Canaccord Financial Inc. Reports First Quarter Fiscal 2014 Results
Excluding significant items, earned net income of $11.8 million during the quarter (1)
(All dollar amounts are stated in Canadian dollars unless otherwise indicated)
TORONTO, Aug. 6, 2013 /PRNewswire/ - In the first quarter of fiscal 2014, the quarter ended June 30, 2013, Canaccord Financial Inc. (Canaccord, the Company, TSX: CF, LSE: CF.) generated $187.2 million in revenue. Excluding significant items(1) (a non-IFRS measure), the Company recorded net income of $11.8 million, or $0.09 per diluted common share. Including all expense items, on an IFRS basis, the Company recorded net income of $7.9 million, or $0.06 per diluted common share.
In addition, the Company announces that Canaccord Financial Inc. will be rebranded Canaccord Genuity Group Inc. on October 1, 2013.
"Our Q1 results showcased the early benefits of our expanded global platform. This was a record quarter for our US division and another solid performance by our UK and European operations. While challenging market conditions continued in some of our core markets, Canaccord Genuity's firm-wide cost containment initiatives continued to deliver increased value for our shareholders," stated Paul Reynolds, President and CEO of Canaccord Financial Inc. "We will be focusing on further enhancing the operational efficiency of our business through targeted investments in our back-office infrastructure and upgrading elements of our support services."
Mr. Reynolds continued: "Notably, 67% of our global revenue, and 96% of adjusted net income after tax, was generated outside of Canada, a strong reflection of our diversification strategy."
First quarter of fiscal 2014 vs. fourth quarter of fiscal 2013
Revenue of $187.2 million, down 14% or $30.8 million from $218.0 million
Excluding significant items, expenses of $174.5 million, down 13% or
$26.0 million from $200.5 million(1)
Expenses of $178.1 million, down 16% or $33.9 million from $212.0
Excluding significant items, net income of $11.8 million compared to net
income of $15.6 million (1)
Net income of $7.9 million compared to net income of $6.4 million
Excluding significant items, diluted earnings per common share (EPS) of
$0.09 compared to diluted EPS of $0.12 in the fourth quarter of fiscal
Diluted EPS of $0.06 compared to diluted EPS of $0.04 in the fourth
quarter of fiscal 2013
First quarter of fiscal 2014 vs. first quarter of fiscal 2013
Revenue of $187.2 million, up 15% or $24.7 million from $162.5 million
Excluding significant items, expenses of $174.5 million, down 4% or $7.2
million from $181.7 million (1)
Expenses of $178.1 million, down 5% or $8.9 million from $187.0 million
Excluding significant items, net income of $11.8 million compared to a
net loss of $16.3 million (1)
Net income of $7.9 million compared to a net loss of $20.6 million
Excluding significant items, diluted EPS of $0.09 compared to a diluted
loss per common share of $0.20(1)
Diluted EPS of $0.06 compared to a diluted loss per common share of
Financial condition at end of first quarter fiscal 2014 vs. fourth quarter fiscal 2013
Cash and cash equivalents balance of $380.9 million, down $110.1 million
from $491.0 million
Working capital of $408.8 million, up $15.1 million from $393.7 million
Total shareholders' equity of $1.1 billion, up $19.5 million from $1.0
Book value per diluted common share of $7.87, up $0.19 from $7.68 (1)
On August 6, 2013, the Board of Directors approved a quarterly dividend
of $0.05 per common share payable on September 10, 2013 with a record date of
August 30, 2013
On August 6, 2013, the Board of Directors also approved a cash dividend
of $0.34375 per Series A Preferred Share payable on September 30, 2013
with a record date of September 13, 2013, and a cash dividend of
$0.359375 per Series C Preferred Share payable on September 30, 2013 to
Series C Preferred shareholders of record as at September 13, 2013
SUMMARY OF OPERATIONS
During the fiscal first quarter, Canaccord Financial Inc. repurchased
564,504 of its common shares under the terms of its normal course
issuer bid (NCIB)
Subsequent to the end of the quarter and as of August 2, 2013, Canaccord
Financial Inc. repurchased 278,968 of its common shares under the terms
of its NCIB; on July 31, 2013, 843,472 common shares were cancelled.
