Canaccord Genuity Group Inc. second quarter fiscal 2014

Canaccord Genuity Group Inc. reports second quarter fiscal 2014 results Excluding significant items, earned net income of $6.7 million during thequarter ( 1) (All dollar amounts are stated in Canadian dollars unless otherwise indicated) TORONTO, Nov. 6, 2013 /CNW/ - In the second quarter of fiscal 2014, the quarterended September 30, 2013, Canaccord Genuity Group Inc. (Canaccord, the Company,TSX: CF, LSE: CF.) generated $183.3 million in revenue. Excluding significantitems(1) (a non-IFRS measure), the Company recorded net income of $6.7 millionor net income of $3.3 million available to common shareholders(2) ($0.03 perdiluted common share). Including all expense items, on an IFRS basis, theCompany recorded a net loss of $0.1 million or a net loss available to commonshareholders(2) of $3.3 million (loss of $0.03 per diluted common share). "Fiscal Q2 was characterized by a challenging environment in some of ouroperating units, but we believe we are beginning to see signs of improvedmarket activity across our geographies. Canaccord Genuity's global platform isvery well suited to meet the evolving demands of our clients," said PaulReynolds, President and CEO of Canaccord Genuity Group Inc. "I'm confidentthat our improving pipeline of activity combined with our focus oncost-containment should provide for better results in the coming quarters." Second quarter of fiscal 2014 vs. first quarter of fiscal 2014 · Revenue of $183.3 million, down 2% or $3.9 million from $187.2 million · Excluding significant items, expenses of $175.4 million, up $0.9 million from $174.5 million(1) · Expenses of $184.3 million, up 3% or $6.2 million from $178.1 million · Excluding significant items, net income of $6.7 million compared to net income of $11.8 million (1) · Net loss of $0.1 million compared to net income of $7.9 million · Excluding significant items, diluted earnings per common share (EPS) of $0.03 compared to diluted EPS of $0.09 in the first quarter of fiscal 2014 (1) · Loss per common share of $0.03 compared to diluted EPS of $0.06 in the first quarter of fiscal 2014 Second quarter of fiscal 2014 vs. second quarter of fiscal 2013 · Revenue of $183.3 million, down 2% or $3.3 million from $186.6 million · Excluding significant items, expenses of $175.4 million, down 2% or $4.3 million from $179.7 million (1) · Expenses of $184.3 million, down 10% or $20.6 million from $204.9 million · Excluding significant items, net income of $6.7 million compared to net income of $5.9 million (1) · Net loss of $0.1 million compared to a net loss of $14.8 million · Excluding significant items, diluted EPS of $0.03 compared to diluted EPS of $0.03(1) · Loss per common share of $0.03 compared to a loss per common share of $0.19 First half of fiscal 2014 vs. first half of fiscal 2013(Six months ended September 30, 2013 vs. six months ended September 30, 2012) · Revenue of $370.5 million, up 6% or $21.4 million from $349.1 million · Excluding significant items, expenses of $349.9 million, down 3% from $361.4 million(1) · Expenses of $362.4 million, down 8% or $29.6 million from $392.0 million · Excluding significant items, net income of $18.5 million compared to a net loss of $10.4 million (1) · Net income of $7.8 million compared to a net loss of $35.5 million · Excluding significant items, diluted EPS of $0.12 compared to a loss per common share of $0.17(1) · Diluted EPS of $0.02 compared to a loss per common share of $0.43 Financial condition at end of second quarter fiscal 2014 vs. fourth quarter fiscal 2013 · Cash and cash equivalents balance of $360.2 million, down $130.8 million from $491.0 million · Working capital of $412.3 million, up $18.6 million from $393.7 million · Total shareholders' equity of $1.1 billion, up $33.4 million from $1.0 billion · Book value per diluted common share of $8.00, up $0.32 from $7.68 (1) · On November 6, 2013, the Board of Directors approved a quarterly dividend of $0.05 per common share payable on December 10, 2013 with a record date of November 22, 2013 · On November 6, 2013, the Board of Directors also approved a cash dividend of $0.34375 per Series A Preferred Share payable on December 31, 2013 with a record date of December 20, 2013, and a cash dividend of $0.359375 per Series C Preferred Share payable on December 31, 2013 to Series C Preferred shareholders of record as at December 20, 2013 SUMMARY OF OPERATIONS Corporate · On August 7, 2013, the