GMP Capital Inc. reports a 27% increase in year over year net income before
income taxes in second quarter
Generates an annualized return on common equity of 33.1%(1) in second quarter 2010
Increases quarterly cash dividend
TORONTO, Aug. 6 /CNW/ - GMP Capital Inc. ("GMP") (TSX: GMP) today reported revenue of $111.6 million in second quarter 2010, representing an increase of 11% compared with the same period a year ago primarily driven by higher results in the Capital Markets segment. Net income increased 177% to $22.5 million ($0.32 per basic share) compared with $8.1 million ($0.12 per basic share) reported in the same period a year ago. Operating earnings(1) were $35.4 million in second quarter 2010 compared with $28.1 million during the same period a year ago.
"Although market conditions became increasingly more challenging in the latter half of this quarter, the resiliency of the GMP franchise and our strong client relationships provided us the opportunity to lead or co-lead several of the largest equity underwriting transactions completed in Canada during the second quarter. We are also encouraged by the positive momentum generated by GMP Europe as they continue to deliver services to a wider European institutional client base," said Kevin Sullivan, CEO, GMP. "GMP Investment Management also continues to perform well, with the GMP Diversified Alpha Domestic Fund generating a positive return for the first six months of 2010. In addition, with integration efforts largely complete at Richardson GMP, this business is now focused on accelerating organic growth and recruiting additional investment advisors."
FINANCIAL HIGHLIGHTS
Second Quarter 2010 versus Second Quarter 2009
- Revenue of $111.6 million compared with revenue of $100.8 million
- Record underwriting revenue of $68.1 million, an increase of 38%
- Net income of $22.5 million compared with net income of $8.1 million.
Net income in second quarter 2009 included $7.7 million in
adjustments to increase the provision for future income taxes in
connection with GMP's conversion to a corporation which occurred in
May 2009.
- Basic earnings per share of $0.32 compared with $0.12
- Annualized return on common equity ("Annualized ROE")(1) of 33.1%
compared with 13.1%
First Half 2010 versus First Half 2009
- Revenue of $194.3 million compared with revenue of $168.3 million
- Investment banking revenue of $123.6 million, an increase of 51%
- Net loss of $40.0 million compared with net income of $15.2 million.
Net income in first half 2009 included $7.7 million in income tax
adjustments in connection with GMP's conversion to a corporation as
discussed above.
- Net loss per basic share of $0.57 compared with earnings per basic
share of $0.23
- Excluding impairment charges recorded in the first quarter of 2010
relating to the EdgeStone reporting unit, adjusted net income(1) was
$36.1 million (adjusted earnings per share(1) of $0.51) and adjusted
Annualized ROE(1) was 21.3%
For further information about GMP, our results for second quarter 2010 and the meaning of certain references, this press release should be read in conjunction with our Second Quarter 2010 Financial Statements and GMP's Management's Discussion and Analysis for the three and six months ended June 30, 2010, which can be accessed on our website at gmpcapital.com and on SEDAR at sedar.com.
Commenting further, Mr. Sullivan said, "While we are encouraged by our results this quarter, led by strong performances in investment banking, we are mindful that the timing of the global economic recovery remains less certain and investor confidence is expected to remain tentative over the near term, which could result in downward pressure on client and business activity; however, we will remain focused on appropriately and profitably managing all of our businesses and supporting our clients through these volatile market conditions."
For the six-month period ended June 30, 2010, GMP reported revenue of $194.2 million, an increase of 15% compared with the same period in 2009, largely due to higher investment banking revenue. Partly offsetting this increase was lower commission revenue and lower investment management and fee income. A net loss of $40.0 million ($0.57 basic earnings per share) was recorded for the six-month period ended June 30, 2010 compared with net income of $15.2 million ($0.23 basic earnings per share) in the same period in 2009. Results for the six months ended June 30, 2010 were impacted by $80.5 million ($76.1 million after-tax) in non-cash impairment charges relating to the EdgeStone reporting unit, recorded in the first quarter of 2010. Excluding these impairment charges, adjusted net income(2) was $36.1 million, adjusted earnings per share(2) was $0.51 and adjusted Annualized ROE(2) was 21.3% for the six-month period ended June 30, 2010.
