GMP Capital Inc. Reports Fourth Quarter and Year-End 2014 Results

For further information about GMP Capital Inc., our results for fourth quarter and year-end 2014 and the meaning of certain references, this earnings release should be read in conjunction with our annual financial statements as at and for the year ended December 31, 2014 (2014 Annual Financial Statements), our management's discussion and analysis for the year ended December 31, 2014 (2014 Annual MD&A) and our annual information form, 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 2014 Annual Financial Statements prepared in accordance with generally accepted accounting principles (GAAP) under International Financial Reporting Standards (IFRS).

TORONTO, March 6, 2015 /CNW/ - GMP Capital Inc. (GMP) (TSX: GMP) today reported revenue of $52.8 million in fourth quarter 2014 representing a 22% decrease relative to the same period a year ago. GMP recorded a net loss of $6.9 million and a diluted loss per share of $0.12 in fourth quarter 2014 compared with net income of $5.8 million and diluted earnings per share (EPS) of $0.06 in fourth quarter 2013.

"The relatively favourable operating environment we experienced in the first several months of 2014 deteriorated abruptly late in the third quarter resulting in a sharp contraction in business activity for the remainder of the year," said Harris Fricker, Chief Executive Officer, GMP.  "Our revenues decreased 22% in fourth quarter 2014 primarily reflecting a 43% decrease in investment banking fees compared with fourth quarter 2013."

Full year revenue was $264.6 million in 2014, up 21% compared with 2013.  GMP recorded net income of $14.3 million and a diluted EPS of $0.12 in 2014 compared with net income of $9.6 million and a diluted loss per share $0.02 in 2013.  Adjusted net income1 nearly doubled to $17.3 million in 2014, generating an adjusted return on equity (ROE)1 of 4.3% compared with 2.1% in 2013.

Commenting further, Mr. Fricker said, "Despite a difficult fourth quarter, our full year results demonstrate the potential of the operating leverage we've built into our business, which positions us for out-performance in better markets. We continue to take measures to safeguard capital and maintain liquidity while building on the strengths of our franchise."

FINANCIAL HIGHLIGHTS

Fourth Quarter 2014 versus Fourth Quarter 2013

  • Revenue of $52.8 million compared with $67.8 million.
  • Net loss of $6.9 million compared with net income of $5.8 million.
  • On an adjusted basis, net loss of $6.2 million and net loss attributable to common shareholders of $7.6 million compared with net income of $9.1 million and net income attributable to common shareholders of $7.5 million.
  • Diluted loss per share of $0.12 compared with diluted EPS of $0.06; adjusted diluted loss per share of $0.11 compared with adjusted diluted EPS of $0.11.
  • ROE was negative 12.6% compared with positive 6.6%; adjusted ROE was negative 11.4% compared with positive 11.9%.

2014 versus 2013


  • Revenue of $264.6 million compared with $219.5 million.
  • Net income of $14.3 million compared with $9.6 million.
  • On an adjusted basis, net income of $17.3 million and net income attributable to common shareholders of $11.7 million compared with net income of $9.1 million and net income attributable to common shareholders of $5.1 million.
  • Diluted EPS of $0.12 compared with a diluted loss per share of $0.02; adjusted diluted EPS of $0.16 compared with adjusted diluted EPS of $0.07.
  • ROE of 3.2% compared with negative 0.6%; adjusted ROE of 4.3% compared with 2.1%.

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.  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 2014 Annual MD&A.

  

FOURTH QUARTER 2014 BUSINESS SEGMENT FINANCIAL RESULTS

CAPITAL MARKETS

($000, except as otherwise noted)





%

increase/

(decrease)



%

increase/

(decrease)

Fourth
Quarter
2014


Fourth 
Quarter
2013


2014


2013

Revenue

48,775


64,008


(24)


245,673


189,953

29


Investment banking

29,118


51,008


(43)


152,963


114,503

34


Commissions

13,409


11,351


18


58,290


49,419

18


Principal transactions

4,309


(948)


555


23,495


17,233

36


Interest

2,235


1,586


41


7,568


5,842

30


Other

(296)


1,012


(129)


3,357


2,956

14

Expenses

52,321


51,972


1


215,321


183,345

17


Employee compensation and benefits

37,441


38,775


(3)


161,356


133,489

21


Selling, general and administrative

13,688


11,830


16


49,392


44,432

11


Interest

414


667


(38)


1,845


2,253

(18)


Depreciation and amortization

778


700


11


2,728


3,171

(14)

(Loss) income before income taxes -
reported

(3,546)


12,036


(129)


30,352


6,608

359

Pre-tax impact of adjusting items












Restructuring costs



n.m.



