GMP CAPITAL INC. REPORTS STRONG FIRST QUARTER 2011 RESULTS

  • Revenues increased 41% compared with same period last year

  • Announces a 25% increase in common share dividend

For further information about GMP Capital Inc., our results for first quarter 2011 and the meaning of certain references, this quarterly earnings release should be read in conjunction with our First Quarter 2011 Financial Statements and Management's Discussion and Analysis for the three months ended March 31, 2011, 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 2011 Financial Statements prepared in accordance with International Accounting Standard 34: Interim Financial Reporting using the policies we expect to apply in our annual financial statements for the year ending December 31, 2011, prepared in accordance with International Financial Reporting Standards ("IFRS").

TORONTO, May 6 /CNW/ - GMP Capital Inc. ("GMP") (TSX: GMP) today reported revenue of $115.3 million in first quarter 2011, representing a 41% increase compared with the same period a year ago largely due to strong performance in the Capital Markets business. Net income was $26.3 million ($0.32 per basic share) compared with a net loss of $62.0 million in first quarter 2010 ($0.89 per basic share), primarily reflecting the EdgeStone impairment charge recognized last year. First quarter 2011 results generated a return on common shareholders' equity ("ROE")1 of 28.4%. Excluding the impact of the one-time cash redemption costs incurred this quarter, adjusted earnings per share(1) was $0.38, and adjusted ROE1 was 33.1%.

"I am pleased with our performance in first quarter 2011 as it marks a strong start to the year. Our results this quarter benefitted from improving business and economic conditions and reflect our continued focus on our clients and a leading position in the Canadian capital markets," said Harris Fricker, CEO, GMP. "Our Capital Markets business realized broad-based increases in performance, while GMP Investment Management continued to grow its assets under management this quarter and launched a new fund focused on North American equities. Richardson GMP recorded its second consecutive quarterly profit in first quarter 2011 and we remain encouraged by this performance and opportunities to seek growth in this business."

First Quarter 2011 versus First Quarter 2010

  • Revenue of $115.3 million compared with $82.0 million

  • Net income of $26.3 million compared with a net loss of $62.0 million Earnings per basic share of $0.32 compared with a net loss per basic share of $0.89

  • Annualized ROE1 of 28.4% compared with negative 86.8 %

  • Excluding the impacts of the one-time cash redemption costs recorded in connection with the redemption of our long-term debt this quarter, first quarter 2011 adjusted net income1 was $30.2 million, adjusted earnings per basic share1 was $0.38, and adjusted ROE1 was 33.1%
  • Excluding the impacts of the goodwill and intangible asset impairment charge recorded last year, first quarter 2010 adjusted net income1 was $14.1 million, adjusted earnings per basic share1 was $0.19, and adjusted ROE1 was 16.6%

Commenting further, Mr. Fricker said, "I am encouraged by the positive momentum in the global capital markets and the steady pace of economic recovery; I remain confident that the strategic initiatives undertaken to expand and strengthen the GMP franchise leave us well-positioned for the future."

FIRST QUARTER 2011 BUSINESS HIGHLIGHTS

CAPITAL MARKETS

  • Revenue of $103.6 million increased $33.6 million or 48% compared with first quarter 2010, primarily driven by broad-based increases in investment banking, commissions and principal activities.

  • Operating earnings1 of $40.7 million increased $14.7 million or 57% compared with first quarter 2010 reflecting strong revenue generation.

Highlights for GMP Securities L.P. ("GMP Securities") in first quarter 2011 include:

  • ranked first among Canadian investment dealers in the dollar value of common equity underwriting transactions completed in Canada2;

  • led or co-lead 37 underwriting transactions completed in Canada helping to raise approximately $1.8 billion on behalf of clients;3 and

  • ranked third in Canada for equity block trading volumes, achieving an 8.5% market share.4

WEALTH MANAGEMENT

  • Wealth Management reported operating earnings1 in first quarter 2011 of $1.1 million compared with an operating loss1 of $1.9 million in first quarter 2010. Wealth Management, comprised of GMP's ownership interest in Richardson GMP, reflects the improvement in Richardson GMP's results which, in first quarter 2011, benefitted from improving market conditions and increased client trading activity, while operating results in first quarter 2010 were negatively impacted by post-merger integration-related costs and other expenses recorded in the period.

