GMP Capital Inc. Reports Second Quarter 2012 Results

For further information about GMP Capital Inc., our results for second quarter 2012 and the meaning of certain references, this quarterly earnings release should be read in conjunction with our Second Quarter 2012 Financial Statements and Management's Discussion and Analysis for the three and six months ended June 30, 2012, which can be accessed on our website at gmpcapital.com and on SEDAR at sedar.com. Unless otherwise indicated, all amounts are expressed in Canadian dollars and have been taken from our Second Quarter 2012 Financial Statements prepared in accordance with International Financial Reporting Standards ("IFRS").

TORONTO, Aug. 3, 2012 /CNW/ - GMP Capital Inc. ("GMP") (TSX: GMP) today reported revenue of $62.7 million in second quarter 2012, representing a 7% decrease compared with the same period a year ago. GMP recorded a net loss of $0.4 million and a net loss attributable to common shareholders of $4.1 million ($0.06 net loss per basic share) in second quarter 2012 compared with net income of $5.1 million and net income attributable to common shareholders of $2.7 million ($0.04 per basic share) in second quarter 2011.  This quarter's results continued to be affected by the adverse market conditions.

"The fragility of the capital markets environment has been exacerbated by ongoing European sovereign debt concerns and an anaemic global economic outlook.  The resulting negative market sentiment has led to a significant retrenchment of risk among investors contributing to a sharp contraction in capital markets activity," said Harris Fricker, Chief Executive Officer, GMP.  "Not surprisingly, the pace of client trading and equity underwriting activity has slowed considerably with the severity of this downturn.  Despite the unfavourable market conditions, we are pleased with the performance of our M&A franchise, which delivered solid results this quarter, and our new high yield business which continued to gain momentum as we married our traditionally strong origination ability with a first-rate distribution network via GMP Securities, LLC." 

FINANCIAL HIGHLIGHTS

Second Quarter 2012 versus Second Quarter 2011

• Net loss of $0.4 million compared with net income of $5.1 million

• Net loss attributable to common shareholders of $4.1 million compared with net income attributable to common shareholders of $2.7 million

• Net loss per basic share of $0.06 compared with earnings per basic share of $0.04

• Annualized return on common shareholders' equity ("ROE")¹ was negative 6.8% compared with positive 3.7%

• Excluding the share-based compensation expense (the "Retention Shares") recorded in second quarter 2012 in connection with the common shares issued to certain key employees of GMP Securities, LLC ("GMP USA"), adjusted net income¹ was $0.6 million, adjusted net loss per basic share¹ was $0.05 and adjusted annualized ROE¹ was negative 5.2%

First Half 2012 versus First Half 2011

• Net loss of $0.2 million compared with net income of $31.3 million

• Net loss attributable to common shareholders of $6.4 million compared with net income attributable to common shareholders of $25.1 million

• Net loss per basic share of $0.10 compared with earnings per basic share of $0.37

• Annualized ROE¹ was negative 5.2% compared with positive 16.6%

• Excluding the expense related to the Retention Shares recorded in first half 2012, adjusted net income¹ was $1.8 million, adjusted net loss per basic share¹ was $0.07 and adjusted annualized ROE¹ was negative 3.6%

• Excluding costs recorded in connection with the redemption of our long term debt in first half 2011, adjusted net income¹ was $35.2 million, adjusted net income per basic share¹ was $0.42 and adjusted annualized ROE¹ was 19.0%

Commenting further, Mr. Fricker said, "In light of the prolonged downturn in the capital markets and uncertainty as to timing of sustained global economic recovery, we remain focused on preserving our considerable capital strength, closely monitoring and managing risk and limiting costs.  Despite market conditions, we continue to invest in our franchise and we believe we have the people, platform and product capabilities that will allow us to excel in normalized markets."

SECOND QUARTER 2012 BUSINESS HIGHLIGHTS

CAPITAL MARKETS

• Revenue of $56.4 million, a decrease of 7% compared with second quarter 2011 primarily due to lower commission revenue reflecting lower client trading volumes and lower equity underwriting activity, particularly in the Canadian resource sectors.  Partly offsetting these decreases was a year-over-year increase in advisory revenue and improved debt underwriting results as we continue to grow our fixed income franchise.
  
