Mr. Paul Reynolds reports
CANACCORD GENUITY GROUP INC. REPORTS FIRST QUARTER FISCAL 2015 RESULTS
In the first quarter of fiscal 2015, the
quarter ended June 30, 2014, Canaccord Genuity Group Inc. generated $245.6-million in revenue.
Excluding significant items, the company recorded net income of $24.0-million,
or net income of $20.0-million attributable to common shareholders (20 cents per diluted common share). Including all expense items, the company recorded net income of $18.9-million, or net
income attributable to common shareholders of $15.1-million (earnings per diluted common share of 15 cents).
"Our fiscal first quarter results were characterized by the positive
momentum in our Canadian capital markets business that started in the
second half of fiscal 2014," said Paul Reynolds, president and chief executive officer of
Canaccord Genuity Group. "During the quarter, we made continued
progress growing all of our businesses, reflecting the impact of our
diversification strategy and the differentiated global service we
provide."
First quarter of fiscal 2015 versus first quarter of fiscal 2014
- Revenue of $245.6-million, an increase of 31 per cent, or $58.4-million, from
$187.2-million;
-
Excluding significant items, expenses of $215.9-million, up 24 per cent, or $41.4-million, from $174.5-million;
- Expenses of $222.3-million, an increase of 25 per cent, or $44.2-million, from
$178.1-million;
-
Excluding significant items, diluted earnings per common share of
20 cents compared with diluted EPS of nine cents;
- Excluding significant items, net income of $24.0-million compared with net
income of $11.8-million;
- Net income of $18.9-million compared with net income of $7.9-million;
-
Diluted EPS of 15 cents compared with diluted EPS of six cents.
First quarter of fiscal 2015 versus fourth quarter of fiscal 2014
- Revenue of $245.6-million, down 3 per cent, or $8.1-million, from $253.7-million;
-
Excluding significant items, expenses of $215.9-million, down 1 per cent, or $1.9-million, from $217.8-million;
- Expenses of $222.3-million, an increase of $600,000 from $221.7-million;
-
Excluding significant items, diluted EPS of 20 cents compared with diluted
EPS of 25 cents;
- Excluding significant items, net income of $24.0-million compared with net
income of $29.1-million;
- Net income of $18.9-million compared with net income of $25.9-million;
-
Diluted EPS of 15 cents compared with diluted EPS of 22 cents.
Financial condition at end of first quarter fiscal 2015 versus fourth
quarter fiscal 2014
- Cash and cash equivalents balance of $273.9-million, down $90.4-million
from $364.3-million;
-
Working capital of $435.1-million, down $34.3-million from $469.4-million;
-
Total shareholders' equity of $1.12-billion, down $45.4-million from
$1.17-billion;
-
Book value per diluted common share of $8.70, down 35 cents from $9.05;
-
On Aug. 5, 2014, the board of directors approved a quarterly dividend
of five cents per common share payable on Sept. 10, 2014, with a record
date of Aug. 29, 2014;
-
On Aug. 5, 2014, the board of directors also approved a cash dividend
of 34.375 cents per Series A preferred share payable on Sept. 30, 2014,
with a record date of Sept. 19, 2014, and a cash dividend of
35.9375 cents per Series C preferred share payable on Sept. 30, 2014, to
Series C preferred shareholders of record as at Sept. 19, 2014.
Summary of operations
Corporate
- On May 23, 2014, Canaccord Genuity announced that Peter Brown stepped
down as a director and honorary chairman.
- On June 20, 2014, Canaccord Genuity was added to the S&P/TSX Composite
Index, the S&P/TSX Composite Dividend Index and the S&P/TSX High Beta
Index.
- On June 24, 2014 Canaccord Genuity announced the nomination of Kalpana
Desai as an independent director for election at the upcoming annual
general meeting of shareholders.
- During the quarter, the company purchased and cancelled 264,200 of its
common shares under the terms of its normal course issuer bid (NCIB).
-
On Aug. 5, 2014, the board of directors approved the filing of an
application to renew the normal course issuer bid 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 Toronto Stock Exchange during the period from Aug. 13,
2014, to Aug. 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 per cent of
the company's outstanding common shares.
