Half-yearly Report

Canaccord Genuity Group Inc. reports second quarter fiscal 2015 results andadjusted net income improvement of 208% Excluding significant items, second quarter diluted earnings per share of $0.17(1) compared to $0.03 (1) one year ago (All dollar amounts are stated in Canadian dollars unless otherwise indicated) TORONTO, Nov. 5, 2014 /CNW/ - In the second quarter of fiscal 2015, the quarterended September 30, 2014, Canaccord Genuity Group Inc. (Canaccord, the Company,TSX: CF, LSE: CF.) generated $236.3 million in revenue. Excluding significantitems(1) (a non-IFRS measure), the Company recorded net income of $20.7 millionor net income of $17.1 million attributable to common shareholders(2) ($0.17per diluted common share). Including all expense items, on an IFRS basis, theCompany recorded net income of $17.6 million or net income attributable tocommon shareholders(2) of $14.2 million (earnings per diluted common share of$0.14). "During our second fiscal quarter, we achieved strong results in our globaladvisory business and steady recurring revenue growth from our global wealthmanagement operations", said Paul Reynolds, President and CEO of CanaccordGenuity Group Inc. "While fundamentals of the broader market environmentadversely impacted transaction and trading activity during the quarter, ourlonger term outlook for our capital markets business is stable and positive." Second Quarter of Fiscal 2015 vs. Second Quarter of fiscal 2014 · Revenue of $236.3 million, an increase of 29% or $53.0 million from$183.3 million · Excluding significant items, expenses of $207.4 million, an increaseof 18% or $32.0 million from $175.4 million(1) · Expenses of $211.3 million, an increase of 15% or $27.0 million from$184.3 million · Excluding significant items, diluted earnings per common share (EPS)of $0.17 compared to diluted EPS of $0.03(1) · Excluding significant items, net income of $20.7 million compared tonet income of $6.7 million(1) · Net income of $17.6 million compared to net loss of $0.1 million · Diluted EPS of $0.14 compared to diluted loss per share of $0.03 Second Quarter of Fiscal 2015 vs. First Quarter of Fiscal 2015 · Revenue of $236.3 million, a decrease of 4% or $9.3 million from$245.6 million · Excluding significant items, expenses of $207.4 million, a decreaseof 4% or $8.5 million from $215.9 million(1) · Expenses of $211.3 million, a decrease of 5% or $11.0 million from$222.3 million · Excluding significant items, diluted EPS of $0.17 compared to dilutedEPS of $0.20(1) · Excluding significant items, net income of $20.7 million compared tonet income of $24.0 million (1) · Net income of $17.6 million compared to net income of $18.9 million · Diluted EPS of $0.14 compared to diluted EPS of $0.15 Year-to-Date Fiscal 2015 vs. Year-to-Date Fiscal 2014(Six months Ended September 30, 2014 vs. Six Months Ended September 30, 2013) · Revenue of $481.8 million, an increase of 30% or $111.3 million from$370.5 million · Excluding significant items, expenses of $423.3 million, an increaseof 21% or $73.4 million from $349.9 million(1) · Expenses of $433.6 million, an increase of 20% or $71.2 million from$362.4 million · Excluding significant items, diluted EPS of $0.37 compared to dilutedEPS of $0.12(1) · Excluding significant items, net income of $44.8 million compared tonet income of $18.5 million (1) · Net income of $36.5 million compared to net income of $7.8 million · Diluted EPS of $0.29 compared to diluted EPS of $0.02 Financial Condition at End of Second Quarter Fiscal 2015 vs. Fourth QuarterFiscal 2014 · Cash and cash equivalents balance of $290.4 million, down $73.9million from $364.3 million · Working capital of $453.5 million, a decrease of $15.9 million from$469.4 million · Total shareholders' equity of $1.14 billion, down $26.9 million from$1.17 billion · Book value per diluted common share of $8.90, down $0.15 from $9.05(3) · On November 5, 2014, the Board of Directors approved a quarterlydividend of $0.05 per common share and a special dividend of $0.05 per commonshare payable on December 10, 2014 with a record date of November 21, 2014 · On November 5, 2014, the Board of Directors also approved a cashdividend of $0.34375 per Series A Preferred Share payable on December 31, 2014with a record date of December 19, 2014, and a cash dividend of $0.359375 perSeries C Preferred Share payable on December 31, 2014 to Series C Preferredshareholders of record as at December 19, 2014 SUMMARY OF OPERATIONS Corporate · On August 6, 2014, the Company held its 2014 Annual General Meetingof shareholders, where all nominated