Excluding significant items, second quarter diluted earnings per share of $0.17 (1) compared to $0.03(1) one year ago
(All dollar amounts are stated in Canadian dollars unless otherwise indicated)
TORONTO, Nov. 5, 2014 /CNW/ - In the second quarter of fiscal 2015, the quarter ended September 30, 2014, Canaccord Genuity Group Inc. (Canaccord, the Company,TSX: CF, LSE: CF.) generated $236.3 million in revenue. Excluding significant items(1) (a non-IFRS measure), the Company recorded net income of $20.7 million or net income of $17.1 million attributable to common shareholders(2) ($0.17 per diluted common share). Including all expense items, on an IFRS basis, the Company recorded net income of $17.6 million or net income attributable to common shareholders(2) of $14.2 million (earnings per diluted common share of $0.14).
"During our second fiscal quarter, we achieved strong results in our global advisory business and steady recurring revenue growth from our global wealth management operations", said Paul Reynolds, President and CEO of Canaccord Genuity Group Inc. "While fundamentals of the broader market environment adversely impacted transaction and trading activity during the quarter, our longer term outlook for our capital markets business is stable and positive."
Second Quarter of Fiscal 2015 vs. Second Quarter of fiscal 2014
- Revenue of $236.3 million, an increase of 29% or $53.0 million from $183.3 million
- Excluding significant items, expenses of $207.4 million, an increase of 18% or $32.0 million from $175.4 million(1)
- Expenses of $211.3 million, an increase of 15% or $27.0 million from $184.3 million
- Excluding significant items, diluted earnings per common share (EPS) of $0.17 compared to diluted EPS of $0.03(1)
- Excluding significant items, net income of $20.7 million compared to net income of $6.7 million(1)
- Net income of $17.6 million compared to net loss of $0.1 million
- Diluted EPS of $0.14 compared to diluted loss per share of $0.03
Second Quarter of Fiscal 2015 vs. First Quarter of Fiscal 2015
- Revenue of $236.3 million, a decrease of 4% or $9.3 million from $245.6 million
- Excluding significant items, expenses of $207.4 million, a decrease of 4% or $8.5 million from $215.9 million(1)
- Expenses of $211.3 million, a decrease of 5% or $11.0 million from $222.3 million
- Excluding significant items, diluted EPS of $0.17 compared to diluted EPS of $0.20(1)
- Excluding significant items, net income of $20.7 million compared to net income of $24.0 million (1)
- Net income of $17.6 million compared to net income of $18.9 million
- Diluted EPS of $0.14 compared to diluted EPS of $0.15
Year-to-Date Fiscal 2015 vs. Year-to-Date Fiscal 2014
(Six months Ended September 30, 2014 vs. Six Months Ended September 30, 2013)
- Revenue of $481.8 million, an increase of 30% or $111.3 million from $370.5 million
- Excluding significant items, expenses of $423.3 million, an increase of 21% or $73.4 million from $349.9 million(1)
- Expenses of $433.6 million, an increase of 20% or $71.2 million from $362.4 million
- Excluding significant items, diluted EPS of $0.37 compared to diluted EPS of $0.12(1)
- Excluding significant items, net income of $44.8 million compared to net income of $18.5 million (1)
- Net income of $36.5 million compared to net income of $7.8 million
- Diluted EPS of $0.29 compared to diluted EPS of $0.02
Financial Condition at End of Second Quarter Fiscal 2015 vs. Fourth Quarter Fiscal 2014
- Cash and cash equivalents balance of $290.4 million, down $73.9 million from $364.3 million
- Working capital of $453.5 million, a decrease of $15.9 million from $469.4 million
- Total shareholders' equity of $1.14 billion, down $26.9 million from $1.17 billion
- Book value per diluted common share of $8.90, down $0.15 from $9.05(3)
- On November 5, 2014, the Board of Directors approved a quarterly dividend of $0.05 per common share and a special dividend of $0.05 per common share payable on December 10, 2014 with a record date of November 21, 2014
- On November 5, 2014, the Board of Directors also approved a cash dividend of $0.34375 per Series A Preferred Share payable on December 31, 2014 with a record date of December 19, 2014, and a cash dividend of $0.359375 per Series C Preferred Share payable on December 31, 2014 to Series C Preferred shareholders of record as at December 19, 2014
SUMMARY OF OPERATIONS
- On August 6, 2014, the Company held its 2014 Annual General Meeting of shareholders, where all nominated directors were re-elected or elected to the Board, including Ms. Kalpana Desai as an independent director, bringing the Board to nine directors, seven of whom are independent.