On August 6, 2013, the Company filed a notice for the renewal of its
NCIB to provide for the ability to purchase, at the Company's
discretion, up to a maximum of 5,136,948 common shares through the
facilities of the TSX during the period from August 13, 2013 to August
12, 2014. 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.
Subsequent to the end of the quarter, on July 9, 2013, Canaccord
announced that Tim Hoare has stepped down as Chairman of Canaccord
Genuity Limited. Mr. Hoare is continuing his involvement with Canaccord
as a member of Canaccord Financial's Global Advisory Board.
Subsequent to the end of the quarter and related to the above, on July
9, 2013, Canaccord announced that Paul Reynolds assumed the position of
Chairman of Canaccord Genuity Limited
Canaccord Genuity led or co-led 36 transactions globally, raising total
proceeds of C$1.7 billion(2) during fiscal Q1/14
Canaccord Genuity participated in 82 transactions globally, raising total proceeds of C$5.9 billion(2) during fiscal Q1/14
During fiscal Q1/14, Canaccord Genuity led or co-led the following
US$345 million for 3D Systems on the NYSE
C$184.1 million for Pure Industrial Real Estate Trust on the TSX
C$172.5 million for Artis REIT on the TSX
US$90.1 million for Synergy Pharmaceuticals on the NASDAQ
US$84.2 million for Emerald Oil, Inc. on the NYSE
C$69.0 million for HealthLease Properties REIT on the TSX
C$63.5 million for Halogen Software Inc. on the TSX
£60.7 million for Tyman PLC on AIM
US$57.9 million for Novadaq Technologies Inc. on the NASDAQ
C$51.7 million for MBAC Fertilizer Corp. on the TSX
AUD$50.0 million for Sundance Energy Limited on the ASX
£39.9 million for Brewin Dolphin Inc. on the LSE
£37.1 million for Lombard Medical Technologies PLC on AIM
US$35.0 million for Pure Multi-Family REIT LP on the TSX Venture
US$32.7 million for GW Pharmaceuticals PLC on the NASDAQ
AUD$34.4 million for Bucaneer Energy Limited on the ASX
US$28.1 million for Mast Therapeutics, Inc. on the NYSE
£19.7 million for Mears Group PLC on the LSE
In Canada, Canaccord Genuity raised $209.5 million for government bond
issuances and $24.3 million for corporate bond issuances during fiscal
Canaccord Genuity generated advisory revenues of $35.9 million during
fiscal Q1/14, an increase of 43% compared to the same quarter last year
During fiscal Q1/14, Canaccord advised on the following M&A and advisory
Encore Capital Group on their acquisition of Cabot Credit Management
from JC Flowers & Co.
Montagu Private Equity LLP on its disposal of Unifeeder A/S to Nordic
KEYreit on its acquisition by Plazacorp Retail Properties Ltd.
Palomar Medical Technologies, Inc. on its acquisition by Cynosure, Inc.
EACOM Timber Corporation on its sale to Kelso & Company
Pure Gym Limited on its sale to CCMP
Régie Linge Distribution on the restructuring of its debt facilities
Kingfisher PLC on its acquisition of Bricostore Romania
SAExploration Holdings, Inc. on the merger with Trio Merger Corp.
