Strength
in Stability
2018 ANNUAL REPORT
C
A
N
A
C
C
O
R
D
G
E
N
U
I
T
Y
G
R
O
U
P
I
N
C
.
2
0
1
8
A
N
N
U
A
L
R
E
P
O
R
T
FRUKUSUAEAUCA
Financial Highlights
Selected financial information(1)(2)(3)
For the years ended March 31
(C$ thousands, except per share and % amounts,
and number of employees)
Canaccord Genuity Group Inc. (CGGI)
Revenue
Commissions and fees
Investment banking
Advisory fees
Principal trading
Interest
Other
Total revenue
Expenses
Non-share based incentive compensation
Share-based incentive compensation
Salaries and benefits
Other overhead expenses(4)
Restructuring costs(5)
Acquisition-related costs
Acceleration of long-term incentive plan expense(6)
Share of loss of an associate(7)
Impairment of goodwill and other assets(8)
Total expenses
Income (loss) before income taxes
Net income (loss)
Net income (loss) attributable to CGGI shareholders
Non-controlling interests
Earnings (loss) per common share (EPS) – basic
Earnings (loss) per common share – diluted
Return on common equity (ROE)
Dividends per common share
Dividends per Series A Preferred Share
Dividends per Series C Preferred Share
Book value per diluted common share(9)
Excluding significant items(10)
Total revenue
Total expenses
Income (loss) before income taxes
Net income (loss)
Net income (loss) attributable to CGGI shareholders
Net income attributable to non-controlling interests
Earnings (loss) per common share – diluted
Balance sheet data
Total assets
Total liabilities
Non-controlling interests
Total shareholders’ equity
Number of employees
2018
2017
2016
2018/2017 change
$
$ 461,937
282,195
122,372
113,921
27,875
14,577
1,022,877
$ 396,741
196,129
130,749
119,040
16,847
20,040
879,546
$ 376,817
132,029
160,180
85,559
16,830
16,390
787,805
480,369
46,245
99,239
298,250
7,643
6,732
48,355
298
—
987,131
35,746
17,077
13,024
4,053
0.04
0.03
0.9%
0.15
0.9712
1.2482
5.71
$
$
$
$
$
$
$
$
$
414,676
40,322
85,698
284,966
—
—
—
—
—
825,662
53,884
43,186
38,103
5,083
0.29
0.27
5.0%
0.10
1.173
1.4375
5.08
382,851
35,025
92,981
302,530
17,352
—
—
—
321,037
1,151,776
(363,971)
$ (358,567)
$ (358,471)
(96)
$
(4.09)
$
(4.09)
$
(50.4)%
0.10
1.375
1.4375
4.99
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
65,196
86,066
(8,377)
(5,119)
11,028
(5,463)
143,331
65,693
5,923
13,541
13,284
7,643
6,732
48,355
298
—
161,469
(18,138)
(26,109)
(25,079)
(1,030)
(0.25)
(0.24)
(4.1) p.p.
0.05
(0.20)
(0.19)
0.63
$ 1,022,877
$ 912,270
$ 110,607
81,657
$
77,604
$
4,053
$
0.59
$
$ 878,353
$ 817,096
61,257
$
49,196
$
43,903
$
5,293
$
0.32
$
$ 787,805
$ 793,862
$
$
$
$
$
(6,057)
(5,995)
(6,620)
625
(0.21)
$ 144,524
95,174
$
49,350
$
32,461
$
33,701
$
(1,240)
$
0.27
$
$ 4,020,736
3,165,813
13,571
841,352
1,956
$ 5,203,516
4,426,873
11,858
764,785
1,700
$ 3,424,546
2,665,895
8,722
749,929
1,795
$ (1,182,780)
(1,261,060)
1,713
76,567
256
16.4%
43.9%
(6.4)%
(4.3)%
65.5%
(27.3)%
16.3%
15.8%
14.7%
15.8%
4.7%
n.m.
n.m.
n.m.
n.m.
—
19.6%
(33.7)%
(60.5)%
(65.8)%
(20.3)%
(86.2)%
(88.9)%
50.0%
(17.2)%
(13.2)%
12.3%
16.5%
11.6%
80.6%
66.0%
76.8%
(23.4)%
84.4%
(22.7)%
(28.5)%
14.4%
10.0%
15.1%
(1) Data is in accordance with IFRS except for ROE, book value per diluted common share, figures excluding significant items and number of employees. See Non-IFRS Measures on page 14.
(2) The operating results of the Australian operations have been fully consolidated, and a 42% non-controlling interest has been recognized for the year ended March 31, 2018 [year ended March 31, 2017 –
42% and March 31, 2016 – 40%].
(3) Data includes the results of Hargreave Hale since the closing date of September 18, 2017.
(4) Consists of trading costs, premises and equipment, communication and technology, interest, general and administrative, amortization of tangible and intangible assets, and development costs.
(5) Restructuring costs for the year ended March 31, 2018 related to termination benefits incurred as a result of the closing of certain trading operations in our UK & Europe capital markets operations, staff
reductions in our Canadian and US capital markets operations, as well as real estate costs related to the acquisition of Hargreave Hale. Restructuring costs for the year ended March 31, 2016 were related
to staff reductions in our US capital markets operations and the closure of our Barbados office in Other Foreign Locations, as well as charges related to changes in our Corporate and Other segment.
(6) Effective as of March 31, 2018, the Plan was changed to remove certain employment-related conditions for the vesting of RSU awards made as part of the normal course incentive compensation payment
cycle. As a result of this change, the costs of RSUs granted as part of the normal course incentive compensation payment cycle will now be expensed in the period in which those awards are deemed to be
earned, instead of recognizing the costs over the vesting period. This change led to the acceleration of the remaining expense for certain awards made under the LTIP which had not been fully amortized as
of March 31, 2018. The total charge recorded during the year ended March 31, 2018 in respect of awards granted prior to fiscal 2018 was $48.4 million.
(7) Represents the Company’s equity portion of the net loss of its investment in Canaccord Genuity Acquisition Corp. for the year ended March 31, 2018.
(8) Impairment of goodwill and other assets for the year ended March 31, 2016 is in connection with our capital markets operations in the UK, US, Canada, Australia, and Other Foreign Locations –
Singapore operations.
(9) Book value per diluted common share is calculated as total common shareholders’ equity adjusted for assumed proceeds from exercise of options and warrants and conversion of convertible debentures
divided by the number of diluted common shares outstanding including estimated amounts in respect of share issuance commitments including options, warrants and convertible debentures, as applicable,
and adjusted for shares purchased under the normal course issuer bid and not yet cancelled, and estimated forfeitures in respect of unvested share awards under share-based payment plans.
(10) Net income (loss) and earnings (loss) per common share excluding significant items reflect tax-effected adjustments related to such items. See the Selected Financial Information Excluding Significant
Items table on page 23.
p.p.: percentage points
n.m.: not meaningful
Strength
in Stability
Fiscal 2018 was a pivotal year for our organization. We substantially increased
scale in our global wealth management operations and extracted greater value from
our global capital markets businesses. As we continue to advance our position as
a dominant independent capital markets and wealth management firm in all of the
regions where we operate, our efforts will always be centred on expanding our client
relationships and increasing the value of our business for our shareholders.
Revenue
(C$ millions, fiscal years)
Net Income (Loss)(1)
(C$ millions, excluding significant items, fiscal years)
Diluted Earnings (Loss) per Share(1)
(C$, excluding significant items, fiscal years)
2018
2017
2016
2015
2014
$1,022.9
2018
$81.7
$879.5
2017
$49.2
$787.8
2016
($6.0)
$880.8
$855.2
2015
2014
$39.3
$68.8
2018
2017
2016
2015
2014
($0.21)
$0.32
$0.25
$0.59
$0.54
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. Canaccord Genuity, the international
capital markets division, operates in North America, the UK & Europe, Asia, Australia
and the Middle East. To us there are no foreign markets.™
Canaccord Genuity Group Inc. is publicly traded under the symbol CF on the TSX.
CONTENTS
Introduction
Global Performance
Letter to Shareholders
Letter from the Executive Chairman
Canaccord Genuity Wealth Management
Canaccord Genuity
Our Culture
MD&A and Financials
Shareholder Information
1
2
4
7
8
10
12
13
Inside
Back Cover
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
CANACCORD GENUITY GROUP INC. | 2018 ANNUAL REPORT
1
STRENGTH IN STABILITY
Global
Performance
Our efforts to increase stability across our business have helped us
to deliver enhanced outcomes for our clients, making us a stronger
competitor in everything that we do.
$1.0 billion
Record revenue
for fiscal 2018
$0.59 in fiscal
2018 diluted
earnings per
share(1)
66% pre-tax
net income(1)
improvement
in fiscal 2018
Driving stronger returns
for our shareholders
Improved business mix
is driving earnings power
60% of fiscal
2018 EPS(1)
from global
wealth
management
Important contributor of
stable, recurring revenue
growth
61% of
fiscal 2018
revenue
from outside
of Canada
Global platform provides
opportunities to benefit
from activity in all our
geographies
$575.6 million
in working
capital
Well capitalized for
continued investment
in our key priorities
(1) These figures exclude significant items. Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
2
CANACCORD GENUITY GROUP INC. | 2018 ANNUAL REPORT
Fiscal 2018 Revenue by Division
Geographic Distribution of Revenue(2)
(Percent of total fiscal year revenue)
Canaccord Genuity(1)
62%
Canaccord Genuity
Wealth Management
36%
Corporate and Other
2%
(1) Includes Australia
Wealth Management.
2018
2017
2016
2015
2014
Canada
Australia
US
UK, Europe & Dubai
Other Foreign Locations
(2) Commencing in Q3/17, the operating results of our Australian
operations are disclosed separately as Canaccord Genuity –
Australia, and the operating results of Canaccord Genuity (Dubai)
are included as Canaccord Genuity UK, Europe & Dubai. In
previous quarters, the operating results have been reported as
Other Foreign Locations. Comparatives for all prior periods have
been reclassified.
Total Expenses
(C$ millions, excluding significant items, non-IFRS and
non-GAAP , fiscal years)
Total Expenses as a Percent of Revenue
(Excluding significant items, non-IFRS and non-GAAP,
fiscal years)
2018
2017
2016
2015
2014
$912.3
$817.1
$793.9
$827.5
$770.6
2018
2017
2016
2015
2014
89%
93%
101%
94%
90%
Driving earnings
power by transforming
our business mix and
growing global wealth
management
CANACCORD GENUITY GROUP INC. | 2018 ANNUAL REPORT
3
STRENGTH IN STABILITY
Letter to
Shareholders
Fellow Shareholders,
Fiscal 2018 was a good year for Canaccord Genuity Group Inc.
Total firm-wide revenue surpassed $1 billion for the first time in
our Company’s history. Excluding significant items(1), we delivered
earnings per share of $0.59, an improvement of 84% compared
to a year ago.
Throughout the year, we made excellent progress against our
objectives: we achieved significant growth in our global wealth
management operations and improved market share across
our capital markets operations. Because of these efforts, we
delivered solid financial results and set new benchmarks for
our businesses.
Our strategic shift to strengthening
contributions from our global wealth
management businesses has positioned this
segment to deliver a significantly higher
contribution to our overall profitability.
Total client assets grew to $61.3 billion, a year-over-year
improvement of 59%. Excluding significant items, our global
wealth management operations contributed 49% of the total
pre-tax net income for our combined operating businesses for the
fiscal year, in line with our stated goal. We have begun to break
out our earnings per share(2) by business segment, and excluding
significant items, we estimate that our global wealth management
business contributed $0.36 in fiscal 2018, with the remaining
$0.23 contributed by our global capital markets operation.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
(2) Based on management estimates including certain assumptions made in respect of allocations
of taxes, non-direct costs and expenses.
4
CANACCORD GENUITY GROUP INC. | 2018 ANNUAL REPORT
The most substantial contribution to this growth came from our
expanded UK & Europe wealth management business, which
contributed record revenue of $201.4 million for the year. With
the closing of our acquisition of Hargreave Hale in September,
we have been privileged to welcome over 200 new employees
and more than 14,000 new clients, and we are making excellent
progress with our integration efforts. Now a top 10 wealth
manager in the UK with £24.8 billion in client assets, our teams
are leveraging synergies across their expanded platform to deliver
impressive asset and related revenue growth, while strengthening
our national footprint across the UK.
We also achieved significant growth in our Canadian wealth
management business. With a platform that welcomes and
embraces established and entrepreneurial financial advisors,
we have added Investment Advisory teams and new clients
representing over $5.0 billion in assets since we began our
recruiting efforts in 2016 and have meaningfully strengthened
our competitive position as a leading independent wealth
management business in Canada. Total assets under
administration and management increased by 18% from a
year ago, to $15.6 billion. Excluding significant items, this
business contributed pre-tax net income of $20.2 million to
our overall results.
A supportive backdrop for growth stocks
allowed us to reinforce our market
position as a leading independent investment
bank and advisory firm for mid-market
growth companies.
Our global capital markets division was a major contributor to our
firm-wide revenue growth in fiscal 2018 with a record revenue
result of $637.5 million.
Despite the market being punctuated by periods of elevated
volatility during fiscal 2018, our investment banking segment
performed well. A healthy environment for capital raising activity
in our core focus sectors – particularly during the second half of
our fiscal year – led to a 39% year-over-year increase in revenues
for this segment.
Our Canadian operation ended the fiscal year as the dominant
independent investment bank in the country for both number of
transactions and total amount raised. Revenue generated through
investment banking activities in this business nearly doubled over
the 12-month period to $125.1 million.
An environment of growing earnings and elevated equity
valuations led to a general trend of larger deal size across our
advisory business, and we serviced increasing demand for
independent advice that is free from conflict. We also experienced
strong flows across our institutional equities business. Despite a
softer trading environment, our US equities business continued to
gain market share and the International Equities Group delivered
continued growth. We anticipate that the acquisition of Jitneytrade
and its related technology business, Finlogik Inc., will further
strengthen our market share as the leading independent trader
in Canada and provide access to new areas of growth through
the development of fintech solutions for our capital markets and
wealth management divisions.
Our efforts to intensify our focus on our core capabilities in
our US capital markets division led to improved profitability in
fiscal 2018. Excluding significant items, pre-tax net income in
this business grew to $5.4 million over the year, while the total
revenue contribution was in line with prior periods. Our teams
in the UK, Europe & Dubai have continued to be productive on
several notable investment banking and advisory mandates, and,
despite a slow start to the year, delivered positive results for the
last three consecutive quarters.
And finally, our Australian capital markets business delivered
another strong performance. Despite the brief loss of momentum
for growth stocks early in the year, an improved market backdrop
allowed this business to deliver a record revenue result in the
second half of the fiscal year. I am also very pleased that our
increased investment in this operation supports our objective
of more closely aligning this business with our global platform
and exploring opportunities to grow our wealth management
business in the region. Since our initial investment in 2011, this
operation has steadily increased its contributions to our overall
group results, and we look forward to capturing a greater share of
this growth for our shareholders. By increasing share ownership
among our partners and employees in Australia, we more closely
align their incentives with the performance of the organization.
Our efforts to better focus and align
our operations have allowed us to
strengthen our operating leverage and
extract greater value from our business
in any market environment.
Revenue per employee in our global capital markets business
has improved by 38% since we began our realignment initiatives
in fiscal 2016, a reflection of our efforts to capture greater
efficiencies from our existing infrastructure while improving our
execution capabilities. By strengthening collaboration across
regions, we have been able to drive incremental revenue growth
and harness opportunities to lead the market in emerging high
growth sectors such as cannabis and blockchain.
We have continued to manage our fixed costs, leaving our
business increasingly better positioned to generate meaningful
profits. Despite higher costs related to the expansion of our UK &
Europe wealth management business and the increased activity
across our capital markets operations, excluding significant
items, our firm-wide expense ratio decreased by 3.8 percentage
points over the fiscal year.
We have also improved our technological and operational
infrastructure with a focus on strengthening the security and
stability of our platform and ensuring compliance with an
increasingly complex regulatory environment. Our enhanced
back-office support capabilities provide us with the flexibility to
continue adding scale across our wealth management operations
while positioning our capital markets business to move swiftly
into new areas of growth.
In keeping with our stated intention to review every aspect of
our business with a view to improving long term value for our
shareholders, we took steps to better align our compensation
strategy with the performance of the business, shifting
performance goals from a revenue basis to a longer term
profitability basis. A significant portion of certain senior officers’
compensation will be in the form of Performance Share Units
(PSUs), whose future payout will be conditioned on achievement
of predetermined multi-year, market-based and financial
performance metrics.
With an effective date of March 31, 2018, we made certain non-
substantive changes to the Company’s long-term incentive plan,
which governs our share-based awards program. These changes
had the effect of causing a change in the method of expensing
these awards so that they are now expensed in the period they
are deemed to be earned rather than over the vesting period.
With this accounting change, the cost of share-based awards
granted in respect of fiscal 2018, as well as the unamortized
expense as at March 31, 2018 of outstanding awards granted
prior to fiscal 2018, was expensed in the fourth quarter of fiscal
2018. This change did not affect awards made in connection
with new hires or for retention purposes, and the cost of those
awards will continue to be recognized over the vesting period. The
cost of awards granted prior to fiscal 2018 that was expensed
in the current year was $48.4 million. This amount has been
treated as a significant item for purposes of determining our
adjusted (i.e., excluding significant items) fourth quarter and
fiscal 2018 results. Share-based awards are generally covered
through shares held in employee benefit trusts, so this change
in accounting treatment does not have an impact on cash, book
value or capital.
Others within the industry treat their share-based awards on a
similar basis, and we believe this treatment provides greater
transparency of our financial results and more closely aligns our
revenues and expenses in reporting periods. Going forward, the
share-based award expense recognized in each period will reflect
only the cost of awards earned in respect of that period as well
as the amortized cost of new hire and retention-based awards
applicable to that period.
CANACCORD GENUITY GROUP INC. | 2018 ANNUAL REPORT
5
STRENGTH IN STABILITY
The strong performance we achieved
this year reflects hard work and
diligence by all of our employees, who upheld
our core values of entrepreneurialism,
independence and partnership.
Our results for this fiscal year are indicative of the continued
momentum in our business as we solidify our position as the
dominant mid-market investment bank and wealth management
firm in the regions where we operate. I believe that a significant
market share opportunity exists across our businesses, and I am
confident that Canaccord Genuity is best positioned versus our
peers to capture this share.
We will continue to focus on key sectors of the global growth
economy, because it’s what we do best. At the same time, we
continue to make disciplined investments in our business,
broadening our technological capability and further developing
our digital offerings.
Looking ahead, I believe that our business is appropriately
scaled to take advantage of market opportunities while allowing
us to exceed our clients’ expectations in a range of market
environments. The volatility that shocked the market toward the
end of our fiscal year served as an important reminder that the
markets are not always going to be predictable, and reinforced
the value of maintaining liquidity in our business and being
prepared for developments outside of our control.
I would like to thank our Board of Directors for their guidance
throughout this pivotal year for our organization. And to you, our
valued shareholders, I thank you for your continued support and
would like to remind you that the values that drive our decisions
are shared by all our employees, partners and directors. Getting
here required hard work, and we know that continuing to advance
our business will require ongoing discipline and commitment
across the organization. As we begin a new fiscal year, we
remain committed to operating a highly focused business that
is thoughtful in the way it deploys capital and one where all
employees are aligned with shareholders in their incentives.
Kind regards,
“Dan Daviau”
Dan Daviau
President & CEO
Canaccord Genuity Group Inc.
6
CANACCORD GENUITY GROUP INC. | 2018 ANNUAL REPORT
Canaccord Genuity
Group Inc. is committed
to creating a workplace
where diversity is
encouraged and in
which all employees
have the opportunity to
realize their potential
for excellence.
We know that many of our greatest opportunities arise
when we bring together the diverse and differentiated
perspectives from across our talent pool, and we strive
to operate as an organization that celebrates partnership
and is free from discrimination and bias.
With a firm belief that diverse teams create better
business outcomes, representatives in all our
businesses have been working together to advance
diversity and parity across our organization. While the
activities may vary across businesses and regions –
from advancing our recruitment, retention and talent
development practices to ensuring that our parental
leave policies are competitive – the goal is shared. Our
collective success depends on sharing this responsibility
across our organization and harnessing opportunities to
drive measurable improvement.
While we realize this will take some time for our
business and our industry, we believe this coordinated
global diversity effort is further positioning our
business – and our people – for long term success.
To learn more about our Diversity Policy, visit the
Corporate Governance section of our website at
www.canaccordgenuitygroup.com.
Letter from the Executive Chairman
We have a capable and committed leadership team in place
and a strong group of talented men and women to support
our long term strategy. On behalf of the Board of Directors,
I would like to thank the senior management team and all
employees of Canaccord Genuity Group for their hard work
and steadfast commitment.
Equity participation continues to be an important priority. Our
strategy of increasingly aligning senior officers’ compensation
with the longer term performance of the business has
delivered positive change across all our operations. With a fully
accountable leadership team, we now have a stronger culture of
partnership that permeates throughout the organization. This has
helped to improve collaboration across regions and businesses
and drive stronger outcomes for our clients. Consequently, we
have been able to increase our productivity while simultaneously
increasing our market share in many of our regions and verticals.
We are also committed to ensuring strong corporate governance
as we continually strive to advance the best interests of our
shareholders. We will be adding to the quality and diversity of
our Board of Directors with Merri Jones, who will be nominated
as an Independent Director at our upcoming Annual General
Meeting of Shareholders. Merri is a highly accomplished senior
corporate executive with more than four decades of multi-faceted
leadership experience within the financial services industry.
Additionally, Massimo Carello has decided not to stand for
re-election to the Board of Directors at our upcoming Annual
General Meeting of Shareholders. I would like to thank Massimo
for providing valuable guidance, expertise and perspective to
senior management on behalf of our shareholders over the last
decade. His deep business background, his extensive network in
the UK & Europe, and his courtly manner and strong engagement
with the Company and its employees at all levels have served us
very well.
We remain committed to representing your best interests as
we continue to deliver on our business plan, with a disciplined
approach to capital allocation and a steady focus on achieving
sustainable growth in the areas where we know we can add the
most compelling value for our clients.
“David Kassie”
David Kassie
Executive Chairman
Canaccord Genuity Group Inc.
CANACCORD GENUITY GROUP INC. | 2018 ANNUAL REPORT
7
Our fiscal 2018 performance reflects our extensive efforts
to adjust our business mix and adopt a responsible growth
model that is capable of delivering more consistent results
for our shareholders.
With a newly expanded wealth management business and
a refocused and aligned capital markets business, we have
improved our operating leverage and achieved our goal of
making our Company less susceptible to changes in our
operating environment.
Excluding significant items(1), we estimate that our global wealth
management business contributed 60% of our diluted earnings
per share for fiscal 2018, making the impact of periodic market-
driven challenges in our capital markets less apparent in our
overall results.
As we strive to increase the long term value of our business, we
have taken a prudent approach to evaluating and implementing
various strategies. The acquisition of Hargreave Hale – our
most significant development of the year – was financed without
diluting value for our shareholders or compromising our capital
strength. In our Canadian wealth management business, we
have been recruiting established Investment Advisory teams on
a value-accretive basis. We also made a small investment to
enhance our Canadian trading operation, which we expect will
provide access to new areas of growth for our capital markets
and wealth management businesses over the long term. And finally,
we announced our intention to increase our investment in our
Australian business, which serves to strengthen alignment of this
operation with our global platform while we explore opportunities
to expand our wealth management business in the region.
I am pleased with the steady progress we have made to adjust
our business mix and strengthen our market position across our
operations. The market has also responded favourably to our
strategy, and the value of our common shares on the last trading
day of fiscal 2018 increased by 36% compared to a year ago.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
STRENGTH IN STABILITY
Canaccord Genuity
Wealth Management
UK & EUROPE
In the UK & Europe, Canaccord Genuity
Wealth Management has 188 investment
professionals and fund managers who
provide highly tailored discretionary
portfolio management, advisory and
execution stockbroking, wealth planning,
and fund management services to
individual investors, institutions and
charities. With almost 70% of revenue
from recurring, fee-based business,
this operation continues to serve as
an excellent model for the growth and
business mix that we hope to achieve
in our other geographies.
In September 2017, we closed
our acquisition of Hargreave Hale
in a transaction that established
a substantially larger wealth
management business in the region.
With this development, Canaccord
Genuity Wealth Management advanced
UK & Europe Wealth Management
Revenue
(C$ millions, fiscal years)
2018
2017
2016
2015
2014
$201.4
$134.8
$138.4
$125.6
$113.0
$44.9
£24.8
UK & Europe Client Assets(1)
(Fiscal years)
2018
2017
2016
2015
2014
$24.5
£14.7
$22.8
£12.2
$21.8
£11.6
$20.2
£10.9
(1) Assets under administration, management and management
contract in C$ billions and £ billions.
to become a top 10 wealth management
business in the UK by assets, with
even stronger growth potential from
a larger asset base and an expanded
national footprint.
When measured in local currency, total
client assets in this business reached
£24.8 billion at the end of fiscal 2018,
an increase of 69.0% from a year ago.
Revenue for the year increased by
49.4% to $201.4 million, and excluding
significant items, this business recorded
pre-tax net income of $37.4 million.
As we move ahead with a carefully
orchestrated integration process,
we look forward to unlocking
greater operational efficiencies and
enhanced revenue opportunities for
our combined businesses.
Top 10 wealth
manager in the
UK & Europe by assets
GLOBAL WEALTH MANAGEMENT
Canaccord Genuity Wealth Management provides clients
with the focused and personalized service they expect
from a local investment manager with added benefits
from the vast resources, expertise and support of a
global financial institution.
In fiscal 2018, we added meaningful scale in our global
wealth management operations, which has been an
important driver of our stronger financial performance
and a key element of the stability that we expect to
deliver for our shareholders over the long term.
Global Wealth Management Revenue
(C$ millions, fiscal years)
2018
2017
2016
2015
2014
$267.1
$246.6
$250.9
$224.0
$370.3
8
CANACCORD GENUITY GROUP INC. | 2018 ANNUAL REPORT
CANADA
Our Canadian wealth management
business has Investment Advisory teams
operating from a network of offices
across the country who provide a full
range of investment advisory and wealth
planning strategies, with an emphasis
on bespoke services, to meet the unique
needs of their respective clients.
On track to become
leading independent
Canadian wealth
management business
Throughout fiscal 2018, we continued
to advance our strategy of adding
new Investment Advisory teams in this
business. At the end of the fiscal year,
total client assets increased by 17.7% to
$15.6 billion. Total revenue grew 27.7%
year over year, driven by increased
private client participation in new issue
activity, strengthening valuations for
small-cap equities and the addition
of new advisors to our platform. This
business also delivered a significant
improvement in profitability and,
excluding significant items, contributed
pre-tax net income of $20.2 million, up
from $2.0 million one year ago.
Canada Wealth Management Revenue
(C$ millions, fiscal years)
2018
2017
2016
2015
2014
$168.9
$132.3
$108.2
$125.3
$111.0
Canada Client Assets(1)
(C$ billions, fiscal years)
management in this business increased
by 6.8% and the average book size per
Investment Advisory teams grew by
16.9% when compared to a year ago.
Our culture of independence and a
platform which encourages advisors
to operate in ways that best fit their
business and client needs have helped
us to further advance our recruiting
strategy in this business. Looking ahead,
we remain focused on developing and
supporting our existing teams while
continuing to invest in bringing new ones
to our platform.
$15.6
AUSTRALIA
2018
2017
2016
2015
2014
$13.2
$9.2
$10.7
$10.2
(1) Assets under administration and management.
We have steadily improved the quality
of our offering to improve the client
experience and help our Investment
Advisory teams capture a greater share
of wealth. As part of our development
efforts, discretionary assets under
Canaccord Genuity Wealth Management
has offices in Melbourne and Sydney,
and our team of seven advisors provides
comprehensive wealth management
solutions to growing numbers of clients
in Australia and Southeast Asia. The
exceptional performance of our capital
markets business in the region has also
been helpful for our wealth management
brand. With our increased investment
in our Australian operations, we look
forward to exploring opportunities
to expand our wealth management
business in the region.
Global Client Assets(1)
(C$ billions, fiscal years)
2018
2017
2016
2015
2014
$38.6
$32.7
$33.3
$30.9
(1) Assets under administration, management and
management contract.
$61.3
$61.3 billion
in total client
assets(1)
Growth will drive earnings power
$370.3 million
in global wealth
management
revenue
Positioned for margin expansion
and enhanced earnings
8
CANACCORD GENUITY GROUP INC. | 2018 ANNUAL REPORT
CANACCORD GENUITY GROUP INC. | 2018 ANNUAL REPORT
9
STRENGTH IN STABILITY
Canaccord Genuity
Our global capital markets operations
provide investment banking, advisory,
sales and trading, equity research and
fixed income services to corporate and
institutional clients around the world.
Independent advice and our globally
integrated service model are the
hallmarks of our ability to lead the
market in key growth sectors of the
global economy.
Each of our capital
markets businesses in
Canada, the US, Australia,
and the UK, Europe &
Dubai has its own distinct
regional advantages, but our
global capabilities are an
extraordinary differentiator
and an important
competitive advantage for
Canaccord Genuity.
With a supportive backdrop for growth
stocks, Canaccord Genuity has
reinforced its market position as a
leading independent investment bank
and advisory firm for mid-market growth
companies during fiscal 2018. Revenues
earned by our global capital markets
businesses for the 12-month period
improved by 6.9% to $637.5 million –
a record for this segment.
The performance that we delivered
this year highlights the commitment
and dedication of the many talented
professionals who worked hard to
generate ideas and solutions when
markets were difficult, and seized every
opportunity to deliver for their clients as
soon as markets were receptive.
It’s also important to consider our
performance in the context of the
strategic advancements that have taken
place across our operations in recent
years. Our alignment efforts have helped
us to strengthen collaboration across
regions, drive incremental revenue growth,
and harness opportunities to lead the
market in emerging high growth sectors
such as cannabis and blockchain.
Because of these efforts, revenue per
employee in our global capital markets
business has improved by 38.4% since
we began our realignment initiatives in
fiscal 2016.
We ended the fiscal year as the dominant
independent investment bank in Canada
for both number of transactions and
total amount raised. Total revenue
in this business increased by 39.1%
year over year to $216.1 million. We
also maintained our lead as the top
independent trader in the country. With
our recent acquisition of Jitneytrade, we
expect that our margin of leadership will
increase as we expand our client offering
to include futures, options and low latency
trading capabilities.
In the US, our capital markets business
earned revenue of $235.9 million for
the fiscal year. Early in the year, we took
steps to realign and strengthen our core
capabilities in this region, which led to a
significant improvement in profitability for
Canaccord Genuity Revenue
(C$ millions, fiscal years)
2018
2017
2016
2015
2014
$637.5
$597.2
$532.3
$613.1
$615.8
C$34.5 billion
raised for global
growth companies
during fiscal 2018
Agility allows us to lead the market
in fast growing sectors
10
CANACCORD GENUITY GROUP INC. | 2018 ANNUAL REPORT
$637.5 million
in global revenue
this business. By leveraging our proven strengths in the
healthcare and technology sectors, our Advisory professionals
delivered a 47.9% year-over-year increase in revenues for this
segment. We also experienced strong flows during the year, as
our institutional equities business continued to grow its market
share in an otherwise difficult market backdrop.
Revenue earned by our UK, Europe & Dubai operation amounted
to $128.5 million for the fiscal year. Our teams in this business
have leveraged our cross-border capabilities to help UK-based
companies attract partnerships and investment from across
Europe, and our Paris operation has been an important
contributor to the positive momentum in this business.
A return to robust activity levels for small-cap equities in our
core focus sectors led our Australian business to deliver a
record revenue result for the second half of the fiscal year.
This business has delivered very promising growth in recent
years, and with our increased investment, we look forward to
continuing to support its development initiatives in the region.
Across the organization, we are guided by one fundamental
truth: that our own success depends on our ability to
continuously support our clients’ success. We compete strongly
on our ability to offer our clients highly relevant services and
access to deep global expertise, which gives us a tremendous
opportunity to lead the market in each of our businesses
and geographies.
Canaccord Genuity
participated in
455 transactions(1)
across the globe
(1) Transactions valued above C$1.5 million.
Fiscal 2018 Revenue by Activity
Investment Banking
37%
Commissions and Fees
24%
Advisory
19%
Trading
18%
Interest and Other
2%
Total Capital Markets Revenue by Region
United States
37%
Canada
34%
UK, Europe & Dubai
20%
Australia
9%
We leverage our
competitive strengths
across businesses and
geographies to drive
stronger outcomes for
our clients and our
business.
CANACCORD GENUITY GROUP INC. | 2018 ANNUAL REPORT
11
STRENGTH IN STABILITY
A Strong Culture
to Drive Our Success
We Are Partners.
How we interact with each other is critical to our culture. As a global investment bank,
we differentiate ourselves every day by providing a truly global perspective, which by its
very nature is a product of extensive collaboration and co-operation across borders and
business units.
We Are Entrepreneurial.
We are not a large bank and strive to be a flat organization, by eliminating bureaucratic
thinking and fostering innovation.
We Are Collegial.
We want to be the company where people feel empowered to satisfy their clients’
expectations with the help of all their partners.
We Work Hard.
As a mid-market investment bank, we do not have many of the advantages (or
disadvantages) of our larger competition. We work harder and smarter, and we always
make the extra effort to create successful outcomes for our clients and our business.
We Operate with Integrity.
From the types of clients we represent to the quality of our research and the people we
hire, we must always operate with strength of character and integrity.
We Are Earnings Focused.
Many of us are shareholders and we know that the end result of all our efforts must be
in a sustainably stronger share price. Achieving this is a function of higher revenue and,
importantly, lower costs.
12
CANACCORD GENUITY GROUP INC. | 2018 ANNUAL REPORT
13
Financial Review
14
14
15
17
20
21
21
22
28
32
43
44
45
45
46
Management’s Discussion and Analysis
Non-IFRS Measures
Business Overview
Key Developments During Fiscal 2018
Market Environment During Fiscal 2018
Fiscal 2019 Outlook
Overview of Preceding Years − Fiscal 2017 vs. 2016
Financial Overview
Quarterly Financial Information
Business Segment Results
Financial Condition
Off-Balance Sheet Arrangements
Liquidity and Capital Resources
Preferred Shares
Outstanding Share Data
47
48
49
53
53
55
55
59
59
59
60
61
107
113
Share-Based Payment Plans
Related Party Transactions
Critical Accounting Policies and Estimates
Financial Instruments
Future Changes in Accounting Policies and Estimates
Disclosure Controls and Procedures and Internal Control
over Financial Reporting
Risk Management
Dividend Policy
Dividend Declaration
Additional Information
Independent Auditors’ Report
Consolidated Financial Statements and Notes
Supplemental Information
Glossary
CAUTION REGARDING FORWARD-LOOKING STATEMENTS:
This document may contain ‘‘forward-looking statements’’ (as defined under applicable securities laws). These statements relate to
future events or future performance and reflect management’s expectations, beliefs, plans, estimates, intentions and similar
statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts,
including business and economic conditions and Canaccord Genuity Group’s growth, results of operations, performance and business
prospects and opportunities. Such forward-looking statements reflect management’s current beliefs and are based on information
currently available to management. In some cases, forward-looking statements can be identified by terminology such as ‘‘may’’, ‘‘will’’,
‘‘should’’, ‘‘expect’’, ‘‘plan’’, ‘‘anticipate’’, ‘‘believe’’, ‘‘estimate’’, ‘‘predict’’, ‘‘potential’’, ‘‘continue’’, ‘‘target’’, ‘‘intend’’, ‘‘could’’ or the
negative of these terms or other comparable terminology. Disclosure identified as an ‘‘Outlook’’ including the section entitled ‘‘Fiscal
2019 Outlook’’ contains forward looking information. By their very nature, forward-looking statements involve inherent risks and
uncertainties, both general and specific, and a number of factors could cause actual events or results to differ materially from the
results discussed in the forward-looking statements. In evaluating these statements, readers should specifically consider various
factors that may cause actual results to differ materially from any forward-looking statement. These factors include, but are not limited
to, market and general economic conditions, the nature of the financial services industry and the risks and uncertainties discussed
from time to time in the Company’s interim condensed and annual consolidated financial statements and its annual report and Annual
Information Form (AIF) filed on www.sedar.com as well as the factors discussed in the sections entitled ‘‘Risk Management’’ in this
MD&A and ‘‘Risk Factors’’ in the AIF, which include market, liquidity, credit, operational, legal, cyber and regulatory risks. Material
factors or assumptions that were used by the Company to develop the forward-looking information contained in this document include,
but are not limited to, those set out in the Fiscal 2019 Outlook section in the annual MD&A and those discussed from time to time in
the Company’s interim condensed and annual consolidated financial statements and its annual report and AIF filed on www.sedar.com.
The preceding list is not exhaustive of all possible risk factors that may influence actual results. Readers are also cautioned that the
preceding list of material factors or assumptions is not exhaustive.
Although the forward-looking information contained in this document is based upon what management believes are reasonable
assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. The
forward-looking statements contained in this document are made as of the date of this document and should not be relied upon
as representing the Company’s views as of any date subsequent to the date of this document. Certain statements included in this
document may be considered ‘‘financial outlook’’ for purposes of applicable Canadian securities laws, and such financial outlook
may not be appropriate for purposes other than this document. Except as may be required by applicable law, the Company does
not undertake, and specifically disclaims, any obligation to update or revise any forward-looking information, whether as a result of
new information, further developments or otherwise.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
14
Management’s Discussion and Analysis
Fiscal year 2018 ended March 31, 2018 − this document is dated June 6, 2018.
The following discussion of Canaccord Genuity Group Inc.’s financial condition, financial performance and cash flows is provided to
enable a reader to assess material changes in the financial condition, financial performance and cash flows for the year ended
March 31, 2018 compared to the preceding fiscal year, with an emphasis on the most recent year. Unless otherwise indicated or
the context otherwise requires, the ‘‘Company’’ refers to Canaccord Genuity Group Inc. and its direct and indirect subsidiaries.
‘‘Canaccord Genuity’’ refers to the investment banking and capital markets segment of the Company. The Management’s
Discussion and Analysis (MD&A) should be read in conjunction with the audited consolidated financial statements for the years
ended March 31, 2018 and 2017, beginning on page 60 of this report. The Company’s financial information is expressed in
Canadian dollars unless otherwise specified. The Company’s consolidated financial statements for the years ended March 31,
2018 and 2017 are prepared in accordance with International Financial Reporting Standards (IFRS).
Non-IFRS Measures
Certain non-IFRS measures are utilized by the Company as measures of financial performance. Non-IFRS measures do not have
any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other
companies. Non-IFRS measures presented include assets under administration, assets under management, book value per diluted
common share, return on common equity and figures that exclude significant items.
The Company’s capital is represented by common and preferred shareholders’ equity and, therefore, management uses return on
common equity (ROE) as a performance measure. Also used by the Company as a performance measure is book value per diluted
common share, which is calculated as total common shareholders’ equity adjusted for assumed proceeds from the exercise of
options and warrants and conversion of convertible debentures divided by the number of diluted common shares outstanding
including estimated amounts in respect of share issuance commitments including options, warrants, and convertible debentures,
as applicable, and adjusted for shares purchased under the normal course issuer bid and not yet cancelled, and estimated
forfeitures in respect of unvested share awards under share-based payment plans.
Assets under administration (AUA) and assets under management (AUM) are non-IFRS measures of client assets that are common
to the wealth management business. AUA − Canada, AUM − Australia and AUM − UK & Europe are the market value of client
assets managed and administered by the Company from which the Company earns commissions and fees. This measure includes
funds held in client accounts as well as the aggregate market value of long and short security positions. AUM − Canada includes
all assets managed on a discretionary basis under programs that are generally described as or known as the Complete Canaccord
Investment Counselling Program and the Complete Canaccord Private Investment Management Program. Services provided include
the selection of investments and the provision of investment advice. The Company’s method of calculating AUA − Canada,
AUM − Canada, AUM − Australia and AUM − UK & Europe may differ from the methods used by other companies and therefore
may not be comparable to other companies. Management uses these measures to assess operational performance of the
Canaccord Genuity Wealth Management business segment. AUM − Canada is also administered by the Company and is included
in AUA − Canada.
Financial statement items that exclude significant items are non-IFRS measures. Significant items for these purposes include
restructuring costs, amortization of intangible assets acquired in connection with a business combination, impairment of goodwill
and other assets, acquisition-related expense items, which include costs recognized in relation to both prospective and completed
acquisitions, gains or losses related to business disposals including recognition of realized translation gains on the disposal of
foreign operations, certain accounting charges related to the change in the Company’s long-term incentive plan (“LTIP” or the
“Plan”) as recorded with effect on March 31, 2018, certain incentive-based payments related to the acquisition of Hargreave Hale,
as well as certain expense items, typically included in development costs, which are considered by management to reflect a
singular charge of a non-operating nature. See the Selected Financial Information Excluding Significant Items table on page 23.
Management believes that these non-IFRS measures allow for a better evaluation of the operating performance of the Company’s
business and facilitate meaningful comparison of results in the current period to those in prior periods and future periods. Figures
that exclude significant items provide useful information by excluding certain items that may not be indicative of the Company’s
core operating results. A limitation of utilizing these figures that exclude significant items is that the IFRS accounting effects of
these items do in fact reflect the underlying financial results of the Company’s business; thus, these effects should not be ignored
in evaluating and analyzing the Company’s financial results. Therefore, management believes that the Company’s IFRS measures
of financial performance and the respective non-IFRS measures should be considered together.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 15
Business Overview
Through its principal subsidiaries, Canaccord Genuity Group Inc. 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. Canaccord Genuity Group has wealth management offices located in Canada, the UK,
Guernsey, Jersey, the Isle of Man and Australia. Canaccord Genuity, the Company’s international capital markets division, operates
in North America, the UK & Europe, Asia, Australia and the Middle East. To us there are no foreign marketsTM.
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.
ABOUT CANACCORD GENUITY GROUP INC.’S OPERATIONS
Canaccord Genuity Group Inc.’s operations are divided into two business segments: Canaccord Genuity (investment banking and
capital markets operations) and Canaccord Genuity Wealth Management. Together, these operations offer a wide range of
complementary investment banking services, investment products and brokerage services to the Company’s institutional,
corporate and private clients. The Company’s administrative segment is referred to as Corporate and Other.
Canaccord Genuity
Canaccord Genuity is the global capital markets division of Canaccord Genuity Group Inc. (TSX: CF), offering institutional and
corporate clients idea-driven investment banking, merger and acquisition, research, sales and trading services with capabilities in
North America, the UK & Europe, Asia, Australia and the Middle East. We are committed to providing valued services to our clients
throughout the entire lifecycle of their business and operating as a gold standard independent investment bank − expansive in
resources and reach, but targeted in industry expertise, market focus and individual client attention.
Canaccord Genuity Wealth Management
Canaccord Genuity Wealth Management operations provide comprehensive wealth management solutions and brokerage services
to individual investors, private clients, charities and intermediaries through a full suite of services tailored to the needs of clients
in each of its markets. The Company’s wealth management division now has Investment Advisors (IAs) and professionals in
Canada, the UK, Jersey, Guernsey, the Isle of Man and Australia.
Corporate and Other
Canaccord Genuity Group’s administrative segment, described as Corporate and Other, includes revenues and expenses
associated with providing correspondent brokerage services, bank and other interest, foreign exchange gains and losses, and
activities not specifically allocable to either the Canaccord Genuity or Canaccord Genuity Wealth Management divisions. Also
included in this segment are the Company’s operations and support services, which are responsible for front- and back-office
information technology systems, compliance and risk management, operations, legal, finance, and all administrative functions of
Canaccord Genuity Group Inc.
Corporate structure
Canaccord Genuity
Group Inc.
US
sub-group
UK and Europe
Wealth Management
sub-group
UK and Europe
Capital Markets
sub-group
50%
Canaccord
Genuity Corp.
(Canada)
Canaccord
Genuity Wealth
Management
(USA) Inc.
Canaccord
Genuity LLC
(USA)
Canaccord
Genuity Wealth
(International)
Limited
(Channel Islands)
The chart shows principal operating companies of the Canaccord Genuity Group.
Canaccord
Genuity
Wealth Limited
(UK)
Hargreave
Hale
Limited
(UK)
Canaccord
Genuity
(Dubai) Ltd.
Canaccord
Genuity
Limited
(UK)
Canaccord
Genuity Asia
(China and
Hong Kong)
Canaccord
Genuity
(Australia)
Limited
The Company owns 50% of the issued shares of Canaccord Financial Group (Australia) Pty Ltd and Canaccord Genuity (Australia) Limited, but for accounting purposes, as of March 31, 2018, the
Company is considered to have a 58% interest because of the shares held in a trust controlled by Canaccord Financial Group (Australia) Pty Ltd [March 31, 2017 − 58%].
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
16 Management’s Discussion and Analysis
BUSINESS ACTIVITY
Our business is affected by the overall condition of the worldwide debt and equity markets.
The timing of revenue recognition can also materially affect the Company’s quarterly results. The majority of revenue from
underwriting and advisory transactions is recorded when the transaction has closed and, as a result, quarterly results can also be
affected by the timing for the recognition of such transactions in our capital markets business.
The Company has taken steps to reduce its exposure to variances in the equity markets and local economies by diversifying not
only its industry sector coverage but also its international scope. To improve recurring revenue streams and offset the inherent
volatility of the capital markets business, the Company has taken steps to increase the scale of its global wealth management
operations. Historically, the Company’s diversification across major financial centres has allowed it to benefit from strong equity
markets in certain regions and improve our capability for identifying and servicing opportunities in regional centres and across our
core focus sectors.