- On August 8, 2014 the Company announced the filing of a renewal for its normal course issuer bid (NCIB) to provide for the ability to purchase, at the Company's discretion, up to a maximum of 5,100,049 common shares through the facilities of the TSX during the period from August 13, 2014 to August 12, 2015. The purpose of any purchases under this program is to enable the Company to acquire shares for cancellation. The maximum number of shares that may be purchased represents 5.0% of the Company's outstanding common shares. There were no shares repurchased during Q2/15 under the NCIB. In Q1/15, 264,200 shares were purchased and cancelled under the terms of the NCIB which expired on August 12, 2014.
- Canaccord Genuity led or co-led 35 transactions globally, raising total proceeds of C$1.8 billion(4) during fiscal Q2/15
- Canaccord Genuity participated in 86 transactions globally, raising total proceeds of C$10.7 billion(4) during fiscal Q2/15
- Significant investment banking transactions for Canaccord Genuity during fiscal Q2/15:
- C$640.0 million for Amaya Gaming Group common shares on the TSX
- US$179.2 million private placement for Amaya Gaming Group preferred shares
- C$103.5 million for The Intertain Group Limited on the TSX
- AUD$98.0 million for Ashley Services Group Limited on the ASX
- AUD$74.0 million for Tiger Resources Group on the ASX
- £56.0 million for Intelligent Energy Plc on the LSE
- US$52.0 million for Inventure Foods, Inc. on the NASDAQ
- £41.0 million for Matomy Media Limited on the LSE
- US$39.6 million for BioAmber Inc. on the NYSE
- C$38.6 million for WesternOne on the TSX
- C$30.7 million for PRO REIT on the TSX
- US$30.2 million for Pure Multi-Family REIT on the TSX-V
- C$30.0 million for DataWind Inc. on the TSX
- C$27.4 million for Dalradian Resources on the TSX
- C$25.0 million for Petro-Victory Energy Corp. on the TSX-V
- C$23.0 million for Terrace Energy Corp. on the TSX-V
- In Canada, Canaccord Genuity participated in raising $210.7 million for government and corporate bond issuances during fiscal Q2/15
- Canaccord Genuity generated advisory revenues of $55.7 million during fiscal Q2/15, an increase of 86% compared to the same quarter last year
- During fiscal Q2/15, Canaccord Genuity advised on the following M&A and advisory transactions:
- Amaya Gaming Group on its US$4.9 billion purchase of Rational Group
- Plan Group on its sale to Bouygues SA
- B2Gold Corp. on its merger with Papillon Resources Limited
- Medical Action Industries Inc. on its acquisition by Owens & Minor
- Nordion Inc. on its US$826.0 million sale to Sterigenics International
- SOF Investments on the £212.0 million sale of Moneycorp to Bridgepoint
- DHX Media Limited on its acquisition of Family Channel, Disney XD, Disney Junior (English) and Disney Junior (French)
- Paperny Entertainment Inc. on its sale to Entertainment One Limited
- Exact Holdings on its divestiture of Longview Solutions to Marlin Equity Partners
- TowerBrook Capital Partners on the acquisition of Independent Clinical Services from The Blackstone Group
- Geodis SA on the sale of Ciblex to Eurotranspharma
- Pteris Global Limited on the SGD$151.2 million reverse takeover of Shenzhen CIMC-TianDa Airport Support Ltd.
- TA Associates on the £120.0 million disposal of MandM Direct
- Regard Holdings Limited on its £120.0 million disposal by MML Capital Partners to Montreux Healthcare Funds and Macquarie Lending
- OnMobile on its divestiture of VoxMobili SA to Synchronoss Technologies, Inc.