Company held its 2013 Annual General Meeting of shareholders, where all nominated directors were re-elected to the Board · On August 8, 2013, the Company renewed its normal course issuer bid (NCIB)/ buy-back programme, which provides the Company with the ability to purchase, at its discretion, up to 5,136,948 of its common shares through the facilities of the TSX for cancellation · During the fiscal second quarter, the Company repurchased 796,992 of its common shares under the terms of its former and current NCIB · Of these shares, 739,292 have been cancelled effective as of September 30, 2013, and the remaining 57,700 will be held in treasury until subsequently cancelled · During fiscal Q2/14, the Company recorded restructuring costs of $5.5 million in connection with the restructuring of the sales and trading operations in Canada and the UK and Europe as well as certain office closure costs · Subsequent to the end of the quarter, on October 1, 2013, Canaccord Financial Inc. was renamed Canaccord Genuity Group Inc. · Subsequent to the end of the quarter, on October 23, 2013, Canaccord Genuity Inc. (Canaccord Genuity's US capital markets division) held a charity trading day, where designated commissions from equity, electronic and agency options trades on that day were donated to Youth, I.N.C. In total, Canaccord Genuity's US team generated approximately US$1.0 million for at-risk children through the eighth annual Trading Day for Kids. Capital Markets · Canaccord Genuity led or co-led 27 transactions globally, raising total proceeds of C$1.5 billion(2) during fiscal Q2/14 · Canaccord Genuity participated in 75transactions globally, raising total proceeds of C$8.8 billion(2) during fiscal Q2/14 · During fiscal Q2/14, Canaccord Genuity led or co-led the following transactions : · £300.0 million for the Renewables Infrastructure Group Limited on the LSE · £125.0 million for Saffron Housing Finance PLC on the LSE · £86.0 million for HICL Infrastructure Company Limited on the LSE · AUD$80.6 million for G8 Education Limited on the ASX · C$68.8 million for HealthLease Properties REIT on the TSX · C$65.0 million for MINT Income Fund on the TSX · AUD$47.7 million for Red Fork Energy Limited on the ASX · US$41.7 million for Datalink Corporation on the NASDAQ · US$40.4 million for TearLab Corp. on the NASDAQ · C$40.0 million for Amaya Gaming Group Inc. on the TSX · AUD$36.4 million for Buccaneer Energy Limited on the ASX · US$31.6 million for XOMA Corporation on the NASDAQ · US$25.0 million for DragonWave Inc. on the NASDAQ · £15.0 million for W&G Investments PLC on AIM · C$24.2 million for Halogen Software Inc. on the TSX · US$23.0 million for Pure Multi-Family REIT LP on the TSX Venture · C$23.1 million for FAM Real Estate Investment Trust on the TSX · US$15.2 million for Glu Mobile on the NASDAQ · SGD$18.4 million for Sin Heng Heavy Machinery Limited on the Singapore Exchange · In Canada, Canaccord Genuity raised $228.8 million for government and corporate bond issuances during fiscal Q2/14. · Canaccord Genuity generated advisory revenues of $29.9 million during fiscal Q2/14, an increase of 5% compared to the same quarter last year. · During fiscal Q2/14, Canaccord Genuity advised on the following M&A and advisory transactions: · Uranium One Inc. on its sale to ARMZ Uranium Holding Company · May Gurney Integrated Services PLC on the recommended takeover offer by Kier Group PLC · Morgan Stanley Real Estate on its disposal of Executive Offices Group · AXA Private Equity and Trescal Group's Management team on its acquisition of Trescal · Independent News & Media PLC on the sale of its South African subsidiary · Renewable Energy Developers Inc. on its sale to Capstone Infrastructure Corporation · Payzone Group on its disposal of Cashzone to Cardtronics · Côte Holdings Limited on its disposal to CPBE Capital LLP · Phoenix Equity Partners on its acquisition of a controlling stake in the issued share capital of Key Retirement Solutions Limited · Xceed Mortgage Corporation on its sale to MCAN Mortgage Corporation · Datawatch Corporation on its acquisition of Panopticon Software AB · Labrador Iron Mines Holdings Limited on its strategic collaboration agreement with Tata Steel Minerals Canada Ltd. · Luminus Devices, Inc. on its merger with Lightera Corporation · Revolution Lighting Technologies, Inc. on its acquisition of Relume Technologies Inc. · Cub Energy Inc. on its acquisition of Anatolia Energy Corp. Canaccord Genuity Wealth