Capital markets
- Canaccord Genuity led or co-led 50 transactions globally, raising total
proceeds of $4.0-billion during fiscal Q1 2015.
- Canaccord Genuity participated in 115 transactions globally, raising
total proceeds of $11.3-billion during fiscal Q1 2015.
- Canaccord Genuity participated in the following significant investment
banking transactions during fiscal Q1 2015:
-
$828.7-million (U.S.) for Abengoa Yield on the Nasdaq;
- 352.0 million British pounds for Zoopla Property Group PLC on the London Stock Exchange;
- $316.8-million (U.S.) for 3D Systems Inc. on the New York Stock Exchange;
- 294.0 million British pounds for Polypipe Group PLC on the LSE;
- $289.8-million for Callidus Capital Corp. on the Toronto Stock Exchange;
- 194.3 million British pounds for Cambian Group on the LSE;
- 180.0 million euros for SLM Solutions AG on the Frankfurt Stock Exchange;
- $178.3-million for Pure Industrial Real Estate Trust on the TSX;
- $172.6-million for Bellatrix Exploration Ltd. on the TSX and NYSE;
- 154.4 million British pounds for OneSavings Bank PLC on the LSE;
- $125.0-million for Canacol Energy Ltd. on the TSX;
- 120.8 million British pounds for Game Digital PLC on the LSE;
- $120.0-million (Australian) for Greencross Ltd. on the Australian Stock Exchange;
- $115.7-million for Kinaxis Inc. on the TSX;
- $115.1-million for Artis Real Estate Investment Trust on the TSX;
- $115.0-million for Lumenpulse Inc. on the TSX;
- 100.0 million British pounds for Volution Group PLC on the LSE;
- $90.5-million (U.S.) for ePlus Inc. on the Nasdaq;
- 79.3 million British pounds for Patisserie Holdings PLC on the Alternative Investment Market;
- $67.2-million (Australian) for TFS Corporation Ltd. on the ASX;
- $62.0-million (U.S.) for SCYNEXIS Inc. on the Nasdaq;
- $57.5-million (U.S.) for Abraxas Petroleum on the Nasdaq;
- $56.1-million (U.S.) for Radius Health Inc. on the Nasdaq;
-
$50.7-million for American Hotel Income Properties REIT LP on the TSX;
- 50.0 million British pounds for HICL Infrastructure Co. Ltd. on the LSE;
- 41.5 million British pounds for River & Mercantile Group on AIM;
- $33.6-million (Australian) for iBuy Group Ltd. on the ASX;
-
$31.3-million for Merus Labs International Inc. on the TSX;
-
$28.8-million for Mosaic Capital Corporation on the TSX-V;
- 26.0 million British pounds for EKF Diagnostics on the LSE;
-
$25.0-million (Australian) for Rubik Financial Ltd. on the ASX;
- 24.0 million British pounds for Rathbones on the LSE;
- $22.8-million for Transeastern Power Trust on the TSX;
- $22.5-million (U.S.) for Hydrogenics Corp. on the Nasdaq;
-
$20.7-million for MBAC Fertilizer Corp. on the TSX;
- $20.4-million (Australian) for Tiger Resources Ltd. on the ASX;
- $20.0-million (U.S.) for Venaxis Inc. on the Nasdaq;
-
In Canada, Canaccord Genuity participated in raising $342.8-million for
government and corporate bond issuances during fiscal Q1 2015.
- Canaccord Genuity generated advisory revenues of $32.7-million during
fiscal Q1 2015, a decrease of 9 per cent compared with the same quarter last year.
- During fiscal Q1 2015, Canaccord Genuity advised on the following mergers and acquisitions, and
advisory transactions:
- Yamana Gold on the $3.9-billion joint acquisition with Agnico Eagle of
Osisko Mining Corp.;
- Iridium Communications on the amendment of its $1.8-billion (U.S.) Coface
export financing;
-
Jaguar Mining Inc. on its $315.0-million (U.S.) recapitalization;
-
Viewpoint Construction Software on its recapitalization;
-
Chalet Bidco Ltd. on debt financing supporting the acquisition of
Ogier Fiduciary Services Ltd.;
- AIB, RBS and Santander on their disposal of Morethan Hotels Group to
Somerston Capital and Lone Star;
-
Gaucho on the refinancing of its debt facilities;
-
HgCapital on its disposal of Americana International Ltd.;
- Minova Insurance Holdings on its financing from Capital Z Partners
Management;
-
EKF Diagnostics on its acquisition of DiaSpect Medical AB;
-
EKF Diagnostics on its acquisition of Selah Genomics;
-
Photomedex Inc. on its acquisition of LCA-Vision Inc.