Ares Capital Europe Limited and Toscafund Asset Management LLP on their
acquisition of Healthcare Locums PLC and the restructuring of its
Earth Video Camera Inc. on its reverse takeover transaction with
Petrogas Global Limited on the acquisition of its debt facilities
TCR Capital on its disposal of Laboratories Chemineau to Groupe Anjac
Cub Energy Inc. on its acquisition of TechnoGasIndustria
Solais Lighting Inc. on its acquisition by PowerSecure International,
Thermal Technology LLC on its acquisition by GT Advanced Technologies
BENEV Capital Inc. on the sale of its Saint Ambroise waste treatment
Canaccord Genuity Wealth Management (Global)
Globally, Canaccord Genuity Wealth Management generated $54.6 million in
Assets under administration in Canada and assets under management in the
UK and Europe, and Australia, were $25.8 billion at the end of Q1/14 (1)
Canaccord Genuity Wealth Management (North America)
Canaccord Genuity Wealth Management (North America) generated $26.8
million in revenue and, after intersegment allocations, recorded a net
loss of $5.1 million before taxes in Q1/14
Assets under administration in Canada were $9.3 billion as at June 30,
2013, down 11% from $10.4 billion at the end of the previous quarter
and down 29% from $13.1 billion at the end of fiscal Q1/13 (1)
Assets under management in Canada (discretionary) were $880 million as
at June 30, 2013, up 5% from $835 million at the end of the previous
quarter and up 24% from $709 million at the end of fiscal Q1/13(1)
As at June 30, 2013, Canaccord Genuity Wealth Management had 173
Advisory Teams(3), a decrease of 96 Advisory Teams from June 30, 2012 and a decrease of
five from March 31, 2013
Canaccord Genuity Wealth Management (UK and Europe)
Wealth management operations in the UK and Europe generated $27.0
million in revenue and, after intersegment allocations, and excluding
significant items, recorded net income of $5.1 million before taxes in
- Assets under management (discretionary and non-discretionary) were $16.1 billion (£10.1 billion)
The non-International Financial Reporting Standards (IFRS) measures presented include assets under administration, assets under management, book value per diluted common share and figures that exclude significant items. Significant items include restructuring costs, amortization of intangible assets, and acquisition-related expense items, which include costs recognized in relation to both prospective and completed acquisitions. Management believes that these non-IFRS measures will allow for a better evaluation of the operating performance of Canaccord's business and facilitate meaningful comparison of results in the current period to those in prior periods and future periods. Figures that exclude significant items provide useful information by excluding certain items that may not be indicative of Canaccord's core operating results. A limitation of utilizing these figures that exclude significant items is that the IFRS accounting effects of these items do in fact reflect the underlying financial results of Canaccord's business; thus, these effects should not be ignored in evaluating and analyzing Canaccord's financial results. Therefore, management believes that Canaccord's IFRS measures of financial performance and the respective non-IFRS measures should be considered together.
Selected financial information excluding significant items
Three months ended
|(C$ thousands, except per share and % amounts)||2013||2012||change|
|Total revenue per IFRS||$187,231||$162,549||15.2%|
|Total expenses per IFRS||$178,118||$187,048||(4.8)%|
|Significant items recorded in Canaccord Genuity|
|Amortization of intangible assets||1,702||4,373||(61.1)%|
|Significant items recorded in Canaccord Genuity Wealth Management|
|Amortization of intangible assets||1,889||998||(89.3)%|
|Total significant items||3,591||5,371||(33.1)%|
|Total expenses excluding significant items||174,527||181,677||(3.9)%|
|Net income (loss) before taxes - adjusted||$12,704||$(19,128)||166.4%|
|Income taxes (recovery) - adjusted||894||(2,833)||131.6%|
|Net income (loss) - adjusted||$11,810||$(16,295)||172.5%|
|Earnings (loss) per common share - basic, adjusted||$0.10||$(0.20)||150.0%|
|Earnings (loss) per common share - diluted, adjusted||$0.09||$(0.20)||145.0%|
Our results this quarter reflect the progress we've made in diversifying our revenue streams, growing our market position globally, and enhancing our relevance to our clients. While our overall performance is in line with the slower global market environment, we made great strides in capturing the cost and revenue synergies of our significantly expanded platform. This diversification is evidenced by two-thirds of our revenue this quarter coming from outside of Canada.