IMPACT OF CHANGES IN CAPITAL MARKETS ACTIVITY
As a brokerage firm, the Company derives its revenue primarily from sales commissions, underwriting and advisory fees, and
trading activity. As a result, the Company’s business is materially affected by conditions in the financial marketplace and the
economic environment, primarily in North America and Europe, and to some degree Asia and Australia. Canaccord Genuity Group’s
long term international business development initiatives over the past several years have laid a solid foundation for revenue
diversification. A conservative capital strategy allows the Company to remain competitive in today’s changing financial landscape.
During fiscal 2018, the Company’s capital markets activities were focused on the following sectors: Metals & Mining, Energy,
Technology, Real Estate, Sustainability, Healthcare & Life Sciences, Consumer & Retail, Infrastructure, Aerospace & Defense,
Financials and Private Equity. Coverage of these sectors included investment banking, mergers and acquisitions (M&A) and
advisory services, and institutional equity activities, such as sales, trading and research.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 17
Key Developments During Fiscal 2018
CORPORATE
(cid:129) On June 1, 2017, the Company announced that the dividend rate on its Cumulative 5-Year Rate Reset First Preferred Shares,
Series C (the ‘‘Series C Preferred Shares’’) for the period from July 1, 2017 to June 30, 2022 would be 4.993% per annum.
(cid:129) On June 16, 2017, the Company announced that the number of Series C Preferred Shares tendered for conversion into
Cumulative Floating Rate First Preferred Shares, Series D (the ‘‘Series D Preferred Shares’’) did not meet the minimum required
and, accordingly, no Series D Preferred Shares were issued.
(cid:129) On July 5, 2017, the Company announced that through its UK & Europe based wealth management business, Canaccord
Genuity Wealth Management (‘‘CGWM (UK)’’), it had agreed to acquire Hargreave Hale Limited (‘‘Hargreave Hale’’), a leading
independent UK-based investment and wealth management business. This transaction closed on September 18, 2017. In
September 2017, the Company acquired 100% of Hargreave Hale for cash and deferred consideration of £52.1 million
(C$86.0 million) and additional contingent consideration of up to £27.5 million (C$45.4 million). The contingent consideration
is structured to be payable over a period of up to three years, subject to the achievement of certain performance targets related
to the retention and growth of client assets and revenues and an amount determined with reference to the fund management
business. The cash consideration was funded in part from a credit facility provided to CGWM (UK) by National Westminster
Bank plc and HSBC Bank plc in the amount of £40.0 million (C$72.5 million as of March 31, 2018). Additional contingent
consideration, if paid, will be funded from the ongoing cash flow of the business.
The Company expensed $6.7 million of acquisition-related costs and $2.9 million of restructuring costs for the year ended
March 31, 2018. In addition, the Company expensed $1.5 million of incentive-based payments determined with reference to
financial targets and other performance criteria that are included as part of development costs. The Company anticipates
additional costs related to these incentive-based payments of approximately £13.0 million (C$23.4 million) to be recorded as a
significant item over a four-year measurement period.
(cid:129) On August 1, 2017, Canaccord Genuity Acquisition Corp. (‘‘CGAC’’), a newly organized special purpose acquisition corporation
formed for the purpose of effecting a qualifying acquisition of one or more businesses, announced the closing of its initial
public offering of $30.0 million of Class A Restricted Voting Units. The sponsor of CGAC is a wholly-owned subsidiary of the
Company and owns an approximate 26.2% interest in CGAC.
(cid:129) On August 11, 2017, the Company announced the filing of a normal course issuer bid (NCIB) to purchase common shares of
the Company through the facilities of the TSX and on alternative trading systems during the period from August 15, 2017 to
August 14, 2018. The purpose of any purchase under this program is to enable the Company to acquire shares for cancellation.
The maximum number of shares that may be repurchased represented 5.0% of the Company’s outstanding common shares at
the time of filing the NCIB. There have been no shares purchased under this and the previous NCIB during the year ended
March 31, 2018.
(cid:129) On April 25, 2018, the Company announced that it has entered into an agreement to acquire Jitneytrade Inc. and Finlogik Inc.
directly and through the purchase of Finlogik Capital Inc. Jitneytrade Inc. is a direct access broker and an active trader in
futures and equity options in Canada. Finlogik Inc. is in the business of delivering value-added fintech solutions in the Canadian
market. The acquisition closed on June 6, 2018.
(cid:129) At its meeting on June 6, 2018, the Board of Directors approved the grant of 6,220,000 performance share options (PSOs) to
senior management of the Company and its operating subsidiaries. The options will be granted under the terms of the
Company’s Performance Share Option (PSO) plan to be presented to the shareholders for their approval at the Company’s
annual general meeting to be held on August 2, 2018. The grant is subject to ratification at that meeting. The options will have
an exercise price determined within the context of the market at the time of the grant, will have a term of five years and will
time-vest rateably over four years (with one third vesting on each of the second, third and fourth anniversaries of the date of
grant). PSOs will also be subject to market (stock price) performance vesting conditions, as well as have a three times exercise
price cap on payout value.
CANACCORD GENUITY
(cid:129) Canaccord Genuity generated revenue of $637.6 million in fiscal 2018
(cid:129) Net income before taxes excluding significant items(1) was $62.5 million, an increase of $16.2 million compared to the prior
year
(cid:129) Canaccord Genuity led 178 transactions globally, each over C$1.5 million, to raise total proceeds of C$6.1 billion during fiscal
2018. Of this:
(cid:129) Canada led 131 transactions, which raised C$3.5 billion
(cid:129) The UK, Europe & Dubai led 14 transactions, which raised C$1.8 billion
(cid:129) The US led 16 transactions, which raised C$650 million
(cid:129) Australia led 17 transactions, which raised C$149.1 million
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
18 Management’s Discussion and Analysis
(cid:129) During fiscal 2018, including the 178 transactions led globally, Canaccord Genuity participated in a total of 455 transactions
globally, each over C$1.5 million, to raise gross proceeds of C$34.5 billion. Of this:
(cid:129) Canada participated in 334 transactions, which raised C$21.6 billion
(cid:129) The US participated in 67 transactions, which raised C$8.8 billion
(cid:129) The UK, Europe & Dubai participated in 22 transactions, which raised C$3.4 billion
(cid:129) Australia participated in 32 transactions, which raised C$659.6 million
(cid:129) Significant investment banking transactions for Canaccord Genuity during fiscal 2018 include:
(cid:129) £267.7 million for HICL Infrastructure Company on LSE
(cid:129) £200.0 million initial public offering of Triple Point Social Housing REIT plc on LSE
(cid:129) US$312.5 million in two transactions for Atara Biotherapeutics on Nasdaq
(cid:129) £187.5 million for Aberdeen Standard European Logistics Income plc on LSE
(cid:129) US$260.2 million for Xencor Inc. on Nasdaq
(cid:129) US$210.7 million in four transactions for Helios + Matheson on Nasdaq
(cid:129) C$243.6 million in three transactions for Hydropothecary Corporation on TSXV
(cid:129) AUD $250.5 in two transactions for Cooper Energy Limited on ASX
(cid:129) C$200.0 million for Cobalt 27 Capital Corp. on TSXV
(cid:129) C$125.0 million Initial Public Offering for Cannabis Strategies Acquisition Corp. on TSX
(cid:129) AUD$151.0 million for Infigen Energy Limited on ASX
(cid:129) £173 million initial public offering for Baillie Gifford US Growth Trust plc on LSE
(cid:129) C$489 million in four transactions for Aurora Cannabis Inc. on TSX
(cid:129) C$92.4 million for Osisko Mining on TSX
(cid:129) £95 million for IQE plc on AIM
(cid:129) C$140.0 million for DHX Media Ltd. on TSX
(cid:129) C$132.8 million for MedReleaf on TSX
(cid:129) £58.8 million for accesso Technology Group plc on AIM
(cid:129) US$63.6 million IPO for Zymeworks on NYSE & TSX
(cid:129) £90 million equity raise for Oxenwood Real Estate for its purchase of Ultrabox Logistics portfolio
(cid:129) C$80.0 million for Brio Gold on TSX
(cid:129) C$75.6 million for SolGold plc on TSX and LSE
(cid:129) £57.6 million for The Renewables Infrastructure Group Limited on LSE
(cid:129) US$47.4 million for Savara Inc. on Nasdaq
(cid:129) US$49.1 million for VBI Vaccines on Nasdaq
(cid:129) AUD$60.0 million for CANN Group Limited on ASX
(cid:129) £52.2 million for Ediston Property Investment Company PLC on LSE
(cid:129) US$65.3 million in two tranches for Neovasc Inc. on Nasdaq & TSX
(cid:129) US$60.0 million initial public offering for BioXcel Therapeutics Inc
(cid:129) C$43.9 million for Global Blockchain Technologies Corp. on TSX-V
(cid:129) In Canada, Canaccord Genuity participated in raising $838.9 million for government and corporate bond issuances during fiscal
2018
(cid:129) During fiscal 2018, significant M&A and advisory transactions included:
(cid:129) Broken Coast Cannabis Inc. on its C$273 million sale to Aphria
(cid:129) Cape plc on its £575 million sale to Altrad Investment Authority SAS
(cid:129) Nuuvera on its C$787 million sale to Aphria Inc.
(cid:129) Polaris Materials on its sale to U.S. Concrete for C$309 million
(cid:129) Sandvine Corporation on its C$562 million sale to Francisco Partners and Procera Networks
(cid:129) Aurora Cannabis on its C$1.2 billion acquisition of CanniMed Therapeutics Inc.
(cid:129) DCC plc on the £219.0 million sale of DCC Environmental
(cid:129) HLD/Dentressangle on its €1.5 billion acquisition of Kiloutou
(cid:129) Ardian on its €670 million disposal of Trescal to OMERS Private Equity
(cid:129) Thoma Bravo and Motus on Thoma Bravo’s acquisition of the premier vehicle management platforms of Motus and
Runzheimer
(cid:129) Rockspring Property Holdings Limited on its sale to PATRIZIA Immobilien AG
(cid:129) Outpatient Imaging Affiliates, LLC on its sale to ICV Partners
(cid:129) Monitise plc on its £75 million sale to Fiserv, Inc.
(cid:129) OSRAM Licht AG on its acquisition of Digital Lumens
(cid:129) Sientra Inc. on its acquisition of Miramar Labs
(cid:129) Gaming Nation on its C$44 million sale to Orange Capital
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 19
(cid:129) SignUpGenius Inc. on its majority recapitalization by Providence Equity Partners
(cid:129) Halt Medical Inc. on its sale to Acessa AssetCo LLC pursuant to §363 of the U.S. bankruptcy code
(cid:129) DHX Media on its US$345 million acquisition of Peanuts and Strawberry Shortcake
WEALTH MANAGEMENT (GLOBAL)
(cid:129) Globally, Canaccord Genuity Wealth Management generated $375.2 million in revenue during fiscal 2018
(cid:129) Total assets under administration, management & management contract (“Client Assets”) in Canada, the UK & Europe and
Australia were $61.3 billion at March 31, 2018(2), an increase of $22.7 billion or 58.7% compared to $38.6 billion at the end
of fiscal 2017(2)
WEALTH MANAGEMENT (NORTH AMERICA)
(cid:129) Canaccord Genuity Wealth Management (North America) generated $168.9 million in revenue during fiscal 2018 and, excluding
significant items, recorded net income of $20.2 million(1)
(cid:129) Assets under administration were $15.6 billion as of March 31, 2018, an increase of 17.7% from $13.2 billion at the end of
fiscal 2017(2)
(cid:129) Assets under management (discretionary) were $2.8 billion as of March 31, 2018, an increase from $2.6 billion at the end of
fiscal 2017(2)
(cid:129) At March 31, 2018, Canaccord Genuity Wealth Management had 142 Advisory Teams in Canada(3), an increase of one Advisory
Team from March 31, 2017
WEALTH MANAGEMENT (UK & EUROPE)
Contributions from Hargreave Hale from September 18, 2017 are included in the operating figures under Canaccord Genuity Wealth
Management (UK & Europe) below.
(cid:129) Canaccord Genuity Wealth Management (UK & Europe) generated $201.4 million in revenue and, excluding significant items,
recorded net income of $37.4 million before taxes in fiscal 2018(1)
(cid:129) Assets under management (discretionary and non-discretionary) were $44.9 billion (£24.8 billion) as at March 31, 2018, an
increase of 83.0% from $24.5 billion (£14.7 billion) at March 31, 2017(2). In local currency (GBP), assets under management at
March 31, 2018 increased 69.0% compared to March 31, 2017. The acquisition of Hargreave Hale Limited in Q2/18 largely
contributed to the increase in AUM at March 31, 2018 compared to the prior year.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
(2) See Non-IFRS Measures on page 14.
(3) Advisory teams are normally comprised of one or more IAs and their assistants and associates, who together manage a shared set of client accounts. Advisory teams that are led by, or only include,
an IA who has been licensed for less than three years are not included in our advisory team count, as it typically takes a new IA approximately three years to build an average-sized book of business.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
20 Management’s Discussion and Analysis
Market Environment During Fiscal 2018:
ECONOMIC BACKDROP:
During fiscal 2018, the global economy generally enjoyed positive and synchronized economic growth for the first time since 2007.
In the US, the tax reform and infrastructure changes fuelled a long-awaited earnings and corporate capital expenditure recovery.
The combination of a weak US dollar, higher commodity prices, a strong labour market and positive earnings/economic momentum
pushed inflation and interest rates higher. Against this backdrop, the Federal Reserve and the Bank of Canada continued their
monetary tightening. Elsewhere, the European Central Bank and the Bank of Japan maintained highly accommodative policies
while low inflation in emerging markets (EMs) provided more headroom for EM central banks to cut policy rates further. Late in the
fiscal year, global equity markets experienced the first correction since 2015 on the back of rapidly rising interest rates and fears
that US trade tariffs could ignite global trade wars. Overall, despite rising bond yields and policy rates in North America, the
recovery in corporate earnings worldwide has allowed world equities to deliver above-average returns to investors throughout fiscal
2018. On a total return basis, US (+14.0%), Canadian (+1.7%), EM (+22.3%) and world equities (+15.4%) all posted positive
returns.
INVESTMENT BANKING AND ADVISORY
Capital raising and advisory activity in our core focus areas improved markedly for most of the fourth fiscal quarter and in fiscal
2018. As indicated in the table below, the performance gap between global large cap equities and global small cap equities
closed over the 12-month period. The continued strong performance of small cap equities remains an encouraging sign for capital
raising and advisory activities in our business.
Performance at End of Fiscal Quarter
S&P IFCI Global Small Cap
S&P IFCI Global Large Cap
(Q/Q)
12.1%
11.3%
(Y/Y)
14.9%
16.1%
(Q/Q)
1.9%
5.7%
(Y/Y)
16.5%
22.7%
(Q/Q)
8.6%
6.7%
(Y/Y)
18.4%
20.5%
(Q/Q)
8.4%
7.2%
(Y/Y)
34.5%
34.6%
(Q/Q)
1.3%
0.8%
(Y/Y)
21.5%
22.0%
Q4/17
Q1/18
Q2/18
Q3/18
Q4/18
Source: Thomson Reuters Datastream, Canaccord Genuity estimates
Our capital raising and advisory activities are primarily focused on small- and mid-capitalization companies in specific growth
sectors of the global economy, as outlined on page 17. These sectors may experience growth or downturns independent of
broader economic and market conditions, and government regulation can also have a more profound impact on capital formation
for smaller companies. Volatility in the business environment for these industries or in the market for securities of companies
within these industries in the regions where we operate could adversely affect our financial results and ultimately, the market
value of our shares. Advisory revenues are primarily dependent on the successful completion of merger, acquisition or
restructuring mandates. Weak economic and global financial market conditions and lack of access to capital can result in a
challenging business environment for small and mid-market M&A activity, but may provide opportunities for our restructuring
business.
TRADING
Trading volumes for small- and mid-cap equities in many of the markets where we operate improved compared to the previous
fiscal quarter, and the rebound in new issue activity in small- and mid-cap equities has translated into somewhat stronger trading
activity. Heightened market volatility during the fiscal fourth quarter also supported our agency trading activities.
Average Value
During Fiscal
Quarter/Year
Q4/17
Q1/18
Q2/18
Q3/18
Q4/18
FY18
31-Mar-17
(Y/Y) 30-Jun-17
(Y/Y) 29-Sep-17
(Y/Y) 29-Dec-17
(Y/Y) 29-Mar-18
(Y/Y)
(Q/Q) 29-Mar-18
(Y/Y)
Russell 2000
1374.8
32.0%
1390.4
22.7%
1416.1
15.8%
1511.5
17.4%
1554.4
13.1%
S&P 400 Mid Cap
1706.4
27.6%
1729.7
17.8%
1745.6
12.8%
1853.4
16.5%
1914.6
12.2%
2.8%
3.3%
1467.8
17.0%
1810.4
14.7%
FTSE 100
7271.7
21.3%
7388.2
19.1%
7380.7
9.1%
7480.4
8.0%
7359.4
1.2% −1.6%
7402.3
9.0%
MSCI EU Mid Cap
1003.9
14.1%
1067.4
18.3%
1071.5
15.5%
1107.9
18.0%
1105.0
10.1% −0.3%
1087.9
15.4%
S&P/TSX
15543.8
21.3% 15472.3
11.7% 15181.4
4.1% 15982.8
7.0% 15752.1
1.3% −1.4% 15596.5
5.9%
Source: Thomson Reuters Datastream, Canaccord Genuity estimates
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 21
GLOBAL WEALTH MANAGEMENT
The low-volatility environment that investors have enjoyed over the past few years ended in our fourth quarter of fiscal 2018, as
heightened trade tensions between the US and their world trading counterparts and escalating geopolitical concerns in North
Korea and Syria sent most world equity markets lower. Nevertheless, the strong returns enjoyed over the first three quarters of the
fiscal year were such that world equities (+15.4%) and commodities (+13.8%) have boosted the performance of investors’
portfolios in fiscal 2018.
Total Return (excl. currencies)
S&P 500
S&P/TSX
MSCI EM ERGING MARKETS
MSCI WORLD
S&P GS COMMODITY INDEX
US 10-YEAR T-BONDS
CAD/USD
CAD/EUR
Q4/17
Change
(Q/Q)
6.1%
2.4%
7.8%
7.0%
-5.1%
0.8%
0.9%
-0.4%
Q1/18
Change
(Q/Q)
3.1%
-1.6%
6.7%
4.5%
-5.5%
0.9%
2.7%
-4.3%
Q2/18
Change
(Q/Q)
4.5%
3.7%
7.7%
5.3%
7.2%
0.6%
4.0%
0.6%
Q3/18
Change
(Q/Q)
6.6%
4.5%
5.7%
5.8%
9.9%
-0.2%
-0.9%
-2.4%
Q4/18
Change
(Q/Q)
-0.8%
-4.5%
0.6%
-0.9%
2.2%
-2.5%
-2.4%
-4.8%
Fiscal 2017
Change (Y/Y)
Fiscal 2018
Change (Y/Y)
17.2%
18.6%
15.5%
15.7%
8.4%
-3.0%
-2.3%
4.4%
14.0%
1.7%
22.3%
15.4%
13.8%
-1.2%
3.3%
-10.5%
Source: Thomson Reuters DataStream, Canaccord Genuity estimates
Fiscal 2019 Outlook
Recent economic data and leading economic indicators confirm that global economic growth is losing steam, albeit from a high
level. However, the growth slowdown observed and projected appears to be spreading mainly over developed markets (DMs) where
rising interest rates have begun to impact economic conditions. Our view is that this growth lull is temporary. We expect that fiscal
reflation and weak currencies should act as shock absorbers in North America while monetary reflation should protect growth in
Europe, Australia, Asia and Far East regions. Elsewhere, growth prospects remain upbeat in EM countries, which account for
roughly 75% of global GDP growth and expected growth in calendar 2018 and 2019. We expect that disinflationary pressures and
strong EM currencies will allow central banks to further cut short-term rates. This positive decoupling between EM/DM monetary
policy, leading economic indicators and economic momentum is a key reason why we see no imminent risk of a marked
deterioration in global growth into fiscal 2019. However, higher tariffs imposed by the US administration on imported goods
increase the uncertainty on our longer-term global economic outlook. We will continue to monitor market trends and if we see a
deterioration of the economic outlook we would expect to react quickly to any anticipated changes in market conditions.
US and Canadian equity market valuations remain elevated by historical standards, especially when accounting for debt on
corporate balance sheets. However, we believe equity markets will continue to benefit from strong earnings growth within a low,
but rising, interest rate and inflationary environment. These conditions should benefit our global wealth management operations.
Also, we expect investors to rotate out of expensive growth sectors into cheaper value sectors such as resource cyclicals,
supporting agency trading activities in the process. This rotation, however, could mark the late stages of a maturing bull market,
hence increased market volatility. Nevertheless, assuming pro-business industry regulations, we expect that financing and advisory
activities in the health-care and technology sectors should stay vigorous while higher commodity prices could prompt resource
companies to raise capital for M&A or production-related growth objectives.
Overview of Preceding Years − Fiscal 2017 vs. 2016
Total revenue for the year ended March 31, 2017 (fiscal 2017) was $879.5 million, an increase of $91.7 million or 11.6%
compared to the year ended March 31, 2016 mainly because of an increase in investment banking and principal trading revenues.
Revenue generated from investment banking activities increased by $64.1 million to $196.1 million in fiscal 2017, most notably
in our Canadian and Australian capital markets operations. Revenue from principal trading revenue increased by $33.5 million for
the year ended March 31, 2017 compared to the prior year due to higher revenue earned across all regions.
Canaccord Genuity Group recorded net income of $43.2 million during fiscal 2017, compared to a net loss of $358.6 million in
fiscal 2016 attributable to certain significant items which included goodwill and other asset impairment charges and restructuring
costs recorded in fiscal 2016. Excluding significant items(1), net income for fiscal 2017 was $49.2 million compared to a net loss
of $6.0 million for fiscal 2016, largely due to the higher revenue earned as a result of increased capital raising activities as well
as expansion of our wealth management operations during fiscal 2017.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
22 Management’s Discussion and Analysis
Financial Overview
SELECTED FINANCIAL INFORMATION(1)(2)(3)
(C$ thousands, except per share and % amounts, and number of
employees)
Canaccord Genuity Group Inc. (CGGI)
Revenue
Commissions and fees
Investment banking
Advisory fees
Principal trading
Interest
Other
Total revenue
Expenses
Non-share based incentive compensation
Share based incentive compensation
Salaries and benefits
Other overhead expenses(4)
Restructuring costs(5)
Acquisition-related costs
Acceleration of long-term incentive plan expense(6)
Share of loss of an associate(7)
Impairment of goodwill and other assets(8)
Total expenses
Income (loss) before income taxes
Net income (loss)
Net income (loss) attributable to CGGI shareholders
Non-controlling interests
Earnings (loss) per common share − basic
Earnings (loss) per common share − diluted
Return on common equity (ROE)
Dividends per common share
Dividends per Series A Preferred Share
Dividends per Series C Preferred Share
Book value per diluted common share(9)
Excluding significant items(10)
Total revenue
Total expenses
Income (loss) before income taxes
Net income (loss)
Net income (loss) attributable to CGGI shareholders
Net income attributable to non-controlling interests
Earnings (loss) per common share − diluted
Balance sheet data
Total assets
Total liabilities
Non-controlling interests
Total shareholders’ equity
Number of employees
For the years ended March 31
2018
2017
2016
2018/2017
change
$
461,937
$ 396,741
$ 376,817
$
65,196
282,195
122,372
113,921
27,875
14,577
196,129
130,749
119,040
16,847
20,040
132,029
160,180
85,559
16,830
16,390
86,066
(8,377)
(5,119)
11,028
16.4%
43.9%
(6.4)%
(4.3)%
65.5%
(5,463)
(27.3)%
1,022,877
879,546
787,805
143,331
16.3%
480,369
414,676
382,851
46,245
99,239
40,322
85,698
298,250
284,966
7,643
6,732
48,355
298
—
—
—
—
—
—
35,025
92,981
302,530
17,352
—
—
—
321,037
65,693
5,923
13,541
13,284
7,643
6,732
48,355
298
—
987,131
825,662
1,151,776
161,469
35,746
17,077
13,024
4,053
0.04
0.03
0.9%
0.15
0.9712
1.2482
5.71
$
$
$
$
$
$
$
$
$
53,884
(363,971)
43,186
$ (358,567)
38,103
$ (358,471)
5,083
0.29
0.27
5.0%
0.10
1.173
1.4375
5.08
$
$
$
$
$
$
$
(96)
(4.09)
(4.09)
(50.4)%
0.10
1.375
1.4375
4.99
$
$
$
$
$
$
$
$
$
$ 1,022,877
$ 878,353
$ 787,805
$
$
$
$
$
$
912,270
$ 817,096
$ 793,862
110,607
81,657
77,604
4,053
0.59
$
$
$
$
$
61,257
49,196
43,903
5,293
0.32
$
$
$
$
$
(6,057)
(5,995)
(6,620)
625
(0.21)
(18,138)
(26,109)
(25,079)
(1,030)
(0.25)
(0.24)
(4.1) p.p.
0.05
(0.20)
(0.19)
0.63
144,524
95,174
49,350
32,461
33,701
(1,240)
0.27
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$ 4,020,736
$ 5,203,516
$ 3,424,546
$(1,182,780)
3,165,813
4,426,873
2,665,895
(1,261,060)
13,571
841,352
1,956
11,858
764,785
1,700
8,722
749,929
1,795
1,713
76,567
256
15.8%
14.7%
15.8%
4.7%
n.m.
n.m.
n.m.
n.m.
—
19.6%
(33.7)%
(60.5)%
(65.8)%
(20.3)%
(86.2)%
(88.9)%
50.0%
(17.2)%
(13.2)%
12.3%
16.5%
11.6%
80.6%
66.0%
76.8%
(23.4)%
84.4%
(22.7)%
(28.5)%
14.4%
10.0%
15.1%
(1)
(2)
(3)
(4)
Data is in accordance with IFRS except for ROE, book value per diluted common share, figures excluding significant items and number of employees. See Non-IFRS Measures on page 14.
The operating results of the Australian operations have been fully consolidated, and a 42% non-controlling interest has been recognized for the year ended March 31, 2018 [year ended March 31,
2017 − 42% and March 31, 2016 − 40%.].
Data includes the results of Hargreave Hale since the closing date of September 18, 2017.
Consists of trading costs, premises and equipment, communication and technology, interest, general and administrative, amortization of tangible and intangible assets, and development costs.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 23
(5)
(6)
(7)
(8)
(9)
Restructuring costs for the year ended March 31, 2018 related to termination benefits incurred as a result of the closing of certain trading operations in our UK & Europe capital markets
operations, staff reductions in our Canadian and US capital markets operations, as well as real estate costs related to the acquisition of Hargreave Hale. Restructuring costs for the year ended
March 31, 2016 were related to staff reductions in our US capital markets operations and the closure of our Barbados office in Other Foreign Locations, as well as charges related to changes in
our Corporate and Other segment.
Effective as of March 31, 2018 the Plan was changed to remove certain employment-related conditions for the vesting of RSU awards made as part of the normal course incentive compensation
payment cycle. As a result of this change, the costs of RSUs granted as part of the normal course incentive compensation payment cycle will now be expensed in the period in which those awards
are deemed to be earned, instead of recognizing the costs over the vesting period. This change led to the acceleration of the remaining expense for certain awards made under the LTIP which had
not been fully amortized as of March 31, 2018. The total charge recorded during the year ended March 31, 2018 in respect of awards granted prior to fiscal 2018 was $48.4 million.
Represents the Company’s equity portion of the net loss of its investment in Canaccord Genuity Acquisition Corp. for the year ended March 31, 2018.
Impairment of goodwill and other assets for the year ended March 31, 2016 is in connection with our capital markets operations in the UK, US, Canada, Australia, and Other Foreign
Locations − Singapore operations.
Book value per diluted common share is calculated as total common shareholders’ equity adjusted for assumed proceeds from exercise of options and warrants and conversion of convertible
debentures divided by the number of diluted common shares outstanding including estimated amounts in respect of share issuance commitments including options, warrants and convertible
debentures, as applicable, and adjusted for shares purchased under the normal course issuer bid and not yet cancelled, and estimated forfeitures in respect of unvested share awards under
share-based payment plans.
(10) Net income (loss) and earnings (loss) per common share excluding significant items reflect tax-effected adjustments related to such items. See the Selected Financial Information Excluding
Significant Items table below.
p.p.: percentage points
n.m.: not meaningful
SELECTED FINANCIAL INFORMATION EXCLUDING SIGNIFICANT ITEMS(1)
(C$ thousands, except per share and % amounts)
2018
For the years ended March 31
2017
2016
2018/2017 change
Total revenue per IFRS
Total expenses per IFRS
Revenue
Significant items recorded in Canaccord Genuity
$ 1,022,877
$ 879,546
$ 787,805
$ 143,331
$
987,131
$ 825,662
$ 1,151,776
$ 161,469
16.3%
19.6%
Realized translation gains on disposal of Singapore
—
1,193
—
(1,193)
(100.0)%
Total revenue excluding significant items
1,022,877
878,353
787,805
144,524
16.5%
(987)
(29.9)%
Expenses
Significant items recorded in Canaccord Genuity
Amortization of intangible assets
Impairment of goodwill and other assets
Restructuring costs(2)
Development costs
Acceleration of long-term incentive plan expense(3)
Significant items recorded in Canaccord Genuity Wealth Management
Amortization of intangible assets
Restructuring costs(2)
Acquisition related costs
Acceleration of long-term incentive plan expense(3)
Incentive based payments related to acquisition(4)
Significant items recorded in Corporate and Other
Restructuring costs
Development costs
Acceleration of long-term incentive plan expense(3)
Total significant items
2,317
—
4,704
—
42,399
8,273
2,939
6,732
4,058
1,541
—
—
1,898
74,861
3,304
—
—
—
—
5,262
—
—
—
—
—
—
—
8,566
Total expenses excluding significant items
912,270
817,096
5,409
321,037
11,305
1,157
—
4,704
—
—
42,399
6,055
165
—
—
—
5,882
6,904
—
357,914
793,862
3,011
2,939
6,732
4,058
1,541
—
—
1,898
66,295
95,174
Net income (loss) before income taxes − adjusted
$
110,607
Income tax expense (recovery) − adjusted
Net income (loss) − adjusted
Net income attributable to common shareholders, adjusted
Earnings (loss) per common share − basic, adjusted
Earnings (loss) per common share − diluted, adjusted
28,950
81,657
68,011
0.73
0.59
$
$
$
$
$
$
$
61,257
12,061
49,196
32,825
0.36
0.32
$
$
$
$
(6,057)
$
49,350
(62)
16,889
(5,995)
$
32,461
(18,612)
35,186
(0.21)
(0.21)
$
$
0.37
0.27
—
n.m.
—
n.m.
57.2%
n.m.
n.m.
n.m.
n.m.
—
—
n.m.
n.m.
11.6%
80.6%
140.0%
66.0%
107.2%
102.8%
84.4%
(1)
(2)
(3)
Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
Restructuring costs for the year ended March 31, 2018 related to termination benefits incurred as a result of the closing of certain trading operations in our UK & Europe capital markets
operations, staff reductions in our Canadian and US capital markets operations, as well as real estate costs related to the acquisition of Hargreave Hale.
Effective as of March 31, 2018 the Plan was changed to remove certain employment-related conditions for the vesting of RSU awards made as part of the normal course incentive compensation
payment cycle. As a result of this change, the costs of RSUs granted as part of the normal course incentive compensation payment cycle will now be expensed in the period in which those awards
are deemed to be earned, instead of recognizing the costs over the vesting period. This change led to the acceleration of the remaining expense for certain awards made under the LTIP which had
not been fully amortized as of March 31, 2018. The total charge recorded during the year ended March 31, 2018 in respect of awards granted prior to fiscal 2018 was $48.4 million.
Incentive-based payments related to the acquisition of Hargreave Hale determined with reference to financial targets and other performance criteria.
(4)
n.m.: not meaningful
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
24 Management’s Discussion and Analysis
FOREIGN EXCHANGE
Revenues and expenses from our foreign operations are initially recorded in their respective functional currencies and translated
into Canadian dollars at exchange rates prevailing during the period. The pound sterling depreciated slightly by 0.4% against the
Canadian dollar and the US dollar depreciated by 2.2% against the Canadian dollar in fiscal 2018 when compared to fiscal 2017.
This change in foreign exchange rates contributed to certain changes in revenue and expense items measured in Canadian dollars
when compared to the applicable prior periods and should be considered when reviewing the following discussion in respect of our
consolidated results as well as the discussion in respect of Canaccord Genuity and Canaccord Genuity Wealth Management
UK & Europe.
GEOGRAPHIES
Commencing in Q3/17, the operating results of our Australian operations were disclosed as a separate geography. Prior to Q3/17
Australia was included as part of Other Foreign Locations. Also, commencing in Q3/17, our Dubai operation, which was previously
included in Other Foreign Locations, was included as part of Canaccord Genuity UK & Europe. The Other Foreign Locations
geographic segment is now comprised of our Asian-based operations, including China and Hong Kong and prior to their sale or
closure also included Singapore and Barbados. These reclassifications reflect the growing contributions from Australia and the
working associations between the UK and Dubai. For purposes of the discussion provided herein the Canaccord Genuity
operations in the UK, Europe and Dubai are referred to as the ‘‘UK’’.
Operating results of Hargreave Hale are included since the closing date of September 18, 2017 as part of Canaccord Genuity
Wealth Management UK & Europe.
GOODWILL
The Company has recorded on its balance sheet as at March 31, 2018 goodwill in the amount of $258.0 million and included in
intangible assets is an intangible asset with an indefinite life in the amount of $44.9 million. In determining whether to perform an
impairment test, the Company considers factors such as its market capitalization, market conditions generally and overall
economic conditions as well as market conditions in the key sectors in which the Company operates and the impact that such
conditions are expected to have on the Company’s operations.
Utilizing management’s estimates for revenue and operating performance, growth rates and other assumptions typically required in
connection with discounted cash flow models the Company determined that there was no impairment in the goodwill and indefinite
life intangible assets associated with any of its wealth management business units in the UK & Europe or its remaining goodwill
recorded in Canaccord Genuity Canada. Notwithstanding this determination as of March 31, 2018, changes or uncertainty in the
economic environment may cause this determination to change. If the business climate changes and the Company is unable to
achieve its internal forecasts the Company may determine that there has been impairment and the Company may be required to
record a goodwill impairment charge in future periods in respect of the Canaccord Genuity Wealth Management business units in
the UK & Europe or in respect of the remaining goodwill recorded in Canaccord Genuity Canada. Adverse changes in the key
assumptions utilized for purposes of impairment testing for goodwill and indefinite life intangible assets may result in the
estimated recoverable amount of some or all of the applicable business units declining below the carrying value with the result
that impairment charges may be required. The amount of any impairment charge would affect some or all of the amounts recorded
for goodwill and indefinite life intangible assets. Any such impairment charges would be determined after incorporating the effect
of any changes in key assumptions including any consequential effects of such changes on estimated operating income and on
other factors. In addition, notwithstanding that there may be no change in the performance estimates used by the Company for
purposes of determining whether there has been any impairment in its indefinite life intangible asset related to the Genuity brand
name, in the event that the Company changes the way in which it uses that asset the Company may be required to record an
impairment charge.
REVENUE
On a consolidated basis, revenue is generated through six activities: commissions and fees associated with agency trading and
private client wealth management activity, investment banking, advisory fees, principal trading, interest and other.
Revenue for fiscal 2018 was $1.02 billion, an increase of 16.3% or $143.3 million from fiscal 2017, marking the first time our
consolidated revenue has surpassed $1.0 billion. The increase in revenue compared to the prior year was mainly related to an
increase of $86.1 million in investment banking revenue as well as an increase of $65.2 million in commissions and fees
revenue.
As a result of an improvement in capital raising activity in our core focus areas, particularly during the second half of fiscal 2018,
revenue in our Canaccord Genuity segment increased by $39.2 million or 6.6% compared to fiscal 2017. Our investment banking
revenue experienced an increase of $65.9 million compared to the past fiscal year, largely related to an increase of $60.1 million
recorded in our Canadian operations. Our Canadian business participated in numerous transactions in the blockchain and
cannabis sectors leading to the higher investment banking revenue recorded during the year. Our Australian operations recorded a
decrease of $2.7 million from our record year in fiscal 2017, but overall revenue was still very strong at $57.0 million for fiscal
2018. Revenue in our UK & Europe operations decreased by $18.4 million or 12.5% as a result of a decrease in advisory
mandates completed during the current fiscal year. Our US operations generated revenue of $235.9 million in fiscal 2018, a slight
increase of 0.7% from the prior year.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 25
As part of our strategic focus to strengthening contributions from our global wealth management operations, the Company
completed its acquisition of Hargreave Hale during the year ended March 31, 2018. Revenue in our wealth management
operations in the UK & Europe increased by $66.6 million or 49.4% compared to the year ended March 31, 2017, largely due to
revenue generated from our newly acquired Hargreave Hale operations. Measured in local currency (GBP), revenue increased by
£38.9 million or 49.2% compared to the year ended March 31, 2017. Our Canadian wealth management operations also
generated $168.9 million of revenue in fiscal 2018, representing an increase of $36.6 million or 27.7% over the prior year.
Commissions and fees revenue is primarily generated from private client trading activity and institutional sales and trading.
Revenue generated from commissions and fees increased by $65.2 million or 16.4% from fiscal 2017 to $461.9 million in fiscal
2018. As discussed above, the expansion of our wealth management operations was the primary reason for the increase in
commissions and fees revenue. Offsetting the increase in our wealth management operations was a decrease of $15.4 million in
commissions and fees revenue from our capital markets operations, mainly due to lower revenue earned from our institutional
customers in our Canadian and US operations.
As a result of improved market conditions, revenue generated from investment banking activities increased by $86.1 million to
$282.2 million in fiscal 2018, compared to $196.1 million in fiscal 2017, most notably in our Canadian wealth management and
capital markets operations. As discussed above, the increase in Canada was largely due to increased participation in financing
transactions particularly in the cannabis and blockchain sectors. Our UK & Europe and Australian capital markets operations also
recorded an increase of $6.9 million and $0.9 million, respectively, in investment banking revenue compared to the prior year.
Offsetting these increases was a decrease of $1.7 million in investment banking revenue in our US capital markets operations
compared to last year. In both Canada and Australia, investment banking revenue also reflects gains in our warrant and inventory
positions earned in respect of investment banking activity in the current and prior periods.
Advisory fees revenue decreased by $8.4 million, or 6.4% compared to the prior year to $122.4 million for fiscal 2018. This was
primarily due to a reduction in the number of completed advisory mandates in our capital markets operations in the UK & Europe
and Australia. The largest decrease was in our UK & Europe capital markets operations, which experienced a decline of
$14.4 million, primarily because of a significant advisory transaction in our Dubai operations recorded in fiscal 2017. Offsetting
these decreases were increases of $10.7 million and $1.3 million in our US and Canadian capital markets operations,
respectively, compared to last year as a result of an increase in advisory mandates completed in these two operations.
Revenue derived from principal trading decreased by $5.1 million to $113.9 million for the year ended March 31, 2018. Small
increases in Canada and the US were offset by lower revenue earned in our UK & Europe capital markets operation as a result of
lower market volatility compared to the prior year which reduced opportunities for trading gains.
Interest revenue was $27.9 million in fiscal 2018, an increase of 65.5%, or $11.0 million, from last year due to higher revenue
earned in our Canadian operations arising from increased margin loan and stock loan activity. Increased investment banking
activity in Canada during the year gave rise to increased opportunities for lending activity and increased interest revenue. Other
revenue was $14.6 million, a decrease of $5.5 million from the same period a year ago, partially due to lower foreign exchange
gains as well as a realized translation gain recorded on the disposal of our Singapore operations during fiscal 2017.
EXPENSES
Expenses as a percentage of revenue
Non-share based incentive compensation
Share based incentive compensation
Salaries and benefits
Other overhead expenses(1)
Restructuring costs(2)(3)
Acquisition-related costs(2)
Acceleration of long-term incentive plan expense(2)(4)
Share of loss of an associate(5)
Total
For the years ended March 31
2018
47.0%
4.5%
9.7%
29.2%
0.7%
0.7%
4.7%
0.0%
2017
47.5%
4.2%
9.8%
32.4%
—
—
—
—
2018/2017
change
(0.5) p.p.
0.3 p.p
(0.1) p.p.
(3.2) p.p.
n.m.
n.m.
n.m.
n.m.
96.5%
93.9%
2.6 p.p.
(1) Consists of trading costs, premises and equipment, communication and technology, interest, general and administrative, amortization of tangible and intangible assets and development costs.
(2) Refer to the Selected Financial Information Excluding Significant Items table on page 23.
(3) Restructuring costs for the year ended March 31, 2018 related to termination benefits incurred as a result of the closing of certain trading operations in our UK & Europe capital markets operations,
staff reductions in our Canadian and US capital markets operations, as well as real estate costs related to the acquisition of Hargreave Hale. Restructuring costs for the year ended March 31, 2017
were related to staff reductions in our US, Canada and UK capital markets operations and the closure of our Barbados office in Other Foreign Locations, as well as charges related to staff reductions
and certain executive changes in our Corporate and Other segment.
(4) Effective as of March 31, 2018 the Plan was changed to remove certain employment-related conditions for the vesting of RSU awards made as part of the normal course incentive compensation
payment cycle. As a result of this change, the costs of RSUs granted as part of the normal course incentive compensation payment cycle will now be expensed in the period in which those awards
are deemed to be earned, instead of recognizing the costs over the vesting period. This change led to the acceleration of the remaining expense for certain awards made under the LTIP which had
not been fully amortized as of March 31, 2018. The total charge recorded during the year ended March 31, 2018 in respect of awards granted prior to fiscal 2018 was $48.4 million.
(5) Represents the Company’s equity portion of the net loss of its investment in Canaccord Genuity Acquisition Corp. for the year ended March 31, 2018.
p.p.: percentage points
n.m.: not meaningful
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
26 Management’s Discussion and Analysis
Expenses for fiscal 2018 were $987.1 million, an increase of 19.6% or $161.5 million compared to the last fiscal year. Excluding
significant items(1), total expenses were $912.3 million, up $95.2 million or 11.6% from fiscal 2017. As a result of the increase in
revenue during the year and the non-variable nature of certain infrastructure and overhead costs, total expenses excluding
significant items(1) as a percentage of revenue decreased by 3.8 percentage points compared to the year ended March 31, 2017.
Compensation expenses
Long-term incentive plan
Employees (including senior executives) of the Company receive a component of their overall compensation in the form of
share-based awards. Participating employees receive shares as they vest, typically over three years (the ‘‘RSUs’’). This program is
referred to as the Long-Term Incentive Plan (the ‘‘LTIP’’ or the ‘‘Plan’’). Effective as of March 31, 2018 the Plan was changed to
remove certain employment-related conditions for the vesting of RSU awards that were made as part of the normal course
incentive compensation payment cycle. With the change, RSUs will continue to vest after termination of employment so long as
the employee does not violate certain post-termination restrictions and is not engaged in certain competitive or soliciting activities
as provided in the Plan. Because of this change, for accounting purposes, the RSUs granted as part of the normal course
incentive compensation payment cycle will now be expensed in the period in which those awards are deemed to be earned, which
is generally the fiscal period in which the awards are either made or the immediately preceding fiscal year for those awards made
after the end of such fiscal year but were determined and earned in respect of that fiscal year. Accordingly, a charge of
$48.4 million in respect of awards granted prior to fiscal 2018 including the acceleration of the remaining expense for certain
awards which had not been fully amortized as of March 31, 2018 was recorded in fiscal 2018. This non-cash accounting charge
was excluded from the calculation of the total compensation ratio as noted below and included as a significant item(1) as it
represented a singular charge of a non-operating nature. The costs associated with LTIP awards granted for fiscal 2018 was
included as part of incentive compensation expense. Refer to Note 21 of the audited consolidated financial statements for the
year ended March 31, 2018 for further information on the share-based payment plans.
Incentive compensation expense was $526.6 million (excluding the accelerated expense related to certain share-based awards
referred to above), an increase of $71.6 million or 15.7% from the prior year, in line with the increase in incentive-based revenue.
Incentive compensation as a percentage of total revenue was 51.5% for fiscal 2018, a slight decrease of 0.2 percentage points
from 51.7% in the prior year. Salaries and benefits expense of $99.2 million for the year ended March 31, 2018 was
$13.5 million or 15.8% higher than the prior fiscal year. The increase was largely due to additional costs from our expansion in the
UK & Europe wealth management operations including the acquisition of Hargreave Hale. Despite the increase in fixed staff costs,
total compensation expense (incentive compensation expense excluding the accelerated expense related to certain share-based
awards referred to above plus salaries and benefits) as a percentage of total revenue was 61.2% in fiscal 2018, relatively
unchanged from the prior year representing a decrease of 0.4 percentage points.
OTHER OVERHEAD EXPENSES
(C$ thousands, except % amounts)
Trading costs
Premises and equipment
Communication and technology
Interest
General and administrative
Amortization(1)
Development costs
Total other overhead expenses
For the years ended March 31
2018
2017
$
68,209
$
65,211
39,605
56,346
18,437
83,982
24,007
7,664
42,286
52,381
12,744
79,011
21,124
12,209
$
298,250
$ 284,966
2018/2017
change
4.6%
(6.3)%
7.6%
44.7%
6.3%
13.6%
(37.2)%
4.7%
(1)
Includes amortization of intangible assets for the years ended March 31, 2018 and March 31, 2017, respectively. See the Selected Financial Information Excluding Significant Items table on
page 23.
Other overhead expenses were $298.3 million or 4.7% higher in fiscal 2018, which as a percentage of revenue was 29.2%
compared to 32.4% in fiscal 2017. Most of our other overhead expenses increased as a result of business growth during fiscal
2018, partially offset by lower premises and equipment expense and development costs.
