Canaccord Genuity Group Inc. Reports Fourth Quarter Fiscal 2019 Results

Excluding significant items, fourth quarter earnings per common share of $0.12 ⁽¹⁾

(All dollar amounts are stated in Canadian dollars unless otherwise indicated)

TORONTO, June 5, 2019 /CNW/ - During the fourth quarter of fiscal 2019, the quarter ended March 31, 2019, Canaccord Genuity Group Inc. (Canaccord Genuity, the Company, TSX: CF) generated $284.8 million in revenue. Excluding significant items ⁽¹⁾_, the Company recorded net income ⁽³⁾ of $16.6 million or net income of $14.5 million attributable to common shareholders ⁽²⁾ (earnings per common share of $0.12).  Including all expense items, on an IFRS basis, the Company recorded net income ⁽³⁾ of $2.5 million or net income of $0.3 million attributable to common shareholders ⁽²⁾ (earnings per common share of $0.00). 

During the fiscal year ended March 31, 2019, the Company generated $1.2 billion in revenue. Excluding significant items ⁽¹⁾_, the Company recorded net income ⁽³⁾ of $107.4 million or net income of $96.9 million attributable to common shareholders ⁽²⁾ (diluted earnings per common share of $0.80).  Including all expense items, on an IFRS basis, the Company recorded net income ⁽³⁾ of $71.6 million or net income of $61.1 million attributable to common shareholders ⁽²⁾ (diluted earnings per common share of $0.48).

"This is our third consecutive year of meaningful year-over-year earnings growth, a testament to the work we have done to reshape our business to deliver more predictable contributions from stable businesses and verticals," said Dan Daviau, President & CEO of Canaccord Genuity Group Inc. "We have continued to advance our mid-market leadership in our North American capital markets businesses, and our wholly owned global wealth management operations are increasingly contributing a greater share of our profitability. With an improved market environment, the backdrop for our business activities is constructive as we begin the new fiscal year." 

Fourth Quarter of Fiscal 2019 vs. Fourth Quarter of Fiscal 2018

• Revenue of $284.8 million, a decrease of 11.6% or $37.3 million from $322.1 million
• Excluding significant items, expenses of $262.6 million, a decrease of 2.7% or $7.3 million from $269.9 million ⁽¹⁾
• Expenses of $279.3 million, a decrease of 13.9% or $45.1 million from $324.4 million
• Excluding significant items, diluted earnings per common shares (EPS) of $0.12 compared to diluted EPS of $0.28 ⁽¹⁾
• Excluding significant items, net income ⁽³⁾ of $16.6 million compared to net income ⁽³⁾ of $37.3 million ⁽¹⁾
• Net income ⁽³⁾ of $2.5 million compared to a net loss ⁽³⁾ of $9.7 million
• Diluted earnings per common share of $0.00 compared to a diluted loss per common share of $0.15

Fourth Quarter of Fiscal 2019 vs Third Quarter of Fiscal 2019

• Revenue of $284.8 million, a decrease of 14.1% or $46.8 million from $331.6 million
• Excluding significant items, expenses of $262.6 million, a decrease of 8.1% or $23.1 million from $285.7 million ⁽¹⁾
• Expenses of $279.3 million, a decrease of 4.0% or $11.7 million from $291.0 million
• Excluding significant items, diluted EPS of $0.12 compared to diluted EPS of $0.28 ⁽¹⁾
• Excluding significant items, net income ⁽³⁾ of $16.6 million compared to net income ⁽³⁾ of $36.8 million ⁽¹⁾ 
• Net income ⁽³⁾ of $2.5 million compared to net income ⁽³⁾ of $32.5 million
• Diluted earnings per common share of $0.00 compared to diluted EPS of $0.25

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¹ Figures excluding significant items are non-IFRS measures.  See Non-IFRS measures on page 5.

² Net income (loss) attributable to common shareholders is calculated as the net income (loss) adjusted for non-controlling interests and preferred share dividends. 

³ Before non-controlling interests and preferred share dividends.

