Excluding significant items, first quarter earnings per common share of $0.10(1)
(All dollar amounts are stated in Canadian dollars unless otherwise indicated)
TORONTO, Aug. 4, 2015 /PRNewswire/ - During the first quarter of fiscal 2016, the quarter ended June 30, 2015, Canaccord Genuity Group Inc. (Canaccord, the Company, TSX: CF, LSE: CF.) generated $214.5 million in revenue. Excluding significant items (1), the Company recorded net income of $13.3 million or net income of $9.5 million attributable to common shareholders (2) (earnings per common share of $0.10). Including all expense items, on an IFRS basis, the Company recorded net income of $11.0 million or net income attributable to common shareholders (2) of $7.4 million (earnings per common share of $0.08).
"The steps we have taken to reduce costs across our business were evident in our first quarter results, as we returned to profitability," said David Kassie, Chairman and CEO of Canaccord Genuity Group Inc. "We continue to focus on improving operating efficiencies and growing our recurring revenue streams across our global business, to deliver long-term value for clients and our shareholders."
First Quarter of Fiscal 2016 vs. First Quarter of Fiscal 2015
- Revenue of $214.5 million, a decrease of 13% or $31.1 million from $245.6 million
- Excluding significant items, expenses of $199.1 million, a decrease of 8% or $16.8 million from $215.9 million(1)
- Expenses of $202.0 million, a decrease of 9% or $20.3 million from $222.3 million
- Excluding significant items, diluted earnings per common share (EPS) of $0.10 compared to diluted EPS of $0.20(1)
- Excluding significant items, net income of $13.3 million compared to net income of $24.0 million(1)
- Net income of $11.0 million compared to net income of $18.9 million
- Diluted EPS of $0.08 compared to diluted EPS of $0.15
First Quarter of Fiscal 2016 vs Fourth Quarter of Fiscal 2015
- Revenue of $214.5 million, a decrease of 8% or $18.0 million from $232.5 million
- Excluding significant items, expenses of $199.1 million, a decrease of 10% or $20.9 million from $220.0 million(1)
- Expenses of $202.0 million, a decrease of 23% or $58.8 million from $260.8 million
- Excluding significant items, diluted EPS of $0.10 compared to diluted EPS of $0.05(1)
- Excluding significant items, net income of $13.3 million compared to net income of $8.8 million (1)
- Net income of $11.0 million compared to a net loss of $26.3 million
- Diluted EPS of $0.08 compared to a diluted loss per common share of $0.33
Financial Condition at End of First Quarter Fiscal 2016 vs. Fourth Quarter Fiscal 2015
- Cash and cash equivalents balance of $424.6 million, up $102.2 million from $322.3 million
- Working capital of $432.6 million, an increase of $5.4 million from $427.2 million
- Total shareholders' equity of $1.128 billion, up $10.4 million from $1.118 billion
- Book value per diluted common share of $8.34, down $0.36 from $8.71(3)
- On August 4, 2015, the Board of Directors approved a quarterly dividend of $0.05 per common share payable on September 10, 2015 with a record date of August 28, 2015.
- On August 4, 2015, the Board of Directors also approved a cash dividend of $0.34375 per Series A Preferred Share payable on September 30, 2015 with a record date of September 18, 2015, and a cash dividend of $0.359375 per Series C Preferred Share payable on September 30, 2015 to Series C Preferred shareholders of record as at September 18, 2015.
SUMMARY OF OPERATIONS
- On August 4, 2015, the Board of Directors approved the filing of an application to renew the normal course issuer bid ("NCIB") to provide for the ability to purchase, at the Company's discretion, up to a maximum of 5,163,737 common shares through the facilities of the TSX during the period from August 13, 2015 to August 12, 2016. 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.