In order to support the higher headcount and expansion of our wealth management business resulting from the completion of the
Hargreave Hale acquisition, many of our overhead expenses experienced increases compared to the year ended March 31, 2017.
The expanded operations have contributed to increases in our trading costs and communication and technology expense of
$3.0 million or 4.6% and $4.0 million or 7.6%, respectively, compared to the prior year. Trading costs also increased partially as a
result of higher costs recorded in our UK capital markets operations of $1.1 million compared to fiscal 2017.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 27
General and administrative expense, which includes reserves, promotion and travel expense, office expense, professional fees
and donations, was up by $5.0 million or 6.3%, largely due to the additional costs to support the expanded UK & Europe wealth
management operations following the completion of the Hargreave Hale acquisition. In addition, our Canadian capital markets
operations also experienced an increase of $8.4 million compared to the prior year as a result of additional costs such as
professional fees and promotion and travel expenses required to support the increased level of activity and headcount in this
region during fiscal 2018. Our US and UK capital markets operations both recorded decreases in general and administrative
expenses, in line with the reduced headcount and our continued focus on cost reductions
Interest expense increased by $5.7 million or 44.7% compared to fiscal 2017 because fiscal 2018 reflects a full year’s worth of
interest expense for the convertible debentures issued in Q3/17 as well as interest related to the bank loan obtained in Q2/18 in
connection with the acquisition of Hargreave Hale.
Amortization expense was $24.0 million, an increase of $2.9 million or 13.6% from fiscal 2017, mainly as a result of the
amortization of intangible assets in connection with our acquisition of Hargreave Hale recorded in our UK & Europe wealth
management operations.
Offsetting the increases in expenses discussed above, premises and equipment expense decreased by $2.7 million or 6.3% in
fiscal 2018 because of the costs associated with the rationalization of our office space in Toronto recorded in our Corporate and
Other segment in Q3/17. In addition, development costs decreased by $4.5 million or 37.2% from fiscal 2017 partially because
of lower recruitment costs in our US and UK capital markets operations, as well as an impairment charge of $2.4 million related to
an investment that was recorded in fiscal 2017 in our Corporate and Other segment. Offsetting these decreases in development
costs was $1.5 million of incentive-based payments related to the acquisition of Hargreave Hale determined with reference to
financial targets and other performance criteria.
There were $7.6 million of restructuring costs recorded in fiscal 2018 related to staff reductions in our US and Canadian capital
markets operations, costs related to the closure of certain trading operations in Dublin, as well as costs associated with the
rationalization of office space related to the acquisition of Hargreave Hale. No restructuring costs were recorded during the same
period last year.
The Company also recorded $6.7 million of acquisition-related costs in relation to the acquisition of Hargreave Hale for the year
ended March 31, 2018. The acquisition-related costs included professional and consulting fees incurred during the year.
NET INCOME
Net income for fiscal 2018 was $17.1 million compared to net income of $43.2 million in fiscal 2017, a decrease of
$26.1 million or 60.5%, largely due to the acceleration of LTIP expense related to the change in the Plan as discussed above,
offset by the significant increase in revenue in both our capital markets and wealth management operations. Net income
attributable to common shareholders was $3.4 million for fiscal 2018 compared to $27.0 million for fiscal 2017. Earnings per
common share was $0.03 in fiscal 2018 compared to earnings per common share of $0.27 in the prior fiscal year. Excluding
significant items(1), net income for fiscal 2018 was $81.7 million or net income attributable to common shareholders of
$68.0 million, compared to net income of $49.2 million or net income attributable to common shareholders of $32.8 million in
fiscal 2017. Diluted earnings per share excluding significant items(1) was $0.59 for fiscal 2018 compared to $0.32 for the prior
year.
Income tax expense was $18.7 million for fiscal 2018, reflecting an effective tax rate of 52.2% compared to an effective tax rate
of 19.9% in the prior year. Non-recognition of deferred tax assets in certain of our foreign operations contributed to a higher
effective tax rate for the year ended March 31, 2018.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
28 Management’s Discussion and Analysis
Quarterly Financial Information(1)(2)
The following table provides selected quarterly financial information for the eight most recently completed financial quarters ended
March 31, 2018. This information is unaudited, but reflects all adjustments of a recurring nature that are, in the opinion of
management, necessary to present a fair statement of the results of operations for the periods presented. Quarter-to-quarter
comparisons of financial results are not necessarily meaningful and should not be relied upon as an indication of future
performance.
(C$ thousands,
except per share amounts)
Revenue
Q4
Q3
Q2
Fiscal 2018
Q1
Q4
Q3
Q2
Fiscal 2017
Q1
Commissions and fees
$ 135,148
$ 125,709
$ 96,125
$ 104,955
$ 105,890
$ 102,637
$ 95,342
$
92,872
Investment banking
Advisory fees
Principal trading
Interest
Other
Total revenue
Total expenses
Net (loss) income before
income taxes
Net (loss) income
(Loss) earnings per
share − basic(4)
(Loss) earnings per
share − diluted(4)
Excluding significant items(3)
Net income
Earnings (loss) per
share − basic(4)
Earnings (loss) per
share − diluted(4)
95,514
40,930
36,047
10,045
4,396
322,080
324,379
112,639
31,947
29,138
6,861
3,148
309,442
262,559
33,356
30,589
22,849
5,793
2,835
191,547
198,613
40,696
18,896
25,887
5,176
4,198
71,595
52,474
31,066
5,217
5,414
46,508
17,127
33,569
4,017
4,250
40,901
21,554
26,859
4,005
4,941
199,808
201,580
271,656
234,251
208,108
202,397
193,602
192,845
37,125
39,594
27,546
3,608
5,435
206,180
196,169
(2,299)
46,883
(9,703)
$ 36,598
(0.15)
(0.15)
$
$
0.35
0.29
$
$
$
$ 37,312
$ 39,182
$
$
0.36
0.28
$
$
0.38
0.31
(7,066)
(7,258)
(0.11)
(0.11)
3,548
0.01
0.01
$
$
$
$
$
$
$
$
$
$
$
$
(1,772)
37,405
5,711
(2,560)
$ 30,987
$
4,544
$
757
200
10,011
$
7,455
(0.05)
(0.05)
$
$
0.29
0.01
(0.05)
0.26
0.01
(0.05)
1,615
$ 32,740
(0.01)
(0.01)
$
$
0.31
0.27
$
$
$
6,309
0.03
0.03
$
$
$
2,008
(0.03)
(0.03)
$
$
$
0.04
0.04
8,139
0.05
0.05
(1) Data is in accordance with IFRS except for figures excluding significant items. See Non-IFRS Measures on page 14.
(2) The operating results of our Australian operations have been fully consolidated and a 42% non-controlling interest has been recognized during fiscal 2018 [fiscal 2017 − 42%].
(3) Figures excluding significant items are non-IFRS measures. See the Quarterly Financial Information Excluding Significant Items table on the next page.
(4) Due to rounding or calculation of the dilutive impact of share issuance commitments in the quarterly and year to date EPS figures, the sum of the quarterly earnings (loss) per common share figures
may not equal the year to date earnings (loss) per share figure.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 29
QUARTERLY FINANCIAL INFORMATION EXCLUDING SIGNIFICANT ITEMS(1)(2)
(C$ thousands,
except per share amounts)
Total revenue per IFRS
Total expenses per IFRS
Revenue
Significant items recorded in
Canaccord Genuity
Realized translation gains
on disposal of
Singapore
Total revenue excluding
significant items
Expenses
Significant items recorded in
Canaccord Genuity
Amortization of intangible
assets
Restructuring costs(3)
Acceleration of long-term
incentive plan
expense(4)
Significant items recorded in
Canaccord Genuity Wealth
Management
Amortization of intangible
assets
Restructuring costs
Acquisition-related costs
Acceleration of long-term
incentive plan
expense(4)
Incentive payment related
to acquisition(5)
Significant items recorded in
Corporate and Other
Acceleration of long-term
incentive plan
expense(4)
Total significant items
Total expenses excluding
significant items
Net income before income
Q4
$ 322,080
324,379
Q3
$ 309,442
262,559
Q2
$ 191,547
198,613
Fiscal 2018
Q1
$ 199,808
201,580
Q4
$271,656
234,251
Q3
$208,108
202,397
Q2
$193,602
192,845
Fiscal 2017
Q1
$ 206,180
196,169
—
—
—
—
—
—
—
1,193
322,080
309,442
191,547
199,808
271,656
208,108
193,602
204,987
579
—
579
—
579
4,256
580
448
830
—
829
—
827
—
818
—
42,399
—
—
—
—
—
—
—
2,867
939
184
4,058
1,541
2,820
—
—
1,262
2,000
4,364
1,324
—
2,184
1,260
—
—
1,274
—
—
1,323
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1405
—
—
—
—
1,898
54,465
—
3,399
—
12,461
—
4,536
—
2,090
—
2,103
—
2,150
—
2,223
269,914
259,160
186,152
197,044
232,161
200,294
190,695
193,946
taxes − adjusted
$ 52,166
$ 50,282
$
5,395
$
2,764
39,495
7,814
2,907
11,041
Income tax
expense − adjusted
Net income − adjusted
Net income (loss)
attributable to common
shareholders
Earnings (loss) per
14,854
$ 37,312
11,100
$ 39,182
$ 33,003
$ 34,665
share − basic − adjusted(6)
$
0.36
Earnings (loss) per
share − diluted − adjusted(6) $
0.28
$
$
0.38
0.31
1,847
3,548
970
0.01
0.01
$
$
$
$
$
$
$
$
1,149
1,615
6,755
$ 32,740
(627)
$ 28,099
(0.01)
(0.01)
$
$
0.31
0.27
$
$
$
$
1,505
6,309
899
2,008
$
2,907
$ (2,481)
0.03
0.03
$
$
(0.03)
(0.03)
2,902
8,139
4,300
0.05
0.05
$
$
$
$
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
(2) The operating results of our Australian operations have been fully consolidated and a 42% non-controlling interest has been recognized during fiscal 2018 [fiscal 2017 − 42%].
(3) Restructuring costs recorded in Q2 fiscal 2018 related to termination benefits incurred as a result of the closing of certain trading operations in our UK & Europe capital markets operations and
staff reductions in our Canadian and US capital markets operations. There were also real estate costs related to the acquisition of Hargreave Hale recorded in Q2 and Q4 of fiscal 2018.
(4) Effective as of March 31, 2018 the Plan was changed to remove certain employment-related conditions for the vesting of RSU awards made as part of the normal course incentive compensation
payment cycle. As a result of this change, the costs of RSUs granted as part of the normal course incentive compensation payment cycle will be expensed in the period in which those awards are
deemed to be earned, instead of recognizing the costs over the vesting period. This change led to the acceleration of the remaining expense for certain awards made under the LTIP which had not
been fully amortized as of March 31, 2018. The total charge recorded during Q4/18 in respect of awards granted prior to fiscal 2018 was $48.4 million.
Incentive-based payments related to the acquisition of Hargreave Hale determined with reference to financial targets and other performance criteria.
(5)
(6) Due to rounding or calculation of the dilutive impact of share issuance commitments in the quarterly and year to date EPS figures, the sum of the quarterly earnings (loss) per common share figures
may not equal the year to date earnings (loss) per share figure.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
30 Management’s Discussion and Analysis
Quarterly trends and risks
Our quarterly results are generally not significantly affected by seasonal factors. However, the Company’s revenue and income can
experience considerable variations from quarter to quarter and year to year due to factors beyond the Company’s control. The
business is affected by the overall condition of the global capital markets and activity in our core focus sectors as well as growth
company activity. The Company’s revenue from an underwriting transaction is recorded only when a transaction has been
substantially completed or closed. Consequently, the timing of revenue recognition can materially affect Canaccord Genuity Group
Inc.’s quarterly results.
With the increase in capital raising and advisory activity in our core focus areas over the recent quarters and higher contribution
from our global wealth management operations, revenue and net income excluding significant items(1) generated in fiscal 2018
have shown marked improvements over the past fiscal year. Revenue for Q4/18 was $322.1 million, an increase of 18.6% over
the same quarter in the prior year and 4.1% over Q3/18. Our fiscal 2018 revenue was $1.02 billion, marking the first time our
consolidated revenue has surpassed $1.0 billion. Over 61.7% of total revenue for fiscal 2018 was generated in the second half of
fiscal 2018, which have historically been our stronger quarters.
The Canaccord Genuity division, which had been positively impacted by the increased market activity during the recent quarters,
experienced an increase in revenue of 3.7% compared to Q4/17 and an increase of 2.3% from the prior quarter. Revenue in our
Canadian capital markets operations increased significantly in the last two quarters of fiscal 2018 compared to the first
six months of fiscal 2018 and the prior year. This increase was largely driven by an increase in investment banking and advisory
fees, reflecting our active involvement with numerous transactions in the cannabis and blockchain sectors. The increase in
investment banking revenue in Q3/18 and Q4/18 also reflects gains in our warrant and inventory positions earned from
transactions in the current and prior year. As a result of the increase in revenue, commitment to our cost containment efforts and
the fixed nature of certain expenses, overhead expenses as a percentage of revenue excluding significant items(1) have decreased
in recent quarters, leading to higher pre-tax margins, with Q4/18 reaching 17.9% excluding significant items.(1)
Revenue in our US capital markets operations was $68.2 million in Q4/18, an increase of 5.3% compared to Q4/17, and the
highest revenue in this operating segment over the past eight quarters. Our International Equities Group continued to perform
well, with principal trading revenue increasing by $4.4 million in Q4/18 for this region compared to the prior year. This increase in
principal trading revenue was driven by increased trading volumes in smaller emerging companies in new and developing industry
sectors. Profitability in our US capital markets operations has strengthened from our efforts in the first half of fiscal 2018 to
realign and strengthen our core capabilities in this region. Excluding significant items(1), pre-tax income for this region was
$6.8 million in Q4/18, more than double the $2.8 million pre-tax profit generated in Q4/17.
Our Australian operations generated higher revenue in the second half of fiscal 2018 and have recovered from weakened market
conditions in that region in the first half of the current fiscal year, with revenue reaching a record high of $22.1 million for Q3/18
and $20.1 million for Q4/18. Contributing to the increase in revenue in this region were profits and gains recorded in certain
inventory and warrant positions earned in respect of investment banking activity in the current and prior periods.
Our Canaccord Genuity Wealth Management North America operations have been positively impacted by stabilizing market
conditions, improved transaction activity and a growth in managed assets. Revenue increased by 27.8% during Q4/18 compared
to the same period a year ago and by 6.3% compared to Q3/18. In addition to an increase in commissions and fees revenue,
revenue attributable to investment banking activity in this segment also increased significantly in the second half of fiscal 2018
compared to the early part of fiscal 2018 and fiscal 2017, reflecting the increased private client participation in new issue activity
in our Canadian operations because of the increased activity by companies in new and developing industry sectors such as
cannabis. Excluding significant items(1), pre-tax income for Q4/18 was $8.5 million, the highest in the past eight quarter, reflecting
the growth in revenue discussed above. Assets under management increased in Q4/18 by 6.8% compared to Q4/17 to
$2.8 billion as a result of additional client assets with the hiring of new investment advisors as well as generally higher market
values. Our fee related revenue continued to grow, but fee related revenue as a percentage of total revenue in Q4/18 decreased
by 4.2 percentage points compared to Q4/17 primarily as a result of an increase in transactional-based revenue during the year
which was led by an increase in investment banking revenue attributable to private client activity.
The Canaccord Genuity Wealth Management UK & Europe operations were expanded during fiscal 2018 with the completion of the
Hargreave Hale acquisition at the end of Q2/18. Revenue generated in this region increased from $37.5 million in Q2/18 to
$64.9 million in Q4/18, reflecting the immediate contribution of Hargreave Hale to our operating results. Although this region
incurred higher operating expenses resulting from the expansion of this business and our increased headcounts, profit margins
continued to be strong at 15.1% in Q4/18 on an excluding significant items basis(1). At the end of Q4/18, fee-related revenue was
at 67.3%, a 3.2 percentage point decrease from Q4/17 due to an increase in transaction activity during the year. Assets under
management for this group increased by $20.4 billion reaching $44.9 billion as of the end of Q4/18, compared to $24.5 billion at
the end of Q4/17. While a significant portion of this growth is attributable to the addition of Hargreave Hale, net new assets and
market gains also contributed to the overall increase in AUM.
The movement in revenue in the Corporate and Other segment was mainly due to foreign exchange gains or losses resulting from
fluctuations in the Canadian dollar.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 31
Fourth quarter 2018 performance
Revenue for the fourth quarter was $322.1 million, an increase of $50.4 million or 18.6% compared to the same period in the
previous year. Our global wealth management operations generated an increase in revenue of $43.0 million or 58.7% compared to
Q4/17, largely due to the acquisition of Hargreave Hale in Q2/18. In addition to an increase in commissions and fees revenue,
investment banking fees generated in our wealth management operations also increased by $6.9 million or 70.4%, reflecting the
increased private client participation in new issue activity in our Canadian operations.
Our Canaccord Genuity segment also recorded an increase of $7.2 million or 3.7% compared to Q4/17, with the largest increase
being generated by our Canadian capital markets division due to an increase in investment banking revenue and advisory fees, as
a result of the completion of large transactions such as Nuuvera Inc. and Aurora Cannabis. Our US operations also recorded an
increase of $3.4 million or 5.3% compared to Q4/17, driven mainly by higher principal trading revenue resulting from increased
market volatility. These revenue increases were offset by a decrease in our UK capital markets operations of $27.4 million or
44.0% compared to the same period in the previous year, of which $12.8 million of the decrease was attributable to a large
advisory transaction completed in our Dubai operations during Q4/17 which caused advisory fee revenue during that quarter to be
substantially higher than a typical quarter. Revenue for the fourth quarter in our Australian operations was $20.1 million, a slight
decrease of $0.2 million or 1.2% compared to Q4/17. In our Other Foreign Locations, now comprised of only our Asian-based
operations, no significant changes were reported compared to the same quarter last year.
On a consolidated basis, commissions and fees revenue increased by $29.3 million or 27.6% to $135.1 million compared to the
same period in the previous year, predominantly attributable to our expanded UK & Europe wealth management operations as
discussed above. Investment banking revenue increased by $23.9 million or 33.4% to $95.5 million in Q4/18, largely attributable
to our Canadian capital markets operations as a result of increased financing activity in this region. Principal trading revenue
increased by $5.0 million during the three months ended March 31, 2018 compared to the same period last year, mostly due to
higher trading revenue generated in our International Equities Group in our US operations. Interest revenue for Q4/18 was
$10.0 million, an increase of $4.8 million over Q4/17, mainly attributable to our Canadian capital markets operations arising from
increased margin loan and stock loan activity. Advisory fees revenue decreased by $11.5 million or 22.0% to $40.9 million
compared to the same period in the previous year, predominantly attributable to our UK & Europe capital markets operations as
Q4/17 reflected the completion of a large advisory transaction as discussed above.
Expenses were $324.4 million, up $90.1 million or 38.5% from Q4/17. Total expenses excluding significant items(1) were
$269.9 million, an increase of $37.8 million or 16.3% from the same period last year.
Effective March 31, 2018, the LTIP Plan was changed to remove certain employment-related conditions for the vesting of certain
RSU awards made as part of the normal course incentive compensation payment cycle. As a result of this change, the costs of
RSUs granted as part of the normal course incentive compensation payment cycle will be expensed in the period in which those
awards are deemed to be earned, instead of recognizing the costs over the vesting period. This change led to the acceleration of
the remaining expense for certain awards which had not been fully amortized as of March 31, 2018, resulting in a charge of
$48.4 million recorded during Q4/18. The total charge recorded during Q4/18 in respect of awards granted prior to fiscal 2018
was $48.4 million.
Incentive compensation expense excluding the accelerated expense related to certain share-based awards referred to above
increased by $24.0 million compared to the same period last year, in line with the increase in incentive-based revenue. Salaries
and benefits expense was $6.5 million higher compared to the same period in the prior year largely due to higher headcount from
our Hargreave Hale acquisition. Total compensation expense (incentive compensation expense excluding the accelerated expense
related to certain share-based awards referred to above plus salaries and benefits) as a percentage of revenue increased slightly
by 0.3 percentage point to 58.7% in Q4/18 compared to Q4/17 as a result of higher fixed staff costs offset by the increase in
revenue.
Other overhead expenses were $87.0 million compared to $75.8 million in Q4/17, an increase of 14.8% compared to Q4/17
largely due to the restructuring and acquisition related costs recorded during Q4/18. Excluding significant items(1), overhead
expenses as a percentage of revenue decreased by 2.0 percentage points, reflecting the increase in revenue and the fixed nature
of certain expenses. As a result of our expanded operations and higher headcount, particularly in our global wealth management
operations, most of our overhead expenses increased compared to Q4/17. The largest increases in overhead expenses compared
to the same period in the prior year were general and administrative expense of $4.9 million or 25.2%, trading costs of
$1.9 million or 10.0%, interest expense of $2.2 million or 56.8%, communication and technology of $1.7 million or 12.7%, as well
as amortization of $1.8 million or 36.1%.
General and administrative costs, which increased by $4.9 million, were largely affected by higher costs to support the expanded
UK & Europe wealth management operations following the completion of the Hargreave Hale acquisition. In addition, our Canadian
capital markets operations also contributed to the increase as a result of higher costs in promotion and travel and professional
fees to support the growth in business activity in this region. Trading costs increased across our capital markets operations as a
result of increased trading activity. Communication and technology expense increased by $1.7 million due to the higher headcount
in our wealth management operations. There was also an increase of $2.2 million in interest expense partially related to the bank
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
32 Management’s Discussion and Analysis
loan obtained in connection with the acquisition of Hargreave Hale during Q2/18. In addition, in connection with the acquisition of
Hargreave Hale, amortization related to intangible assets led to an increase in amortization expense recorded in Q4/18 compared
to the same period in the prior year.
Offsetting these increases was a decrease of $2.2 million in development costs, due to a decline in hiring incentives in our US
and UK operations, as well as an impairment charge related to an investment recorded in our Corporate and Other segment in
Q4/17.
There were restructuring costs of $0.9 million and acquisition related expenses of $0.2 million recorded in Q4/18 in connection
with the acquisition of Hargreave Hale. The restructuring costs related to rationalization of office space as part of our integration
efforts of the Hargreave Hale operations into our existing UK wealth management operations. There were no restructuring or
acquisition-related costs recorded in Q4/17.
Net loss for the fourth quarter of fiscal 2018 was $9.7 million compared to net income of $31.0 million in Q4/17, largely due to
the acceleration of LTIP expense discussed above. Net loss attributable to common shareholders was $14.0 million for Q4/18
compared to net income attributable to common shareholders of $26.3 million in Q4/17. Loss per common share in the current
quarter was $0.15, compared to diluted EPS of $0.26 in Q4/17. Excluding significant items(1), net income for Q4/18 was
$37.3 million compared to $32.7 million in Q4/17, an increase of $4.6 million or 14.0%, primarily due to the increase in revenue.
Net income attributable to common shareholders excluding significant items(1) was $33.0 million compared to $28.1 million in the
same period of the prior year. Diluted EPS excluding significant items(1) was $0.28 in Q4/18 compared to $0.27 in Q4/17.
Income tax expense was $7.4 million in Q4/18 compared to income tax expense of $6.4 million for the three months ended
March 31, 2017. The effective tax rate was 322.1% in Q4/18, largely driven by the non-recognition of deferred tax assets in
certain of our foreign operations in Q4/18 compared to Q4/17. Excluding significant items(1), the effective tax rate for Q4/18 was
28.5% compared to 17.1% in Q4/17.
Business Segment Results(1)(2)
(C$ thousands,
except number of employees)
Canaccord
Genuity
Canaccord
Genuity
Wealth
Management
Corporate
and Other
Total
Canaccord
Genuity
Canaccord
Genuity
Wealth
Management
Corporate
and Other
For the years ended March 31
2018
2017
Total
Revenue
Canada
UK & Europe
US
Australia
Other Foreign Locations
Total revenue
Expenses
Intersegment allocations
Income (loss) before income
$ 216,106
$ 165,891
$ 15,056
$ 397,053
$ 155,411
$ 129,361
$ 14,044
$ 298,816
128,458
235,942
57,022
28
637,556
607,906
16,524
201,383
2,991
—
—
370,265
320,737
15,529
—
—
—
—
329,841
238,933
57,022
28
15,056
1,022,877
58,488
987,131
(32,053)
—
146,812
234,211
59,693
2,264
598,391
535,913
18,210
134,819
2,931
—
—
—
—
—
—
267,111
226,048
14,044
63,701
16,796
(35,006)
281,631
237,142
59,693
2,264
879,546
825,662
—
taxes (recovery)
$ 13,126
$ 33,999
$ (11,379) $
35,746
$ 44,268
$ 24,267
$ (14,651)
$
53,884
Excluding significant items(3)
Revenue
Expenses
Intersegment allocations
Income (loss) before income
637,556
558,486
16,524
370,265
297,194
15,529
15,056
1,022,877
56,590
912,270
(32,053)
—
597,198
532,609
18,210
267,111
220,786
14,044
63,701
16,796
(35,006)
878,353
817,096
—
taxes (recovery)
$ 62,546
$ 57,542
$
(9,481) $ 110,607
$ 46,379
$ 29,529
$ (14,651)
$
61,257
Number of employees
730
938
288
1,956
749
672
279
1,700
(1) Data is in accordance with IFRS except for figures excluding significant items and number of employees. See Non-IFRS Measures on page 14. Detailed financial results for the business segments
are shown in Note 23 of the Audited Consolidated Financial Statements on page 101.
(2) The operating results of Canaccord Genuity (Australia) Limited have been consolidated and a 42% non-controlling interest has been recognized and included in the Canaccord Genuity business
segment in fiscal 2018 [fiscal 2017 − 42%].
(3) See the Selected Financial Information Excluding Significant Items table on page 23.
Canaccord Genuity Group’s operations are divided into three segments: Canaccord Genuity and Canaccord Genuity Wealth
Management are the main operating segments while Corporate and Other is mainly an administrative segment.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 33
CANACCORD GENUITY
Overview
Canaccord Genuity provides investment banking, advisory, equity research, and sales and trading services to corporate,
institutional and government clients as well as conducting principal trading activities in Canada, the US, the UK & Europe and the
Asia-Pacific region. Canaccord Genuity has offices in 21 cities in 9 countries worldwide.
Our operating results demonstrate the strength of our global business and the success of our efforts to diversify our revenue
streams and improve alignment across our businesses and regions. For fiscal 2018, 66.1% of total Canaccord Genuity revenue
was earned outside of Canada.
Canaccord Genuity’s global alignment efforts are helping to firmly position the Company as a leading global independent
investment bank focused on the mid-market.
During fiscal 2018, Canaccord Genuity participated in 455 transactions to raise gross proceeds of $34.5 billion(1). Of these,
Canaccord Genuity led 178 transactions globally, raising total proceeds of $6.1 billion. Sector diversification remains a core
component of the Company’s strategy. Resource-related revenue accounted for 18.0% of Canaccord Genuity’s total investment
banking revenue in fiscal 2018, versus 30.5% in fiscal 2017. Resource-related transactions comprised 25.8% of the total number
of Canaccord Genuity’s investment banking transactions in fiscal 2018, down from 29.3% in fiscal 2017.
Outlook
Canaccord Genuity continues to be very well positioned in many of the Company’s key markets. In the fiscal year ahead,
management intends to focus on capturing operating efficiencies and improving profitability through further integration of its global
capital markets platform and encouraging further cross-border coordination among our global offices.
We believe Canaccord Genuity’s integrated global platform provides a competitive advantage for our business compared to many
of the domestically focused firms we compete with. Smaller regional or local investment dealers are increasingly under pressure
to diversify, and larger international competitors dedicate limited resources to servicing growth companies. We believe this
competitive landscape provides a significant opportunity for Canaccord Genuity in the global mid-market, as this space is currently
relatively underserviced by other global investment banks. Canaccord Genuity’s mid-market strategy and focus on key growth
sectors differentiate the firm from its competition.
The continued shift towards electronic trading, and trading on alternative platforms, is expected to move some trading market
share away from the main stock exchanges. In response to this, Canaccord Genuity is active in offering trading services on many
of the alternative exchanges (Chi-X, CX2, Alpha, Aequitas, Pure, CSE (Canadian Stock Exchange), Omega, Lynx, Triact). The
Company has also developed a strong presence in the US with its American Depositary Receipts (ADR) and foreign equity trading
capabilities from its International Equities Group. The Company continues to actively monitor shifts and trends in the capital
markets and regulatory environment.
Canaccord Genuity remains committed to operating as efficiently as possible in order to sustain its global platform during periods
of slower capital markets activity. A culture of cost containment continues to be reinforced throughout the Company, and strategies
to lower operating costs over the long term continue to be explored.
While we are optimistic about our prospects for the future, the Company has made the prudent decision to balance investments in
growth with our ability to generate profit in the current market environment. The dynamic nature of our operating environment
requires us to maintain a level of agility in our business mix that allows us to stay competitive and meet the evolving needs of our
clients. For this reason, the Company will continue to make disciplined investments with the addition of small teams in specific
sector verticals or key service offerings to further strengthen our operations in areas where we believe we can capture additional
market share.
The management team believes the investments that the Company has made to improve Canaccord Genuity’s global presence and
refine its service offering have positioned the business very well for the future.
(1) Transactions over C$1.5 million
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
34 Management’s Discussion and Analysis
FINANCIAL PERFORMANCE(1)(2)
For the years ended March 31
2018
(C$ thousands, except
number of employees)
Revenue
Expenses
Non-share based
incentive
compensation
Share based incentive
compensation
Salaries and benefits
Other overhead expenses
Acceleration of long term
incentive plan
expense(6)
Restructuring costs
Total expenses
Intersegment allocations(3)
Income (loss) before
income taxes
(recovery)(3)
Excluding significant
items(4)
Total revenue
Total expenses
Intersegment allocations(3)
Income (loss) before
income taxes
(recovery)(3)
Number of employees
Canada
UK(5)
US
Australia
$216,106 $128,458 $235,942 $57,022 $
Total
Australia
28 $637,556 $155,411 $146,812 $234,211 $59,693
Canada
US
UK(5)
Other
Foreign
Locations
2017
Other
Foreign
Locations
Total
$ 2,264 $598,391
96.653
72,081 115,049
29,452
3 313,238
66,802
85,746 113,086
30,583
1,092
297,309
16,002
5,381
45,875
7,942
5,672
40,621
12,974
11,890
87,565
1,302
1,881
9,195
— 38,220
25,512
688
577 183,833
13,227
5,381
35,721
4,792
5,520
43,165
13,882
12,551
89,811
1,102
1,649
9,232
0
997
1,574
33,003
26,098
179,503
12,870
448
11,657
2,366
17,872
1,890
177,934 139,634 247,240
3,113
10,159
2,969
—
—
41,830
283
— 42,399
4,704
—
1,268 607,906
— 16,524
—
—
121,131
12,271
—
—
—
—
139,223 229,330
2,993
2,946
—
—
42,566
—
—
—
3,663
—
—
—
535,913
18,210
$ 28,013 $ (14,145) $ (14,411) $14,909 $(1,240) $ 13,126 $ 22,009 $
4,643 $
1,888 $17,127
$(1,399) $ 44,268
216,106 128,458 235,942
161,599 126,316 227,473
3,113
10,159
2,969
57,022
41,830
283
28 637,556
1,268 558,486
— 16,524
155,411
118,818
12,271
146,812 234,211
139,223 229,328
2,993
2,946
59,693
41,577
—
1,071
3,663
—
597,198
532,609
18,210
$ 44,348 $
189
(827) $ 5,356 $14,909 $(1,240) $ 62,546 $ 24,322 $
214
256
730
178
68
3
4,643 $
225
1,890 $ 18,116
69
275
$ (2,592) $ 46,379
749
2
(1) Data is in accordance with IFRS except for figures excluding significant items and number of employees. See Non-IFRS Measures on page 14.
(2) The operating results of Canaccord Genuity (Australia) Limited have been consolidated and a 42% non-controlling interest has been recognized and included in the Canaccord Genuity segment during
Includes our Dubai based operations
fiscal 2018 [fiscal 2017 − 42%].
Income (loss) before income taxes includes intersegment allocations. See the Intersegment Allocated Costs section on page 43.
(3)
(4) Refer to the Selected Financial Information Excluding Significant Items table on page 23.
(5)
(6) Effective as of March 31, 2018 the Plan was changed to remove certain employment-related conditions for the vesting of RSU awards made as part of the normal course incentive compensation
payment cycle. As a result of this change, the costs of RSUs granted as part of the normal course incentive compensation payment cycle will be expensed in the period in which those awards are
deemed to be earned, instead of recognizing the costs over the vesting period. This change led to the acceleration of the remaining expense for certain awards made under the LTIP which had not
been fully amortized as of March 31, 2018. The total charge recorded during the year ended March 31, 2018 in respect of awards granted prior to fiscal 2018 was $42.4 million in the Canaccord
Genuity segment.
REVENUE
REVENUE BY GEOGRAPHY AS A PERCENTAGE OF CANACCORD GENUITY REVENUE
Revenue generated in:
Canada
UK & Europe(1)
US
Australia
Other Foreign Locations
p.p.: percentage points
(1)
Includes our Dubai based operations
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
For the years ended March 31
2018
2017
33.9%
20.2%
37.0%
8.9%
0.0%
26.0%
24.5%
39.1%
10.0%
0.4%
100.0%
100.0%
2018/2017
change
7.9 p.p.
(4.3) p.p.
(2.1) p.p.
(1.1) p.p.
(0.4) p.p.
Management’s Discussion and Analysis 35
Canaccord Genuity generated revenue of $637.6 million, an increase of 6.6% or $39.2 million compared to fiscal 2017 as a result
of improved market activity. Revenue increased most notably in Canada, where revenue increased by $60.7 million or 39.1%
compared to the prior year. The increase in revenue in our Canadian capital markets operations was driven largely by higher
investment banking revenue and advisory fees, partially as a result of our active involvement with numerous transactions in the
cannabis and blockchain sectors. Revenue in our UK operations decreased by $18.4 million to $128.5 million in fiscal 2018
largely due to a decrease of $12.8 million in our Dubai operations related to a large advisory transaction completed in fiscal
2017. Our Australian operations generated revenue of $57.0 million, which represents a decrease of $2.7 million or 4.5% from
fiscal 2017. Our Australian operations was impacted by slower market activity in the first half of fiscal 2018. However, a return to
strong activity levels for small cap equities in our focus sectors has largely improved our revenue performance in this region in the
second half of the fiscal year. Revenue in our US operations remained the same as in prior year, a slight increase of
0.7 percentage points over fiscal 2017. In our Other Foreign Locations, now comprised of only our Asian-based operations,
revenue decreased by 98.8% or $2.2 million compared to the year ended March 31, 2017 due to the realized translation gain on
disposal of our Singapore operations recorded in the prior year. In both our Canadian and Australian operations, investment
banking revenue also reflect profits and gains recorded in certain warrant and inventory positions earned in respect of investment
banking activity in the current and prior periods.
Investment banking activity
The Company’s focus sector mix in fiscal 2018 showed increasing diversity, with 74.2% of total transactions occurring in sectors
outside of Metals & Mining and Energy, which have traditionally been a higher component of the Company’s revenue.
Canaccord Genuity’s transactions and revenue by focus sectors are detailed below.
CANACCORD GENUITY − OVERALL
Investment banking transactions and revenue by sector
Sectors
Healthcare & Life Sciences
Technology
Metals & Mining
Real Estate & Hospitality
Infrastructure
Energy
Financials, Diversified and Investment Trusts
Other
Media & Telecommunications
Sustainability
Consumer & Retail
Aerospace & Defense
Ag & Fertilizers
Structured Products
Total
For the year ended March 31, 2018
as a % of
investment
banking
transactions
9.5%
12.0%
19.1%
12.2%
0.9%
6.7%
27.0%
5.7%
0.2%
0.9%
3.5%
0.2%
2.1%
—
as a % of
investment
banking
revenue
44.9%
16.9%
15.3%
7.2%
2.8%
2.7%
4.1%
2.1%
1.4%
1.0%
1.0%
0.3%
0.2%
0.1%
100.0%
100.0%
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
36 Management’s Discussion and Analysis
CANACCORD GENUITY − BY GEOGRAPHY
Investment banking transactions by sector (as a % of the number of investment banking transactions for each geographic region)
Sectors
Healthcare & Life Sciences
Technology
Metals & Mining
Real Estate & Hospitality
Infrastructure
Energy
Financials, Diversified and Investment Trusts
Other
Media & Telecommunications
Sustainability
Consumer & Retail
Aerospace & Defense
Ag & Fertilizers
Total
For the year ended March 31, 2018
Canada
3.3%
7.9%
20.1%
13.1%
0.9%
5.8%
34.4%
7.5%
0.3%
—
4.0%
—
2.7%
UK
—
18.8%
6.3%
31.3%
6.3%
12.3%
25.0%
—
—
—
—
—
—
US
48.2%
31.5%
—
9.3%
—
—
—
—
—
7.4%
1.7%
1.9%
—
Australia
11.4%
17.1%
45.7%
—
—
22.9%
—
—
—
—
2.9%
—
—
100.0%
100.0%
100.0%
100.0%
Investment banking revenue by sector (as a % of investment banking revenue for each geographic region)
Sectors
Healthcare & Life Sciences
Technology
Metals & Mining
Real Estate & Hospitality
Infrastructure
Energy
Financials, Diversified and Investment Trusts
Other
Media & Telecommunications
Sustainability
Consumer & Retail
Aerospace & Defense
Ag & Fertilizers
Structured Products
Transportation
Total
For the year ended March 31, 2018
Canada
59.4%
11.0%
11.2%
5.2%
0.6%
2.1%
1.8%
4.1%
2.7%
—
1.3%
—
0.3%
0.2%
0.1%
UK
—
16.7%
1.6%
34.1%
19.8%
2.8%
25.0%
—
—
—
—
—
—
—
—
US
47.2%
44.5%
0.1%
1.5%
—
0.2%
—
—
—
4.0%
0.7%
1.8%
—
—
—
Australia
31.1%
3.8%
54.6%
—
0.1%
7.4%
0.3%
0.3%
—
1.4%
1.0%
—
—
—
—
100.0%
100.0%
100.0%
100.0%
Note for reference in the tables above: transactions with companies in the cannabis sector in Canada are included under the Healthcare & Life Sciences sector.
Other Foreign
Locations
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Other Foreign
Locations
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 37
EXPENSES
Expenses for fiscal 2018 were $607.9 million, an increase of 13.4% or $72.0 million compared year over year. Excluding
significant items(1), total expenses for fiscal 2018 were $558.5 million, an increase of 4.9% or $25.9 million compared to fiscal
2017, and decreased by 1.6 percentage points as a percentage of revenue.
Incentive compensation and salaries and benefits
Long-term incentive plan
Effective as of March 31, 2018 the Plan was changed to remove certain employment-related conditions for the vesting of RSU
awards that were made as part of the normal course incentive compensation payment cycle. With the change, RSUs will continue
to vest after termination of employment so long as the employee does not violate certain post-termination restrictions and is not
engaged in certain competitive or soliciting activities as provided in the Plan. Because of this change, for accounting purposes, the
RSUs granted as part of the normal course incentive compensation payment cycle will now be expensed in the period in which
those awards are deemed to be earned, which is generally the fiscal period in which the awards are either made or the
immediately preceding fiscal year for those awards made after the end of such fiscal year but were determined and earned in
respect of that fiscal year. Accordingly, a charge of $42.4 million was recorded for the Canaccord Genuity segment in respect of
awards granted prior to fiscal 2018 including the acceleration of the remaining expense for certain awards which had not been
fully amortized as of March 31, 2018. This charge was excluded from the calculation of the total compensation ratios noted below
and included as a significant item(1) for purposes of our adjusted earnings (i.e. excluding significant items). The costs associated
with LTIP awards granted for fiscal 2018 was included as part of incentive compensation expense.
Incentive compensation expense excluding the accelerated expense related to certain share-based awards referred to above for
fiscal 2018 increased by $21.1 million or 6.4% compared to fiscal 2017. Incentive compensation expense as a percentage of
revenue was 55.1%, a slight decrease of 0.1 percentage point from fiscal 2017. Salaries and benefits expense for fiscal 2018
decreased by $0.6 million or 2.3% compared to fiscal 2017. Total compensation expense (incentive compensation expense
excluding the accelerated expense related to certain share-based awards referred to above plus salaries and benefits) as
a percentage of revenue was 0.4 percentage points lower than fiscal 2017, at 59.1% for the year ended March 31, 2018.
Across all regions, total compensation expense as a percentage of revenue has remained fairly consistent with fiscal 2017, in line
with our efforts to monitor all compensation costs closely. In Canada, total compensation as a percentage of revenue decreased
slightly by 0.4 percentage point compared to fiscal 2017. Our US operations recorded a compensation ratio of 59.3% in fiscal
2018, also a slight decrease of 0.3 percentage points compared to the prior year. In our UK operations, total compensation
expense as a percentage of revenue increased by 1.3 percentage points compared to fiscal 2017 as a result of the decline in
revenue relative to fixed staff costs. Total compensation expense as a percentage of revenue in our Australian operations was
57.2%, an increase of 1.4 percentage points due to the decrease in revenue and the non-variable nature of certain staff costs.
Canaccord Genuity total compensation expense (incentive compensation plus salaries and benefits) as a percentage of revenue by
geography
Canada
UK & Europe
US
Australia
Other Foreign Locations
Canaccord Genuity (total)
p.p.: percentage points
n.m.: not meaningful
Other overhead expenses
For the years ended March 31
2018
54.6%
66.7%
59.3%
57.2%
n.m.
59.1%
2017
55.0%
65.4%
59.6%
55.8%
92.3%
59.6%
2018/2017
change
(0.4) p.p.
1.3 p.p.
(0.3) p.p.
1.4 p.p.
n.m.
(0.4) p.p.
Other overhead expenses were $183.3 million for fiscal 2018 compared to $179.5 million in fiscal 2017, an increase of
$3.8 million or 2.1%. As a percentage of revenue, other overhead expenses excluding significant items(1) was 1.0 percentage
point lower compared to fiscal 2017, reflecting the increase in revenue as well as the fixed nature of certain overhead expenses.
The most significant increases in overhead costs compared to the prior year include trading costs and general and administrative
expense, offset by decreases in amortization expense and development costs.
The increase in trading costs was mainly due to higher execution and settlement charges in connection with our UK operations.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
38 Management’s Discussion and Analysis
General and administrative expense increased by $5.3 million compared to fiscal 2017. Our Canadian operations experienced an
increase of $8.4 million compared to fiscal 2017 as a result of additional professional and promotion and travel expenses to
support the growth in business activity and higher headcount in this region. Offsetting this increase in Canada were decreases in
both our US and UK capital markets operations, in line with the reduced headcount in these two regions and restructuring efforts
undertaken during fiscal 2018.
Amortization expense decreased by $1.2 million to $9.5 million compared to the prior year due to a decrease in amortization of
intangible assets in our Australian operations.
Communication and technology expense increased by $0.7 million to $36.5 million for the year ended March 31, 2018, primarily
attributable to an increase in our Canadian operations due to higher headcount.
Development costs decreased by $1.9 million from last year to $0.7 million in fiscal 2018, partially due to lower hiring incentives
and recruitment costs in all regions.
During the year ended March 31, 2018, there were restructuring costs incurred of $4.7 million related to staff reductions in our
US and Canadian capitals markets operations, as well as costs related to certain trading operations in Dublin. No restructuring
costs were recorded in the prior year.
INCOME BEFORE INCOME TAXES
Income before income taxes in fiscal 2018 was $13.1 million, a decrease of $31.1 million or 70.3% compared to fiscal 2017.
Excluding significant items(1), income before income taxes, including allocated overhead expenses, increased from $46.4 million
to income before income taxes of $62.5 million in fiscal 2018. The increase in income before income tax excluding significant
items(1) was attributable to higher revenue generated in our Canadian and US operating segments combined with a reduction in
overhead expenses.
CANACCORD GENUITY WEALTH MANAGEMENT
Overview
Canaccord Genuity Group’s wealth management division provides a range of comprehensive financial services and investment
products to individual investors (private clients), institutions and intermediaries, and charities. Revenue from wealth management
operations is generated through traditional commission-based brokerage services; the sale of fee-based products and services;
client-related interest; and fees and commissions earned by Investment Advisors (IAs) from investment banking and venture
capital transactions. The Company has wealth management operations in Canada, the UK & Europe, and Australia. During the year
ended March 31, 2018, the Company completed its acquisition of Hargreave Hale, expanding its wealth management operations
in the UK & Europe.
In the UK & Europe, Canaccord Genuity Wealth Management has 12 offices in the UK, Guernsey, Jersey and the Isle of Man.
Revenue earned by this business is largely generated through fee-based accounts and portfolio management activities. With
68.5% of its fiscal 2018 revenue generated from recurring fee-based activity, this geography has a significantly higher proportion
of fee-based revenue than the Company’s Canadian wealth management businesses. The business offers services to both
domestic (UK) and international and European clients and provides clients with investing options from both third party and
proprietary financial products, including 18 funds managed by Canaccord Genuity Wealth Management portfolio managers.
At March 31, 2018 Canaccord Genuity Wealth Management had 15 offices located across Canada, including five Independent
Wealth Management (IWM) locations. The Company is focused on actively recruiting established Advisory Teams to accelerate
growth in this business.
Outlook
Our strategic shift to strengthening contributions from our global wealth management performance will continue to be a main
focus for the Company. Management’s priorities for Canaccord Genuity Wealth Management will be focused on growing assets
under administration and management, and increasing the proportion of fee-based revenue as a percentage of total revenue. By
increasing recurring revenue streams, we expect to meaningfully reduce our reliance on transaction-based revenue over the
coming years, making our business less sensitive to changes in market conditions.
