GMP Capital Inc. Reports Second Quarter 2015 Results

  • Earned adjusted1 net income of $5.0 million on record advisory revenue

For further information about GMP Capital Inc., our results for second quarter 2015 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, 2015 (Second Quarter 2015 Financial Statements), and our management's discussion and analysis for the three and six months ended June 30, 2015 (Second Quarter 2015 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 2015 Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS).

TORONTO, Aug. 7, 2015 /CNW/ - GMP Capital Inc. (GMP) (TSX: GMP) today reported revenue of $79.2 million in second quarter 2015, down 1% compared with the same period a year ago. GMP recorded net income of $5.5 million and diluted earnings per share (EPS) of $0.06 in second quarter 2015 compared with net income of $12.4 million and EPS of $0.15 in second quarter 2014.  On an adjusted basis1, second quarter 2015 net income was $5.0 million and EPS was $0.06.

"Notwithstanding the challenging global macroeconomic environment, we are encouraged by this quarter's top-line momentum that included record advisory fees and significant non-resource underwriting mandates," said Harris Fricker, Chief Executive Officer, GMP. "Earnings in second quarter 2015 were adversely impacted by expenses in support of our new U.S. energy business and exacerbated by a weakened Canadian currency."

FINANCIAL HIGHLIGHTS

Second quarter 2015 versus Second quarter 2014

  • Revenue of $79.2 million compared with $80.4 million.
  • Net income of $5.5 million compared with $12.4 million.
  • Net income attributable to common shareholders of $4.6 million compared with $10.9 million.
  • EPS of $0.06 compared with $0.15.
  • Return on common equity (ROE)1 of 7.3% compared with 15.9%.
  • Adjusted net income of $5.0 million compared with $13.7 million.
  • Adjusted EPS of $0.06 compared with $0.16 and adjusted ROE of 6.5% compared with 17.6%.

First half 2015 versus First half 2014

  • Revenue of $132.5 million compared with $144.3 million.
  • Net loss of $3.4 million compared with net income of $15.1 million.
  • Net loss attributable to common shareholders of $5.0 million compared with net income attributable to common shareholders of $13.1 million.
  • Diluted loss per share of $0.07 compared with EPS of $0.18.
  • ROE1 of negative 4.0% compared with ROE of 9.6%.
  • Adjusted net loss of $1.4 million compared with adjusted net income of $19.1 million.
  • Adjusted diluted loss per share of $0.04 compared with adjusted EPS of $0.23 and adjusted ROE of negative 2.4% compared with adjusted ROE of 12.4%.

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 Second Quarter 2015 MD&A.

 

Commenting further, Mr. Fricker said "We remain focused on prudently managing our capital while optimizing our businesses globally in the context of the current market environment."

SECOND QUARTER 2015 BUSINESS SEGMENT HIGHLIGHTS

Capital Markets

Second quarter 2015 versus Second quarter 2014

Revenue
Revenue of $73.7 million decreased 3% primarily due to lower commissions.

  • Investment banking revenue of $56.9 million increased 18% primarily driven by record M&A revenue. M&A fees increased 576% to $29.7 million.
  • Commission revenue of $14.0 million decreased 28% on lower client trading activity.
  • Principal transactions revenue decreased 77%, generating net gains of $1.4 million, primarily due to lower returns on principal inventories.

Expenses
Expenses of $64.5 million increased 11% primarily due to higher costs incurred in connection with the expansion of our energy business into the U.S.

  • Elevated employee compensation and benefits reflect costs associated with the U.S. energy initiative.
  • Ratio of total compensation and benefits to total revenue of 66.1% compared with 60.2% in second quarter 2014.
  • Canadian dollar weakening contributed to the increase in reported expenses.

Income before income taxes

  • Income before income taxes of $9.3 million compared with $17.8 million.
  • On an adjusted basis, loss before income taxes of $9.4 million compared with income before income taxes $18.2 million.

Capital Markets highlights:

  • Reported record advisory revenues in second quarter 2015.
  • GMP ranked fourth among investment dealers in dollar value of mid-market M&A transactions announced in Canada (Source: Mergermarket).
  • Participated in several significant non-resource underwriting mandates - 70% of second quarter 2015 underwriting fees were associated with non-resource transactions.
  • GMP maintained ranking as top equity underwriter among independent investment dealers in Canada (Source: FPinfomart).

Wealth Management
Second quarter 2015 versus Second quarter 2014

  • Wealth Management reported income before income taxes of $1.2 million compared with $0.5 million.
  • The current period reflects the impact of a $1.8 million dividend recognized on our preferred share investments in Richardson GMP following a dividend declaration by Richardson GMP.
  • The prior year quarter was adversely impacted by integration costs related to Richardson GMP's acquisition of Macquarie Private Wealth Inc., our share of which was $1.0 million (nil in second quarter 2015).

