On an adjusted basis1, net income of $5.4 million and diluted EPS of $0.07 compared with net income of $1.1 million and diluted EPS of nil in the same period last year.
For further information about GMP Capital Inc., our results for first quarter 2014 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 months ended March 31, 2014 (First Quarter 2014 Financial Statements), and our management's discussion and analysis for the three months ended March 31, 2014 (First Quarter 2014 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 First Quarter 2014 Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS).
Toronto, May 1, 2014 - GMP Capital Inc. (GMP) (TSX: GMP) today reported revenue of $63.9 million in first quarter 2014, up 31% compared with the same period a year ago. GMP recorded net income of $2.7 million and diluted earnings per share (EPS) of $0.03 in first quarter 2014 compared with a net loss of $0.4 million and a diluted loss per share of $0.02 in first quarter 2013. On an adjusted basis1, net income was $5.4 million and diluted EPS was $0.07 in first quarter 2014 compared with net income of $1.1 million and diluted EPS of nil in the same period last year.
"We are encouraged by this quarter’s financial performance and pleased with operational developments. Leading the way was higher investment banking revenue and improved trading activity in both Canada and the United States. Our businesses generated a 31% increase in revenues, our expansion into the U.S. energy sector is on track and our partners at Richardson GMP are already demonstrating the financial performance potential from increased scale," said Harris Fricker, Chief Executive Officer, GMP.
First Quarter 2014 versus First Quarter 2013
• Revenue of $63.9 million compared with $48.8 million
• Net income of $2.7 million compared with a net loss of $0.4 million
• On an adjusted basis1, GMP recorded net income of $5.4 million and net income attributable to common shareholders of $4.9 million compared with net income of $1.1 million and net income attributable to common shareholders of $0.1 million
• Diluted EPS of $0.03 compared with a diluted loss per share of $0.02
• On an adjusted basis1, diluted EPS was $0.07 compared with nil
• Return on common equity (ROE)1 was 3.2% compared with negative 2.3%
• Adjusted ROE1 was 7.1% compared with 0.1%
Commenting further, Mr. Fricker said, "While we are optimistic that the growth momentum in the industry sectors we serve will be a catalyst for rising investor confidence and business activity, we remain cognizant of the risks and challenges still facing our industry."
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, which sets out the composition of the measures for the periods presented, and the “Presentation of Financial Information and Non-GAAP Measures” section in the First Quarter 2014 MD&A.
FIRST QUARTER 2014 BUSINESS SEGMENT HIGHLIGHTS
• Revenue of $59.4 million - an increase of 41% compared with first quarter 2013 largely due to higher investment banking revenue and higher returns from principal transactions.
• Investment banking revenue of $29.6 million increased 36% compared with first quarter 2013 largely due to a 72% increase in equity underwriting revenue on the strength of robust activity in the Mining, Technology and Healthcare and Oil and Gas sectors. This increase was partly offset by decreased debt underwriting and advisory revenue.
• Principal transactions generated a net gain of $11.6 million in first quarter 2014 compared with a net gain of $4.6 million in first quarter 2013. This increase reflects improved returns on principal inventories, lower losses on client facilitation trading and an increase in client-related fixed income activity mainly in our U.S. operations, which generated net gains of $11.9 million in first quarter 2014 compared with net gains of $10.3 million in first quarter 2013.
• Commission revenue of $15.0 million in first quarter 2014 increased 11% compared with first quarter 2013 which is consistent with higher industry-wide trading activity. This represents the strongest quarterly result since the fourth quarter of 2012.
Expenses of $51.4 million - an increase of 22% compared with first quarter 2013 primarily reflecting a 40% increase in variable compensation, which was in-line with increased revenues. Selling, general and administrative expenses increased $1.6 million or 15% compared with first quarter 2013 largely due to higher transactional costs in support of the increased level of business activity this quarter. First quarter 2013 expenses included $1.4 million in pre-tax restructuring charges (2014 nil).
On an adjusted basis1, income before income taxes was $8.4 million in first quarter 2014 compared with income before income taxes of $2.2 million in first quarter 2013.
GMP Securities L.P. highlights:
• Ranked first in Canada among independent dealers for the dollar value of M&A transactions announced during first quarter 2014. (Source: Mergermarket)
• Participated in 76 underwriting transactions completed in Canada during first quarter 2014, valued at $5.6 billion, of which we led or co-led 17 of these transactions valued at $0.8 billion. (Source: Company reports)
• The Wealth Management segment consists of GMP's non-controlling ownership interest in Richardson GMP Limited (Richardson GMP) and the financial results of GMP's asset management business, CQI Capital Management L.P. (CQI).
• Wealth Management reported a loss before income taxes of $1.6 million in first quarter 2014 compared with income before income taxes of $1.5 million in first quarter 2013. The decrease primarily reflects our share of Richardson GMP's net loss attributable to common shareholders in first quarter 2014, which was adversely impacted by transaction costs recorded by Richardson GMP in connection with its acquisition of Macquarie Private Wealth Inc. (MPW Canada). GMP's proportionate share of these costs was $2.5 million in first quarter 2014.
