GMP Capital Inc. reports third quarter 2016 results

Reported diluted loss per share of $0.18 on restructuring and integration costs of $15.1 million Generated adjusted earnings per share of $0.01

For further information about GMP Capital Inc., our results for third 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 and nine months ended September 30, 2016 (Third Quarter 2016 Financial Statements), and our management's discussion and analysis for the three and nine months ended September 30, 2016 (Third 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 Third Quarter 2016 Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS).

TORONTO, Nov. 2, 2016 /CNW/ - GMP Capital Inc. (GMP) (TSX: GMP) today reported revenue of $43.5 million for third quarter 2016, down 19% compared with the same period last year. Loss before income tax was $11.4 million compared with loss before income tax of $7.1 million in third quarter 2015. Third quarter 2016 results include $15.1 million in pre-tax restructuring and integration expenses associated with our previously announced acquisition of First Energy Capital Holdings Corp. (FirstEnergy). GMP recorded a net loss of $10.6 million and a diluted loss per share of $0.18 in third quarter 2016, compared with a net loss of $11.1 million and diluted loss per share of $0.19 in third quarter 2015. On an adjusted basis1, GMP reported net income of $2.2 million and diluted earnings per share (EPS) of $0.01.

"This quarter was about taking the necessary steps to transform our energy business into the preeminent independent player in Canada. With the acquisition of FirstEnergy complete, we are focused on integrating this coveted franchise into our broader platform," said Harris Fricker, President and Chief Executive Officer, GMP.  Commenting further, Mr. Fricker said, "We have meaningfully reduced headcount and fixed costs across our energy business in both Calgary and Houston.  Excluding the restructuring and integration costs incurred in doing so, we generated EPS of $0.01 this quarter, clearly reflecting the operating leverage already built into our franchise."

FINANCIAL HIGHLIGHTS

Third Quarter 2016 versus Third Quarter 2015

  • Revenue of $43.5 million compared with $53.9 million.
  • Expenses of $55.7 million compared with $60.4 million.
  • Net loss of $10.6 million compared with net loss of $11.1 million.
  • Adjusted net income of $2.2 million compared with adjusted with net loss of $6.6 million.
  • Diluted loss per share of $0.18 compared with diluted loss per share of $0.19.
  • Adjusted EPS of $0.01 compared with adjusted diluted loss per share of $0.12.
  • Annualized return on common equity (ROE)1 of negative 21.8% compared with negative 20.2%.
  • Adjusted ROE of 1.1% compared with adjusted negative ROE of 12.6%.

First Nine Months 2016 versus First Nine Months 2015

  • Revenue of $130.9 million compared with $186.4 million.
  • Expenses of $146.9 million compared with $192.4 million.
  • Net loss of $14.9 million compared with net loss of $14.5 million.
  • Adjusted net loss of $1.5 million compared with adjusted net loss of $8.0 million.
  • Diluted loss per share of $0.28 compared with diluted loss per share of $0.26.
  • Adjusted diluted loss per share of $0.08 compared with adjusted diluted loss per share of $0.16.


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 2016 MD&A.

 

THIRD QUARTER 2016 BUSINESS SEGMENT HIGHLIGHTS

Capital Markets
Third Quarter 2016 versus Third Quarter 2015

Revenue
Revenue of $40.9 million decreased 21% primarily due to a decline in investment banking fees.

  • Investment banking revenue of $22.2 million decreased 28% driven by a decline in client activity; the prior year quarter included a significant transaction in the technology and healthcare sector.
  • Principal transactions generated net gains of $7.2 million in both third quarter 2016 and third quarter 2015.
  • Lower third quarter 2016 fixed income activity was largely offset by lower client trade facilitation losses and improved returns on principal inventories.
  • Commission revenue of $10.2 million decreased 2% on lower client trading activity.

Expenses
Expenses of $49.5 million decreased 9% despite impact of pre-tax restructuring and integration expenses of $13.2 million.

  • Reduced expenses reflect efficiency gains from restructuring initiatives undertaken in fourth quarter 2015 as well as expiry of certain guaranteed compensation arrangements in our U.S. energy business.
  • Variable compensation decreased 19% on lower revenue generation.
  • Higher non-compensation expenses reflect impairment costs in connection with leases and fixed assets in our energy business, included in the restructuring and integration charge. GMP has vacated its former premises in Houston and Calgary.
  • Houston operation wound down in October 2016.