  
• Expenses of $53.4 million, an increase of 10% compared with second quarter 2011 primarily reflecting the incremental costs associated with GMP USA acquired in third quarter 2011 and our Australian operations which were launched in second quarter 2011.
  
  
• Income before income taxes of $3.1 million in second quarter 2012 compared with $12.1 million in second quarter 2011.

GMP Securities L.P. ("GMP Securities") Highlights:

• ranked eighth in the dollar value of common equity underwriting transactions completed in Canada for which we were lead or co-lead;²
  
  
• ranked sixth in equity block trading volumes on the Toronto Stock Exchange and TSX Venture Exchange, achieving a 5.0% market share;³
  
  
• participated in 47 underwriting transactions completed in Canada helping raise approximately $3.7 billion on behalf of clients, leading or co-leading 10 of these transactions with an aggregate dollar value of $1.1 billion;⁴ and
  
  
• advised on seven M&A transactions announced in Canada valued at US$1.8 billion⁵.

WEALTH MANAGEMENT

• The Wealth Management segment is comprised of GMP's non-controlling ownership interest in Richardson GMP Limited ("Richardson GMP").  Wealth Management reported a loss before income taxes of $0.7 million in second quarter 2012 compared with income before income taxes of $0.5 million in second quarter 2011.  Wealth Management's second quarter 2012 results reflect lower operating performance by Richardson GMP primarily due to lower client trading volumes as a result of the continued challenging market environment. 

Richardson GMP Highlights (100% basis):

• assets under administration¹ of $13.7 billion; and
  
  
• 111 investment advisory teams strategically located in offices across Canada.

ALTERNATIVE INVESTMENTS

• Revenue of $2.0 million, a decrease of 28% compared with second quarter 2011 due primarily to the deconsolidation of EdgeStone Capital Partners, L.P. from GMP's financial results in fourth quarter 2011;
  
  
• loss before income taxes of $1.2 million compared with a loss before income taxes of $1.1 million in second quarter 2011;
  
  
• GMP Investment Management L.P. ended the quarter with assets under management¹ of $578 million; and
  
  
• generated a return of 12.0% in first half 2012 for the Canadian ABCP Fund L.P., net of management fees and other expenses.

DIVIDENDS
On August 2, 2012, GMP's board of directors 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 September 30, 2012⁶, to the respective shareholders of record at the close of business on September 10, 2012.

____________________________________
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 second quarter 2012 Management's Discussion and Analysis.
² Source: FPinfomart as at July 9, 2012.
³ Source: CanadaEquity.com as at July 9, 2012.
⁴ Source: GMP Capital Inc. internal reports as at July 9, 2012.
⁵ Source: Mergermarket as at July 9, 2012.
⁶ In the event that the payment date is not a business day, such dividend shall be paid on the next succeeding day that is a business day.

CONFERENCE CALL
GMP executives will host a conference call and live audio webcast today at 10:00 a.m. (ET) to discuss GMP's second quarter 2012 results.  Interested parties are invited to access the conference call 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 Friday, August 10, 2012, by dialing 416-640-1917 or 1-877-289-8525 (toll free) and entering access code 4546890#. 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 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 second quarter 2012 Management's Discussion and Analysis.