Highlights for Richardson GMP in first quarter 2011 include:

  • Revenue of $43.0 million increased $9.8 million or 29% in first quarter 2011 compared with first quarter 2010, primarily due to higher commission revenue and higher investment management and fee income resulting from higher client trading activity amid improving market conditions;

  • Operating earnings1 were $3.8 million this quarter compared with an operating loss1 of $5.0 million in first quarter 2010 due primarily to stronger revenue generation and effective cost management;
  • recorded its second consecutive quarterly profit amid improving business conditions and higher assets under administration ("AUA"); and

  • AUA1 of $14.4 billion as at March 31, 2011, an increase of 15% relative to March 31, 2010, and 108 advisory teams located in 17 cities across Canada.

ALTERNATIVE INVESTMENTS

  • Revenue of $7.8 million decreased $0.1 million or 2% compared with first quarter 2010, primarily due to lower results in principal activities and lower investment management and fee income, partly offset by performance fees recognized by GMP Investment Management following distributions by the Genesis Partners Fund LP this quarter.

  • Operating earnings1 of $3.7 million increased $0.7 million or 24% compared with first quarter 2010, largely driven by lower expenses in EdgeStone.

Highlights for GMP Investment Management in first quarter 2011 include:

  • assets under management ("AUM")1 of $529.5 million as at March 31, 2011, representing an increase of $217.7 million in AUM across its various funds compared with March 31, 2010;

  • generated a return of 3.05% in first quarter 2011 for the GMP Diversified Alpha Fund (Class F), net of management fees and other expenses; and

  • generated a return of 10.98% in first quarter 2011 for the Canadian ABCP Fund L.P., net of management fees and other expenses.

__________________________________________

1   Represents a non-GAAP measure. This measure does not have any standardized meaning prescribed by generally accepted accounting principles ("GAAP") 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.
2   Source: FPinfomart as at April 11, 2011. Based on Full Credit to Lead.
3   Source: GMP Capital Inc. internal reports.
4   Source: CanadaEquity.com as at April 11, 2011.

DIVIDENDS

On May 5, 2011, the Board of Directors approved a 25% increase in the quarterly cash dividend from $0.08 to $0.10 per common share, and also declared a quarterly cash dividend of $0.3438 per Cumulative 5-Year Rate Reset Preferred Share, Series B, each payable on June 30, 2011, to the respective shareholders of record at the close of business on June 9, 2011.

REDEMPTION OF OUTSTANDING NOTES

On March 24, 2011, GMP redeemed all of its issued and outstanding Series A and Series B senior unsecured notes originally issued on November 1, 2006 (the "Notes"). The Notes were redeemed for an aggregate redemption price of $67.2 million, comprised of the aggregate principal amount of the Notes of $60.0 million, together with all accrued and unpaid interest of $1.7 million, plus a redemption cost of $5.5 million calculated in accordance with the terms of the note indenture.

NORMAL COURSE ISSUER BID ACTIVITY

During the three months ended March 31, 2011, GMP purchased for cancellation 2.261 million common shares under its normal course issuer bid ("NCIB") for an aggregate cost of $34.2 million.

MANAGEMENT TRANSITION

GMP also announced today that Michael Wekerle will transition out of his day-to-day role as Head of Institutional Trading, GMP Securities. Mr. Wekerle joined GMP in September 1995 and co-founded the firm's sales and trading operations. He remains a Vice Chairman and in his new role will focus on strategic initiatives, including business development, the maintenance of several key client relationships and promoting the brand and broader interests of the firm.

Mark Hawkins, a Managing Director and 12 year GMP veteran, will replace Mr. Wekerle as Head of Institutional Trading and brings extraordinary depth of experience to the position. Chris Bond, who has been with GMP since its inception in 1995 and was appointed to Managing Director in December 2009, will lead GMP's agency trading business.

Commenting on the transition, Mr. Wekerle said, "We have built an incredible team of trading professionals and I have every confidence that they will continue to build upon our legacy of superior execution and unparalleled customer service. The move is a logical next step for me in my career at GMP and I am looking forward to my new role and to contributing to the continued success of GMP."