directors were re-elected or elected tothe Board, including Ms. Kalpana Desai as an independent director, bringing theBoard to nine directors, seven of whom are independent. · On August 8, 2014 the Company announced the filing of a renewal forits normal course issuer bid (NCIB) to provide for the ability to purchase, atthe Company's discretion, up to a maximum of 5,100,049 common shares throughthe facilities of the TSX during the period from August 13, 2014 to August 12,2015. The purpose of any purchases under this program is to enable the Companyto acquire shares for cancellation. The maximum number of shares that may bepurchased represents 5.0% of the Company's outstanding common shares. Therewere no shares repurchased during Q2/15 under the NCIB. In Q1/15, 264,200shares were purchased and cancelled under the terms of the NCIB which expiredon August 12, 2014. Capital Markets · Canaccord Genuity led or co-led 35 transactions globally, raisingtotal proceeds of C$1.8 billion(4) during fiscal Q2/15 · Canaccord Genuity participated in 86 transactions globally, raisingtotal proceeds of C$10.7 billion(4) during fiscal Q2/15 · Significant investment banking transactions for Canaccord Genuityduring fiscal Q2/15: · C$640.0 million for Amaya Gaming Group common shares on the TSX · US$179.2 million private placement for Amaya Gaming Group preferredshares · C$103.5 million for The Intertain Group Limited on the TSX · AUD$98.0 million for Ashley Services Group Limited on the ASX · AUD$74.0 million for Tiger Resources Group on the ASX · £56.0 million for Intelligent Energy Plc on the LSE · US$52.0 million for Inventure Foods, Inc. on the NASDAQ · £41.0 million for Matomy Media Limited on the LSE · US$39.6 million for BioAmber Inc. on the NYSE · C$38.6 million for WesternOne on the TSX · C$30.7 million for PRO REIT on the TSX · US$30.2 million for Pure Multi-Family REIT on the TSX-V · C$30.0 million for DataWind Inc. on the TSX · C$27.4 million for Dalradian Resources on the TSX · C$25.0 million for Petro-Victory Energy Corp. on the TSX-V · C$23.0 million for Terrace Energy Corp. on the TSX-V · In Canada, Canaccord Genuity participated in raising $210.7 millionfor government and corporate bond issuances during fiscal Q2/15 · Canaccord Genuity generated advisory revenues of $55.7 million duringfiscal Q2/15, an increase of 86% compared to the same quarter last year · During fiscal Q2/15, Canaccord Genuity advised on the following M&Aand advisory transactions: · Amaya Gaming Group on its US$4.9 billion purchase of Rational Group · Plan Group on its sale to Bouygues SA · B2Gold Corp. on its merger with Papillon Resources Limited · Medical Action Industries Inc. on its acquisition by Owens & Minor · Nordion Inc. on its US$826.0 million sale to SterigenicsInternational · SOF Investments on the £212.0 million sale of Moneycorp toBridgepoint · DHX Media Limited on its acquisition of Family Channel, Disney XD,Disney Junior (English) and Disney Junior (French) · Paperny Entertainment Inc. on its sale to Entertainment One Limited · Exact Holdings on its divestiture of Longview Solutions to MarlinEquity Partners · TowerBrook Capital Partners on the acquisition of IndependentClinical Services from The Blackstone Group · Geodis SA on the sale of Ciblex to Eurotranspharma · Pteris Global Limited on the SGD$151.2 million reverse takeover ofShenzhen CIMC-TianDa Airport Support Ltd. · TA Associates on the £120.0 million disposal of MandM Direct · Regard Holdings Limited on its £120.0 million disposal by MML CapitalPartners to Montreux Healthcare Funds and Macquarie Lending · OnMobile on its divestiture of VoxMobili SA to SynchronossTechnologies, Inc. · The Intertain Group Limited on its £45.0 million purchase of MandalayMedia · Rathbones on the £43.1 million acquisition of Jupiter AssetManagement's private client and charity investment business · PRO REIT on its sale of subscription units to Lotus Crux REIT LP · Ultimo on its disposal to B2 Holding ASA Canaccord Genuity Wealth Management (Global) · Globally, Canaccord Genuity Wealth Management generated $63.0 millionin revenue in Q2/15 · Assets under administration in Canada and assets under management inthe UK and Europe and Australia were $31.7 billion at the end of Q2/15(3) Canaccord Genuity Wealth Management (North America) · Canaccord Genuity Wealth Management (North America) generated $31.6million in revenue and, after intersegment allocations, recorded a net loss of$1.8 million before taxes in Q2/15 · Assets under administration in Canada were $10.8 billion as atSeptember 30, 2014, down 2% from $11.0 