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GMP Capital Inc. Reports First Quarter 2018 Results

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GMP Capital Inc. Reports First Quarter 2018 Results

Canada NewsWire

  • Earned net income of $4.1 million and diluted earnings per share of $0.04 in first quarter 2018
  • On an adjusted basis1, net income was $7.3 million and diluted earnings per share was $0.08
  • Investment banking revenue increased 90% led by meaningful client engagement in cannabis and blockchain

For further information about GMP Capital Inc., our results for first quarter 2018 and the meaning of certain references, this earnings release should be read in conjunction with our unaudited interim condensed consolidated financial statements as at and for the three months ended March 31, 2018 (First Quarter 2018 Financial Statements) and our management's discussion and analysis for the three months ended March 31, 2018 (First Quarter 2018 MD&A), 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 First Quarter 2018 Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS).

 

FINANCIAL HIGHLIGHTS

First Quarter 2018 vs. First Quarter 2017

  • Revenue of $52.5 million increased from $48.9 million.
  • Net income of $4.1 million increased from $3.5 million.
  • On an adjusted basis1, net income of $7.3 million increased from $7.1 million.
  • Diluted earnings per share (EPS) of $0.04 increased from $0.03
  • On an adjusted basis1, EPS of $0.08 increased from $0.07

TORONTO, May 3, 2018 /CNW/ - GMP Capital Inc. (GMP) (TSX:GMP) today reported revenue of $52.5 million in first quarter 2018, up 8% compared with the same period a year ago.   First quarter 2018 net income was $4.1 million and EPS was $0.04, compared with net income of $3.5 million and EPS of $0.03 in first quarter 2017.  On an adjusted basis1, first quarter 2018 net income was $7.3 million and EPS was $0.08.

"2018 is off to a good start with meaningful growth in our investment banking businesses and ongoing solid contribution from our industry-leading wealth management franchise.  Leading the way in investment banking was significant client engagement from our cannabis and blockchain franchises.  An explicit element of our strategic agenda has been to diversify and further strengthen the non-commodities portion of our franchise and, we believe, our results this quarter evidences we are on the right path," said Harris Fricker, President and CEO of GMP.

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 First Quarter 2018 MD&A.

 

FIRST QUARTER 2018 BUSINESS SEGMENT HIGHLIGHTS

Capital Markets
First quarter 2018 vs. First quarter 2017

Revenue
Revenue of $48.8 million increased 28% primarily due to higher investment banking fees and higher interest revenue in connection with increased stock borrowing and lending activity. Partly offsetting the increase was lower commission revenue and lower net gains from principal transactions.

  • Investment banking revenue of $30.2 million increased 90% primarily driven by higher underwriting fees which increased 83% to $23.7 million largely reflecting increased new issue activity in cannabis and blockchain.
  • Advisory fees increased 117% to $6.4 million largely due to higher revenues in mining and special situations.
  • Principal transactions generated net gains of $6.9 million, representing a decrease of 16% primarily due to lower U.S. client-related fixed income trading activity. Partly offsetting this decrease was higher returns on principal inventories.
  • Commission revenue of $8.0 million decreased 34% on lower client trading activity.
  • Interest revenue increased 78% to $3.3 million on higher activity in stock borrowing and lending.

Expenses
Expenses of $38.3 million increased 5% largely due to higher employee compensation and benefits, which increased 18%. Higher interest expense compared with first quarter 2017 reflects improved stock borrowing and lending activity. These increases were partly offset by lower selling, general and administrative costs, which decreased 25% largely due to lower transaction-related expenses commensurate with the decline in client trading activity over the same period.

  • Variable compensation expense increased 29% in first quarter 2018 compared with first quarter 2017 commensurate with stronger revenue generation.
  • Share-based compensation expense declined 64% in connection with the expiration of certain incentive arrangements.
  • The ratio of total employee compensation and benefits to revenues decreased to 57.3% in first quarter 2018 compared with 62.5%.

Income before income taxes

  • Income before income taxes of $10.4 million compared with $1.5 million.

Wealth Management
First quarter 2018 vs. First quarter 2017

  • Wealth Management reported income before income taxes of $1.4 million compared with $8.4 million
  • First quarter 2018 and first quarter 2017 revenues include $0.6 million and $7.7 million, respectively, in dividends received in connection with GMP's preferred share investments in Richardson GMP.
  • Share of Richardson GMP net income of $0.8 million compared with $0.7 million.