AGREEMENT TO ACQUIRE MILLER TABAK ROBERTS SECURITIES, LLC

On April 6, 2011, GMP announced it had entered into an agreement to acquire all of the outstanding shares of Miller Tabak Roberts Securities, LLC ("MTR") for cash consideration of approximately US$33.0 million. In addition, on closing, certain key employees of MTR will receive common shares of GMP, subject to escrow conditions, having an aggregate value of US$15.0 million. The vendors will also receive an "earn-out" amount of up to US$11.0 million. Completion of the transaction is subject to a number of customary closing conditions, including regulatory approval, and is expected to occur before the end of GMP's third quarter 2011.

CONFERENCE CALL

Management will host a conference call and live audio webcast today at 9:00 a.m. (ET) to discuss GMP's first quarter ended March 31, 2011. The call may be accessed by dialing 416-644-3415 or 1-877-974-0445 (toll free). The link to the live audio webcast will be accessible at gmpcapital.com. A replay of the conference call can be accessed by telephone until Friday, May 13, 2011, by calling 416-640-1917 or 1-877-289-8525 (toll free) and entering access code 4432017 followed by the number sign.

NON-GAAP MEASURES

Consistent with our management framework, we use certain measures to assess our financial performance which are not generally accepted accounting principle measures ("GAAP") 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 earnings 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.

GMP uses "operating earnings" as a supplement to net income (loss) to assess the operating performance of its business segments and its corporate segment and also to assess GMP's overall performance. Operating earnings represents "Income (loss) before income taxes" excluding "impairment charge" as set out in the unaudited interim consolidated statements of income (loss) for the three months ended March 31, 2011. GMP also evaluates the performance of its consolidated operations using annualized return on common equity ("ROE"). Our ROE calculation is based on net income available to common shareholders divided by total average common shareholder equity for the period, which are measures derived from information contained in our First Quarter 2011 Financial Statements. Assets under administration ("AUA") is a non-GAAP measure of client assets that is used by management to assess the performance of the Wealth Management segment. Assets under management ("AUM") is a non-GAAP measure of client assets that is used by management to assess the performance of GMP Investment Management and EdgeStone.

Adjusted measures exclude: (i) from the first quarter 2011 financial results, the impact of redemption costs recorded in connection with the redemption of all of the outstanding senior unsecured notes issued by Griffiths McBurney L.P. an indirect, wholly-owned subsidiary of GMP, which was completed during first quarter 2011; and (ii) from the comparative financial results, the impact of goodwill and intangible asset impairment charges recorded during first quarter 2010. Management believes excluding such charges from these measures is more reflective of ongoing operating results and will provide readers with a better understanding of how management views GMP's performance. These adjusted measures should also improve the comparability of GMP's financial results for first quarter 2011 with the corresponding prior period.

The following table provides a reconciliation of GMP's adjusted measures:

Non-GAAP measures

    For the three months ended March 31, 2011       For the three months ended March 31, 2010
    As reported       Redemption       Adjusted       As reported       Impairment       Adjusted
($000, except per share and percentage amounts)   IFRS       costs       IFRS       IFRS       charges       IFRS
Income (loss) before income taxes   34,594       5,466       40,060       (59,566)       80,464       20,898
Income tax   8,343       (1,558)       9,901       2,386       (4,399)       6,785
Net income (loss)   26,251       3,908       30,159       (61,952)       76,065       14,113
                                             
Net income (loss) attributable:                                            
  GMP Capital Inc. shareholders   23,096       3,908       27,004       (62,556)       76,065       13,509
  Non-controlling interests   3,155       -       3,155       604       -       604
                                             
Net income (loss) attributable to GMP Capital Inc. shareholders   23,096       3,908       27,004       (62,556)       76,065       13,509
Dividend declared on Series B preferred shares   (641)       -       (641)       -       -       -
Net income (loss) attributable to common shareholders   22,455       3,908       26,363       (62,556)       76,065       13,509
                                             