Management (Global) · Globally, Canaccord Genuity Wealth Management generated $51.2 million in revenue in Q2/14 · Assets under administration in Canada and assets under management in the UK and Europe, and Australia were $27.5 billion at the end of Q2/14(1) Canaccord Genuity Wealth Management (North America) · Canaccord Genuity Wealth Management (North America) generated $24.4 million in revenue and, after intersegment allocations, recorded a net loss of $5.1 million before taxes in Q2/14 · Assets under administration in Canada were $9.4 billion as at September 30, 2013, up 1% from $9.3 billion at the end of the previous quarter and down 29% from $13.3 billion at the end of fiscal Q2/13(1) · Assets under management in Canada (discretionary) were $935 million as at September 30, 2013, up 6% from $880 million at the end of the previous quarter and up 19% from $784 million at the end of fiscal Q2/13(1) · As at September 30, 2013, Canaccord Genuity Wealth Management had 163 Advisory Teams(3), a decrease of 68 Advisory Teams from September 30, 2012 and a decrease of 10 from June 30, 2013 Canaccord Genuity Wealth Management (UK and Europe) · Wealth management operations in the UK and Europe generated $25.8 million in revenue and, after intersegment allocations, and excluding significant items, recorded net income of $3.6 million before taxes in Q2/14(1) · Assets under management (discretionary and non-discretionary) were $17.7 billion (£10.6 billion) (1) Non-IFRS Measures The non-International Financial Reporting Standards (IFRS) measures presentedinclude assets under administration, assets under management, book value perdiluted common share and figures that exclude significant items. Significantitems include restructuring costs, amortization of intangible assets, andacquisition-related expense items, which include costs recognized in relationto both prospective and completed acquisitions. Book value per diluted commonshare is calculated as total common shareholders' equity divided by the numberof diluted common shares outstanding, and commencing in Q1/14, adjusted forshares purchased under the normal course issuer bid and not yet cancelled, andestimated forfeitures in respect of unvested share awards under share-basedpayment plans. Management believes that these non-IFRS measures will allow for a betterevaluation of the operating performance of Canaccord's business and facilitatemeaningful comparison of results in the current period to those in priorperiods and future periods. Figures that exclude significant items provideuseful information by excluding certain items that may not be indicative ofCanaccord's core operating results. A limitation of utilizing these figuresthat exclude significant items is that the IFRS accounting effects of theseitems do in fact reflect the underlying financial results of Canaccord'sbusiness; thus, these effects should not be ignored in evaluating and analyzingCanaccord's financial results. Therefore, management believes that Canaccord'sIFRS measures of financial performance and the respective non-IFRS measuresshould be considered together. Selected financial information excluding significant items (1) Three months Quarter- Six months ended YTD- ended over- September 30 over- September 30 quarter YTD change change (C$ thousands, except per 2013 2012 2013 2012share and % amounts) Total revenue per IFRS $183,306 $186,599 (1.8)% $370,537 $349,148 6.1% Total expenses per IFRS 184,262 204,910 (10.1)% 362,380 391,958 (7.5)% Significant items recorded in CanaccordGenuity Restructuring costs 5,486 4,395 24.8% 5,486 4,395 24.8% Acquisition-related - 388 (100.0)% - 388 (100.0) costs % Amortization of 1,658 3,436 (51.7)% 3,360 7,809 (57.0)% intangible assets Significant items recordedin Canaccord Genuity Wealth Management Restructuring costs - 13,567 (100.0)% - 13,567 (100.0) % Acquisition-related - 900 (100.0)% - 900 (100.0) costs % Amortization of 1,751 1,614 8.5% 3,640 2,612 39.4% intangible assets Significant items recordedin Corporate and Other Restructuring costs - 900 (100.0)% - 900 (100.0) % Total significant items 8,895 25,200 (64.7)% 12,486 30,571 (59.2)% Total expenses excluding 175,367 179,710 (2.4)% 349,894 361,387 (3.2)%significant items Net income (loss) before $7,939 $6,889 15.2% $20,643 $ 268.7%taxes - adjusted (12,239) Income taxes (recovery) - 1,205 982 22.7% 2,099 (1,851) 213.4%adjusted Net income (loss) - $6,734 $5,907 14.0% $18,544 $ 278.5%adjusted (10,388) Earnings (loss) per