Fiscal 2019 vs. Fiscal 2018

• Revenue of $1.191 billion, an increase of 16.4% or $167.7 million from $1.023 billion ⁽¹⁾
• Excluding significant items, expenses of $1.055 billion, an increase of 15.6% or $142.7 million from $912.3 million ⁽¹⁾
• Expenses of $1.098 billion, an increase of 11.2% or $110.7 million from $987.1 million
• Excluding significant items, diluted EPS of $0.80 compared to diluted EPS of $0.59⁽¹⁾
• Excluding significant items, net income ⁽³⁾ of $107.4 million compared to net income ⁽³⁾ of $81.7 million ⁽¹⁾
• Net income ⁽³⁾ of $71.6 million compared to net income ⁽³⁾ of $17.1 million
• Diluted EPS of $0.48 compared to diluted EPS of $0.03

Financial Condition at End of Fourth Quarter Fiscal 2019 vs. Fourth Quarter Fiscal 2018

• Cash and cash equivalents balance of $820.7 million, a decrease of $42.1 million from $862.8 million
• Working capital of $623.2 million, an increase of $47.6 million from $575.6 million
• Total shareholders' equity of $876.4 million, an increase of $35.0 million from $841.4 million
• Book value per diluted common share of $6.25, an increase of $0.54 from $5.71 ⁽⁴⁾
• On June 5, 2019, the Board of Directors approved a dividend of $0.17 per common share, payable on July 2, 2019, with a record date of June 21, 2019. The dividend is comprised of a $0.01 base quarterly dividend and a $0.16 supplemental dividend as outlined below.

The Company's fiscal 2019 dividend policy, which was first adopted for the fiscal year ended March 31, 2017, was to pay a quarterly dividend of $0.01 per common share, and following the end of each fiscal year, pay a supplemental dividend. Supplemental dividends, if declared, would be variable from year to year.   In accordance with this policy, a supplemental dividend for fiscal 2019 was declared as described above.

On June 5, 2019, with the increasing stability in the Company's wealth management business and its expected growth profile, the Board of Directors implemented a new dividend policy pursuant to which the Company intends to pay a quarterly dividend of at least $0.05 per share, subject to the conditions described below.  This new dividend policy will take effect for the first quarter of fiscal 2020. With this new policy, the Company will no longer pay a supplemental dividend at the end of each fiscal year, but instead will adjust the regular quarterly dividend as appropriate in accordance with the factors described below and with a strategy that the Company expects will lead to growth in the quarterly dividend amount.

Although dividends are expected to be declared and paid on an ongoing basis, the Board of Directors, in its sole discretion, will determine the amount and timing of any dividends. All dividend payments will depend on general business conditions, the Company's financial condition, results of operations, capital requirements and such other factors as the Board determines to be relevant.

Together with its dividend policy, the Company also expects that it will be more active with share buyback programs, considering the factors described above, and that such programs will be an important feature of its overall strategy for providing returns to shareholders.

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⁴ See Non-IFRS Measures on page 5.

• On June 5, 2019, the Board approved a cash dividend of $0.24281 per Series A Preferred Share payable on July 2, 2019 to Series A Preferred shareholders of record as at June 21, 2019
• On June 5, 2019, the Board approved a cash dividend of $0.31206 per Series C Preferred Share payable on July 2, 2019 to Series C Preferred shareholders of record as at June 21, 2019.

SUMMARY OF OPERATIONS

Corporate

• On March 31, 2019, the Company announced a restructuring of its UK capital markets operations, Canaccord Genuity Limited. The objective of the plan is to enhance the Company's ability to achieve its goal of operating at a level which can generate profits from all of its businesses on a sustained basis. The plan resulted in a significant reduction in the Company's UK capital markets staff level. In connection with the restructuring, the Company recorded a charge of $11.8 million during Q4/19.
• On May 1, 2019, the Company announced that through its UK & Europe wealth management business, it has completed the acquisition of Thomas Miller Wealth Management Limited ("TMWML") and the private client investment management business of Thomas Miller Investment (Isle of Man) Limited. TMWML provides financial planning and investment management services to private clients, trusts, charities and corporates in the UK. The consideration for the purchase was initial cash consideration of £18.5 million (C$31.8 million), with additional contingent consideration of up to £9.5 million (C$16.8 million) payable over a period of three years following completion subject to achievement of performance targets related to revenue and client assets. In connection with the acquisition, an additional £17.0 million (C$30.0 million) has been added to the Company's existing bank loan facility.