billion at the end of the previousquarter and up 14% from $9.4 billion at the end of fiscal Q2/14(3) · Assets under management in Canada (discretionary) were $1.4 billionas at September 30, 2014, up 10% from $1.3 billion at the end of the previousquarter and up 49% from $935 million at the end of fiscal Q2/14(3) · As at September 30, 2014, Canaccord Genuity Wealth Management had 162Advisory Teams(5), a decrease of one Advisory Team from September 30, 2013 andJune 30, 2014 Canaccord Genuity Wealth Management (UK and Europe) · Wealth management operations in the UK and Europe generated $29.8million in revenue and, after intersegment allocations, and excludingsignificant items, recorded net income of $4.6 million before taxes in Q2/15(1) · Assets under management (discretionary and non-discretionary) were$20.4 billion (£11.3 billion) (3) Non-IFRS Measures The non-International Financial Reporting Standards (IFRS) measures presentedinclude assets under administration, assets under management, book value perdiluted common share and figures that exclude significant items. Significantitems include restructuring costs, amortization of intangible assets, andacquisition-related expense items, which include costs recognized in relationto both prospective and completed acquisitions. Book value per diluted commonshare is calculated as total common shareholders' equity divided by the numberof diluted common shares outstanding and, commencing in Q1/14, adjusted forshares purchased under the NCIB and not yet cancelled, and estimatedforfeitures in respect of unvested share awards under share-based paymentplans. Management believes that these non-IFRS measures will allow for a betterevaluation of the operating performance of the Company's business andfacilitate meaningful comparison of results in the current period to those inprior periods and future periods. Figures that exclude significant itemsprovide useful information by excluding certain items that may not beindicative of the Company's core operating results. A limitation of utilizingthese figures that exclude significant items is that the IFRS accountingeffects of these items do in fact reflect the underlying financial results ofthe Company's business; thus, these effects should not be ignored in evaluatingand analyzing the Company's financial results. Therefore, management believesthat the Company's IFRS measures of financial performance and the respectivenon-IFRS measures should be considered together. Selected financial information excluding significant items(1) Three months Quarter- Six months ended YTD - ended over- September 30 over - September 30 quarter YTD change change (C$ thousands, except per 2014 2013 2014 2013share and % amounts) Total revenue per IFRS $236,271 $183,306 28.9% $481,827 $370,537 30.0% Total expenses per IFRS 211,326 184,262 14.7% 433,594 362,380 19.7% Significant items recordedin Canaccord Genuity Amortization of 1,707 1,658 3.0% 3,448 3,360 2.6% intangible assets Restructuring costs - 5,486 (100.0)% - 5,486 (100.0) % Significant items recordedin Canaccord GenuityWealth Management Amortization of 2,224 1,751 27.0% 4,464 3,640 22.6% intangible assets Restructuring costs - - - 783 - n.m. Significant items recordedin Corporate and Other Restructuring costs - - - 1,600 - n.m. Total significant items 3,931 8,895 (55.8)% 10,295 12,486 (17.5)% Total expenses excluding 207,395 175,367 18.3% 423,299 349,894 21.0%significant items Net income before taxes - $28,876 $7,939 263.7% $58,528 $20,643 183.5%adjusted Income taxes - adjusted 8,130 1,205 n.m. 13,765 2,099 n.m. Net income - adjusted $20,746 $6,734 208.1% $44,763 $18,544 141.4% Earnings per common share $0.19 $0.03 n.m. $0.40 $0.13 207.7%- basic, adjusted Earnings per common share $0.17 $0.03 n.m. $0.37 $0.12 208.3%- diluted, adjusted (1) Figures excluding significant items are non-IFRS measures. See Non-IFRSMeasures above.n.m.: not meaningful Fellow Shareholders: While we continue to have confidence in the solid fundamentals for globalequities markets, our second quarter results were impacted by a globalexpectation of a market correction that became a reality in early October.Broad market indices posted minor increases during the quarter, while smallerand mid cap stocks struggled, leading to diminished transaction and tradingactivity in the growth-oriented sectors. This operating environment had the most notable impact on our US operations.Following seven straight quarters of gains, US equities turned quickly downwardin September. Valuations in the top half of historic ranges resulted in fewercompelling investment