March 4, 2014 - GMP Announces Q4/13 and Year-End 2013 Results

For further information about GMP Capital Inc., our results for fiscal 2013 and the meaning of certain references, this earnings release should be read in conjunction with our annual financial statements as at and for the year ended December 31, 2013 (2013 Annual Financial Statements), our management's discussion and analysis for the year ended December 31, 2013 (2013 Annual MD&A) and our annual information form dated March 3, 2014, which can be accessed on our website at gmpcapital.com and on SEDAR at sedar.com. Unless otherwise indicated, all dollar amounts are expressed in Canadian dollars and have been taken from our 2013 Annual Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS).

Toronto, March 4, 2014 - GMP Capital Inc. (GMP) (TSX: GMP) today reported revenue of $67.8 million in fourth quarter 2013, down 15.9% compared with the same period a year ago. GMP recorded net income of $5.8 million and diluted earnings per share (EPS) of $0.06 in fourth quarter 2013 compared with net income of $6.7 million and diluted EPS of $0.08 in fourth quarter 2012.

“This quarter saw a significant rebound from the cyclical lows experienced in the third quarter. Leading the way was our performance in underwriting which included 19 Lead or Co-Lead mandates equating to $4.6 billion and is indicative of the ongoing strength of our core capital markets franchise," said Harris Fricker, Chief Executive Officer, GMP. "We continue to believe that the firm’s enhanced operating torque will provide attractive returns to our shareholders in more normalized market conditions."

Revenue was $219.5 million for 2013, down 17.9% compared with 2012. GMP recorded net income of $9.6 million and a diluted loss per share of $0.02 in 2013 compared with net income of $6.1 million and a diluted loss per share $0.04 in 2012. Commenting further, Mr. Fricker said, “Amid challenging conditions, we have been relentless in pursuing operational efficiencies while exploiting opportunities to expand and diversify our core franchise. We believe that these measures and our conservative capitalization provide the foundation for GMP’s long-term sustainability. We have reason for guarded optimism as we enter 2014 well-positioned to take advantage of building market momentum."

FINANCIAL HIGHLIGHTS

Fourth Quarter 2013 versus Fourth Quarter 2012

• Revenue of $67.8 million compared with $80.5 million

• Net income of $5.8 million compared with $6.7 million

• On an adjusted basis1, GMP recorded net income of $9.1 million and net income attributable to common shareholders of $7.5 million compared with net income of $13.2 million and net income attributable to common shareholders of $12.1 million

• Diluted EPS of $0.06 compared with $0.08

• On an adjusted basis1, diluted EPS was $0.11 compared with $0.17

• Return on common equity (ROE)1 was 6.6% compared with 8.8%

2013 versus 2012

• Revenue of $219.5 million compared with $267.4 million

• Net income of $9.6 million compared with $6.1 million

• On an adjusted basis1, GMP recorded net income of $9.1 million and net income attributable to common shareholders of $5.1 million compared with net income of $20.5 million and net income attributable to common shareholders of $11.6 million

• Diluted loss per share of $0.02 compared with a diluted loss per share of $0.04

• On an adjusted basis1, diluted EPS was $0.07 compared with diluted EPS of $0.17

• ROE1 of negative 0.6% compared with negative 1.1%

1. Considered to be a non-GAAP financial measure. This measure does not have any standardized meaning prescribed by generally accepted accounting principles (GAAP) under IFRS and is therefore unlikely to be comparable to similar measures presented by other issuers. This data should be read in conjunction with the “Non-GAAP Measures” section at the end of this press release and the “Presentation of Financial Information and Non-GAAP Measures” section in the 2013 Annual MD&A.

FOURTH QUARTER 2013 BUSINESS SEGMENT FINANCIAL RESULTS

CAPITAL MARKETS


Revenue of $64.0 million - a decrease of 7.9% compared with fourth quarter 2012 largely due to lower commission revenue and lower returns on principal transactions.

• Commission revenue of $11.4 million decreased 24.1% compared with fourth quarter 2012 consistent with lower industry-wide trading activity.

• Principal transactions generated a net loss of $0.9 million in fourth quarter 2013 compared with a net gain of $2.4 million in fourth quarter 2012. This decrease reflects higher realized losses on security positions acquired in connection with investment banking mandates partly offset by a 13.5% year-over-year increase to $8.4 million in net gains on client-related fixed income trading revenue.