Capital Markets

• Canaccord Genuity led or co-led 24 investment banking transactions globally, raising total proceeds of C$872.4 million ⁽⁵⁾ during fiscal Q4/19
• During fiscal Q4/19, including the 24 transactions led globally, Canaccord Genuity participated in 64 investment banking transactions globally, raising total proceeds of C$6.5 billion.
• Significant investment banking transactions for Canaccord Genuity during fiscal Q4/19 include:
• £302.1 million for The Renewables Infrastructure Group Limited on LSE
• C$57.5 million for Flower One Holdings on CSE
• £53.9 million for Low & Bonar plc on LSE
• US$53.1 million for Cansortium, Inc on CSE
• US$51.4 million for Vireo Health International, Inc on CSE
• US$48.3 million private placement for GreenLane Holdings
• C$35.1 million for Innovative Properties Inc. d/b/a Nabis Holdings on CSE
• US$33.3 million for Selecta Biosciences on Nasdaq
• US$32.8 million private placement for Green Peak Innovations
• C$28.8 million for Khiron Life Science Corp on TSXV
• C$25.0 million for Aquilini GameCo Inc. (Luminosity) on TSX-V
• C$25.0 million for Plus Products Inc on CSE
• AUD$20.0 million for Bellevue Gold Limited on ASX
• AUD$18.1 million for Think Childcare Limited on ASX
• C$17.7 million for Chantrell Ventures Corp on TSX-V
• £17.0 million for EMMAC Life Sciences Plc on its private placement
• £16.0 million for i3 Energy plc on AIM
• In Canada, Canaccord Genuity participated in raising $327.4 million for government and corporate bond issuances during fiscal Q4/19
• During fiscal Q4/19, significant M&A and advisory transactions included:
• Natura Naturals Holdings on its sale to Tilray Inc for up to C$82 million
• mc²i Groupe on the refinancing of its existing LBO debt package
• GiftCertificates.com on its sale by Marlin Equity to Tango Card and FTV Capital
• Matrix on its acquisition of Piraeus Insurance Brokers and strategic partnership with Hyperion Insurance Group
• Dye & Durham Corporation on its acquisition of Index Property Information Ltd
• Dye & Durham Corporation on its acquisition of the Cyberbahn and Marque d'or businesses from Thomson Reuters Canada
• API Technologies on the divestiture of its EMS business to Kitron
• OSRAM Licht AG on its sale of North American Service Business, Sylvania Lighting Solutions to WESCO International, Inc
• CareATC on its growth recapitalization with LLR PartnersUS
• Tessi on its refinancing and its dividend recapitalisation
• HICL Infrastructure PLC on the scheme of arrangement enabling change of domicile to the UK
• MediaAlpha on its significant minority investment by Insignia Capital Group
• Strong-Bridge Envision on its sale to HCL Technologies
• Recommended offer for GBGI Limited from Further Global

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⁵ Transactions over $1.5 million. Internally sourced information.

Canaccord Genuity Wealth Management (Global)

• Globally, Canaccord Genuity Wealth Management generated $117.1 million in revenue during Q4/19
• Assets under administration in Canada and assets under management in the UK & Europe and Australia were $65.7 billion at the end of Q4/19⁽⁴⁾, an increase of 9.2% or $5.5 billion at the end of the previous quarter and an increase of 7.3% or $4.4 billion at the end of fiscal Q4/18

Canaccord Genuity Wealth Management (North America)

• Canaccord Genuity Wealth Management (North America) generated $53.6 million in revenue and, after intersegment allocations, and excluding items significant items ⁽¹⁾, recorded net income before taxes of $5.2 million during Q4/19
• Assets under administration in North America were $20.7 billion as at March 31, 2019, an increase of 13.2% from $18.3 billion at the end of the previous quarter and an increase of 32.8% from $15.6 billion at the end of fiscal Q4/18⁽⁴⁾
• Assets under management in North America (discretionary) were $4.2 billion as at March 31, 2019, an increase of 6.8% from $4.0 billion at the end of the previous quarter and an increase of 49.9% from $2.8 billion at the end of fiscal Q4/18⁽⁴⁾ (included in assets under administration)
• Canaccord Genuity Wealth Management had 155 Advisory Teams ⁽⁶⁾ at the end of fiscal Q4/19, an increase of thirteen Advisory teams from March 31, 2018 and an increase of five Advisory teams from December 31, 2018

^6 Advisory Teams are normally comprised of one or more Investment Advisors (IAs) and their assistants and associates, who together manage a shared set of client accounts. Advisory Teams that are led by, or only include, an IA who has been licensed for less than three years are not included in our Advisory Team count, as it typically takes a new IA approximately three years to build an average-sized book of business.