- The Intertain Group Limited on its £45.0 million purchase of Mandalay Media
- Rathbones on the £43.1 million acquisition of Jupiter Asset Management's private client and charity investment business
- PRO REIT on its sale of subscription units to Lotus Crux REIT LP
- Ultimo on its disposal to B2 Holding ASA
Canaccord Genuity Wealth Management (Global)
- Globally, Canaccord Genuity Wealth Management generated $63.0 million in revenue in Q2/15
- Assets under administration in Canada and assets under management in the UK and Europe and Australia were $31.7 billion at the end of Q2/15(3)
Canaccord Genuity Wealth Management (North America)
- Canaccord Genuity Wealth Management (North America) generated $31.6 million in revenue and, after intersegment allocations, recorded a net loss of $1.8 million before taxes in Q2/15
- Assets under administration in Canada were $10.8 billion as at September 30, 2014, down 2% from $11.0 billion at the end of the previous quarter and up 14% from $9.4 billion at the end of fiscal Q2/14(3)
- Assets under management in Canada (discretionary) were $1.4 billion as at September 30, 2014, up 10% from $1.3 billion at the end of the previous quarter and up 49% from $935 million at the end of fiscal Q2/14(3)
- As at September 30, 2014, Canaccord Genuity Wealth Management had 162 Advisory Teams(5), a decrease of one Advisory Team from September 30, 2013 and June 30, 2014
Canaccord Genuity Wealth Management (UK and Europe)
- Wealth management operations in the UK and Europe generated $29.8 million in revenue and, after intersegment allocations, and excluding significant items, recorded net income of $4.6 million before taxes in Q2/15(1)
- Assets under management (discretionary and non-discretionary) were $20.4 billion (£11.3 billion) (3)
The non-International Financial Reporting Standards (IFRS) measures presented include assets under administration, assets under management, book value per diluted common share and figures that exclude significant items. Significant items include restructuring costs, amortization of intangible assets, and acquisition-related expense items, which include costs recognized in relation to both prospective and completed acquisitions. Book value per diluted common share is calculated as total common shareholders' equity divided by the number of diluted common shares outstanding and, commencing in Q1/14, adjusted for shares purchased under the NCIB and not yet cancelled, and estimated forfeitures in respect of unvested share awards under share-based payment plans.
Management believes that these non-IFRS measures will allow for a better evaluation of the operating performance of the Company's business and facilitate meaningful comparison of results in the current period to those in prior periods and future periods. Figures that exclude significant items provide useful information by excluding certain items that may not be indicative of the Company's core operating results. A limitation of utilizing these figures that exclude significant items is that the IFRS accounting effects of these items do in fact reflect the underlying financial results of the Company's business; thus, these effects should not be ignored in evaluating and analyzing the Company's financial results. Therefore, management believes that the Company's IFRS measures of financial performance and the respective non-IFRS measures should be considered together.
Selected financial information excluding significant items(1)
| Three months ended
| Six months ended
| YTD -
|(C$ thousands, except per share and % amounts)||2014||2013||2014||2013|
|Total revenue per IFRS||$236,271||$183,306||28.9%||$481,827||$370,537||30.0%|
|Total expenses per IFRS||211,326||184,262||14.7%||433,594||362,380||19.7%|
|Significant items recorded in Canaccord Genuity|
|Amortization of intangible assets||1,707||1,658||3.0%||3,448||3,360||2.6%|
|Significant items recorded in Canaccord Genuity Wealth Management|
|Amortization of intangible assets||2,224||1,751||27.0%||4,464||3,640||22.6%|
|Significant items recorded in Corporate and Other|
|Total significant items||3,931||8,895||(55.8)%||10,295||12,486||(17.5)%|
|Total expenses excluding significant items||207,395||175,367||18.3%||423,299||349,894||21.0%|
|Net income before taxes - adjusted||$28,876||$7,939||263.7%||$58,528||$20,643||183.5%|
|Income taxes - adjusted||8,130||1,205||n.m.||13,765||2,099||n.m.|
|Net income - adjusted||$20,746||$6,734||208.1%||$44,763||$18,544||141.4%|
|Earnings per common share - basic, adjusted||$0.19||$0.03||n.m.||$0.40||$0.13||207.7%|
|Earnings per common share - diluted, adjusted||$0.17||$0.03||n.m.||$0.37||$0.12||208.3%|
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures above.
n.m.: not meaningful
While we continue to have confidence in the solid fundamentals for global equities markets, our second quarter results were impacted by a global expectation of a market correction that became a reality in early October. Broad market indices posted minor increases during the quarter, while smaller and mid cap stocks struggled, leading to diminished transaction and trading activity in the growth-oriented sectors.
This operating environment had the most notable impact on our US operations. Following seven straight quarters of gains, US equities turned quickly downward in September. Valuations in the top half of historic ranges resulted in fewer compelling investment opportunities, which negatively impacted investment banking and trading activity in that region. The aggregate value of follow-on offerings in our core US coverage sectors declined by 56% compared to the previous quarter.
