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Classified in: Business, Covid-19 virus
Subject: ERN

Canaccord Genuity Group Inc. Reports Fourth Quarter Fiscal 2020 Results


Excluding significant items, fourth quarter earnings per common share of $0.17 (1)

TORONTO, June 2, 2020 /CNW/ - Canaccord Genuity Group Inc. (Canaccord Genuity Group, the Company) (TSX: CF) today announced its financial results for the fourth quarter and fiscal year ended March 31, 2020.

"Despite the unprecedented market turmoil in our fourth fiscal quarter, we achieved a solid quarterly result, which contributed to a strong financial performance for fiscal 2020. I am so proud of our employees for staying grounded in our core values and supporting our clients at a time when they needed us most," said Dan Daviau, President & CEO of Canaccord Genuity Group Inc.

"We entered this environment with a robust financial and strategic position to support our business activities, and while the medium and longer-term macroeconomic impact of COVID-19 remains unclear, I am confident that Canaccord Genuity continues to perform well and remains well positioned to deliver long-term value for our clients and our shareholders."

Fourth quarter and fiscal 2020 highlights:

(All dollar amounts are stated in thousands of Canadian dollars unless otherwise indicated)

 


Three months ended

March 31

Quarter-
over-
quarter
change

Three months
ended
December 31

Quarter-
over-
quarter
change

Fiscal 2020

Fiscal 2019

Change


Q4/20

Q4/19


Q3/20






Revenue

$319,648

$284,808

12.2%

$308,014

3.8 %

$1,223,867

$1,190,567

2.8%


Fourth fiscal quarter highlights- adjusted1

Expenses - excluding significant items1

$294,703

$262,587

12.2%

$277,004

6.4 %

$1,100,810

$1,054,981

4.3%


Earnings per common share ? diluted, excluding significant items1

$0.17

$0.12

41.7%

$0.23

(26.1) %

$0.81

$0.80

1.3%


Net Income - excluding significant items1,2

$21,451

$16,610

29.1%

$30,458

(29.6) %

$106,323

$107,355

(1.0) %


Net Income attributable to common shareholders ? excluding significant items1,3

$19,142

$14,466

32.3%

$27,619

(30.7) %

$96,491

$96,899

(0.4) %


Fourth fiscal quarter highlights- IFRS

Expenses

$289,430

$279,265

3.6%

$285,731

1.3 %

$1,123,844

$1,097,911

2.4%


Earnings per common share ? diluted

$0.21

$0.00

n.m.

$0.17

23.5 %

$0.65

$0.48

35.4%


Net Income2

$26,246

$2,456

n.m.

$22,840

14.9 %

$86,554

$71,582

20.9%


Net Income attributable to common shareholders3

$23,937

$312

n.m.

$20,158

18.7 %

$77,086

$61,126

26.1%


1. Figures excluding significant items are non-IFRS measures. See Non-IFRS measures on page 14 of the MD&A

2. Before non-controlling interests and preferred share dividends

3. Net income attributable to common shareholders is calculated as the net income adjusted for non-controlling interests and preferred share dividends

Core business performance highlights:

Canaccord Genuity Wealth Management

The Company's combined global wealth management operations earned revenue of $137.9 million for the fourth fiscal quarter, a year-over-year increase of 17.8%. Excluding significant items (1), the pre-tax net income contribution from this segment was $16.6 million, which represents 53.3% of the adjusted pre-tax net income attributable to the Company's combined operating businesses for the three-month period.

Fourth quarter revenue in the Company's UK & Europe wealth management business increased by 7.7% compared to the same period one year ago, primarily due to higher commissions and fees revenue and contributions from the Thomas Miller and McCarthy Taylor acquisitions. Excluding significant items (1), the pre-tax profit margin in this business was 19.1% for the three-month period and 20.3% for the fiscal year.

Revenue in the Company's North American wealth management business increased by 5.8% in Q4/20 compared to the same period in the prior year, primarily due to higher commission and fees revenue partially offset by lower investment banking revenue when compared to the same period in the prior year. The pre-tax profit margin in this business decreased to 4.7% for the three-month period and decreased by 2.2 p.p. to 10.8% for the fiscal year. With the rapid decline in market prices in March 2020, there were certain pressures on client margin accounts with the result that provisions were recorded above normal levels, negatively impacting profit margins for the quarter.

The Company's Australian wealth management business earned revenue of $12.9 million, reflecting contributions from the recent acquisition of Patersons Securities Limited, which was completed on October 21, 2019.