common $0.03 $0.03 - $0.13 $(0.17) 176.5%share - basic, adjusted Earnings (loss) per common $0.03 $0.03 - $0.12 $(0.17) 170.6%share - diluted, adjusted Fellow Shareholders Canaccord Genuity's fiscal second quarter once again showcased our geographicdiversification. While our core markets were affected by the decreased activityof the summer months, we saw sequentially strong performances by our US- andUK-based businesses. Overall, we believe we are returning to more normalizedmarket conditions, as we have already seen an improvement in activity acrossour geographies and sector verticals. As such, our firm's performance reboundedin September, ending the quarter with growing momentum across our business anda strong pipeline of activity. Following a significant period of growth over the past several years, ourpriorities centre on delivering global services to our clients as well as thecontinued search for efficiencies throughout our business. We are implementingimportant changes that we're confident will lower our ongoing expenses andimprove our margins in the longer term, and we are making investments toimprove our support infrastructure and internal systems. While our Q2performance was profitable on a non-IFRS basis, Canaccord Genuity recorded $8.9million of restructuring and other significant items(1) during the quarter, duelargely to the leadership changes in our equities businesses in Canada and theUK, resulting in a small loss for the quarter under IFRS. On October 1, the parent company of the Canaccord group of companies wasrenamed Canaccord Genuity Group Inc., unifying the brand structure of ourglobal business under the established Canaccord Genuity name. We believe thisbetter aligns the publicly traded company with the proven capabilities of ourtwo main operating divisions. Financial Performance The benefits of our diversified revenue streams continue to be apparent, witheach of our geographies providing meaningful contributions to our overallresults this quarter. Once again, two-thirds of our global revenue wasgenerated outside of Canada. During the second quarter fiscal 2014, Canaccord Genuity generated $183 millionof revenue, a steady result compared to the previous quarter and the sameperiod last year, and excluding significant items(1) recorded net income of$6.7 million or net income of $3.3 million available to common shareholders(2)($0.03 per diluted common share). Including significant items, the Companyrecorded a net loss of $0.1 million or a net loss available to commonshareholders(2) of $3.3 million (loss of $0.03 per diluted common share). We remain well capitalized through the diligent monitoring of our balancesheet, and as of September 30 the Company's net working capital position was$412.3 million. I am pleased to report the renewal of our normal course issuerbid (NCIB)/buy-back programme, and during the first half of the year, theCompany repurchased for cancellation 1,361,496 common shares under our formerand current NCIB. We continue to be very active in share buybacks into ourfiscal third quarter. Canaccord Genuity - Capital Markets Our global capital markets division generated $126.7 million of revenue duringthe second quarter, an increase of 5% compared to the same period last year anda slight decline compared to the previous quarter. Advisory revenue declined by17% from the previous quarter and increased slightly by 5% compared to the samequarter last year. We were pleased that the division increased underwritingrevenue by 29% compared to the previous quarter and by 18% compared to the samequarter last year. Globally, our business continues to leverage the currentmarket environment to find opportunities for our clients. For the three months ended September 30, 2013, Canaccord Genuity led or co-led27 transactions globally, raising total proceeds of $1.5 billion for ourclients, due largely by the solid performances of our US and UK-based teams. Infact, our Investment Companies team in the UK acted on the £300 million IPO ofthe Renewables Infrastructure Group, a milestone transaction in the EuropeanIPO market. And we're maintaining our market leadership in IPO transactions inthis geography as we begin our fiscal third quarter. Canaccord Genuity in theUK was named the Investment Bank of the Week by Financial News in earlyOctober, following our role as sole bookrunner in the Tungsten Corporation IPO,the largest corporate float on AIM since 2007. In Canada, our capital markets practice was impacted