Investment dealer Canaccord Capital Inc., which recently completed its initial public stock offering, is reporting a first-quarter profit of $8.4 million.
For the quarter ended June 30, the company said earnings amounted to 23¢ a share, compared with a loss of $400,000 or 2¢ per share a year earlier.
Revenue rose to $80.6 million from $51.5 million.
“Our performance is a reflection of the momentum our firm has sustained and validates our strategy,” chairman and CEO Peter Brown said in a news release.
Canaccord completed its initial public offering of shares on the Toronto Stock Exchange on June 30, raising about $70 million.
“Despite the distractions and effort involved in taking a company public, our employees generated a $29.1 million, or 57%, increase in revenue over the first quarter a year ago,” said Michael Greenwood, president and chief operating officer.
In its first conference call as a public company today, Canaccord disclosed that it is working on a number of acquisition possibilities, although actual deals appear to be far off.
Brown noted that the firm has lots of cash, which it needs to put to work, and he said the company is constantly in the market for acquisitions.
However, Brown noted that its deals in the past have usually come in down markets when sellers are more motivated. He said that Canaccord expects the ranks of 160 or so independent firms to shrink when the market hits its next downturn.
Brown reported that the firm is in early stage discussions with a few firms, but that the deals “may or may not happen”. In the meantime it is actively talking with firms, and doing other things that will make it easier to get deals done when the time is right, such as serving as the back office to a number of firms.
Short of acquiring firms, Brown noted that Canaccord is also actively recruiting from rivals on the Street, and that he’s very pleased with the quality of people it has been able to attract.
Canaccord president and COO, Mike Greenwood, noted that the firm has been upgrading the quality of its sales force over the past six months, replacing low-end producers with more productive reps who are able to help it grow assets under administration and expand its fee-based business. Canaccord has also been actively recruiting investment bankers to its U.K. division. Greenwood reported that it is in the midst of adding five new bankers, who are a team it has wooed from Credit Lyonnais.
Brown said that the U.K. market is one of its biggest capital market opportunities, both because deals are agency deals, rather than bought deals, and they rarely syndicated in that market (so it keeps 100% of underwriting commissions); and, the small and mid-cap market appears to be under-served by the traditional banking firms.
Greenwood said that its registered trader business was the firm’s one weak spot, with negative gross revenue in the quarter. He noted that it has scaled back its capital allocated to this business, and is reviewing its strategy and performance in this business.