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Enter Symbol
or Name
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CA



Canaccord Genuity Group Inc
Symbol CF
Shares Issued 103,267,682
Close 2015-08-04 C$ 7.03
Market Cap C$ 725,971,804
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Canaccord Genuity earns $11-million in fiscal Q1 2016

2015-08-04 16:14 ET - News Release

Mr. David Kassie reports

CANACCORD GENUITY GROUP INC. REPORTS FIRST QUARTER FISCAL 2016 RESULTS; EXCLUDING SIGNIFICANT ITEMS, FIRST QUARTER EARNINGS PER COMMON SHARE OF $0.10

During the first quarter of fiscal 2016, the quarter ended June 30, 2015, Canaccord Genuity Group Inc. generated $214.5-million in revenue. Excluding significant items, the company recorded net income of $13.3-million or net income of $9.5-million attributable to common shareholders (earnings per common share of 10 cents). Including all expense items, on an IFRS (international financial reporting standards) basis, the company recorded net income of $11.0-million or net income attributable to common shareholders of $7.4-million (earnings per common share of eight cents).

"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 chief executive officer 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 compared with first quarter of fiscal 2015:

  • Revenue of $214.5-million, a decrease of 13 per cent or $31.1-million from $245.6-million;
  • Excluding significant items, expenses of $199.1-million, a decrease of 8 per cent or $16.8-million from $215.9-million;
  • Expenses of $202.0-million, a decrease of 9 per cent or $20.3-million from $222.3-million;
  • Excluding significant items, diluted earnings per common share (EPS) of 10 cents compared with diluted EPS of 20 cents;
  • Excluding significant items, net income of $13.3-million compared with net income of $24.0-million;
  • Net income of $11.0-million compared with net income of $18.9-million;
  • Diluted EPS of eight cents compared with diluted EPS of 15 cents.

First quarter of fiscal 2016 compared with fourth quarter of fiscal 2015:

  • Revenue of $214.5-million, a decrease of 8 per cent or $18.0-million from $232.5-million;
  • Excluding significant items, expenses of $199.1-million, a decrease of 10 per cent or $20.9-million from $220.0-million;
  • Expenses of $202.0-million, a decrease of 23 per cent or $58.8-million from $260.8-million;
  • Excluding significant items, diluted EPS of 10 cents compared with diluted EPS of five cents;
  • Excluding significant items, net income of $13.3-million compared with net income of $8.8-million;
  • Net income of $11.0-million compared with a net loss of $26.3-million;
  • Diluted EPS of eight cents compared to a diluted loss per common share of 33 cents.

Financial condition at end of first quarter fiscal 2016 compared with 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-million, up $10.4-million from $1,118-million;
  • Book value per diluted common share of $8.34, down 36 cents from $8.71;
  • On Aug. 4, 2015, the board of directors approved a quarterly dividend of five cents per common share, payable on Sept. 10, 2015, with a record date of Aug. 28, 2015;
  • On Aug. 4, 2015, the board of directors also approved a cash dividend of 34.375 cents per Series A preferred share, payable on Sept. 30, 2015, with a record date of Sept. 18, 2015, and a cash dividend of 35.9375 cents per Series C preferred share, payable on Sept. 30, 2015, to Series C preferred shareholders of record as at Sept. 18, 2015.

Summary of operations

Corporate:

  • On Aug. 4, 2015, 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 5,163,737 common shares through the facilities of the TSX during the period from Aug. 13, 2015, to Aug. 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 per cent of the company's outstanding common shares.

Capital markets:

  • Canaccord Genuity participated in 79 transactions globally, raising total proceeds of $11.5-billion during fiscal Q1 2016;
  • Canaccord Genuity led or co-led 27 transactions globally, raising total proceeds of $1.7-billion during fiscal Q1 2016;
  • Significant investment banking transactions for Canaccord Genuity during fiscal Q1 2016 include:
    • 451.0-million-British-pound underwritten rights issue for Optimal Payments PLC on the AIM in relation to its proposed 1.1-billion-euro acquisition of Skrill Group;
    • 227.0 million British pounds for Playtech PLC on the London Stock Exchange;
    • $102.0-million (U.S.) for DP Aircraft I Ltd. on the LSE;
    • $95.0-million (U.S.) for EMED Mining Public Ltd. on the AIM;
    • $66.1-million for American Hotel Income Properties REIT LP on the Toronto Stock Exchange;
    • $57.5-million for ProMetic Life Sciences Inc. on the TSX;
    • $49.1-million for Innova Gaming Group Inc. on the TSX;
    • $45.0-million (Australian) for AMA Group Ltd. on the Australian Securities Exchange;
    • $41.4-million (U.S.) for Scynexis Inc. on the Nasdaq;
    • 40.0 million British pounds for Silence Therapeutics PLC on the AIM;
    • $36.5-million (Australian) for AirXpanders Inc. on the ASX;
    • $35.2-million (U.S.) for Pure Multi-Family REIT LP on the TSX Venture Exchange;
    • $35.1-million (U.S.) for BioAmber on the New York Stock Exchange;
    • $34.8-million (U.S.) for Liopcine Inc. on the Nasdaq;
    • $32.9-million for Gaming Nation Inc. on the TSX-V;
    • $32.3-million (Australian) for Orocobre Ltd. on the ASX;
    • $24.1-million (Australian) for Affinity Education Group Ltd. on the ASX;
    • $21.2-million (U.S.) for Aldeyra Therapeutics Inc. on the Nasdaq;
    • 20.0 million British pounds for Nanoco Group PLC on its admission to the main market of the LSE;
    • 17.5 million British pounds for Tungsten Corp. PLC on the AIM;
    • 15.8 million British pounds for Charles Stanley Group PLC on the AIM;
  • In Canada, Canaccord Genuity participated in raising $174.1-million for government and corporate bond issuances during fiscal Q1 2016;
  • Canaccord Genuity generated advisory revenues of $21.7-million during fiscal Q1 2016, a decrease of $11.0-million or 33.7 per cent compared with the same quarter last year;
  • During fiscal Q1 2016, significant M&A (mergers and acquisitions) and advisory transactions included:
    • Postmedia Network Canada Corp. on its acquisition of Sun Media Corp.;
    • 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, Credit Agriole and RBS on the disposal of LA Fitness to Pure Gym;
    • Playtech PLC on the 458.0-million-euro acquisition of 91.1 per cent of TradeFX Ltd.;
    • Active Private Equity on the sale of Evans Holdings Ltd. to ECI Partners;
    • Hipcricket Inc. on its Chapter 11 case and plan of reorganization;
    • Fosun International Ltd. on its strategic partnership with Ingenico Group;
    • PhotoMedex Inc. on the sale of its XTRAC and VTRAC businesses to MELA Sciences Inc.;
    • Payzone Ventures Ltd. 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 2016;
  • Assets under administration in Canada, and assets under management in the United Kingdom and Europe, and Australia were $34.3-billion at the end of Q1 2016.

