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Name | Symbol | Market | Type |
---|---|---|---|
Canaccord Genuity Group Inc | TSX:CF.PR.C | Toronto | Preference Share |
Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.25 | -1.27% | 19.50 | 19.55 | 19.80 | 19.50 | 19.50 | 19.50 | 421 | 20:56:31 |
Generates net income of $5.9 million during the quarter, excluding significant items(1)
(All dollar amounts are stated in Canadian dollars unless otherwise indicated)
TORONTO, Nov. 7, 2012 /CNW/ - In the second quarter of fiscal 2013, the quarter ended September 30, 2012, Canaccord Financial Inc. (Canaccord, the Company, TSX: CF, LSE: CF.) generated $186.6 million in revenue. During the quarter, the Company implemented several cost-reduction initiatives aimed at improving the performance of certain business units. Excluding restructuring and other significant items(1) (a non-IFRS measure), the Company recorded net income of $5.9 million, or $0.03 per diluted common share. Including these expenses, the Company recorded a net loss of $14.8 million, or $0.19 per common share.
"We are pleased with the momentum we're building in the UK, the US and Asia, where the impacts of our acquisition of Collins Stewart Hawkpoint are beginning to demonstrate the power of our expanded platform," stated Paul Reynolds, President and CEO of Canaccord Financial Inc. "We're continuing with our efforts to foster further cross-border collaboration across our platform to ensure our clients and shareholders receive the full value of our global offering."
Mr. Reynolds continued: "Our fiscal second quarter was highlighted by key leadership appointments and activities aimed at strengthening the performance of certain divisions. In particular, we expect these activities will allow our wealth management businesses to operate more competitively within this dynamic economic environment."
Second quarter of fiscal 2013 vs. first quarter of fiscal 2013
Second quarter of fiscal 2013 vs. second quarter of fiscal 2012
First half of fiscal 2013 vs. first half of fiscal 2012
(Six months ended September 30, 2012 vs. six months ended September 30,
2011)
Financial condition at end of second quarter 2013 vs. second quarter 2012
SUMMARY OF OPERATIONS
Corporate
Capital Markets
Canaccord Wealth Management (Global)
Canaccord Wealth Management (North America and Australia)
Canaccord Wealth Management (UK and Europe)
Subsequent Events
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, and acquisition-related expense items, which include costs recognized in relation to both prospective and completed acquisitions. Management believes that these non-IFRS measures will allow for a better evaluation of the operating performance of Canaccord'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 Canaccord'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 Canaccord's business; thus, these effects should not be ignored in evaluating and analyzing Canaccord's financial results. Therefore, management believes that Canaccord's IFRS measures of financial performance and the respective non-IFRS measures should be considered together.
Selected financial information excluding significant items
Three months ended September 30 |
Quarter -over- quarter change |
Six months ended September 30 |
YTD- over- YTD change |
||||||||
(C$ thousands, except % amounts) | 2012 | 2011 | 2012 | 2011 | |||||||
Total revenue per IFRS | $ | 186,599 | $ | 119,500 | 56.1% | $ | 349,148 | $ | 279,283 | 25.0% | |
Total expenses per IFRS | 204,910 | 126,396 | 62.1% | 391,958 | 270,430 | 44.9% | |||||
Significant items recorded in Canaccord Genuity | |||||||||||
Restructuring costs | 4,395 | — | n.m. | 4,395 | — | n.m. | |||||
Acquisition-related costs | 388 | 1,443 | (73.1)% | 388 | 1,443 | (73.1)% | |||||
Amortization of intangible assets | 3,436 | 930 | 269.5% | 7,809 | 1,860 | n.m. | |||||
Significant items recorded in Canaccord Wealth Management | |||||||||||
Restructuring costs | 13,567 | — | n.m. | 13,567 | — | n.m. | |||||
Acquisition-related costs | 900 | — | n.m. | 900 | — | n.m. | |||||
Amortization of intangible assets | 1,614 | — | n.m. | 2,612 | — | n.m. | |||||
Significant items recorded in Corporate and Other | |||||||||||
Restructuring costs | 900 | — | n.m. | 900 | — | n.m. | |||||
Acquisition-related costs | — | 1,513 | (100.0)% | — | 1,513 | (100.0)% | |||||
Total significant items | 25,200 | 3,886 | n.m. | 30,571 | 4,816 | n.m. | |||||
Total expenses excluding significant items | 179,710 | 122,510 | 46.7% | 361,387 | 265,614 | 36.1% | |||||
Net income (loss) before tax - adjusted | $ | 6,889 | $ | (3,010) | n.m. | $ | (12,239) | $ | 13,669 | (189.5)% | |
Income taxes (recovery) - adjusted | 982 | (1,345) | (173.0)% | (1,851) | 1,209 | (253.1)% | |||||
Net income (loss) - adjusted | 5,907 | $ | (1,665) | n.m. | (10,388) | $12,460 | (183.4)% | ||||
Earnings (loss) per common share - basic, adjusted | $ | 0.03 | $ | (0.05) | (160.0)% | $ | (0.17) | $ | 0.14 | (221.4)% | |
Earnings (loss) per common share - diluted, adjusted | $ | 0.03 | $ | (0.05) | (160.0)% | $ | (0.17) | $ | 0.13 | (230.8)% |
n.m.: not meaningful
Fellow shareholders:
Over the past three years, we have been focused on constructing a strong, comprehensive platform to cater to the increasingly global needs and perspectives of our corporate, institutional and wealth management clients. Our fiscal second quarter saw us advance this strategy with the announcement of a number of key leadership appointments that drew from our deep bench strength, as well as from world-class expertise outside our firm. In addition, we have undertaken a number of cost containment initiatives that, while difficult, should allow us to improve margins in a very challenging macro operating environment.