- Canaccord Genuity participated in 79 transactions globally, raising total proceeds of C$11.5 billion(4) during fiscal Q1/16
- Canaccord Genuity led or co-led in 27 transactions globally, raising total proceeds of C$1.7 billion(4) during fiscal Q1/16
- Significant investment banking transactions for Canaccord Genuity during fiscal Q1/16 include:
- £451.0 million underwritten rights issue for Optimal Payments PLC on AIM in relation to its proposed €1.1 billion acquisition of Skrill Group
- £227.0 million for Playtech PLC on the LSE
- US$102.0 million for DP Aircraft I Limited on the LSE
- US$95.0 million for EMED Mining Public Limited on AIM
- C$66.1 million for American Hotel Income Properties REIT LP on the TSX
- C$57.5 million for ProMetic Life Sciences Inc. on the TSX
- C$49.1 million for Innova Gaming Group Inc. on the TSX
- AUD$45.0 million for AMA Group Limited on the ASX
- US$41.4 million for SCYNEXIS, Inc. on NASDAQ
- £40.0 million for Silence Therapeutics PLC on AIM
- AUD$36.5 million for AirXpanders Inc. on the ASX
- US$35.2 million for Pure Multi-Family REIT LP on the TSXV
- US$35.1 million for BioAmber on the NYSE
- US$34.8 million for Liopcine Inc. on NASDAQ
- C$32.9 million for Gaming Nation Inc. on the TSXV
- AUD$32.3 million for Orocobre Limited on the ASX
- AUD$24.1 million for Affinity Education Group Limited on the ASX
- US$21.2 million for Aldeyra Therapeutics Inc. on NASDAQ
- £20.0 million for Nanoco Group PLC on their admission to the Main Market of the LSE
- £17.5 million for Tungsten Corporation PLC on AIM
- £15.8 million for Charles Stanley Group PLC on AIM
- In Canada, Canaccord Genuity participated in raising $174.1 million for government and corporate bond issuances during fiscal Q1/16
- Canaccord Genuity generated advisory revenues of $21.7 million during fiscal Q1/16, a decrease of $11.0 million or 33.7% compared to the same quarter last year
- During fiscal Q1/16, significant M&A and advisory transactions included:
- Postmedia Network Canada Corporation on their acquisition of Sun Media Corporation
- GLENTEL Inc. on its sale to BCE Inc.
- NorthWest Healthcare Properties REIT on the acquisition of NorthWest International Healthcare Properties REIT
- Barclays, Candlewick Asset Management, Crédit Agriole, and RBS on the disposal of LA Fitness to Pure Gym
- Playtech PLC on the €458.0 million acquisition of 91.1% of TradeFX Limited
- Active Private Equity on the sale of Evans Holdings Limited to ECI Partners
- Hipcricket, Inc. on its Chapter 11 case and Plan of Reorganization
- Fosun International Limited on its strategic partnership with Ingenico Group
- PhotoMedex, Inc. on the sale of its XTRAC® and VTRAC® businesses to MELA Sciences, Inc.
- Payzone Ventures Limited on the disposal of Payzone Ireland
- Candlewick Asset Management on the disposal of Barbon Holdings
Canaccord Genuity Wealth Management (Global)
- Globally, Canaccord Genuity Wealth Management generated $66.9 million in revenue in Q1/16
- Assets under administration in Canada and assets under management in the UK & Europe and Australia were $34.3 billion at the end of Q1/16(3)
Canaccord Genuity Wealth Management (North America)
- Canaccord Genuity Wealth Management (North America) generated $30.9 million in revenue and, after intersegment allocations and before taxes, recorded a net loss of $0.4 million before taxes in Q1/16
- Assets under administration in Canada were $10.6 billion as at June 30, 2015, down 1% from $10.7 billion at the end of the previous quarter and down 3% from $11.0 billion at the end of fiscal Q1/15(3)
- Assets under management in Canada (discretionary) were $1.4 billion as at June 30, 2015, down 9% from $1.6 billion at the end of the previous quarter and up 12% from $1.3 billion at the end of fiscal Q1/15(3)
- Canaccord Genuity Wealth Management had 147 Advisory Teams(5), a decrease of five Advisory Teams from March 31, 2015 and a decrease of 16 from June 30, 2014
Canaccord Genuity Wealth Management (UK & Europe)
- Wealth management operations in the UK & Europe generated $34.4 million in revenue and, after intersegment allocations, and excluding significant items, recorded net income of $6.4 million before taxes in Q1/16(1)
- Assets under management (discretionary and non-discretionary) were $22.8 billion (£11.6 billion) (3) as at June 30, 2015
The non-International Financial Reporting Standards (IFRS) measures presented include assets under administration, assets under management, book value per diluted common share and figures that exclude significant items. Significant items include restructuring costs, amortization of intangible assets, impairment of goodwill and acquisition-related expense items, which include costs recognized in relation to both prospective and completed acquisitions. Book value per diluted common share is calculated as total common shareholders' equity divided by the number of diluted common shares outstanding and, commencing in Q1/14, adjusted for shares purchased under NCIB and not yet cancelled, and estimated forfeitures in respect of unvested share awards under share-based payment plans.