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 approximately a 30% non-controlling interest in Richardson GMP as at June 30, 2015.

  • Revenue of $71.4 million representing a 14% decrease primarily driven by lower commissions.
  • Adjusted EBITDA2 of $10.5 million decreased 37%.
  • Assets under administration2 of $27.7 billion as at June 30, 2015, decreased 4% compared with June 30, 2014.
  • 197 advisory teams at the end of the quarter compared with 204 at the end of the prior year quarter.

CQI Update:
In July 2015, CQI and GMP mutually decided to terminate each of the CQI Equity Opportunity Fund I, CQI Equity Opportunities Fund II, CQI Income Opportunities Fund and CQI Core Equity Fund. As a result, CQI intends to wind down its fund operations and return invested capital to clients. This is expected to reduce GMP's annual expenses by approximately $2.3 million going forward. In connection with the wind down of fund operations, GMP will receive a return of the capital it invested in CQI funds of $9.7 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 Second Quarter 2015 MD&A.

 

DIVIDENDS

On August 6, 2015, 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, 2015, to the respective shareholders of record on September 15, 2015.

CONFERENCE CALL

A conference call and live audio webcast to discuss GMP's second quarter 2015 results will be held this morning at 10:00 a.m. (EST). 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 416-340-2216 or 1-866-225-0198 (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 Friday, August 14, 2015, by dialing 905-694-9451 or 1-800-408-3053 (toll free) and entering access code 8645685#. 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 Second Quarter 2015 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 June 30

Six months ended June 30


2015

2014

2015

2014

Reported Results





Income before income taxes

9,409

16,528

308

21,489

Income tax expense

3,909

4,132

3,686

6,366

Net income (loss)

5,500

12,396

(3,378)

15,123

Net income (loss) attributable to common shareholders

4,574

10,918

(5,002)

13,091

Reported Measures





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






Basic

0.07

0.16

(0.07)

0.19


Diluted ¹

0.06

0.15

(0.07)

0.18

ROE ²

7.3%

15.9%

(4.0)%

9.6%

Pre-Tax Impact of Adjusting Items






Bond forward unrealized (gains)/losses

(831)

2,469


Share of associate's MPW Canada integration costs

1,020

3,489


Retention shares

164

455

300

906

Impact of adjusting items on income before income taxes

(667)

1,475

2,769

4,395

After-Tax Impact of Adjusting Items






Bond forward unrealized (gains)/losses

(612)

1,820


Share of associate's MPW Canada integration costs

1,020

3,489


Retention shares

91

254

167

506

Impact of adjusting items on net income (loss)

(521)

1,274

1,987

3,995

Adjusted Results ²





Income before income taxes

8,742

18,003

3,077

25,884

Net income (loss)

4,979

13,670

(1,391)

19,118

Net income (loss) attributable to common shareholders

4,053

12,192

(3,015)

17,086

Adjusted Measures ²





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






Basic

0.06

0.17

(0.04)

0.24


Diluted ¹

0.06

0.16

(0.04)

0.23

ROE

6.5%

17.6%

(2.4)%

12.4%

 

1.

In the case of a net loss, the effect of common share options potentially exercisable and the impact of shares pledged on share purchase loans and other common shares subject to vesting conditions under share-based compensation programs 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.

These 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 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 Second Quarter 2015 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 approximately a 30% non-controlling interest in Richardson GMP as at June 30, 2015.


($000, except as otherwise noted)

Three months ended
June 30


%
increase/
(decrease)


Six months ended
June 30


%
increase/
(decrease)


2015


2014


2015


2014


Revenue

71,374


83,453


(14)


139,908


162,998


(14)


Expenses

68,696


79,384


(13)


136,774


161,523


(15)


Employee compensation and benefits

48,263


55,338


(13)


95,998


109,729


(13)


Non-compensation expenses

20,433


24,046


(15)


40,776


51,794


(21)


Net income - reported

2,678


4,069


(34)


3,134


1,475


112


Pre-tax impact of adjusting items








Interest

1,503


1,961


(23)


3,151


3,701


(15)



Depreciation and amortization

1,557


1,346


16


2,984


2,694


11



Transition assistance loan amortization

3,329


3,448


(3)


6,858


6,583


4


EBITDA1

9,067


10,824


(16)


16,127


14,453


12



MPW Canada integration costs


3,233


(100)



10,973


(100)



Share-based compensation

1,439


2,576


(44)


2,610


4,120


(37)


Adjusted EBITDA1

10,506


16,633


(37)


18,737


29,546


(37)


Number of advisory teams

197


204


(3)





AUA at period-end ($ millions)1

27,700


28,874


(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"  in the Second Quarter 2015 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", "Second Quarter 2015 Financial Highlights", "Segment Results ", "Liquidity and Capital Resources" sections of the Second Quarter 2015 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 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, Sydney, Hong Kong and Beijing. 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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