Canaccord Genuity strives to provide our clients with global service and differentiated ideas. We have worked diligently to strengthen our cross-border collaboration in an effort to provide our clients with increased global opportunities. We have strong teams in each of our geographies, and we're working hard to ensure our clients receive exceptional service and our global perspective. Our new slogan - to us there are no foreign markets - showcases the benefits we offer through our global platform.
In this challenging market environment, Canaccord Genuity increased revenue by 15% compared to the same quarter last year. We have established a culture of cost containment within the firm, and during the quarter, we successfully lowered overall expense levels by 5% compared to the same quarter last year. This decrease was driven by lowering our overhead expenses, adjusting our compensation levels and consolidating office space. In addition, we lowered our compensation ratio to 58.4% of revenue, a decrease from 66.5% and 62.4% compared to last year and the previous quarter, respectively. Looking ahead, we will continue to pursue opportunities to improve operational efficiencies across our global platform.
A Record Performance in the US
Canaccord Genuity's revenue increase compared to Q1/13 was led by the record performance of our US division and another strong quarter from our UK-based business. In these geographies, we're finding opportunities to leverage the current market environment and deliver value to the broader franchise. Combined, our US and UK divisions generated 65% of Canaccord Genuity's global revenue during our fiscal first quarter, underscoring the important additions we've made to our platform over the last several years. We have established a strong market position in the US, notably through gains in market share and through the success of our trading desks, and we're seeing the benefits of our integrated investment banking practice in the UK.
In the three months ended June 30, 2013, Canaccord Genuity generated $187 million of revenue and, excluding significant itemsi, recorded net income of $11.8 million or $0.09 per diluted common share. Including significant items, Canaccord recorded net income of $7.9 million, or $0.06 per diluted common share.
We continue to carefully monitor our balance sheet and our cash and working capital positions remain strong and liquid. Canaccord Genuity is well capitalized to operate in these challenging market conditions. At the close of our fiscal first quarter, the Company had $409 million in working capital, $380.9 million in cash and cash equivalents and $1.1 billion in shareholders' equity. Our Board of Directors has approved a quarterly dividend of $0.05 to thank our shareholders for their continued support.
Canaccord Genuity Capital Markets
Canaccord Genuity capital markets generated $131.2 million in revenue, a marked increase of 30% compared to the same quarter last year, and a 15% decrease compared to the previous quarter. Importantly, global expenses decreased by 13% sequentially, which helped the division contribute $13.6 million of net income, excluding significant itemsi, to our bottom line. Including significant items, Canaccord Genuity capital markets recorded net income, before taxes, of $11.9 million, on par with the previous quarter, which was achieved even with lower revenue, by decreasing expenses by over 14%, excluding restructuring charges incurred during the last quarter.
In the US, record revenue of $52.9 million was achieved, a sizeable increase of over 70% compared to the same period last year and a 17% increase compared to the previous quarter, due mainly to our enlarged team and expanded platform. Our UK and European capital markets team generated $40.5 million in revenue and delivered net income before taxes of $5.7 million, a result of solid advisory and trading activity, combined with the prudent control of our expense levels.
The exceptional quality of our sales and trading teams was evidenced by their consistently strong performance during the quarter, with commission revenue at $42.8 million and principal trading revenue at $19.9 million. This achievement highlights the value of this expanded department and their ability to leverage the market environment on behalf of our clients.
Canaccord Genuity Wealth Management
The changes we have implemented to strengthen our wealth management operations are beginning to take hold. Globally, Canaccord Genuity Wealth Management generated $54.6 million in revenue, but experienced a slight decline in client assets to $25.8 billion as of June 30, 2013.