by the difficult marketenvironment, particularly in the resources sector. However, we are beginning tosee encouraging signs of a return to more normalized activity, as evidenced bythe $200 million financing that Canaccord Genuity recently co-led for BellatrixExploration Ltd. on the TSX in October. In the US, our business continues to outperform. This division was the largestcontributor of revenue globally for the second consecutive quarter,underscoring the exceptional equity financing team we have assembled. We'vefurther enhanced our institutional service offering by adding new high yieldcapabilities to our platform, through the addition of a US fixed income salesand trading team. We're confident this added scale is well suited to our broadsector coverage and will help the division grow our client base. In addition, Canaccord Genuity in Australia had a record performance,demonstrating the success of our strategy to expand the business' sectorcoverage beyond the resource space. In July, our Australian business was namedthe Best Equities House in the non-bank owned category of the 2013 East ColesSurvey, as voted on by Australian institutional investors. It's clear that the diversity of our revenue streams is a key differentiator ofour global capital markets business, and we're confident the division is poisedfor success in a more robust market environment. Canaccord Genuity - Wealth Management Canaccord Genuity Wealth Management generated $50.2 million of revenue duringthe second fiscal quarter, a 7% decline compared to the previous quarter.However, we're pleased that each of our wealth management businessessuccessfully increased assets under management compared to Q1. Globally, thedivision manages $27.5 billion of client assets, an increase of 7% from June30, 2013. In Canada, difficult market conditions continue to pose challenges to thebusiness. Canaccord Genuity Wealth Management in North America generated $24.4million of revenue and recorded a net loss of $5.1 million for the quarter.However, the business increased assets under management by 6% compared to theprevious quarter and by 19% compared to last year, to $935 million, a solidindication of growth in our managed and fee-based accounts. Our wealth management business in the UK and Europe provides consistent returnsto our global franchise, recording another quarter of profitability. Thedivision generated $25.8 million of revenue and posted net income of $3.6million before taxes and excluding significant items.(1) Having consistentlyincreased assets under management over the past four consecutive quarters to$17.7 billion as of September 30, this division is successfully attracting moreclients in a market facing growing regulation. In the coming months, our wealth management business in Canada will beintroducing a sophisticated portfolio offering developed for the Canadianretail investor, while leveraging the global infrastructure established by ourUK-based business. Once it is available to our clients, we believe this newproduct will drive higher fee-generation and improve our margins. Looking Ahead Subsequent to the end of the quarter, Canaccord Genuity launched an advertisingcampaign featuring our new global value proposition, To us there are no foreignmarkets. It showcases the global perspective of our capital markets and wealthmanagement businesses and enhances our brand exposure to existing andprospective clients. In addition, I want to reiterate our continuing commitment to pursueopportunities to further reduce our overhead expenses and find ways to advancethe efficiencies of our company on behalf of our shareholders. In closing, we are beginning to see a strengthening in global market conditionswith a concurrent improvement in our pipelines across our operating units.While our fiscal second quarter performance was seasonally slow, we believeCanaccord Genuity is in an excellent position to leverage the improvingenvironment in the latter half of our fiscal year. Kind regards,Paul ReynoldsPresident and CEOCanaccord Genuity Group Inc. ACCESS TO QUARTERLY RESULTS INFORMATIONInterested investors, the media and others may review this quarterly earningsrelease and supplementary financial information at http://www.canaccordgenuitygroup.com/EN/IR/Pages/default.aspx . CONFERENCE CALL AND WEBCAST PRESENTATIONInterested parties are invited to listen to Canaccord's second quarter fiscal2014 results conference call with analysts and institutional investors, via alive