On Friday, Toronto-based GMP Capital Inc. reported quarterly earnings results, which reflect the firm’s divestment of its capital markets business.
The firm reported a net loss of $25.4 million in the third quarter of 2019, compared with net income of $2.9 million in last year’s third quarter.
The decline was mostly due to an $18-million net loss from discontinued operations, which comprise most of GMP Capital’s capital markets business, the firm said in its earnings release.
In August, shareholders approved the sale of GMP’s capital markets business to Stifel Financial Corp. The sale will close in the fourth quarter.
As previously announced, GMP Capital intends to make wealth management the centrepiece of its growth strategy, with the firm consolidating two-thirds of Richardson GMP Ltd. (GMP Capital owns roughly one-third of Richardson GMP).
In the release, the firm said a special committee of the board has been formed to pursue the Richardson GMP acquisition.
Q3 earnings details
For its continuing operations, the firm reported a net loss of $7.4 million in the third quarter of 2019, down $0.9 million compared to the same period last year. (Continuing operations comprise a new operations clearing segment, and wealth management and corporate segments. Prior period results were re-stated to conform to the new reporting segments.)
The net loss was mostly due to deferred tax expense related to a write-down of deferred tax assets, the release said, as well as lower revenue and expense related to lower carrying broker and other administrative support services provided to Richardson GMP amid lower retail client activity.
The wealth management business segment reported income before taxes of $1.2 million in the quarter, compared to $1 million in the same quarter last year. The increase largely reflects an increase in GMP Capital’s share of Richardson GMP’s net income, which was $0.6 million in the third quarter of 2019 and $0.5 million in the third quarter of 2018, the release said.
Richardson GMP’s financial results were reported on a 100% basis, noting that GMP Capital owned a roughly one-third non-controlling interest in Richardson GMP as at Sept. 30, 2019.
Richardson GMP’s revenue decreased by 6% in the quarter to $66.9 million, mainly due to lower commission and interest revenue, the release said. Investment management fees rose in the third quarter compared to the same quarter last year.
Richardson GMP’s adjusted EBITDA (non-GAAP) was $12.2 million, up from $10.4 million in 2018’s third quarter.
GMP Capital’s board of directors approved a quarterly cash dividend of per common share, payable on Dec. 31, 2019.