GMP Capital Inc. reports first quarter 2016 results

For further information about GMP Capital Inc., our results for first quarter 2016 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 months ended March 31, 2016 (First Quarter 2016 Financial Statements), and our management's discussion and analysis for the three months ended March 31, 2016 (First Quarter 2016 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 First Quarter 2016 Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS).

TORONTO, April 28, 2016 /CNW/ - GMP Capital Inc. (GMP) (TSX: GMP) today reported revenue of $45.9 million in first quarter 2016, down 14% compared with the same period a year ago.  GMP recorded a net loss of $3.6 million and a diluted loss per share of $0.08 in first quarter 2016, compared with a net loss of $8.9 million and diluted loss per share of $0.14 in first quarter 2015.  On an adjusted basis1, the first quarter 2016 net loss was $2.9 million and diluted loss per share was $0.07.

"A daunting operating environment gave way to a modest improvement in business conditions late in first quarter 2016.  While our industry continues to be affected by persistent structural and cyclical headwinds, we remain encouraged by the strength and resilience of both our Capital Markets and Wealth Management franchises," said Harris Fricker, President and Chief Executive Officer, GMP.  "And with the impact of our restructuring initiatives substantially complete, we are confident we have undertaken the steps necessary to ensure both sustainability through the trough and considerable operating leverage to an upturn in the cycle."

Commenting further, "If there is a benefit to be seen from the ongoing challenging market conditions it is that they are transforming the competitive landscape. This should augur well for our relative competitiveness as conditions abate."

FINANCIAL HIGHLIGHTS

First Quarter 2016 versus First Quarter 2015

  • Revenue of $45.9 million compared with $53.3 million.
  • Net loss of $3.6 million compared with net loss of $8.9 million.
  • Net loss attributable to common shareholders of $5.1 million compared with net loss attributable to common shareholders of $9.6 million.
  • Diluted loss per share of $0.08 compared with diluted loss per share of $0.14.
  • Annualized return on common equity (ROE)1 of negative 9.3% compared with negative 15.2%.
  • Adjusted net loss of $2.9 million compared with adjusted net loss of $6.4 million.
  • Adjusted diluted loss per share of $0.07 compared with adjusted diluted loss per share of $0.10 and adjusted ROE of negative 8.0% compared with negative 11.1%.
  • Adjusted net loss attributable to common shareholders of $4.4 million compared with adjusted net loss attributable to common shareholders of $7.1 million.

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 First Quarter 2016 MD&A.

FIRST QUARTER 2016 BUSINESS SEGMENT HIGHLIGHTS

Capital Markets

First Quarter 2016 versus First Quarter 2015

Revenue

Revenue of $43.6 million decreased 17% primarily due to a decline in trading commissions and lower net gains on principal transactions.

  • Investment banking revenue of $22.5 million increased 20% primarily driven by higher M&A advisory fees which increased 57% to $13.3 million.
  • Principal transactions generated net gains of $10.5 million representing a decrease of 33%, primarily due to reduced returns on principal inventories and moderately lower U.S. client-related fixed income activity.
  • Commission revenue of $9.4 million decreased 33% on lower client trading activity.

Expenses

Expenses of $45.1 million decreased 19% primarily due to lower employee compensation and benefits expenses.

  • Fixed salaries and benefits declined 24% primarily due to a lower cost base following our recent restructuring initiative and also due to the run-off of certain guaranteed compensation arrangements in our U.S. energy business.
  • Employee compensation and benefits included $3.4 million associated with the U.S. energy business compared with $5.2 million.
  • Variable compensation decreased 16% in-line with the 17% decrease in revenue.

Loss before income taxes

  • Loss before income taxes of $1.5 million compared with loss before income taxes of $3.0 million.

Wealth Management

First Quarter 2016 versus First Quarter 2015

  • Wealth Management reported income before income taxes of $0.1 million compared with a loss before income taxes of $0.7 million.

Richardson GMP Highlights:

The following information sets forth an overview of the consolidated financial results of Richardson GMP, on a 100% basis; noting, however, that GMP owns an approximate 31% non-controlling interest of Richardson GMP as at March 31, 2016.

  • Revenue of $65.4 million representing a 5% decrease primarily driven by lower commissions.
  • Adjusted EBITDA2 of $7.9 million decreased 4%.
  • Assets under administration of $26.6 billion as at March 31, 2016, compared with $27.7 billion as at March 31, 2015.
  • Net addition of three advisory teams during the quarter.

2.  Considered to be a non-GAAP financial measure. This data should be read in conjunction with the "Supplemental Information" section at the end of this press release and in the First Quarter 2016 MD&A.

DIVIDENDS

On April 27, 2016, the board of directors of GMP (Board of Directors) approved a quarterly cash dividend of $0.2257 per Cumulative 5-Year Rate Reset Preferred Share, Series B, and $0.2089 per Cumulative Floating Rate Preferred Shares, Series C, payable on June 30, 2016 to preferred shareholders of record on June 15, 2016.

As previously announced, on January 13, 2016, the Board of Directors approved the suspension of the Corporation's quarterly cash dividend on its Common Shares.

