GMP Capital Inc. reports third quarter 2013 results

For further information about GMP Capital Inc., our results for third 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 nine months ended September 30, 2013 (Third Quarter 2013 Financial Statements), and our management's discussion and analysis for the three and nine months ended September 30, 2013 (Third 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 Third Quarter 2013 Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS).

TORONTO, Nov. 8, 2013 /CNW/ - GMP Capital Inc. (GMP) (TSX: GMP) today reported revenue of $42.6 million in third quarter 2013, down 26.6% compared with the same period a year ago.  GMP recorded a net loss of $0.5 million and a diluted loss per share of $0.01 in third quarter 2013 compared with a net loss of $0.4 million and a diluted loss per share of $0.03 in third quarter 2012.

"Business conditions for the quarter continued to be challenging as evidenced by low levels of both primary and secondary market activity.   That said, the balance sheet strength, operating efficiency and high variable cost orientation of our business allows us to weather such challenging times and provides significant earnings leverage in better markets," said Harris Fricker, Chief Executive Officer, GMP. "And, market conditions aside, we continued to build our business in the quarter as evidenced by the transformative transaction in our Wealth Management segment and continued expansion of our U.S. fixed income franchise."

FINANCIAL HIGHLIGHTS

Third Quarter 2013 versus Third Quarter 2012

  • Revenue of $42.6 million compared with $58.1 million
  • Net loss of $0.5 million compared with a net loss of $0.4 million
  • On an adjusted basis1, GMP recorded a net loss of $1.1 million and a net loss attributable to common shareholders of $1.3 million compared with net income of $1.6 million and near break-even net loss attributable to common shareholders
  • Diluted loss per share of $0.01 compared with a diluted loss per share of $0.03
  • On an adjusted basis1, diluted loss per share of $0.02 compared with a diluted earnings per share of nil
  • Return on common equity (ROE)1 of negative 1.2% compared with negative 3.2%

First Nine Months 2013 versus First Nine Months 2012

  • Revenue of $151.8 million compared with $186.9 million
  • Net income of $3.8 million compared with a net loss of $0.5 million
  • On an adjusted basis1, GMP recorded a net loss of $0.3 million and a net loss attributable to common shareholders of $2.8 million compared with net income of $7.3 million and a net loss attributable to common shareholders of $0.5 million
  • Diluted loss per share of $0.09 compared with a diluted loss per share of $0.13
  • On an adjusted basis1, diluted loss per share of $0.04 compared with a diluted loss per share of $0.01
  • ROE1 of negative 3.1% compared with negative 4.5%

Commenting further, Mr. Fricker said, "Our business has proven itself sustainable through persistent and extremely challenging market conditions. This sustainability arises from the underlying strength of our franchise, our legacy of superior execution and the depth of our client relationships. These factors should serve us well in better markets and activity to date in the current quarter indicates a thaw in 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 and the "Presentation of Financial Information and Non-GAAP Measures" section in the Third Quarter 2013 MD&A.

THIRD QUARTER 2013 BUSINESS SEGMENT HIGHLIGHTS

Capital Markets

  • Revenue of $38.5 million - a decrease of 25.0% compared with third quarter 2012 largely due to lower investment banking revenue, led by a notable decline in client activity in the mining sector, and lower returns on principal transactions.
  • Investment banking revenue of $17.7 million decreased 35.1% compared with third quarter 2012 largely due to lower advisory and debt underwriting revenue, partly offset by a 77.7% increase in equity underwriting revenue.
  • Principal transactions generated a net gain of $8.2 million in third quarter 2013 compared with a net gain of $9.9 million in third quarter 2012.  This decrease is largely due to higher losses on client facilitation trading partly offset by a 22.6% year-over-year increase in net gains on client-related fixed income trading revenue to $9.5 million.
  • Expenses of $37.8 million - a decrease of 25.2% compared with third quarter 2012 primarily due to a 22.4% decrease in variable compensation, commensurate with lower revenue generation, as well as a year-over-year decrease in selling, general and administrative expenses.  Selling, general and administrative expenses declined in third quarter 2013 reflecting lower professional fees and lower transaction-related expense.  Lower share-based compensation expense recorded in third quarter 2013 in connection with our 2011 acquisition of GMP Securities, LLC also contributed to the decline.  Third quarter 2013 employee compensation and benefits expenses included a $1.5 million pre-tax recovery of previously accrued restructuring charges.
  • Income before income taxes of $0.6 million in third quarter 2013 compared with income before income taxes of $0.7 million in third quarter 2012.
  • On an adjusted basis1, near break-even performance in third quarter 2013 compared with income before income taxes of $5.3 million in third quarter 2012.

GMP Securities L.P. highlights:

  • Participated in 36 underwriting transactions completed in Canada during third quarter 2013, valued at $4.9 billion, of which we led or co-led seven of these transactions valued at $0.6 billion. Source: FPinfomart.
  • Ranked sixth in the dollar value of common equity underwriting transactions completed in Canada during third quarter 2013 for which we were lead or co-lead. Source: FPinfomart.

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 GMP's asset management business, CQI Capital Management L.P. (CQI), formerly GMP Investment Management L.P.
  • Wealth Management reported income before income taxes of $1.1 million in third quarter 2013 compared with a loss before income taxes of $0.3 million in third quarter 2012 largely due to lower employee compensation and benefits expense at CQI subsequent to the completion of the sale of certain advisory contracts relating to CQI's assets under management (AUM) during the second quarter of 2013.
  • Lower investment management and fee income reflects a decrease in AUM at CQI following the previously mentioned AUM sale transaction.  Other income includes $1.4 million recognized by GMP in third quarter 2013 on its preferred share investment in Richardson GMP following dividend declarations by Richardson GMP.

