerage into a leading independent global investment bank. Through sector and regional diversification, our business is able to maintain a level of stability in volatile markets that is not shared by our domestically focused competitors. This not only protects value for shareholders, but ensures we are able to provide a consistent service offering to clients in all regions.

On June 20, Canaccord Genuity was added to the S&P/TSX Composite Index, the principal broad market measure for the Canadian equity markets. With our recent successes and robust pipeline of activity for the coming quarters, this milestone achievement comes at a time when our firm is well positioned to benefit from the increased visibility and broader market participation associated with being a part of the index.

Looking Forward

By leveraging our expanded operations and integrated service model, we will continue to reinforce a culture of cost containment across the firm, while making disciplined investments in areas that support our growth and enhance our competitive strengths.

We are committed to maintaining our strong position in Canadian capital markets and growing our wealth management business in that geography. We will continue to invest strategically in our US capital markets division, a business we expect to grow aggressively in the coming years.

In the UK and Europe, we will focus on enhancing our leading position in the mid-market and growing our advisory capability in continental Europe. We will also continue to pursue strategic opportunities to grow our UK wealth management business.

We see significant opportunity for growth in the Asia-Pacific region and in response to growing client demand, are working towards establishing a robust sales, trading and research capability in Singapore.

I am confident in the outlook for our business. We expect the diversification strategy within our long term business plan will continue to deliver strong results.  I am thankful to see all of our teams working together so effectively, as we continue to establish leadership in the global mid-market.

Kind regards,
Paul Reynolds
President & Chief Executive Officer

ACCESS TO QUARTERLY RESULTS INFORMATION
Interested investors, the media and others may review this quarterly earnings release and supplementary financial information at http://www.canaccordgenuitygroup.com/EN/IR/Pages/default.aspx.

CONFERENCE CALL AND WEBCAST PRESENTATION
Interested parties are invited to listen to Canaccord's first quarter fiscal 2015 results conference call with analysts and institutional investors, via a live webcast or a toll free number. The conference call is scheduled for Wednesday, August 6, 2014 at 5:00 a.m. (Pacific Time), 8:00 a.m. (Eastern Time), 1:00 p.m. (UK Time), 8:00 p.m. (China Standard Time) and 10:00 p.m. (Australia Eastern Daylight Time). At that time, senior executives will comment on the results for the first quarter of the fiscal 2015 year and respond to questions from analysts and institutional investors.

The conference call may be accessed live and archived on a listen-only basis via the Internet at: http://www.canaccordgenuitygroup.com/EN/NewsEvents/Pages/Events.aspx.

Analysts and institutional investors can call in via telephone at:

  • 647-427-7450 (within Toronto)
  • 1-888-231-8191 (toll free in North America)
  • 0-800-051-7107 (toll free from the UK)
  • 1-800-760-620 (toll free from Ireland)
  • 0-800-917-449 (toll free from France)
  • 0-800-183-0171 (toll free from Germany)
  • 10-800-714-1191 (toll free from Northern China)
  • 10-800-140-1195 (toll free from Southern China)
  • 1-800-287-011 (toll free from Australia)

Please request to participate in Canaccord Genuity Group Inc.'s Q1/15 earnings call. If a passcode is requested, please use 62228933.

A replay of the conference call can be accessed after 8:00 a.m. (Pacific Time), 11:00 a.m. (Eastern Time) on Wednesday, August 6, 2014 until September 16, 2014 at 416-849-0833 or 1-855-859-2056 by entering passcode 62228933 followed by the pound (#) sign.

ABOUT CANACCORD GENUITY GROUP INC.:

Through its principal subsidiaries, Canaccord Genuity Group Inc. (the Company) is a leading independent, full-service financial services firm, with operations in two principal segments of the securities industry: wealth management and capital markets. Since its establishment in 1950, the Company has been driven by an unwavering commitment to building lasting client relationships. We achieve this by generating value for our individual, institutional and corporate clients through comprehensive investment solutions, brokerage services and investment banking services. The Company has offices in 10 countries worldwide, including wealth management offices located in Canada, Australia, the UK and Europe. Canaccord Genuity, the international capital markets division, operates in Canada, the US, the UK, France, Germany, Ireland, Hong KongChina, Singapore, Australia and Barbados. To us there are no foreign markets.™

Canaccord Genuity Group Inc. is publicly traded under the symbol CF on the TSX and the symbol CF. on the London Stock Exchange. Canaccord Series A Preferred Shares are listed on the TSX under the symbol CF.PR.A. Canaccord Series C Preferred Shares are listed on the TSX under the symbol CF.PR.C.

FOR FURTHER INFORMATION, CONTACT:

North American media:
Scott Davidson
Executive Vice President, Global Head of
Corporate Development & Strategy
Phone: 416-869-3875
Email: scott.davidson@canaccord.com

London media:
Robert Morgan or Nicola Ratchford
Stockwell
Phone: +44 (0) 20 7240 2486
Email: robert.morgan@stockwellgroup.com
nicola.ratchford@stockwellgroup.com
Investor relations inquiries:
Christina Marinoff
Vice President, Investor
Relations & Communications
Phone: 416-687-5507
Email: christina.marinoff@canaccord.com
Broker:
Oliver Hearsey
RBC Europe Limited
Phone: +44 (0) 20 7653 4000
Email: oliver.hearsey@rbccm.com

None of the information on the Company's websites at www.canaccordgenuity.com, www.canaccordgenuitygroup.com, and www.canaccordgenuity.com/cm should be considered incorporated herein by reference.

___________________________
1 Excluding significant items. See Non-IFRS Measures on pages 4 and 8.
2 Net income attributable to common shareholders is calculated as net income adjusted for non-controlling interests and preferred share dividends.
3 See Non-IFRS Measures on pages 4 and 8.
4 Source: Transactions over $1.5 million. Internally sourced information.
5 Advisory Teams are normally comprised of one or more Investment Advisors (IAs) and their assistants and associates, who together manage a shared set of client accounts. Advisory Teams that are led by, or only include, an IA who has been licensed for less than three years are not included in our Advisory Team count, as it typically takes a new IA approximately three years to build an average-sized book of business.

SOURCE Canaccord Genuity Group Inc.

For further information:

North American media:
Scott Davidson
Executive Vice President, Global Head of Corporate Development & Strategy
Phone: 416-869-3875
Email: scott.davidson@canaccord.com 

London media:
Robert Morgan or Nicola Ratchford
Stockwell
Phone: +44 (0) 20 7240 2486
Email: robert.morgan@stockwellgroup.com
nicola.ratchford@stockwellgroup.com 

Investor relations inquiries:
Christina Marinoff
Vice President, Investor Relations & Communications
Phone: 416-687-5507
Email: christina.marinoff@canaccord.com 

Broker:
Oliver Hearsey
RBC Europe Limited
Phone: +44 (0) 20 7653 4000
Email: oliver.hearsey@rbccm.com