Mr. Dan Daviau reports
CANACCORD GENUITY GROUP INC. REPORTS SECOND QUARTER FISCAL 2016 RESULTS
During the second quarter of fiscal 2016,
the quarter ended Sept. 30, 2015, Canaccord Genuity Group Inc.
generated $190.6-million in
revenue. Excluding significant items, the company recorded net income of $1.9-million or a net loss of $900,000 attributable to common shareholders (a loss per common share of one cent). Including all expense items, on an
IFRS (international financial reporting standards) basis, the company recorded a net loss of $400,000 or a net
loss attributable to common shareholders of $3.1-million (a loss per common share of three cents).
All dollar amounts are stated in Canadian dollars unless otherwise
indicated.
Excluding significant items, second quarter loss per common share of
one cent was driven by a significant decline in global equity capital markets
activity.
"The sharp decline in global capital markets activity during the period
negatively impacted performance in many areas of our business," said
Dan Daviau, president and chief executive officer of Canaccord Genuity Group. "We are
using this period of market weakness productively, with a focus on
improving alignment across our global operations to enhance operating
efficiencies and drive significantly stronger outcomes for our
shareholders and for our clients."
Second quarter of fiscal 2016 compared with second quarter of fiscal 2015
- Revenue of $190.6-million, a decrease of 19 per cent or $45.7-million from
$236.3 million;
- Excluding significant items, expenses of $186.2-million, a decrease of
10 per cent or $21.2-million from $207.4-million;
- Expenses of $189.1-million, a decrease of 11 per cent or $22.2-million from
$211.3-million;
- Excluding significant items, loss per common share of one cent compared with diluted earnings per share (EPS) of 17 cents;
- Excluding significant items, net income of $1.9-million compared with net
income of $20.7-million;
- Net loss of $400,000 compared with net income of $17.6-million;
- Loss per common share of three cents compared with diluted EPS of 14 cents.
Second quarter of fiscal 2016 compared with first quarter of fiscal 2016
- Revenue of $190.6-million, a decrease of 11 per cent or $23.9-million from
$214.5-million;
- Excluding significant items, expenses of $186.2-million, a decrease of
6 per cent or $12.9-million from $199.1-million;
- Expenses of $189.1-million, a decrease of 6 per cent or $12.9-million from
$202-million;
- Excluding significant items, loss per common share of one cent compared with diluted EPS of 10 cents;
- Excluding significant items, net income of $1.9-million compared with net
income of $13.3-million;
-
Net loss of $400,000 compared with a net income of $11-million;
- Loss per common share of three cents compared with a diluted EPS of eight cents.
Year-to-date fiscal 2016 compared with year-to-date fiscal 2015
Six months ended Sept. 30, 2015, compared with six months ended Sept. 30,
2014
- Revenue of $405.1-million, a decrease of 16 per cent or $76.7-million from
$481.8-million;
- Excluding significant items, expenses of $385.4-million, a decrease of
9 per cent or $37.9-million from $423.3-million;
- Expenses of $391.1-million, a decrease of 10 per cent or $42.5-million from
$433.6-million;
- Excluding significant items, diluted EPS of nine cents compared with diluted
EPS of 37 cents;
- Excluding significant items, net income of $15.3-million compared with net
income of $44.8-million;
- Net income of $10.5-million compared with net income of $36.5-million;
- Diluted EPS of four cents compared with diluted EPS of 29 cents.
