GMP Capital Inc. Reports Second Quarter 2014 Results

  • Net income of $13.7 million and diluted EPS of $0.16 on an adjusted basis1
  • Second quarter adjusted ROE1of 17.6%

For further information about GMP Capital Inc., our results for second quarter 2014 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, 2014 (Second Quarter 2014 Financial Statements), and our management's discussion and analysis for the three and six months ended June 30, 2014 (Second Quarter 2014 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 2014 Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS).

TORONTO, Aug. 8, 2014 /CNW/ - GMP Capital Inc. (GMP) (TSX: GMP) today reported revenue of $80.4 million in second quarter 2014, up 33% compared with the same period a year ago.  GMP recorded net income of $12.4 million and diluted earnings per share (EPS) of $0.15 in second quarter 2014 compared with net income of $4.8 million and a diluted loss per share of $0.05 in second quarter 2013. On an adjusted basis1, net income was $13.7 million and diluted EPS was $0.16 in second quarter 2014 compared with a net loss of $0.3 million and diluted loss per share of $0.02 in the prior year quarter.  Return on common equity (ROE)1 was 15.9% in second quarter 2014 compared with negative 5.7% in second quarter 2013.

"Business activity, especially underwriting, was more robust this quarter. With much of that activity in the non-commodity space, our performance is reflective of the agility and resiliency of our diversified global brokerage franchise while at the same time highlighting our rigorous approach to risk and cost management. We are also pleased with the performance of our partners at Richardson GMP as they continue to build on their standing as Canada's largest independent wealth management firm," said Harris Fricker, Chief Executive Officer, GMP.

FINANCIAL HIGHLIGHTS

Second quarter 2014 vs. Second quarter 2013

  • Revenue of $80.4 million compared with $60.3 million
  • Net income of $12.4 million compared with $4.8 million
  • On an adjusted basis1, GMP recorded net income of $13.7 million and net income attributable to common shareholders of $12.2 million compared with a net loss of $0.3 million and net loss attributable to common shareholders of $1.5 million
  • Diluted EPS of $0.15 compared with a diluted loss per share of $0.05
  • On an adjusted basis1, diluted EPS was $0.16 compared with a diluted loss per share of $0.02
  • ROE1 was 15.9% compared with negative 5.7%
  • Adjusted ROE1 was 17.6% compared with negative 2.5%

First half 2014 vs. First half 2013

  • Revenue of $144.3 million compared with $109.2 million
  • Net income of $15.1 million compared with $4.4 million
  • Diluted EPS of $0.18 compared with a diluted loss per share of $0.08
  • ROE1 was 9.6% compared with negative 4.0%
  • On an adjusted basis1, net income was $19.1 million, diluted EPS of $0.23 and ROE of 12.4% compared with net income of $0.8 million, diluted loss per share of $0.02 and ROE of negative 1.1%

Commenting further, Mr. Fricker said, "Simply put, the challenges of the past few years presented us with the opportunity to become better operators of our business. The resulting operational changes leave us highly confident in our ability to weather the market storms that inevitably arise and to outperform in better market conditions."

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, which sets out the composition of the measures for the periods presented, and the "Presentation of Financial Information and Non-GAAP Measures" section in the Second Quarter 2014 MD&A.

SECOND QUARTER 2014 BUSINESS SEGMENT HIGHLIGHTS

Capital Markets

Revenue

  • Revenue of $75.7 million representing a 67% increase compared with second quarter 2013, primarily driven by robust investment banking revenue particularly in the financial services, technology & healthcare, and oil & gas sectors.
  • Investment banking revenue more than doubled relative to second quarter 2013 on the strength of a 224% increase in equity underwriting.
  • Non-resources investment banking revenue increased 164% and contributed 61% of overall investment banking revenue compared with 46% in second quarter 2013.
  • Commissions increased 30% compared with second quarter 2013 on higher client trading volumes.

Expenses

  • Expenses of $58.0 million increased 13% compared with second quarter 2013 primarily reflecting higher variable compensation commensurate with the increased revenue generation as well as incremental costs associated with the expansion of our energy business into Houston.
  • The prior year quarter included $7.1 million in pre-tax restructuring charges.