Management believes that these non-IFRS measures will allow for a better evaluation of the operating performance of the Company's business and facilitate meaningful comparison of results in the current period to those in prior periods and future periods. Figures that exclude significant items provide useful information by excluding certain items that may not be indicative of the Company's core operating results. A limitation of utilizing these figures that exclude significant items is that the IFRS accounting effects of these items do in fact reflect the underlying financial results of the Company's business; thus, these effects should not be ignored in evaluating and analyzing the Company's financial results. Therefore, management believes that the Company's IFRS measures of financial performance and the respective non-IFRS measures should be considered together.
Selected financial information excluding significant items (1)
|Three months ended June 30||
|(C$ thousands, except per share and % amounts)||2015||2014|
|Total revenue per IFRS||$214,454||$245,556||(12.7)%|
|Total expenses per IFRS||202,007||222,268||(9.1)%|
|Significant items recorded in Canaccord Genuity|
|Amortization of intangible assets||1,410||1,741||(19.0)%|
|Significant items recorded in Canaccord Genuity Wealth Management|
|Amortization of intangible assets||1,467||2,240||(34.5)%|
|Significant items recorded in Corporate and Other|
|Total significant items||2,877||6,364||(54.8)%|
|Total expenses excluding significant items||199,130||215,904||(7.8)%|
|Net income before income taxes - adjusted||$15,324||$29,652||(48.3)%|
|Income taxes - adjusted||2,005||5,635||(64.4)%|
|Net income - adjusted||$13,319||$24,017||(44.5)%|
|Earnings per common share - basic, adjusted||$0.10||$0.22||(54.5)%|
|Earnings per common share - diluted, adjusted||$0.10||$0.20||(50.0)%|
|(1) Figures excluding significant items are non-IFRS measures.|
During the first fiscal quarter of 2016, our business returned to profitability, a result of our recent restructuring initiatives and our commitment to scaling our business to perform under changing market conditions. Excluding significant items, Canaccord Genuity Group earned $13.3 million in net income, an improvement of 51% over the previous three-month period, and our earnings per share doubled to $0.10 per share from $0.05 per share last quarter. Earnings per share, including significant items, for the first fiscal quarter improved to $0.08 from $(0.33) in the previous three-month period.
Continued focus on creating stronger operating efficiencies
Excluding significant items, firm wide expenses as a percentage of revenue for the first fiscal quarter were 93% and non-compensation related expenses as a percentage of revenue were 33%, in-line with our expectations in a weaker revenue environment and a direct result of our initiatives to reduce fixed costs across our business. Our overall compensation ratio during the quarter decreased to 60%, marking a return to more normalized compensation levels across our global operations.
Improving fundamentals in UK & Europe capital markets
During the quarter, our global capital markets business generated revenues of $145 million. Canaccord Genuity participated in 79 transactions, to raise total proceeds of $11.5 billion for global growth companies.
Our global banking and advisory teams successfully completed a number of transactions for long-standing clients of our firm, demonstrating our ability to harness opportunities when broad market fundamentals are supportive. Our ability to consistently deliver value for clients at every stage of the business cycle has made Canaccord Genuity the partner of choice for companies focused on growth.
In the UK, we experienced notable sequential improvement in capital markets activity following the recent national election, a reflection of our strong market position under improving market conditions. For the first fiscal quarter, our capital markets operations in the region recorded a year-over-year increase of 30% in advisory revenues. When compared to the previous three-month period, our investment banking operations in the region increased revenues by 123%, due in part to our role in the £451.0 million underwritten rights issue for Optimal Payments PLC on AIM, in relation to its proposed €1.1 billion acquisition of Skrill Group. As earnings expectations for European equities begin to trend higher, I am confident that our capital markets business in the UK & Europe will continue to drive stronger returns over time.