In September, we were very pleased to welcome Alexis de Rosnay as CEO of our UK and European operations and Peter O'Malley as CEO of Canaccord Genuity Asia. These two well-regarded executives made the decision to join Canaccord as a result of the momentum we're building in these geographies, and we expect they will be able to draw on their considerable global expertise on behalf of our clients.
To lead the efforts in advancing the global integration of our capital markets team, we recently appointed Phil Evershed as Global Head of Investment Banking, and Steve Buell as Global Head of Research. Their priorities will be focused on enhancing our cross-border collaboration and standardizing global best practices to enhance the value of the services we provide our clients.
The second quarter also saw Canaccord Wealth Management address the losses related to a number of small, consistently unprofitable corporate and independent branches in Canada. In conjunction with the decision to reduce our branch complement, we also reduced our back-office salary costs in Canada by approximately 20% through staffing reductions. We expect to continue to reduce our fixed costs in Canada during the balance of this fiscal year as we seek to better align our cost structure with our market opportunities.
In total, there were $25.2 million of significant expense items5 that were not attributable to normal operating activities during the quarter. We are taking these charges now, so that our businesses are better positioned to generate stronger future performance.
Financial Performance
During the second quarter of Canaccord's fiscal year, the Company generated $186.6 million of revenue, an increase of 15% from the previous quarter and 56% from the same quarter last year. Much of this increase can be attributed to the expanded Canaccord operating platform. On an operating basis, excluding significant expense items related to activities taken in the quarter, Canaccord generated net income of $5.9 million, or $0.03 per diluted common share. Including all significant expense items, the Company recorded a net loss of $14.8 million, or $0.19 per share.
Our operating results showed significant improvement compared to last
quarter, as a result of both revenue growth and the ongoing expense
reduction initiatives we're undertaking. Excluding incentive
compensation, which is directly correlated to revenue, operating
expenses decreased this quarter on average by 12%. And we were able to
achieve this while growing revenue by nearly 15%, or $24 million, in
that same time frame.
Canaccord Genuity
Canaccord Genuity, our global capital markets division, recorded $119.0 million of revenue during the second quarter, an increase of 18% compared to the previous quarter and 71% compared to the same period last year. Our principal trading and investment banking activities generated a marked improvement, due largely to enhanced performance from our US and UK operations. In fact, our US and UK businesses are beginning to build the kind of momentum we expected from our acquisition of Collins Stewart Hawkpoint plc.
We're particularly pleased that all of our geographies made meaningful contributions to our capital raising activities this quarter, with sizable transactions led on the Canadian, UK, Singapore and Australian exchanges. Globally, Canaccord Genuity's investment banking team led or co-led 28 financing transactions during the quarter, raising approximately $1.1 billion for our clients. Our M&A and advisory practice also had another solid contribution, generating $28.6 million in revenue during the quarter, and continues to have an exceptionally strong pipeline.
Wealth Management
Our Canadian wealth management business continued to be affected by slower market activity during the quarter, generating $35.8 million in revenue with expenses of $47.4 million including a one time only charge of $13.6 million related to a restructuring of that business unit. This led to a net loss before tax of $20.8 million. To strengthen the performance of this business, we are in the process of implementing a new strategy to streamline and refocus our operations in larger Canadian centres. On September 24, we announced the closing of four corporate and 12 independent underperforming branches, located mostly in smaller communities. This strategy will allow us to invest further in core branches that have a strong market presence and have demonstrated consistently profitable operations. By removing loss-generating locations from our Canadian wealth management platform, we're confident that we can meaningfully improve the performance of this business. While market conditions in Canada remain subdued, we expect this business will operate at or near a break-even basis. Given stronger market conditions, we believe this business can generate meaningful returns to our shareholders. Most importantly, we expect that these activities will allow our wealth management businesses to operate more competitively within this dynamic economic environment.