6,997

(100)


Retention Shares

168


524


(68)


1,659


3,240

(49)

(Loss) income before income taxes - adjusted

(3,378)


12,560


(127)


32,011


16,845

90


n.m. = not meaningful

 

Fourth Quarter 2014 vs Fourth Quarter 2013

Revenue
Revenue of $48.8 million decreased 24% compared with fourth quarter 2013 largely due to lower investment banking revenue. 

  • Investment banking revenue of $29.1 million decreased 43% primarily driven by lower underwriting fees. Fourth quarter 2013 included a significant mining sector underwriting fee.
  • Commission revenue of $13.4 million increased 18% on higher client trading activity.
  • Principal transactions generated a net gain of $4.3 million. The prior year quarter was adversely impacted by realized losses on security positions acquired in connection with investment banking mandates.

Expenses
Expenses of $52.3 million relatively consistent with fourth quarter 2013 as lower variable compensation was largely offset by incremental expenses associated with the build-out of Houston office.

  • Lower variable compensation in line with reduced revenue generation.
  • Employee compensation and benefits included $3.8 million associated with the Houston office.
  • Selling, general and administrative expenses are 16% higher, primarily due to incremental costs associated with the Houston office.

Loss before income taxes
On an adjusted basis1, loss before income taxes was $3.4 million in fourth quarter 2014 compared with income before income taxes of $12.6 million in fourth quarter 2013.

Highlights

  • Ranked #1 among independent investment dealers in dollar value of completed common equity underwriting transactions in Canada during fourth quarter 2014 (Source: FPinformart).

WEALTH MANAGEMENT

The Wealth Management segment consists of GMP's non-controlling ownership interest in Richardson GMP Limited (Richardson GMP) and the asset management business, CQI Capital Management L.P. (CQI).

($000, except as otherwise noted)





% increase/

(decrease)



% increase/

(decrease)

Fourth
Quarter
2014


Fourth 
Quarter
2013


2014


2013


Revenue

161


750


(79)


3,076


18,405


(83)


Investment management and fee income

229


153


50


939


3,417


(73)


Other

(68)


597


(111)


2,137


14,988


(86)

Expenses

895


698


28


2,912


5,705


(49)


Employee compensation and benefits

512


216


137


1,687


2,565


(34)


Non-compensation expenses

383


482


(21)


1,225


3,140


(61)

Share of net loss of associate

(225)


(2,044)


89


(53)


(1,503)


96

(Loss) income before income taxes - reported

(959)


(1,991)


52


111


11,197


(99)


Restructuring costs



n.m.



648


(100)


AUM sale transaction



n.m.



(11,843)


100


Dilution Gain



n.m.


(1,978)



n.m.


Share of associate's MPW Canada
acquistion/integration costs

645


3,023


(79)


4,134


3,372


23

(Loss) income before income taxes - adjusted

(314)


1,032


(130)


2,688


3,374


(20)

AUM CQI ($ millions)1

63


53


19








  n.m. = not meaningful

 

Fourth Quarter 2014 vs Fourth Quarter 2013

  • Wealth Management reported a loss before income taxes of $1.0 million compared with a loss before income taxes of $2.0 million.
  • Other income in fourth quarter 2014 reflects lower returns on GMP's investments in certain of CQI's funds.
  • Share of net loss of associate reflects costs related to Richardson GMP's acquisition and integration of Macquarie Private Wealth Inc. (MPW Canada), our share of which was $0.6 million compared with $3.0 million in the prior year quarter.
  • CQI ended 2014 with $63 million in AUM representing a 19% increase during the year.

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 an approximate 31% non-controlling interest of Richardson GMP as at December 31, 2014.