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

($000s, except as otherwise noted)							Three months ended June 30, 2012				Six months ended June 30, 2012				Six months ended June 30, 2011
Reported Results
(Loss) income before income taxes								(809)				(942)				42,415
Income tax (benefit) expense								(433)				(777)				11,092
Net (loss) income								(376)				(165)				31,323
Net (loss) income attributable to common shareholders								(4,087)				(6,375)				25,120
Reported Measures
Net (loss) income per common share
		Basic						($0.06)				($0.10)				$0.37
		Diluted ^1						($0.06)				($0.10)				$0.33
Average common equity								240,248				243,787				302,311
Return on common equity ^2								(6.8%)				(5.2%)				16.6%
Pre-tax Impact of Adjusting Items
Corporate Segment
		Charges to Interest expense - Redemption of senior unsecured notes ^3						—				—				5,466
Capital Markets Segment
		Charges to Employee compensation and benefits - Deferred share-based awards ^4						1,758				3,502				—
Impact of adjusting items on income before income taxes								1,758				3,502				5,466
After-Tax Impact of Adjusting Items
		Redemption costs associated with senior unsecured notes						—				—				3,908
		Cost of deferred share-based awards						981				1,956				—
Impact of adjusting items on:
		Net income						981				1,956				3,908
		Net income attributable to common shareholders						981				1,956				3,908
		Net income per common share:
			Basic				$	0.01			$	0.03			$	0.06
			Diluted				$	0.01			$	0.03			$	0.05
Adjusted Results ^5
Income before income taxes								949				2,560				47,881
Income tax expense								344				769				12,650
Net income								605				1,791				35,231
Net (loss) income attributable to common shareholders								(3,106)				(4,419)				29,028
Adjusted Measures ^5
Net (loss) income per common share
		Basic					$	(0.05)			$	(0.07)			$	0.42
		Diluted ¹					$	(0.05)			$	(0.07)			$	0.38
Average common equity								240,738				244,764				305,242
Return on common equity								(5.2%)				(3.6%)				19.0%

^1											In the case of a net loss, the effect of common share options and warrants potentially exercisable and the impact of shares pledged on share purchase loans and other common shares subject to vesting conditions under stock-based compensation programs on diluted net loss per common share will be anti-dilutive; therefore, basic and diluted net loss per common share will be the same.
^2											Considered to be a non-GAAP financial measure.  Return on common equity 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 "Presentation of Financial Information and Non-GAAP Measures" section in the Second Quarter 2012 Management's Discussion and Analysis.
^3											Represents the impact of the one-time redemption costs (the "Redemption Costs") recorded in connection with the redemption of all of the outstanding senior unsecured notes issued by Griffiths McBurney L.P., an indirect, wholly-owned subsidiary of GMP.
^4											Represents the share-based compensation expense recorded in connection with the common shares issued to certain key employees of GMP USA in connection with our acquisition of GMP USA in third quarter 2011.
^5											Adjusted results and measures are considered to be non-GAAP financial measures.  These measures do not have any standardized meaning prescribed by GAAP under IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers.  The table above outlines such measures with their closest GAAP counterparts. Management believes that presenting certain results and measures on an adjusted basis which excludes the impacts of specified items may be more reflective of ongoing operating results and provides readers with an enhanced understanding of how management views GMP's core performance. 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 the specified items on the results for the periods presented.

 

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 2012 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, variations in the market value of securities, the volatility and liquidity of equity and fixed income trading markets, the 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 the "Risk Management" section in the Second Quarter 2012 MD&A and "Risk Factors" in GMP's annual information form dated March 13, 2012. These risks and uncertainties are not the only ones facing GMP, together with its consolidated operations controlled by it (the "GMP Group").  Additional risks and uncertainties not currently known to us or that 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 and Market Outlook" section of the Second Quarter 2012 MD&A and include, without limitation: further escalation of the sovereign debt crisis in Europe, slowing growth in emerging markets, the increasing debt burden in the U.S., and the ongoing fragile prospects for global economic recovery. 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 the 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 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 client base that includes corporate clients, institutional investors and high-net-worth individuals in three 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, 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, a full-service independent firm focused on providing exclusive and comprehensive wealth management and investment services delivered by an experienced team of investment professionals. The Alternative Investments segment consists of the investment management and alternative investment products provided by GMP Investment Management L.P. GMP is listed on the Toronto Stock Exchange under the symbol "GMP". For further information, please visit our corporate website at gmpcapital.com.

SOURCE: GMP Capital Inc.

GMP Capital Inc.
Rocco Colella, Director, Investor Relations
145 King Street West, Suite 300, Toronto, Ontario M5H 1J8
Tel: [phone]; Fax: [phone]
[email protected] or [email protected]