• Investment banking revenue of $51.0 million increased 1.4% compared with fourth quarter 2012 largely due to higher equity and debt underwriting revenue, partly offset by decreased advisory revenue. Revenue outside of the resource sectors more than doubled relative to fourth quarter 2012, which helped offset lower levels of activity in the mining and oil and gas sectors.

Expenses of $52.0 million - a decrease of 14.5% compared with fourth quarter 2012 primarily reflecting restructuring charges of $7.6 million recorded in the prior year quarter as well as lower variable compensation costs in fourth quarter 2013 in line with reduced revenues and lower professional fees and transaction-related expenses.

On an adjusted basis1, income before income taxes was $12.6 million in fourth quarter 2013 compared with income before income taxes of $17.3 million in fourth quarter 2012.

GMP Securities L.P. highlights:

• Named the Top Canadian Mid-Market Investment Bank for 2013 by Canadian Dealmakers.

• Ranked first in Canada for the dollar value of common equity underwriting transactions completed during fourth quarter 2013 for which we were lead or co-lead. (Source: FPinfomart)

• Participated in 71 underwriting transactions completed in Canada during fourth quarter 2013, valued at $8.1 billion, of which we led or co-led 19 of these transactions valued at $4.6 billion. Source: Company reports.

• Successfully co-led Barrick Gold Corporation's US$3.0 billion equity offering, the largest-ever Canadian bought deal in terms of number of shares issued.

• Continued revenue diversification momentum: 38% of fourth quarter 2013 investment banking revenue was generated outside of the resource sectors compared with 16% in fourth quarter 2012.

WEALTH MANAGEMENT

The Wealth Management segment consists of GMP's non-controlling ownership interest in Richardson GMP Limited (Richardson GMP) and, commencing in 2013, this segment also includes the financial results of GMP's asset management business, CQI Capital Management L.P. (CQI), formerly GMP Investment Management L.P.


 

• Wealth Management reported a loss before income taxes of $2.0 million in fourth quarter 2013 compared with income before income taxes of $1.1 million in fourth quarter 2012. The decrease primarily reflects our share of Richardson GMP's net loss in fourth quarter 2013, which included acquisition and integration costs incurred in connection with its acquisition of Macquarie Private Wealth Inc. (MPW Canada). GMP's proportionate share of these costs was $3.0 million in fourth quarter 2013.

• Lower investment management and fee income reflects a decrease in assets under management (AUM) at CQI following the sale of the majority of the advisory contracts relating to CQI's AUM to Fiera Capital Corporation during the second quarter of 2013 (AUM sale transaction).

Richardson GMP highlights:

The following information sets forth an overview of the consolidated financial results of Richardson GMP for the periods indicated, on a 100% basis; noting, however, that GMP owns a 32.3% non-controlling interest of Richardson GMP as at December 31, 2013.

• Revenue of $66.0 million - an increase of 68% compared with fourth quarter 2012 primarily due to higher investment management and fee income commensurate with increased average assets under administration (AUA)1.

• Earned adjusted EBITDA1,2 of $9.5 million in fourth quarter 2013, up $4.5 million compared with fourth quarter 2012.

• Ended fiscal 2013 with AUA of $29.0 billion, up $14.2 billion from fiscal 2012, and 275 investment advisory teams, up from 114 teams at the end of fiscal 2012. 2.

This data should be read in conjunction with the “Supplemental Information” section at the end of this press release and in the 2013 Annual MD&A. 

Richardson GMP Transfers Select Advisor Teams to Dundee Goodman Private Wealth

On January 13, 2014, Richardson GMP announced that it had reached an agreement with Dundee Goodman Private Wealth (Dundee Goodman), a division of Dundee Securities Ltd., pursuant to which a group of approximately 60 investment advisors and their related staff will be transferred to Dundee Goodman from Richardson GMP. These advisors and staff joined Richardson GMP as part of its acquisition of MPW Canada. Richardson GMP will receive approximately $15 million in connection with this transaction which is expected to be completed during the first quarter of 2014, subject to a number of customary closing conditions including regulatory approval by the Investment Industry Regulatory Organization of Canada.

CORPORATE

The following table sets forth the financial results for the Corporate segment for the periods presented.