Fourth Quarter 2014 vs Fourth Quarter 2013

  • Revenue of $70.4 million representing an increase of 7%, primarily driven by higher investment management and fee income.
  • Adjusted EBITDA2 increased 12% to $10.6 million.
  • Ended 2014 with $27.2 billion of AUA administered by 192 advisor teams, average AUA per team in excess of $140 million.

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 2014 Annual MD&A.

 


2014 FINANCIAL HIGHLIGHTS

Selected Financial Information

($000, except as otherwise noted)



2014

2013

%
increase/(decrease)

Revenue

264,623

219,549

21


Investment banking

152,963

114,503

34


Commissions

58,290

49,419

18


Investment management

and fee income

939

3,417

(73)


Principal transactions

23,557

18,607

27


Interest

8,362

6,606

27


Other

20,512

26,997

(24)

Expenses

240,953

206,790

17


Employee compensation and

benefits

172,094

143,231

20


Non-compensation expenses

68,859

63,559

8

Share of net loss of associate

(53)

(1,503)

96

Income before income taxes

23,617

11,256

110

Net income

14,255

9,631

48

Net income (loss) attributable to
common shareholders:

8,570

(1,486)

677

Net income (loss) per

Common Share (dollars):






Basic

0.12

(0.02)

700



Diluted1

0.12

(0.02)

700

Cash dividends declared per

 Common Share (dollars)

0.20

0.20

ROE

3.2%

(0.6)%

633

Total assets

1,902,230

1,921,149

(1)

Adjusted measures





Income before income taxes

27,432

13,670

101


Net income

17,337

9,114

90


Net income per Common

 Share (dollars):






Basic

0.17

0.08

113



Diluted

0.16

0.07

129


ROE

4.3%

2.1%

105



1.

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

 

2014 vs. 2013

Net income increased 48% to $14.3 million in 2014 compared with net income of $9.6 million in 2013. The improvement was primarily driven by higher revenue and operating leverage.  Adjusted net income was $17.3 million in 2014 compared with adjusted net income of $9.1 million in 2013.

Total revenues increased 21% in 2014 compared with 2013, primarily driven by higher investment banking revenue which rose 34%. Investment banking revenue was bolstered by higher equity and debt underwriting fees, as well as increased advisory fees. Commissions increased 18% in 2014  compared with 2013 on higher client trading volumes. Lower investment management and fee income primarily reflects the impact of the AUM Sale Transaction (for more information on the AUM Sale Transaction, refer to the "About GMP" section in the 2014 Annual MD&A). Principal transactions generated a net gain of $23.6 million in 2014 compared with a net gain of $18.6 million in the prior year.  Total revenues also benefited from the depreciation of the Canadian dollar relative to the U.S. dollar.

Total expenses increased 17% in 2014 compared with 2013, primarily reflecting higher variable compensation in line with the increase in revenue generation. Incremental costs associated with the expansion of our energy business into Houston also contributed to the increase in total expenses. Expenses  in 2014 were adversely impacted by the depreciation of the Canadian dollar relative to the U.S. dollar.  Expenses in 2013 included $7.6 million in pre-tax restructuring charges.

Share of net income (loss) of associate reflects improved results at Richardson GMP subsequent to the MPW Canada acquisition and includes associated integration costs, our share of which was $4.1 million in 2014 compared with $3.4 million in 2013. For more information on Richardson GMP's 2014 financial performance, refer to the "Supplemental Information" section at the end of this press release and the 2014 Annual MD&A.

DIVIDENDS

On March 5, 2015, 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 March 31, 2015, to the respective shareholders of record on March 16, 2015.

NORMAL COURSE ISSUER BID ACTIVITY

During fourth quarter 2014, GMP purchased for cancellation 1,584,284  Common Shares under its normal course issuer bid at a volume-weighted average price per Common Share of $6.00.

CONFERENCE CALL

A conference call and live audio webcast to discuss GMP's fourth quarter and fiscal 2014 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 conference call on a listen-only basis by dialing 416-340-2218 or 1-866-223-7781 (toll free) or via live audio webcast at http://www.gmpcapital.com/investor.  A recording of the conference call will be available until Friday, March 13, 2015, by dialing 905-694-9451 or 1-800-408-3053 (toll free) and entering access code 9358180#. The webcast will be archived at http://www.gmpcapital.com/investor.