Income (loss) before income taxes

  • Income before income taxes of $17.8 million compared with a loss before income taxes of $5.9 million in second quarter 2013.
  • On an adjusted basis1, income before income taxes of $18.2 million compared with $2.1 million in second quarter 2013.

GMP Securities L.P. highlights:

  • Ranked first among independent dealers in the dollar value of common equity underwriting transactions completed in Canada during second quarter 2014 for which we were lead or co-lead. (Source: FPinfomart)
  • Participated in 60 underwriting transactions completed in Canada during second quarter 2014, valued at $11.7 billion, of which we led or co-led 18 of these transactions valued at $4.8 billion. (Source: Company reports)
  • Continued expansion of capabilities in the U.S. energy sector with the addition of several experienced professionals in our Houston office.

Wealth Management

  • The Wealth Management segment consists of GMP's non-controlling ownership interest in Richardson GMP Limited (Richardson GMP) and the financial results of CQI Capital Management L.P. (CQI).
  • Wealth Management reported income before income taxes of $0.5 million in second quarter 2014 compared with $10.5 million in second quarter 2013. The decrease primarily reflects the impact of the sale of the majority of CQI's assets under management (AUM) in second quarter 2013 (AUM sale transaction) which generated proceeds of $10.8 million in that quarter.
  • CQI's total expenses decreased in second quarter 2014 compared with second quarter 2013 primarily reflecting lower non-compensation expenses.
  • GMP's share of Richardson GMP's net income increased to $0.7 million in second quarter 2014 compared with $0.2 million in second quarter 2013.
  • Our share of Richardson GMP's net income in second quarter 2014 was reduced by $1.0 million representing our proportionate share of integration costs recorded by Richardson GMP in connection with its acquisition of Macquarie Private Wealth Inc.
  • On an adjusted basis1 , second quarter 2014 income before income taxes was $1.5 million compared with a loss before income taxes of $0.7 million in second quarter 2013.

Richardson GMP highlights:

The following information 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 31.6% non-controlling interest of Richardson GMP as at June 30, 2014.

  • Revenue of $83.5 million - an increase of 113% compared with second quarter 2013 primarily due to increased commissions and higher investment management and fee income commensurate with higher average assets under administration (AUA)1.
  • Adjusted EBITDA2 of $16.6 million in second quarter 2014 compared with $3.9 million in second quarter 2013.
  • AUA of $28.9 billion at June 30, 2014, up $14.2 billion or 97% relative to June 30, 2013.
  • 204 investment advisory teams at June 30, 2014, up from 116 teams at June 30, 2013.

2. 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.  This data should be read in conjunction with the "Supplemental Information" section at the end of this press release and in the Second Quarter 2014 MD&A.

DIVIDENDS

On August 7, 2014, the board of directors of GMP (Board of Directors) 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, 2014, to the respective shareholders of record on September 10, 2014.

GMP APPOINTS NEW DIRECTOR

GMP is pleased to announce that the Board of Directors appointed David C. Ferguson as an independent director and Chair of its Audit Committee, effective August 7, 2014. From December 1999 until his retirement in December 2012, Mr. Ferguson served as Executive Managing Director and Chief Financial Officer of BMO Capital Markets, the wholesale banking and institutional brokerage pillar of the Bank of Montreal. Mr. Ferguson's previous experience includes a 25 year career in public accounting including serving as National Director of KPMG's investment dealer practice. In addition to being a Fellow of the Chartered Professional Accountants of Ontario, Mr. Ferguson holds Bachelor of Commerce and MBA degrees from the University of Toronto as well as several capital markets related accreditations. GMP's board is now comprised of 10 directors, including seven independent directors.

CONFERENCE CALL

A conference call and live audio webcast to discuss GMP's second quarter 2014 results will be held that morning at 10:00 a.m. (ET).  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 conference call on a listen-only basis by dialing 416-340-2218 or 1-866-225-2055 (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 15, 2014, by dialing 905-694-9451 or 1-800-408-3053 (toll free) and entering access code 2002411. 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 2014 MD&A.

