- GMP,
Richardson Financial Group and investment advisor representatives extend negotiation period for consolidation of 100% of the ownership in Richardson GMP under GMP (the Potential RGMP Transaction) due to ongoing COVID-19 outbreak - Net working capital as at
March 31, 2020 , was$126.1 million - AUA1 at Richardson GMP dropped 11% during the quarter compared with a 21.6% decline in S&P/TSX Composite Index
For further information about |
$1.6 million in professional fees and restructuring costs incurred in first quarter 2020 in connection with GMP's intention to consolidate the ownership of Richardson GMP;$0.8 million decrease in GMP's proportionate share of Richardson GMP's net income;$0.5 million tax expense recorded in first quarter 2020 in connection with Part V1.1 tax relating to dividends paid on GMP's preferred shares;$0.6 million in dividends received on GMP's preferred share investments in Richardson GMP in first quarter 2019, compared with nil in first quarter 2020;$0.4 million decline in the net contribution from our Emerging Markets operations this quarter compared with the quarter endedMarch 31, 2019 ; and- partly offset by a
$0.7 million increase in other revenue largely due to higher carrying broker services provided to Stifel Financial Corp.'s (Stifel) Canadian capital markets business and higher foreign exchange translation gains recorded in first quarter 2020.
"Our top priority this quarter, before the current and severe public health crisis, was to complete the Potential RGMP Transaction we announced on
Discontinued Operations
Discontinued operations reflect substantially all of GMP's former capital markets business, excluding Emerging Markets, which was sold to Stifel on
For further information relating to Discontinued Operations, please refer to Note 6 to the First Quarter 2020 Financial Statements.
1. Considered to be a non-GAAP financial measure. This measure 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. |
Consolidated Operations
Net loss in first quarter 2020 was
Working Capital
The Company reported net working capital as at
COVID-19 UPDATE
The outbreak of the novel strain of coronavirus, specifically identified as "COVID-19", has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, may cause material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility, uncertainty and weakness. Governments and central banks have responded with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company and its operating subsidiaries or business affiliates in future periods.
Impact on Richardson GMP Results
Richardson GMP reported AUA1 of
For more information on Richardson GMP's first quarter 2020 financial performance, refer to the "Supplemental Information" section within this press release.
Impact on Potential RGMP Transaction
Subsequent to quarter end, on
GMP and RFGL are continuing to work toward entering into a definitive agreement and remain hopeful that they will do so in the future. The Company cautions its shareholders and other stakeholders that there is no assurance that any transaction involving Richardson GMP will result from these discussions or on what terms or structure any transaction may occur.
The Shareholders Agreement, as amended, governing Richardson GMP, including material aspects of the RGMP liquidity mechanism process (the RGMP Liquidity Mechanism) that was triggered on
FIRST QUARTER 2020 BUSINESS SEGMENT HIGHLIGHTS
FROM CONTINUING OPERATIONS
Continuing operations are comprised of the new Operations Clearing, Wealth Management and Corporate segments. Prior period results have been re-stated to conform to new reporting segments.
Operations Clearing
Three months ended | % | ||||
( | 2020 | 2019 | |||
Revenue | 8,915 | 7,997 | 11 | ||
Expenses | 8,215 | 7,337 | 12 | ||
Employee compensation and benefits | 2,068 | 1,697 | 22 | ||
Selling, general and administrative | 3,054 | 2,537 | 20 | ||
Interest | 2,965 | 2,663 | 11 | ||
Depreciation and amortization | 128 | 440 | (71) | ||
Income before income taxes | 700 | 660 | 6 |
First quarter 2020 vs First quarter 2019
Operations Clearing reported net income before income taxes of
Revenue in first quarter 2020 was
Expenses
Expenses of
- Employee compensation and benefits expense increased 22% in first quarter 2020 largely due to
$0.3 million in restructuring costs recorded first quarter 2020. - Selling, general and administrative expenses increased 20% in first quarter 2020 largely reflecting incremental trade clearing and settlement costs in connection with providing carrying broker services to Stifel's Canadian capital markets.