Income before income taxes

  • Loss before income taxes of $8.6 million compared with loss before income taxes of $2.8 million.
  • Adjusted income before income tax of $4.6 million compared with adjusted loss before income tax of $2.7 million.

Wealth Management
Third Quarter 2016 versus Third Quarter 2015

  • Wealth Management reported income before income taxes of $0.8 million compared with a loss before income taxes of $2.4 million.
  • Third quarter 2015 included $0.9 million in costs associated with the wind-down of our fund operations.

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 September 30, 2016.

  • Revenue of $70.7 million representing a 9% increase primarily due to higher investment management fees and commissions.
  • Adjusted EBITDA2 of $10.9 million increased 42%.
  • Assets under administration of $28.3 billion as at September 30, 2016 increased 10% compared with the prior year 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 Third Quarter 2016 MD&A.

 

DIVIDENDS

On November 1, 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  $0.2143 per Cumulative Floating Rate Preferred Shares, Series C, each payable on January 3, 2017, to preferred shareholders of record on December 15, 2016.

CONFERENCE CALL

A conference call and live audio webcast to discuss GMP's third 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 Wednesday, November 9, 2016, by dialing 905-694-9451 or 1-800-408-3053 (toll free) and entering access code 1897247#. 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 Third 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
September 30

Nine months ended
September 30


2016

2015

2016

2015

Reported Results





Loss before income taxes

(11,358)

(7,062)

(14,797)

(6,754)

Income tax (recovery) expense

(799)

4,060

84

7,746

Net loss

(10,559)

(11,122)

(14,881)

(14,500)

Net loss attributable to common shareholders

(12,104)

(12,334)

(18,421)

(17,336)

Reported Measures





Net loss per common share (dollars):






Basic

(0.18)

(0.19)

(0.28)

(0.26)


Diluted

(0.18)

(0.19)

(0.28)

(0.26)

ROE 1

(21.8)%

(20.2)%

(11.2)%

(9.3)%

Pre-Tax Impact of Adjusting Items:






Restructuring and integration charge

15,106

15,106



Bond forward loss

563

945

3,032


Retention shares

135

435


Wind-down of operations

898

898

Impact of adjusting items on loss before income taxes

15,106

1,596

16,051

4,365

After-Tax Impact of Adjusting Items:






Restructuring and integration charge

12,716

12,716


Bond forward loss

415

696

2,235


Retention shares

75

242


Wind-down of operations

662

662


Deferred tax asset write-down

3,368

3,368

Impact of adjusting items on net loss

12,716

4,520

13,412

6,507

Adjusted Results 1





Income (loss) before income taxes

3,748

(5,466)

1,254

(2,389)

Net income (loss)

2,157

(6,602)

(1,469)

(7,993)

Net income (loss) attributable to common shareholders

612

(7,814)

(5,009)

(10,829)

Adjusted Results 1





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






Basic

0.01

(0.12)

(0.08)

(0.16)


Diluted

0.01

(0.12)

(0.08)

(0.16)

ROE

1.1%

(12.6)%

(3.0)%

(5.7)%


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  Third 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 September 30, 2016.


Three months ended
September 30


%
increase/
(decrease)


Nine months ended
September 30



increase/
(decrease)

($000, except as otherwise noted)

2016


2015



2016


2015


Revenue

70,664


64,925


9


200,814


204,833


(2)

Expenses

65,730


65,087


1


191,354


201,861


(5)

Employee compensation and benefits

48,663


45,001


8


138,656


140,999


(2)

Non-compensation expenses

17,067


20,086


(15)


52,698


60,862


(13)

Net income - reported

4,934


(162)


n.m.


9,460


2,972


218

Pre-tax impact of adjusting items








Interest

792


1,482


(47)


2,414


4,633


(48)


Depreciation and amortization

1,313


1,608


(18)


3,980


4,592


(13)


Transition assistance loan amortization

3,519


3,671


(4)


10,646


10,529


1

EBITDA1

10,558


6,599


60


26,500


22,726


17


Share-based compensation

355


1,111


(68)


1,899


3,721


(49)

Adjusted EBITDA1

10,913


7,710


42


28,399


26,447


7

Number of advisory teams

198


194


2





AUA at period-end ($ millions)

28,334


25,875


10






n.m.= not meaningful

 

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. The integration of FirstEnergy Capital Holdings Corp. is subject to various risks and uncertainties. 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 Third 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", "Third Quarter and First Nine Months 2016 Financial Highlights", "Segment Results", "Liquidity and Capital Resources" sections of the Third 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, Calgary, Montreal, New York, Miami, Dallas, London, 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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