opportunities, which negatively impacted investmentbanking and trading activity in that region. The aggregate value of follow-onofferings in our core US coverage sectors declined by 56% compared to theprevious quarter. On a positive note, Canaccord Genuity Group recorded $236.3 million in revenuesfor the quarter, a healthy year-over year improvement of 29%. This translatedinto adjusted earnings per share of $0.17, an increase of 467%. We attributethis performance to the investments we have made to diversify our revenuestreams and improve our cross-border execution capabilities. Working capital increased by $18.4 million to $453.5 million since the firstquarter of fiscal 2015. On an adjusted basis, we have lowered non-compensationrelated expenses by 4.6% compared to our most recent quarter against a 3.7%decrease in revenue for the same period. Global advisory revenue increases 87% year-over-year Lower volatility and volumes continued to support M&A activity during thequarter and we achieved strong results advising mid-market growth companies inall regions. Advisory fees for our second fiscal quarter were $55.7 million, anincrease of 87% from the same period last year. The largest contributor to thisgrowth came from our Canadian business, and our UK, US and Asia-Pacificbusinesses also achieved advisory revenue within the upper ranges of theirhistoric quarterly results. Capital Markets During the fiscal quarter, Canaccord Genuity participated in 86 transactionsglobally and raised total proceeds of C$10.7 billion. When compared to the sameperiod last year, our global investment banking business generated a secondquarter revenue increase of 63%, led by the performance of our Canadianoperations and due in part from our role as lead advisor and bookrunner toAmaya Gaming Group, in the second largest transaction in our firm's history.Additionally, our Asia-Pacific operations continue to post meaningful increasesin investment banking and trading commissions. Planned investments in the strategic build-out of our US research, banking andfixed income businesses added roughly $3 million to our expenses for thequarter. We believe these investments will meaningfully contribute to thegrowth for this business as they will add to the breadth of our offering andimprove our execution capabilities. In October, the strength and quality of our Australian business was givenprominence as the dominant recipient of the East Coles Equities Markets Awards,winning Best Independent Equities House, Best Independent Equity CapitalMarkets Bank and Best Independent Equities Research House, with 13 of ouranalysts receiving top rankings. Also in October, our European team received the 2014 Corporate Financier of theYear award in the Unquote British Private Equity Awards, which celebrateinnovation and excellence in private equity and venture capital. Recurring revenues balance capital markets volatility We expect increasing levels of fee-based and managed accounts in our Canadianand UK wealth management businesses will materially improve recurring revenuestreams and reduce earnings volatility for our business. On a global basis,Canaccord Genuity Wealth Management generated $63 million in revenue for thesecond quarter and increased assets under administration and management by15.5% compared to the same period last year. Our Canadian wealth management business continues to show improvement,narrowing its loss before taxes to $1.8 million, a decrease of 66% compared tothe second quarter of last year. Continued focus on the transition to fee-basedand managed accounts has led to a 49% year-over-year increase in assets undermanagement. Through targeted recruitment, we have attracted growing numbers ofadvisors with established books of business and proven track records ofexceptional client service. Our UK and European wealth management business has also shown steadyimprovement, increasing assets under management to $20.4 billion andfee-related revenue was a record 68.5% of total revenue for the quarter. Commitment to our Communities Another important measure of our success is our ability to make positivecontributions in the communities where we operate. During the quarter, wehosted the second annual Canaccord Genuity Great Camp Adventure Walk to benefitthe Hospital for Sick Children. A grand total of $1.8 million was raised tosupport the goal of improving the health and well-being of children around theworld. On October 13th our US capital markets team hosted Trading Day for Kids tobenefit Youth I.N.C. Through commission fees generated from designated equity,electronic and agency