- Interest expense increased 11% in first quarter 2020 compared with first quarter 2019 in connection with GMP's stock borrowing and lending business this quarter.
Wealth Management
The following table sets forth an overview of the financial results of the Wealth Management segment for the periods presented.
( | Three months ended | % (decrease) | |||
2020 | 2019 | ||||
Revenue | 33 | 574 | (94) | ||
Expenses | 14 | 6 | 133 | ||
Share of net income of associate 2 | 114 | 945 | (88) | ||
Income before income taxes | 133 | 1,513 | (91) |
2. GMP's non-controlling ownership interest in Richardson GMP as at |
First quarter 2020 vs First quarter 2019
Wealth Management reported income before income taxes of
For more information on Richardson GMP's first quarter 2020 financial performance, refer to the "Supplemental Information" section within this press release.
Corporate
The Corporate segment primarily comprises enterprise-wide items, results of the Company's Emerging Markets business, corporate functions and public company costs. The following table sets forth the financial results for the Corporate segment for the periods presented.
Three months ended | % | ||||
( | 2020 | 2019 | |||
Revenue | (120) | 609 | (120) | ||
Expenses | 3,148 | 2,820 | 12 | ||
Employee compensation and benefits | 973 | 1,358 | (28) | ||
Non-compensation expenses | 2,175 | 1,462 | 49 | ||
Loss before income taxes - reported | (3,268) | (2,211) | (48) | ||
Pre-tax impact of adjusting items | |||||
Potential RGMP Transaction costs | 1,282 | — | n.m. | ||
Loss before income taxes - adjusted1 | (1,986) | (2,211) | 10 |
n.m. = not meaningful |
1. Considered to be a non-GAAP financial measure. This measure 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. |
The majority of revenue in the Corporate segment reflects GMP's Emerging Markets business that was not acquired in connection with the sale of capital markets to Stifel on
First quarter 2020 vs First quarter 2019
First quarter 2020 revenue reflects a mark-to-market loss on an inventory position in Emerging Markets, compared with revenue of
Potential RGMP Transaction Costs
In first quarter 2020, GMP recorded
DIVIDENDS
On
On
CONFERENCE CALL
A conference call and live audio webcast to discuss GMP's first quarter 2020 results will be held this morning at
A recording of the conference call will be available until
NON-GAAP MEASURES
We use certain measures to assess our financial performance that are not generally accepted accounting principles (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.
Annualized Return on Common Equity
We evaluate the performance of our consolidated operations using annualized return on common equity (ROE) which we calculate based on net income attributable to common shareholders divided by total average common shareholder equity for the period, which are measures derived from information contained in our First Quarter 2020 Financial Statements.
AUA is a non-GAAP financial measure of client assets that are common to the wealth management business. AUA represents the market value of client assets managed and administered by Richardson GMP from which it earns commissions and fees. This measure includes funds held in client accounts as well as the aggregate market value of long and short security positions. Richardson GMP's method of calculating may differ from the methods used by other companies and therefore may not be comparable to other companies. Management uses these measures to assess Richardson GMP's operational performance.
Potential RGMP Transaction Costs:
In first quarter 2020, GMP recorded
SUPPLEMENTAL INFORMATION - RICHARDSON GMP
The following supplemental information reflects how Richardson GMP's management assesses the financial performance of Richardson GMP.
Richardson GMP's management assesses performance on both a reported and an adjusted Non-GAAP 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 specified items on financial results. Richardson GMP presents earnings before interest, income tax, depreciation and amortization (EBITDA) which excludes:
- Interest expense recorded primarily in connection with subordinated loan financing arrangements.
- Income tax expense (benefit) recorded.
- Depreciation and amortization expense recorded primarily in connection with equipment and leasehold improvements.
- Transition assistance loan amortization in connection with investment advisor loan programs. Richardson GMP views these loans as an effective recruiting and retention tool, the cost of which is assessed by management upfront when the loan is provided rather than over its term.