On a positive note, Canaccord Genuity Group recorded $236.3 million in revenues for the quarter, a healthy year-over year improvement of 29%. This translated into adjusted earnings per share of $0.17, an increase of 467%. We attribute this performance to the investments we have made to diversify our revenue streams and improve our cross-border execution capabilities.
Working capital increased by $18.4 million to $453.5 million since the first quarter of fiscal 2015. On an adjusted basis, we have lowered non-compensation related expenses by 4.6% compared to our most recent quarter against a 3.7% decrease in revenue for the same period.
Global advisory revenue increases 87% year-over-year
Lower volatility and volumes continued to support M&A activity during the quarter and we achieved strong results advising mid-market growth companies in all regions. Advisory fees for our second fiscal quarter were $55.7 million, an increase of 87% from the same period last year. The largest contributor to this growth came from our Canadian business, and our UK, US and Asia-Pacific businesses also achieved advisory revenue within the upper ranges of their historic quarterly results.
During the fiscal quarter, Canaccord Genuity participated in 86 transactions globally and raised total proceeds of C$10.7 billion. When compared to the same period last year, our global investment banking business generated a second quarter revenue increase of 63%, led by the performance of our Canadian operations and due in part from our role as lead advisor and bookrunner to Amaya Gaming Group, in the second largest transaction in our firm's history. Additionally, our Asia-Pacific operations continue to post meaningful increases in investment banking and trading commissions.
Planned investments in the strategic build-out of our US research, banking and fixed income businesses added roughly $3 million to our expenses for the quarter. We believe these investments will meaningfully contribute to the growth for this business as they will add to the breadth of our offering and improve our execution capabilities.
In October, the strength and quality of our Australian business was given prominence as the dominant recipient of the East Coles Equities Markets Awards, winning Best Independent Equities House, Best Independent Equity Capital Markets Bank and Best Independent Equities Research House, with 13 of our analysts receiving top rankings.
Also in October, our European team received the 2014 Corporate Financier of the Year award in the Unquote British Private Equity Awards, which celebrate innovation and excellence in private equity and venture capital.
Recurring revenues balance capital markets volatility
We expect increasing levels of fee-based and managed accounts in our Canadian and UK wealth management businesses will materially improve recurring revenue streams and reduce earnings volatility for our business. On a global basis, Canaccord Genuity Wealth Management generated $63 million in revenue for the second quarter and increased assets under administration and management by 15.5% compared to the same period last year.
Our Canadian wealth management business continues to show improvement, narrowing its loss before taxes to $1.8 million, a decrease of 66% compared to the second quarter of last year. Continued focus on the transition to fee-based and managed accounts has led to a 49% year-over-year increase in assets under management. Through targeted recruitment, we have attracted growing numbers of advisors with established books of business and proven track records of exceptional client service.
Our UK and European wealth management business has also shown steady improvement, increasing assets under management to $20.4 billion and fee-related revenue was a record 68.5% of total revenue for the quarter.
Commitment to our Communities
Another important measure of our success is our ability to make positive contributions in the communities where we operate. During the quarter, we hosted the second annual Canaccord Genuity Great Camp Adventure Walk to benefit the Hospital for Sick Children. A grand total of $1.8 million was raised to support the goal of improving the health and well-being of children around the world.
On October 13th our US capital markets team hosted Trading Day for Kids to benefit Youth I.N.C. Through commission fees generated from designated equity, electronic and agency options trades, the team raised $850,000, bringing our three year contribution to just over $2.75 million.
We expect the current market environment will prove challenging for our capital markets activities in the near term, but our longer term outlook for equity markets is stable and positive. While our macroeconomic outlook for the balance of the fiscal year is cautiously optimistic, our pipeline is strong and diverse.
Our priorities for our global capital markets division centre on increasing contributions from new products, such as debt and restructuring, and leveraging the capabilities of strategic hires to compete domestically and support cross-border collaboration.
For our global wealth management division, we will continue to focus on growing our share of fee-based and discretionary managed accounts and actively pursue opportunities to increase our scale in the UK & Europe. The imminent launch of our proprietary asset management product, Canaccord Genuity Global Portfolio Solutions (GPS) is expected to increase our recurring revenue streams by attracting new clients to our Canadian wealth management business and increasing engagement with existing clients. This unique range of portfolios has been created to service the growing demand for investment solutions which seek to provide stable returns with minimal risk by targeting limited levels of volatility.
We have worked hard to improve our competitive position and further strengthen our brand in regions we have targeted for growth. As we enter the second half of our fiscal year, we will continue to pursue opportunities for organic growth and uphold our culture of cost containment. We will adhere to a disciplined approach to investing in key areas of our business with a focus on better serving our clients and creating long term value for our shareholders.