With 68.5% of the division’s revenue derived from recurring, fee-based activities, the revenue stream generated through Canaccord
Genuity Wealth Management’s UK & European wealth management business helps to improve the stability of its overall
performance. Client holdings in our in-house investment management products exceed $1 billion and are attracting growing
interest from domestic intermediaries and international fund companies. The Company will continue to pursue strategic
opportunities to increase the scale of its UK wealth management business.
In Canada, the Company continues to focus on enhancing margins, managing costs, and growing the business through targeted
recruitment and training. While the recruiting environment remains competitive, we expect the benefits of our independent global
platform to help drive continued recruiting success in select markets. The Company also intends to invest further in training
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 39
programs for new and existing Investment Advisors to continue developing the skills of our Advisory Teams and to support the
growth of fee-based services offered through the Canadian business. We maintain a strong focus on attracting and retaining high
quality advisors, investing in training programs and building a comprehensive suite of premium products targeted at attracting high
net worth investors and helping advisors grow their businesses.
In Australia, the Company still has a relatively small wealth management operation; however, expansion is expected to occur
through targeted recruiting, and through the build-out of wealth management services and products in this market.
FINANCIAL PERFORMANCE − NORTH AMERICA(1)(2)
(C$ thousands, except AUM and AUA (in C$ millions),
number of employees, Advisory Teams and % amounts)
Revenue
Expenses
Non-share based incentive compensation
Share based incentive compensation
Salaries and benefits
Other overhead expenses
Acceleration of long term incentive plan expense(6)
Restructuring costs
Total expenses
Intersegment allocations(3)
Income before income taxes(3)
AUM − Canada (discretionary)(4)
AUA − Canada(5)
Number of Advisory Teams − Canada
Number of employees
Excluding significant items(7)
Total expenses
Intersegment allocations(3)
Income before income taxes(3)
For the years ended March 31
2018
2017
2018/2017 change
$
168,882
$
132,292
$
36,590
27.7%
85,430
952
11,315
36,795
668
—
135,160
14,200
65,909
824
11,335
36,756
—
—
114,824
15,504
19,521
128
(20)
39
668
—
20,336
(1,304)
$
19,522
$
1,964
$
17,558
2,815
15,567
142
379
2,637
13,228
141
359
178
2,339
1
20
$
134,492
$
114,824
$
19,668
14,200
20,190
15,504
1,964
(1,304)
18,226
29.6%
15.5%
(0.2)%
(0.1)%
n.m.
—
17.7%
(8.4)%
n.m.
6.8%
17.7%
0.7%
5.6%
17.1%
(8.4)%
n.m.
(1) Data is in accordance with IFRS except for figures excluding significant items, AUA, AUM, number of Advisory Teams and number of employees. See Non-IFRS Measures on page 14.
(2)
(3)
(4) AUM represents assets managed on a discretionary basis under our programs generally described as or known as the Complete Canaccord Investment Counselling Program and the Complete
Includes Canaccord Genuity Wealth Management operations in Canada and the US.
Income (loss) before income taxes includes intersegment allocations. See the Intersegment Allocated Costs section on page 43.
Canaccord Private Investment Management Program.
(5) AUA is the market value of client assets administered by the Company, for which the Company earns commissions or fees. AUA includes AUM.
(6) Effective as of March 31, 2018 the Plan was changed to remove certain employment-related conditions for the vesting of RSU awards made as part of the normal course incentive compensation
payment cycle. As a result of this change, the costs of RSUs granted as part of the normal course incentive compensation payment cycle will be expensed in the period in which those awards are
deemed to be earned, instead of recognizing the costs over the vesting period. This change led to the acceleration of the remaining expense for certain awards made under the LTIP which had not
been fully amortized as of March 31, 2018. The total charge recorded during the year ended March 31, 2018 in respect of awards granted prior to fiscal 2018 was $0.7 million for the Canaccord
Genuity Wealth Management North America segment.
(7) Refer to the Selected Financial Information Excluding Significant Items table on page 23.
n.m.: not meaningful
Revenue from Canaccord Genuity Wealth Management North America was $168.9 million, an increase of $36.6 million or 27.7%
from fiscal 2017, as a result of stabilizing market conditions and improved client and corporate finance activities. We continue to
focus on growth in our fee-based and proprietary asset management offerings. As a key distribution channel for our capital
markets business, the increased investment banking activity contributed to the overall increases in revenue in fiscal 2018
compared to fiscal 2017 in our Canadian wealth management business.
AUA in Canada increased by 17.7% to $15.6 billion at March 31, 2018 from $13.2 billion at March 31, 2017, reflecting our
development initiatives in this sector as well as higher market values over the year. There were 142 Advisory Teams in Canada, an
increase of one from a year ago. The fee-based revenue in our North American operations was 1.2 percentage points lower than in
the prior year and accounted for 33.5% of the wealth management revenue earned in Canada during the year ended March 31,
2018. The slight decrease in fee-based revenue as a percentage of revenue was primarily a result of strong transaction-based
revenue during the year which was led by a 74.1% increase in investment banking revenue attributable to private client activity
primarily in companies in new and developing industries.
Expenses for fiscal 2018 were $135.2 million, an increase of $20.3 million or 17.7% from fiscal 2017. As a result of the revenue
increase in the current fiscal year compared to fiscal 2017 and the relatively fixed nature of expenses other than incentive
compensation, total expenses as a percentage of revenue decreased by 6.8 percentage points compared to last year.
Effective as of March 31, 2018 the LTIP was changed to remove certain employment-related conditions for the vesting of RSU
awards that were made as part of the normal course incentive compensation payment cycle. With the change, RSUs will continue
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
40 Management’s Discussion and Analysis
to vest after termination of employment so long as the employee does not violate certain post-termination restrictions and is not
engaged in certain competitive or soliciting activities as provided in the Plan. Because of this change, for accounting purposes, the
RSUs granted as part of the normal course incentive compensation payment cycle will now be expensed in the period in which
those awards are deemed to be earned, which is generally the fiscal period in which the awards are either made or the
immediately preceding fiscal year for those awards made after the end of such fiscal year but were determined and earned in
respect of that fiscal year. Accordingly, a charge of $0.7 million in respect of awards granted prior to fiscal 2018 including the
acceleration of the remaining expense for certain awards which had not been fully amortized as of March 31, 2018 was recorded
in fiscal 2018. This non-cash accounting charge was excluded from the calculation of the total compensation ratio as noted above
below and included as a significant item(1) as it represented a singular charge of a non-operating nature. The costs associated
with the LTIP awards granted for fiscal 2018 was included as part of incentive compensation expense.
Incentive compensation expense excluding the accelerated expense related to certain share-based awards referred to above
increased by $19.6 million or 29.4% compared to prior year, consistent with the increase in incentive-based revenue. Salaries and
benefits expense remained consistent with the prior year. Total compensation expense (incentive compensation expense excluding
the accelerated expense related to certain share-based awards referred to above plus salaries and benefits) as a percentage of
revenue decreased by 1.2 percentage points compared to last year to 57.8% in fiscal 2018, reflecting the increase in revenue in
fiscal 2018.
Other overhead expenses remained consistent with the prior year despite the increase in revenue. Trading costs decreased by
$0.9 million as a result of a change in the re-allocation of certain trading, clearing and settlement charges from our Corporate and
Other segment. Premise and equipment expense also decreased by $0.6 million compared to fiscal 2017 as a result of the
rationalization of office space. These decreases in overhead expenses were partially offset by higher development costs recorded
in fiscal 2108 as a result of increased new-hire incentive payments.
Income before income taxes increased by $17.6 million in fiscal 2018 to $19.5 million as a result of the net increase in revenue
after variable costs and continued expense containment efforts in this operating segment.
FINANCIAL PERFORMANCE − UK & EUROPE(1)(5)
(C$ thousands, except AUM (in C$ millions), number of employees,
investment professionals and fund managers, and % amounts)
Revenue
Expenses
Non-share based incentive compensation
Share based incentive compensation
Salaries and benefits
Other overhead expenses
Acceleration of long term incentive plan expense(6)
Restructuring costs
Acquisition-related costs
Total expenses
Intersegment allocations(2)
Income before income taxes(2)
AUM − UK & Europe(3)
Number of investment professionals and fund managers − UK & Europe
Number of employees
Excluding significant items(4)
Total expenses
Intersegment allocations(2)
Income before income taxes(2)
For the years ended March 31
2018
2017
2018/2017 change
$
201,383
$ 134,819
$
66,564
49.4%
73,222
4,081
36,214
58,999
3,390
2,939
6,732
185,577
1,329
14,477
44,877
188
559
45,755
1,884
21,711
41,874
—
—
—
111,224
1,292
22,303
24,526
118
313
$
162,702
1,329
37,352
$ 105,962
1,292
27,565
$
$
$
$
27,467
2,197
14,503
17,125
3,390
2,939
6,732
74,353
37
(7,826)
20,351
70
246
56,740
37
9,787
60.0%
116.6%
66.8%
40.9%
n.m.
n.m.
n.m.
66.8%
2.9%
(35.1)%
83.0%
59.3%
78.6%
53.5%
2.9%
35.5%
(1) Data is in accordance with IFRS except for figures excluding significant items, AUM, number of investment professionals and fund managers, and number of employees. See Non-IFRS Measures on
page 14.
Income before income taxes includes intersegment allocations. See the Intersegment Allocated Costs section on page 43.
(2)
(3) AUM in the UK & Europe is the market value of client assets managed and administered by the Company, for which the Company earns commissions or fees. This measure includes both
discretionary and non-discretionary accounts.
Includes the operating results of Hargreave Hale since the closing date of September 18, 2017.
(4) Refer to the Selected Financial Information Excluding Significant Items table on page 23.
(5)
(6) Effective as of March 31, 2018 the Plan was changed to remove certain employment-related conditions for the vesting of RSU awards made as part of the normal course incentive compensation
payment cycle. As a result of this change, the costs of RSUs granted as part of the normal course incentive compensation payment cycle will be expensed in the period in which those awards are
deemed to be earned, instead of recognizing the costs over the vesting period. This change led to the acceleration of the remaining expense for certain awards made under the LTIP which had not
been fully amortized as of March 31, 2018. The total charge recorded during the year ended March 31, 2018 in respect of awards granted prior to fiscal 2018 was $3.4 million in the Canaccord
Genuity Wealth Management (UK & Europe) segment.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 41
Operating results of Hargreave Hale are included under Canaccord Genuity Wealth Management (UK & Europe) since the closing
date of September 18, 2017.
Revenue generated by our UK & Europe operations is largely produced through fee-based accounts and portfolio management
activities, and, as such, is less sensitive to changes in market conditions. Revenue for fiscal 2018 was $201.4 million, an
increase of 49.4% compared to fiscal 2017. Measured in local currency (GBP), revenue was £118.0 million during fiscal 2018, an
increase of £38.4 million or 49.2% compared to the previous year. Hargreave Hale contributed £30.8 million or 79.2% of the total
increase in revenue compared to fiscal 2017.
AUM in the UK & Europe as of March 31, 2018 was $44.9 billion, an increase of 83.0% compared to $24.5 billion as of
March 31, 2017. Measured in local currency (GBP), AUM increased by 69.0% when compared to March 31, 2017, with Hargreave
Hale contributing 96.0 percentage points of this increase. The fee-related revenue in our UK & European wealth management
operations accounted for 68.5% of total revenue in this geography in fiscal 2018, a decrease of 0.7 percentage points compared
to last year as a result of the increase in transactional revenue.
As discussed above, effective as of March 31, 2018, the LTIP Plan was changed to remove certain employment-related conditions
for the vesting of RUS awards made as part of the normal course incentive compensation payment cycle. As a result of this
change, the costs of RSUs granted as part of the normal course incentive compensation payment cycle are expensed in the period
in which those awards are deemed to be earned, instead of recognizing the costs over the vesting period. This change led to the
acceleration of the remaining expense for certain awards which had not been fully amortized as of March 31, 2018. The total
amount of LTIP expense in respect of awards granted prior to fiscal 2018 including the acceleration of the remaining expense for
certain awards which had not been fully amortized as of March 31, 2018 was $3.4 million for our UK & Europe wealth
management operations. This non-cash accounting charge was excluded from the calculation of the total compensation ratio and
included as a significant item(1) as it represented a singular charge of a non-operating nature. The costs associated with LTIP
awards granted for fiscal 2018 was included as part of incentive compensation expense.
Incentive compensation expense (excluding the accelerated expense related to certain share-based awards referred to above) was
$77.3 million, a $29.7 million increase from $47.6 million in fiscal 2017, in line with the increase in incentive-based commissions
and fees revenue. Salaries and benefits expense increased by $14.5 million compared to fiscal 2017 to $36.2 million primarily as
a result of a larger team required to support the growth in the existing UK & Europe wealth management business as well as the
newly acquired Hargreave Hale operations. Total compensation expense (incentive compensation expense excluding the
accelerated expense related to certain share-based awards referred to above plus salaries and benefits) as a percentage of
revenue increased by 4.9 percentage points from 51.4% in fiscal 2017 to 56.4% in fiscal 2018 mainly due to the increase in fixed
staff costs as discussed above.
Other overhead expenses for the year ended March 31, 2018 increased by $17.1 million or 40.9% compared to last year. The
increased headcount and expanded operations resulting from the acquisition of Hargreave Hale in Q2/18 led to an increase in
most of our overhead expenses, particularly in communication and technology as well as general and administrative expense.
Amortization expense for fiscal 2018 also increased by $3.5 million mainly as a result of the intangible assets amortization in
connection with the acquisition of Hargreave Hale. Partially offsetting these increases was a $0.4 million decrease in development
costs compared to the prior year as a result of lower hiring incentives.
Included in development costs were $1.5 million of incentive-based payments related to the acquisition of Hargreave Hale.
There were $2.9 million of restructuring costs recorded in fiscal 2018 related to the rationalization of office space due to the
acquisition of Hargreave Hale. No restructuring costs were recorded during the same period last year.
The Company also recorded $6.7 million of acquisition-related costs in relation to the acquisition of Hargreave Hale for the year
ended March 31, 2018. The acquisition-related costs included professional and consulting fees incurred during the year.
Income before income taxes was $14.5 million compared to $22.3 million in the same period a year ago mainly as a result of the
restructuring and acquisition-related costs incurred during fiscal 2018, as well as the acceleration of LTIP expense, as discussed
above. Excluding significant items(1), income before income taxes was $37.4 million, an increase of $9.8 million or 35.5% from
the prior year, reflecting the net contribution from our expanded operations.
CORPORATE AND OTHER SEGMENT
Overview
The Corporate and Other segment includes Pinnacle Correspondent Services, interest, foreign exchange revenue, and expenses
not specifically allocable to Canaccord Genuity or Canaccord Genuity Wealth Management.
Pinnacle Correspondent Services provides trade execution, clearing, settlement, custody, and other middle- and back-office
services to other introducing brokerage firms, portfolio managers and other financial intermediaries. This business unit was
developed as an extension and application of the Company’s substantial investment in its information technology and operating
infrastructure.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
42 Management’s Discussion and Analysis
Also included in this segment are the Company’s administrative, operational and support services departments, which are
responsible for front- and back-office information technology systems, compliance and risk management, operations, legal,
finance, and other administrative functions. The Company has 288 employees in the Corporate and Other segment. Most of the
Company’s corporate support functions are based in Vancouver and Toronto, Canada.
Our operations group is responsible for processing securities transactions, including the clearing and settlement of securities
transactions, account administration and custody of client securities. The finance department is responsible for internal financial
accounting and controls, and external financial and regulatory reporting, while the compliance department is responsible for client
credit and account monitoring in relation to certain legal and financial regulatory requirements. The Company’s risk management
and compliance activities include procedures to identify, control, measure and monitor the Company’s risk exposure at all times.
FINANCIAL PERFORMANCE(1)
(C$ thousands, except number of employees and % amounts)
2018
2017
2018/2017 change
For the years ended March 31
Revenue
Expenses
Non-share based incentive compensation
Share based incentive compensation
Salaries and benefits
Other overhead expenses
Acceleration of long-term incentive plan expense(3)
Share of loss of an associate
Total expenses
Intersegment allocations(2)
Loss before income tax recovery(2)
Number of employees
Excluding significant items(4)
Total expenses
Intersegment allocations(2)
Loss before income taxes (recovery)(2)
$
15,056
$
14,044
$
1,012
7.2%
8,479
2,992
26,198
18,623
1,898
298
58,488
(32,053)
8,718
1,596
26,554
26,833
—
—
63,701
(35,006)
$
(11,379)
$
(14,651)
$
288
279
(239)
1,396
(356)
(8,210)
1,898
298
(5,213)
2,953
3,272
9
(2.7)%
87.5%
(1.3)%
(30.6)%
n.m.
n.m.
(8.2)%
8.4%
22.3%
3.2%
$
56,590
$
63,701
$
(7,111)
(11.2)%
(32,053)
(9,481)
(35,006)
(14,651)
2,953
5,170
8.4%
35.3%
(1) Data is in accordance with IFRS except for figures excluding significant items and number of employees. See Non-IFRS Measures on page 14.
(2) Loss before income tax recovery includes intersegment allocations. See the Intersegment Allocated Costs section.
(3) Effective as of March 31, 2018 the Plan was changed to remove certain employment-related conditions for the vesting of RSU awards made as part of the normal course incentive compensation
payment cycle. As a result of this change, the costs of RSUs granted as part of the normal course incentive compensation payment cycle will be expensed in the period in which those awards are
deemed to be earned, instead of recognizing the costs over the vesting period. This change led to the acceleration of the remaining expense for certain awards made under the LTIP which had not
been fully amortized as of March 31, 2018. The total charge recorded during the year ended March 31, 2018 in respect of awards granted prior to fiscal 2018 was $1.9 million for our Corporate and
Other segment.
(4) Refer to the Selected Financial Information Excluding Significant Items table on page 23.
Revenue for fiscal 2018 was $15.1 million, an increase of $1.0 million or 7.2% from fiscal 2017 primarily related to an increase
in foreign exchange gains.
Total expenses were $58.5 million for the year ended March 31, 2018, a decrease of $5.2 million or 8.2% compared to the prior
year. Total compensation expense increased by $0.8 million compared to the prior year.
The total amount of LTIP expense recorded in respect of awards granted prior to fiscal 2018 including the acceleration of the
remaining expense for certain awards which had not been fully amortized as of March 31, 2018 was $1.9 million. This non-cash
accounting charge was included as a significant item(1) in our adjusted earnings (i.e. excluding significant items).
Other overhead expenses decreased by $8.2 million or 30.6% compared to the prior year. The most significant decreases were
premises and equipment expense, general and administrative expense and development costs. Premises and equipment expense
decreased by $4.4 million compared to the year ended March 31, 2017 as a result of costs associated with the rationalization of
our office space in Toronto recorded in the prior year. General and administrative expense decreased by $5.0 million as a result of
higher professional fees incurred in the prior year as well as cost reduction efforts made during the year. There was an accounting
impairment charge of $2.4 million recorded in fiscal 2017 related an investment which was the primary reason for the decrease in
development costs. Offsetting these decreases was a $3.3 million increase in interest expense, partially related to the convertible
debentures issued during the third quarter of fiscal 2017.
Loss before income taxes was $11.3 million for fiscal 2018 compared to a loss before income taxes of $14.7 million for the prior
year. Excluding significant items(1), loss before income taxes was $9.5 million for the year ended March 31, 2018 compared to a
loss before income taxes of $14.7 million last year as a result of a reduction in overhead expenses.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 43
INTERSEGMENT ALLOCATED COSTS
Included in the Corporate and Other segment are certain support services, research and other expenses that have been incurred
to support the activities within the Canaccord Genuity and Canaccord Genuity Wealth Management segments in Canada. Certain
trading, clearing and settlement charges are included as a trading cost in the applicable business units and as a trading cost
recovery in Corporate and Other. In addition, certain overhead costs are charged by Canaccord Genuity UK & Europe to Canaccord
Genuity Wealth Management UK & Europe and included in intersegment allocated costs for these business units.
Financial Condition
Below are selected balance sheet items for the past five years:
(C$ thousands)
Assets
Cash and cash equivalents
Securities owned
Accounts receivable
Income taxes recoverable
Deferred tax assets
Investments
Equipment and leasehold improvements
Goodwill and other intangible assets
Total assets
Liabilities and shareholders’ equity
Bank indebtedness
Securities sold short
Balance sheet summary as at March 31
2018
2017
2016
2015
2014
$
862,838
$ 677,769
$ 428,329
$ 322,324
$
364,296
469,217
784,230
564,746
848,128
2,215,837
3,395,736
2,041,150
2,491,488
1,170
19,941
2,035
30,967
1,085
15,323
2,829
31,479
12,537
11,221
5,578
37,049
5,295
10,148
8,693
43,373
418,731
295,065
323,936
640,456
1,143,201
2,785,898
3,983
9,735
9,977
50,975
646,557
$ 4,020,736
$ 5,203,516
$ 3,424,546
$ 4,369,905
$ 5,014,622
$
— $
25,280
$
14,910
$
20,264
$
—
301,006
645,742
427,435
654,639
913,913
Accounts payable and accrued liabilities
2,638,954
3,669,883
2,185,047
2,527,636
2,877,933
Provisions
Income taxes payable
Current portion of bank loan
Deferred consideration
Contingent consideration
Bank loan
Deferred tax liabilities
Liability portion of Convertible Debenture
Subordinated debt
Shareholders’ equity
Non-controlling interests
8,428
7,851
9,679
9,997
49,844
61,758
13,715
57,081
7,500
841,352
13,571
11,793
10,093
18,811
4,242
14,320
8,172
10,334
10,822
—
—
—
—
140
56,442
7,500
764,785
11,858
—
—
—
—
450
—
15,000
—
—
—
—
2,057
—
15,000
—
—
—
—
3,028
—
15,000
749,929
1,117,542
1,168,680
8,722
10,275
14,912
Total liabilities and shareholders’ equity
$ 4,020,736
$ 5,203,516
$ 3,424,546
$ 4,369,905
$ 5,014,622
ASSETS
Cash and cash equivalents were $862.8 million at March 31, 2018 compared to $677.8 million at March 31, 2017. Refer to the
Liquidity and Capital Resources section for more details.
Securities owned were $469.2 million at March 31, 2018 compared to $784.2 million at March 31, 2017 mainly due to a
decrease in corporate and government debt owned.
Accounts receivable were $2.2 billion at March 31, 2018 compared to $3.4 billion at March 31, 2017, mainly due to a decrease
in receivables from brokers and investment dealers.
Goodwill was $258.0 million and intangible assets were $160.8 million at March 31, 2018. At March 31, 2017, goodwill was
$192.2 million and intangible assets were $102.8 million. These amounts represent the goodwill and intangible assets acquired
through the purchases of Genuity Capital Markets, Collins Stewart Hawkpoint plc (‘‘CSHP’’), Eden Financial Ltd., and as of
September 18, 2017, Hargreave Hale.
Other assets, consisting of income taxes receivable, deferred tax assets, equipment, investments and leasehold improvements
were $54.1 million at March 31, 2018 compared to $50.7 million at March 31, 2017, mainly due to an increase in deferred tax
assets. The Company, through a wholly-owned subsidiary, invested $2.5 million in Canaccord Genuity Acquisition Corp. (‘‘CGAC’’), a
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
44 Management’s Discussion and Analysis
special purpose acquisition corporation formed for the purpose of effecting an acquisition of one or more businesses. The
investment is accounted for using the equity method. The Company’s equity portion of the net loss of CGAC for the year ended
March 31, 2018 was $0.3 million.
LIABILITIES AND SHAREHOLDERS’ EQUITY
Bank overdrafts and call loan facilities utilized by the Company may vary significantly on a day-to-day basis and depend on
securities trading activity. On March 31, 2018, Canaccord Genuity Group had available credit facilities with banks in Canada and
the UK & Europe in the aggregate amount of $669.2 million [March 31, 2017 − $602.6 million]. These credit facilities, consisting
of call loans, letters of credit and daylight overdraft facilities, are collateralized by unpaid client securities and/or securities owned
by the Company. On March 31, 2018, there was bank indebtedness of $nil, compared to $25.3 million on March 31, 2017.
Securities sold short were $301.0 million at March 31, 2018 compared to $645.7 million at March 31, 2017, mostly due to a
decrease in short positions in corporate and government debt.
Accounts payable and accrued liabilities, including provisions, were $2.6 billion, a decrease from $3.7 billion on March 31, 2017,
mainly due to a decrease in payables to clients and brokers and investment dealers.
Other liabilities, including subordinated debt, income taxes payable and deferred tax liabilities, were $29.1 million at March 31,
2018 compared to $17.7 million in the prior year. The increase was mostly due to an increase in deferred tax liabilities recognized
on intangible assets related to the acquisition of Hargreave Hale.
In connection with our acquisition of Hargreave Hale through a subsidiary of the Company, that subsidiary obtained a £40.0 million
(C$72.5 million as of March 31, 2018) bank loan to finance a portion of the cash consideration. The loan is repayable in
instalments of principal and interest over a period of 4 years. The interest rate on this loan is LIBOR plus 3.375% per annum. In
connection with the acquisition, there was also deferred and contingent consideration of $10.0 million and $49.8 million,
respectively, recorded as of March 31, 2018. Refer to Note 12 of the audited consolidated financial statements for the year ended
March 31, 2018 for further information on the purchase consideration for Hargreave Hale.
Bank overdrafts and call loan facilities utilized by the Company may vary significantly on a day-to-day basis and depend on
securities trading activity. At March 31, 2018, excluding the bank loan discussed above related to the Hargreave Hale acquisition,
the Company had available other credit facilities with banks in Canada and the UK in the aggregate amount of $669.2 million
[March 31, 2017 − $602.6 million]. These credit facilities, consisting of call loans, subordinated debt, letters of credit and
daylight overdraft facilities, are collateralized by either unpaid client securities and/or securities owned by the Company. As of
March 31, 2018, and 2017, there were no balances outstanding under these other credit facilities.
Non-controlling interests were $13.6 million at March 31, 2018 compared to $11.9 million at March 31, 2017, which represents
42% of the net assets of our operations in Australia.
Off-Balance Sheet Arrangements
A subsidiary of the Company has entered into secured irrevocable standby letters of credit from a financial institution totaling
$2.6 million (US$2.0 million) [March 31, 2017 − $2.7 million (US$2.0 million)] as rent guarantees for its leased premises in
New York.
Bank Indebtedness and Other Credit Facilities
The Company enters into call loans or overdraft positions primarily to facilitate the securities settlement process for both client and
Company securities transactions. The bank indebtedness is collateralized by unpaid client securities and/or securities owned by the
Company. As of March 31, 2018, the Company had $nil of bank indebtedness outstanding [March 31, 2017 − $25.3 million].
In connection with the acquisition of Hargreave Hale, a subsidiary of the Company obtained a £40.0 million (C$72.5 million as of
March 31, 2018) bank loan to finance a portion of the cash consideration. The loan is repayable in instalments of principal and
interest over a period of 4 years. The interest rate on this loan is LIBOR plus 3.375% per annum.
As discussed above, excluding the bank loan related to the acquisition, subsidiaries of the Company also have other credit
facilities, such as call loans, letters of credit and overdraft facilities, with banks in Canada and the UK. The aggregate amount of
other credit facilities available to the Company was $669.2 million as of March 31, 2018 [March 31, 2017 − $602.6 million]. As
of March 31, 2018, there were no balances outstanding under these other credit facilities.
In the normal course of business, the Company enters into contracts that give rise to commitments of future minimum payments
that affect its liquidity.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
The following table summarizes Canaccord Genuity Group’s long term contractual obligations on March 31, 2018:
Management’s Discussion and Analysis 45
(C$ thousands)
Premises and equipment operating leases
Bank loan(1)
Convertible debentures(2)
Total contractual obligations
Total
Fiscal 2019
Fiscal 2020 −
Fiscal 2021
Fiscal 2022 −
Fiscal 2023
177,165
72,500
75,600
325,265
32,476
9,679
3,900
46,055
59,427
24,179
7,800
91,406
44,517
38,642
63,900
Thereafter
40,745
—
—
147,059
40,745
(1) Bank loan consists of £40,000,000 credit facility obtained to finance a portion of the cash consideration for the acquisition of Hargreave Hale. The bank loan bears interest at LIBOR plus 3.375%
per annum and is repayable in instalments of principal and interest over 4 years and matures in September of 2021.
(2) Convertible debentures consist of the unsecured senior subordinated convertible debentures (the ‘‘Debentures’’) issued in Q3/17. The Debentures bear interest at a rate of 6.50% per annum and
mature on December 31, 2021. The Company, under certain circumstances, may redeem the Debentures on or after December 31, 2019.
Liquidity and Capital Resources
The Company has a capital structure comprised of preferred shares, common shares, contributed surplus, debentures, warrants,
retained earnings and accumulated other comprehensive income. On March 31, 2018, cash and cash equivalents were
$862.8 million, an increase of $185.1 million from $677.8 million as of March 31, 2017. During the year ended March 31, 2018,
financing activities used cash in the amount of $10.3 million, mainly due to cash used in the acquisition of common shares for
the Company’s long-term incentive plan, payment of preferred and common share dividends, and a decrease in bank
indebtedness, partially offset by the proceeds from the bank loan obtained in relation to the acquisition of Hargreave Hale.
Investing activities used cash in the amount of $63.7 million mainly for the acquisition of Hargreave Hale and the purchase of
leasehold improvements. Operating activities generated cash of $244.1 million, which was largely due to changes in non-cash
working capital. An increase in cash of $15.0 million was attributable to the effect of foreign exchange translation on cash
balances.
The Company’s business requires capital for operating and regulatory purposes. The majority of current assets reflected on the
Company’s audited consolidated statements of financial position are highly liquid. The majority of the positions held as securities
owned are readily marketable, and all are recorded at their fair value. Securities sold short are highly liquid securities. The fair
value of these securities fluctuates daily as factors such as changes in market conditions, economic conditions and investor
outlook affect market prices. Client receivables are secured by readily marketable securities and are reviewed daily for impairment
in value and collectability. Receivables and payables from brokers and dealers represent the following: current open transactions
that generally settle within the normal three-day settlement cycle (as of September 30, 2017, the North American markets moved
to a two-day settlement cycle); collateralized securities borrowed and/or loaned in transactions that can be closed within a few
days on demand; and balances on behalf of introducing brokers representing net balances in connection with their client
accounts.
Preferred Shares
SERIES A PREFERRED SHARES
In fiscal 2012, the Company issued 4,540,000 Cumulative 5-Year Rate Reset First Preferred Shares, Series A (Series A Preferred
Shares) at a purchase price of $25.00 per share for gross proceeds of $113.5 million. The aggregate net amount recognized after
deducting issue costs, net of deferred taxes of $1.0 million, was $110.8 million.
Quarterly cumulative cash dividends, as declared, were paid at an annual rate of 5.5% for the initial five-year period ended on
September 30, 2016. Commencing October 1, 2016 and ending on and including September 30, 2021, quarterly cumulative
dividends, if declared, will be paid at an annual rate of 3.885%. Thereafter, the dividend rate will be reset every five years at a rate
equal to the five-year Government of Canada bond yield plus 3.21%.
Holders of Series A Preferred Shares had the option to convert any or all of their shares into an equal number of Cumulative
Floating Rate First Preferred Shares, Series B (Series B Preferred Shares), subject to certain conditions, on September 30, 2016
and have the option on September 30 every five years thereafter. The number of shares tendered for conversion by the conversion
deadline of September 15, 2016 was below the minimum required to proceed with the conversion and, accordingly, no Series B
Preferred Shares were issued. Series B Preferred Shares would entitle any holders thereof to receive floating rate, cumulative,
preferential dividends payable quarterly, if declared, at a rate equal to the three-month Government of Canada Treasury Bill yield
plus 3.21%.
The Company had the option to redeem the Series A Preferred Shares on September 30, 2016, and has the option to redeem on
September 30 every five years thereafter, in whole or in part, at $25.00 per share together with all declared and unpaid dividends.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
46 Management’s Discussion and Analysis
SERIES C PREFERRED SHARES
In fiscal 2013, the Company issued 4,000,000 Cumulative 5-Year Rate Reset First Preferred Shares, Series C (Series C Preferred
Shares) at a purchase price of $25.00 per share for gross proceeds of $100.0 million. The aggregate net amount recognized after
deducting issue costs, net of deferred taxes of $1.0 million, was $97.5 million.
Quarterly cumulative cash dividends, as declared, were paid at an annual rate of 5.75% for the initial five-year period ending on
June 30, 2017. Commencing July 1, 2017 and ending on and including June 30, 2022, quarterly cumulative dividends, if declared,
will be paid at an annual rate of 4.993%. Thereafter, the dividend rate will be reset every five years at a rate equal to the five-year
Government of Canada bond yield plus 4.03%.
Holders of Series C Preferred Shares had the option to convert any or all of their shares into an equal number of Cumulative
Floating Rate First Preferred Shares, Series D (Series D Preferred Shares), subject to certain conditions, on June 30, 2017 and
have the option on June 30 every five years thereafter. The number of shares tendered for conversion by the conversion deadline
of June 30, 2017 was below the minimum required to proceed with the conversion and, accordingly, no Series D Preferred Shares
were issued. Series D Preferred Shares would entitle any holders thereof to receive floating rate, cumulative, preferential dividends
payable quarterly, if declared, at a rate equal to the three-month Government of Canada Treasury Bill yield plus 4.03%.
The Company had the option to redeem the Series C Preferred Shares on June 30, 2017, and has the option to redeem on
June 30 every five years thereafter, in whole or in part, at $25.00 per share together with all declared and unpaid dividends.
CONVERTIBLE DEBENTURES
In fiscal 2017, the Company issued convertible unsecured senior subordinated debentures (‘‘Debentures’’) in the aggregate
principal amount of $60.0 million. The Debentures bear interest at a rate of 6.50% per annum. The Debentures are convertible at
the holder’s option into common shares of the Company at a conversion price of $6.50 per share. The Debentures will mature on
December 31, 2021 and may be redeemed by the Company, in certain circumstances, on or after December 31, 2019.
Outstanding Share Data
Preferred shares
Series A − issued shares outstanding
Series C − issued shares outstanding
Common shares
Issued shares excluding unvested shares(1)
Issued shares outstanding(2)
Issued shares outstanding − diluted(3)
Average shares outstanding − basic
Average shares outstanding − diluted(4)
Average shares outstanding − diluted, excluding significant items(4)(5)
Outstanding shares as of March 31
2018
2017
4,540,000
4,000,000
4,540,000
4,000,000
93,053,875
113,522,629
124,294,132
92,587,216
110,862,087
120,092,836
92,779,817
113,511,468
124,479,390
91,656,708
101,149,072
101,149,072
(1) Excludes 654,322 outstanding unvested shares related to share purchase loans for recruitment and 19,814,432 unvested shares purchased by the employee benefit trusts for the LTIP.
(2)
(3)
(4) This is the diluted share number used to calculate diluted EPS. For years with net losses attributable to common shareholders, all instruments involving potential common shares were excluded
Includes 654,322 unvested shares related to share purchase loans for recruitment and 19,814,432 unvested shares purchased by the employee benefit trusts for the LTIP.
Includes 10,771,503 of share issuance commitments net of forfeitures.
from the calculation of diluted earnings per share as they were anti-dilutive.
(5) See Non-IFRS Measures on page 14. This is the diluted share number used to calculate diluted EPS on an excluding significant items basis.
On August 11, 2017, the Company filed a notice to renew the normal course issuer bid (NCIB) to provide the Company with the
choice to purchase up to a maximum of 5,675,573 of its common shares during the period from August 15, 2017 to August 14,
2018 through the facilities of the TSX and on alternative trading systems in accordance with the requirements of the TSX.
Shareholders may obtain a copy of the notice, without charge, by contacting the Company. The purpose of the purchase of
common shares under the NCIB is to enable the Company to acquire shares for cancellation. The maximum number of shares that
may be purchased under this and the previous NCIB represents 5.0% of the Company’s outstanding common shares at the time of
the notice. There were no shares purchased and cancelled through the NCIB between April 1, 2017 and March 31, 2018.
The Company has entered into a predefined plan with a designated broker to allow for the repurchase of its common shares under
this NCIB. The Company’s broker may repurchase the common shares under the plan on any trading day during the NCIB, including
at any time during the Company’s internal trading blackout periods. The plan has been reviewed by the TSX and will terminate on
the earlier of the termination of the plan by the Company in accordance with its terms and the expiry of the NCIB.
The ability to make purchases under the current NCIB commenced on August 15, 2017, and will continue for one year (to
August 14, 2018) at the discretion of the Company. The maximum consideration will be the market price of the securities at the
time of acquisition. In order to comply with the trading rules of the TSX, the daily purchases are limited to 54,968 common shares
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 47
of the Company (which is 25% of the average daily trading volume of common shares of the Company on the TSX in the six
calendar months from February 2017 to July 2017.)
As of May 31, 2018, the Company has 113,531,412 common shares issued and outstanding.
ISSUANCE AND CANCELLATION OF COMMON SHARE CAPITAL
Total common shares issued and outstanding as of March 31, 2017
Shares issued in connection with replacement plans
Total common shares issued and outstanding as of March 31, 2018
Share-Based Payment Plans
LONG-TERM INCENTIVE PLAN
Fiscal 2018
113,511,468
11,161
113,522,629
Under the long-term incentive plan (LTIP), eligible participants are awarded restricted share units (RSUs), which generally vest over
three years. For employees in Canada, the United States, Channel Islands, Australia and the United Kingdom, employee benefit
trusts (the Trusts) have been established. The Company or certain of its subsidiaries, as the case may be, fund the Trusts with
cash which is used by the trustees to purchase common shares on the open market that will be held in the Trusts until the RSUs
vest.
FORGIVABLE COMMON SHARE PURCHASE LOANS
The Company provides loans to certain employees (other than directors or executive officers) for the purpose of partially funding
the purchase of shares of the Company and increasing share ownership by the employees. The Company has provided such loans
to executive officers in the past but has now adopted a policy not to make any further such loans to directors or executive officers.
When made, these loans are forgiven over a vesting period. No interest is charged related to the share purchase loans.
REPLACEMENT PLANS
As a result of the acquisition of CSHP, the Company introduced the Replacement Annual Bonus Equity Deferral (ABED) plan, which
replaced the ABED plans that existed at CSHP as of the acquisition date. Eligible employees who participated in the CSHP ABED
plan were granted awards under the Replacement ABED plan. In addition, the Company introduced the Replacement Long-term
Incentive Plan, which replaced the existing LTIPs at CSHP as of the acquisition date for eligible employees.
SHARE OPTIONS
The Company previously granted share options to purchase common shares of the Company to independent directors and senior
management. As at March 31, 2018, all share options have expired.
DEFERRED SHARE UNITS
Beginning April 1, 2011, the Company adopted a deferred share unit (DSU) plan for its independent directors. The independent
directors can elect to have fees payable to them paid in the form of DSUs or in cash. Directors must elect annually as to how they
wish their directors’ fees to be paid and can specify the allocation of their directors’ fees between DSUs and cash. When a
director leaves the Board of Directors, outstanding DSUs are paid out in cash, with the amount equal to the number of DSUs
granted multiplied by the closing share price as of the end of the fiscal quarter immediately following such terminations. Under the
plan, the directors are not entitled to receive any common shares in the Company, and under no circumstances will DSUs confer
on any participant any of the rights or privileges of a holder of common shares.
PERFORMANCE SHARE UNITS
For the year ended March 31, 2018, the Company adopted a performance share unit (‘‘PSU’’) plan for certain senior executives.
The PSUs are a notional equity-based instrument linked to the value of the Company’s common shares. At the end of a 3-year
vesting period, the number of PSUs which vest is determined upon performance against certain pre-determined metrics. The PSUs
cliff vest on the 3rd anniversary of the date of the grant. The PSUs are settled in cash, based on the average share price of the
Company’s shares at the time of vesting.
OTHER RETENTION AND INCENTIVE PLANS
There were other retention and incentive plans, including the employee stock purchase plan, with individual employees, for which
the amount incurred was not significant in the aggregate.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
48 Management’s Discussion and Analysis
Related Party Transactions
The Company’s related parties include the following persons and/or entities: (a) entities that are controlled or significantly
influenced by the Company, and (b) key management personnel, who are comprised of the directors of the Company, as well as
executives involved in strategic decision-making for the Company.
The Company’s trading subsidiaries and intermediate holding companies are listed in the following table:
Canaccord Genuity Corp.
CG Investments Inc.
Canaccord Genuity SAS
Canaccord Genuity Wealth (International) Limited
Canaccord Genuity Financial Planning Limited
Canaccord Genuity Wealth Limited
Canaccord Genuity Wealth Group Limited
Canaccord Genuity Wealth (International) Holdings Limited
Hargreave Hale Limited
Canaccord Genuity Limited
Canaccord Genuity Wealth Group Holdings Ltd.
Canaccord Genuity LLC
Canaccord Genuity Wealth Management (USA) Inc.
Canaccord Genuity Wealth & Estate Planning Services Ltd.
Canaccord Asset Management Inc.
Canaccord Adams Financial Group Inc.
Collins Stewart Inc.
Canaccord Adams BC ULC
Canaccord Adams (Delaware) Inc.
Canaccord Genuity Securities LLC
Stockwave Equities Ltd.
CLD Financial Opportunities Limited
Canaccord Genuity (Hong Kong) Limited
Canaccord Financial Group (Australia) Pty Ltd*
Canaccord Genuity (Australia) Limited*
(Beijing) Limited)
The Balloch Group Limited
Canaccord Genuity Asia (Hong Kong) Limited
Canaccord Genuity (Dubai) Ltd.
(Canaccord Genuity Asia
% equity interest
Country of
incorporation
March 31,
2018
March 31,
2017
Canada
Canada
France
Guernsey
United Kingdom
United Kingdom
United Kingdom
Guernsey
United Kingdom
United Kingdom
Canada
United States
United States
Canada
Canada
United States
United States
Canada
United States
United States
Canada
Canada
China (Hong Kong SAR)
Australia
Australia
China
British Virgin Islands
China (Hong Kong SAR)
United Arab Emirates
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
100%
100%
100%
100%
100%
n/a
100%
100%
100%
100%
100%
100%
n/a
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
100%
100%
100%
100%
*
The Company owns 50% of the issued shares of Canaccord Financial Group (Australia) Pty Ltd and Canaccord Genuity (Australia) Limited, but for accounting purposes, as of March 31, 2018 the
Company is considered to have a 58% interest because of the shares held in a trust controlled by Canaccord Financial Group (Australia) Pty Ltd [March 31, 2017 − 58%].
Security trades executed for employees, officers and directors of Canaccord Genuity Group Inc. are transacted in accordance with
terms and conditions applicable to all clients. Commission income on such transactions in the aggregate is not material in
relation to the overall operations of Canaccord Genuity Group Inc.
The Company offers various share-based payment plans to its key management personnel, including common share purchase
loans, a long-term incentive plan, PSU plan, and share options. Directors have also been granted share options and have the right
to acquire DSUs.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 49
Disclosed in the table below are the amounts recognized as expenses related to individuals who are key management personnel
as at March 31, 2018 and March 31, 2017.
(in thousands)
Short term employee benefits
Post termination benefits
Share-based payments
Total compensation paid to key management personnel
March 31,
2018
10,515
$
—
4,933
March 31,
2017
7,053
1,989
3,979
15,448
$
13,021
$
$
Accounts payable and accrued liabilities include the following balances with key management personnel:
(in thousands)
Accounts receivable
Accounts payable and accrued liabilities
Critical Accounting Policies and Estimates
March 31,
2018
$
$
969
1,527
$
$
March 31,
2017
211
219
The following is a summary of Canaccord Genuity Group’s critical accounting estimates. The Company’s significant accounting
policies are in accordance with IFRS and are described in Note 5 to the Audited Consolidated Financial Statements for the year
ended March 31, 2018. The Company’s consolidated financial statements for the years ended March 31, 2018 and 2017 were
also prepared in accordance with IFRS.
The preparation of the March 31, 2018 Audited Consolidated Financial Statements in conformity with IFRS requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements. Therefore, actual results may differ from those estimates and
assumptions. The significant judgments, estimates and assumptions include consolidation, revenue recognition, share-based
payments, income taxes, tax losses available for carryforward, impairment of goodwill and other assets, indefinite life intangible
assets and other long-lived assets, allowance for credit losses, fair value of financial instruments, capitalization of software costs
and provisions. Amendments may be made to estimates relating to net assets acquired in an acquisition as well as the allocation
of identifiable intangible assets between indefinite life and finite lives. Judgments, estimates and assumptions were also utilized
in connection with the valuation of goodwill and intangible assets acquired in connection with the acquisition of Hargreave Hale.
Significant accounting policies used and policies requiring management’s judgment and estimates are disclosed in Notes 2 and 5
of the Audited Consolidated Financial Statements for the year ended March 31, 2018.
CONSOLIDATION
The Company owns 50% of the voting shares of Canaccord Genuity (Australia) Limited (CGAL) as at March 31, 2018. The Company
also completed an evaluation of its contractual arrangement with the other shareholders and the control it has over the financial
and operating policies of CGAL and determined it should consolidate under IFRS 10, ‘‘Consolidated Financial Statements’’
(IFRS 10) as at March 31, 2018 and 2017. Therefore, the financial position, financial performance, and cash flows of CGAL have
been consolidated. Although the Company owns 50% of the issued shares of CGAL, for accounting purposes, as of March 31,
2018, the Company is considered to have a 58% interest because of the shares held in a trust controlled by Canaccord Financial
Group (Australia) Pty Ltd. and therefore has recognized a 42% non-controlling interest (March 31, 2017 − 42%), which represents
the portion of CGAL’s net identifiable assets not owned by the Company. At the date of acquisition, the non-controlling interest was
determined using the proportionate method. Net income (loss) and each component of other comprehensive income (loss) are
attributed to the non-controlling interest and to the owners of the parent.
