GMP Capital Inc., Canada’s second-largest non-bank brokerage, said it will suspend its dividend, cut its workforce and exit Australia and the U.K. as a plunge in commodities erodes revenue.
GMP will scrap its 5-cents-a-share quarterly dividend and take a C$15 million ($11 million) restructuring charge as it closes offices in Perth, Sydney and London, the Toronto-based firm said Wednesday in a statement. GMP said it has trimmed 97 jobs since the end of September and plans to pare its sales, trading and research business in Canada and its U.S. energy businesses in New York and Houston, which it spent the past two years building up.
“The combination of soft revenue trends and costs associated with the ill-timed expansion into the Houston energy space has resulted in higher operating losses at GMP over the past year," Sumit Malhotra, a Scotia Capital analyst, said in a note.
GMP shares slid 3.1 percent to C$3.80 at 10:41 a.m. in Toronto. The stock has plunged by more than a third in the past 12 months.
The moves are in response to structural changes in the industry resulting from “technology-driven disintermediation and increased regulation" and the sustained trough in commodities, GMP Chief Executive Officer Harris Fricker said in the statement. The changes will cut annual costs by more than C$40 million.
“We emerge from this restructuring a leaner and more focused business, better able to weather prolonged periods of market and industry turbulence and to successfully compete in our core markets," Fricker said.
GMP may also reconsider its wealth-management partnership with Winnipeg, Manitoba-based James Richardson & Sons Ltd., known as Richardson GMP, Malhotra said.
“We believe that the repositioning of GMP in 2016 will include the divestiture of their 31 percent stake in retail brokerage firm Richardson GMP, which in our view would significantly boost capital without having a material negative impact on earnings power," Malhotra said in his note.
Canadian securities firms including Canaccord Genuity Group Inc. have been reorganising and cutting jobs as a pervasive resource slump curtails investment banking. Canaccord in November trimmed jobs in sales, trading and research and “substantially" reduced its institutional high-yield fixed- income trading business in the U.S.
Other smaller companies, which depended on the mining and oil-and-gas industries to drive their capital markets businesses, have disappeared. In the past four years, 46 Canadian securities firms have closed or been taken over, according to the Investment Industry Association of Canada.