Canaccord Genuity Wealth Management (UK & Europe)

• Wealth management operations in the UK & Europe generated $63.5 million in revenue and, after intersegment allocations, and excluding significant items, recorded net income before taxes of $11.4 million during Q4/19⁽¹⁾
• Assets under management (discretionary and non-discretionary) were $44.2 billion (£25.4 billion) as at March 31, 2019, an increase of 7.4% from $41.2 billion (£23.8 billion) at the end of the previous quarter and a decrease of 1.5% from $44.9 billion (£24.8 billion) at March 31, 2018⁽⁴⁾. In local currency (GBP), assets under management at March 31, 2019 increased by 6.7% compared to Q3/19 and increased 2.6% compared to March 31, 2018 ⁽⁴⁾.

Non-IFRS Measures

The non-International Financial Reporting Standards (IFRS) measures presented include assets under administration, assets under management, book value per diluted common share and figures that exclude significant items. Significant items include restructuring costs, amortization of intangible assets acquired in connection with a business combination, impairment of goodwill and other assets and acquisition-related expense items, which include costs recognized in relation to both prospective and completed acquisitions,  gains or losses related to business disposals including recognition of realized translation gains on the disposal of foreign operations, certain accounting charges related to the change in the Company's long-term incentive plan as recorded with effect on March 31, 2018, certain incentive-based costs related to the acquisition of Hargreave Hale recorded under development costs, loss related to the extinguishment of convertible debentures as recorded for accounting purposes, as well as certain expense items, typically included in development costs, which are considered by management to reflect a singular charge of a non-operating nature. Book value per diluted common share is calculated as total common shareholders' equity adjusted for assumed proceeds from the exercise of options and warrants, issuance of common shares in connection with deferred consideration related to acquisitions, settlement of a promissory note issued as purchase consideration in shares at the Company's option and conversion of convertible debentures divided by the number of diluted common shares that would then be outstanding including estimated amounts in respect of share issuance commitments including options, warrants,  other share-based payment plan, deferred consideration related to acquisitions, convertible debentures and a promissory note, as applicable, and  adjusted for shares purchased or committed to be purchased under the Company's normal course issuer bid (NCIB) and not yet cancelled and estimated forfeitures in respect of unvested share awards under share-based payment plans.

Management believes that these non-IFRS measures will allow for a better evaluation of the operating performance of the Company's business and facilitate meaningful comparison of results in the current period to those in prior periods and future periods. Figures that exclude significant items provide useful information by excluding certain items that may not be indicative of the Company's core operating results. A limitation of utilizing these figures that exclude significant items is that the IFRS accounting effects of these items do in fact reflect the underlying financial results of the Company's business; thus, these effects should not be ignored in evaluating and analyzing the Company's financial results. Therefore, management believes that the Company's IFRS measures of financial performance and the respective non-IFRS measures should be considered together.   

Selected financial information excluding significant items ⁽¹⁾

	Three months ended March 31		Quarter- over- quarter change	Years ended March 31		Year – over – year change
(C$ thousands, except per share and % amounts)	2019	2018		2019	2018
Total revenue per IFRS	$284,808	$322,080	(11.6)%	$1,190,567	$1,022,877	16.4%
Total expenses per IFRS	$279,265	$324,379	(13.9)%	$1,097,911	$987,131	11.2%
Revenue
Total revenue excluding significant items	$284,808	$322,080	(11.6)%	$1,190,567	$1,022,877	16.4%
Expenses Significant items recorded in Canaccord Genuity
Amortization of intangible assets	639	579	10.4%	2,496	2,317	7.7%
Restructuring costs^(2)	11,754	—	n.m.	13,070	4,704	177.8%.
Acquisition-related costs	803	---	n.m.	1,976	---	n.m.
Acceleration of long-term incentive plan   expense ^(3)	---	42,399	(100.0)%	---	42,399	(100.0)%
Significant items recorded in Canaccord Genuity Wealth Management
Amortization of intangible assets	2,801	2,867	(2.3)%	11,153	8,273	34.8%
Restructuring costs^(2)	---	939	n.m.	---	2,939	(100.0)%
Acquisition-related costs	918	184	n.m.	1,088	6,732	(83.8)%
Acceleration of long-term incentive plan expense ^(3)	---	4,058	n.m.	---	4,058	(100.0%)
Development costs	---	---	n.m.	245	---	n.m.
Incentive based payments related to acquisition ^(3)	(237)	1,541	(115.4)%	4,294	1,541	178.7%
Significant items recorded in Corporate and Other
Loss on convertible debentures ^(4)	---	---	n.m.	8,608	---	n.m.
Acceleration of long-term incentive plan expense	---	1,898	(100.0)%	---	1,898	(100.0)%
Total significant items	16,678	54,465	(69.4)%.	42,930	74,861	(42.7)%
Total expenses excluding significant items	262,587	269,914	(2.7)%	1,054,981	912,270	15.6%
Net income before income taxes – adjusted	$22,221	$52,166	(57.4)%	$135,586	$110,607	22.6%
Income tax expense – adjusted	5,611	14,854	(62.2)%	28,231	28,950	(2.5)%
Net income – adjusted	$16,610	$37,312	(55.5)%	$107,355	$81,657	31.5%
Net income attributable to common shareholders, adjusted	$14,466	$33,003	(56.2)%	$96,899	$68,011	42.5%
Earnings per common share – basic, adjusted	$0.15	$0.36	(58.3)%	$1.01	$0.73	38.4%
Earnings per common share – diluted, adjusted	$0.12	$0.28	(57.1)%	$0.80	$0.59	35.6%