Financial condition at end of second quarter fiscal 2016 compared with fourth
quarter fiscal 2015
- Cash and cash equivalents balance of $289.4-million, down $32.9-million
from $322.3-million;
- Working capital of $426.7-million, a decrease of $500,000 from
$427.2-million;
- Total shareholders' equity of $1.128-billion, an increase of $10-million from $1.118-billion;
- Book value per diluted common share of $8.38, a decrease of 33 cents from
$8.71;
- On Nov. 4, 2015, the board of directors approved a quarterly
dividend of five cents per common share payable on Dec. 10, 2015, with a
record date of Nov. 20, 2015;
- On Nov. 4, 2015, the board of directors also approved a cash
dividend of 34.375 cents per Series A preferred share payable on Dec. 31, 2015, with a record date of Dec. 18, 2015, and a cash dividend
of 35.9375 cents per Series C preferred share payable on Dec. 31, 2015,
to Series C preferred shareholders of record as at Dec. 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 (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 Toronto Stock Exchange and on alternative trading systems 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 per cent of
the company's outstanding common shares. A total of 375,050 shares
have been purchased under the terms of the NCIB during the six months
ended Sept. 30, 2015, of which 15,000 shares were held in treasury
as of Sept. 30, 2015, until subsequently cancelled on Oct. 30,
2015;
- On Sept. 11, 2015, the appointment of Mr. Daviau as president and
chief executive officer of Canaccord Genuity Group was announced,
effective Oct. 1, 2015.
Capital markets
- Canaccord Genuity participated in 62 transactions globally, raising
total proceeds of $5.8-billion during fiscal Q2 2016;
-
Canaccord Genuity led or co-led in 26 transactions globally, raising
total proceeds of $1.6-billion during fiscal Q2 2016;
- Significant investment banking transactions for Canaccord Genuity during
fiscal Q2 2016 include:
- $402.5-million for Acasta Enterprises Inc. on the TSX;
- $206.9-million (U.S.) for Atara Biotherapeutics Inc. on Nasdaq;
- 200.7 million British pounds for Market Tech Holdings Ltd. on the AIM;
- $155.2-million (U.S.) for ConforMIS Inc. on Nasdaq;
- $138-million (U.S.) for Penumbra Inc. on the New York Stock Exchange;
- $117.2-million (U.S.) for vTv Therapeutics Inc. on Nasdaq;
- 127.8 million British pounds for The Renewables Infrastructure Group Ltd. on the
London Stock Exchange;
- $105-million for NYX Gaming Group Ltd. on the TSX;
- $98-million (U.S.) for Aquinox Pharmaceuticals Inc. on Nasdaq;
- 91.2 million British pounds for HICL Infrastructure Company Ltd. on the LSE;
- $81.2-million for Automotive Properties REIT on the TSX;
- $51-million (U.S.) for Energy Focus Inc. on Nasdaq;
- $45-million (Australian) for Freelancer Ltd. on the Australian Securities Exchange;
- 35.9 million British pounds for Ediston Property Investment Company PLC on the LSE;
- 32.4 million euros for Cellnovo Group SA on Euronext Paris;
- $20-million (Australian) for MainStream Aquaculture Pty Ltd. (private placement);
- In Canada, Canaccord Genuity participated in raising $233-million for
government and corporate bond issuances during fiscal Q2 2016;
- Canaccord Genuity generated advisory revenues of $43.9-million during
fiscal Q2 2016, a decrease of $11.8-million or 21 per cent compared with the same
quarter last year;
- During fiscal Q2 2016, significant M&A (mergers and acquisitions) and advisory transactions included:
- Distech Controls Inc. on its $318-million sale to Acuity Brands Inc.;
- Data & Audio-Visual Enterprises Wireless Inc., operating as Mobilicity,
on its sale to Rogers Communications;
- NYX Gaming Group Ltd. on its $150-million acquisition of Chartwell
Technology Inc. and Cryptologic Ltd.;
- Charles Bank Capital Partners on its acquisition of Six Degrees
Technology Group Ltd.;
- Bridgepoint Development Capital and shareholders of Siblu Holdings
Ltd. on the sale of Siblu to Stirling Square Capital Partners;
- Altura Medical Inc. on its sale to Lombard Medical Inc.;
- Amino Technologies PLC on the acquisition of Entone Inc.;
- Anite PLC on its sale to Keysight Technologies Inc.;
- Shoe Sensation Inc. on its sale to J.W. Childs Associates LP;
- Harvest International New Energy Inc., a subsidiary of Sunshine Kaidi
New Energy Group Co. of China, on the $147-million acquisition of
Alter NRG Corp.;
- TFS Corp. Ltd. on its acquisition of ViroXis Corp. and
Santalis Pharmaceuticals;
- United House Group Holdings on the disposal of Tegeneration Portfolio to
Telford Homes PLC.