Richardson GMP Highlights
The following information sets forth an overview of the consolidated financial results of Richardson GMP, on a 100% basis; noting, however, that GMP owns an approximate 32% non-controlling interest of Richardson GMP as at March 31, 2018.

  • Revenue of $75.3 million representing a 3% decrease largely on lower commission revenue.
  • Adjusted EBITDA2 of $11.2 million, decreased 1%.
  • Assets under administration of $29.9 billion as at March 31, 2018 was largely unchanged compared with the same period a year ago.

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 First Quarter 2018 MD&A.

 

DIVIDENDS

On May 2, 2018, the board of directors of GMP approved a quarterly cash dividend of $0.2257 per Cumulative 5-Year Rate Reset Preferred Share, Series B, and $0.2531 per Cumulative Floating Rate Preferred Shares, Series C, payable on July 3, 2018, to preferred shareholders of record on June 15, 2018.

NORMAL COURSE ISSUER BID RENEWAL

On May 2, 2018, the Board of Directors approved the renewal of GMP's normal course issuer bid, which has been accepted by the TSX (2018 NCIB). The 2018 NCIB will commence on May 5, 2018, and will terminate on May 4, 2019, or until such earlier date on which purchases under the 2018 NCIB have been completed. Under the 2018 NCIB, GMP is authorized to purchase for cancellation up to 5,139,428 Common Shares, representing 10% of the public float on April 20, 2018, by way of normal course purchases effected by GMP Securities L.P. through the facilities of the TSX and any other protected marketplace or alternative trading system in Canada. As of April 20, 2018, GMP had 77,970,142 Common Shares outstanding. Purchases will be made by GMP in accordance with the requirements of the TSX and the price which GMP will pay for any such Common Shares will be the market price of any such Common Shares at the time of acquisition, or such other price as may be permitted by the TSX. For purposes of the TSX rules, a maximum of 34,875 Common Shares may be purchased by GMP on any one day under the bid, except where purchases are made in accordance with the "block purchase exception" of the TSX rules. The daily repurchase limit represents 25% of the average daily trading volume of 139,501 Common Shares for the six-month period ended March 31, 2018, excluding purchases made under the previously approved normal course issuer bid program during that period.  Pursuant to a previous notice of intention to conduct a normal course issuer bid, under which GMP sought and received approval from the TSX to purchase up to 5,306,499 Common Shares for the period of April 29, 2017 to April 28, 2018, GMP has purchased, as of April 20, 2018, 3,515,064 Common Shares on the open market at an average weighted purchase cost per share of $2.9507.  GMP has renewed the 2018 NCIB program because it believes the purchase of Common Shares may at certain times enhance value to shareholders and is an appropriate use of funds. Shareholders may obtain a copy of the filed notice without charge by contacting GMP's Chief Financial Officer by telephone at (416) 367-8600 or toll-free at 1-888-301-3244 or by email at investorrelations@gmpcapital.com.


CONFERENCE CALL

A conference call and live audio webcast to discuss GMP's first quarter 2018 results will be held this morning at 9:00 a.m. (EST). Interested parties are invited to access the quarterly conference call on a listen-only basis by dialing 416-340-2216 or 1-800-377-0758 (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 Thursday, May 10, 2018, by dialing 905-694-9451 or 1-800-408-3053 (toll free) and entering access code 7262368#. The webcast will be archived at http://gmpcapital.com/Investor-Relations/Quarterly-Information.

NON-GAAP MEASURES

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 First Quarter 2018 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.

($000, except as otherwise noted)

Three months ended
March 31


2018

2017

Reported Results



Income before income taxes

7,002

3,961

Net income

4,090

3,491

Net income attributable to common shareholders

3,045

2,470

Reported Measures



Net income per common share (dollars):




Basic

0.04

0.04


Diluted

0.04

0.03

ROE 1

6.7%

4.4%

Pre-Tax Impact of Adjusting Items:




Transaction Shares

3,100

3,423


Amortization of intangible asset

217

217

Impact of adjusting items on income before income taxes

3,317

3,640

After-Tax Impact of Adjusting Items:




Transaction Shares

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