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 32.3% non-controlling interest of Richardson GMP as at September 30, 2013.

  • Revenue of $38.4 million - an increase of 7.5% compared with third 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 $4.2 million in third quarter 2013, up $1.5 million compared with third quarter 2012.
  • Ended third quarter 2013 with AUA of $15.2 billion, up $0.7 billion or 5.1% compared with third quarter 2012, and 114 investment advisory teams, up from 110 teams at the end of third quarter 2012.

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 Third Quarter 2013 MD&A.

Richardson GMP Completes Acquisition of Macquarie Private Wealth Inc.

On November 1, 2013, Richardson GMP successfully completed the acquisition of Macquarie Group's Canadian retail business, Macquarie Private Wealth Inc. (MPW Canada).   Pursuant to the purchase agreement, Richardson GMP acquired all of the outstanding shares of MPW Canada for aggregate consideration of $132 million, which was partially funded through a combination of a preference share and convertible debenture offering on a private placement basis.  Concurrent with the closing, each of Richardson Financial Group (RFG), a subsidiary of James Richardson & Sons, Limited, and GMP equally subscribed to a preference share and convertible unsecured subordinated debentures offering by Richardson GMP for total proceeds of $70 million and $20 million, respectively.  Richardson GMP also anticipates offering an additional $10 million of convertible debentures to its investment advisors.  If Richardson GMP's investment advisors subscribe for less than $10 million of convertible debentures, GMP and/or RFG will be permitted to subscribe for the balance.  Richardson GMP believes this to be a transformational transaction that reinforces its position as Canada's largest independent wealth management firm with an estimated $28 billion in AUA as of November 1, 2013.

DIVIDENDS

On November 7, 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 December 31, 2013, to the respective shareholders of record on December 10, 2013.

CONFERENCE CALL

A conference call and live audio webcast to discuss GMP's third quarter results will be held this 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 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, November 15, 2013, by dialing 416-640-1917 or 1-877-289-8525 (toll free) and entering access code 4639969#. 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 Third Quarter 2013 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 September 30, Nine months ended September 30,
  2013 2012 2013 2012
Reported Results        
(Loss)income before income taxes (440) (1,329) 2,748 (2,271)
Income tax expense (benefit) 71 (971) (1,099) (1,748)
Net (loss) income (511) (358) 3,847 (523)
Net loss attributable to common shareholders (695) (1,913) (5,663) (8,288)
Reported Measures        
Net loss per common share (dollars):        
  Basic (0.01) (0.03) (0.09) (0.13)
  Diluted ¹ (0.01) (0.03) (0.09) (0.13)
ROE ² (1.2)% (3.2)% (3.1)% (4.5)%
Pre-Tax Impact of Adjusting Items        
  Retention shares 839 2,088 2,716 5,590
  Restructuring costs (1,500) 2,465 7,645 7,847
  AUM sale transaction (11,843)
Impact of adjusting items on income (loss) before income taxes (661) 4,553 (1,482) 13,437
After-Tax Impact of Adjusting Items        
  Retention shares 468 1,155 1,516 3,111
  Restructuring costs (1,105) 1,875 5,613 5,843
  AUM sale transaction (11,310)
  Income tax expense recovery - favorable assessment (1,122)   (1,122)
Impact of adjusting items on net (loss) income (637) 1,908 (4,181) 7,832
Adjusted Results ²        
(Loss) income before income taxes (1,101) 3,224 1,266 11,166
Net (loss) income (1,148) 1,550 (334) 7,309
Net loss attributable to common shareholders (1,332) (5) (2,762) (456)
Adjusted Measures ²        
Net loss per common share (dollars):        
  Basic (0.02) (0.04) (0.01)
  Diluted ¹ (0.02) (0.04) (0.01)
ROE (2.2)% (1.5)% (0.2)%

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 use 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 Third 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 September 30, 2013.

 

  Three months ended   %   Nine months ended   %
  September 30   increase/   September 30   increase/
($000, except as otherwise noted)
2013   2012   (decrease)   2013   2012   (decrease)
Revenue 38,375   35,693   8   116,018   109,607   6
Expenses 37,910   35,475   7   112,371   110,660   2
Employee compensation and benefits 24,901   22,633   10   74,854   70,706   6
Non-compensation expenses 13,009   12,842   1   37,517   39,954   (6)
Net income (loss) - reported 465   218   n.m.   3,647   (1,053)   n.m.
Impact of adjusting items:                      
  Acquisition-related costs 1,080     n.m.   1,080     n.m.
  Interest 405   404     1,203   1,204  
  Depreciation and amortization 837   950   (12)   2,526   2,952   (14)
  Share-based compensation 377   117   222   838   708   18
  Transition assistance loan amortization 1,053   1,048     3,302   3,313  
Net income - adjusted1 4,217   2,737   54   12,596   7,124   77
Number of advisory teams 114   110   4            
AUA at period-end ($ millions)1 15,224   14,491   5            

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 Third 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 Third Quarter 2013 MD&A and include, without limitation:uncertain economic conditions in Canada, tepid investor confidence for the balance of 2013 and into early 2014, suppressed Canadian capital markets activity in GMP's core mid-market resource sectors during this time frame.  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, 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


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