Canaccord Genuity Wealth Management (global)
- Globally, Canaccord Genuity Wealth Management generated $64.1-million in
revenue in Q1 2015.
-
Assets under administration in Canada, the
United Kingdom, Europe and Australia were $32.1-billion at the end of Q1 2015.
Canaccord Genuity Wealth Management (North America)
- Canaccord Genuity Wealth Management (North America) generated $32.4-million in revenue and, after intersegment allocations, recorded a net
loss of $2.3-million before taxes in Q1 2015.
-
Assets under administration in Canada were $11.0-billion as at June 30,
2014, up 8 per cent from $10.2-billion at the end of the previous quarter and
up 18 per cent from $9.3-billion at the end of fiscal Q1 2014.
- Assets under management in Canada (discretionary) were $1.3-billion as
at June 30, 2014, up 5 per cent from $1.2-billion at the end of the previous
quarter and up 44 per cent from $880-million at the end of fiscal Q1 2014.
- As at June 30, 2014, Canaccord Genuity Wealth Management had 163
advisory teams, a decrease of 10 advisory teams from June 30, 2013, and an increase of
three from March 31, 2014.
Canaccord Genuity Wealth Management (U.K. and Europe)
- Wealth management operations in the U.K. and Europe generated $30.1-million in revenue and, after intersegment allocations and excluding
significant items, recorded net income of $5.1-million before taxes in
Q1 2015.
- Assets under management (discretionary and non-discretionary) were $20.5-billion (11.2 billion British pounds).
SELECTED FINANCIAL INFORMATION EXCLUDING SIGNIFICANT ITEMS
(In thousands, except per share)
Three months ended June 30,
2014 2013
Total revenue per IFRS $245,556 $187,231
Total expenses per IFRS 222,268 178,118
Significant items recorded in Canaccord Genuity
Amortization of intangible assets 1,741 1,702
Significant items recorded in Canaccord Genuity Wealth Management
Amortization of intangible assets 2,240 1,889
Restructuring costs 783 -
Significant items recorded in corporate and other
Restructuring costs 1,600 -
Total significant items 6,364 3,591
Total expenses excluding significant items 215,904 174,527
Net income before taxes -- adjusted 29,652 12,704
Income taxes -- adjusted 5,635 894
Net income -- adjusted 24,017 11,810
Earnings per common share -- basic, adjusted 0.22 0.10
Earnings per common share -- diluted, adjusted 0.20 0.09
"Fellow shareholders:
"Our solid results this quarter reflect the impact of our diversification
strategy and the ongoing strength of our global platform. For the first
three months of fiscal 2015, Canaccord Genuity Group earned $245.6-million in revenue, an increase of 31 per cent compared with the same period last
year.
"While the strength of our global business and diversified revenue
streams were the main drivers of our revenue growth, the impact of
foreign currency translation, particularly the U.S. dollar and British
pound, further supported our revenue growth for the period.
"We continue in our efforts to realize cost synergies across our global
business. Despite higher expenses related to increased business
activity and the occurrence of one-time costs associated with certain
restructuring charges, our expenses as a percentage of revenue during
the quarter decreased by 4.6 per cent compared with the same period last year.
"Canadian capital markets revenue increases 77 per cent year over year
"Driven by robust performance on the TSX, we are experiencing a welcome
recovery in financing and advisory activity in Canada. On a
year-over-year basis, our Canadian capital markets division experienced
a 162-per-cent increase in investment banking revenue and a 166-per-cent increase in
advisory fees, resulting in revenue of $58.2-million, an overall
increase of 77 per cent over the same period last year.