Total client assets in the Company's global wealth management businesses at the end of the fourth fiscal quarter amounted to $60.7 billion, a decrease of $5.0 billion or 7.6% from March 31, 2019. This reduction in client assets has been in-line with the broader market, with declines for equities partially offset by cash and non-equities in client portfolios. Total client assets as of May 31, 2020 have recovered to approximately $66 billion.

Canaccord Genuity Capital Markets

Globally, Canaccord Genuity Capital Markets earned revenue of $176.6 million for the fourth fiscal quarter, representing an increase of 10.3% from Q4/19, largely resulting from an increase in advisory fees revenue in our US and Canadian operations. Compared to the exceptional performance in fiscal 2019, revenue in Canaccord Genuity Capital Markets declined slightly, by 2.1% to $689.5 million for the fiscal year. Excluding significant items (1), this segment contributed pre-tax net income of $14.5 million for the fourth quarter, an improvement of 36.3% compared to the prior year, and $59.8 million for fiscal 2020.

The Company's US capital markets business was the largest contributor of revenue in this segment for the three-month period, with revenue of $105.6 million, or 59.8% of total global capital markets revenue. This included a 37.2% increase over the same period in the prior year in advisory revenue, reflecting organic growth and contributions from the Petsky Prunier acquisition which closed in Q4/19.

Fourth quarter revenue in our Canadian capital markets operations decreased by 28.1% year-over-year as a result of lower investment banking and commissions and fees revenue. Even with this decrease in revenue, this business continues to be a top-ranked domestic underwriter in Canada. For both the fourth quarter and fiscal 2020, Canaccord Genuity Capital Markets in Canada was ranked #1 for IPOs and was the #1 equities underwriter (by volume) based on league table data provided by FP Infomart.

Excluding significant items, our UK & Europe capital markets business earned pre-tax net income of $0.8 million for the fourth quarter, increasing its pre-tax net income for the year to $3.6 million.

Fourth quarter revenue earned by our Australian capital markets business more than doubled year-over-year to $8.9 million, reflecting an increase in investment banking activities and higher commissions and fees revenue.

Summary of Corporate Developments:

On March 25, 2020, the Company provided a business and operational update for its shareholders in relation to the recent volatility driven by COVID-19. The Company employs a disciplined capital allocation strategy and ongoing business continuity planning as part of the Company's firm wide and continuous risk management practices. These integral procedures have ensured that businesses in all geographies have continued to provide uninterrupted service for clients during the current global healthcare and economic crisis.

On May 12, 2020, the Company announced its investment in a state-of-the art unified managed account platform to support Investment Advisors and Portfolio Managers in its Canadian wealth management business.

On May 20, 2020, the Company announced that Canaccord Genuity Wealth Management has been selected by Morgan Stanley as its Canadian platform partner to support the entry of Morgan Stanley Wealth Management into Canada. Canaccord Genuity will deliver a suite of wealth management solutions and technology, as well as custody and clearing services to Morgan Stanley Wealth Management Canada.

Results for the Fourth quarter and fiscal 2020 were impacted by the following significant items:

In addition, results for the quarter were impacted by the recognition of $3.7 million of deferred tax assets ($11.6 million for fiscal 2020) in the Company's US operations which, because of historical losses, had not been recognized previously.This deferred tax asset recognition resulted in an effective tax rate of 13.1% for the fourth quarter and 13.5% for fiscal 2020.  

Selected financial information excluding significant items (1):


Three months ended
March 31

Quarter-
over-
quarter
change

Year ended

March 31

YTD over
YTD change

(C$ thousands, except per share and % amounts)

2020

2019


2020

2019


Total revenue per IFRS

$319,648

$284,808

12.2%

$1,223,867

$1,190,567

2.8%

Total expenses per IFRS

$289,430

$279,265

3.6%

$1,123,844

$1,097,911

2.4%

Total expenses per IFRS

$289,430

$279,265

3.6%

$1,123,844

$1,097,911

2.4%

Expenses







Significant items recorded in Canaccord Genuity Capital Markets




Amortization of intangible assets

$1,773

$639

177.5%

$9,167

$2,496

267.3%

Restructuring costs 

-

$11,754

n.m.

-

$13,070

n.m.

Acquisition- related costs

-

$803

n.m.

$1,806

$1,976

(8.6) %

Significant items recorded in Canaccord Genuity Wealth Management





Amortization of intangible assets

$3,924

$2,801

40.1%

$13,940

$11,153

25.0%

Restructuring costs

$(427)

-

n.m.

$1,921

-

n.m.