(1)	Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 5.
(2)	Restructuring costs for the year ended March 31, 2019 related to termination benefits and certain real estate costs incurred as a result of the restructuring of our UK capital markets operations. Restructuring costs for the year ended March 31, 2018 related to termination benefits as a result of the closing of certain trading operations in our UK & Europe capital markets operations, staff reductions in our Canadian and US capital markets operations, as well as real estate costs related to the acquisition of Hargreave Hale.
(3)	Incentive-based payments related to the acquisition of Hargreave Hale determined with reference to financial targets and other performance criteria.
(4)	During Q2/19, there was an accounting loss of $13.5 million related to the extinguishment of the $60.0 million convertible unsecured subordinated debentures issued in October 2016.  This loss was adjusted to reflect directly in shareholders' equity $4.9 million of the loss that was related to the conversion feature of the extinguished debentures. The adjustment had no impact on the calculation of the basic or diluted earnings per share.
n.m.: not meaningful (percentages over 300% are indicated as n.m.)

Business segment results for the three months ended March 31, 2019

				Excluding  significant items ^(A)	IFRS
(C$ thousands, except per share amounts)	Canaccord Genuity Capital Markets	Canaccord Genuity Wealth Management	Corporate and Other	Total	Total
Revenue	$160,047	$117,130	$7,631	$284,808	$284,808
Expenses	(156,930)	(99,612)	(22,723)	(279,265)	(279,265)
Inter-segment allocations	(5,646)	(4,419)	10,065	---	---
Income (loss) before income taxes and significant items	$(2,529)	$13,099	$(5,027)	$5,543	$5,543
Significant items
Amortization of intangible assets	639	2,801	---	3,440	---
Restructuring costs	11,754	---	---	11,754	---
Acquisition-related costs	803	918	---	1,721	---
Incentive-based costs related to acquisition	---	(237)	---	(237)	---
Total significant items	13,196	3,482	---	16,678	---
Income (loss) before income taxes	$10,667	$16,581	$(5,027)	$22,221	$5,543
Income (taxes) recovery ^(B)	(3,512)	(2,773)	674	(5,611)	(3,087)
Non-controlling interests	207	---	---	207	207
Preferred share dividends ^(C)	(1,358)	(993)	---	(2,351)	(2,351)
Corporate and other ^(C)	(2,513)	(1,840)	4,353	---	---
Net income attributable to common shareholders	$3,491	$10,975	---	$14,466	$312
Dilutive EPS factors
Interest on convertible debentures, net of tax ^(C)	984	721	---	1,705	--
	$4,475	$11,696	---	$16,171	$312
Average diluted number of shares ^(D)	131,510	131,510		131,510	118,237
Diluted earnings per share, excluding significant items ^(A)	$0.03	$0.09	---	$0.12	---
Diluted earnings per share on an IFRS basis	---	---	---	---	$0.00

(A)	Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 5.
(B)	Allocation of consolidated tax provision based on management estimates by region and by business unit
(C)	Allocation to capital markets and wealth management segments based on revenue
(D)	This is the diluted share number used to calculate diluted EPS.