"In addition to an improved market environment, the growth in our
financing and advisory businesses is attributable to the long-standing
relationships and track record of success we have historically achieved
for our clients in the region. Our position as the leading Canadian
independent firm for M&A advisory was reflected in our engagement by
Yamana Gold on the $3.9-billion acquisition of Osisko Mining
Corp. Another example of our strong market position and
differentiated global service level was demonstrated in our role as
lead adviser and bookrunner to long-time client Amaya Gaming Group in
a significant transaction that closed on Aug. 1.
"Increased financing activity in all regions
"During the first fiscal quarter, Canaccord Genuity participated in 115
transactions globally, raising a total of $11.3-billion. By
establishing consistent advisory and equity transaction leadership
across our capital markets businesses, we have increased our market
share and continue to improve our relevance to clients in all regions.
"Our global capital markets division generated revenue of $179.2-million
during the first quarter, an increase of 37 per cent compared with the same
period last year. While financing activities increased across all
regions, our U.S. and Canadian capital markets divisions were the largest
contributors during the quarter, with 35 per cent and 32 per cent of total global
capital markets revenues, respectively.
"Through our integrated approach to leadership in the Asia-Pacific
region, we continue to gain market share and broaden our reach into
additional sectors. For the fiscal first quarter, this region
contributed 8 per cent of total Canaccord Genuity revenues, doubling its
contribution from 4 per cent during the first quarter of last year.
"Global assets under administration and management increase 24 per cent
"Further reflecting improved market conditions, our Canadian wealth
management division increased revenues by 22 per cent to $32.4-million and
increased assets under administration to $11-billion, an improvement of
18 per cent compared with the first quarter of last year. We continue to focus on
growing our share of fee-based and discretionary managed accounts with
existing advisory teams and through targeted recruitment. As a result
of these initiatives, we have successfully increased Canadian assets
under management by 44 per cent year over year to $1.3-billion.
"The momentum we are building in our Canadian wealth management division,
and the impact of strategic and operational changes, led to a 56-per-cent
reduction in year-over-year losses for this business.
"Assets under management in our U.K. and Europe wealth management
operations increased to $20.5-billion, an improvement of 27 per cent over the
same period last year.
"We are committed to growing our global wealth management operations and
we have begun to invest strategically in advancing the scale and scope
of this business. The Canadian launch of our proprietary global
portfolio solutions (GPS) product is expected later in the fiscal
year. In the U.K., the November, 2014, projected launch of a new front-
and back-office system will provide the necessary infrastructure for
continued growth in the region.
"A stronger business for all stakeholders
"Monday, June 30, marked the 10-year anniversary of Canaccord Genuity's
initial public offering on the Toronto Stock Exchange. Over the past
decade, we have worked hard to grow from our roots as a Canadian
brokerage into a leading independent global investment bank. Through
sector and regional diversification, our business is able to maintain a
level of stability in volatile markets that is not shared by our
domestically focused competitors. This not only protects value for
shareholders, but ensures we are able to provide a consistent service
offering to clients in all regions.
"On June 20, Canaccord Genuity was added to the S&P/TSX Composite Index,
the principal broad market measure for the Canadian equity markets.
With our recent successes and robust pipeline of activity for the
coming quarters, this milestone achievement comes at a time when our
firm is well positioned to benefit from the increased visibility and
broader market participation associated with being a part of the index.
"Looking forward
"By leveraging our expanded operations and integrated service model, we
will continue to reinforce a culture of cost containment across the
firm, while making disciplined investments in areas that support our
growth and enhance our competitive strengths.
"We are committed to maintaining our strong position in Canadian capital
markets and growing our wealth management business in that geography.
We will continue to invest strategically in our U.S. capital markets
division, a business we expect to grow aggressively in the coming
years.
"In the U.K. and Europe, we will focus on enhancing our leading position in
the mid-market and growing our advisory capability in continental
Europe. We will also continue to pursue strategic opportunities to grow
our U.K. wealth management business.
"We see significant opportunity for growth in the Asia-Pacific region and
in response to growing client demand are working towards establishing
a robust sales, trading and research capability in Singapore.
"I am confident in the outlook for our business. We expect the
diversification strategy within our long-term business plan will
continue to deliver strong results. I am thankful to see all of our
teams working together so effectively, as we continue to establish
leadership in the global mid-market."
We seek Safe Harbor.
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