MANAGEMENT TRANSITION AT EDGESTONE
Subsequent to quarter end, GMP appointed Sandra Bosela as President and Managing Partner of EdgeStone Capital Partners, L.P. ("EdgeStone"). Sandra, currently a Partner with EdgeStone, has been an integral member of the EdgeStone team since its formation in 1999. In her new role, Sandra will be responsible for managing the day to day operations of EdgeStone, working with other senior team members to oversee and manage the EdgeStone Funds as well as providing leadership to support the franchise going forward. GMP remains committed to working closely with Sandra and the EdgeStone team to build the private equity business going forward.
COMMON SHARE DIVIDEND DECLARED
On August 5, 2010, the Board of Directors approved a 20% increase in the quarterly cash dividend from $0.05 to $0.06 per share. Accordingly, the Board of Directors has declared a quarterly cash dividend of $0.06 per share for the second quarter ended June 30, 2010, payable on August 25, 2010, to shareholders of record on August 16, 2010. The Board of Directors' decision to increase the quarterly cash dividend is attributable to GMP's strong year-to-date operating earnings(2) performance, free cash flow and its sound balance sheet, and reflects the Board's continued commitment to return excess capital back to GMP's shareholders.
SECOND QUARTER 2010
BUSINESS SEGMENT HIGHLIGHTS
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CAPITAL MARKETS
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- Revenue increased $18.8 million or 23% to $100.7 million in second
quarter 2010 compared with second quarter 2009
- Investment banking revenue increased $22.3 million or 42% to $75.9
million in second quarter 2010 compared with second quarter 2009
primarily due to record underwriting revenue of $68.1 million and
higher M&A and advisory revenue
- Sales and trading commissions decreased $2.7 million or 13% to $17.7
million in second quarter 2010 compared with second quarter 2009
- Operating earnings(2) increased $9.6 million or 31% to $40.8 million
in second quarter 2010 compared with second quarter 2009
- GMP Securities ranked first among Canadian investment dealers, for
the second consecutive quarter, in the dollar value of common equity
underwriting transactions completed in Canada for which we were lead
or co-lead
- GMP Securities participated in 52 underwriting transactions completed
in Canada helping raise approximately $6.1 billion on behalf of
clients, leading or co-leading 21 of these transactions(3)
- GMP Securities ranked third in Canada for equity block trading volume
on the Toronto Stock Exchange (the "TSX"), achieving a 9.2% market
share(4)
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WEALTH MANAGEMENT
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- Wealth Management reported an operating loss of $1.6 million in
second quarter 2010 compared with an operating loss of $1.0 million
in second quarter 2009.
Integration Update
- With several cost rationalization and staffing initiatives largely
complete, Richardson GMP has now focused its efforts on the
acceleration of organic growth and the recruitment of additional
investment advisors
- Richardson GMP has also finalized the terms of new arrangements with
certain third party vendors that provide a significant opportunity
for savings on execution costs, market data and other communications
expenses
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ALTERNATIVE INVESTMENTS
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- Revenue decreased $3.0 million or 33% to $6.2 million in second
quarter 2010 compared with second quarter 2009, largely due to
unrealized losses of $0.1 million recorded in principal activities in
second quarter 2010, arising from GMP's investment in the GMP
Diversified Alpha Domestic Fund, compared with unrealized gains of
$2.7 million recorded in the same period last year.
- Operating earnings(5) were $1.4 million for second quarter 2010
compared with $4.7 million in second quarter 2009
CONFERENCE CALL
Management will host a conference call and live audio webcast today at 10:00 a.m. (ET) to discuss GMP's second quarter ended June 30, 2010. The call may be accessed by dialling 416-644-3415 or 1-800-814-4860 (toll free). The link to the live audio webcast will be accessible at gmpcapital.com. A replay of the conference call can be accessed by telephone until Friday, August 13, 2010, by calling 416-640-1917 or 1-877-289-8525 (toll free) and entering access code 4328639 followed by the number sign.
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(1) Represents a non-GAAP measure. This measure does not have any
standardized meaning prescribed by GAAP and is therefore unlikely to
be comparable to similar measures presented by other issuers. This
data should be read in conjunction with the "Presentation of
Financial Information and Non-GAAP Measures" section in GMP's
Management's Discussion and Analysis for the three and six-months
ended June 30, 2010.