• Lower investment management and fee income reflects a decrease in assets under management (AUM) at CQI following the sale of the majority of the advisory contracts relating to CQI's AUM to Fiera Capital Corporation during the second quarter of 2013 (AUM sale transaction).
• Other income in first quarter 2013 included $1.4 million recognized by GMP on its preferred share investment in Richardson GMP following dividend declarations by Richardson GMP.
Expenses of $0.6 million - a decrease of 79% compared with first quarter 2013 largely due to reduced employee compensation and benefits as well as lower trailer fees at CQI subsequent the AUM sale transaction.
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 a 31.9% non-controlling interest of Richardson GMP as at March 31, 2014.
• Revenue of $79.5 million - an increase of 106% compared with first quarter 2013 primarily due to higher investment management and fee income commensurate with increased average assets under administration (AUA)1.
• Adjusted EBITDA1,2 of $13.3 million in first quarter 2014, nearly triple the $4.5 million recorded in first quarter 2013.
• AUA of $27.7 billion at March 31, 2014, up $12.5 billion or 83% from first quarter 2013.
• 209 investment advisory teams at March 31, 2014, up from 115 teams at the end of March 31, 2013.
2. 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 “Supplemental Information” section at the end of this press release and in the First Quarter 2014 MD&A.
On April 30, 2014, 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 June 30, 2014, to the respective shareholders of record on June 10, 2014.
NORMAL COURSE ISSUER BID RENEWAL
On April 30, 2014, the Board of Directors approved the renewal of GMP’s normal course issuer bid, which has been accepted by the TSX (2014 NCIB). The 2014 NCIB program commences on April 30, 2014 and will terminate on April 29, 2015, or until such earlier date on which purchases under the 2014 NCIB have been completed. Under the 2014 NCIB program, GMP is authorized to purchase for cancellation up to 5,495,970 of its common shares, representing 10% of the public float as of April 25, 2014, by way of normal course purchases effected by GMP Securities L.P. through the facilities of the TSX and any other protected marketplace or alternative trading system in Canada. As of April 25, 2014, GMP had 74,231,281 common shares outstanding. Purchases will be made by GMP in accordance with the requirements of the TSX and the price which GMP will pay for any such common shares will be the market price of any such common shares at the time of acquisition, or such other price as may be permitted by the TSX. For purposes of the TSX rules, a maximum of 16,749 common shares may be purchased by GMP on any one day under the bid, except where purchases are made in accordance with the “block purchase exception” of the TSX rules. The daily repurchase limit represents 25% of the average daily trading volume of 66,996 common shares of GMP for the six-month period ended March 31, 2014, excluding purchases made under the previously approved NCIB program during that period. Under its previously approved NCIB program that expired on March 21, 2014, GMP purchased for cancellation 688,700 of its common shares at an average weighted purchase cost per share of $6.3131. GMP has renewed the 2014 NCIB program because it believes that from time to time the market price of its common shares may be attractive and that at such times the purchase of common shares would be in the best interest of GMP and an appropriate use of corporate funds in light of potential benefits to shareholders.
A conference call and live audio webcast to discuss GMP’s first quarter 2014 results will be held this morning at 9:00 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 416-644-3414 or 1-800-814-4859 (toll free) or via live audio webcast at http://www.gmpcapital.com/investor. A recording of the conference call will be available until Thursday, May 8, 2014, by dialing 416-640-1917 or 1-877-289-8525 (toll free) and entering access code 4675084#. The webcast will be archived at http://www.gmpcapital.com/investor.
Consistent with GMP's management framework, management uses certain measures to assess GMP's financial performance, which are not generally accepted accounting principle (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 First Quarter 2014 MD&A.
The table below provides a reconciliation of GMP's reported results to its adjusted measures:
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. Adjusted EBITDA does not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other issuers. This Non-GAAP measure should not be considered as an alternative 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 First Quarter 2014 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 a 31.9% non-controlling interest of Richardson GMP as at March 31, 2014.
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 2014 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 (M&A), 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 First Quarter 2014 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 are set out in the “Business Environment and Market Outlook” section of the First Quarter 2014 MD&A and include, without limitation:Canadian economic conditions continuing to trend positively, accommodative monetary policy, gradual strengthening of economic fundamentals and emerging geo-political headwinds. 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, Connecticut, Miami, Dallas, London, Perth and Sydney. The Capital Markets segment conducts its business through the following operating entities: GMP Securities L.P., GMP Securities, LLC, Griffiths McBurney Corp., GMP Securities
Europe LLP and GMP Securities Australia Pty Limited. Wealth Management consists of GMP's non-controlling ownership interest in Richardson GMP Limited and the investment management and alternative investment products provided by CQI Capital Management L.P. Richardson GMP Limited is a full-service independent firm 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.
For further information please contact:
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
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