Business segment results for the year ended March 31, 2019

				Excluding  significant items ^(A)	IFRS
(C$ thousands, except per share amounts)	Canaccord Genuity Capital Markets	Canaccord Genuity Wealth Management	Corporate and Other	Total	Total
Revenue	$704,326	$461,811	$24,430	$1,190,567	$1,190,567
Expenses	(622,760)	(388,741)	(86,410)	(1,097,911)	(1,097,911)
Inter-segment allocations	(18,689)	(14,467)	33,156	---	---
Income (loss) before income taxes and significant items	$62,877	$58,603	$(28,824)	$92,656	$92,656
Significant items
Amortization of intangible assets	2,496	11,153	---	13,649	---
Restructuring costs	13,070	---	---	13,070	---
Acquisition-related costs	1,976	1,088	---	3,064	---
Development costs	---	245	---	245	---
Incentive-based costs related to acquisition	---	4,294	---	4,294	---
Loss on debenture extinguishment	---	---	8,608	8,608	---
Total significant items	17,542	16,780	8,608	42,930	---
Income (loss) before income taxes	$80,419	$75,383	$(20,216)	$135,586	$92,656
Income (taxes) recovery ^(B)	(22,120)	(13,222)	7,111	(28,231)	(21,074)
Non-controlling interests	(1,052)	---	---	(1,052)	(1,052)
Preferred share dividends ^(C)	(5,680)	(3,724)	---	(9,404)	(9,404)
Corporate and other ^(C)	(7,915)	(5,190)	13,105	---	---
Net income attributable to common shareholders	$43,652	53,247	---	$96,899	$61,126
Dilutive EPS factors
Interest on convertible debentures, net of tax ^(C)	4,358	2,858	---	7,216	7,216
Equity portion of loss on extinguishment of convertible debentures	---	---	---	---	(4,892)
	$48,010	$56,105	---	$104,115	$63,450
Average diluted number of shares ^(D)	130,944	130,944		130,944	130,944
Diluted earnings per share, excluding significant items ^(A)	$0.37	$0.43	---	$0.80	---
Diluted earnings per share on an IFRS basis	---	---	---	---	$0.48

(A)	Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 5.
(B)	Allocation of consolidated tax provision based on management estimates by region and by business unit
(C)	Allocation to capital markets and wealth management segments based on revenue
(D)	This is the diluted share number used to calculate diluted EPS.

Fellow Shareholders:

Fiscal 2019 was another good year for Canaccord Genuity Group Inc. We continued to deliver on our objectives of strengthening our existing businesses, and expanding into the verticals that we know best. As a result, our Company is demonstrating the resilience and sustainability that we have been working to achieve over the past few years.

Revenue for the full fiscal year was a record $1.2 billion, reflecting higher contributions from our global wealth management operations and increased capital raising and advisory activity in our core focus sectors, primarily in our North American capital markets business. On an adjusted ⁽¹⁾ basis, Canaccord Genuity Group Inc. earned pre-tax net income of $135.6 million and diluted earnings per share of $0.80 for the fiscal year, a year-over-year improvement of 36%. We estimate that roughly half of this amount was contributed by our global wealth management operations and half from our global capital markets business.

Over the past three years we have reshaped our business to derive more predictable contributions from stable businesses and verticals. 

During this period, we doubled client assets in our global wealth management businesses and increased contributions from higher-margin businesses, with an emphasis on increasing our advisory activities. In the second half of fiscal 2019, we announced two acquisitions where we saw opportunities to add complementary growth in these areas:

The addition of Thomas Miller's private client business in the UK and the Isle of Man contributes further growth in our client assets and expands our UK business. It also enhances our financial planning capabilities, as we look to expand our wealth management offering to meet the future planning needs of our growing client base. This transaction closed in May 2019.

In our capital markets business, the acquisition of mid-market advisory firm Petsky Prunier adds scale in our U.S. business and creates an exceptional opportunity to diversify our revenue streams and improve earnings power through market cycles. The revenue growth and profitability impact of these developments will be more wholly reflected as we progress through the coming fiscal year.

With a more stable and diverse global franchise, we are focused on enhancing our profit margins and delivering stronger, more sustainable returns for our shareholders.

We remain balanced in our capital allocation by maintaining capital to support the long-term growth of our business and returning excess capital to our shareholders. During the year we committed capital to grow our wealth management operations and to invest in complementary growth strategies that will make us a stronger capital markets competitor.  We also repurchased and cancelled a total of 1,379,200 shares and we expect to increase our activity around our share repurchase program into fiscal 2020. In addition, I am pleased to announce that our Board of Directors has approved a supplemental dividend of $0.16, bringing our full fiscal year dividend payment to $0.20, an increase of 33% from a year ago.