Canaccord Genuity Wealth Management (global)
- Globally, Canaccord Genuity Wealth Management generated $62.5-million in
revenue in Q2 2016;
-
Assets under administration in Canada and assets under management in the
United Kingdom, Europe and Australia were $33.2-billion at the end of Q2 2016.
Canaccord Genuity Wealth Management (North America)
- Canaccord Genuity Wealth Management (North America) generated $26.2-million in revenue and, after intersegment allocations and before
taxes, recorded a net loss of $1.7-million in Q2 2016;
-
Assets under administration in Canada were $9.5-billion as at Sept. 30, 2015, a decrease of 11 per cent from $10.6-billion at the end of the
previous quarter and a decrease of 12 per cent from $10.8-billion at the end of
fiscal Q2 2015;
- Assets under management in Canada (discretionary) were $1.36-billion as
at Sept. 30, 2015, a decrease of 4 per cent from $1.42-billion at the end
of the previous quarter and a decrease of 2 per cent from $1.39-billion at the
end of fiscal Q2 2015;
- Canaccord Genuity Wealth Management had 141 advisory teams, a decrease of six advisory teams from June 30, 2015, and a decrease of 21
from Sept. 30, 2014.
Canaccord Genuity Wealth Management (U.K. and Europe)
- Wealth management operations in the U.K. and Europe generated $34-million
in revenue and, after intersegment allocations and excluding
significant items, recorded net income of $6-million before taxes in
Q2 2016;
- Assets under management (discretionary and non-discretionary) were $22.9-billion (11.4 billion British pounds) as at Sept. 30, 2015, an increase of 1 per cent
from $22.8-billion (11.6 billion British pounds) at the end of the previous quarter
and an increase of 12 per cent from $20.4-billion (11.3 billion British pounds) from Sept. 30, 2014.
SELECTED FINANCIAL INFORMATION EXCLUDING SIGNIFICANT ITEMS (1)
(In thousands of dollars, except per-share amounts)
Three months ended Six months ended
Sept. 30, Sept. 30,
2015 2014 2015 2014
Total revenue per IFRS $190,602 $236,271 $405,056 $481,827
Total expenses per IFRS $189,103 $211,326 $391,110 $433,594
Significant items recorded in Canaccord Genuity
Amortization of intangible assets 1,320 1,707 2,730 3,448
Restructuring costs - - - -
Significant items recorded in Canaccord Genuity
Wealth Management
Amortization of intangible assets 1,557 2,224 3,024 4,464
Restructuring costs - - - 783
Significant items recorded in corporate and other
restructuring costs - - - 1,600
Total significant items 2,877 3,931 5,754 10,295
Total expenses excluding significant items 186,226 207,395 385,356 423,299
Net income before taxes - adjusted $4,376 $28,876 $19,700 $58,528
Income taxes -- adjusted 2,433 8,130 4,438 13,765
Net income -- adjusted $1,943 $20,746 $15,262 $44,763
(Loss) earnings per common share -- basic, adjusted $(0.01) $0.19 $0.10 $0.40
(Loss) earnings per common share -- diluted, adjusted $(0.01) $0.17 $0.09 $0.37
(1) Figures excluding significant items are non-IFRS measures.
"Fellow shareholders:
"Our second quarter was one of the more challenging periods for global
capital markets in recent history. During the three-month period, the
MSCI world equity index fell 9.9 per cent, the S&P/TSX lost 8.6 per cent and the S&P
500 dropped 6.9 per cent. This translated into significantly lower capital
markets activity for our business when compared to the same period last
year.