The Company has established employee benefit trusts, which are considered special purpose entities (SPEs), to fulfill obligations
to employees arising from the Company’s share-based payment plans. The employee benefit trusts have been consolidated in
accordance with IFRS 10 since their activities are conducted on behalf of the Company, and the Company retains the majority of
the benefits and risks of the employee benefit trusts.
INTANGIBLE ASSETS
Identifiable intangible assets acquired separately are measured on initial recognition at cost. The cost of identifiable intangible
assets acquired in a business combination is equal to their fair value as at the date of acquisition. Following initial recognition,
identifiable intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses.
The useful lives of identifiable intangible assets are assessed to be either finite or indefinite. Identifiable intangible assets with
finite lives are amortized over their useful economic lives and assessed for impairment whenever there is an indication that the
identifiable intangible asset may be impaired. The amortization period and the amortization method for an identifiable intangible
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
50 Management’s Discussion and Analysis
asset are reviewed at least annually, at each financial year end. Identifiable intangible assets with indefinite useful lives are not
amortized, but are tested for impairment annually.
Technology development expenditures on an individual project are recognized as an intangible asset when the Company can
demonstrate that the technical feasibility of the asset for use has been established. The asset is carried at cost less any
accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete
and the asset is available for use. It is amortized over the period of expected future benefit.
IMPAIRMENT OF NON-FINANCIAL ASSETS
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication
exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An
asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its
value-in-use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its
recoverable amount, the asset is considered impaired and is written down to its recoverable amount, and the impairment is
recognized in the consolidated statements of operations.
In assessing fair value less costs to sell, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. The
Company bases its impairment calculation on annual budget calculations, which are prepared separately for each of the
Company’s CGUs to which the individual assets are allocated. These budget calculations generally cover a period of five years. For
longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.
Impairment losses are recognized in the consolidated statements of operations in expense categories consistent with the function
of the impaired asset.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that
previously recognized impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the
asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the
assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is
limited so that the carrying amount of the asset does not exceed its recoverable amount, or exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such
reversal is recognized in the consolidated statement of operations unless the asset is carried at a revalued amount, in which case
the reversal is treated as a revaluation increase.
The following assets have specific characteristics for impairment testing:
Goodwill
Goodwill is tested for impairment at least annually as at March 31 and when circumstances indicate that the carrying value may
be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which goodwill
relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment
losses relating to goodwill cannot be reversed in future periods.
Intangible assets
Intangible assets with indefinite useful lives are tested for impairment annually as at March 31 at the CGU level and when
circumstances indicate that the carrying value may be impaired.
REVENUE RECOGNITION
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be
reliably measured. The Company assesses its revenue arrangements in order to determine if it is acting as principal or agent.
Commissions and fees revenue consists of revenue generated through commission-based brokerage services, recognized on a
trade date basis, and the sale of fee-based products and services, recognized on an accrual basis. Realized and unrealized gains
and losses on securities purchased for client-related transactions are reported as net facilitation losses and recorded as a
reduction of commission revenues.
Investment banking revenue consists of underwriting fees and commissions earned on corporate finance activities. Revenue from
underwritings and other corporate finance activities is recorded when the underlying transaction is substantially completed under
the engagement terms and the related revenue is reasonably determinable.
Advisory fees consist of management and advisory fees that are recognized on an accrual basis. Also included in advisory fees is
revenue from mergers and acquisitions activities, which is recognized when the underlying transaction is substantially completed
under the engagement terms and the related revenue is reasonably determinable.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 51
Principal trading revenue consists of income earned in connection with principal trading operations and is recognized on a trade
date basis.
Interest revenue consists of interest earned on client margin accounts, interest earned on the Company’s cash and cash
equivalents balances, interest earned on cash delivered in support of securities borrowing activity, and dividends earned on
securities owned. Interest revenue is recognized on an effective interest rate basis. Dividend income is recognized when the right
to receive payment is established.
Other revenue includes foreign exchange gains or losses, revenue earned from our correspondent brokerage services and
administrative fees revenues.
INCOME TAXES
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid
to the taxation authorities. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively
enacted, at the reporting date, in the countries where the Company operates and generates taxable income.
Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations
are subject to interpretation and establishes provisions where appropriate.
Current income tax relating to items recognized directly in equity is recognized in equity and not in the consolidated statements of
operations.
Deferred tax
Deferred taxes are accounted for using the liability method. This method requires that deferred taxes reflect the expected deferred
tax effect of temporary differences at the reporting date between the carrying amounts of assets and liabilities for financial
statement purposes and their tax bases.
Deferred tax liabilities are recognized for all taxable temporary differences, except for taxable temporary differences associated
with investments in subsidiaries where the timing of the reversal of the temporary difference can be controlled and it is probable
that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits and carryforward of
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences and the carryforward of unused tax credits and unused tax losses can be utilized. The carrying amounts of deferred
tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit
will be available to allow all or part of the deferred tax assets to be utilized. Unrecognized deferred tax assets are assessed at
each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred
tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is
realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of
the reporting period. Deferred tax is charged or credited in the statements of operations except where it relates to items that may
be credited directly to equity, in which case the deferred tax is recognized directly against equity.
Sales tax
Revenues, expenses and assets are recognized net of the amount of sales tax, except where the amount of sales tax incurred is
not recoverable from the tax authority. In these circumstances, sales tax is recognized as part of the cost of acquisition of the
asset or as part of an item of the expense. The net amount of sales tax recoverable from, or payable to, the taxation authority is
included as part of accounts receivable or accounts payable in the consolidated statements of financial position.
SHARE-BASED PAYMENTS
Employees (including senior executives) of the Company receive remuneration in the form of share-based payment transactions,
whereby employees render services as consideration for equity instruments (equity-settled transactions). The participating
employees are eligible to receive shares that generally vest over three years (the ‘‘RSUs’’). This program is referred to as the
“LTIP” (or the ‘‘Plan’’).
Independent directors also receive deferred share units (DSUs) as part of their remuneration, which can only be settled in cash.
For the year ended March 31, 2018, certain senior executives receive performance share units (PSUs) as part of their
remuneration, which can only be settled in cash (cash-settled transactions).
The dilutive effect, if any, of outstanding options and share-based payments is reflected as additional share dilution in the
computation of diluted earnings (loss) per common share.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
52 Management’s Discussion and Analysis
Equity-settled transactions
For equity-settled transactions, the Company measures the fair value of share-based awards as of the grant date.
Effective as of March 31, 2018 the Plan was changed so that the vesting of certain RSUs was no longer necessarily contingent
upon continued employment. With the change, RSUs will continue to vest after termination of employment so long as the
employee does not violate certain post-termination restrictions and is not engaged in certain competitive or soliciting activities as
provided in the Plan. Because of this change, the Company determined that the awards do not meet the criteria for an
in-substance service condition, as defined by IFRS 2. Accordingly, RSUs granted as part of the normal course incentive
compensation payment cycle are expensed in the period in which those awards are deemed to be earned with a corresponding
increase in contributed surplus, which is generally the fiscal period in which the awards are either made or the immediately
preceding fiscal year for those awards made after the end of such fiscal year but were determined and earned in respect of that
fiscal year.
For certain awards, typically new hire awards or retention awards, vesting is subject to continued employment and therefore these
awards are subject to a continuing service requirement. Accordingly, the Company recognizes the cost as an expense on a graded
basis over the applicable vesting period with a corresponding increase in contributed surplus. The Company estimates the number
of equity instruments that will ultimately vest when calculating the expense attributable to equity-settled transactions. No expense
is recognized for awards that do not ultimately vest.
When share-based awards vest, contributed surplus is reduced by the applicable amount and share capital is increased by the
same amount.
Cash-settled transactions
The cost of cash-settled transactions is measured initially at fair value at the grant date. The fair values of DSUs and PSUs are
expensed upon grant, as there are no vesting conditions. The liability is remeasured to fair value at each reporting date up to and
including the settlement date, with changes in fair value recognized through the statements of operations.
TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS AND FOREIGN SUBSIDIARIES
The Company’s consolidated financial statements are presented in Canadian dollars, which is also the Company’s functional
currency. Each subsidiary of the Company determines its own functional currency, and items included in the financial statements
of each subsidiary are measured using that functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company and its subsidiaries at their respective functional
currencies using exchange rates prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated by the Company and its subsidiaries into their
respective functional currencies at the exchange rate in effect at the reporting date. All differences upon translation are
recognized in the consolidated statements of operations.
Non-monetary assets and liabilities denominated in foreign currencies are translated by the Company and its subsidiaries into
their respective functional currencies at historical rates. Non-monetary items measured at fair value in a foreign currency are
translated using the exchange rates in effect at the date when the fair value is determined.
Translation of foreign subsidiaries
Assets and liabilities of foreign subsidiaries with a functional currency other than the Canadian dollar are translated into Canadian
dollars at rates prevailing at the reporting date, and income and expenses are translated at average exchange rates prevailing
during the period. Unrealized gains or losses arising as a result of the translation of the foreign subsidiaries are recorded in
accumulated other comprehensive income (loss). On disposal of a foreign operation, the component of other comprehensive
income relating to that particular foreign operation is recognized in the consolidated statements of operations.
The Company also has monetary assets and liabilities that are receivable or payable from a foreign operation. If settlement of the
receivable or payable is neither planned nor likely to occur in the foreseeable future, the differences upon translation are
recognized in accumulated other comprehensive income (loss) as these receivables and payables form part of the net investment
in the foreign operation.
PROVISIONS
Provisions are recognized when the Company has a present obligation as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation. The expense relating to any provision is presented in the statements of operations net of any
reimbursement. If the effect of the time value of money is significant, provisions are discounted using a current pre-tax rate that
reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the
passage of time is recognized as an interest expense.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 53
Financial Instruments
A significant portion of the Company’s assets and liabilities are composed of financial instruments. The Company uses financial
instruments for both trading and non-trading activities. The Company engages in trading activities which include the purchase and
sale of securities in the course of facilitating client trades and taking principal trading positions with the objective of earning a
profit.
The use of financial instruments may either introduce or mitigate exposures to market, credit and/or liquidity risks. See Risk
Management in this MD&A for details on how these risks are managed. For significant assumptions made in determining the
valuation of financial and other instruments, refer to Critical Accounting Policies and Estimates in this MD&A. For additional
information regarding the Company’s financial instruments, refer to Note 7 of the Audited Consolidated Financial Statements for
the year ended March 31, 2018.
FOREIGN EXCHANGE
The Company manages its foreign exchange risk by periodically hedging pending settlements in foreign currencies. Realized and
unrealized gains and losses related to these transactions are recognized in income during the period. On March 31, 2018, forward
contracts outstanding to sell US dollars had a notional amount of US$17.7 million, a decrease of US$4.4 million compared to
March 31, 2017. Forward contracts outstanding to buy US dollars had a notional amount of US$2.1 million, a decrease of
US$0.8 million from March 31, 2017. The fair value of these contracts was nominal. Some of the Company’s operations in the
US, the UK & Europe, Australia, Hong Kong and China are conducted in the local currency; however, any foreign exchange risk in
respect of these transactions is generally limited as pending settlements on both sides of the transaction are typically in the local
currency.
These contracts were entered into in an attempt to mitigate foreign exchange risk on pending security settlements in foreign
currencies. The fair value of these contracts is nominal due to their short term to maturity.
The Company’s Canaccord Genuity Wealth Management segment in the UK & Europe trades foreign exchange forward contracts on
behalf of its clients, and establishes matching contracts with the counterparties. The Company has no significant net exposure,
assuming no counterparty default.
FUTURES
The Company’s Canadian operations are involved in trading various futures contracts, in an attempt to mitigate market risk,
interest rate risk, yield curve risk and liquidity risk. Futures contracts are agreements to buy or sell a standardized amount of an
underlying asset, at a predetermined future date and price, in accordance with terms specified by a regulated futures exchange,
and are subject to daily cash margining. The Company’s Canadian operations have traditionally engaged in the trading of Canadian
and US government bond futures contracts to mitigate its risk. At March 31, 2018, the notional amount of the Canadian bond
futures contracts outstanding was long $0.1 million [March 31, 2017 − long $0.5 million].
The Company’s Canadian operations are also involved in trading US Treasury futures in an attempt to mitigate interest rate risk,
yield curve risk and liquidity risk. There were no outstanding US Treasury futures contracts outstanding as at March 31, 2018 and
March 31, 2017.
The fair value of all of the above futures contracts is nominal due to their short term to maturity. Realized and unrealized gains
and losses related to these contracts are recognized in net income (loss) during the reporting period.
Future Changes in Accounting Policies and Estimates
The Company monitors the potential changes proposed by the International Accounting Standards Board on an ongoing basis and
analyzes the effect that changes in the standards may have on the Company’s operations.
STANDARDS ISSUED BUT NOT YET EFFECTIVE
Standards issued, which may be reasonably expected to impact upon the Company’s financial statements, but which are not yet
effective are listed below.
IFRS 15, ‘‘REVENUE FROM CONTRACTS WITH CUSTOMERS’’
In May 2014, the IASB issued IFRS 15 − Revenue from Contracts with Customers (‘‘IFRS 15’’). IFRS 15 establishes a single
five-step model framework for determining the nature, amount, timing and uncertainty of revenue and cash flows arising from a
contract with a customer. The standard is effective for annual periods on or after January 1, 2018, with early adoption permitted.
Either a modified retrospective application or full retrospective application is permitted under IFRS 15. The Company will be
adopting IFRS 15 for its fiscal year ending March 31, 2019 using the modified retrospective application approach.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
54 Management’s Discussion and Analysis
The Company has evaluated the impact of IFRS 15 on its various revenue streams and the assessment is as follows:
(cid:129) Commissions and fees − The Company concluded there is no material change in the amount or timing of revenue recognized
under the new standard as the point of transfer of risk and reward for services and transfer of control occur at the same
time.
(cid:129) Investment banking − The Company concluded that investment banking will generally not be affected by IFRS 15 as revenue
will be recognized upon completion of the performance obligation.
(cid:129) Advisory fees − The Company concluded that advisory fees will generally not be affected by IFRS 15 as revenue will be
recognized upon completion of the performance obligation. In certain cases, some fees are collected based on progress and
do not correspond to the satisfaction of any discrete performance obligation. Under IFRS 15, such payments may need to be
deferred until the performance obligation is satisfied. The impact of this change on the amount of revenue recognized in a
fiscal year is insignificant.
(cid:129) Principal trading, interest and other revenue are excluded from the scope of IFRS 15.
IFRS 15 contains presentation and disclosure requirements which are more detailed than the current standards. Upon adoption of
IFRS 15, the Company will provide disclosures for each of the Company’s revenue streams, to supplement the revenue data that
are currently presented in the segmented information disclosure. New disclosures will be presented relating to the timing of
completion of the Company’s performance obligations.
IFRS 9, ‘‘FINANCIAL INSTRUMENTS’’
In July 2014, the IASB issued IFRS 9 − Financial Instruments (‘‘IFRS 9’’), which replaces the earlier versions of IFRS 9 (2009,
2010, and 2013) and completes the IASB’s project to replace IAS 39 − Financial Instruments: Recognition and Measurement.
IFRS 9 is effective for annual periods beginning on or after January 1, 2018 and must be applied retrospectively with the exception
of hedge accounting. The Company will adopt IFRS 9 for its fiscal year ending March 31, 2019.
The Company has evaluated the impact of IFRS 9 on its consolidated financial statements and the assessment is as follows:
Classification − financial assets and liabilities
IFRS 9 sets out requirements for recognizing and measuring financial assets and financial liabilities. IFRS 9 contains a new
classification and measurement approach for financial assets that reflects the business model in which assets are managed and
their cash flow characteristics. IFRS 9 contains three principal classification categories for financial assets: measured at
amortized cost, fair value through other comprehensive income (‘‘FVOCI’’) and fair value through profit and loss (‘‘FVTPL’’). IFRS 9
largely retains the existing requirements in IAS 39 for the classification of financial liabilities. The Company expects to continue
to classify cash and cash equivalents and securities owned as financial assets classified as FVTPL and accounts receivable as
financial assets measured at amortized costs. The Company’s investment in Euroclear, which is classified as available for sale
as of March 31, 2018, will be reclassified as FVOCI. The classification of financial liabilities is expected to remain consistent
under IFRS 9.
Impairment − financial assets
IFRS 9 introduces the new ‘‘expected credit loss’’ impairment model which replaces the ‘‘incurred loss’’ model in IAS 39. Based on
its assessment, the Company does not believe that new impairment requirements will have a material impact on its financial
statements given the short-term nature of the Company’s receivables.
Hedge accounting requirement
IFRS 9 offers greater flexibility to the types of transactions eligible for hedge accounting. The Company does not expect this
change to have any material impact on its consolidated financial statements upon adoption.
IFRS 16, ‘‘LEASES’’
In January 2016, the IASB issued IFRS 16 ‘‘Leases’’ (‘‘IFRS 16’’), which requires lessees to recognize assets and liabilities for
most leases. The new standard will be effective for annual periods beginning on or after January 1, 2019. Early adoption is
permitted, provided the new revenue standard, IFRS 15, has been applied, or is applied at the same date as IFRS 16 using either
a full retrospective or a modified retrospective approach. The Company plans to apply IFRS 16 for its year ending March 31, 2020
but has not yet selected a transition approach.
Upon adoption of IFRS 16, the Company anticipates it will result in an increase in assets and liabilities related to leases. Due to
the recognition of additional lease assets and liabilities, a higher amount of depreciation expense and interest expense on lease
liabilities will be recognized under IFRS 16 compared to the current standard. Lastly, the Company expects a reduction in operating
cash outflows with a corresponding increase in financing cash outflows under IFRS 16. The Company is in the process of
identifying and collecting data relating to existing agreements to determine the impact of adoption of IFRS 16.
Please see Note 4 of the Audited Consolidated Financial Statements for the year ended March 31, 2018 for further information.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 55
Disclosure Controls and Procedures and Internal Control over Financial Reporting
DISCLOSURE CONTROLS AND PROCEDURES
As of March 31, 2018, an evaluation was carried out, under the supervision of and with the participation of management,
including the President & CEO and the Executive Vice President, Chief Financial Officer, of the effectiveness of our disclosure
controls and procedures as defined under National Instrument 52-109. Based on that evaluation, the President & CEO and the
Executive Vice President, Chief Financial Officer concluded that the design and operation of these disclosure controls and
procedures were effective as of and during the fiscal year ended March 31, 2018.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Management, including the President & CEO and the Executive Vice President, Chief Financial Officer, has designed internal
control over financial reporting as defined under National Instrument 52-109 to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Based
on that evaluation, the President & CEO and the Executive Vice President, Chief Financial Officer concluded that the Company’s
internal control over financial reporting was designed and operating effectively as of and during the year ended March 31, 2018
and that there were no material weaknesses in our internal control over financial reporting.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in internal control over financial reporting that occurred during the year ended March 31, 2018 that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Risk Management
OVERVIEW
Uncertainty and risk are inherent when conducting operations within financial markets. As an active participant in the Canadian
and international capital markets, the Company is exposed to risks that could result in financial losses. The Company has
identified its principal risks as: market risk, credit risk, operational risk and other risks. Accordingly, risk management and control
of the balance between risk and return are critical elements in maintaining the Company’s financial stability and profitability.
Therefore, an effective risk management framework is integral to the success of Canaccord Genuity Group Inc.
RISK MANAGEMENT STRUCTURE AND GOVERNANCE
The Company’s disciplined risk management process encompasses a number of functional areas and requires frequent
communication, judgment and knowledge of the business, products and markets. The Company’s senior management is actively
involved in the risk management process and has developed policies, procedures and reports that enable the Company to assess
and control its risks. These policies and procedures are subject to ongoing review and modification as activities, markets and
circumstances change.
As part of the Company’s risk philosophy, the first line of responsibility for managing risk lies with branch managers, department
heads and trading desk managers (within prescribed limits). The monitoring and control of the Company’s risk exposure is
conducted through a variety of separate, but complementary, financial, credit, operational, compliance and legal reporting systems.
The Company’s governance structure includes the following elements:
Audit Committee
Board of Directors
Canaccord
Genuity Group Inc.
Corporate Governance &
Compensation Committee
Risk Management
Committee
Cyber Security
Committee
Canaccord Genuity Global
Operating Committee
The Board of Directors (the Board) has oversight of the company-wide risk management framework. These responsibilities are
delegated to the Audit and Risk Management Committees. See the company’s current Annual Information Form (AIF) for details of
the Audit Committee’s mandate as it relates to risk management.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
56 Management’s Discussion and Analysis
The Audit Committee assists the Board in fulfilling its oversight responsibility by monitoring the effectiveness of internal controls
and the control environment. It also receives and reviews various quarterly and annual updates, and reports on key risk metrics as
well as the overall risk management program.
The Risk Management Committee assists the Board in fulfilling its responsibilities for monitoring risk exposures against the
defined risk appetite and for general oversight of the risk management process. The Risk Management Committee is led by the
firm’s Chief Risk Officer and committee members include the CEO, the CFO and senior management representation from the key
revenue-producing businesses and functional areas of the Company. The Risk Management Committee identifies, measures and
monitors the principal risks facing the business through review and approval of the Company’s risk appetite, policies, procedures,
and limits/thresholds.
The segregation of duties and management oversight are important aspects of the Company’s risk management framework.
The Company has a number of functions that are independent of the revenue-producing businesses that perform risk management
activities, including the monitoring, evaluating and analyzing of risk. These functions include Enterprise Risk Management,
Compliance, Operations, Internal Audit, Treasury, Finance, Information Technology and Legal.
In fiscal 2017, the Company formed a global Cyber Security Committee to help identify, monitor and manage risks specific to the
company’s information networks, data and internal systems. This committee is chaired by the firm’s Chief Risk Officer and
committee members include senior IT management from across the firm, as well as representation from Legal, Compliance,
Internal Audit and Operations. The Cyber Security Committee is focused on issues such as cyber security risk assessment,
IT safeguards and controls, risks related to third-party service provides, employee training and awareness and incident response
planning.
MARKET RISK
Market risk is the risk that a change in market prices and/or any of the underlying market factors will result in losses. Each
business area is responsible for ensuring that their market risk exposure is prudent within a set of risk limits set by the Risk
Management Committee and approved by the Audit Committee. In addition, the Company has established procedures to ensure
that risks are measured, closely monitored, controlled and visible to senior levels of management.
The Company is exposed to equity price risk, liquidity risk and volatility risk as a result of its principal trading activities in equity
securities. The Company is also exposed to specific interest rate risk, credit spread risk and liquidity risk in respect of its principal
trading in fixed income securities. In addition to active supervision and review of trading activities by senior management,
Canaccord Genuity Group mitigates its risk exposure through a variety of limits to control concentration, capital allocation and
usage, as well as through trading policies and guidelines. The Company manages and monitors its risks in this area using both
qualitative and quantitative measures, on a company-wide basis, and also by trading desk and by individual trader. Canaccord
Genuity Group utilizes scenario analysis and a Value-at-Risk (VaR) risk measurement system for its equity and fixed income
inventories. Management also regularly reviews and monitors inventory levels and positions, trading results, liquidity profile,
position aging and concentration levels. Consequently, the Company can ensure that it is adequately diversified with respect to
market risk factors and that trading activity is within the risk tolerance levels established by senior management.
CREDIT RISK
Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The primary source for
credit risk to Canaccord Genuity Group is in connection with trading activity by clients in the Canaccord Genuity Wealth
Management business segment and private client margin accounts. In order to minimize financial exposure in this area, the
Company applies certain credit standards and conducts financial reviews with respect to clients and new accounts.
The Company provides financing to clients by way of margin lending. In margin-based lending, the Company extends credit for a
portion of the market value of the securities in a client’s account, up to certain limits. The margin loans are collateralized by those
securities in the client’s account. In connection with this lending activity, the Company faces a risk of financial loss in the event
that a client fails to meet a margin call if market prices for securities held as collateral decline and if the Company is unable to
recover sufficient value from the collateral held. For margin lending purposes, the Company has established risk-based limits that
are generally more restrictive than those required by applicable regulatory policies. In addition, the Company has established
limits to how much it will lend against an individual security or group of securities in a single sector so as to limit credit
concentration risk.
The extension of credit via margin lending is overseen by the firm’s Credit Committee. The Committee meets regularly to review
and discuss the firm’s credit risks, including large individual loans, collateral quality, loan coverage ratios and concentration risk.
The Committee will also meet, as required, to discuss any new loan arrangements proposed by senior management.
The Company also faces a risk of financial loss with respect to trading activity by clients if such trading results in overdue or
unpaid amounts in under-secured cash accounts. The Company has developed a number of controls within its automated trade
order management system to ensure that trading by individual account and advisor is done in accordance with customized limits
and risk parameters.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 57
The Company is engaged in various trading and brokerage activities whose counterparties primarily include broker dealers, banks,
clearing agents, exchanges, financial intermediaries and other financial institutions. These activities include agency and principal
trading, securities borrowing and lending, and entering into repurchase agreements and reverse repurchase agreements. In the
event that counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the
creditworthiness of the counterparty and/or the issuer of the instrument. The Company manages this risk by imposing and
monitoring individual and aggregate trading and position limits within each business segment, for each counterparty, conducting
regular credit reviews of financial counterparties, reviewing security and loan concentrations, holding and marking to market
collateral on certain transactions, and conducting business through clearing organizations that guarantee performance.
The Company records a provision for bad debts in general and administrative expense. Any actual losses arising from or
associated with client trading activity as described above are charged to this provision. Historically, this provision has been
sufficient to cover actual losses.
OPERATIONAL RISK
Operational risk is the risk of loss resulting from inadequate or failed internal processes, fraud, people and systems, or from
external events such as the occurrence of disasters or security threats. Operational risk exists in all of the Company’s activities,
including processes, systems and controls used to manage other risks. Failure to manage operational risk can result in financial
loss, reputational damage, regulatory fines and failure to manage market or credit risks.
The Company operates in different markets and relies on its employees and systems to process a high number of transactions. In
order to mitigate this risk, the Company has developed a system of internal controls and checks and balances at appropriate
levels, which includes overnight trade reconciliation, control procedures related to clearing and settlement, transaction and daily
value limits within all trading applications, cash controls, physical security, independent review procedures, documentation
standards, billing and collection procedures, and authorization and processing controls for transactions and accounts. In addition,
the Company has implemented an operational risk program that helps Canaccord Genuity Group measure, manage, report and
monitor operational risk issues (see RCSA below). The Company also has disaster recovery procedures, business continuity plans
and built-in redundancies in place in the event of a systems or technological failure. In addition, the Company utilizes third party
service agreements and security audits where appropriate.
Risk and Control Self-Assessment (RCSA)
The purpose of RCSAs is to:
(cid:129) Identify and assess key risks inherent to the business and categorize them based on severity and frequency of occurrence
(cid:129) Rate the effectiveness of the control environment associated with the key risks
(cid:129) Mitigate the risks through the identification of action plans to improve the control environment where appropriate
(cid:129) Provide management with a consistent approach to articulate and communicate the risk profiles of their areas of
responsibility
(cid:129) Meet regulatory requirements and industry standards
The Company has established a process to determine what the strategic objectives of each group/unit/department are and
identify, assess and quantify operational risks that hinder the Company’s ability to achieve those objectives. The RCSA results are
specifically used to calculate the operational risk regulatory capital requirements for operations in the UK and operational risk
exposure in all geographies. The RCSAs are periodically updated and results are reported to the Risk Management and Audit
Committees.
OTHER RISKS
Other risks encompass those risks that can have an adverse material impact on the business but do not belong to market, credit
or operational risk categories.
Regulatory and legal risk
Regulatory risk results from non-compliance with regulatory requirements, which could lead to fines and/or sanctions. The
Company has established procedures to ensure compliance with all applicable statutory and regulatory requirements in each
jurisdiction in which it operates. These procedures address issues such as regulatory capital requirements, disclosure
requirements, internal controls over financial reporting, sales and trading practices, use of and safekeeping of client funds, use of
and safekeeping of client data, credit granting, collection activity, anti-money laundering, insider trading, employee misconduct,
conflicts of interest and recordkeeping.
Legal risk results from potential criminal, civil or regulatory litigation against the Company that could materially affect the
Company’s business, operations or financial condition. The Company has in-house legal counsel, as well as access to external
legal counsel, to assist the Company in addressing legal matters related to operations and to defend the Company’s interests in
various legal actions.
Losses or costs associated with routine regulatory and legal matters are included in general and administrative expense in the
Company’s Audited Consolidated Financial Statements.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
58 Management’s Discussion and Analysis
The Company and its affiliates provide financial advisory, underwriting and other services to, and trade the securities of issuers
that are involved with new and emerging industries, including the US cannabis industry. Activities within such industries, including
the US cannabis industry, typically have not had the benefit of a history of successful operating results. In addition to the
economic uncertainties associated with new industries, new activities and new issuers, the laws applicable to such industries or
activities, particularly the US cannabis industry and the activities of issuers in that industry, and the effect or enforcement of such
laws are undetermined, conflicting and uncertain. With respect to the US cannabis industry, cannabis continues to be a controlled
substance under the United States Controlled Substances Act and as such, there is a risk that certain issuers, while in
compliance with applicable state law, may be prosecuted under federal law. Accordingly, the Company has adopted policies and
procedures reasonably designed to ensure compliance with the United States Currency and Foreign Transactions Reporting Act of
1970 (the ‘‘Bank Secrecy Act’’) and the guidance issued by the United States Department of the Treasury Financial Crimes
Enforcement Network, FIN-2014-G001 (the “FinCEN Guidance”) relating to providing financial services to marijuana related
businesses in the United States (as that term is used in the FinCEN Guidance). While the Company takes steps to identify the
risks associated with emerging industries, including the US cannabis industry, and only provides services to those issuers where it
determines that there is no material risk to the Company or where any risk is unlikely to result in a material adverse consequence
to the Company, there is a risk that the Company could be the subject of third party proceedings which may have a material
adverse effect on the Company business, revenues, operating results and financial condition as well as the Company’s reputation,
even if such proceedings were concluded successfully in favour of the Company. The Company has determined that any such
proceedings are unlikely and, accordingly, has not recorded a provision in respect of such matters.
Cybersecurity risk
Cybersecurity risk is the risk that the Company’s information networks, data or internal systems will be damaged, disrupted,
misappropriated, stolen, accessed without permission or otherwise attacked. This risk exists due to the interconnected nature
of the Company’s business with its clients, suppliers, vendors, partners and the public via the internet and other networks.
As a result of this interconnectivity, third parties with which the Company does business with or that facilitate the Company’s
business may also be a source of cybersecurity risk to the firm. The Company devotes considerable effort and resources to
defend against and mitigate cybersecurity risk, including increasing awareness throughout the organization by implementing a
firmwide cybersecurity training program for all employees. The Company’s management of cybersecurity risk, as well as any
reported incidents, is regularly presented to both senior management via the Cybersecurity Committee and the Audit Committee of
the Board of Directors.
Reputational risk
Reputational risk is the risk that an activity undertaken, or alleged to have been undertaken, by an organization or its
representatives will impair its image in the community or lower public confidence in it, resulting in a loss of revenue, legal action or
increased regulatory oversight. Possible sources of reputational risk could come from operational failures, non-compliance with
laws and regulations, disparaging media coverage, or leading an unsuccessful financing. The Company could face reputational risk
through its association with past or present corporate finance clients who are the subject of regulatory and/or legal scrutiny.
Reputational risk can also be reflected within customer satisfaction and external ratings, such as equity analyst reports. In
addition to its various risk management policies, controls and procedures, the Company has a formal Code of Business Conduct
and Ethics and an integrated program of marketing, branding, communications and investor relations to help manage and support
the Company’s reputation.
CONTROL RISK
As of March 31, 2018, senior officers and directors of the Company collectively owned approximately 9.3% of the issued and
outstanding (13.7% fully diluted) common shares of Canaccord Genuity Group Inc. If a sufficient number of these shareholders act
or vote together, they will have the power to exercise significant influence over all matters requiring shareholder approval, including
the election of the Company’s directors, amendments to its articles, amalgamations and plans of arrangement under Canadian law
and mergers or sales of substantially all of its assets. This could prevent Canaccord Genuity Group from entering into transactions
that could be beneficial to the Company or its other shareholders. Also, third parties could be discouraged from making a tender
offer or takeover bid to acquire any or all of the outstanding common shares of the Company.
Any significant change in these shareholdings through sale or other disposition, or significant acquisitions by others of the
common shares in the public market or by way of private transactions, could result in a change of control and changes in business
focus or practices that could affect the profitability of the Company’s business.
Restrictions on ownership and transfer of common shares
Restrictions on ownership and transfer of common shares in the articles of Canaccord Genuity Group Inc. to prevent unauthorized
change in control without regulatory approval could, in certain cases, affect the marketability and liquidity of the common shares.
Risk factors
For a detailed list of the risk factors that are relevant to the Company’s business and the industry in which it operates, see the
Risk Factors section in the Company’s current AIF. Risks include, but are not necessarily limited to, those listed in the AIF.
Investors should carefully consider the information about risks, together with the other information in this document, before
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Management’s Discussion and Analysis 59
making investment decisions. It should be noted that this list is not exhaustive, but contains risks that the Company considers to
be of particular relevance. Other risk factors may apply.
Further discussion regarding risks can be found in our Annual Information Form.
Dividend Policy
Although dividends are expected to be declared and paid quarterly, the Board of Directors, in its sole discretion, will determine the
amount and timing of any dividends. All dividend payments will depend on general business conditions, the Company’s financial
condition, results of operations, capital requirements and such other factors as the Board determines to be relevant.
Dividend Declaration
On June 6, 2018, the Board of Directors approved a dividend of $0.12 per common share, payable on July 3, 2018, with a record
date of June 22, 2018. This dividend is comprised of a $0.01 base quarterly dividend and an $0.11 supplemental dividend as
outlined below.
The Company’s dividend policy which became effective March 31, 2017 reflects its commitment to return a portion of earnings to
shareholders, in balance with the inherent variability of its business, which is impacted by the overall condition of debt and equity
markets, and the market for securities in specific growth sectors. In the context of its dividend policy, the Company expects to
return 25% to 50% of net earnings attributable to common shareholders on an annual basis. The policy is to pay a quarterly
dividend of $0.01 per common share that will be declared and paid quarterly, which commenced with the fourth quarter of fiscal
2017. Following the end of each fiscal year, the Board will review the capital position of the Company in the context of the market
environment in combination with capital allocation requirements for its strategic priorities, and determine whether a supplemental
dividend should be paid. Supplemental dividends, if declared, may be highly variable from year to year, given the nature of the
Company’s operating environment and the potential need to conserve cash and for certain corporate growth opportunities.
Although dividends are expected to be declared and paid on an ongoing basis, the Board of Directors, in its sole discretion, will
determine the amount and timing of any dividends. All dividend payments will depend on general business conditions, the
Company’s financial condition, results of operations, capital requirements and such other factors as the Board determines to be
relevant.
On June 6, 2018, the Board of Directors approved the following cash dividends: $0.24281 per Series A Preferred Share payable
on July 3, 2018 with a record date of June 22, 2018; and $0.31206 per Series C Preferred Share payable on July 3, 2018 with a
record date of June 22, 2018.
Additional Information
Additional information relating to Canaccord Genuity Group Inc., including our Annual Information Form, is available on our website
at www.canaccordgenuitygroup.com/EN/IR/FinReports/Pages/default.aspx and on SEDAR at www.sedar.com.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
60
Independent Auditors’ Report
To the Shareholders of
Canaccord Genuity Group Inc.
We have audited the accompanying consolidated financial statements of Canaccord Genuity Group Inc., which comprise the
consolidated statements of financial position as at March 31, 2018 and 2017, and the consolidated statements of operations,
comprehensive income, changes in equity and cash flows for the years then ended, and a summary of significant accounting
policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance
with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable
the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our
audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the
auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements
in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Canaccord
Genuity Group Inc. as at March 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards.
Toronto, Canada
June 6, 2018
Chartered Professional Accountants
Licensed Public Accountants
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Consolidated Statements of Financial Position
As at (in thousands of Canadian dollars)
ASSETS
Current
Cash and cash equivalents
Securities owned
Accounts receivable
Income taxes receivable
Total current assets
Deferred tax assets
Investments
Equipment and leasehold improvements
Intangible assets
Goodwill
LIABILITIES AND EQUITY
Current
Bank indebtedness
Securities sold short
Accounts payable and accrued liabilities
Provisions
Income taxes payable
Subordinated debt
Current portion of bank loan
Total current liabilities
Deferred tax liabilities
Convertible debentures
Deferred consideration
Contingent consideration
Bank loan
Equity
Preferred shares
Common shares
Equity portion of convertible debentures
Warrants
Contributed surplus
Retained deficit
Accumulated other comprehensive income
Total shareholders’ equity
Non-controlling interests
Total equity
See accompanying notes
On behalf of the Board:
‘‘Daniel Daviau’’
DANIEL DAVIAU
Director
61
Notes
March 31,
2018
March 31,
2017
6
9, 22
14
10
11
13
13
$
862,838
$
469,217
2,215,837
1,170
677,769
784,230
3,395,736
1,085
3,549,062
4,858,820
19,941
2,035
30,967
160,757
257,974
15,323
2,829
31,479
102,799
192,266
$
4,020,736
$
5,203,516
$
7
6
9, 22
26
15
16
14
17
7, 12
7, 12
16
18
19
17
19
8
— $
301,006
2,638,954
8,428
7,851
7,500
9,679
25,280
645,742
3,669,883
11,793
10,093
7,500
—
2,973,418
4,370,291
13,715
57,081
9,997
49,844
61,758
140
56,442
—
—
—
3,165,813
4,426,873
205,641
649,846
2,604
1,975
145,426
(277,472)
113,332
841,352
13,571
854,923
205,641
641,449
2,604
1,975
85,405
(267,559)
95,270
764,785
11,858
776,643
$
4,020,736
$
5,203,516
‘‘Terrence A. Lyons’’
TERRENCE A. LYONS
Director
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
62
Consolidated Statements of Operations
For the years ended (in thousands of Canadian dollars, except per share amounts)
Notes
March 31,
2018
March 31,
2017
$
461,937
$
282,195
122,372
113,921
27,875
14,577
1,022,877
94,600
480,369
99,239
68,209
39,605
56,346
18,437
83,982
24,007
7,664
7,643
6,732
298
11, 13
26
$
987,131
$
14
8
19
19
19
19
20
20
20
$
$
$
$
$
$
$
$
35,746
20,620
(1,951)
18,669
17,077
13,024
4,053
92,587
110,862
0.04
0.03
0.9712
1.2482
0.15
$
$
$
$
$
$
$
$
396,741
196,129
130,749
119,040
16,847
20,040
879,546
40,322
414,676
85,698
65,211
42,286
52,381
12,744
79,011
21,124
12,209
—
—
—
825,662
53,884
16,322
(5,624)
10,698
43,186
38,103
5,083
91,657
101,149
0.29
0.27
1.173
1.4375
0.10
REVENUE
Commissions and fees
Investment banking
Advisory fees
Principal trading
Interest
Other
EXPENSES
Share-based incentive compensation
Non share-based incentive compensation
Salaries and benefits
Trading costs
Premises and equipment
Communication and technology
Interest
General and administrative
Amortization
Development costs
Restructuring costs
Acquisition-related costs
Share of loss of an associate
Income before income taxes
Income tax expense (recovery)
Current
Deferred
Net income for the year
Net income attributable to:
CGGI shareholders
Non-controlling interests
Weighted average number of common shares outstanding (thousands)
Basic
Diluted
Income per common share
Basic
Diluted
Dividend per Series A Preferred Share
Dividend per Series C Preferred Share
Dividend per common share
See accompanying notes
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Consolidated Statements of Comprehensive Income
For the years ended (in thousands of Canadian dollars)
Net income for the year
Other comprehensive income
Realized translation gains related to foreign operations disposed of during the year
Net change in valuation of available for sale investments, net of tax
Net change in unrealized gains (losses) on translation of foreign operations, net of tax
Comprehensive income for the year
Comprehensive income (loss) attributable to:
CGGI shareholders
Non-controlling interests
See accompanying notes
63
March 31,
2017
43,186
(1,560)
—
(37,889)
3,737
(1,510)
5,247
March 31,
2018
$
17,077
$
—
2,993
15,671
35,741
31,086
4,655
$
$
$
$
$
$
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
64
Consolidated Statements of Changes in Equity
As at and for the years ended (in thousands of Canadian dollars)
Preferred shares, opening and closing
Common shares, opening
Shares issued in connection with share-based payments
Acquisition of common shares for long-term incentive plan (LTIP)
Shares issued in connection with private placement
Release of vested common shares from employee benefit trusts
Shares cancelled
Net unvested share purchase loans
Common shares, closing
Warrants, opening and closing
Convertible debentures − equity, opening and closing
Contributed surplus, opening
Share-based payments
Shares cancelled
Unvested share purchase loans
Change in deferred tax asset relating to share based payments
Contributed surplus, closing
Retained deficit, opening
Net income attributable to CGGI shareholders
Common share dividends
Preferred share dividends
Retained deficit, closing
Accumulated other comprehensive income, opening
Other comprehensive income (loss) attributable to CGGI shareholders
Accumulated other comprehensive income, closing
Total shareholders’ equity
Non-controlling interests, opening
Foreign exchange on non-controlling interests
Comprehensive income attributable to non-controlling interests
Dividends paid to non-controlling interests
Non-controlling interests, closing
Total equity
See accompanying notes
Notes
March 31,
2018
18
$
205,641
$
641,449
101
(28,093)
—
32,121
—
4,268
March 31,
2017
205,641
617,756
17,898
(47,061)
26,601
21,878
(1,356)
5,733
19
649,846
641,449
20
20
1,975
2,604
85,405
60,460
—
(1,427)
988
145,426
(267,559)
13,024
(13,344)
(9,593)
(277,472)
95,270
18,062
113,332
841,352
11,858
503
4,655
(3,445)
13,571
1,975
2,604
86,235
3,139
324
(4,293)
—
85,405
(294,586)
38,103
—
(11,076)
(267,559)
134,883
(39,613)
95,270
764,785
8,722
409
5,247
(2,520)
11,858
$
854,923
$
776,643
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Consolidated Statements of Cash Flows
For the years ended (in thousands of Canadian dollars)
OPERATING ACTIVITIES
Net income for the year
Items not affecting cash
Amortization
Deferred income tax recovery
Share-based compensation expense
Impairment of investment in a private company
Share of loss of associate
Changes in non-cash working capital
Decrease (increase) in securities owned
Decrease (increase) in accounts receivable
Increase in income taxes payable, net
(Decrease) increase in securities sold short
(Decrease) increase in accounts payable, accrued liabilities, and provisions
Cash provided by operating activities
FINANCING ACTIVITIES
(Decrease) increase in bank indebtedness
Purchase of shares for cancellation
Acquisition of common shares for long-term incentive plan
Proceeds from Private Placement
Repayment of subordinated debt
Proceeds from bank loan
Proceeds from convertible debentures
Cash dividends paid on common shares
Cash dividends paid on preferred shares
Cash paid related to CSH Inducement Plan
Cash (used in) provided by financing activities
INVESTING ACTIVITIES
Purchase of equipment and leasehold improvements
Acquisition of Hargreave Hale Limited, net of cash acquired
Investment in associate
Purchase of intangible assets
Cash used in investing activities
Effect of foreign exchange on cash balances
Increase in cash position
Cash position, beginning of year
Cash position, end of year
Supplemental cash flow information
Interest received
Interest paid
Income taxes paid
See accompanying notes
65
Notes
March 31,
2018
March 31,
2017
$
17,077
$
43,186
11, 13
21
7
24,007
(1,951)
95,357
—
298
314,871
1,185,922
8,582
(344,736)
(1,055,366)
244,061
(25,280)
—
(28,093)
—
—
66,016
—
(13,345)
(9,592)
—
(10,294)
(6,311)
(54,051)
(2,500)
(795)
(63,657)
14,959
185,069
677,769
862,838
$
$
$
27,900
17,470
24,023
$
$
$
21,124
(5,624)
40,322
2,390
—
(219,496)
(1,394,913)
18,514
218,307
1,513,070
236,880
10,370
(360)
(47,061)
28,321
(7,500)
—
60,000
—
(11,076)
(1,905)
30,789
(5,202)
—
—
(440)
(5,642)
(12,587)
249,440
428,329
677,769
12,571
11,009
10,385
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
66
Notes to Consolidated Financial Statements
As at March 31, 2018 and March 31, 2017
and for the years ended March 31, 2018 and 2017
(in thousands of Canadian dollars, except per share amounts)
NOTE 01
Corporate Information
Through its principal subsidiaries, Canaccord Genuity Group Inc. (the Company or CGGI) is a leading independent, full-service
investment dealer with capital markets operations in Canada, the United Kingdom (UK) & Europe, the United States of America
(US), Australia, China and Dubai. The Company also has wealth management operations in Canada, the UK & Europe, and
Australia. The Company has operations in each of the two principal segments of the securities industry: capital markets and
wealth management. Together, these operations offer a wide range of complementary investment products, brokerage services
and investment banking services to the Company’s private, institutional and corporate clients.
Canaccord Genuity Group Inc. was incorporated on February 14, 1997 by the filing of a memorandum and articles with the
Registrar of Companies for British Columbia under the Company Act (British Columbia) and continues in existence under the
Business Corporations Act (British Columbia). The Company’s head office is located at Suite 2200 − 609 Granville Street,
Vancouver, British Columbia, V7Y 1H2. The Company’s registered office is located at Suite 400 − 725 Granville Street, Vancouver,
British Columbia, V7Y 1G5.
The Company’s common shares are publicly traded under the symbol CF on the Toronto Stock Exchange (TSX). The Company’s
Series A Preferred Shares are listed on the TSX under the symbol CF.PR.A. The Company’s Series C Preferred Shares are listed on
the TSX under the symbol CF.PR.C.