Volatile market conditions helped our trading operations in the US deliver strong results. This division contributed first quarter revenues of $17.7 million, a year-over-year increase of 32%, with the majority of activity driven by our International Equities Group.
In our Asia-Pacific operations, we were able to increase revenues from commissions and fees by 12% during the quarter, as we further establish our capability in research, sales and trading. While we are hopeful that Chinese markets will begin to stabilize, we have lowered our near-term expectations for advisory activity in the region.
As global growth visibility improves, I am confident that our capital markets business is well positioned to benefit from increasingly positive market sentiment throughout the balance of our fiscal year.
Consistent growth of fee-based assets across our global wealth management business
Our global wealth management operations generated revenues of $65.3 million during our first fiscal quarter. Assets under management at the end of the three-month period amounted to $34.3 billion, an improvement of 7% compared to the same period last year. Notably, pre-tax profit margin in our UK wealth management operations increased by 8 percentage points year-over-year, a testament to the strength of our operations in the region. With our investments in back-office infrastructure complete, we expect continued margin improvement as we pursue aggressive growth for this business.
As a result of our ongoing cost reduction initiatives, we have also reduced expenses in our Canadian wealth management operations by 12% compared to the first quarter of last year. The steps we have taken to improve our advisor and product mix have allowed us to decrease our expenses as a percentage of revenue by 7 percentage points over the past twelve months, and we have reduced losses in this business by 83% compared to the first quarter of last year.
In November, we launched our proprietary asset management product, GPS Optimized Portfolios, across our Canadian wealth management business, an initiative that added to our development costs in the last fiscal year. In the absence of this investment, I am pleased to report our Canadian wealth management operations would have achieved a modest level of profitability at the end of our first fiscal quarter, a reflection of this team's unwavering commitment to the strategic repositioning of this business.
While the GPS platform is still in its first year, by the end of our first fiscal quarter we had successfully doubled assets under management to $51.4 million. As increasing numbers of investors recognize the value of incorporating a risk-focused product into their investment strategy, we are confident this unique range of portfolios will continue to be a strong contributor to long-term recurring revenue growth in our Canadian operations.
In recent months, we have communicated our plan to appoint a new Chief Executive Officer. I am pleased to report that the board of directors is actively progressing with the comprehensive candidate review and diligence process and we expect to announce a successor to lead our firm in the fall. In the interim, we continue to work together as partners and fellow shareholders, to advance our strategic initiatives with a focus on delivering stronger long-term returns for our employees, our clients, and our investors.
Chairman & CEO
Canaccord Genuity Group 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.canaccordgenuitygroup.com/EN/IR/Pages/default.aspx.
CONFERENCE CALL AND WEBCAST PRESENTATION
Interested parties are invited to listen to Canaccord Genuity's fiscal first quarter 2016 results conference call, via live webcast or a toll free number. The conference call is scheduled for Wednesday, August 5, 2015 at 5:00 a.m. Pacific time, 8:00 a.m. Eastern time, 1:00 p.m. UK time, 8:00 p.m. China Standard Time, and 10:00 pm Australia EST. During the call, senior executives will comment on the results 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 Q1/16 earnings call. If a passcode is requested, please use 85124159.
A replay of the conference call can be accessed after 8:00 a.m. (Pacific Time), 11:00 a.m. (Eastern Time) on Wednesday, August 5, 2015 until September 18, 2015 at 416-849-0833 or 1-855-859-2056 by entering passcode 85124159 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, Guernsey, Jersey, and the Isle of Man. Canaccord Genuity, the international capital markets division, operates in Canada, the US, the UK, France, 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.
|None of the information on the Company's websites at www.canaccordgenuity.com, www.canaccordgenuitygroup.com, and www.canaccordgenuity.com/cm should be considered incorporated herein by reference.|
1 Figures excluding significant items are non-IFRS measures. See Non-IFRS
Measures on page 4.
2 Net income attributable to common shareholders is calculated as the net
income adjusted for non-controlling interests and preferred share
3 See Non-IFRS Measures on page 4.
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.|
SOURCE Canaccord Genuity Group Inc.
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