"For the second fiscal quarter of 2016, Canaccord Genuity Group Inc.
earned revenue of $190.6-million. Excluding significant items, net
income for the period was $1.9-million, which translated into a loss
per common share of one cent. The overall decline in net income we
experienced was largely a result of reduced activity by corporate
issuers, leading to a decrease in investment banking and advisory fees
when compared to the same period last year. Notwithstanding the
difficult environment, we are pleased to report year-over-year revenue
growth in our U.S. capital markets, and U.K. and Europe wealth management
businesses.
"Committed to driving net income growth
"As incoming CEO, I am intensely focused on addressing the challenges in
our business. With the support of my global colleagues, I have
prioritized initiatives which centre on driving longer term value
creation and ultimately, improving our net income results. I firmly
believe the principles driving these initiatives will become entrenched
in our corporate culture, and better enhance alignment across our firm
and with our shareholders.
"Specifically, we are using this period of market weakness to address and
eliminate any barriers which have inhibited our regional businesses
from maximizing opportunities globally. We have renewed our emphasis on
key verticals to drive growth, and we are working to enhance global
coordination across our firm, as a more partnership-based
organization. Through improved transparency and a stronger bottom-line
focus, our employees will become better aligned with shareholders. Most
importantly, we are working to redefine our culture and strengthen our
reputation as a leading global independent investment bank.
"An important component of these initiatives is a commitment to improve
global alignment and operating efficiencies across our business. Since
Oct. 1, we have made early progress in identifying areas where we can reduce
fixed costs and strengthen alignment between our front- and back-office
operations. While I am confident we can implement certain developments
near term, the benefits of larger projects may require multiple
quarters to translate into our financial results. I look forward to
updating you on our advancements, as we approach the release of our
third quarter results in early February.
"Capital markets
"In the second fiscal quarter of 2016, Canaccord Genuity participated in
62 transactions and raised total proceeds of $5.8-billion for our
clients.
"During this three-month period, global equity capital markets volumes
fell to their lowest levels since 2011. While the industry saw
improving demand for new issues at the start of the quarter,
significant volatility in August and September led to the withdrawal or
postponement of a number of transactions. With the exception of our U.S.
capital markets business, which generated revenues of $55.9-million, or
44.2 per cent of global capital markets revenues, all other geographies had
declining revenue for the period. Compared to the same quarter last
year, revenue from our global capital markets business declined by 26 per cent,
to $126.5-million.
"In Canada, equity underwriting activity decreased by 52 per cent compared to the
same period last year. As a result, our Canadian capital markets
business experienced the most significant decline in revenue, a 64-per-cent drop compared to the same period one year ago. The decrease was
magnified by two substantial transactions that took place during second
fiscal quarter of last year.
"The strong start to the quarter allowed our U.K. and Europe business to
increase year-over-year equity underwriting revenues by 7.9 per cent, but
lower activity in advisory and principal trading impacted total
revenues for this business, which declined by 22 per cent to $38.3-million for
the quarter.
"While our Australian business has demonstrated its ability to outperform
in recent quarters, a dramatic drop in capital raising activity across
the Asia-Pacific region during the period was reflected in second
quarter results, and revenue in this business fell 38 per cent, to $7.5-million. During the period, we took steps to establish a single point
of leadership for the Asia-Pacific region, an initiative which will
promote better alignment across our investment banking and advisory
practices, and one we expect will enhance earnings capability going
forward.
"The steps we are taking to improve global alignment will provide
opportunities for incremental revenue improvement over the coming
quarters. Additionally, with our differentiated service offering and
proven global execution capabilities, each of our businesses continues
to enjoy a strong pipeline. I am confident in our ability to deliver
value on behalf of growth companies when market conditions are
supportive.
"While we remain cautious in our outlook for near-term global investment
banking and advisory activity, we are focused on positioning our
business to capitalize on the intermediate and longer term
opportunities in sectors we have targeted for growth.
"Stronger fee-based business limits losses for wealth management
operations
"Our global wealth management operations generated revenue of $60.2-million for the quarter, a decrease of $1.2-million compared to the
second quarter of last year. This result was mostly attributable to
lower commission fees and revenues associated with the decline in
investment banking activity in our North American operations.