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 $400,000 before taxes in Q1 2016;
  • Assets under administration in Canada were $10.6-billion as at June 30, 2015, down 1 per cent from $10.7-billion at the end of the previous quarter and down 3 per cent from $11.0-billion at the end of fiscal Q1 2015;
  • Assets under management in Canada (discretionary) were $1.4-billion as at June 30, 2015, down 9 per cent from $1.6-billion at the end of the previous quarter and up 12 per cent from $1.3-billion at the end of fiscal Q1 2015;
  • Canaccord Genuity Wealth Management had 147 advisory teams, a decrease of five advisory teams from March 31, 2015, and a decrease of 16 from June 30, 2014.

Canaccord Genuity Wealth Management (U.K. and Europe):

  • Wealth management operations in the U.K. and 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 2016;
  • Assets under management (discretionary and non-discretionary) were $22.8-billion (11.6 billion British pounds) as at June 30, 2015.

                SELECTED FINANCIAL INFORMATION EXCLUDING SIGNIFICANT ITEMS (1)
                         ($ thousands, except per-share amounts)

                                                                  Three months ended June 30,
                                                                           2015         2014

Total revenue per IFRS                                                 $214,454     $245,556
Total expenses per IFRS                                                 202,007      222,268
Significant items recorded in Canaccord Genuity
Amortization of intangible assets                                         1,410        1,741
Significant items recorded in Canaccord Genuity Wealth Management
Amortization of intangible assets                                         1,467        2,240
Restructuring costs                                                           -          783
Significant items recorded in corporate and other
Restructuring costs                                                           -        1,600
Total significant items                                                   2,877        6,364
Total expenses excluding significant items                              199,130      215,904
Net income before income taxes -- adjusted                              $15,324      $29,652
Income taxes -- adjusted                                                  2,005        5,635
Net income -- adjusted                                                  $13,319      $24,017
Earnings per common share -- basic, adjusted                              $0.10        $0.22
Earnings per common share -- diluted, adjusted                            $0.10        $0.20

(1) Figures excluding significant items are non-IFRS measures.

"Fellow shareholders,

"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 per cent over the previous three-month period, and our earnings per share doubled to 10 cents per share from five cents per share last quarter. Earnings per share, including significant items, for the first fiscal quarter improved to eight cents from negative 33 cents 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 per cent, and non-compensation-related expenses as a percentage of revenue were 33 per cent, 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 per cent, marking a return to more normalized compensation levels across our global operations.

"Improving fundamentals in U.K. and 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 U.K., 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 per cent in advisory revenues. When compared to the previous three-month period, our investment banking operations in the region increased revenues by 123 per cent, due in part to our role in the 451.0-million-British-pound underwritten rights issue for Optimal Payments PLC on AIM, in relation to its proposed 1.1-billion-euro acquisition of Skrill Group. As earnings expectations for European equities begin to trend higher, I am confident that our capital markets business in the U.K. and Europe will continue to drive stronger returns over time.

"Volatile market conditions helped our trading operations in the U.S. deliver strong results. This division contributed first quarter revenues of $17.7-million, a year-over-year increase of 32 per cent, 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 per cent 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 per cent compared to the same period last year. Notably, pretax profit margin in our U.K. wealth management operations increased by eight 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 per cent compared to the first quarter of last year. The steps we have taken to improve our adviser and product mix have allowed us to decrease our expenses as a percentage of revenue by seven percentage points over the past 12 months, and we have reduced losses in this business by 83 per cent 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.

"Looking ahead

"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.

"Kind regards,

"David Kassie

"Chairman and 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 the company's website.

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, Aug. 5, 2015, at 5 a.m. Pacific Time, 8 a.m. Eastern Time, 1 p.m. U.K. time, 8 p.m. China Standard Time and 10 p.m. Australian Eastern Standard Time. 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 the company's website.

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 U.K.);
  • 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 2016 earnings call. If a passcode is requested, please use 85124159.

A replay of the conference call can be accessed after 8 a.m. (Pacific Time), 11 a.m. (Eastern Time), on Wednesday, Aug. 5, 2015, until Sept. 18, 2015, at 416-849-0833 or 1-855-859-2056, by entering passcode 85124159 followed by the pound sign.

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