President & Chief Executive Officer
ACCESS TO QUARTERLY RESULTS INFORMATION
Interested investors, the media and others may review this quarterly earnings release and supplementary financial information at http://www.canaccordgenuitygroup.com/EN/IR/Pages/default.aspx.
CONFERENCE CALL AND WEBCAST PRESENTATION
Interested parties are invited to listen to the Company's second quarter fiscal 2015 results conference call with analysts and institutional investors, via a live webcast or a toll free number. The conference call is scheduled for Thursday, November 6, 2014 at 5:00 a.m. Pacific time, 8:00 a.m. Eastern time, 1:00 p.m. UK time, 9:00 p.m. China standard time and on Friday, November 7, 2014 at 12:00 a.m. Australia EST. At that time, senior executives will comment on the results for the second quarter of fiscal 2015 year and respond to questions from analysts and institutional investors.
The conference call may be accessed live and archived on a listen-only basis via the Internet at: http://www.canaccordgenuitygroup.com/EN/NewsEvents/Pages/Events.aspx.
Analysts and institutional investors can call in via telephone at:
- 647-427-7450 (within Toronto)
- 1-888-231-8191 (toll free in North America)
- 0-800-051-7107 (toll free from the UK)
- 1-800-760-620 (toll free from Ireland)
- 0-800-917-449 (toll free from France)
- 0-800-183-0171 (toll free from Germany)
- 10-800-714-1191 (toll free from Northern China)
- 10-800-140-1195 (toll free from Southern China)
- 1-800-287-011 (toll free from Australia)
Please request to participate in Canaccord Genuity Group Inc.'s Q2/15 earnings call. If a passcode is requested, please use 6814072.
A replay of the conference call can be accessed after 8:00 a.m. (Pacific Time), 11:00 a.m. (Eastern Time) on Thursday, November 6, 2014 until December 18, 2014 at 416-849-0833 or 1-855-859-2056 by entering passcode 6814072 followed by the pound (#) sign.
ABOUT CANACCORD GENUITY GROUP INC.:
Through its principal subsidiaries, Canaccord Genuity Group Inc. (the Company) is a leading independent, full-service financial services firm, with operations in two principal segments of the securities industry: wealth management and capital markets. Since its establishment in 1950, the Company has been driven by an unwavering commitment to building lasting client relationships. We achieve this by generating value for our individual, institutional and corporate clients through comprehensive investment solutions, brokerage services and investment banking services. The Company has offices in 10 countries worldwide, including wealth management offices located in Canada, Australia, the UK and Europe. Canaccord Genuity, the international capital markets division, operates in Canada, the US, the UK, France, Germany, Ireland, Hong Kong, China, Singapore, Australia and Barbados. To us there are no foreign markets.TM
Canaccord Genuity Group Inc. is publicly traded under the symbol CF on the TSX and the symbol CF. on the London Stock Exchange. Canaccord Genuity Series A Preferred Shares are listed on the TSX under the symbol CF.PR.A. Canaccord Genuity Series C Preferred Shares are listed on the TSX under the symbol CF.PR.C.
1 Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on pages 5.
2 Net income attributable to common shareholders is calculated as net income adjusted for non-controlling interests and preferred share dividends.
3 See Non-IFRS Measures on pages 5.
4 Source: Transactions over $1.5 million. Internally sourced information.
5 Advisory Teams are normally comprised of one or more Investment Advisors (IAs) and their assistants and associates, who together manage a shared set of client accounts. Advisory Teams that are led by, or only include, an IA who has been licensed for less than three years are not included in our Advisory Team count, as it typically takes a new IA approximately three years to build an average-sized book of business.
Image with caption: "Canaccord Genuity Group Inc. (CNW Group/Canaccord Genuity Group Inc.)". Image available at: http://photos.newswire.ca/images/download/20141105_C9413_PHOTO_EN_43176.jpg
SOURCE: Canaccord Genuity Group Inc.
For further information:
North American media:
Executive Vice President, Global Head of Corporate Development & Strategy
Email: [email protected]
Robert Morgan or Nicola Ratchford
Phone: +44 (0) 20 7240 2486
Email: [email protected]
Investor relations inquiries:
Vice President, Investor Relations & Communications
Email: [email protected]
RBC Europe Limited
Phone: +44 (0) 20 7653 4000
Email: [email protected]