Richardson GMP also presents an adjusted EBITDA1 which excludes the following (adjusted EBITDA):
- Share-based compensation costs recorded in connection with awards granted to employees and investment advisors of Richardson GMP.
EBITDA and adjusted EBITDA1 do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. These Non-GAAP measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of Richardson GMP's performance, liquidity, cash flows and profitability. Richardson GMP's management believes adjusting results by excluding the impact of the specified items is more reflective of ongoing financial performance and cash-generating capabilities and provides readers with an enhanced understanding of how management views Richardson GMP's core performance.
The following tables set forth an overview of the consolidated financial results of Richardson GMP for the periods indicated, on a 100% basis; noting, however, that GMP owns an approximate 34.5% non-controlling interest of Richardson GMP as at
( | Three months | % | ||||
2020 | 2019 | |||||
Revenue | 70,152 | 67,985 | 3 | |||
Commissions | 9,213 | 7,896 | 17 | |||
Investment management and fee income | 53,301 | 48,137 | 11 | |||
Interest | 5,842 | 7,217 | (19) | |||
Other | 2,102 | 4,767 | (56) | |||
Unrealized loss of trading securities | (306) | (32) | n.m | |||
Expenses | 67,601 | 62,132 | 9 | |||
Employee compensation and benefits | 49,641 | 44,007 | 13 | |||
Non-compensation expenses | 17,960 | 18,125 | (1) | |||
Income before income tax | 2,551 | 5,853 | (56) | |||
Net income - reported | 1,460 | 4,030 | (64) | |||
Pre-tax impact of adjusting items | ||||||
Interest | 1,979 | 2,034 | (3) | |||
Income tax | 1,091 | 1,823 | (40) | |||
Depreciation and amortization | 3,316 | 3,221 | 3 | |||
Transition assistance loan amortization | 2,370 | 2,051 | 16 | |||
EBITDA1 | 10,216 | 13,159 | (22) | |||
Share-based compensation | 1,246 | 461 | 170 | |||
Adjusted EBITDA1 | 11,462 | 13,620 | (16) | |||
Number of advisory teams | 164 | 160 | 3 | |||
AUA1 at period-end ($ millions) | 25,394 | 28,707 | (12) |
n.m. = not meaningful |
1. Considered to be a non-GAAP financial measure. This measure 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. |
First quarter 2020 vs First quarter 2019
Richardson GMP reported net income of
Total revenues increased 3% primarily due to higher investment management fees, which reflects Richardson GMP's high proportion of fee-based client assets, and higher commissions.
Total expenses increased 9% in first quarter 2020 compared with first quarter 2019 primarily due to higher employee compensation and benefits expense, which was commensurate with higher revenue generation, higher advisor transition loan amortization and higher share-based compensation.
Richardson GMP Highlights
- AUA2 as at
March 31, 2020 was$25.4 billion , down 11% compared withDecember 31, 2019 . This decrease compares favourably to the sharp declines of 21.6% and 26.0% for the S&P/TSX Composite and theU.S. S&P 500 indices, respectively, over the same period. - Ended first quarter 2020 with 164 advisory teams; up four teams from 160 as at
December 31, 2019 .