 

Revenue for the fiscal periods presented in the table above was comprised primarily of revenue received in support of carrying broker and other administrative support services provided to Richardson GMP. The decrease in such revenues reflects restructuring initiatives we undertook in fiscal 2012, which resulted in Richardson GMP assuming control over critical functions previously performed at GMP Securities. The decline in total expenses reflects a reduction in headcount in connection with the restructuring initiatives.

FISCAL 2013 FINANCIAL HIGHLIGHTS

Selected Financial Information

Financial Performance

Fiscal 2013 vs. Fiscal 2012

GMP recorded net income of $9.6 million in fiscal 2013 compared with net income of $6.1 million in fiscal 2012. The increase in net income was primarily driven by the impact of the AUM sale transaction which added $11.3 million to fiscal 2013 net income. Lower compensation expense also contributed to the improved result. On an adjusted basis, net income in fiscal 2013 was $9.1 million compared with $20.5 million in fiscal 2012. Total revenue decreased in fiscal 2013 compared with fiscal 2012 primarily due to lower investment banking revenue in our Capital Markets segment. Investment banking revenue decreased 31% compared with fiscal 2012 reflecting a significant reduction in M&A advisory fees in our core sectors, particularly within mining and oil & gas. Commissions decreased consistent with lower industry-wide trading activity. Reduced investment management and fee income is in line with the decrease in CQI's AUM subsequent to the AUM sale transaction. The improvement in principal transactions was primarily driven by higher client-related fixed income trading revenue and lower losses on client facilitation trading. 5 Total expenses decreased in fiscal 2013 compared with fiscal 2012, primarily reflecting lower variable compensation amounts in line with the decrease in revenue generation as well as lower fixed compensation due to reduced headcount following restructuring initiatives. Expenses for fiscal 2013 included $7.6 million in pre-tax restructuring charges compared with $16.1 million in such charges recorded in fiscal 2012. Fiscal 2013 selling, general and administrative expenses were lower primarily due to lower professional fees, a decline in AUM-related trailer fees and reduced deal-related expenses.

DIVIDENDS

On March 3, 2014, the board of directors of GMP declared a quarterly cash dividend of $0.05 per common share, and a quarterly cash dividend of $0.3438 per Cumulative 5-Year Rate Reset Preferred Share, Series B, each payable on March 31, 2014, to the respective shareholders of record on March 14, 2014.

NORMAL COURSE ISSUER BID ACTIVITY

During the three months ended December 31, 2013, GMP purchased for cancellation 436,700 common shares under its normal course issuer bid for an aggregate cost of $2.8 million. CONFERENCE CALL A conference call and live audio webcast to discuss GMP’s fourth quarter and fiscal 2013 results will be held this morning at 10:00 a.m. (ET). GMP executives will host the call followed by a question-and-answer session for analysts and institutional investors. Interested parties are invited to access the quarterly conference call on a listen-only basis by dialing 416-644-3415 or 1-877-974-0445 (toll free) or via live audio webcast at http://www.gmpcapital.com/investor. A recording of the conference call will be available until Tuesday, March 11, 2014, by dialing 416-640-1917 or 1-877-289-8525 (toll free) and entering access code 4660461#. The webcast will be archived at http://www.gmpcapital.com/investor.

NON-GAAP MEASURES

Consistent with GMP's management framework, management uses certain measures to assess GMP's financial performance, which are not generally accepted accounting principle (GAAP) measures under IFRS. These measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. Non- GAAP measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of GMP's performance, liquidity, cash flows and profitability. For further information, refer to the “Presentation of Financial Information and Non-GAAP Measures” section in the 2013 Annual MD&A.

The table below provides a reconciliation of GMP's reported results to its adjusted measures:

 

SUPPLEMENTAL INFORMATION

The following supplemental information reflects how management of Richardson GMP assesses the financial performance of Richardson GMP. Supplemental Financial Information - Richardson GMP Richardson GMP's management assesses performance on both a reported and an adjusted basis and considers both bases to be useful in assessing underlying, ongoing business performance. Presenting results on both bases also permits readers to assess the impact of specified items on financial results. Richardson GMP's management use certain measures to assess the financial performance of Richardson GMP that are not GAAP measures under IFRS. Adjusted EBITDA does not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other issuers. This Non- GAAP measure should not be considered as an alternative to net income or comparable metrics determined in accordance with IFRS as indicators of Richardson GMP's performance, liquidity, cash flows and profitability. Richardson GMP's management believes adjusting results by excluding the impact of the specified items is more reflective of ongoing financial performance and cash generating capabilities and provides readers with an enhanced understanding of how management views Richardson GMP's core performance. For further information, refer to the "Supplemental Information" section in the 2013 Annual MD&A. The following table sets forth an overview of the consolidated financial results of Richardson GMP for the periods indicated, on a 100% basis; noting, however, that GMP owns a 32.3% non-controlling interest of Richardson GMP as at December 31, 2013.