webcast or a toll free number. The conference call is scheduled forWednesday, November 6, 2013 at 2:00 p.m. (Pacific Time), 5:00 p.m. (EasternTime), 10:00 p.m. (UK Time), and at 6:00 a.m. (China Standard Time), and 9:00a.m. (Australia EST Time) on Thursday, November 7, 2013. At that time, seniorexecutives will comment on the results for the first quarter of the fiscal 2014year and respond to questions from analysts and institutional investors. The conference call may be accessed live and archived on a listen-only basisvia the Internet at: http://www.canaccordgenuitygroup.com/EN/NewsEvents/Pages/Events.aspx Analysts and institutional investors can call in via telephone at: · 647-427-7450 (within Toronto) · 1-888-231-8191 (toll free North America) · 0-800-051-7107 (toll free from the UK) · 1-800-760-620 (toll free from Ireland) · 0-800-917-449 (toll free from France) · 0-800-183-0171 (toll free from Germany) · 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) Please request to participate in Canaccord Genuity Group Inc.'s Q2/14 earningscall. If a passcode is requested, please use 90809089. A replay of the conference call can be accessed after 5:00 p.m. (Pacific Time),8:00 p.m. (Eastern Time) Wednesday, November 6, 2013 until December 19, 2013at416-849-0833 or 1-855-859-2056 by entering passcode 90809089 followed by thepound (#) sign. 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 operationsin two principal segments of the securities industry: wealth management andcapital markets. Since its establishment in 1950, the Company has been drivenby an unwavering commitment to building lasting client relationships. Weachieve this by generating value for our individual, institutional andcorporate clients through comprehensive investment solutions, brokerageservices and investment banking services. The Company has offices in 11countries worldwide, including wealth management offices located in Canada,Australia, the UK and Europe. Canaccord Genuity, the international capitalmarkets division, operates in Canada, the US, the UK, France, Germany, Ireland,Hong Kong, mainland China, Singapore, Australia and Barbados. To us there areno foreign markets.™ Canaccord Genuity Group Inc. is publicly traded under the symbol CF on the TSXand the symbol CF. on the London Stock Exchange. Canaccord Series A PreferredShares are listed on the TSX under the symbol CF.PR.A. Canaccord Series CPreferred Shares are listed on the TSX under the symbol CF.PR.C. FOR FURTHER INFORMATION, CONTACT: North American media: Investor relations inquiries: Broker:Scott Davidson Andrea Sergautis Oliver HearseyExecutive Vice President, Manager, Investor Relations & RBC Europe LimitedGlobal Communications Phone: +44 (0) 20 7653Head of Corporate Phone: 416-687-5507 4000Development & Email: Email:Strategy [email protected] [email protected]: 416-869-3875Email:[email protected] London media:Bobby Morse or Ben RomneyBuchanan Communications(London)Phone: +44 (0) 207 466 5000Email:[email protected] None of the information on the Company's websites at www.canaccord.com ,www.canaccordgenuitygroup.com , www.canaccordgenuity.com and www.canaccord.com/wm should be considered incorporated herein by reference. _______________________1 See Non-IFRS Measures. 2 Net income (loss) available to common shareholders is calculated as netincome (loss) adjusted for non-controlling interests and preferred sharedividends. 3 Source: Transactions over $1.5 million. Internally sourced information. 4 Advisory Teams are normally comprised of one or more Investment Advisors(IAs) and their assistants and associates, who together manage a shared set ofclient accounts. Advisory Teams that are led by, or only include, an IA who hasbeen licensed for less than three years are not included in our Advisory Teamcount, as it typically takes a new IA approximately three years to build anaverage-sized book of business. i A non-IFRS measure SOURCE: Canaccord Genuity Group Inc. For further information: North American media:Scott DavidsonExecutive Vice President, Global Head of Corporate Development & StrategyPhone: 416-869-3875Email: [email protected] London media:Bobby Morse or Ben RomneyBuchanan Communications (London)Phone: +44 (0) 207 466 5000Email: [email protected] Investor relations inquiries:Andrea SergautisManager, Investor Relations & CommunicationsPhone: 416-687-5507Email:[email protected] Broker:Oliver HearseyRBC Europe LimitedPhone: +44 (0) 20 7653 4000Email: [email protected]

(CF. CF)