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

($000, except as otherwise noted) Three months ended June 30 Six months ended June 30
  2014 2013 2014 2013
Reported Results        
Income before income taxes 16,528 3,531 21,489 3,188
Income tax expense (benefit) 4,132 (1,249) 6,366 (1,170)
Net income 12,396 4,780 15,123 4,358
Net income (loss) attributable to common
shareholders
10,918 (3,492) 13,091 (4,968)
Reported Measures        
Net income (loss) per common share (dollars):        
  Basic 0.16 (0.05) 0.19 (0.08)
  Diluted ¹ 0.15 (0.05) 0.18 (0.08)
ROE ² 15.9% (5.7)% 9.6% (4.0)%
Pre-Tax Impact of Adjusting Items        
    Share of associate's MPW Canada integration costs 1,020 3,489
    Retention shares 455 879 906 1,877
    Restructuring costs 7,769 9,145
    AUM sale transaction (11,843) (11,843)
Impact of adjusting items on income (loss) before
income taxes
1,475 (3,195) 4,395 (821)
After-Tax Impact of Adjusting Items        
  Share of associate's MPW Canada integration costs 1,020 3,489
  Retention shares 254 490 506 1,048
  Restructuring costs 5,723 6,718
  AUM sale transaction (11,310) (11,310)
Impact of adjusting items on net income 1,274 (5,097) 3,995 (3,544)
Adjusted Results ²        
Income before income taxes 18,003 336 25,884 2,367
Net income (loss) 13,670 (317) 19,118 814
Net income (loss) attributable to common
shareholders
12,192 (1,507) 17,086 (1,430)
Adjusted Measures ²        
Net income (loss) per common share (dollars):        
   Basic 0.17 (0.02) 0.24 (0.02)
   Diluted ¹ 0.16 (0.02) 0.23 (0.02)
ROE 17.6% (2.5)% 12.4% (1.1)%

1. In the case of a net loss, the effect of GMP's 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.

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 bases to be useful in assessing underlying, ongoing business performance. Presenting results on both bases also permits readers to assess the impact of specified items on financial results. Richardson GMP's management use certain measures to assess the financial performance of Richardson GMP that are not GAAP measures under IFRS. Adjusted EBITDA does not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other issuers. This Non-GAAP measure should not be considered as an alternative 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 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 2014 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 31.6% non-controlling interest of Richardson GMP as at June 30, 2014.

($000, except as otherwise noted) Three months ended
June 30
%
increase/
(decrease)
Six months ended
June 30
  %
increase/
(decrease)
2014   2013     2014   2013  
Revenue 83,453   39,119   113   162,998   77,643   110
Expenses 79,384   37,882   110   161,523   74,462   117
Employee compensation and benefits 55,338   24,837   123   109,729   49,953   120
Non-compensation expenses 24,046   13,045   84   51,794   24,509   111
Net (loss) income - reported 4,069   1,237   229   1,475   3,181   (54)
Pre-tax impact of adjusting items                        
   Interest 1,961   400   390   3,701   797   364
   Depreciation and amortization 1,346   852   58   2,694   1,691   59
   Transition assistance loan amortization 3,448   1,127   206   6,583   2,250   193
EBITDA2 10,824   3,616   199   14,453   7,919   83
   MPW Canada integration costs 3,233     n.m.   10,973     n.m.
   Share-based compensation 2,576   257   902   4,120   461   794
Adjusted EBITDA2 16,633   3,873   329   29,546   8,380   253
Number of advisory teams 204   116   76              
AUA at period-end ($ millions)1 28,874   14,694   97              

n.m. = not meaningful

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 2014 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 Second Quarter 2014 MD&A and "Risk Factors" in GMP's annual information form. 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 2014 MD&A and include, without limitation:generally positive Canadian business sentiment, continued accommodative monetary policy in Canada, strengthening global demand, healthy corporate balance sheets, strengthening profits and strong global geo-political headwinds.   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, Houston, Connecticut, 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