Working Capital
During first quarter 2020, Richardson GMP reclassified its current assets and liabilities to better reflect assets and liabilities that are typically due in one year. As at
2. Considered to be a non-GAAP financial measure. This data should be read in conjunction with the "Supplemental Information" section at the end of this press release and in the First Quarter 2020 MD&A. |
The following table is Richardson GMP's balance sheet without adjusting for GMP's proportionate interest: | |||
As at, | 2020 | 2019 | |
Assets | |||
Cash | 73,058 | 67,901 | |
Securities owned | 384 | 997 | |
Due from carrying broker | 4,882 | 10,328 | |
Other assets | 8,424 | 7,310 | |
Deposit with carrying broker | 500 | 496 | |
Advisor loans receivable | 9,498 | 10,083 | |
Total current assets | 96,746 | 97,115 | |
Equipment and leasehold improvements, net | 13,460 | 14,418 | |
Right-of-use asset | 23,135 | 24,949 | |
Advisor loans receivable | 20,754 | 20,775 | |
Deferred Tax Asset | 27,460 | 28,494 | |
145,232 | 145,267 | ||
Total assets | 326,787 | 331,018 | |
Liabilities and shareholders' equity | |||
Accounts payable and accrued liabilities | 27,526 | 32,039 | |
Other liabilities | 36 | 79 | |
Securities sold short | 253 | — | |
Due to issuer/broker | 235 | — | |
Lease liability | 7,341 | 7,556 | |
Subordinated loans | 4,000 | 3,000 | |
Total current liabilities | 39,391 | 42,674 | |
Commitment to advisors and other liabilities | 9,103 | 7,242 | |
Provisions | 9,632 | 10,382 | |
Lease liability | 18,384 | 19,848 | |
Subordinated loans | 67,000 | 68,000 | |
Total liabilities | 143,510 | 148,146 | |
Shareholders' equity | |||
Share capital: | |||
Common shares | 135,890 | 134,891 | |
Preferred shares | 61,517 | 61,517 | |
Share capital | 197,407 | 196,408 | |
Contributed surplus | 2,688 | 2,793 | |
Accumulated deficit | (16,818) | (16,329) | |
Total shareholders' equity | 183,277 | 182,872 | |
Total liabilities and shareholders' equity | 326,787 | 331,018 |
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 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. The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement.
The forward-looking statements included in this press release, including statements regarding the Potential RGMP Transaction and the execution of any of the Company's potential plans, are not guarantees of future results and involve numerous risks and uncertainties that may cause actual results to differ materially from the potential results discussed in the forward-looking statements. In respect of the forward-looking statements and information concerning the consolidation of 100% of ownership in Richardson GMP, and the Company's strategy going forward, management has provided same based on reliance on certain assumptions it considers reasonable at this time including that a transaction involving Richardson GMP can be completed on acceptable terms and that any conditions precedent can be satisfied. There is no assurance that any transaction involving Richardson GMP will result from the discussions with RFGL or on what terms or structure any transaction may occur as proposed or at all, including the timing of the completion of any transaction involving Richardson GMP. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this press release.
Risks and uncertainties related to the Potential RGMP Transaction include, but are not limited to: failure of GMP and RFGL to enter into the Potential RGMP Transaction on satisfactory terms, or at all; failure of GMP and RFGL to obtain the required shareholders and regulatory approvals for, or satisfy other conditions to effect, the Potential RGMP Transaction; the risk that the Potential RGMP Transaction may involve unexpected costs, liabilities or delays; the risk that, prior to or as a result of the completion of the Potential RGMP Transaction, the business of GMP and/or Richardson GMP may experience significant disruptions, including loss of clients or employees due to transaction related uncertainty, industry conditions or other factors; risks relating to employee retention; the risk that legal proceedings may be instituted against GMP or Richardson GMP; risks related to the diversion of management's attention from GMP's ongoing business operations and risks related to the COVID-19 pandemic and the State of Emergency declared by government and public health authorities. For a description of additional risks that could cause our actual results to materially differ from our current expectations, see the "Risk Management" and "Risk Factors" sections of GMP's 2019 Annual MD&A and the "Risk Factors" section in the Company's AIF. For additional information on the risk factors related to the Potential RGMP Transaction, see "The Sale Transaction - Reasons for the Sale Transaction" and "The Sale Transaction - Risk Factors" in GMP's Notice of Special Meeting and Management Information Circular dated
Although forward-looking information contained in this press release is provided based on management's reliance on certain assumptions it considers reasonable, there can be no assurance that such expectations will prove to be correct. 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. Readers should not place undue reliance on the forward-looking statements and information contained in this press release. When relying on forward-looking statements to make decisions, readers should carefully consider the foregoing factors, the list of which is not exhaustive.
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 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 currently operates through two business segments: Operations Clearing and Wealth Management; and a Corporate segment. Operations Clearing, through
SOURCE
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