Canaccord Financial Cuts Dividend by 50% as It Swings to Loss

Canaccord Financial Inc. (CF), Canada’s largest non-bank-owned brokerage firm, cut its dividend by 50 percent to 5 cents a share after reporting a loss in the first quarter that missed analysts’ estimates.

The Vancouver-based firm also announced job cuts of about 60 positions in addition to a previously announced 16 as market activity, including mergers and public offerings, cooled.

The company reported a loss of C$20.6 million compared with income of C$13.2 million in the same period a year ago. Its loss per share was 24 cents compared with earnings of 16 cents last year. Its adjusted loss was 20 cents compared with an average estimate of a 4-cent loss of four analysts surveyed by Bloomberg. Revenue rose 1.7 percent to C$162.5 million.

“Our operating environment continues to be characterized by adverse market conditions -- particularly in the small-to- mid-market resource space -- a traditional strength for our company,” Chief Executive Officer Paul Reynolds said in a statement. “The results were apparent in several revenue lines during our fiscal first quarter.” 

Sumit Malhotra, banking analyst at Macquarie Capital Markets in Toronto, forecast that a dividend cut was “likely on the table” in an Aug. 1 note as Canadian independent brokerage firms slow “significantly” from a trading and underwriting perspective.

The company, which relies on trading and fees from mergers and stock sales for more than half of its revenue, faces a slowdown in Canadian equity financings, which have dropped to the lowest level in two years. It had previously announced 16 job cuts in Montreal.

“We’re actively engaged in additional cost-reduction initiatives aimed at enhancing the efficiency of our operations during this period of market instability,” Reynolds said in the company’s statement.

To contact the reporter on this story: Katia Dmitrieva in New York at edmitrieva1@bloomberg.net

To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net

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