For further information about GMP Capital Inc., our results for fourth quarter and year-end 2014 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, 2014 (2014 Annual Financial Statements), our management's discussion and analysis for the year ended December 31, 2014 (2014 Annual MD&A) and our annual information form, 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 2014 Annual Financial Statements prepared in accordance with generally accepted accounting principles (GAAP) under International Financial Reporting Standards (IFRS).
Toronto, March 6, 2015 - GMP Capital Inc. (GMP) (TSX: GMP) today reported revenue of $52.8 million in fourth quarter 2014 representing a 22% decrease relative to the same period a year ago. GMP recorded a net loss of $6.9 million and a diluted loss per share of $0.12 in fourth quarter 2014 compared with net income of $5.8 million and diluted earnings per share (EPS) of $0.06 in fourth quarter 2013.
"The relatively favourable operating environment we experienced in the first several months of 2014 deteriorated abruptly late in the third quarter resulting in a sharp contraction in business activity for the remainder of the year," said Harris Fricker, Chief Executive Officer, GMP. "Our revenues decreased 22% in fourth quarter 2014 primarily reflecting a 43% decrease in investment banking fees compared with fourth quarter 2013."
Full year revenue was $264.6 million in 2014, up 21% compared with 2013. GMP recorded net income of $14.3 million and a diluted EPS of $0.12 in 2014 compared with net income of $9.6 million and a diluted loss per share $0.02 in 2013. Adjusted net income1 nearly doubled to $17.3 million in 2014, generating an adjusted return on equity (ROE)1 of 4.3% compared with 2.1% in 2013.
Commenting further, Mr. Fricker said, “Despite a difficult fourth quarter, our full year results demonstrate the potential of the operating leverage we've built into our business, which positions us for out-performance in better markets. We continue to take measures to safeguard capital and maintain liquidity while building on the strengths of our franchise."
Fourth Quarter 2014 versus Fourth Quarter 2013
2014 versus 2013
ROE of 3.2% compared with negative 0.6%; adjusted ROE of 4.3% compared with 2.1%.
1. Considered to be a non-GAAP financial measure. This measure does not have any standardized meaning prescribed by 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 2014 Annual MD&A.
FOURTH QUARTER 2014 BUSINESS SEGMENT FINANCIAL RESULTS
Fourth Quarter 2014 vs Fourth Quarter 2013
Revenue of $48.8 million decreased 24% compared with fourth quarter 2013 largely due to lower investment banking revenue.
Expenses of $52.3 million relatively consistent with fourth quarter 2013 as lower variable compensation was largely offset by incremental expenses associated with the build-out of Houston office.
• Lower variable compensation in line with reduced revenue generation.
• Employee compensation and benefits included $3.8 million associated with the Houston office.
• Selling, general and administrative expenses are 16% higher, primarily due to incremental costs associated with the Houston office.
Loss before income taxes
On an adjusted basis1, loss before income taxes was $3.4 million in fourth quarter 2014 compared with income before income taxes of $12.6 million in fourth quarter 2013.
• Ranked #1 among independent investment dealers in dollar value of completed common equity underwriting transactions in Canada during fourth quarter 2014 (Source: FPinformart).
The Wealth Management segment consists of GMP's non-controlling ownership interest in Richardson GMP Limited (Richardson GMP) and the asset management business, CQI Capital Management L.P. (CQI).
• Wealth Management reported a loss before income taxes of $1.0 million compared with a loss before income taxes of $2.0 million.
• Other income in fourth quarter 2014 reflects lower returns on GMP's investments in certain of CQI's funds.
• Share of net loss of associate reflects costs related to Richardson GMP's acquisition and integration of Macquarie Private Wealth Inc. (MPW Canada), our
share of which was $0.6 million compared with $3.0 million in the prior year quarter.
• CQI ended 2014 with $63 million in AUM representing a 19% increase during the year.
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 an approximate 31% non-controlling interest of Richardson GMP as at December 31, 2014.
• Revenue of $70.4 million representing an increase of 7%, primarily driven by higher investment management and fee income.
• Adjusted EBITDA2 increased 12% to $10.6 million.