The Company’s business experiences considerable variations in revenue and income from quarter to quarter and year to year due
to factors beyond the Company’s control. The Company’s business is affected by the overall condition of the worldwide equity and
debt markets.
NOTE 02
Basis of Preparation
STATEMENT OF COMPLIANCE
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB).
These audited consolidated financial statements have been prepared on a historical cost basis except for investments, securities
owned, securities sold short and certain impaired non-current assets, which have been measured at fair value as set out in the
relevant accounting policies.
These audited consolidated financial statements are presented in Canadian dollars and all values are in thousands of dollars,
except when otherwise indicated.
These audited consolidated financial statements were authorized for issuance by the Company’s Board of Directors on June 6,
2018.
PRINCIPLES OF CONSOLIDATION
These consolidated financial statements include the financial statements of the Company, its subsidiaries and controlled special
purpose entities (SPEs).
The financial results of a subsidiary or controlled SPE are consolidated if the Company acquires control. Control is achieved when
an entity has power over the investee, is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee.
The results of subsidiaries acquired or disposed of during the year are included in the statements of operations from the effective
date of the acquisition or up to the effective date of the disposal, as appropriate.
All inter-company transactions and balances have been eliminated. In cases where an accounting policy of a subsidiary differs
from the Company’s accounting policies, the Company has made the appropriate adjustments to ensure conformity for purposes of
the preparation of these consolidated financial statements. The financial statements of the subsidiaries are prepared for the
same reporting period as the parent company.
USE OF JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of these consolidated financial statements requires management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and liabilities, accompanying note disclosures, and the disclosure
of contingent liabilities at the reporting date. Therefore, actual results may differ from those estimates and assumptions. The
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Notes to Consolidated Financial Statements 67
significant judgments, estimates and assumptions include consolidation, revenue recognition, share-based payments, income
taxes and valuation of deferred tax assets, impairment of goodwill, intangible assets and other long-lived assets, allowance for
credit losses, fair value of financial instruments, capitalization of intangible assets related to software costs, and provisions.
Amendments may be made to estimates relating to net assets acquired in an acquisition as well as the allocation of identifiable
intangible assets between indefinite life and finite lives. Judgments, estimates and assumptions were also utilized in connection
with the valuation of goodwill and intangible assets acquired in connection with the acquisition of Hargreave Hale [Note 12].
Consolidation
The Company owns 50% of the voting shares of Canaccord Genuity (Australia) Limited (CGAL) as at March 31, 2018. The Company
also completed an evaluation of its contractual arrangements with the other shareholders of CGAL and the control it has over the
financial and operating policies of CGAL and determined it should consolidate under IFRS 10, ‘‘Consolidated Financial
Statements’’ (IFRS 10) as at March 31, 2018 and 2017. Therefore, the financial position, financial performance, and cash flows of
CGAL have been consolidated. Although the Company owns 50% of the issued shares of CGAL as at March 31, 2018, for
accounting purposes, the Company is considered to have a 58% interest because of the shares held in a trust controlled by
Canaccord Financial Group (Australia) Pty Ltd. Accordingly, the Company has consolidated the entity and recognized a 42%
non-controlling interest as at March 31, 2018 (March 31, 2017 − 42%), which represents the portion of CGAL’s net identifiable
assets not owned by the Company. At the date of acquisition, the non-controlling interest was determined using the proportionate
method. Net income and each component of other comprehensive income are attributed to the non-controlling interest and to the
owners of the parent.
The Company has employee benefit trusts, which are considered SPEs [Note 21], to fulfill obligations to employees arising from
the Company’s share-based payment plans. The employee benefit trusts have been consolidated in accordance with IFRS 10 since
their activities are conducted on behalf of the Company, and the Company retains the majority of the benefits and risks of the
employee benefit trusts.
Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefit will flow to the Company and the revenue can be
reliably measured. Estimation may be required to determine the amount of revenue that can be recognized and also the timing of
the substantial completion of the underlying investment banking or advisory transactions.
Share-based payments
The Company measures the cost of equity-settled and cash-settled transactions with employees and directors based on the fair
value of the awards granted. The fair value is determined based on the observable share prices or by using an appropriate
valuation model. The use of option pricing models to determine the fair value requires the input of highly subjective assumptions
including the expected price volatility, expected forfeitures, expected life of the award and dividend yield. Changes in the subjective
assumptions can materially affect the fair value estimates. The assumptions and models used for estimating the fair value of
share-based payments, if and as applicable, are disclosed in Note 21.
Income taxes and valuation of deferred taxes
Accruals for income tax liabilities require management to make estimates and judgments with respect to the ultimate outcome of
tax filings and assessments. Actual results could vary from these estimates. The Company operates within different tax
jurisdictions and is subject to individual assessments by these jurisdictions. Tax filings can involve complex issues, which may
require an extended period of time to resolve in the event of a dispute or re-assessment by tax authorities. Deferred taxes are
recognized for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses
can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be
recognized based upon the likely timing and the level of future taxable profit.
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws and the amount and timing of
future taxable income. The Company establishes tax provisions, based on reasonable estimates, for possible consequences of
audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various
factors, such as the Company’s experience of previous tax audits.
Impairment of goodwill and indefinite life intangible assets
Goodwill and indefinite life intangible assets are tested for impairment at least annually, or whenever an event or change in
circumstance may indicate potential impairment, to ensure that the recoverable amount of the cash-generating unit (CGU) to which
goodwill and indefinite life intangible assets are attributed is greater than or equal to their carrying values.
In determining the recoverable amount, which is the higher of fair value less costs to sell (FVLCS) and value-in-use, management
uses valuation models that consider such factors as projected earnings, price-to-earnings multiples, relief of royalties related to
brand names and discount rates. Management must apply judgment in the selection of the approach to determining the
recoverable amount and in making any necessary assumptions. These judgments may affect the recoverable amount and any
resulting impairment write-down. The key assumptions used to determine recoverable amounts for the different
cash-generating units are disclosed in Note 13.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
68 Notes to Consolidated Financial Statements
Impairment of other long-lived assets
The Company assesses its amortizable long-lived assets at each reporting date to determine whether there is an indication that
an asset may be impaired. If any indication exists, the Company estimates the recoverable amount of the asset or the CGU
containing the asset using management’s best estimates and available information.
Allowance for credit losses
The Company records allowances for credit losses associated with clients’ receivables, loans, advances and other receivables.
The Company establishes an allowance for credit losses based on management’s estimate of probable unrecoverable amounts.
Judgment is required as to the timing of establishing an allowance for credit losses and the amount of the required specific
allowance, taking into consideration counterparty creditworthiness, current economic trends and past experience. Clients’
receivable balances are generally collateralized by securities; therefore, any provision is generally measured after considering the
market value of the collateral, if any.
Fair value of financial instruments
The Company measures its financial instruments at fair value. Fair value is determined based on market prices from independent
sources, if available. If there is no available market price, then the fair value is determined by using valuation models. The inputs
to these models, such as expected volatility and liquidity discounts, are derived from observable market data where possible; but
where observable data is not available, judgment is required to select or determine inputs to a fair value model.
There is inherent uncertainty and imprecision in estimating the factors that can affect fair value, and in estimating fair values
generally, when observable data is not available. Changes in assumptions and inputs used in valuing financial instruments could
affect the reported fair values.
Provisions
The Company records provisions related to pending or outstanding legal matters and regulatory investigations. Provisions in
connection with legal matters are determined on the basis of management’s judgment in consultation with legal counsel,
considering such factors as the amount of the claim, the possibility of wrongdoing by an employee of the Company and
precedents. Contingent litigation loss provisions are recorded by the Company when it is probable that the Company will incur a
loss as a result of a past event and the amount of the loss can be reliably estimated. The Company also records provisions
related to restructuring costs when the recognition criteria for provisions as they apply to restructuring costs are fulfilled.
NOTE 03
Adoption of New and Revised Standards
There were no new or revised standards adopted by the Company during the fiscal year.
NOTE 04
Future Changes in Accounting Policies
Standards issued but not yet effective
Standards issued, which may be reasonably expected to impact upon the Company’s financial statements, but which are not yet
effective are listed below.
IFRS 15, ‘‘Revenue from Contracts with Customers’’
In May 2014, the IASB issued IFRS 15 − Revenue from Contracts with Customers (‘‘IFRS 15’’). IFRS 15 establishes a single
five-step model framework for determining the nature, amount, timing and uncertainty of revenue and cash flows arising from a
contract with a customer. The standard is effective for annual periods on or after January 1, 2018, with early adoption permitted.
Either a modified retrospective application or full retrospective application is permitted under IFRS 15. The Company will be
adopting IFRS 15 for its fiscal year ending March 31, 2019 using the modified retrospective application approach.
The Company has evaluated the impact of IFRS 15 on its various revenue streams and the assessment is as follows:
(cid:129) Commissions and fees − The Company concluded there is no material change in the amount or timing of revenue
recognized under the new standard as the point of transfer of risk and reward for services and transfer of control occur at
the same time.
(cid:129) Investment banking − The Company concluded that investment banking will generally not be affected by IFRS 15 as
revenue will be recognized upon completion of the performance obligation.
(cid:129) Advisory fees − The Company concluded that advisory fees will generally not be affected by IFRS 15 as revenue will be
recognized upon completion of the performance obligation. In certain cases, some fees are collected based on progress
and do not correspond to the satisfaction of any discrete performance obligation. Under IFRS 15, such payments may
need to be deferred until the performance obligation is satisfied. The impact of this change on the amount of revenue
recognized in a fiscal year is insignificant.
(cid:129) Principal trading, interest and other revenue are excluded from the scope of IFRS 15
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Notes to Consolidated Financial Statements 69
IFRS 15 contains presentation and disclosure requirements which are more detailed than the current standards. Upon adoption of
IFRS 15, the Company will provide disclosures for each of the Company’s revenue streams, to supplement the revenue data that
are currently presented in the segmented information disclosure. New disclosures will be presented relating to the timing of
completion of the Company’s performance obligations.
IFRS 9, ‘‘Financial Instruments’’
In July 2014, the IASB issued IFRS 9 − Financial Instruments, which replaces the earlier versions of IFRS 9 (2009, 2010, and
2013) and completes the IASB’s project to replace IAS 39 − Financial Instruments: Recognition and Measurement. IFRS 9 is
effective for annual periods beginning on or after January 1, 2018 and must be applied retrospectively with the exception of hedge
accounting. The Company will adopt IFRS 9 for its fiscal year ending March 31, 2019.
The Company has evaluated the impact of IFRS 9 on its consolidated financial statements and the assessment is as follows:
Classification − financial assets and liabilities
IFRS 9 sets out requirements for recognizing and measuring financial assets and financial liabilities. IFRS 9 contains a new
classification and measurement approach for financial assets that reflects the business model in which assets are managed and
their cash flow characteristics. IFRS 9 contains three principal classification categories for financial assets: measured at
amortized cost, fair value through other comprehensive income (‘‘FVOCI’’) and fair value through profit and loss (‘‘FVTPL’’). IFRS 9
largely retains the existing requirements in IAS 39 for the classification of financial liabilities. The Company expects to continue to
classify cash and cash equivalents and securities owned as financial assets classified as FVTPL and accounts receivable as
financial assets measured at amortized costs. The Company’s investment in Euroclear, which is classified as available for sale as
of March 31, 2018, will be reclassified as FVOCI. The classification of financial liabilities is expected to remain consistent under
IFRS 9.
Impairment − financial assets
IFRS 9 introduces the new ‘‘expected credit loss’’ impairment model which replaces the ‘‘incurred loss’’ model in IAS 39. Based on
its assessment, the Company does not believe that new impairment requirements will have a material impact on its financial
statements given the short-term nature of the Company’s receivables.
Hedge accounting requirement
IFRS 9 offers greater flexibility to the types of transactions eligible for hedge accounting. The Company does not expect this
change to have any material impact on its consolidated financial statements upon adoption.
IFRS 16, ‘‘Leases’’
In January 2016, the IASB issued IFRS 16 ‘‘Leases’’ (‘‘IFRS 16’’), which requires lessees to recognize assets and liabilities for
most leases. The new standard will be effective for annual periods beginning on or after January 1, 2019. Early adoption is
permitted, provided the new revenue standard, IFRS 15, has been applied, or is applied at the same date as IFRS 16 using either
a full retrospective or a modified retrospective approach. The Company plans to apply IFRS 16 for its year ending March 31, 2020
but has not yet selected a transition approach.
Upon adoption of IFRS 16, the Company anticipates it will result in an increase in assets and liabilities related to leases. Due to
the recognition of additional lease assets and liabilities, a higher amount of depreciation expense and interest expense on lease
liabilities will be recognized under IFRS 16 compared to the current standard. Lastly, the Company expects a reduction in operating
cash outflows with a corresponding increase in financing cash outflows under IFRS 16. The Company is in the process of
identifying and collecting data relating to existing agreements to determine the impact of adoption of IFRS 16.
NOTE 05
Summary of Significant Accounting Policies
TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS AND FOREIGN SUBSIDIARIES
The Company’s consolidated financial statements are presented in Canadian dollars, which is also the Company’s functional
currency. Each subsidiary of the Company determines its own functional currency, and items included in the financial statements
of each subsidiary are measured using that functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company and its subsidiaries at their respective functional
currencies using exchange rates prevailing at the date of the transaction.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
70 Notes to Consolidated Financial Statements
Monetary assets and liabilities denominated in foreign currencies are translated by the Company and its subsidiaries into their
respective functional currencies at the exchange rate in effect at the reporting date. All differences upon translation are
recognized in the consolidated statements of operations.
Non-monetary assets and liabilities denominated in foreign currencies are translated by the Company and its subsidiaries into
their respective functional currencies at historical rates. Non-monetary items measured at fair value in a foreign currency are
translated using the exchange rates in effect at the date when the fair value is determined.
Translation of foreign subsidiaries
Assets and liabilities of foreign subsidiaries with a functional currency other than the Canadian dollar are translated into Canadian
dollars at rates prevailing at the reporting date, and income and expenses are translated at average exchange rates prevailing
during the period. Unrealized gains or losses arising as a result of the translation of the foreign subsidiaries are recorded in
accumulated other comprehensive income (loss). On disposal of a foreign operation, the component of other comprehensive
income relating to that particular foreign operation is recognized in the consolidated statements of operations.
The Company also has monetary assets and liabilities that are receivable or payable from a foreign operation. If settlement of the
receivable or payable is neither planned nor likely to occur in the foreseeable future, the differences upon translation are
recognized in accumulated other comprehensive income (loss) as these receivables and payables form part of the net investment
in the foreign operation.
INTANGIBLE ASSETS
Identifiable intangible assets acquired separately are measured on initial recognition at cost. The cost of identifiable intangible
assets acquired in a business combination is equal to their fair value as at the date of acquisition. Following initial recognition,
identifiable intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. The
amortization of intangible assets is recognized in the consolidated statements of operations as part of amortization expense.
The useful lives of identifiable intangible assets are assessed to be either finite or indefinite. Identifiable intangible assets with
finite lives are amortized over their useful economic lives and assessed for impairment whenever there is an indication that the
identifiable intangible asset may be impaired. The amortization period and the amortization method for an identifiable intangible
asset are reviewed at least annually, at each financial year end.
Identifiable intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually.
Identifiable intangible assets purchased through the acquisitions of Genuity Capital Markets (Genuity), the 50% interest in
Canaccord Genuity (Australia) Limited (Canaccord Genuity Australia), Collins Stewart Hawkpoint plc (CSHP), Eden Financial and
Hargreave Hale are customer relationships, non-competition agreements, trading licenses, fund management contract and
technology, which have finite lives and are amortized on a straight-line basis over their estimated useful lives. Branding acquired
through the acquisition of Genuity is considered to have an indefinite life, as it will provide benefit to the Company over a
continuous period. Software under development or acquired is amortized over its useful life once the asset is available for use.
The estimated amortization periods of the amortizable intangible assets are as follows:
Brand names
Customer relationships
Non-competition agreements
Technology
Fund management contract
Canaccord Genuity
Australia
Acquired in business combinations
Eden
Financial
CSHP
n/a
n/a
n/a
5 years
8 to 24 years
8 years
4.5 years
n/a
n/a
n/a
3 years
n/a
n/a
n/a
n/a
Genuity
indefinite
11 years
5 years
n/a
n/a
Internally
developed or acquired
Hargreave
Hale
n/a
11.5 to
12.5 years
n/a
n/a
10.5 years
Software
n/a
n/a
n/a
10 years
n/a
Internally developed or acquired software
Expenditures towards the development or acquisition of projects are recognized as intangible assets when the Company can
demonstrate that the technical feasibility of the assets for use has been established. The assets are carried at cost less any
accumulated amortization and accumulated impairment losses in accordance with IAS 38 ‘‘Intangible Assets’’. Capitalized costs
are expenditures directly attributable to the software development, such as employment, consulting or professional fees.
Amortization of the assets begins when development is complete, and the assets are available for use. The assets are amortized
over the period of expected future benefit.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Notes to Consolidated Financial Statements 71
IMPAIRMENT OF NON-FINANCIAL ASSETS
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication
exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An
asset’s recoverable amount is the higher of the FVLCS and the value-in-use of a particular asset or CGU. The recoverable amount
is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from
other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount, and the impairment is recognized in the consolidated
statements of operations.
In assessing FVLCS, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. The Company bases its
impairment calculation on annual budget calculations, which are prepared separately for each of the Company’s CGUs to which the
individual assets are allocated. These budget calculations generally cover a period of five years. A long-term growth rate is then
calculated and applied to project future cash flows after the fifth year.
Impairment losses are recognized in the consolidated statements of operations.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that
previously recognized impairment losses no longer exist or have decreased. If such an indication exists, the Company estimates
the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in
the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal
is limited so that the carrying amount of the asset does not exceed its recoverable amount, or exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such
reversal is recognized in the consolidated statements of operations.
The following assets have specific characteristics for impairment testing:
Goodwill
Goodwill is tested for impairment annually as at March 31 and when circumstances indicate that the carrying value may be
impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which goodwill
relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment
losses relating to goodwill cannot be reversed in future periods.
Intangible assets
Intangible assets with indefinite useful lives are tested for impairment annually as at March 31 at the CGU level and when
circumstances indicate that the carrying value may be impaired.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on deposit, commercial paper and bankers’ acceptances with a term to maturity of
less than three months from the date of purchase, which are subject to an insignificant risk of changes in value.
FINANCIAL INSTRUMENTS
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument
of another entity.
[i] Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables,
held to maturity investments or available for sale financial assets, as applicable.
Financial assets are recognized when the entity becomes a party to the contractual provisions of the instrument. For financial
assets, trade date accounting is applied, the trade date being the date at which the Company commits itself to either the
purchase or sale of the asset.
All financial assets are initially measured at fair value. Transaction costs related to financial instruments classified as fair value
through profit or loss are recognized in the consolidated statements of operations when incurred. Transaction costs for all
financial instruments other than those classified as fair value through profit or loss are included in the costs of the assets.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
72 Notes to Consolidated Financial Statements
Classification and subsequent measurement
Financial assets classified as fair value through profit or loss
Financial assets classified as fair value through profit or loss include financial assets held for trading and financial assets
designated upon initial recognition as fair value through profit or loss. Financial assets purchased for trading activities are
classified as held for trading and are measured at fair value, with unrealized gains (losses) recognized in the consolidated
statements of operations. In addition, provided that the fair value can be reliably determined, IAS 39 permits an entity to
designate any financial instrument as fair value through profit or loss on initial recognition or adoption of this standard even if that
instrument would not otherwise meet the definition of fair value through profit or loss as specified in IAS 39. The Company did not
designate any financial assets upon initial recognition as fair value through profit or loss. The Company’s financial assets
classified as held for trading include cash and cash equivalents, and securities owned, including derivative financial instruments.
The Company periodically evaluates the classification of its financial assets as held for trading based on whether the intent to sell
the financial assets in the near term is still appropriate. If the Company is unable to trade these financial assets due to inactive
markets or if management’s intent to sell them in the foreseeable future significantly changes, the Company may elect to
reclassify these financial assets in rare circumstances.
Financial assets classified as available for sale
Available for sale assets are measured at fair value, with subsequent changes in fair value recorded in other comprehensive
income, net of tax, until the assets are sold or impaired, at which time the difference is recognized in net income for the year.
Investments in equity instruments classified as available for sale that do not have a quoted market price in an active market are
measured at fair value unless fair value is not reliably measurable. The Company’s investments in Euroclear are classified as
available for sale and measured at their estimated fair value.
Financial assets classified as loans and receivables and held to maturity
Financial assets classified as loans and receivables and held to maturity are measured at amortized cost using the effective
interest rate (EIR) method, less impairment. Amortized cost is calculated by taking into account discounts or premiums on
acquisition and fees or costs that are an integral part of the EIR method. The EIR amortization is included in the consolidated
statements of operations. The Company classifies accounts receivable as loans and receivables. The Company did not have any
held to maturity investments during the years ended March 31, 2018 and 2017.
Impairment of financial assets
The Company assesses at each reporting date whether there is objective evidence that a financial asset or group of financial
assets is impaired. A financial asset or group of financial assets is deemed to be impaired if there is objective evidence of
impairment as a result of one or more events that have occurred since the initial recognition of the asset and those events have
had a significant or prolonged impact on the estimated future cash flows of the asset that can be reliably estimated. The
determination of what is significant or prolonged requires judgment. In making this judgment, the Company evaluates, among
other factors, the duration or extent to which the fair value of an investment is less than its cost.
In the case of debt instruments classified as available for sale, the impairment is assessed based on the same criteria as
financial assets carried at amortized cost.
If there is objective evidence that an impairment loss has been incurred, the amount of the loss is recognized in the consolidated
statements of operations and is measured as the difference between the carrying value and the fair value.
Derecognition
A financial asset is derecognized primarily when the rights to receive cash flows from the asset have expired, or the Company has
transferred its right to receive cash flows from the asset.
[ii] Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, or loans and
borrowings. All financial liabilities are recognized initially at fair value less, in the case of other financial liabilities, directly
attributable transaction costs.
Classification and subsequent measurement
Financial liabilities classified as fair value through profit or loss
Financial liabilities classified as fair value through profit or loss include financial liabilities held for trading and financial liabilities
designated upon initial recognition as fair value through profit or loss. Financial liabilities are classified as held for trading if they
are acquired for the purpose of selling in the near term. Gains or losses on liabilities held for trading are recognized in the
statements of operations. The Company has not designated any financial liabilities as fair value through profit or loss that would
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Notes to Consolidated Financial Statements 73
not otherwise meet the definition of fair value through profit or loss upon initial recognition. Bank indebtedness, securities sold
short, including derivative financial instruments, contingent and deferred considerations are classified as held for trading and
recognized at fair value.
Financial liabilities classified as loans and borrowings
After initial recognition, financial liabilities classified as loans and borrowings are subsequently measured at amortized cost using
the EIR method. Gains and losses are recognized in the statements of operations through the EIR method of amortization. Loans
and borrowings include accounts payable and accrued liabilities, bank loan, and subordinated debt. The carrying value of loans
and borrowings approximates their fair value.
[iii] Offsetting of financial instruments
Financial assets and financial liabilities are offset, and the net amount is reported in the consolidated statements of financial
position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to
settle on a net basis, or to realize the assets and settle the liabilities simultaneously.
[iv] Derivative financial instruments
Derivative financial instruments are financial contracts, the value of which is derived from the value of the underlying assets,
interest rates, indices or currency exchange rates.
The Company uses derivative financial instruments to manage foreign exchange risk on pending security settlements in foreign
currencies. The fair value of these contracts is nominal due to their short term to maturity.
Realized and unrealized gains and losses related to these contracts are recognized in the consolidated statements of operations
during the reporting period.
The Company trades in futures contracts, which are agreements to buy or sell standardized amounts of a financial instrument at a
predetermined future date and price, in accordance with terms specified by a regulated futures exchange, and subject to daily
cash margining. The Company trades in futures in an attempt to mitigate interest rate risk, yield curve risk and liquidity risk.
The Company also trades in forward contracts, which are non-standardized contracts to buy or sell a financial instrument at a
specified price on a future date. The Company trades in forward contracts in an attempt to mitigate foreign exchange risk on
pending security settlements in foreign currencies.
FAIR VALUE MEASUREMENT
The Company measures financial instruments at fair value at each reporting period. Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The
fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place
either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for
the asset or liability.
When available, quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions),
without any deduction for transaction costs, are used to determine fair value. For financial instruments not traded in an active
market, the fair value is determined using appropriate and reliable valuation techniques. Such techniques may include recent
arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same;
discounted cash flow analysis or other valuation models. Valuation techniques may require the use of estimates or management
assumptions if observable market data is not available. When the fair value cannot be reliably measured using a valuation
technique, then the financial instrument is measured at cost.
The Company categorizes its fair value measurements according to a three-level hierarchy. The hierarchy prioritizes the inputs used
by the Company’s valuation techniques. A level is assigned to each fair value measured based on the lowest level input significant
to the fair value measurement in its entirety [Note 7]. For assets and liabilities that are recognized in the consolidated financial
statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by
re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the
end of each reporting period.
The convertible unsecured senior subordinated debentures are classified as compound financial instruments. On initial
recognition, the fair value of the liability was calculated based on the present value of future cash flows under the instruments,
discounted at 8%, being equal to the rate of interest applied by the market at the time of issue to instruments of comparable
credit status and future cash flows, without the conversion feature. The residual amount is recorded as a component of
shareholders’ equity.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
74 Notes to Consolidated Financial Statements
SECURITIES OWNED AND SOLD SHORT
Securities owned and sold short are recorded at fair value based on quoted market prices in an active market or a valuation
model if no market prices are available. Unrealized gains and losses are reflected in income. Certain securities owned have been
pledged as collateral for securities borrowing transactions. Securities owned and sold short are classified as held for trading
financial instruments.
SECURITIES LENDING AND BORROWING
The Company employs securities lending and borrowing activities primarily to facilitate the securities settlement process. These
arrangements are typically short term in nature, with interest being received when cash is delivered, and interest being paid when
cash is received. Securities borrowed, and securities loaned are carried at the amounts of cash collateral delivered and received
in connection with the transactions.
Securities borrowed transactions require the Company to deposit cash, letters of credit or other collateral with the lender. For
securities loaned, the Company receives collateral in the form of cash or other collateral in an amount generally in excess of the
market value of the securities loaned. The Company monitors the fair value of the securities loaned and borrowed against the
cash collateral on a daily basis and, when appropriate, the Company may require counterparties to deposit additional collateral or
it may return collateral pledged to ensure such transactions are adequately collateralized.
Securities purchased under agreements to resell and securities sold under agreements to repurchase represent collateralized
financing transactions. The Company receives securities purchased under agreements to resell, makes delivery of securities sold
under agreements to repurchase, monitors the market value of these securities on a daily basis and delivers or obtains additional
collateral as appropriate.
The Company manages its credit exposure by establishing and monitoring aggregate limits by customer for these transactions.
Interest earned on cash collateral is based on a floating rate.
SECURITIES PURCHASED UNDER REVERSE REPURCHASE AGREEMENTS AND OBLIGATIONS RELATED TO SECURITIES SOLD
UNDER REPURCHASE AGREEMENTS
The Company recognizes these transactions on the trade date at amortized cost using the effective interest rate method.
Securities sold and purchased under repurchase agreements remain on the consolidated statement of financial position. Reverse
repurchase agreements and repurchase agreements are treated as collateralized lending and borrowing transactions.
REVENUE RECOGNITION
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be
reliably measured. The Company assesses its revenue arrangements in order to determine if it is acting as principal or agent.
Commissions and fees revenue consists of revenue generated through commission-based brokerage services, recognized on a
trade date basis, and the sale of fee-based products and services, recognized on an accrual basis. Realized and unrealized gains
and losses on securities purchased for client-related transactions are reported as net facilitation losses and recorded as a
reduction of commission revenues. Facilitation losses for the year ended March 31, 2018 were $8.4 million [March 31,
2017 − $12.8 million].
Investment banking revenue consists of underwriting fees and commissions earned on corporate finance activities. Revenue from
underwritings and other corporate finance activities is recorded when the underlying transaction is substantially completed under
the engagement terms and the related revenue is reasonably determinable.
Advisory fees consist of management and advisory fees that are recognized on an accrual basis. Also included in advisory fees is
revenue from mergers and acquisitions activities, which is recognized when the underlying transaction is substantially completed
under the engagement terms and the related revenue is reasonably determinable.
Principal trading revenue consists of revenue earned in connection with principal trading operations and is recognized on a trade
date basis.
Interest revenue consists of interest earned on client margin accounts, interest earned on the Company’s cash and cash
equivalents balances, interest earned on cash delivered in support of securities borrowing activity, and dividends earned on
securities owned. Interest revenue is recognized on an effective interest rate basis. Dividend income is recognized when the right
to receive payment is established.
Other revenue includes foreign exchange gains or losses, revenue earned from our correspondent brokerage services and
administrative fees revenues.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Notes to Consolidated Financial Statements 75
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Computer equipment, furniture and equipment, and leasehold improvements are recorded at cost less accumulated amortization.
Amortization is being recorded as follows:
Computer equipment
Furniture and equipment
Leasehold improvements
33% declining balance basis
10% to 20% declining balance basis
Straight-line over the shorter of useful life and respective term of the leases
An item of property, plant and equipment, and any specific part initially recognized, is derecognized upon disposal or when no
future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the
consolidated statements of operations when the asset is derecognized.
The assets’ residual values, useful lives and methods of amortization are reviewed at each financial year end, and are adjusted
prospectively where appropriate.
INCOME TAXES
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid
to the taxation authorities. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively
enacted, at the reporting date, in the countries where the Company operates and generates taxable income.
Management periodically evaluates positions taken in the Company’s tax returns with respect to situations in which applicable tax
regulations are subject to interpretation and establishes provisions where appropriate.
Current income tax relating to items recognized directly in equity is recognized in equity and not in the consolidated statements of
operations.
Deferred tax
Deferred taxes are accounted for using the liability method. This method requires that deferred taxes reflect the expected deferred
tax effect of temporary differences at the reporting date between the carrying amounts of assets and liabilities for financial
statement purposes and their tax bases.
Deferred tax liabilities are recognized for all taxable temporary differences, except for taxable temporary differences associated
with investments in subsidiaries where the timing of the reversal of the temporary difference can be controlled and it is probable
that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits and carryforward of
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences, and the carryforward of unused tax credits and unused tax losses, can be utilized. The carrying amounts of deferred
tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit
will be available to allow all or part of the deferred tax assets to be utilized. Unrecognized deferred tax assets are assessed at
each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred
tax asset to be recovered.
No deferred tax liability has been recognized for taxable temporary differences associated with investments in subsidiaries from
undistributed profits and foreign exchange translation differences as the Company is able to control the timing of the reversal of
these temporary differences. The Company has no plans or intention to perform any actions that will cause the temporary
differences to reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is
realized, or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of
the reporting period. Deferred tax is charged or credited in the statements of operations except where it relates to items that may
be credited directly to equity, in which case the deferred tax is recognized directly against equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against
current tax liabilities and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation
authority on the same taxable entity.
Sales tax
Revenues, expenses and assets are recognized net of the amount of sales tax, except where the amount of sales tax incurred is
not recoverable from the tax authority. In these circumstances, sales tax is recognized as part of the cost of acquisition of the
asset or as part of an item of the expense. The net amount of sales tax recoverable from, or payable to, the taxation authority is
included as part of accounts receivable or accounts payable in the consolidated statements of financial position.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
76 Notes to Consolidated Financial Statements
TREASURY SHARES
The Company’s own equity instruments that are reacquired (treasury shares) are recognized at cost and deducted from equity. This
includes shares held in the employee benefits trusts and unvested share purchase loans and preferred shares held in treasury.
No gain or loss is recognized in the statements of operations on the purchase, sale, issue or cancellation of the Company’s own
equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognized in contributed
surplus. Voting rights related to treasury shares are nullified for the Company and no dividends are allocated to them.
EARNINGS (LOSS) PER COMMON SHARE
Basic earnings (loss) per common share is computed by dividing the net income (loss) attributable to common shareholders for
the period by the weighted average number of common shares outstanding. Diluted earnings per common share reflects the
dilutive effect in connection with the LTIP, warrants, other share-based payment plans as well as the convertible debentures based
on the treasury stock method. The treasury stock method determines the number of incremental common shares by assuming
that the number of shares the Company has granted to employees has been issued.
SHARE-BASED PAYMENTS
Employees (including senior executives) of the Company receive remuneration in the form of share-based payment transactions,
whereby employees render services as consideration for equity instruments (equity-settled transactions). The participating
employees are eligible to receive shares that generally vest over three years (the ‘‘RSUs’’). This program is referred to as the
Long-Term Incentive Plan (the ‘‘LTIP’’ or the ‘‘Plan’’).
Independent directors also receive deferred share units (DSUs) as part of their remuneration, which can only be settled in cash
(cash-settled transactions). For the year ended March 31, 2018, certain senior executives receive performance share units (PSUs)
as part of their remuneration, which can only be settled in cash (cash-settled transactions).
The dilutive effect, if any, of outstanding options and share-based payments is reflected as additional share dilution in the
computation of diluted earnings per common share.
Equity-settled transactions
For equity-settled transactions, the Company measures the fair value of share-based awards as of the grant date.
Effective as of March 31, 2018 the Plan was changed to remove certain employment-related conditions for the vesting of RSU
awards made as part of the normal course incentive compensation payment cycle. With the change, RSUs will continue to vest
after termination of employment so long as the employee does not violate certain post-termination restrictions and is not engaged
in certain competitive or soliciting activities as provided in the Plan. Because of this change, the Company determined that the
awards do not meet the criteria for an in-substance service condition, as defined by IFRS 2. Accordingly, RSUs granted as part of
the normal course incentive compensation payment cycle are expensed in the period in which those awards are deemed to be
earned with a corresponding increase in contributed surplus, which is generally the fiscal period in which the awards are either
made or the immediately preceding fiscal year for those awards made after the end of such fiscal year but were determined and
earned in respect of that fiscal year.
For certain awards, typically new hire awards or retention awards, vesting is subject to continued employment and therefore these
awards are subject to a continuing service requirement. Accordingly, the Company recognizes the cost of such awards as an
expense on a graded basis over the applicable vesting period with a corresponding increase in contributed surplus.
The Company estimates the number of equity instruments that will ultimately vest when calculating the expense attributable to
equity-settled transactions. No expense is recognized for awards that do not ultimately vest.
When share-based awards vest, contributed surplus is reduced by the applicable amount and share capital is increased by the
same amount.
Cash-settled transactions
The cost of cash-settled transactions is measured initially at fair value at the grant date. The fair values of DSUs and PSUs are
expensed upon grant [Note 21]. The liability is remeasured to fair value at each reporting date up to and including the settlement
date, with changes in fair value recognized through the statements of operations.
PROVISIONS
Provisions are recognized when the Company has a present obligation as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation. The expense relating to any provision is presented in the statements of operations net of any
reimbursement. If the effect of the time value of money is significant, provisions are discounted using a current pre-tax rate that
reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the
passage of time is recognized as an interest expense.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Notes to Consolidated Financial Statements 77
Legal provisions
Legal provisions are recognized when it is probable that the Company will be liable for the future obligation as a result of a past
event related to legal matters and when they can be reasonably estimated.
Restructuring provisions
Restructuring provisions are only recognized when the recognition criteria for provisions are fulfilled. In order for the recognition
criteria to be met, the Company needs to have in place a detailed formal plan about the business or part of the business
concerned, the location and number of employees affected, a detailed estimate of associated costs and an appropriate timeline.
In addition, either the personnel affected must have a valid expectation that the restructuring is being carried out or the
implementation must have been initiated. The restructuring provision recognized includes staff restructuring costs, reorganization
expenses, onerous lease provisions and impairment of equipment and leasehold improvements.
LEASES
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the
inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement
conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. The Company has assessed its
lease arrangements and concluded that the Company only has leases that have the characteristics of an operating lease. An
operating lease is a lease that does not transfer substantially all of the risks and benefits and ownership of an asset to the
lessee. Operating lease payments are recognized as an expense in the statements of operations on a straight-line basis over the
lease term.
CLIENT MONEY
The Company’s UK and Europe operations hold money on behalf of their clients in accordance with the client money rules of the
Financial Conduct Authority in the United Kingdom. Such money and the corresponding liabilities to clients are not included in the
consolidated statements of financial position as the Company is not beneficially entitled thereto. The amounts held on behalf of
clients at the reporting date are included in Note 25.
SEGMENT REPORTING
The Company’s segment reporting is based on the following operating segments: Canaccord Genuity, Canaccord Genuity Wealth
Management and Corporate and Other. The Company’s business operations are grouped into the following geographic regions:
Canada, UK, Europe and Dubai, Australia, the US, and Other Foreign Locations which comprised of our Asian based operations.
NOTE 06
Securities Owned and Securities Sold Short
Corporate and government debt
Equities and convertible debentures
Securities
owned
254,671
214,546
469,217
$
$
March 31, 2018
Securities sold
short
$
$
220,792
80,214
301,006
$
$
Securities
owned
571,066
213,164
784,230
March 31, 2017
Securities sold
short
$
$
541,827
103,915
645,742
As at March 31, 2018, corporate and government debt maturities range from 2018 to 2098 [March 31, 2017 − 2017 to 2098]
and bear interest ranging from 0.00% to 14.00% [March 31, 2017 − 0.00% to 14.00%].
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
78 Notes to Consolidated Financial Statements
NOTE 07
Financial Instruments
CATEGORIES OF FINANCIAL INSTRUMENTS
The categories of financial instruments, other than cash and cash equivalents and bank indebtedness, held by the Company at
March 31, 2018 and 2017 are as follows:
Held for
trading
Available
for sale
Loans and
receivables
Loans and
borrowings
Total
March 31,
2018
March 31,
2017
March 31,
2018
March 31,
2017
March 31,
2018
March 31,
2017
March 31,
2018
March 31,
2017
March 31,
2018
March 31,
2017
$ 469,217 $ 784,230 $
— $
— $
— $
— $
— $
— $ 469,217 $
784,230
—
—
—
—
—
—
—
—
—
—
$ 469,217 $ 784,230 $
—
—
—
— 1,405,380
2,625,939
—
—
333,434
373,300
330,369
302,532
—
—
— $
146,654
—
2,829
—
2,829 $ 2,215,837 $3,395,736 $
93,965
—
—
—
—
—
— $
— 1,405,380
2,625,939
—
—
333,434
373,300
330,369
302,532
93,965
146,654
—
—
2,829
—
— $ 2,685,054 $ 4,182,795
$ 301,006 $ 645,742 $
— $
— $
— $
— $
— $
— $ 301,006 $
645,742
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$ 301,006 $ 645,742 $
—
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
—
—
— $
— 1,051,546
1,913,177
1,051,546
1,913,177
— 1,228,201
1,468,410
1,228,201
1,468,410
359,207
7,500
57,081
9,997
49,844
71,437
288,296
288,296
—
7,500
7,500
—
56,442
56,442
—
—
—
—
—
—
—
—
—
—
— $ 2,834,813 $3,733,825 $ 3,135,819 $ 4,379,567
359,207
7,500
57,081
9,997
49,844
71,437
Financial assets
Securities owned
Accounts receivable from
brokers and
investment dealers
Accounts receivable from
clients
RRSP cash balances held
in trust
Other accounts
receivable
Investments
Total financial assets
Financial liabilities
Securities sold short
Accounts payable to
brokers and
investment dealers
Accounts payable to
clients
Other accounts payable
and accrued liabilities
Subordinated debt
Convertible debentures
Deferred consideration
Contingent consideration
Bank loan
Total financial liabilities
The Company has not designated any financial instruments as fair value through profit or loss upon initial recognition using the
fair value option.
FAIR VALUE HIERARCHY
All financial instruments for which fair value is recognized or disclosed are categorized within a fair value hierarchy, described as
follows, and based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 − Quoted market prices in an active market (that are unadjusted) for identical assets or liabilities
Level 2 − Valuation techniques (for which the lowest level input that is significant to the fair value measurement is directly or
indirectly observable)
Level 3 − Valuation techniques (for which the lowest level input that is significant to the fair value measurement is
unobservable)
For financial instruments that are recognized at fair value on a recurring basis, the Company determines whether transfers have
occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the
fair value measurement as a whole) at the end of each reporting period.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
As at March 31, 2018 and 2017, the Company held the following classes of financial instruments measured at fair value:
Notes to Consolidated Financial Statements 79
Securities owned
Corporate debt
Government debt
Corporate and government debt
Equities
Convertible debentures
Equities and convertible debentures
Securities sold short
Corporate debt
Government debt
Corporate and government debt
Equities
Convertible debentures
Equities and convertible debentures
Deferred considerations
Contingent consideration
Securities owned
Corporate debt
Government debt
Corporate and government debt
Equities
Convertible debentures
Equities and convertible debentures
Available for sale investments
Securities sold short
Corporate debt
Government debt
Corporate and government debt
Equities
March 31, 2018
Level 1
Estimated fair value
March 31, 2018
Level 2
Level 3
$
13,794
$
— $
13,794
$
240,877
254,671
214,086
460
214,546
469,217
(4,836)
(215,956)
(220,792)
(79,011)
(1,203)
(80,214)
(301,006)
(9,997)
(49,844)
30,593
30,593
165,546
—
165,546
196,139
—
(34,388)
(34,388)
(66,714)
—
(66,714)
(101,102)
—
—
210,284
224,078
48,404
460
48,864
272,942
(4,836)
(181,568)
(186,404)
(12,297)
(1,203)
(13,500)
(199,904)
—
—
(360,847)
(101,102)
(199,904)
—
—
—
136
—
136
136
—
—
—
—
—
—
—
(9,997)
(49,844)
(59,841)
March 31, 2017
Level 1
Level 2
Level 3
Estimated fair value
March 31, 2017
$
15,071
$
— $
15,071
$
555,995
571,066
207,050
6,114
213,164
2,829
787,059
(11,524)
(530,303)
(541,827)
(103,915)
(645,742)
277,121
277,121
165,292
—
165,292
—
278,874
293,945
41,616
6,114
47,730
2,829
442,413
344,504
—
(313,077)
(313,077)
(77,562)
(390,639)
(11,524)
(217,226)
(228,750)
(26,353)
(255,103)
—
—
—
142
—
142
—
142
—
—
—
—
—
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
80 Notes to Consolidated Financial Statements
Movement in net Level 3 financial liabilities
Balance, March 31, 2016
Purchase of Level 3 assets
Other
Balance, March 31, 2017
Other
Addition of deferred consideration
Addition of contingent consideration
Balance, March 31, 2018
$
$
2,593
(2,390)
(61)
142
(6)
(9,997)
(49,844)
$
(59,705)
There were $59.8 million of contingent and deferred consideration included as part of the total purchase consideration for the
acquisition of Hargreave Hale Limited [Note 12]. The deferred and contingent considerations are settled in cash and are therefore
classified as financial liability measured at fair value, with any subsequent gains or losses recognized in earnings.
During the year ended March 31, 2017, the Company recorded an unrealized loss of $2.4 million related to the impairment of an
investment in a private company.
Fair value estimation
i.
Level 2 financial instruments
Level 2 financial instruments include the Company’s investment in certain corporate and government debt, convertible debt, and
over-the-counter equities. The fair values of corporate and government debt, and convertible debt classified as Level 2 are
determined using the quoted market prices of identical assets or liabilities in markets that do not have transactions which take
place with sufficient frequency and volume to provide pricing information on an ongoing basis. The Company regularly reviews the
transaction frequency and volume of trading in these instruments to determine the accuracy of pricing information.
Level 2 financial instruments also include the Company’s equity investment in Euroclear, which has an estimated fair value of
$6.4 million as at March 31, 2018 [March 31, 2017 − $2.8 million]. The current fair value is determined using a market-based
approach based on recent share buyback transactions.
ii.
Level 3 financial instruments
Held for Trading
The fair value for level 3 investments classified as held for trading is determined by the Company using a market-based approach
with information that the Company has determined to be reliable, and represents the best estimate of fair value readily available.
Prices for held for trading investments are determined based on the last trade price or offer price, or, if these prices are
considered stale, the Company obtains information based on certain inquiries, recent trades or pending new issues. The fair value
of the held for trading investments as at March 31, 2018 was $0.1 million [March 31, 2017 − $0.1 million].
Level 3 financial liabilities also include the deferred and contingent considerations included as part of the total purchase
consideration for the acquisition of Hargreave Hale [Note 12]. The fair value for these financial liabilities approximate their carrying
value as of March 31, 2018.
The fair value measurements determined as described above may not be indicative of net realizable value or reflective of future
values. Furthermore, the Company believes its valuation methods are appropriate and consistent with those which would be
utilized by a market participant.
RISK MANAGEMENT
Credit risk
Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. Credit risk arises from cash
and cash equivalents, net receivables from clients and brokers and investment dealers, and other accounts receivable. The
maximum exposure of the Company to credit risk before taking into account any collateral held or other credit enhancements is
the carrying amount of financial assets as disclosed in the consolidated financial statements as at March 31, 2018 and 2017.
The primary source of credit risk to the Company is in connection with trading activity by private clients and private client margin
accounts. To minimize its exposure, the Company applies certain credit standards, applies limits to transactions and requires
settlement of securities transactions on a cash basis or delivery against payment. Margin transactions are collateralized by
securities in the clients’ accounts in accordance with limits established by the applicable regulatory authorities and are subject to
the Company’s credit review and daily monitoring procedures. Management monitors the collectability of receivables and
estimates an allowance for doubtful accounts. The accounts receivable outstanding are expected to be collectible within
one year. The Company has recorded an allowance for doubtful accounts of $3.4 million as at March 31, 2018 [March 31,
2017 − $4.9 million] [Note 9].