Acquisition-related costs

$(4,238)

$918

n.m.

$(1,930)

$1,088

(277.4)%

Incentive-based costs related to acquisitions (2)

$(6,305)

$(237)

n.m.

$(1,870)

$4,294

(143.5)%

Development costs




-

$245

n.m.

Significant items recorded in Corporate and Other







Loss on extinguishment of convertible debentures

-

-

-

-

$8,608

n.m.

Total significant items

$(5,273)

$16,678

(131.6)%

$23,034

$42,930

(46.3)%

Total expenses excluding significant items

$294,703

$262,587

12.2%

$1,100,810

$1,054,981

4.3%

Net income before taxes ? adjusted

$24,945

$22,221

12.3%

$123,057

$135,586

(9.2)%

Income taxes ? adjusted

$3,494

$5,611

(37.7)%

$16,734

$28,231

(40.7)%

Net income - adjusted

$21,451

$16,610

29.1%

$106,323

$107,355

(1.0)%

Net income attributable to common shareholders, adjusted

$19,142

$14,466

32.3%

$96,491

$96,899

(0.4)%

Earnings per common share ? basic, adjusted

$0.20

$0.15

33.3%

$0.98

$1.01

(3.0)%

Earnings per common share ? diluted, adjusted

$0.17

$0.12

41.7%

$0.81

$0.80

1.3%

(1) Figures excluding significant items are non-IFRS measures.

(2) Incentive-based costs related to the acquisitions and growth initiatives in the UK & Europe wealth business

Financial condition at the end of fourth quarter fiscal 2020 vs. third quarter of fiscal 2020:

Common and Preferred Share Dividends: 

On June 2, 2020, the Board of Directors approved a dividend of $0.05 per common share, payable on June 30, 2020, with a record date of June 19, 2020.

On June 2, 2020, the Board approved a cash dividend of $0.24281 per Series A Preferred Share payable on June 30, 2020 to Series A Preferred shareholders of record as at June 19, 2020. 

On June 2, 2020, the Board approved a cash dividend of $0.31206 per Series C Preferred Share payable on June 30, 2020 to Series C Preferred shareholders of record as at June 19, 2020.

ACCESS TO QUARTERLY RESULTS INFORMATION 

Interested investors, the media and others may review this quarterly earnings release and supplementary financial information at www.cgf.com/investor-relations/investor-resources/financial-reports/ 

CONFERENCE CALL AND WEBCAST PRESENTATION

Interested parties are invited to listen to Canaccord Genuity's Fourth quarter and fiscal 2020 results conference call via live webcast or a toll-free number. The conference call is scheduled for Wednesday, June 3, 2020 at 8:00 a.m. Eastern time. During the call, senior executives will comment on the results and respond to questions from analysts and institutional investors.

The conference call may be accessed live and archived on a listen-only basis at: www.cgf.com/investor-relations/news-and-events/conference-calls-and-webcasts/

Analysts and institutional investors can call in via telephone at 647-427-7450 (within Toronto), 1-888-231-8191 (toll free outside Toronto), 0-800-051-7107 (toll free from the United Kingdom), 0-800-91-7449 (toll free from France), 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), 800-017-8071 (toll free from United Arab Emirates).

Please ask to participate in the Canaccord Genuity Group Inc. Q4/20 results call. If a passcode is requested, please use 1996214.

A replay of the conference call will be made available from approximately two hours after the live call on June 3, 2020 until August 3, 2020 at 416-849-0833 or 1-855-859-2056 by entering passcode 1996214.

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 operations in two principal segments of the securities industry: wealth management and capital markets. Since its establishment in 1950, the Company 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. The Company has wealth management offices located in Canada, the UK, Guernsey, Jersey, the Isle of Man and Australia. The Company's international Capital Markets capital markets division operates in North America, UK & Europe, Asia, Australia and the Middle East.

Canaccord Genuity Group Inc. is publicly traded under the symbol CF on the TSX. Canaccord Genuity Series A Preferred Shares are listed on the TSX under the symbol CF.PR.A. Canaccord Genuity Series C Preferred Shares are listed on the TSX under the symbol CF.PR.C. The Company's 6.25% Convertible Unsecured Senior Subordinated Debentures are listed on the TSX under the symbol CF.DA.A.  

None of the information on the Company's websites at www.cgf.com should be considered incorporated herein by reference. 

 

________________________________

(1) Figures excluding significant items are non-IFRS measures. See non-IFRS measures on page 14 of the MD&A.

 

SOURCE Canaccord Genuity Group Inc.


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