In the UK and Europe, our solid performance was characterized by stable markets and strengthened by our acquisition of Eden Financial's wealth management business. The benefits of our integration efforts propelled the division's revenue to $27.0 million, an increase of 38% compared to the same period last year. We are gaining market share in this important geography, as assets under management increased to $16.1 billion. During the quarter, we made the decision to modernize our back-office infrastructure through an investment in a sophisticated software platform designed to promote the increased use of electronic processing. We expect this investment will allow us to grow our business by adding scale to our service levels while lowering our ongoing operational cost base.
Our Canadian wealth management business continues to face headwinds due to difficult market conditions and the current risk-averse appetite of Canadian investors. That said, we are seeing positive changes from the strategic shift we implemented last year. Fee-related revenue has increased to 31.8% during the quarter, a record high for the division and a key indicator of the progress we're making to stabilize revenue streams. Additionally, we increased assets under management to $880 million.
Canaccord Genuity's priorities over the next several quarters will focus on driving further cross-border collaboration, advancing other cost containment initiatives and taking steps to continue to ensure that our clients are well served on a global basis.
I am confident that the market position we have established for Canaccord Genuity provides our firm with a strong competitive advantage as well as exceptional earnings power. We've added the scale we needed to be competitive globally, and I believe our global franchise provides a differentiated service offering with a client-centric approach. Finally, our shareholders are at the forefront of every decision we make, and we remain committed to delivering the value that our global platform has to offer.
President & CEO
Canaccord Financial Inc.
ACCESS TO QUARTERLY RESULTS INFORMATION
Interested investors, the media and others may review this quarterly earnings release and supplementary financial information at http://www.canaccordfinancial.com/EN/IR/Pages/default.aspx.
CONFERENCE CALL AND WEBCAST PRESENTATION
Interested parties are invited to listen to Canaccord's first quarter fiscal 2014 results conference call with analysts and institutional investors, via a live webcast or a toll free number. The conference call is scheduled for Wednesday, August 7, 2013 at 5:00 a.m. (Pacific Time), 8:00 a.m. (Eastern Time), and 1:00 p.m. (UK Time). At that time, senior executives will comment on the results for the first quarter of the fiscal 2014 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: www.canaccordfinancial.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 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 Financial's Q1/14 earnings call.
A replay of the conference call can be accessed after 8:00 a.m. (Pacific Time), 11:00 a.m. (Eastern Time), 4:00 p.m. (UK Time) on Wednesday, August 7, 2013 until September 20, 2013 at 416-849-0833 or 1-855-859-2056 by entering passcode 21019610 followed by the pound (#) sign.
ABOUT CANACCORD FINANCIAL INC.:
Through its principal subsidiaries, Canaccord Financial Inc. 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, Canaccord 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. Canaccord has offices in 12 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, Italy, Hong Kong, mainland China, Singapore, Australia and Barbados.
Canaccord Financial Inc. is publicly traded under the symbol CF on the TSX and the symbol CF. on the London Stock Exchange. Canaccord Series A Preferred Shares are listed on the TSX under the symbol CF.PR.A. Canaccord Series C Preferred Shares are listed on the TSX under the symbol CF.PR.C.
FOR FURTHER INFORMATION, CONTACT:
North American media:
Executive Vice President, Global Head of Corporate Development & Strategy
Investor relations inquiries:
Manager, Investor Relations & Communications
Oliver Hearsey or James Kelly
RBC Europe Limited
Phone: +44 (0) 20 7653 4000
Bobby Morse or Ben Romney
Buchanan Communications (London)
Phone: +44 (0) 207 466 5000
|None of the information on Canaccord's websites at www.canaccordfinancial.com, www.canaccordgenuity.com, and www.canaccord.com should be considered incorporated herein by reference.|
1 See Non-IFRS Measures.
2 Source: Transactions over $1.5 million. Internally sourced information.
3 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.
i A Non-IFRS measure
SOURCE Canaccord Financial Inc.