NORMAL COURSE ISSUER BID RENEWAL

On April 27, 2016, the Board of Directors approved the renewal of GMP's normal course issuer bid, which has been accepted by the TSX (2016 NCIB). The 2016 NCIB will commence on April 29, 2016, and will terminate on April 28, 2017, or until such earlier date on which purchases under the 2016 NCIB have been completed. Under the 2016 NCIB, GMP is authorized to purchase for cancellation up to 5,120,783 Common Shares, representing 10% of the public float on April 15, 2016, by way of normal course purchases effected by GMP Securities L.P. through the facilities of the TSX and any other protected marketplace or alternative trading system in Canada. As of April 15, 2016, GMP had 71,412,628 common shares outstanding. Purchases will be made by GMP in accordance with the requirements of the TSX and the price which GMP will pay for any such Common Shares will be the market price of any such Common Shares at the time of acquisition, or such other price as may be permitted by the TSX. For purposes of the TSX rules, a maximum of 22,056 Common Shares may be purchased by GMP on any one day under the bid, except where purchases are made in accordance with the "block purchase exception" of the TSX rules. The daily repurchase limit represents 25% of the average daily trading volume of 88,224 Common Shares for the six-month period ended March 31, 2016, excluding purchases made under the previously approved normal course issuer bid program during that period. Under its previously approved NCIB program that expires on April 29, 2016, GMP purchased for cancellation 1,010,112 of its common shares at an average weighted purchase cost per share of $4.4741. GMP has renewed the 2016 NCIB program because it believes the purchase of common shares may at certain times enhance value to shareholders and is an appropriate use of funds. Shareholders may obtain a copy of the filed notice without charge by contacting GMP's Chief Financial Officer by telephone at (416) 367-8600 or toll free at 1-888-301-3244 or by email at investorrelations@gmpcapital.com.

CONFERENCE CALL

A conference call and live audio webcast to discuss GMP's first quarter 2016 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. Interested parties are invited to access the quarterly conference call on a listen-only basis by dialing 416-340-2218 or 1-800-396-7098 (toll free) or via live audio webcast at http://gmpcapital.com/Investor-Relations/Quarterly-Information. A recording of the conference call will be available until Thursday, May 5, 2016, by dialing 905-694-9451 or 1-800-408-3053 (toll free) and entering access code 7177916#. The webcast will be archived at http://gmpcapital.com/Investor-Relations/Quarterly-Information.

NON-GAAP MEASURES

We use certain measures to assess our financial performance 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 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 First Quarter 2016 MD&A.

The following table provides a reconciliation of GMP's reported results to its adjusted measures including the composition of the adjusted measures for the periods presented.

($000, except as otherwise noted)

Three months ended March 31


2016

2015

Reported Results



Loss before income taxes

(3,736)

(9,101)

Income tax recovery

(115)

(223)

Net loss

(3,621)

(8,878)

Net loss attributable to common shareholders

(5,123)

(9,576)

Reported Measures



Net loss per common share (dollars):




Basic

(0.08)

(0.14)


Diluted

(0.08)

(0.14)

ROE 1

(9.3)%

(15.2)%

Pre-Tax Impact of Adjusting Items:




Bond forward loss

945

3,300


Retention shares

136

Impact of adjusting items on loss before income taxes

945

3,436

After-Tax Impact of Adjusting Items:




Bond forward loss

696

2,432


Retention shares

76

Impact of adjusting items on net loss

696

2,508

Adjusted Results 1



Loss before income taxes

(2,791)

(5,665)

Net loss

(2,925)

(6,370)

Net loss attributable to common shareholders

(4,427)

(7,068)

Adjusted Results 1



Net loss per common share (dollars):




Basic

(0.07)

(0.10)


Diluted

(0.07)

(0.10)

ROE

(8.0)%

(11.1)%

1.  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 uses certain measures to assess the financial performance of Richardson GMP that are not GAAP measures under IFRS. EBITDA and adjusted EBITDA do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. These 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 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  First Quarter 2016 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 an approximate 31% non-controlling interest of Richardson GMP as at March  31, 2016.



Three months ended

%


 March 31

increase/

($000, except as otherwise noted)

2016

2015

(decrease)

Revenue

65,419

68,534

(5)

Expenses

63,805

68,078

(6)

Employee compensation and benefits

45,029

47,735

(6)

Non-compensation expenses

18,776

20,343

(8)

Net income - reported

1,614

456

254

Pre-tax impact of adjusting items





Interest

835

1,647

(49)


Depreciation and amortization

1,337

1,426

(6)


Transition assistance loan amortization

3,250

3,530

(8)

EBITDA1

7,036

7,059


Share-based compensation

869

1,171

(26)

Adjusted EBITDA1

7,905

8,230

(4)

Number of advisory teams

195

194

1

AUA at period-end ($ millions)

26,581

27,656

(4)

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 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,  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"  and "Risk Factors" in the First Quarter 2016 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 include, but are not limited to, "Business Environment and Outlook", "First Quarter 2016 Financial Highlights", "Segment Results ", "Liquidity and Capital Resources" sections of the First Quarter 2016 MD&A. 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, Miami, Dallas, Hong Kong and Beijing. Wealth Management consists of GMP's non-controlling ownership interest in Richardson GMP Limited. Richardson GMP Limited, Canada's largest independent wealth management firm, is 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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