Our wholly owned wealth management operations have continued to demonstrate stability of revenues and are increasingly contributing a greater share of our profitability.

Excluding significant items, our combined wealth management businesses contributed record pre-tax net income of $75.4 million for the fiscal year, up 31% from a year ago. This was achieved on revenue of $461.8 million, a year-over-year increase of 25%. We are entrusted with client assets of $65.7 billion globally.

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¹ Adjusted earnings is a non-IFRS measure generally referred to by the company as net income excluding significant items. Refer to non-IFRS measures in the Company's MD&A. 

With 73% of revenue derived from recurring, fee-based activities, our UK & European wealth management business is an important driver of our firmwide stability. Despite increased development costs in connection with our growth initiatives, the adjusted pre-tax profit margin in this business was 19% for the fiscal year. We anticipate greater margin improvement over the coming years, as we unlock synergies and expand our financial planning capability, to simultaneously deliver greater value for our clients and shareholders.

In Canada, our wealth management business delivered another year of impressive growth, with revenue of $206.8 million, of which 38% was from fee-based assets. Stabilizing market conditions, improved transaction activity and meaningful growth in managed assets supported an increase of client assets to $20.6 billion, while the average book size per IA team improved by 23% over the year, to $135.1 million.  The adjusted pre-tax profit margin in this business continued to improve on a year-over-year basis, despite increased costs to support the growth of this segment. Recruiting momentum has remained strong and we have continued to solidify our position as a leading independent wealth management business in Canada, as our investment and improved reputation in recent years is making our platform increasingly attractive to established advisors.

Looking ahead, we anticipate that Australia will contribute a greater share of growth for our wealth management operations. Our increased investment in our Australian operation early in the fiscal year has given us a greater foothold in the region, from which we have been actively exploring opportunities to increase contributions from this segment.   

Although we have placed a strong focus on adding scale in our wealth management businesses through acquisitions and recruiting, a key element of our strategy also involves organic growth through technological innovation, product development and the expansion of our client relationships to increase allocations toward advice-based services. Looking forward, we will continue to focus on asset and revenue growth with a greater emphasis on margin improvement.

While we better leverage our scale to generate efficiencies and drive organic growth, we are steadily improving our pre-tax profit margin as we move toward our goal of 20% for our combined global wealth management businesses by fiscal 2022, a material increase from 16% this year.

Our strategic focus for our global capital markets businesses has centered on establishing mid-market leadership in our core focus sectors, while making disciplined investments to deepen our client offering and enhance earnings stability through market cycles.

Without question, our industry was impacted by significant market headwinds during the fiscal year, largely driven by ongoing political uncertainty in the UK, a U.S. federal government shutdown during our second half, and a rotation away from small-cap equites in Australia. Despite these challenges, our global capital markets operations earned annual revenue of to $704.3 million and adjusted pre-tax net income of $80.4 million, year-over-year increases of 11% and 29% respectively. Proficient integration of our sales, trading, research, investment banking and advisory efforts in all regions has helped drive incremental revenue growth and deeper relationships with our clients.

On a regional basis, our U.S. operation was the most significant contributor of revenue for this segment and we expect that profitability in this business will continue to strengthen as we realize the benefits of the expanded advisory capability that has been driven both organically, and through our acquisition of mid-market advisory firm Petsky Prunier. Our Canadian business was the strongest contributor to profitability, delivering adjusted pre-tax net income of $63.0 million, reflecting increased activity levels and our active involvement with numerous transactions in the cannabis sector. Commission and fees revenue in this business also increased each quarter since we completed our acquisition of Jitneytrade in the first fiscal quarter.

Market uncertainty in Australia led to a difficult period for small cap equities, but capital raising activities have recently reaccelerated, and the outcome of the recent Federal election gives us optimism that this business will recover as activity levels improve.

And finally, despite a strong third quarter in the UK, the three-month period from January to March 2019 experienced an eight-year low for listings on both the LSE and AIM markets, a result of prolonged Brexit uncertainty, further compounded by fears of a global economic slowdown. We took steps to restructure this operation in our fourth quarter and a restructuring charge of $11.8 million has been recorded as a significant item for that period. A substantial headcount reduction will be reflected in our results for the first quarter of fiscal 2020 and we have also taken steps to rationalize our fixed costs, the impact of which will also be seen in the coming fiscal year.