options trades, the team raised $850,000, bringing ourthree year contribution to just over $2.75 million. Looking forward We expect the current market environment will prove challenging for our capitalmarkets activities in the near term, but our longer term outlook for equitymarkets is stable and positive. While our macroeconomic outlook for the balanceof the fiscal year is cautiously optimistic, our pipeline is strong anddiverse. Our priorities for our global capital markets division centre on increasingcontributions from new products, such as debt and restructuring, and leveragingthe capabilities of strategic hires to compete domestically and supportcross-border collaboration. For our global wealth management division, we will continue to focus on growingour share of fee-based and discretionary managed accounts and actively pursueopportunities to increase our scale in the UK & Europe. The imminent launch ofour proprietary asset management product, Canaccord Genuity Global PortfolioSolutions (GPS) is expected to increase our recurring revenue streams byattracting new clients to our Canadian wealth management business andincreasing engagement with existing clients. This unique range of portfolioshas been created to service the growing demand for investment solutions whichseek to provide stable returns with minimal risk by targeting limited levels ofvolatility. We have worked hard to improve our competitive position and further strengthenour brand in regions we have targeted for growth. As we enter the second halfof our fiscal year, we will continue to pursue opportunities for organic growthand uphold our culture of cost containment. We will adhere to a disciplinedapproach to investing in key areas of our business with a focus on betterserving our clients and creating long term value for our shareholders. Kind regards,Paul ReynoldsPresident & Chief Executive Officer 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 the Company's second quarter fiscal2015 results conference call with analysts and institutional investors, via alive webcast or a toll free number. The conference call is scheduled forThursday, November 6, 2014 at 5:00 a.m. Pacific time, 8:00 a.m. Eastern time,1:00 p.m. UK time, 9:00 p.m. China standard time and on Friday, November 7,2014 at 12:00 a.m. Australia EST. At that time, senior executives will commenton the results for the second quarter of fiscal 2015 year and respond toquestions 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 in 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 Q2/15 earningscall. If a passcode is requested, please use 6814072. A replay of the conference call can be accessed after 8:00 a.m. (Pacific Time),11:00 a.m. (Eastern Time) on Thursday, November 6, 2014 until December 18, 2014at 416-849-0833 or 1-855-859-2056 by entering passcode 6814072 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 10countries 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, China, Singapore, Australia and Barbados. To us there are no foreignmarkets.TM Canaccord Genuity Group Inc. is publicly traded under the symbol CF on the TSXand the symbol CF. on the London Stock Exchange. Canaccord Genuity Series APreferred Shares are listed on the TSX under the symbol CF.PR.A. CanaccordGenuity Series C Preferred Shares are listed on the TSX under the symbolCF.PR.C. None of the information on the Company's websites at www.canaccordgenuity.com,www.canaccordgenuitygroup.com, and www.canaccordgenuity.com/cm should beconsidered incorporated herein by reference. ________________________________1 Figures excluding significant items are non-IFRS measures. See Non-IFRSMeasures on pages 5.2 Net income attributable to common shareholders is calculated as net incomeadjusted for non-controlling interests and preferred share dividends.3 See Non-IFRS Measures on pages 5.4 Source: Transactions over $1.5 million. Internally sourced information.5 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. Image with caption: "Canaccord Genuity Group Inc. (CNW Group/Canaccord GenuityGroup Inc.)". Image available at: http://40rhel5streamview01.newswire.ca/media/2014/11/05/20141105-763373-43176-8c5639a7-265d-42f2-a372-4821ba366499.jpg 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:Robert Morgan or Nicola RatchfordStockwellPhone: +44 (0) 20 7240 2486Email: [email protected]@stockwellgroup.com Investor relations inquiries:Christina MarinoffVice President, Investor Relations & CommunicationsPhone: 416-687-5507Email: [email protected] Broker:Oliver HearseyRBC Europe LimitedPhone: +44 (0) 20 7653 4000Email: [email protected]