 

FORWARD-LOOKING INFORMATION

This press release contains “forward-looking information” as defined under applicable Canadian securities laws. This information includes, but is not limited to, statements concerning our 2013 objectives, our strategies to achieve those objectives, as well as statements made with respect to management's beliefs, plans, estimates, projections and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking information generally can be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plans” or “continue”, or similar expressions suggesting future outcomes or events. Such forwardlooking information reflects management's current beliefs and is based on information currently available to management. 8 Forward-looking information is not a guarantee of future performance and is subject to numerous risks and uncertainties, including those described in this press release. GMP's primary business activities are both competitive and subject to various risks. These risks include market, credit, liquidity, operational and legal and regulatory risks and other risk factors including, without limitation: variation in the market value of securities, volatility and liquidity of equity and fixed income trading markets, volume of new financings and mergers and acquisitions (M&A), dependence on key personnel and sustainability of fees. Other factors, such as general economic conditions, including interest rate and exchange rate fluctuations, may also have an effect on GMP's results of operations. Many of these risks and uncertainties can affect GMP's actual results and could cause its actual results to differ materially from those expressed or implied in any forward-looking information disclosed by management or on its behalf. For a description of additional risks that could cause our actual results to materially differ from our current expectations, see “Risk Management” in the 2013 Annual MD&A and “Risk Factors” in GMP's annual information form. These risks and uncertainties are not the only ones facing GMP together with its consolidated operations controlled by it and its predecessors (GMP Group). Additional risks and uncertainties not currently known to us or that we currently consider immaterial may also impair the operations of the GMP Group. Material assumptions or factors underlying the forward-looking information contained in this press release are set out in the “Business Environment - 2013 Highlight - Market Outlook” section of the 2013 Annual MD&A and include, without limitation:the prospect of improving global economies, continued weakness in the Canadian dollar, expectations for strengthening investor confidence and improved capital markets activity in 2014. Although forward-looking information contained in this press release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with this forward-looking information. Certain statements included in this press release may be considered a “financial outlook” for purposes of applicable Canadian securities laws, and as such the financial outlook may not be appropriate for purposes other than this press release. The forward-looking information contained in this press release is made as of the date of this press release, and should not be relied upon as representing GMP's views as of any date subsequent to the date of this press release. Except as required by applicable law, management and GMP's Board of Directors undertake no obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

ABOUT GMP CAPITAL INC.

GMP is a leading independent diversified financial services firm headquartered in Toronto, Canada, providing a wide range of financial products and services to a global client base that includes corporate clients, institutional investors and high-net-worth individuals in two integrated reporting segments. The Capital Markets segment provides investment banking, including advisory and underwriting services, institutional sales and trading and research through offices located in Toronto, Montreal, Calgary, New York, Connecticut, Miami, Dallas, London, Perth and Sydney. The Capital Markets segment conducts its business through the following operating entities: GMP Securities L.P., GMP Securities, LLC, Griffiths McBurney Corp., GMP Securities Europe LLP and GMP Securities Australia Pty Limited. Wealth Management consists of GMP's non-controlling ownership interest in Richardson GMP Limited and the investment management and alternative investment products provided by CQI Capital Management L.P. Richardson GMP Limited is a full-service independent firm focused on providing exclusive and comprehensive wealth management and investment services delivered by an experienced team of investment professionals. GMP is listed on the Toronto Stock Exchange under the symbol “GMP”. For further information, please visit our corporate website at gmpcapital.com.

For further information please contact:

GMP Capital Inc.

Rocco Colella, Director, Investor Relations

145 King Street West, Suite 300,

Toronto, Ontario M5H 1J8 Tel: (416) 941-0894; Fax: (416) 943-6175

rcolella@gmpcapital.com or investorrelations@gmpcapital.com 9


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