In the UK and Europe, Collins Stewart Wealth Management continued to provide consistent returns to our business, generating $20.7 million in revenue and, excluding acquisition-related expenses, $2.8 million of net income before tax. Importantly, fee-based activities contributed 62% of revenue generated by this business in fiscal Q2/13, and assets under management continued to grow to $13.1 billion.
During the second quarter we strengthened our UK wealth management division through the addition of Eden Financial's wealth management business. This complementary acquisition, which closed just after our fiscal second quarter, added an additional $1.3 billion to assets under management and grew our UK client base. Eden continues to provide clients with the same high quality, tailored services as before, but under the Canaccord umbrella.
Looking Ahead
In the months ahead, we will continue to be focused on cross-border collaboration, to ensure that our clients and shareholders receive the full value of our global offering. While we're already building momentum in many of the markets we operate in, we're confident that we can find even more opportunities for clients by further integrating our capital markets operations around the world. We also believe that Canaccord Wealth Management can be a positive contributor to the firm's profitability and we expect to make further investments in that business as its performance improves. We plan to continue to actively recruit, launch new products and services, and build out our digital strategy to better serve our existing clients and reduce our costs.
In summary, we expect market conditions will continue to be subdued over the near term but we're confident our company is better positioned now to perform in this environment. While macroeconomic factors will continue to play a significant role in the operating environment for our industry, we are focused on growth - for our firm and for our clients.
Kind regards,
Paul D. Reynolds, President & CEO
Canaccord Financial Inc.
ACCESS TO QUARTERLY RESULTS INFORMATION
Interested investors, the media and others may review this quarterly earnings release and supplementary financial information at http://www.canaccordfinancial.com/EN/IR/Pages/default.aspx.
CONFERENCE CALL AND WEBCAST PRESENTATION
Interested parties are invited to listen to Canaccord's second quarter fiscal 2013 results conference call with analysts and institutional investors, via a live webcast or a toll free number. The conference call is scheduled for Wednesday, November 7, 2012, at 2:30 p.m. (Pacific Time), 5:30 p.m. (Eastern Time), 10:30 p.m. (UK Time), and at 6:30 a.m. (China Standard Time), and 9:30 a.m. (Australia EDT Time) on Thursday, November 8, 2012. At that time, senior executives will comment on the results for the second quarter of the fiscal 2013 year and respond to questions from analysts and institutional investors.
The conference call may be accessed live and archived on a listen-only basis via the Internet at: www.canaccordfinancial.com/EN/NewsEvents/Pages/Events.aspx
Analysts and institutional investors can call in via telephone at:
Please request to participate in Canaccord Financial's Q2/13 earnings call.
A replay of the conference call can be accessed after 5:30 p.m. (Pacific Time), 8:30 p.m. (Eastern Time) Wednesday, November 7, 2012, and after 1:30 a.m. (UK Time), 9:30 a.m. (China Standard Time) and 12:30 p.m. (Australia EDT Time) on Thursday, November 8, 2012 until December 26,, 2012 at 416-849-0833 or 1-855-859-2056 by entering passcode 47119586 followed by the pound (#) sign.
ABOUT CANACCORD FINANCIAL INC.:
Through its principal subsidiaries, Canaccord Financial Inc. is a leading independent, full-service financial services firm, with operations in two principal segments of the securities industry: wealth management and global capital markets. Since its establishment in 1950, Canaccord 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. Canaccord has offices in 12 countries worldwide, including Wealth Management offices located in Canada, Australia, the UK and Europe. Canaccord Genuity, the international capital markets division, operates in Canada, the US, the UK, France, Germany, Ireland, Italy, China, Hong Kong, Singapore, Australia and Barbados.
Canaccord Financial Inc. is publicly traded under the symbol CF on the TSX and the symbol CF. on the London Stock Exchange. Canaccord Series A Preferred Shares are listed on the TSX under the symbol CF.PR.A. Canaccord Series C Preferred Shares are listed on the TSX under the symbol CF.PR.C.
None of the information on Canaccord's websites at www.canaccordfinancial.com, www.canaccordgenuity.com, and www.canaccord.com should be considered incorporated herein by reference. |
______________________________
1 | See Non-IFRS measures. |
2 | Source: Transactions over $1.5 million. Internally sourced information. |
3 | 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. |
4 | These locations were closed prior to November 7, 2012. |
5 | Significant expense items include restructuring costs, amortization of intangible assets, and acquisition-related expense items. |
SOURCE Canaccord Financial Inc.
Copyright 2012 Canada NewsWire
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