"When compared to previous periods of similar revenue generation, our
Canadian Wealth Management business has been able to successfully limit
losses, highlighting the progress we have made in reducing fixed costs
and shifting towards a stronger recurring revenue model. Importantly,
expenses as a percentage of revenue in this business were 86.7 per cent for the
quarter, unchanged from the previous three-month period and a decrease
of 3.5 percentage points when compared to the same period last year.
"Our in-house asset management platform has been a significant
contributor to improving the financial strength of this business. One
year ago, we launched our proprietary asset management product, GPS
optimized portfolios, and brought management of our ETF (exchange-traded fund) portfolios
in-house. Since then, total assets under management in these products
have surpassed $200-million dollars.
"Our U.K. Wealth Management operations generated revenue of $34-million,
an increase of 14 per cent compared to the second quarter of fiscal 2015. Since
70 per cent of revenue in this business is attributable to fee-related
activities, it is less sensitive to changes in market conditions. At
the end of the quarter, assets under management in this business were
$22.9-billion, an increase of 12 per cent from the same period one year ago.
Additionally, assets in funds managed by our in-house investment team
surpassed $1-billion at the end of the quarter. While a percentage of
total asset growth is attributable to the impact of foreign exchange
rates, revenue growth for the period demonstrates our ability to
attract and retain assets in a challenging market environment.
"Looking ahead, we will continue to pursue opportunities to increase
fee-based revenues -- and ultimately, shareholder value -- across our
global wealth management operations. As we continue to strengthen our
wealth management offering, we expect to achieve this growth both
organically and through strategic business opportunities.
"Commitment to our communities
"In any market, our teams are committed to making positive contributions
in the communities where we operate. During the quarter, we hosted the
third annual Canaccord Genuity Great Camp Adventure Walk to benefit the
Hospital for Sick Children. A grand total of $2.2-million was raised to
support the goal of improving health and well-being for children around
the world. From Oct. 14 to 23, through commissions generated from
designated agency trades, our U.S. capital markets team helped raise
$600,000 (U.S.) to benefit Youth INC during Trading Week for
Kids, bringing our four-year contribution to more than $3-million.
"Positioning our business to excel as global growth visibility improves
"Our success depends on the strength of many components.
"While each of our geographies is in a different state of evolution, all
are capable of growing market share and producing stronger returns.
Although we expect this challenging operating environment to persist
through the balance of the fiscal year, I believe we have a number of
opportunities to strengthen our offering and continue to enhance the
delivery of regional and global service levels for our clients. Looking
ahead, we will continue to identify our greatest areas of opportunity
and focus our efforts where we can be most successful.
"I am committed to creating a robust culture of accountability and
partnership, which empowers our employees to deliver the best work of
their careers. We have a highly capable and focused team in place, all
of whom are energized and eager to advance our strategic goals and
continue to deliver stronger outcomes for our clients and our
shareholders.
"I am confident in the strength of our global franchise. As we navigate
these difficult markets together, I encourage you to measure our
success with a longer term view of creating significant shareholder
value.
"Kind regards,
"Dan Daviau
"President & 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 on the company's website.
Conference call and webcast presentation
Interested parties are invited to listen to Canaccord Genuity's fiscal
second quarter 2016 results conference call via live webcast or a toll-free number. The conference call is scheduled for Thursday, Nov. 5,
2015, at 5 a.m. Pacific Time, 8 a.m. Eastern Time, 1 p.m. U.K.
time, 9 p.m. China Standard Time and, on Nov. 6, 2015, at 12 a.m. Australian 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 on 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's Q2 2016
earnings call. If a passcode is requested, please use 57509793.
A replay of the conference call will be available on Nov. 5, 2015,
after 8 a.m. (Pacific Time), 11 a.m. (Eastern Time), 4 p.m. (U.K.
time), and, on Nov. 6, 2015, at 12 a.m. (China Standard Time) and
at 3 a.m. (Australian EST) until Dec. 25, 2015, at
416-849-0833 or 1-855-859-2056, by entering passcode 57509793, followed by the pound symbol.
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