(2) Represents a non-GAAP measure. This measure does not have any
standardized meaning prescribed by GAAP and is therefore unlikely to
be comparable to similar measures presented by other issuers. This
data should be read in conjunction with the "Presentation of
Financial Information and Non-GAAP Measures" section in GMP's
Management's Discussion and Analysis for the three and six-months
ended June 30, 2010.
(3) Source: FPinfomart as at July 9, 2010.
(4) Source: CanadaEquity.com as at July 9, 2010.
(5) Represents a non-GAAP measure. This measure does not have any
standardized meaning prescribed by GAAP and is therefore unlikely to
be comparable to similar measures presented by other issuers. This
data should be read in conjunction with the "Presentation of
Financial Information and Non-GAAP Measures" section in GMP's
Management's Discussion and Analysis for the three and six-months
ended June 30, 2010.
ABOUT GMP CAPITAL INC.
GMP Capital Inc. carries on business through the following principal entities: GMP Securities L.P., Griffiths McBurney Corp., GMP Securities Europe LLP, EdgeStone Capital Partners, L.P. and GMP Investment Management L.P. GMP Capital Inc. also has a significant non-controlling ownership interest in Richardson GMP Limited. The GMP Capital Inc. website is located at gmpcapital.com. GMP Capital Inc. has offices in Toronto, Calgary, Montreal and London, England. GMP Securities L.P. is a leading independent Canadian investment dealer focused on investment banking and institutional equities for corporate clients and institutional investors. GMP Securities L.P. can be found on the web at gmpsecurities.com. Griffiths McBurney Corp. services institutional clients in the United States while GMP Securities Europe LLP provides investment banking and institutional equity services to clients located in Europe. EdgeStone Capital Partners, L.P. is a leading private equity firm, providing capital, strategic direction and business and financial advice to help promising mid-market and early stage companies achieve their full potential. EdgeStone Capital Partners, L.P. can be found on the web at edgestone.com. GMP Investment Management L.P., through its private funds, seeks to generate superior risk-adjusted investment returns over the long term by executing selected investment strategies. GMP Investment Management L.P.'s offerings are aimed at both high-net-worth individuals and institutional investors. Richardson GMP Limited is a full-service investment firm, combining tradition and innovation to offer Canadian families and entrepreneurs access to innovative wealth management and investment services delivered by an experienced team of independent investment professionals. Richardson GMP Limited can be found on the web at richardsongmp.com.
Forward-Looking Statements
This press release contains "forward-looking statements" as defined under applicable Canadian securities laws including such forward-looking statements concerning the payment of a dividend on GMP's common shares in respect of the second quarter ended June 30, 2010 and the continued execution of Richardson GMP's restructuring plan during fiscal 2010, and additional forward-looking statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts but instead represent management's beliefs, expectations, estimates and projections regarding future events, many of which, by their nature, are inherently uncertain and beyond our control. These statements include, but are not limited to, statements made with respect to management's beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements 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 statements reflect management's current beliefs and are based on information currently available to management.
These statements are not guarantees of future performance and are 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, variations in the market value of securities, the volatility and liquidity of equity trading markets, the volume of new financings and mergers and acquisitions, competition in the marketplace for suitable investments, sustainability of fees, nature and type of portfolio company investments, ability to realize carried interest entitlements and dependence on key personnel. Other factors, such as general economic conditions, including exchange rate fluctuations, may also have an effect on GMP's results of operations. Many of these risks and uncertainties can affect our actual results and could cause our actual results to differ materially from those expressed or implied in any forward-looking statement made by us or on our behalf. For a description of risks that could cause our actual results to materially differ from our current expectations, please see the "Risk Management" section in GMP's 2009 Annual MD&A and "Risk Factors" in GMP's annual information form dated March 1, 2010. Material assumptions or factors underlying the forward-looking statements contained in this press release are set out in the "Business Environment and Market Outlook" section in the 2009 Annual MD&A, as updated in GMP's Management's. Discussion and Analysis for the three and six months ended June 30, 2010 and include without limitation the impact of recent capital market uncertainty in light of growing concerns over sovereign debt issues within the European Union, increased equity market volatility, widening credit spreads, lower demand for Canadian resources from less certain economic activity in China and other emerging markets, and a weakening Canadian dollar relative to the United States dollar. 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 these forward-looking statements. 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 statements contained in this press release are 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.
For further information: 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, [email protected], or [email protected]
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