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 2014 Annual 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)

2014


2013


Fourth
Quarter 2014


Fourth
Quarter 2013

Reported Results








Income (loss) before income taxes

23,617


11,256


(6,696)


8,508

Income tax expense

9,362


1,625


224


2,724

Net income (loss)

14,255


9,631


(6,920)


5,784

Net income (loss) attributable to common shareholders

8,570


(1,486)


(8,336)


4,177

Reported Measures








Net income (loss) per common share (dollars):









Basic

0.12


(0.02)


(0.12)


0.06


Diluted ¹

0.12


(0.02)


(0.12)


0.06

ROE ²

3.2%


(0.6)%


(12.6)%


6.6%

Pre-Tax Impact of Adjusting Items:









Share of associate's MPW Canada acquisition and
integration costs

4,134


3,372


645


3,023


Retention Shares

1,659


3,240


168


524


Dilution Gain

(1,978)





Restructuring costs


7,645




AUM sale transaction


(11,843)



Impact of adjusting items on income (loss) before income
taxes

3,815


2,414


813


3,547

After-Tax Impact of Adjusting Items









Share of associate's MPW Canada acquisition and integration costs

4,134


3,372


645


3,023


Retention Shares

926


1,808


94


 

292


Dilution Gain

(1,978)





Restructuring costs


5,613




AUM sale transaction


(11,310)



Impact of adjusting items on net income (loss)

3,082


(517)


739


3,315

Adjusted Results ²








Income (loss) before income taxes

27,432


13,670


(5,883)


12,055

Net income (loss)

17,337


9,114


(6,181)


9,099

Net income (loss) attributable to common shareholders

11,652


5,079


(7,597)


7,492

Adjusted Measures ²








Net income per Common Share (dollars):









Basic

0.17


0.08


(0.11)


0.11


Diluted ¹

0.16


0.07


(0.11)


0.11

ROE

4.3%


2.1%


(11.4)%


11.9%

 


1.

In the case of a net loss, the effect of Common Share options 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.

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 "Non-GAAP Measures" section at the end of this press release and the "Presentation of Financial Information and Non-GAAP Measures" section in the 2014 Annual MD&A.

 

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.  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 2014 Annual 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 December 31, 2014.


($000, except as otherwise noted)





%

increase/

(decrease)



%

increase/

(decrease)

Fourth
Quarter
2014


Fourth
Quarter
2013


2014


2013


Revenue

70,421


65,974


7


309,229


181,504


70

Expenses

69,282


70,932


(2)


301,672


182,816


65

Employee compensation and benefits

44,584


46,015


(3)


205,005


120,170


71

Non-compensation expenses

24,698


24,917


(1)


96,667


62,646


54

Net income (loss) - reported

1,139


(4,958)


123


7,557


(1,312)


676

Pre-tax impact of adjusting items:













 Interest

2,090


1,692


24


7,859


2,895


171


Depreciation and amortization

1,415


1,308


8


5,447


3,834


42


Transition assistance loan amortization

3,006


1,883


60


13,044


6,054


115

EBITDA1

7,650


(75)


n.m.


33,907


11,471


196


MPW Canada acquisition/integration costs

2,103


9,360


(78)


13,076


10,440


25


Share-based compensation

812


187


334


6,123


1,076


469

Adjusted EBITDA1

10,565


9,472


12


53,106


22,987


131

Number of advisory teams

192


275


(30)







AUA at period-end ($ millions)1

27,216


29,021


(6)








 n.m. = not meaningful



1.

Considered to be a non-GAAP financial measure. This data should be read in conjunction with the "Supplemental Information" section in the 2014 Annual MD&A.

 

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 2014 Annual 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 - 2014 Highlights - Outlook", "Segment Results - Capital Markets - Outlook", "Segment Results - Wealth Management - Outlook", "Liquidity and Capital Resources" sections of the 2014 Annual 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, Stamford, Miami, Dallas, London, Perth and Sydney. Wealth Management consists of GMP's non-controlling ownership interest in Richardson GMP Limited and CQI Capital Management L.P., an asset management firm. 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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