• Ended 2014 with $27.2 billion of AUA administered by 192 advisor teams, average AUA per team in excess of $140 million.
2. Considered to be a non-GAAP financial measure. This data should be read in conjunction with the “Supplemental Information” section at the end of this press release and in the 2014 Annual MD&A.
2014 FINANCIAL HIGHLIGHTS
Selected Financial Highlights
1. In the case of a net loss, the effect Common Share options on diluted net loss per Common Share will be anti-dilutive; therefore, basic and diluted net loss per Common Share will be the same.
2014 vs. 2013
Net income increased 48% to $14.3 million in 2014 compared with net income of $9.6 million in 2013. The improvement was primarily driven by higher revenue and operating leverage. Adjusted net income was $17.3 million in 2014 compared with adjusted net income of $9.1 million in 2013.
Total revenues increased 21% in 2014 compared with 2013, primarily driven by higher investment banking revenue which rose 34%. Investment banking revenue was bolstered by higher equity and debt underwriting fees, as well as increased advisory fees. Commissions increased 18% in 2014 compared with 2013 on higher client trading volumes. Lower investment management and fee income primarily reflects the impact of the AUM Sale Transaction (for more information on the AUM Sale Transaction, refer to the "About GMP" section in the 2014 Annual MD&A). Principal transactions generated a net gain of $23.6 million in 2014 compared with a net gain of $18.6 million in the prior year. Total revenues also benefited from the depreciation of the Canadian dollar relative to the U.S. dollar.
Total expenses increased 17% in 2014 compared with 2013, primarily reflecting higher variable compensation in line with the increase in revenue generation. Incremental costs associated with the expansion of our energy business into Houston also contributed to the increase in total expenses. Expenses in 2014 were adversely impacted by the depreciation of the Canadian dollar relative to the U.S. dollar. Expenses in 2013 included $7.6 million in pre-tax restructuring charges.
Share of net income (loss) of associate reflects improved results at Richardson GMP subsequent to the MPW Canada acquisition and includes associated integration costs, our share of which was $4.1 million in 2014 compared with $3.4 million in 2013. For more information on Richardson GMP's 2014 financial performance, refer to the "Supplemental Information" section at the end of this press release and the 2014 Annual MD&A.
On March 5, 2015, 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, 2015, to the respective shareholders of record on March 16, 2015.
NORMAL COURSE ISSUER BID ACTIVITY
During fourth quarter 2014, GMP purchased for cancellation 1,584,284 Common Shares under its normal course issuer bid at a volume-weighted average price per Common Share of $6.00.
A conference call and live audio webcast to discuss GMP’s fourth quarter and fiscal 2014 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 416-340-2218 or 1-866-223-7781 (toll free) or via live audio webcast at http://gmpcapital.com/Investor-Relations/Quarterly-Information.
. A recording of the conference call will be available until Friday, March 13, 2015, by dialing 905-694-9451 or 1-800-408-3053 (toll free) and entering access code 9358180#. The webcast will be archived at http://gmpcapital.com/Investor-Relations/Quarterly-Information.
We use certain measures to assess our financial performance that are not 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 2014 Annual MD&A.
The following table provides a reconciliation of GMP’s reported results to its adjusted measures including the composition of the adjusted measures for the periods presented.
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. EBITDA and adjusted EBITDA do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. These Non-GAAP measures should not be considered as alternatives 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 2014 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 an approximate 31% non-controlling interest of Richardson GMP as at December 31, 2014.
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 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 forward-looking information reflects management's current beliefs and is based on information currently available to management.
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, 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” and "Risk Factors" in the 2014 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 include, but are not limited to, “Business Environment - 2014 Highlights - Outlook”, “Segment Results - Capital Markets - Outlook”, “Segment Results - Wealth Management - Outlook”, “Liquidity and Capital Resources” sections of the 2014 Annual MD&A. 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, Houston, Stamford, Miami, Dallas, London, Perth and Sydney. Wealth Management consists of GMP's non-controlling ownership interest in Richardson GMP Limited and CQI Capital Management L.P., an asset management firm. Richardson GMP Limited, Canada’s largest independent wealth management firm, is 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
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