Weighted average number of common shares   69,629               69,629       70,386       -       70,386
Basic earnings (loss) per common share   $0.32       $0.06       $0.38       ($0.89)       $1.08       $0.19
Weighted average number of diluted common shares   76,779               76,779       76,335               76,335
Diluted earnings (loss) per common share1   $0.29       $0.05       $0.34       ($0.89)       $1.00       $0.18
Average common equity   316,337               318,291       288,389               326,421
Return on common equity   28.4%               33.1%       -86.8%               16.6%

1 In case of a net loss, the effect of common share options and warrants potentially exerciseable and the impact of shares pledged on share purchase loans on diluted net loss per common share will be anti-dilutive; therefore, basic and diluted net loss per common share will be the same.

FORWARD-LOOKING STATEMENTS

This press release contains "forward-looking statements" as defined under applicable Canadian securities laws and may also include additional forward-looking statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts but instead represent management's beliefs, expectations, estimates and projections regarding future events, many of which, by their nature, are inherently uncertain and beyond our control. These statements include, but are not limited to, statements made with respect to management's beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements 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 statements reflect management's current beliefs and are based on information currently available to management.

These statements are not guarantees of future performance and are 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, variations in the market value of securities, the volatility and liquidity of equity trading markets, the volume of new financings and mergers and acquisitions ("M&A"), competition in the marketplace for suitable investments, sustainability of fees, nature and type of portfolio company investments, ability to realize carried interest entitlements and dependence on key personnel. The acquisition of Miller Tabak Roberts Securities, LLC is subject to various risks and uncertainties, including that the conditions to closing will not be satisfied or waived or that the transaction will otherwise not be consummated. 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 our actual results and could cause our actual results to differ materially from those expressed or implied in any forward-looking statement made by us or on our behalf. For a description of additional risks that could cause our actual results to materially differ from our current expectations, please see the "Risk Management" section in the 2010 Annual MD&A, the "Risk Management" section in the First Quarter 2011 MD&A and "Risk Factors" in GMP's annual information form dated March 1, 2011. Material assumptions or factors underlying the forward-looking statements contained in this press release are set out in the "Business Environment and Market Outlook" section included in the First Quarter 2011 MD&A and include, without limitation, improving pace of economic recovery and business activity in North America in connection with the level of public offerings, M&A activity and securities trading opportunities, improving global equity market conditions, prolonged low interest rate environment, high commodity prices, ongoing concerns over sovereign debt issues within the European Union, heightened geo-political tensions and concerns arising from the natural disasters in Japan and a strengthening Canadian dollar relative to the United States dollar. 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 these forward-looking statements. 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 statements contained in this press release are 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 the board of directors of GMP undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

ABOUT GMP CAPITAL INC.

GMP Capital Inc. ("GMP") carries on business through the following principal entities: GMP Securities L.P., Griffiths McBurney Corp., GMP Securities Europe LLP, EdgeStone Capital Partners, L.P. and GMP Investment Management L.P. GMP also has a non-controlling ownership interest in Richardson GMP Limited. The GMP Capital Inc. website is located at gmpcapital.com. GMP has offices in Toronto, Calgary, Montreal and London, England. GMP Securities L.P. is a leading independent Canadian investment dealer focused on investment banking and institutional equities for corporate clients and institutional investors. GMP Securities L.P. can be found on the web at gmpsecurities.com. Griffiths McBurney Corp. services institutional clients in the United States while GMP Securities Europe LLP provides investment banking and institutional equity services to clients located in Europe. EdgeStone Capital Partners, L.P. is a Canadian private equity manager, focused on middle market buy-out and other private equity activities. EdgeStone Capital Partners, L.P. can be found on the web at edgestone.com. GMP Investment Management L.P., through its private funds, seeks to generate superior risk-adjusted investment returns over the long term by executing selected investment strategies. GMP Investment Management L.P.'s offerings are aimed at both high-net-worth individuals and institutional investors. GMP Investment Management L.P. can be found on the web at gmpim.com. Richardson GMP Limited is a full-service investment firm, combining tradition and innovation to offer Canadian families and entrepreneurs access to wealth management and investment services delivered by an experienced team of independent investment professionals. Richardson GMP Limited can be found on the web at richardsongmp.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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