As an independent investment bank, Canaccord Genuity occupies an increasingly vital role in supporting healthy economies in the regions where we live and work. By upholding a disciplined focus in the areas where we know we can add the most value, we protect our ability to form lasting partnerships with our clients and provide market-leading services at every stage of the business cycle.

Our improved business mix has contributed to both earnings stability and earnings growth. 

We are excited about the opportunities ahead - and perhaps more importantly, we are advantageously positioned to manage through the inevitable challenges that this dynamic industry and its ever-changing operating environment present us.  We continue to watch our expenses closely and despite higher costs associated with increased activity levels and investments to support growth, we have modestly reduced our total expenses as a percentage of revenue on a year-over-year basis.

Underpinning our ability to deliver on our strategic priorities is a very strong culture. 

While we can't predict changes in the market environment, regulatory or political challenges, we can ensure that we have a deep bench of talented and committed colleagues working together every day, to deliver the very best outcomes for our clients and our shareholders.

We have continued to advance our employee development and diversity initiatives, as we endeavor to make Canaccord Genuity the employer of choice for talented professionals who want to build a rewarding career.  And finally, the launch of our new CG brand identity in December marked a pivotal moment in our history, firmly establishing that we have become the better, stronger Company that we have all worked so hard to build.

I would like to thank all our employees and directors for their ongoing commitment to our long-term strategy. And to my fellow shareholders, I thank you for your continued support and remind you that in everything we do, we are driven to increase the long-term value of our business for our clients and our valued investors.

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 at www.canaccordgenuity.com/investor-relations/investor-resources/financial-reports/ 

CONFERENCE CALL AND WEBCAST PRESENTATION

Interested parties are invited to listen to Canaccord Genuity's fourth quarter and fiscal 2019 results conference call via live webcast or a toll-free number. The conference call is scheduled for Thursday, June 6, 2019 at 5:00 a.m. Pacific time, 8:00 a.m. Eastern time, 1:00 p.m. UK time, 8:00 p.m. China Standard Time, and 10:00 p.m. Australia 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 at: www.canaccordgenuity.com/investor-relations/news-and-events/conference-calls-and-webcasts/

Analysts and institutional investors can call in via telephone at:

• 647-427-7450 (within Toronto)
• 1-888-231-8191 (toll free outside Toronto)
• 0-800-051-7107 (toll free from the United Kingdom)
• 0-800-91-7449 (toll free from France)
• 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)
• 800-017-8071 (toll free from United Arab Emirates)

Please ask to participate in the Canaccord Genuity Group Inc. Q4/19 results call.  If a passcode is requested, please use 3465899.

A replay of the conference call will be made available from approximately two hours after the live call on June 6, 2019, until August 6, 2019 at 416-849-0833 or 1-855-859-2056 by entering passcode 3465899 followed by the (#) key.

ABOUT CANACCORD GENUITY GROUP INC.:
Through its principal subsidiaries, Canaccord Genuity Group Inc. (the Company) is a leading independent, full-service financial services firm, with operations in two principal segments of the securities industry: wealth management and capital markets. Since its establishment in 1950, the Company has been driven by an unwavering commitment to building lasting client relationships. We achieve this by generating value for our individual, institutional and corporate clients through comprehensive investment solutions, brokerage services and investment banking services. The Company has wealth management offices located in Canada, Australia, the UK, Guernsey, Jersey, and the Isle of Man. Canaccord Genuity Capital Markets, the international capital markets division, operates in North America, UK & Europe, Asia, Australia and the Middle East.

Canaccord Genuity Group Inc. is publicly traded under the symbol CF on the TSX. Canaccord Genuity Series A Preferred Shares are listed on the TSX under the symbol CF.PR.A. Canaccord Genuity Series C Preferred Shares are listed on the TSX under the symbol CF.PR.C. The Company's 6.25% Convertible Unsecured Senior Subordinated Debentures are listed on the TSX under the symbol CF.DA.A.  

None of the information on the Company's websites at www.canaccordgenuity.com, www.canaccordgenuitygroup.com, and www.canaccordgenuity.com/cm should be considered incorporated herein by reference.

SOURCE Canaccord Genuity Group Inc.

Investor and media relations inquiries: Christina Marinoff, Vice President, Investor Relations and Communications, Phone: [phone], Email: [email protected]

Related Links

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