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Notes to Consolidated Financial Statements 81
The Company is also exposed to the risk that counterparties to transactions will not fulfill their obligations. Counterparties
primarily include investment dealers, clearing agencies, banks and other financial institutions. The Company does not rely entirely
on ratings assigned by credit rating agencies in evaluating counterparty risk. The Company mitigates credit risk by performing its
own due diligence assessments on the counterparties, obtaining and analyzing information regarding the structure of the financial
instruments, and keeping current with new innovations in the market. The Company also manages this risk by conducting regular
credit reviews to assess creditworthiness, reviewing security and loan concentrations, holding and marking to market collateral on
certain transactions and conducting business through clearing organizations with performance guarantees.
As at March 31, 2018 and 2017, the Company’s most significant counterparty concentrations were with financial institutions and
institutional clients. Management believes that they are in the normal course of business and does not anticipate loss for
non-performance.
Liquidity risk
Liquidity risk is the risk that the Company cannot meet a demand for cash or fund its obligations as they become due. The
Company’s management is responsible for reviewing liquidity resources to ensure funds are readily available to meet its financial
obligations as they become due, as well as ensuring adequate funds exist to support business strategies and operational growth.
The Company’s business requires capital for operating and regulatory purposes. The current assets reflected on the statements of
financial position are highly liquid. The majority of the positions held as securities owned are readily marketable and all are
recorded at their fair value. Client receivables are generally collateralized by readily marketable securities and are reviewed daily
for impairment in value and collectability. Receivables and payables from brokers and dealers represent the following: current
open transactions that generally settle within the normal three-day settlement cycle; collateralized securities borrowed and/or
loaned in transactions that can be closed within a few days on demand; and balances on behalf of introducing brokers
representing net balances in connection with their client accounts. Additional information regarding the Company’s capital
structure and capital management objectives is discussed in Note 24.
The following table presents the contractual terms to maturity of the financial liabilities owed by the Company as at March 31,
2018:
Financial liability
Bank indebtedness
Accounts payable and accrued liabilities
Securities sold short
Subordinated debt
Convertible debentures
Current portion of bank loan
Bank loan
Deferred consideration
Carrying amount
Contractual term to maturity
March 31, 2018
March 31, 2017
$
— $
25,280
2,638,954
301,006
7,500
57,081
9,679
61,758
9,997
3,669,883
645,742
7,500
56,442
—
—
—
Due on demand
Due within one year
Due within one year
Due on demand(1)
Due in December 2021
Due within one year
2019 to 2021
September 2023
(1) Subject to Investment Industry Regulatory Organization of Canada’s approval.
The fair values for cash, accounts receivable and accounts payable and accrued liabilities approximate their carrying values and
will be paid within 12 months.
Market risk
Market risk is the risk that the fair value of financial instruments will fluctuate because of changes in market prices. The Company
separates market risk into three categories: fair value risk, interest rate risk and foreign exchange risk.
Fair value risk
When participating in underwriting activities, the Company may incur losses if it is unable to resell the securities it is committed to
purchase or if it is forced to liquidate its commitment at less than the agreed upon purchase price. The Company is also exposed
to fair value risk as a result of its principal trading activities in equity securities, fixed income securities, and derivative financial
instruments. Securities at fair value are valued based on quoted market prices where available and, as such, changes in fair value
affect earnings as they occur. Fair value risk also arises from the possibility that changes in market prices will affect the value of
the securities the Company holds as collateral for client margin accounts. The Company mitigates its fair value risk exposure
through controls to limit concentration levels and capital usage within its inventory trading accounts, as well as through monitoring
procedures of the margin accounts.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
82 Notes to Consolidated Financial Statements
The following table summarizes the effect on earnings as a result of a fair value change in financial instruments as at March 31,
2018. This analysis assumes all other variables remain constant. The methodology used to calculate the fair value sensitivity is
consistent with the prior year.
Financial instrument
Equities and convertible
debentures owned
Equities and convertible
debentures sold short
Effect of a
10% increase in
fair value on
net income
March 31, 2018
Effect of a
10% decrease in
fair value on
net income
Effect of a
10% increase in
fair value on
net income
March 31, 2017
Effect of a
10% decrease in
fair value on
net income
Carrying value
Asset (Liability)
Carrying value
Asset (Liability)
214,546
8,850
(8,850)
213,164
8,793
(8,793)
(80,214)
(3,308)
3,308
(103,915)
(4,286)
4,286
The following table summarizes the effect on other comprehensive income (OCI) as a result of a fair value change in the financial
instruments classified as available for sale. This analysis assumes all other variables remain constant and there is no permanent
impairment. The methodology used to calculate the fair value sensitivity is consistent with the prior year.
Effect of a
10% increase in
fair value
on OCI
March 31, 2018
Effect of a
10% decrease in
fair value
on OCI
Effect of a
10% increase in
fair value
on OCI
March 31, 2017
Effect of a
10% decrease in
fair value
on OCI
Carrying value
Carrying value
$
— $
— $
— $
2,829
$
283
$
(283)
Financial instrument
Investments
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect the fair value or future cash flows of financial
instruments held by the Company. The Company incurs interest rate risk on its cash and cash equivalent balances, bank
indebtedness, fixed income portion of securities owned and securities sold short, net clients’ balances, RRSP cash balances held
in trust and net brokers’ and investment dealers’ balances, as well as its subordinated debt and bank loan. The Company
attempts to minimize and monitor its exposure to interest rate risk through quantitative analysis of its net positions of fixed
income securities, clients’ balances, securities lending and borrowing activities, and short-term borrowings. The Company also
trades in futures in an attempt to mitigate interest rate risk. Futures are included in marketable securities owned, net of
marketable securities sold short, for the purpose of calculating interest rate sensitivity.
All cash and cash equivalents mature within three months. Net clients’ receivable (payable) balances charge (incur) interest based
on floating interest rates. Subordinated debt bears interest at a rate of prime plus 4.0%, payable monthly.
The following table provides the effect on net income for the years ended March 31, 2018 and 2017 if interest rates had
increased or decreased by 100 basis points applied to balances as of March 31, 2018 and 2017. Fluctuations in interest rates
do not have an effect on OCI. This sensitivity analysis assumes all other variables remain constant. The methodology used to
calculate the interest rate sensitivity is consistent with the prior year.
Net income
effect of a
100 bps
increase in
interest rates
March 31, 2018
Net income
effect of a
100 bps
decreases in
interest rates(1)
Carrying value
Asset (Liability)
Net income
effect of a
100 bps
increase in
interest rates
March 31, 2017
Net income
effect of a
100 bps
decreases in
interest rates(1)
Carrying value
Asset (Liability)
Cash and cash equivalents, net of
bank indebtedness
$
862,838
$
6,471
$
(6,471)
$
652,489
$
4,894
$
(4,894)
Marketable securities owned, net
of marketable securities sold
short
Clients’ payable, net
RRSP cash balances held in trust
Brokers’ and investment dealers’
balance, net
Subordinated debt
Bank loan
(1) Subject to a floor of zero
168,211
(894,767)
330,369
353,834
(7,500)
(71,437)
(1,211)
(6,783)
2,478
1,343
(56)
(536)
1,365
(1,949)
(2,478)
(3,560)
56
536
138,488
(1,095,110)
302,532
712,762
7,500
—
(359)
(8,215)
2,269
(8,117)
(56)
—
225
(2,249)
(2,269)
406
56
—
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Notes to Consolidated Financial Statements 83
Foreign exchange risk
Foreign exchange risk arises from the possibility that changes in foreign currency exchange rates will result in losses. The
Company’s primary foreign exchange risk results from its investment in its US, Australia, and UK and Europe subsidiaries. These
subsidiaries are translated using the foreign exchange rate at the reporting date. Any fluctuation in the Canadian dollar against the
US dollar, the pound sterling, or the Australian dollar will result in a change in the unrealized gains (losses) on translation of
foreign operations recognized in accumulated other comprehensive income (loss).
All of the subsidiaries may also hold financial instruments in currencies other than their functional currency; therefore, any
fluctuations in foreign exchange rates will impact foreign exchange gains or losses in the statement of operations.
The following table summarizes the estimated effects on net income (loss) and OCI as a result of a 5% change in the value of the
foreign currencies where there is significant exposure. The analysis assumes all other variables remain constant. The
methodology used to calculate the foreign exchange rate sensitivity is consistent with the prior year.
As at March 31, 2018:
Currency
US dollar
Pound sterling
Australian dollar
As at March 31, 2017:
Currency
US dollar
Pound sterling
Australian dollar
Effect of a
5% appreciation
in foreign
exchange rate
on net income
Effect of a
5% depreciation
in foreign
exchange rate
on net income
Effect of a
5% appreciation
in foreign
exchange rate
on OCI
Effect of a
5% depreciation
in foreign
exchange rate
on OCI
$
(1,074)
$
(1,560)
nil
1,074
1,560
nil
$
16,956
$
74,619
1,724
(16,956)
(74,619)
(1.724)
Effect of a
5% appreciation
in foreign
exchange rate
on net income
Effect of a
5% depreciation
in foreign
exchange rate
on net income
Effect of a
5% appreciation
in foreign
exchange rate
on OCI
Effect of a
5% depreciation
in foreign
exchange rate
on OCI
$
(395)
$
(560)
nil
395
560
nil
$
11,120
$
27,578
1,407
(11,120)
(27,578)
(1,407)
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are financial contracts, the value of which is derived from the value of the underlying assets,
interest rates, indices or currency exchange rates. All derivative financial instruments are expected to be settled within six months
subsequent to fiscal year end.
Foreign exchange forward contracts
The Company uses derivative financial instruments to manage foreign exchange risk on pending security settlements in foreign
currencies. The fair value of these contracts is nominal due to their short term to maturity.
Realized and unrealized gains and losses related to these contracts are recognized in the consolidated statements of operations
during the reporting period.
Forward contracts outstanding at March 31, 2018:
To sell US dollars
To buy US dollars
Forward contracts outstanding at March 31, 2017:
To sell US dollars
To buy US dollars
Notional amount
(millions)
USD $
USD $
17.7
2.1
Notional amount
(millions)
USD $
USD $
22.1
2.9
Average price
Maturity
Fair value
$1.28 (CAD/USD)
April 2, 2018
$1.29 (CAD/USD)
April 2, 2018
Average price
Maturity
$1.33 (CAD/USD)
April 3, 2017
$1.33 (CAD/USD)
April 3, 2017
$
$
$
$
(240)
3
Fair value
71
(2)
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
84 Notes to Consolidated Financial Statements
The Company’s Canaccord Genuity Wealth Management segment in the UK and Europe trades foreign exchange forward contracts
on behalf of its clients, and establishes matching contracts with the counterparties. The Company has no significant net exposure,
assuming no counterparty default. The principal currencies of the forward contracts are: the UK pound sterling, the US dollar, or
the euro. The weighted average term to maturity is 85 days as at March 31, 2018 [March 31, 2017 − 61 days]. The table below
shows the fair value of the forward contract assets and liabilities, and the notional value of these forward contracts as at
March 31, 2018. The fair value of the forward contract assets and liabilities is included in the accounts receivable and payable
balances.
Assets
Liabilities
March 31, 2018
Notional
amount
Assets
Liabilities
March 31, 2017
Notional
amount
Foreign exchange forward contracts
$
847
$
747
$
141,662
$
1,806
$
1,640
$
177,384
FUTURES
The Company’s Canadian operations are involved in trading bond futures contracts, which are agreements to buy or sell a
standardized amount of an underlying Government of Canada bond, at a predetermined future date and price, in accordance with
terms specified by a regulated futures exchange, and are subject to daily cash margining. The Company’s Canadian operations
trade in bond futures in an attempt to mitigate interest rate risk, yield curve risk and liquidity risk. At March 31, 2018, the notional
amount of the bond futures contracts outstanding was long $0.1 million [March 31, 2017 − $0.5 million].
The Company’s Canadian operations are also involved in trading US Treasury futures in an attempt to mitigate interest rate risk,
yield curve risk and liquidity risk. There were no outstanding US Treasury futures contracts outstanding as at March 31, 2018 and
March 31, 2017.
The fair value of all of the above futures contracts is nominal due to their short term to maturity and are included in accounts
receivable and accounts payable and accrued liabilities. Realized and unrealized gains and losses related to these contracts are
recognized in the statement of operations during the reporting period.
SECURITIES LENDING AND BORROWING
The Company employs securities lending and borrowing primarily to facilitate the securities settlement process. These
arrangements are typically short term in nature, with interest being received when cash is delivered, and interest being paid when
cash is received. These transactions are fully collateralized and are subject to daily margin calls for any deficiency between the
market value of the security given and the amount of collateral received. These transactions are collateralized by either cash or
securities, including government treasury bills and government bonds, and are reflected within accounts receivable and accounts
payable. Interest earned on cash collateral is based on a floating rate. At March 31, 2018, the floating rates ranged from 0.50% to
0.75% [March 31, 2017 − 0.00% to 0.25%].
March 31, 2018
March 31, 2017
BANK INDEBTEDNESS
Cash
Securities
Loaned or
delivered as
collateral
Borrowed or
received as
collateral
Loaned or
delivered as
collateral
$
185,042
$
36,359
$
52,685
$
182,474
41,098
43,252
Borrowed or
received as
collateral
227,677
233,811
The Company enters into call loans or overdraft positions primarily to facilitate the securities settlement process for both client
and Company securities transactions. The bank indebtedness is collateralized by unpaid client securities and/or securities owned
by the Company. As at March 31, 2018 the Company had $nil bank indebtedness outstanding [March 31, 2017 − $25.3 million].
BANK LOAN
A subsidiary of the Company entered a £40.0 million (C$72.5 million as of March 31, 2018) senior credit facility to finance a
portion of the cash consideration for its acquisition of Hargreave Hale Limited [Notes 12 and 16]. The balance outstanding as of
March 31, 2018 net of unamortized financing fees was $71.4 million. The loan is repayable in instalments of principal and
interest over a period of 4 years. The interest rate on this loan is LIBOR plus 3.375% per annum.
OTHER CREDIT FACILITIES
Subsidiaries of the Company have credit facilities with banks in Canada and the UK for an aggregate amount of $669.2 million
[March 31, 2017 − $602.6 million]. These credit facilities, consisting of call loans, letters of credit and daylight overdraft facilities,
are collateralized by unpaid client securities and/or securities owned by the Company. As of March 31, 2018 and 2017, there
were no balances outstanding under these other credit facilities.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Notes to Consolidated Financial Statements 85
A subsidiary of the Company has also entered into secured irrevocable standby letters of credit from a financial institution totaling
$2.6 million (US$2.0 million) [March 31, 2017 − $2.7 million (US$2.0 million)] as rent guarantees for its leased premises in New
York. As of March 31, 2018 and 2017, there were no outstanding balances under these standby letters of credit.
NOTE 08
Interest in Other Entities
The Company has a 58% controlling interest for accounting purposes in Canaccord Financial Group (Australia) Pty Ltd. and
Canaccord Genuity (Australia) Limited as of March 31, 2018 [March 31, 2017 − 58%]. Together, these entities operate as
Canaccord Genuity Australia and the operation’s principal place of business is in Australia. As discussed in Note 24, Canaccord
Genuity (Australia) Limited is regulated by the Australian Securities and Investments Commission.
Canaccord Genuity Australia reported total net income of $9.6 million in fiscal 2018 [2017: net income of $12.5 million]. As at
March 31, 2018, accumulated non-controlling interest was $13.6 million [March 31, 2017 − $11.9 million]. Summarized financial
information including goodwill on acquisition and consolidation adjustments before inter-company eliminations is presented.
Summarized statement of profit or loss for the years ended March 31, 2018 and 2017:
For the years ended
Revenue
Expenses
Net income before taxes
Income tax expense
Net income
Attributable to:
CGGI shareholders
Non-controlling interests
Total comprehensive income
Attributable to:
CGGI shareholders
Non-controlling interests
Dividends paid to non-controlling interests
Summarized statement of financial position as at March 31, 2018 and 2017:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Summarized cash flow information for the years ended March 31, 2018 and 2017:
Cash provided by operating activities
Cash used by financing activities
Cash used by investing activities
Foreign exchange impact on cash balance
Net (decrease) increase in cash and cash equivalents
Canaccord Genuity Australia
March 31,
2018
$
57,022
$
(42,113)
14,909
5,261
9,648
5,595
4,053
11,084
6,429
4,655
3,445
March 31,
2017
59,693
(42,088)
17,605
5,153
12,452
7,369
5,083
12,844
7,597
5,247
2,520
Canaccord Genuity Australia
March 31,
2018
$
55,486
$
1,302
21,974
3,525
March 31,
2017
51,817
5,460
25,189
—
Canaccord Genuity Australia
March 31,
2018
$ 2,069
$
(6,890)
(120)
10
$(4,931)
$
March 31,
2017
11,623
(3,679)
(201)
276
8,019
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
86 Notes to Consolidated Financial Statements
NOTE 09
Accounts Receivable and Accounts Payable and Accrued Liabilities
ACCOUNTS RECEIVABLE
Brokers and investment dealers
Clients
RRSP cash balances held in trust
Other
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Brokers and investment dealers
Clients
Other
March 31,
2018
March 31,
2017
$
1,405,380
$
2,625,939
333,434
330,369
146,654
373,300
302,532
93,965
$
2,215,837
$
3,395,736
March 31,
2018
March 31,
2017
$
1,051,546
$
1,913,177
1,228,201
359,207
1,468,410
288,296
$
2,638,954
$
3,669,883
Amounts due from and to brokers and investment dealers include balances from resale and repurchase agreements, securities
loaned and borrowed, as well as brokers’ and dealers’ counterparty balances.
Client security purchases are entered into on either a cash or a margin basis. In the case of a margin account, the Company
extends a loan to a client for the purchase of securities, using securities purchased and/or other securities in the client’s account
as collateral. Amounts loaned to any client are limited by the margin regulations of the Investment Industry Regulatory
Organization of Canada (IIROC) and other regulatory authorities and are subject to the Company’s credit review and daily
monitoring procedures.
Amounts due from and to clients are due by the settlement date of the trade transaction. Margin loans are due on demand and
are collateralized by the assets in the clients’ accounts. Interest on margin loans and on amounts due to clients is based on a
floating rate [March 31, 2018 − 6.45% to 7.50% and 0.00% to 0.45%, respectively; March 31, 2017 − 5.70% to 6.75% and
0.00% to 0.05%, respectively].
As at March 31, 2018, the allowance for doubtful accounts was $3.4 million [March 31, 2017 − $4.9 million]. See below for the
movements in the allowance for doubtful accounts:
Balance, March 31, 2016
Charge for the year
Recoveries
Write-offs
Foreign exchange
Balance, March 31, 2017
Charge for the year
Recoveries
Write-offs
Foreign exchange
Balance, March 31, 2018
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
$
$
10,763
4,153
(4,601)
(5,317)
(56)
4,942
4,831
(4,168)
(2,235)
(7)
$
3,363
NOTE 10
Investments
Available for sale
Notes to Consolidated Financial Statements 87
March 31,
2018
$
2,035
$
March 31,
2017
2,829
During the year ended March 31, 2018, the Company reclassified its investment in Euroclear, one of the principal clearing houses
for securities traded in the Euromarket, from investments to securities owned as a result of a change in the business model in
which it is held. The investment is classified as level 2 available for sale financial instrument.
During the year ended March 31, 2018, the Company, through a wholly-owned subsidiary, invested $2.5 million for 833,333
Class B Units, at $3.00 per unit, in Canaccord Genuity Acquisition Corp. (‘‘CGAC’’). CGAC is a special purpose acquisition
corporation formed to effect an acquisition of one or more businesses. Each Class B Unit consists of one Class B Share and one
warrant.
The Company holds a 26.2% interest in CGAC and is considered to exert significant influence over the operations of CGAC.
Accordingly, the investment in CGAC is accounted for using the equity method.
The Company’s equity portion of the net loss of CGAC for the year ended March 31, 2018 was $0.3 million.
NOTE 11
Equipment and Leasehold Improvements
March 31, 2018
Computer equipment
Furniture and equipment
Leasehold improvements
March 31, 2017
Computer equipment
Furniture and equipment
Leasehold improvements
Cost
Balance, March 31, 2016
Additions
Disposals
Foreign exchange
Balance, March 31, 2017
Acquisition of a subsidiary
Additions
Disposals
Foreign exchange
Balance, March 31, 2018
Cost
Accumulated
amortization
Net book
value
$
19,929
$
13,350
$
26,265
86,533
132,727
9,999
21,953
83,513
115,465
20,237
68,173
101,760
4,476
17,764
61,746
83,986
Computer
equipment
Furniture and
equipment
Leasehold
improvements
6,579
6,028
18,360
30,967
5,523
4,189
21,767
31,479
Total
$
10,825
$
21,446
$
82,734
$
115,005
1,358
(1,525)
(659)
915
(131)
(277)
2,929
(929)
(1,221)
5,202
(2,585)
(2,157)
$
9,999
$
21,953
$
83,513
$
115,465
6,523
2,656
(501)
1,252
3,933
1,390
(1,567)
556
—
2,265
(239)
994
10,456
6,311
(2,307)
2,802
$
19,929
$
26,265
$
86,533
$
132,727
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
88 Notes to Consolidated Financial Statements
Accumulated amortization and impairment
Balance, March 31, 2016
Amortization
Disposals
Foreign exchange
Balance, March 31, 2017
Acquisition of a subsidiary
Amortization
Disposals
Foreign exchange
Computer
equipment
Furniture and
equipment
Leasehold
improvements
$
$
3,603
$
16,555
$
57,798
$
2,474
(1,130)
(471)
1,537
(130)
(198)
5,314
(918)
(448)
4,476
$
17,764
$
61,746
$
5,083
3,347
(501)
945
2,608
934
(1,474)
405
—
5,964
(238)
701
Total
77,956
9,325
(2,178)
(1,117)
83,986
7,691
10,245
(2,213)
2,051
Balance, March 31, 2018
$
13,350
$
20,237
$
68,173
$
101,760
The carrying value of any temporarily idle property, plant and equipment is not considered material as at March 31, 2018 and
March 31, 2017.
NOTE 12
Business Combinations
On July 5, 2017, the Company announced that it has agreed to acquire 100% of the outstanding shares of Hargreave Hale Limited
(‘‘Hargreave Hale’’), a leading independent UK-based investment and wealth management business. This transaction closed on
September 18, 2017. This acquisition is part of the Company’s strategy of growing its global wealth management business and
increasing its wealth management contribution to overall consolidated results. Total purchase consideration was $131.4 million
(£79.6 million), of which $76.1 million (£46.1 million) was paid on closing. There is deferred consideration of $9.9 million
(£6.0 million) which has been withheld by the Company for a maximum period of six years from completion pending the outcome
of a regulatory matter. In addition, there is contingent consideration of up to $45.4 million (£27.5 million) which will be payable
over a period of up to three years, subject to achievement of certain performance targets related to the retention and growth of
client assets and revenues and an amount determined with reference to the fund management business.
Further payments of up to $4.1 million (£2.5 million) will be paid to certain continuing Hargreave Hale employees subject to
achievement of certain performance targets related to the retention and growth of client assets and revenues. This amount has
been recognized as an expense during the year ended March 31, 2018 in connection with the acquisition.
The purchase price, determined by the fair value of the consideration given at the date of the acquisition and the fair value of the
net assets acquired on the date of the acquisition, was as follows:
Consideration paid
Cash
Deferred consideration
Contingent consideration
Net assets acquired
Cash
Accounts receivable
Other tangible assets
Liabilities
Identifiable intangible assets
Deferred tax liability related to identifiable intangible assets
Goodwill
$
$
$
76,103
9,902
45,386
131,391
22,052
21,710
1,408
(16,793)
61,560
(10,800)
52,254
131,391
Identifiable intangible assets of $61.6 million were recognized and include customer relationships and a fund management
contract. The goodwill of $52.3 million represents the value of expected synergies arising from the acquisition. Goodwill is not
deductible for tax purposes.
Management has estimated the fair value of the contingent consideration related to this acquisition to be up to $45.4 million
(£27.5 million) as of the acquisition date and will be payable over a period of three years. The contingent consideration must be
settled in cash and meets the definition of a financial liability, and subsequent changes to the fair value of the contingent
consideration will be recognized in the statement of operations. The determination of the fair value is based upon discounted cash
flows, and the key assumption affecting the fair value is the probability that the performance targets will be met.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Notes to Consolidated Financial Statements 89
The above amounts are estimates, which were made by management at the time of the preparation of these consolidated
financial statements based on available information. Amendments may be made to these amounts as well as the allocation of
identifiable intangible assets between indefinite life and finite lives. Values based on estimates are subject to changes during the
period ending 12 months after the acquisition date.
The aggregate acquisition-related expenses incurred by the Company in connection with the acquisition of Hargreave Hale are
$6.7 million. These expenses are mainly comprised of professional and consulting fees. In addition, the Company also incurred
restructuring expenses of $2.9 million related to an onerous lease provision related to the acquisition.
Contributions to revenue and net loss by Hargreave Hale, including restructuring and acquisition-related costs, were $52.9 million
and $4.8 million respectively since the acquisition date.
Had Hargreave Hale been consolidated from April 1, 2017, as part of the consolidated statement of operations, the consolidated
revenue and net income would have been approximately $1.1 billion and $21.4 million, respectively, for the year ended March 31,
2018. These figures represent historical results and are not necessarily indicative of future performance.
NOTE 13
Goodwill and Other Intangible Assets
Goodwill
Brand
names
Customer
relationships
Technology
Software
under
development
Non-
competition
Trading
licenses
Fund
management
Total
Identifiable intangible assets
Gross amount
Balance, March 31, 2016 $ 526,364 $
44,930 $
97,426 $
30,512 $
4,506 $
14,153 $
196 $
— $ 191,723
Additions
Transfer between
categories
Foreign exchange
—
—
(11,466)
—
—
—
—
—
440
—
1,382
(1,382)
(6,303)
(3,132)
(79)
—
—
—
—
—
—
196
—
—
—
—
—
—
—
440
—
(9,514)
182,649
36,639
62,355
—
—
3,599
13,088
—
—
—
91,123
24,921
29,202
3,045
14,153
795
—
—
7,130
3,045
2,359
(3,045)
—
—
Balance, March 31, 2018
580,606
44,930
123,174
35,401
14,153
196
40,238
258,092
Balance, March 31, 2017
514,898
44,930
Additions
Transfer between
categories
Foreign exchange
52,254
—
13,454
—
—
—
Accumulated amortization
and impairment
Balance, March 31, 2016
(322,632)
Amortization
Foreign exchange
—
—
Balance, March 31, 2017
(322,632)
Transfer between
categories
Amortization
Foreign exchange
—
—
—
Balance, March 31, 2018
(322,632)
—
—
—
—
—
—
—
—
Net book value
March 31, 2017
March 31, 2018
192,266
257,974
44,930
44,930
40,591
61,396
16,583
16,028
(44,266)
(10,554)
(2,350)
(14,153)
(196)
(8,617)
(3,182)
2,351
1,117
—
—
—
—
—
(50,532)
(12,619)
(2,350)
(14,153)
(196)
—
(8,700)
(2,546)
(2,350)
(3,339)
(1,065)
(61,778)
(19,373)
—
—
—
—
—
—
—
—
—
—
—
(71,519)
(11,799)
3,468
(79,850)
—
(1,723)
(13,762)
(112)
(3,723)
2,350
—
—
—
695
—
(14,153)
(196)
(1,835)
(97,335)
—
—
—
—
—
38,403
102,799
160,757
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
90 Notes to Consolidated Financial Statements
IMPAIRMENT TESTING OF GOODWILL AND OTHER ASSETS
The carrying amounts of goodwill and indefinite life intangible assets acquired through business combinations are as follows:
Canaccord Genuity CGUs
Canada
Canaccord Genuity Wealth
Management CGUs
UK and Europe (Channel Islands)
UK and Europe (Eden Financial Ltd
(‘‘Eden’’)
UK and Europe (Hargreave Hale)
Intangible assets with indefinite lives
Goodwill
Total
March 31, 2018
March 31, 2017
March 31, 2018
March 31, 2017
March 31, 2018
March 31, 2017
$
44,930
$
44,930
$
92,074
$
92,074
$
137,004
$
137,004
—
—
—
—
—
—
97,754
90,257
97,754
90,257
10,761
57,385
9,935
—
10,761
57,385
9,935
—
$
44,930
$
44,930
$
257,974
$
192,266
$
302,904
$
237,196
The Genuity brand name is considered to have an indefinite life as the Company has no plans to cease its use in the future.
Goodwill and intangible assets with indefinite lives are tested for impairment annually at March 31, and when circumstances
indicate the carrying value may potentially be impaired. If any indication of impairment exists, the Company estimates the
recoverable amount of the CGU to which goodwill and indefinite life intangible assets are allocated. Where the carrying amount of
a CGU exceeds its recoverable amount, an impairment loss is recognized. Any impairment loss first reduces the carrying amount
of any goodwill allocated to the CGUs and then if any impairment loss remains, the other assets of the unit are reduced on a
pro rata basis. Impairment losses relating to goodwill cannot be reversed in future periods. The Company considers the
relationship between its market capitalization and the book value of its equity, among other factors, when reviewing for indicators
of impairment. Consequently, interim goodwill and other assets impairment testing was carried out for all applicable CGUs at
June 30, September 30 and December 31, 2017.
In accordance with IAS 36, ‘‘Impairment of Assets’’ (IAS 36), the recoverable amounts of the CGUs’ net assets have been
determined using fair value less costs to sell (FVLCS) calculations, which are based on future cash flow assumptions which are
considered to be appropriate for the purposes of such calculations. In accordance with IFRS 13 fair value represents an estimate
of the price at which an orderly transaction to sell an asset or transfer a liability would take place between market participants as
at the end of the reporting period under market conditions as at that date (an exit price as at the measurement date). There is a
material degree of uncertainty with respect to the estimates of the recoverable amounts of the CGUs’ net assets given that these
estimates involve making key assumptions about the future. In making such assumptions, management has used its best
estimate of future economic and market conditions within the context of the Company’s capital markets and wealth management
activities. These valuations are categorized as Level 3 in the fair value hierarchy.
The FVLCS calculations are based on assumptions, as described above, made in connection with future cash flows, relief of
royalties with respect to the brand name indefinite life intangible asset, terminal growth rates and discount rates. In order to
estimate the FVLCS for each CGU, cash flows are forecast over a five-year period, a terminal growth rate is applied and then such
cash flows are discounted to their present value. The discount rate is based on the specific circumstances of each CGU and is
derived from the estimated weighted average cost of capital of the Company. The CGUs which recorded goodwill in their carrying
value as of March 31, 2018 were Canaccord Genuity, Canada and Canaccord Genuity Wealth Management UK & Europe (Channel
Islands), UK (Eden) and UK (Hargreave Hale). The discount rate utilized for each of these CGUs for the purposes of these
calculations was 12.5% [March 31, 2017 − 12.5%]. Cash flow estimates for each of these CGUs were based on management
assumptions as described above and utilize five-year compound annual revenue growth rates was 5.0% [March 31, 2017 − 5.0%]
as well as estimates in respect of operating margins. The terminal growth rate used for each of Canaccord Genuity, Canada and
Canaccord Genuity Wealth Management UK & Europe (Channel Islands), UK (Eden) and UK (Hargreave Hale) was 2.5%
[March 31, 2017 − 2.5%].
Sensitivity testing was conducted as part of the annual impairment test of goodwill and indefinite life intangible assets for the
Canaccord Genuity − Canada CGU. The sensitivity testing includes assessing the impact that reasonably possible declines in
revenue estimates for the 12-month period ending on March 31, 2019 and declines in growth rates after that period and
increases in the discount rates would have on the recoverable amounts of the CGUs, with other assumptions being held constant.
An increase in the discount rate of 7.1 percentage points, a decrease in the estimated revenue for the year ending March 31,
2019 of $40.1 million or a decrease in the five-year compound annual growth rate of 15.8 percentage points would result in the
estimate of the recoverable amount declining below the carrying value with the result that an impairment charge would be
required. Any such impairment charge would be determined after incorporating the effect of any changes in key assumptions
including any consequential effects of such changes on estimated operating income and on other factors.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
NOTE 14
Income Taxes
The major components of income tax expense are:
Consolidated statements of operations
Current income tax expense
Current income tax expense
Adjustments in respect of prior years
Deferred income tax recovery
Origination and reversal of temporary differences
Impact of change in tax rates
Income tax expense reported in the statements of operations
Notes to Consolidated Financial Statements 91
March 31,
2018
March 31,
2017
$
$
23,630
(3,010)
20,620
(1,807)
(144)
(1,951)
18,669
$
$
16,286
36
16,322
(5,667)
43
(5,624)
10,698
The Company’s income tax expense differs from the amount that would be computed by applying the combined federal and
provincial income tax rates as a result of the following:
Net income before income taxes
Income tax expense at the statutory rate of 26.25% (2017: 26.0%)
Difference in tax rates in foreign jurisdictions
Non-deductible items affecting the determination of taxable income
Change in accounting and tax base estimate
Change in deferred tax asset − reversal period of temporary difference and other
Tax losses and other temporary differences not recognized
Share based payments
Income tax expense reported in the statements of operations
March 31,
2018
35,746
9,381
(1,631)
2,555
3,248
6,759
(5,409)
3,766
18,669
$
$
$
$
March 31,
2017
53,884
13,999
(4,096)
3,051
(1,143)
(2,292)
1,208
(29)
10,698
The following were the deferred tax assets and liabilities recognized by the Company and movements thereon during the year:
Unrealized gain on securities owned
Legal provisions
Unpaid remunerations
Unamortized capital cost of equipment and leasehold improvements
over their net book value
Unamortized common share purchase loans
Loss carryforwards
Long-term incentive plan
Other intangible assets
Other
Consolidated statements
of financial position
Consolidated statements
of operations
March 31,
2018
(10,053)
774
6,359
2,984
2,434
5,224
25,365
(28,066)
1,205
6,226
$
$
March 31,
2017
(114)
1,195
4,971
2,974
1,792
6,491
14,398
(17,523)
999
15,183
$
$
$
$
March 31,
2018
9,939
421
(1,388)
(10)
(641)
1,267
(10,967)
(1,318)
746
(1,951)
$
$
March 31,
2017
(992)
(839)
(2,713)
(287)
(541)
2,145
(541)
(2,296)
440
(5,624)
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
92 Notes to Consolidated Financial Statements
Deferred tax assets and liabilities as reflected in the consolidated statements of financial position are as follows:
Deferred tax assets
Deferred tax liabilities
The movement for the year in the net deferred tax position was as follows:
Opening balance as of April 1
Tax recovery recognized in the consolidated statements of operations
Foreign exchange on deferred tax position
Deferred tax liability on convertible debentures
Deferred taxes acquired in business combination
Other
Ending balance as of March 31
March 31,
2018
$
$
19,941
(13,715)
6,226
$
$
March 31,
2017
15,323
(140)
15,183
2018
$
15,183
$
1,951
1,111
—
(11,308)
(711)
2017
10,771
5,624
(810)
(990)
—
588
$
6,226
$
15,183
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against
current tax liabilities and if the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same
taxation authority on the same taxable entity.
At the balance sheet date, the Company has tax loss carryforwards of approximately $35.5 million [2017 − $37.9 million] for
which a deferred tax asset has not been recognized. These losses relate to subsidiaries outside of Canada that have a history of
losses and may also be subject to legislative limitations on use and may not be used to offset taxable income elsewhere in the
consolidated group of companies. The subsidiaries have no taxable temporary differences or any tax planning opportunities
available that could partly support the recognition of these losses as deferred tax assets, as the likelihood of future economic
benefit is not sufficiently assured. These losses begin expiring in 2029.
Other temporary differences not recognized as deferred tax assets in relation to subsidiaries outside of Canada amount to
$38.8 million at March 31, 2018 [2017 − $33.7 million]. Since the subsidiaries outside of Canada have a history of losses and
the deductible temporary differences may not be used to offset taxable income elsewhere in the consolidated group of companies,
no asset has been recognized as the likelihood of future economic benefit is not sufficiently assured.
NOTE 15
Subordinated Debt
Loan payable, interest payable monthly at prime + 4% per annum, due on demand
March 31,
2018
$
7,500
March 31,
2017
7,500
The loan payable is subject to a subordination agreement and may only be repaid with the prior approval of IIROC. As at March 31,
2018 and 2017, the interest rates for the subordinated debt were 7.45% and 6.7%, respectively. The carrying value of
subordinated debt approximates its fair value due to the short-term nature of this liability.
NOTE 16
Bank Loan
Loan
Less: Unamortized financing fees
Current portion
Long term portion
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
March 31,
2018
March 31,
2017
$
72,500
$
(1,063)
71,437
9,679
61,758
—
—
—
—
—
Notes to Consolidated Financial Statements 93
In connection with the acquisition of Hargreave Hale [Note 12], a subsidiary of the Company entered into a senior credit facility in
the amount of £40.0 million (C$72.5 million as of March 31, 2018) to finance a portion of the cash consideration. The balance
outstanding as of March 31, 2018 net of unamortized financing fees was $71.4 million. The loan is repayable in instalments of
principal and interest over a period of 4 years. The interest rate on this loan is LIBOR plus 3.375% per annum.
NOTE 17
Convertible Debentures
On October 27, 2016, the Company closed a private placement of convertible unsecured senior subordinated debentures (the
‘‘Debentures’’) in the aggregate principal amount of $60.0 million. The net amount recognized after deducting issue costs net of
deferred tax liability was $58.9 million. The Debentures were placed with funds managed by a large Canadian asset manager.
The Debentures bear interest at a rate of 6.50% per annum, payable semi-annually on the last day of June and December each
year commencing December 31, 2016. The Debentures are convertible at the holder’s option into common shares of the Company
at a conversion price of $6.50 per share. The Debentures will mature on December 31, 2021 and may be redeemed by the
Company, in certain circumstances, on or after December 31, 2019.
The Debentures are classified as compound financial instruments. On initial recognition, the fair value of the liability was
calculated based on the present value of future cash flows under the instruments, discounted at 8%, being equal to the rate of
interest applied by the market at the time of issue to instruments of comparable credit status and future cash flows, without the
conversion feature. The residual amount is recorded as a component of shareholders’ equity.
Convertible debentures
$
57,081
$
2,604
$
56,442
$
2,604
Liability
March 31, 2018
Equity
Liability
March 31, 2017
Equity
NOTE 18
Preferred Shares
Series A Preferred Shares issued and outstanding
$
110,818
4,540,000
$
110,818
Amount
Number of
shares
Amount
Series C Preferred Shares issued and outstanding
Series C Preferred Shares held in treasury
97,450
(2,627)
94,823
4,000,000
(106,794)
3,893,206
97,450
(2,627)
94,823
$
205,641
8,433,206
$
205,641
Number of
shares
4,540,000
4,000,000
(106,794)
3,893,206
8,433,206
March 31, 2018
March 31, 2017
[i] SERIES A PREFERRED SHARES
The Company issued 4,540,000 Cumulative 5-Year Rate Reset First Preferred Shares, Series A (Series A Preferred Shares) at a
purchase price of $25.00 per share for gross proceeds of $113.5 million. The aggregate net amount recognized after deducting
issue costs, net of deferred taxes of $1.0 million, was $110.8 million.
Quarterly cumulative cash dividends, as declared, were paid at an annual rate of 5.5% for the initial five-year period ended on
September 30, 2016. Commencing October 1, 2016 and ending on and including September 30, 2021, quarterly cumulative
dividends, if declared, will be paid at an annual rate of 3.885%. Thereafter, the dividend rate will be reset every five years at a rate
equal to the five-year Government of Canada bond yield plus 3.21%.
Holders of Series A Preferred Shares had the option to convert any or all of their shares into an equal number of Cumulative
Floating Rate First Preferred Shares, Series B (Series B Preferred Shares), subject to certain conditions, on September 30, 2016
and have the option on September 30 every five years thereafter. The number of shares tendered for conversion by the conversion
deadline of September 15, 2016 was below the minimum required to proceed with the conversion and, accordingly, no Series B
Preferred Shares were issued. Series B Preferred Shares would entitle any holders thereof to receive floating rate, cumulative,
preferential dividends payable quarterly, if declared, at a rate equal to the three-month Government of Canada Treasury Bill yield
plus 3.21%.
The Company had the option to redeem the Series A Preferred Shares on September 30, 2016, and has the option to redeem on
September 30 every five years thereafter, in whole or in part, at $25.00 per share together with all declared and unpaid dividends.
[ii] SERIES C PREFERRED SHARES
The Company issued 4,000,000 Cumulative 5-Year Rate Reset First Preferred Shares, Series C (Series C Preferred Shares) at a
purchase price of $25.00 per share for gross proceeds of $100.0 million. The aggregate net amount recognized after deducting
issue costs, net of deferred taxes of $1.0 million, was $97.5 million.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
94 Notes to Consolidated Financial Statements
Quarterly cumulative cash dividends, as declared, were paid at an annual rate of 5.75% for the initial five-year period ending on
June 30, 2017. Commencing July 1, 2017 and ending on and including June 30, 2022, quarterly cumulative dividends, if declared,
will be paid at an annual rate of 4.993%. Thereafter, the dividend rate will be reset every five years at a rate equal to the five-year
Government of Canada bond yield plus 4.03%.
Holders of Series C Preferred Shares had the option to convert any or all of their shares into an equal number of Cumulative
Floating Rate First Preferred Shares, Series D (Series D Preferred Shares), subject to certain conditions, on June 30, 2017 and
have the option on June 30 every five years thereafter. The number of shares tendered for conversion by the conversion deadline
of June 30, 2017 was below the minimum required to proceed with the conversion and, accordingly, no Series D Preferred Shares
were issued. Series D Preferred Shares would entitle any holders thereof to receive floating rate, cumulative, preferential dividends
payable quarterly, if declared, at a rate equal to the three-month Government of Canada Treasury Bill yield plus 4.03%.
The Company had the option to redeem the Series C Preferred Shares on June 30, 2017, and has the option to redeem on
June 30 every five years thereafter, in whole or in part, at $25.00 per share together with all declared and unpaid dividends.
NOTE 19
Common Shares and Warrants
Issued and fully paid
Unvested share purchase loans
Held for the LTIP
Warrants
Warrants issued in connection with Private Placement
[i] AUTHORIZED
Unlimited common shares without par value.
[ii] ISSUED AND FULLY PAID
Balance, March 31, 2016
Shares issued in connection with share-based payment plans [Note 21]
Shares issued in connection with replacement plans [Note 21]
Shares issued for other stock-based award
Shares issued in connection with private placement
Shares cancelled
Balance, March 31, 2017
Shares issued in connection with replacement plans [Note 21]
Balance, March 31, 2018
March 31, 2018
March 31, 2017
Amount
Number of
shares
Amount
Number of
shares
$
772,746
113,522,629
$
772,645
113,511,468
(5,098)
(654,322)
(9,366)
(1,590,146)
(117,802)
(19,814,432)
(121,830)
(19,141,505)
$
649,846
93,053,875
$
641,449
92,779,817
March 31, 2018
March 31, 2017
Amount
1,975
$
Number of
warrants
3,438,412
$
Amount
1,975
Number of
warrants
3,438,412
Number of shares
103,812,814
$
2,433,285
76,088
507,051
6,876,824
(194,594)
113,511,468
11,161
113,522,629
$
Amount
729,502
14,840
685
2,373
26,601
(1,356)
772,645
101
772,746
On August 11, 2017, the Company filed a notice to renew the normal course issuer bid (NCIB) to provide the Company with the
choice to purchase up to a maximum of 5,675,573 of its common shares during the period from August 15, 2017 to August 14,
2018 through the facilities of the TSX and on alternative trading systems in accordance with the requirements of the TSX. The
purpose of the purchase of common shares under the NCIB is to enable the Company to acquire shares for cancellation. The
maximum number of shares that may be purchased under the current NCIB represents 5.0% of the Company’s outstanding
common shares at the time of the notice. There were no shares purchased through this and the previous NCIB between April 1,
2017 and March 31, 2018.
During the year ended March 31, 2017, the Company completed the closings of a non-brokered private placement (Private
Placement) to employees of the Company. In aggregate, the Company issued 6,876,824 units at a price of $4.17 per unit for
aggregate proceeds to the Company of $28.6 million. Each unit consists of one common share (‘‘Common Share’’) of the
Company and one-half of one Common Share purchase warrant (‘‘Warrant’’). Each whole Warrant will entitle the holder to acquire
one Common Share at an exercise price of $4.99 for the period from June 17, 2019 to December 17, 2019. Warrants are not
listed and are not transferable.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Notes to Consolidated Financial Statements 95
The Warrants are classified as equity instruments. The fair value of the Warrants, calculated using an option pricing model, was
determined to be $1.975 million. Option pricing models require the input of highly subjective assumptions including the expected
price volatility. Volatility is based on the historical trend of the share prices of the Company. Changes in the subjective
assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable
single measure of the fair value of the Warrants.
[iii] FORGIVABLE COMMON SHARE PURCHASE LOANS
The Company provides forgivable common share purchase loans to certain employees (other than directors or executive officers)
in order to purchase common shares of the Company. The Company has provided such loans to executive officers in the past but
has now adopted a policy not to make any further such loans to directors or executive officers. The unvested balance of forgivable
common share purchase loans is presented as a deduction from share capital. The forgivable common share purchase loans are
amortized over the vesting period. The difference between the unvested and unamortized values is included in contributed
surplus.
[iv] EARNINGS PER COMMON SHARE
Earnings per common share
Net income attributable to CGGI shareholders
Preferred shares dividends
Net income attributable to common shareholders
Weighted average number of common shares (number)
Basic earnings per share
Diluted earnings per common share
Net income attributable to common shareholders
Weighted average number of common shares (number)
Dilutive effect in connection with LTIP (number)
Dilutive effect in connection with other share-based payment plans (number)
Dilutive effect in connection with warrants (number)
Adjusted weighted average number of common shares (number)
Diluted earnings per common share
For the years ended
March 31,
2018
March 31,
2017
$
13,024
$
(9,593)
3,431
38,103
(11,076)
27,027
92,587,216
91,656,708
$
0.04
$
0.29
3,431
27,027
92,587,216
17,089,575
978,809
206,487
91,656,708
8,248,790
1,243,574
—
110,862,087
101,149,072
$
0.03
$
0.27
The convertible debentures were excluded from the diluted earnings per share calculation for the year ended March 31, 2018 and
2017 as they were anti-dilutive
There have been no other transactions involving common shares or potential common shares between the reporting period and
the date of authorization of these financial statements which would have a significant impact on earnings per common share.
NOTE 20
Dividends
COMMON SHARE DIVIDENDS
The Company declared the following common share dividend during the year ended March 31, 2018:
Record date
March 2, 2018
December 1, 2017
September 1, 2017
June 16, 2017
Payment date
March 15, 2018
December 15, 2017
September 15, 2017
July 3, 2017
Cash dividend per
common share
Total common
dividend amount
$
$
$
$
0.01
0.01
0.01
0.10
$
$
$
$
1,135
1,135
1,135
11,351
On June 6, 2018, the Board of Directors approved a dividend of $0.12 per common share, payable on July 3, 2018, with a record
date of June 22, 2018. This dividend is comprised of a $0.01 base quarterly dividend and an $0.11 variable supplemental
dividend [Note 28].
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
96 Notes to Consolidated Financial Statements
PREFERRED SHARE DIVIDENDS
Record date
March 16, 2018
December 22, 2017
September 15, 2017
June 16, 2017
Payment date
April 2, 2018
January 2, 2018
October 2, 2017
June 30, 2017
Cash dividend per
Series A
Preferred Share
Cash dividend per
Series C
Preferred Share
Total preferred
dividend amount
$
$
$
$
0.24281
0.24281
0.24281
0.24281
$
$
$
$
0.31206
0.31206
0.31206
0.359375
$
$
$
$
2,351
2,351
2,351
2,540
On June 6, 2018, the Board approved a cash dividend of $0.24281 per Series A Preferred Share payable on July 3, 2018 to
Series A Preferred shareholders of record as at June 22, 2018 [Note 28].
On June 6, 2018, the Board approved a cash dividend of $0.31206 per Series C Preferred Share payable on July 3, 2018 to
Series C Preferred shareholders of record as at June 22, 2018 [Note 28].
NOTE 21
Share-Based Payment Plans
[i] LONG-TERM INCENTIVE PLAN
Under the long-term incentive plan (LTIP) or the ‘‘Plan’’, eligible participants are awarded restricted share units (RSUs), which
generally vest over three years. All awards under the LTIP plan are settled by transfer of shares from employee benefit trusts
(“Trusts”) which are funded by the Company, or certain of its subsidiaries, as the case may be, with cash which is used by the
trustees to purchase common shares on the open market that will be held in the Trusts until the RSUs vest. No further shares
may be issued from treasury under the LTIP.
Effective as of March 31, 2018 the Plan was changed to remove certain employment-related conditions for the vesting of RSU
awards made as part of the normal course incentive compensation payment cycle. With the change, RSUs will continue to vest
after termination of employment so long as the employee does not violate certain post-termination restrictions and is not engaged
in certain competitive or soliciting activities as provided in the Plan. Because of this change, the Company determined that the
awards do not meet the criteria for an in-substance service condition, as defined by IFRS 2 ‘‘Share based payments’’. Accordingly,
RSUs granted as part of the normal course incentive compensation payment cycle are expensed in the period in which those
awards are deemed to be earned with a corresponding increase in contributed surplus, which is generally the fiscal period in which
the awards are either made or the immediately preceding fiscal year for those awards made after the end of such fiscal year but
were determined and earned in respect of that fiscal year. With this change to the Plan, the Company recorded an expense of
$48.4 million during the year ended March 31, 2018 in respect of the unamortized portion of outstanding awards as of March 31,
2018 which would have otherwise been expensed in periods after March 31, 2018 if the Plan had not been changed.
For certain awards, typically new hire awards or retention awards, vesting is subject to continued employment and therefore these
awards are subject to a continuing service requirement. Accordingly, the Company recognizes the cost of such awards as an
expense on a graded basis over the applicable vesting period with a corresponding increase in contributed surplus.
There were 7,292,403 RSUs [year ended March 31, 2017 − 11,895,720 RSUs] granted in lieu of cash compensation to
employees during the year ended March 31, 2018. The Trusts purchased 5,681,240 common shares [year ended March 31,
2017 − 9,838,528 common shares] during the year ended March 31, 2018.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Notes to Consolidated Financial Statements 97
The fair value of the RSUs at the measurement date is based on the fair value on grant date. The weighted average fair value of
RSUs granted during the year ended March 31, 2018 was $5.00 [March 31, 2017 − $4.75].
Awards outstanding, March 31, 2016
Grants
Vested
Forfeited
Awards outstanding, March 31, 2017
Grants
Vested
Forfeited
Awards outstanding, March 31, 2018
Common shares held by the Trusts, March 31, 2016
Acquired
Released on vesting
Common shares held by the Trusts, March 31, 2017
Acquired
Released on vesting
Common shares held by the Trusts, March 31, 2018
[ii] FORGIVABLE COMMON SHARE PURCHASE LOANS
Number
11,962,855
11,895,720
(4,598,904)
(1,079,926)
18,179,745
7,292,403
(4,906,479)
(435,281)
20,130,388
Number
12,171,624
9,838,528
(2,868,647)
19,141,505
5,681,240
(5,008,313)
19,814,432
The Company provides loans to certain employees (other than directors or executive officers) for the purpose of partially funding
the purchase of shares of the Company and increasing share ownership by the employees. The Company has provided such loans
to executive officers in the past but has now adopted a policy not to make any further such loans to directors or executive officers.
These loans are equity-settled transactions that are generally forgiven over a three- to five-year period from the initial advance of
the loan or at the end of that three- to five-year period [Note 19 [iii]].
[iii] REPLACEMENT PLANS
As a result of the acquisition of CSHP, the following share-based payment plans were introduced to replace the share-based
payment plans that existed at CSHP at the acquisition date:
Canaccord Genuity Group Inc. Collins Stewart Hawkpoint Replacement Annual Bonus Equity Deferral (ABED) Plan
On March 21, 2012, the Company introduced the Replacement ABED Plan, which replaced the ABED plans that existed at CSHP
as of the acquisition date. Eligible employees who participated in the CSHP ABED plans were granted options to purchase
common shares of the Company under the Replacement ABED Plan. The exercise price of these options was $nil. The options,
which are now vested, vested between one and three years from the acquisition date of CSHP. In accordance with IFRS 3,
‘‘Business Combinations’’ (IFRS 3), a portion of the awards granted was included as part of the purchase consideration for the
acquisition of CSHP and a portion was deferred and amortized to incentive compensation expense over the vesting period. The
awards were fully amortized as of March 31, 2015.
Balance, March 31, 2016
Exercised
Balance, March 31, 2017
Exercised
Balance, March 31, 2018
Number
25,637
(7,155)
18,482
—
18,482
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
98 Notes to Consolidated Financial Statements
The following table summarizes the share options outstanding under the Replacement ABED Plan as at March 31, 2018:
Range of exercise price
$nil
Options outstanding
Options exercisable
Number of
common shares
Weighted average
remaining
contractual life
Weighted
average exercise
price
Number of
options
exercisable
Weighted
average exercise
price
18,482
2.0
Nil
18,482
$
nil
Canaccord Genuity Group Inc. Collins Stewart Hawkpoint Replacement Long-Term Incentive Plan Award
On March 21, 2012, the Company introduced the Replacement LTIP, which replaced the existing LTIPs at CSHP on the acquisition
date. Eligible employees who participated in the CSHP LTIPs were granted options to purchase shares of the Company awards
under the Replacement LTIP. The exercise price of these options was $nil. The options, which are now vested, vested annually on
a graded basis over a three-year period. In accordance with IFRS 3, a portion of awards granted was included as part of the
purchase consideration for the acquisition of CSHP and a portion was deferred and amortized to incentive compensation expense
over the vesting period. The awards were fully amortized as of March 31, 2015.
Awards outstanding, March 31, 2016
Exercised
Balance, March 31, 2017
Exercised
Balance, March 31, 2018
Number
201,552
(68,933)
132,619
(11,161)
121,458
The following table summarizes the share options outstanding under the Replacement LTIP as at March 31, 2018:
Range of exercise price
$nil
[iv] CSH Inducement Plan
Options outstanding
Options exercisable
Number of
common shares
121,458
Weighted average
remaining
contractual life
Weighted
average exercise
price
Number of
options
exercisable
Weighted
average exercise
price
2.0
$nil
121,458
$
nil
In connection with the acquisition of CSHP, the Company agreed to establish a retention plan for key CSHP staff. The awards were
fully vested and fully amortized as of March 31, 2017. As of March 31, 2018, the only CSH inducement Plan award outstanding, if
exercised, would result in the issuance of 9,257 common shares. This is also the maximum number of common shares that may
be issued from treasury under the CSH Inducement Plan. These shares are subject to resolution of a dispute about the status of
a participant who was awarded this number of restricted share units.
[v] DEFERRED SHARE UNITS
Beginning April 1, 2011, the Company adopted a deferred share units (‘‘DSU’’) plan for its independent directors. Independent
directors must elect annually as to how they wish their directors’ fees to be paid and can specify the allocation of their directors’
fees between DSUs and cash. When a director leaves the Board of Directors, outstanding DSUs are paid out in cash, with the
amount equal to the number of DSUs granted multiplied by the closing share price as of the end of the fiscal quarter immediately
following such terminations. Under the plan, the directors are not entitled to receive any common shares in the Company, and
under no circumstances will DSUs confer on any participant any of the rights or privileges of a holder of common shares.
During the year ended March 31, 2018, the Company granted 77,720 DSUs [2017 − 84,990 DSUs]. The carrying amount of the
liability relating to DSUs at March 31, 2018 was $2.2 million [2017 − $1.1 million].
[vi] PERFORMANCE SHARE UNITS
For the year ended March 31, 2018, the Company adopted a performance share unit (‘‘PSU’’) plan for certain senior executives.
The PSUs are a notional equity-based instrument linked to the value of the Company’s common shares. At the end of a 3-year
vesting period, the number of PSUs which vest is determined upon performance against certain pre-determined metrics. The
PSUs cliff vest on the 3rd anniversary of the date of the grant. The PSUs are settled in cash, based on the average share price of
the Company’s shares at the time of vesting.
The carrying amount of the liability relating to PSUs at March 31, 2018 was $6.1 million.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
[vii] SHARE-BASED COMPENSATION EXPENSE
Long-term incentive plan
Forgivable common share purchase loans
CSH Inducement Plan
Deferred share units (cash-settled)
Other
Share-based incentive compensation expense
Accelerated share-based payment expense included as restructuring expense
Notes to Consolidated Financial Statements 99
For the years ended
March 31,
2018
March 31,
2017
$
93,673
$
37,537
199
—
661
67
94,600
757
1,699
1,609
(762)
239
40,322
—
Total share-based compensation expense
$
95,357
$
40,322
With the change to the Plan discussed above, the Company recorded an expense of $48.3 million during the year ended
March 31, 2018 with a corresponding increase in contributed surplus in respect of the awards granted prior to fiscal 2018. The
remainder of the LTIP expense relates to awards made in fiscal 2018 and the 2018 amortization expense associated with new
hire and retention-based awards.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
100 Notes to Consolidated Financial Statements
NOTE 22
Related Party Transactions
[i] CONSOLIDATED SUBSIDIARIES
The consolidated financial statements include the financial statements of the Company and the Company’s operating subsidiaries
and intermediate holding companies listed in the following table:
% equity interest
Country of
incorporation
March 31,
2018
March 31,
2017
Canaccord Genuity Corp.
CG Investments Inc.
Canaccord Genuity SAS
Canaccord Genuity Wealth (International) Limited
Canaccord Genuity Financial Planning Limited
Canaccord Genuity Wealth Limited
Canaccord Genuity Wealth Group Limited
Canaccord Genuity Wealth (International) Holdings Limited
Hargreave Hale Limited
Canaccord Genuity Limited
Canaccord Genuity Wealth Group Holdings Ltd.
Canaccord Genuity LLC
Canaccord Genuity Wealth Management (USA) Inc.
Canaccord Genuity Wealth & Estate Planning Services Ltd.
Canaccord Asset Management Inc.
Canaccord Adams Financial Group Inc.
Collins Stewart Inc.
Canaccord Adams BC ULC
Canaccord Adams (Delaware) Inc.
Canaccord Genuity Securities LLC
Stockwave Equities Ltd.
CLD Financial Opportunities Limited
Canaccord Genuity (Hong Kong) Limited
Canaccord Financial Group (Australia) Pty Ltd*
Canaccord Genuity (Australia) Limited*
(Beijing) Limited)
The Balloch Group Limited
Canaccord Genuity Asia (Hong Kong) Limited
Canaccord Genuity (Dubai) Ltd.
(Canaccord Genuity Asia
Canada
Canada
France
Guernsey
United Kingdom
United Kingdom
United Kingdom
Guernsey
United Kingdom
United Kingdom
Canada
United States
United States
Canada
Canada
United States
United States
Canada
United States
United States
Canada
Canada
China (Hong Kong SAR)
Australia
Australia
China
British Virgin Islands
China (Hong Kong SAR)
United Arab Emirates
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
100%
100%
100%
100%
100%
n/a
100%
100%
100%
100%
100%
100%
n/a
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
100%
100%
100%
100%
*
The Company owns 50% of the issued shares of Canaccord Financial Group (Australia) Pty Ltd and Canaccord Genuity (Australia) Limited, but for accounting purposes, as of March 31, 2018 the
Company is considered to have a 58% interest because of the shares held in a trust controlled by Canaccord Financial Group (Australia) Pty Ltd [March 31, 2017 − 58%] [Note 8]
[ii] COMPENSATION OF KEY MANAGEMENT PERSONNEL OF THE COMPANY
Disclosed in the table below are the amounts recognized as expenses related to individuals who are key management personnel
as at March 31, 2018 and 2017:
Short term employee benefits
Post termination benefits
Share-based payments
Total compensation paid to key management personnel
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
March 31,
2018
10,515
$
—
4,933
March 31,
2017
7,053
1,989
3,979
15,448
$
13,021
$
$
Notes to Consolidated Financial Statements 101
[iii] OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Accounts payable and accrued liabilities include the following balances with key management personnel:
Accounts receivable
Accounts payable and accrued liabilities
March 31,
2018
$
969
$
1,527
March 31,
2017
211
219
[iv] TERMS AND CONDITIONS OF TRANSACTIONS WITH RELATED PARTIES
Security trades executed by the Company for officers and directors are transacted in accordance with the terms and conditions
applicable to all clients. Commission income on such transactions in the aggregate is not material in relation to the overall
operations of the Company.
NOTE 23
Segmented Information
The Company operates in two industry segments as follows:
Canaccord Genuity − includes investment banking, advisory, research and trading activities on behalf of corporate, institutional
and government clients as well as principal trading activities in Canada, the UK, Europe and Dubai, Australia and the US.
Operations located in Other Foreign Locations under Canaccord Genuity Asia are also included in Canaccord Genuity.
Canaccord Genuity Wealth Management − provides brokerage services and investment advice to retail or institutional clients in
Canada, the US, and the UK and Europe.
Corporate and Other includes correspondent brokerage services, interest and foreign exchange revenue and expenses not
specifically allocable to Canaccord Genuity or Canaccord Genuity Wealth Management.
The Company’s industry segments are managed separately because each business offers different services and requires different
personnel and marketing strategies. The Company evaluates the performance of each business based on operating results,
without regard to non-controlling interests.
The Company does not allocate total assets, liabilities or equipment and leasehold improvements to the segments. Amortization
of tangible assets is allocated to the segments based on the square footage occupied. Amortization of identifiable intangible
assets is allocated to the Canaccord Genuity segment, as it relates to the acquisitions of Genuity and the 50% interest in
Canaccord Genuity Australia. Amortization of the identifiable intangible assets acquired through the purchase of Collins Stewart
Hawkpoint plc (CSHP) is allocated to Canaccord Genuity and Canaccord Genuity Wealth Management segments in the UK and
Europe (Channel Islands). Amortization of identifiable intangible assets acquired through the acquisition of Eden Financial Ltd. is
allocated to Canaccord Genuity Wealth Management segments in the UK and Europe (Eden Financial Ltd.). Amortization of
identifiable intangible assets acquired through the acquisition of Hargreave Hale is allocated to Canaccord Genuity Wealth
Management segments in the UK and Europe (Hargreave Hale). There are no significant intersegment revenues. Income taxes are
managed on a Company basis and are not allocated to operating segments. All revenue and operating profit is derived from
external customers. The Company also does not allocate cash flows by reportable segments.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
102 Notes to Consolidated Financial Statements
For the years ended
March 31, 2018
Canaccord
Genuity
Wealth
Management
Canaccord
Genuity
Corporate
and Other
Total
Canaccord
Genuity
Canaccord
Genuity
Wealth
Management
March 31, 2017
Corporate
and Other
Total
Revenues, excluding interest
revenue
$ 627,821
$ 358,193
$
9,735
12,072
8,988
6,068
$ 995,002
$ 593,447
$ 258,230
$ 11,022
$ 862,699
27,875
4,944
8,881
3,022
16,847
Interest revenue
Expenses, excluding
undernoted
Amortization
Development costs
Interest expense
Restructuring costs
Acquisition-related costs
Share of loss of an
associate
Income (loss) before income
taxes and intersegment
allocations
Less: Intersegment
allocations
Income (loss) before
income taxes
583,577
288,400
50,373
922,350
512,933
210,226
56,426
779,585
9,464
690
9,471
4,704
—
—
13,152
6,773
2,741
2,939
6,732
1,391
201
6,225
—
—
24,007
7,664
18,437
7,643
6,732
—
298
298
10,651
2,616
9,713
—
—
—
9,102
6,585
135
—
—
—
1,371
3,008
2,896
—
—
—
21,124
12,209
12,744
—
—
—
29,650
49,528
(43,432)
35,746
62,478
41,063
(49,657)
53,884
16,524
15,529
(32,053)
—
18,210
16,796
(35,006)
—
$ 13,126
$ 33,999
$ (11,379)
$ 35,746
$ 44,268
$ 24,267
$ (14,651)
$
53,884
For geographic reporting purposes, the Company’s business operations are grouped into Canada, the UK and Europe (including
Dubai), the United States, Australia, and Other Foreign Locations which is comprised of our Asian operations. The following table
presents the revenue of the Company by geographic location (revenue is attributed to geographic areas on the basis of the
location of the underlying corporate operating results):
Canada
UK & Europe (including Dubai)
United States
Australia
Other Foreign Locations
For the years ended
March 31,
2018
$
397,053
$
329,841
238,933
57,022
28
March 31,
2017
298,816
281,631
237,142
59,693
2,264
$
1,022,877
$
879,546
The following table presents selected figures pertaining to the financial position of each geographic location:
Canada
UK, Europe
and Dubai
United
States
Other Foreign
Locations
Australia
Total
As at March 31, 2018
Equipment and leasehold improvements
$
9,483
$
13,156
$
6,960
$
Goodwill
Intangible assets
Non-current assets
As at March 31, 2017
Equipment and leasehold improvements
Goodwill
Intangible assets
Non-current assets
92,074
53,201
154,758
11,080
92,074
55,630
165,900
107,464
286,520
9,884
100,192
47,074
—
92
7,052
8,757
—
95
$
158,784
$
157,150
$
8,852
$
66
—
—
66
31
—
—
31
$
1,302
$
—
—
1,302
1,727
—
—
30,967
257,974
160,757
449,698
31,479
192,266
102,799
$
1,727
$
326,544
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Notes to Consolidated Financial Statements 103
NOTE 24
Capital Management
The Company’s business requires capital for operating and regulatory purposes, including funding current and future operations. The
Company’s capital structure is underpinned by shareholders’ equity, which is comprised of preferred shares, common shares,
contributed surplus, warrants, retained earnings and accumulated other comprehensive income (loss), and is further complemented by
the subordinated debt and convertible debentures. The following table summarizes our capital as at March 31, 2018 and 2017:
Type of capital
Preferred shares
Common shares
Convertible debentures − equity portion
Warrants
Contributed surplus
Retained deficit
Accumulated other comprehensive income
Shareholders’ equity
Convertible debentures
Subordinated debt
Bank loan
March 31,
2018
$
205,641
$
649,846
2,604
1,975
145,426
(277,472)
113,332
841,352
57,081
7,500
71,437
March 31,
2017
205,641
641,449
2,604
1,975
85,405
(267,559)
95,270
764,785
56,442
7,500
—
$
977,370
$
828,727
The Company’s capital management framework is designed to maintain the level of capital that will:
(cid:129) Meet the Company’s regulated subsidiaries’ target ratios as set out by the respective regulators
(cid:129) Fund current and future operations
(cid:129) Ensure that the Company is able to meet its financial obligations as they become due
(cid:129) Support the creation of shareholder value
The following subsidiaries are subject to regulatory capital requirements in the respective jurisdictions by the listed regulators:
(cid:129) Canaccord Genuity Corp. is subject to regulation in Canada primarily by the Investment Industry Regulatory Organization of
Canada (IIROC)
(cid:129) Canaccord Genuity Limited, Canaccord Genuity Wealth Limited, Canaccord Genuity Financial Planning Limited and Hargreave
Hale Limited are regulated in the UK by the Financial Conduct Authority (FCA)
(cid:129) Canaccord Genuity Wealth (International) Limited is licensed and regulated by the Guernsey Financial Services Commission,
the Isle of Man Financial Supervision Commission and the Jersey Financial Services Commission
(cid:129) Canaccord Genuity (Australia) Limited is regulated by the Australian Securities and Investments Commission
(cid:129) Canaccord Genuity (Hong Kong) Limited is regulated in Hong Kong by the Securities and Futures Commission
(cid:129) Canaccord Genuity Inc. is registered as a broker dealer in the US and is subject to regulation primarily by the Financial
Industry Regulatory Authority, Inc. (FINRA)
(cid:129) Canaccord Genuity Wealth Management (USA) Inc. is registered as a broker dealer in the US and is subject to regulation
primarily by FINRA
(cid:129) Canaccord Asset Management Inc. is subject to regulation in Canada by the Ontario Securities Commission
(cid:129) Canaccord Genuity (Dubai) Ltd is subject to regulation in the United Arab Emirates by the Dubai Financial Services
Authority (DFSA)
Margin requirements in respect of outstanding trades, underwriting deal requirements and/or working capital requirements cause
regulatory capital requirements to fluctuate on a daily basis. Compliance with these requirements may require the Company to
keep sufficient cash and other liquid assets on hand to maintain regulatory capital requirements rather than using these liquid
assets in connection with its business or paying them out in the form of cash disbursements. Some of the subsidiaries are also
subject to regulations relating to withdrawal of capital, including payment of dividends to the Company. There were no significant
changes in the Company’s capital management policy during the current year. The Company’s subsidiaries were in compliance with
all of the minimum regulatory capital requirements as at and during the year ended March 31, 2018.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
104 Notes to Consolidated Financial Statements
NOTE 25
Client Money
At March 31, 2018, the UK and Europe operations held client money in segregated accounts of $2.978 billion (£1.643 billion)
[2017 − $2.120 billion; £1.267 billion]. This is comprised of $11.1 million (£6.1 million) [2017 − $11.2 million; £6.7 million] of
balances held on behalf of clients to settle outstanding trades and $2.967 billion (£1.637 billion) [2017 − $2.109 billion;
£1.260 billion] of segregated deposits, held on behalf of clients, which are not reflected on the consolidated statements of financial
position. Movement in settlement balances is reflected in operating cash flows.
NOTE 26
Provisions and Contingencies
PROVISIONS
Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, when it is
probable that an outflow of resources will be required to settle the obligation and when a reliable estimate of the amount can be
made. At each reporting date, the Company assesses the adequacy of its pre-existing provisions and adjusts the amounts as
necessary. The following is a summary of the changes during the years ended March 31, 2018 and 2017:
Legal
provisions
Restructuring
provisions
Total
provisions
Balance, March 31, 2016
Additions
Utilized
Balance, March 31, 2017
Additions
Utilized
Recoveries
$
$
3,600
$
15,211
$
$
5,870
(2,530)
6,940
2,704
(5,991)
(400)
—
(10,358)
4,853
7,643
(7,321)
—
$
Balance, March 31, 2018
$
3,253
$
5,175
$
18,811
5,870
(12,888)
11,793
10,347
(13,312)
(400)
8,428
The restructuring provision recorded during the period ended March 31, 2018 related to termination benefits incurred as a result
of the closing of certain trading operations in our UK and Europe capital markets operations, staff reductions in our Canadian and
US capital markets operations, as well as an onerous lease provision related to the acquisition of Hargreave Hale.
Commitments, litigation proceedings and contingent liabilities
In the normal course of business, the Company is involved in litigation, and as of March 31, 2018, it was a defendant in various
legal actions. The Company has established provisions for matters where payments are probable and can be reasonably
estimated. While the outcome of these actions is subject to future resolution, management’s evaluation and analysis of these
actions indicate that, individually and in the aggregate, the probable ultimate resolution of these actions will not have a material
effect on the financial position of the Company.
The Company is also subject to asserted and unasserted claims arising in the normal course of business which, as of March 31,
2018, have not resulted in the commencement of legal actions. The Company cannot determine the effect of all asserted and
unasserted claims on its financial position; however, where losses arising from asserted and unasserted claims are considered
probable and where such losses can be reasonably estimated, the Company has recorded a provision.
Certain claims have been asserted against the Company in respect of the sale of certain conventional wealth management tax
advantaged film partnership products in the UK by a predecessor which could be material if such claims are advanced, additional
claims are made and the Company’s assumptions used to evaluate the matter as neither probable nor estimable change in future
periods. In that event, the Company may be required to record a provision for an adverse outcome which could have a material
adverse effect on the Company’s financial position. The aggregate investment by the Company’s clients in respect of these
products is estimated to be $10.4 million (£5.8 million). The aggregate initial tax deferral realized by the Company’s clients in
respect of these products when they were purchased by those clients during the period from 2006 to 2009 is estimated to be
$14.4 million (£8.0 million). Enforcement in accordance with announcements from the UK taxation authority, the outcome of
certain litigation proceedings in respect of the taxation of other similar products sold by other financial advisors and certain
settlements reached with the UK taxation authority by some investors will likely result in tax liabilities to the purchasers of those
products in excess of the initial tax deferral amount. The potential tax liability for the Company’s clients that is in excess of the
initial tax deferral amount is estimated to be $14.8 million (£8.3 million). The probable outcome of the enforcement actions by
the UK taxation authority in respect of this matter and the likelihood of a loss or the amount of any such loss to the Company in
connection with any claims asserted against the Company, or which may be asserted against the Company, are not determinable
at the date of these audited consolidated financial statements.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Notes to Consolidated Financial Statements 105
An action has been commenced in Alberta by a former client and others claiming the return of losses in certain accounts, return of
administration fees, interest and costs. The claim alleges breach of contract and negligence in the administration of the accounts.
The damages claimed in this action are in excess of $14 million. Although the Company has denied the allegations and intends to
vigorously defend itself, the probable outcome of this action and a reliable estimate of the amount of damages in the event of an
adverse outcome are not determinable at the date of these audited consolidated financial statements.
The Company has been joined as a defendant in three actions commenced in British Columbia and Manitoba by another
investment dealer against a number of its former employees who are now employed in those provinces by the Company. The
claims seek damages for intentional interference with economic relations and inducing breach of contract, among other things, in
connection with the transfer of significant books of wealth management business from the plaintiff to the Company. The claims do
not quantify the amount claimed in damages. Although the Company and the employee defendants have denied the allegations
and intend to vigorously defend themselves, the outcome of these actions cannot be predicted with certainty and an estimate of
the amount of damages in the event of adverse outcomes are not determinable at the date of these audited annual consolidated
financial statements.
An action has been commenced in the Dubai International Financial Centre (DIFC) against the Company and one other claiming
US$10 million in damages against the defendants in connection with a takeover bid made by a third party in the United States
and the use of the plaintiff’s name by that third party. Although the Company has denied the allegations and intends to vigorously
defend itself, the outcome of this action cannot be predicted with certainty and an estimate of the amount of damages in the
event of an adverse outcome is not determinable at the date of these audited consolidated financial statements.
The Company provide financial advisory, underwriting and other services to, and trade the securities of issuers that are involved
with new and emerging industries, including the US cannabis industry. Activities within such industries, including the US cannabis
industry, typically have not had the benefit of a history of successful operating results. In addition to the economic uncertainties
associated with new industries, new activities and new issuers, the laws applicable to such industries or activities, particularly the
US cannabis industry and the activities of issuers in that industry, and the effect or enforcement of such laws are undetermined,
conflicting and uncertain. With respect to the US cannabis industry, cannabis continues to be a controlled substance under the
United States Controlled Substances Act and as such, there is a risk that certain issuers, while in compliance with applicable
state law, may be prosecuted under federal law. Accordingly, the Company has adopted policies and procedures reasonably
designed to ensure compliance with the United States Currency and Foreign Transactions Reporting Act of 1970 (the ‘‘Bank
Secrecy Act’’) and the guidance issued by the United States Department of the Treasury Financial Crimes Enforcement Network,
FIN-2014-G001 (the ‘‘FinCEN Guidance’’) relating to providing financial services to marijuana related businesses in the United
States (as that term is used in the FinCEN Guidance). While the Company takes steps to identify the risks associated with
emerging industries, including the US cannabis industry, and only provides services to those issuers where it determines that
there is no material risk to the Company or where any risk is unlikely to result in a material adverse consequence to the Company,
there is a risk that the Company could be the subject of third party proceedings which may have a material adverse effect on the
Company business, revenues, operating results and financial condition as well as the Company’s reputation, even if such
proceedings were concluded successfully in favour of the Company. The Company has determined that any such proceedings are
unlikely and, accordingly, has not recorded a provision in respect of such matters.
NOTE 27
Commitments
Subsidiaries of the Company are committed to approximate minimum lease payments for premises and equipment over the next
five years and thereafter as follows:
2019
2020
2021
2022
2023
Thereafter
$
32,476
30,304
29,123
25,343
19,174
40,745
$
177,165
Some leases include extension options and provide for stepped rents, which mainly relate to lease of office space.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
106 Notes to Consolidated Financial Statements
Certain subsidiaries of the Company have agreed to sublease agreements and the approximate minimum lease receipts for
premises and equipment over the next five years and thereafter as follows:
2019
2020
2021
2022
2023
Thereafter
The Company is committed to principal and interest payments under the convertible debentures as follows:
2019
2020
2021
2022
The Company is committed to principal and interest payments under the bank loan as follows:
2019
2020
2021
2022
NOTE 28
Subsequent Events
(i) ACQUISITION
$
$
$
$
$
$
2,155
2,121
2,107
2,080
867
—
9,330
3,900
3,900
3,900
63,900
75,600
9,679
9,679
14,500
38,642
72,500
On April 25, 2018, the Company announced that it entered into an agreement to acquire Jitneytrade Inc. and Finlogik Inc. directly
and through the purchase of Finlogik Capital Inc. Jitneytrade Inc. is a direct access broker and an active trader in futures and
equity options in Canada. Finlogik Inc. is in the business of delivering value-added fintech solutions in the Canadian market. The
acquisition closed on June 6, 2018.
(ii) STOCK OPTIONS
At its meeting on June 6, 2018, the Board of Directors approved the grant of 6,220,000 performance share options (PSOs) to
senior management of the Company and its operating subsidiaries. The options will be granted under the terms of the Company’s
Performance Share Option (PSO) plan to be presented to the shareholders for their approval at the Company’s annual general
meeting to be held on August 2, 2018. The grant is subject to ratification at that meeting. The options will have an exercise price
determined within the context of the market at the time of the grant, will have a term of five years and will time-vest rateably over
four years (with one third vesting on each of the second, third and fourth anniversaries of the date of grant). PSOs will also be
subject to market (stock price) performance vesting conditions, as well as have a three times exercise price cap on payout value.
(iii) DIVIDENDS
On June 6, 2018, the Board of Directors approved a dividend of $0.12 per common share, payable on July 3, 2018, with a record
date of June 22, 2018 [Note 20]. This dividend is comprised of a $0.01 base quarterly dividend and an $0.11 supplemental
dividend.
On June 6, 2018, the Board approved a cash dividend of $0.24281 per Series A Preferred Share payable on July 3, 2018 to
Series A Preferred shareholders of record as at June 22, 2018 [Note 20].
On June 6, 2018, the Board approved a cash dividend of $0.31206 per Series C Preferred Share payable on July 3, 2018 to
Series C Preferred shareholders of record as at June 22, 2018 [Note 20].
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Supplemental Information
Advisory note: This supplemental information is not audited and should be read in conjunction with the audited financial
statements contained herein.
107
Financial Highlights(1)
(C$ thousands, except for AUM, AUA, common and preferred
share information, financial measures and percentages)
Financial results
Revenue
Expenses
Income taxes expense (recovery)
Net income (loss)
Net income (loss) attributable to CGGI shareholders
Net income (loss) attributable to common shareholders
Business segment
Income (loss) before income taxes
Canaccord Genuity(2)
Canaccord Genuity Wealth Management(3)
Corporate and Other
Geographic segment
Income (loss) before income taxes
Canada(4)
UK and Europe(5)
US(6)
Australia
Other Foreign Locations(7)
Client assets information ($ millions)
AUM − Canada (discretionary)
AUA − Canada
AUM − UK and Europe
AUM − Australia
Total
Common share information
Per common share ($)
Basic (loss) earnings
Diluted (loss) earnings
Book value per diluted common share(8)
Common share price ($)
High
Low
Close
Common shares outstanding (thousands)
Issued shares excluding unvested shares
Issued and outstanding
Diluted shares
Average basic
Average diluted
Market capitalization (thousands)
Preferred share information (thousands)
Shares issued and outstanding
Financial measures
Dividends per common share
Common dividend yield (closing common share price)
Common dividend payout ratio
Total shareholder return(9)
ROE(10)
Price to earnings multiple(11)
Price to book ratio(12)
For the years ended and as at March 31
2018
2017
2016
2015
2014
1,022,877
987,131
18,669
17,077
13,024
3,431
879,546
825,662
10,698
43,186
38,103
27,025
787,805
1,151,776
(5,404)
(358,567)
(358,471)
(370,463)
44,268
24.267
(14,651)
(349,110)
10,171
(25,032)
880,763
886,420
5,661
(11,318)
(13,184)
(25,061)
1,932
6,097
(13,686)
16,487
(3,216)
(6,658)
6,686
(18,956)
1,561
10,729
21,763
836
33,328
(0.27)
(0.27)
8.71
13.49
5.98
6.52
91,795
102,608
104,704
91,693
n/a
682,673
(179,586)
(104,685)
(24,606)
(23,889)
(31,205)
1,257
9,192
22,791
731
32,714
(4.09)
(4.09)
4.99
8.58
3.50
4.01
89,084
103,812
109,072
90,553
n/a
437,379
8,604
26,946
2,606
17,127
(1,399)
2,637
13,228
24,526
862
38,616
0.29
0.27
5.08
5.70
3.53
5.09
92,780
113,511
124,479
91,657
101,149
633,598
8,540
0.10
2.0%
42.0%
26.9%
5.0%
19.6
0.9
8,540
8,540
0.10
2.5%
(2.8)%
(37.0)%
(50.4)%
(1.0)
0.8
0.25
3.8%
(101.9)%
(17.4)%
(2.9)%
(21.0)
0.7
855,244
790,656
12,531
52,057
51,413
39,651
74,391
(7,389)
(2,414)
(8,572)
47,431
27,320
1,761
(3,352)
1,204
10,160
20,156
555
30,871
0.42
0.39
9.05
8.45
5.05
8.20
93,115
101,471
107,937
94,125
101,993
885,087
8,540
0.20
2.4%
51.6%
23.2%
4.4%
21.0
0.9
13,126
33,999
(11,379)
36,156
332
(14,411)
14,909
(1,240)
2,815
15,567
44,877
830
61,274
0.04
0.03
5.71
7.49
4.08
6.93
93,054
113,523
124,294
92,587
110,862
861,357
8,540
0.15
2.2%
496.3%
39.1%
0.9%
(346.5)
1.2
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Certain non-IFRS measures are utilized by the Company as measures of financial performance. Non-IFRS measures do not have any standardized meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other companies. Non-IFRS measures included are: return on average common equity (ROE), book value per diluted common share,
common dividend yield, common dividend payout ratio, total shareholder return, price to earnings multiple (P/E), price to book ratio (P/B), assets under management (AUM) and assets under
administration (AUA).
Includes the global capital markets division in Canada, the UK and Europe, the US, Australia, China, Dubai and Singapore. The Company disposed 100% of its shares in Canaccord Genuity
Singapore Pte Ltd. as of June 30, 2016. Commencing in Q3/17, the operating results of Canaccord Genuity (Dubai) are included as Canaccord Genuity UK, Europe, and Dubai.
Operating results of Hargreave Hale are included under Canaccord Genuity Wealth Management (UK & Europe) since the closing date of September 18, 2017.
The Company’s Canada geographic segment includes operations for Canaccord Genuity, Canaccord Genuity Wealth Management and Corporate and Other business segments.
The Company’s UK and Europe geographic segment engages in capital markets and wealth management activities. Results of former CSHP entities located in the UK and Europe since March 22,
2012 and the wealth management operations of Eden Financial Ltd. since October 1, 2012 are also included. Commencing in Q3/17, the operating results of Canaccord Genuity (Dubai) are
included as Canaccord Genuity UK, Europe, and Dubai. The operating results of Hargreave Hale are included since the closing date of September 18, 2017.
The Company’s US geographic segment includes US capital markets and wealth management operations. Results of former CSHP entities located in the US are included since March 22, 2012.
Commencing in Q3/17, the operating results of our Australian operations are disclosed as a separate geography. Prior to Q3/17 Australia was included as part of Other Foreign Locations. Also,
commencing in Q3/17, our Dubai operation, which was previously included in Other Foreign Locations, is now included as part of Canaccord Genuity UK & Europe. The Other Foreign Locations
geographic segment is now comprised of our Asian based operations, including China and Hong Kong and prior to their sale of closure also included Singapore and Barbados.
Book value per diluted common share, a non-IFRS measure, is calculated as total common shareholders’ equity adjusted for assumed proceeds from exercise of options and warrants and
conversion of convertible debentures divided by the number of diluted common shares outstanding including estimated amounts in respect of share issuance commitments including options,
warrants, and convertible debentures, as applicable, and adjusted for shares purchased under the normal course issuer bid and not yet cancelled, and estimated forfeitures in respect of unvested
share awards under share-based payment plans.
Total shareholder return is calculated as the change in share price plus dividends paid to common shares and special distributions paid in the current period as a percentage of the prior period’s
closing common share price, assuming reinvestment of all dividends.
(10) ROE is calculated by dividing the annual net income attributable to common shareholders over the average common shareholders’ equity.
(11) The price to earnings multiple is calculated based on the end of period share price and 12-month trailing diluted EPS.
(12) The price to book ratio is calculated based on the end of period common share price and book value per diluted common share.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
108 Supplemental Information
Condensed Consolidated Statements of Operations and Retained Earnings(1)(2)(3)
(C$ thousands, except
per share amounts and percentages)
Revenue
Commissions and fees
Investment banking
Advisory fees
Principal trading
Interest
Other
Expenses
Non share based incentive compensation(4)
Share based incentive compensation
Salaries and benefits
Trading costs
Premises and equipment
Communication and technology
Interest
General and administrative
Amortization
Development costs
Restructuring costs(5)
Acceleration of long-term incentive plan expense(6)
Impairment of goodwill
Share of loss from associate(7)
Acquisition-related costs
Income (loss) before income taxes
Income taxes expense (recovery)
Net income (loss) for the year
Non-controlling interests
Net income (loss) attributable to CGGI shareholders
Retained earnings, beginning of year
Common shares dividends
Preferred shares dividends
Retained earnings, end of year
Incentive compensation expenses as a % of revenue
Total compensation expenses as a % of revenue(8)
Non-compensation expenses as a % of revenue
Total expenses as a % of revenue
Pre-tax profit margin
Effective tax rate
Net profit margin
Basic earnings (loss) per share
Diluted earnings (loss) per share
Book value per diluted common share(9)
Supplemental segmented revenue information
Canaccord Genuity
Canaccord Genuity Wealth Management
Corporate and Other
For the years ended March 31
2018
2017
2016
2015
2014
461,937
282,195
122,372
113,921
27,875
14,577
1,022,877
480,369
46,245
99,239
68,209
39,605
56,346
18,437
83,982
24,007
7,664
7,643
48,355
—
298
6,732
987,131
35,746
18,669
17,077
4,053
13,024
(267,559)
(13,344)
(9,593)
(277,742)
51.5%
61.2%
30.6%
96.5%
3.5%
52.2%
1.7%
0.04
0.03
5.71
396,741
196,129
130,749
119,040
16,847
20,040
879,546
414,676
40,322
85,698
65,211
42,286
52,381
12,744
79,011
21,124
12,209
—
—
—
—
—
825,662
53,884
10,698
43,186
5,083
38,103
(294,586)
—
(11,076)
(267,559)
51.7%
61.5%
32.4%
93.9%
6.1%
19.9%
4.9%
0.29
0.27
5.08
376,817
132,029
160,180
85,559
16,830
16,390
787,805
382,851
35,025
92,981
56,998
40,863
55,975
10,222
87,004
25,339
26,129
17,352
—
321,037
—
—
1,151,776
(363,971)
(5,404)
(358,567)
(96)
(358,471)
92,815
(16,938)
(11,992)
(294,586)
53.0%
64.8%
81.4%
146.2%
(46.2)%
1.5%
(45.5)%
(4.09)
(4.09)
4.99
374,058
236,551
153,302
75,217
22,212
19,423
880,763
414,680
40,800
85,770
52,795
40,281
51,758
13,424
94,688
28,428
24,448
24,813
—
14,535
—
—
886,420
(5,657)
5,661
(11,318)
1,866
(13,184)
144,799
(26,806)
(11,994)
92,815
51.7%
61.5%
39.2%
100.6%
(0.6)%
(100.1)%
(1.3)%
(0.27)
(0.27)
8.71
361,647
219,718
140,834
91,313
24,549
17,183
855,244
375,807
37,482
91,135
47,872
38,461
46,065
16,359
83,834
26,786
21,369
5,486
—
—
—
—
790,656
64,588
12,531
52,057
644
51,413
126,203
(21,055)
(11,762)
144,799
48.3%
59.0%
33.5%
92.4%
7.6%
19.4%
6.1%
0.42
0.39
9.05
615,790
224,036
15,418
855,244
598,391
267,111
14,044
879,546
532,270
246,567
8,968
787,805
613,105
250,890
16,768
880,763
637,556
370,265
15,056
1,022,877
Certain non-IFRS measures are utilized by the Company as measures of financial performance. Non-IFRS measures do not have any standardized meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other companies. Non-IFRS measures included are: incentive compensation expenses as a % of revenue, total compensation expenses
as a % of revenue, non-compensation expenses as a % of revenue, total expenses as a % of revenue, and book value per diluted common share.
The operating results of the Australian operations have been fully consolidated, and a 42% non-controlling interest has been recognized for the year ended March 31, 2018 [year ended March 31,
2017 — 42% and March 31, 2016 — 40%.].
Data includes the results of Hargreave Hale since the closing date of September 18, 2017.
Incentive compensation expenses include the National Insurance Tax applicable to the UK.
Restructuring costs for the year ended March 31, 2018 related to termination benefits incurred as a result of the closing of certain trading operations in our UK & Europe capital markets
operations, staff reductions in our Canadian and US capital markets operations, as well as real estate costs related to the acquisition of Hargreave Hale. Restructuring costs for the year ended
March 31, 2016 were related to staff reductions in our US capital markets operations and the closure of our Barbados office in Other Foreign Locations, as well as charges related to changes in
our Corporate and Other segment.
Effective as of March 31, 2018 the Plan was changed to remove certain employment-related conditions for the vesting of RSU awards made as part of the normal course incentive compensation
payment cycle. As a result of this change, the costs of RSUs granted as part of the normal course incentive compensation payment cycle will now be expensed in the period in which those awards
are deemed to be earned, instead of recognizing the costs over the vesting period. This change led to the acceleration of the remaining expense for certain awards made under the LTIP which had
not been fully amortized as of March 31, 2018. The total charge recorded during the year ended March 31, 2018 in respect of awards granted prior to fiscal 2018 was $48.4 million.
Represents the Company’s equity portion of the net loss of its investment in Canaccord Genuity Acquisition Corp. for the year ended March 31, 2018.
Total compensation expenses include incentive compensation and salaries and benefits, but exclude hiring incentives, which are included in development costs.
Book value per diluted common share, a non-IFRS measure, is calculated as total common shareholders’ equity adjusted for assumed proceeds from exercise of options and warrants and
conversion of convertible debentures divided by the number of diluted common shares outstanding including estimated amounts in respect of share issuance commitments including options,
warrants, and convertible debentures, as applicable, and adjusted for shares purchased under the normal course issuer bid and not yet cancelled, and estimated forfeitures in respect of unvested
share awards under share-based payment plans.
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Supplemental Information 109
Condensed Consolidated Statements of Financial Position
As at March 31 (C$ thousands)
Assets
Cash and cash equivalents
Securities owned, at market
Accounts receivable
Income taxes recoverable
Deferred tax assets
Investments
Equipment and leasehold improvements
Goodwill and other intangibles
Liabilities and shareholders’ equity
Bank indebtedness
Short term credit facility
Securities sold short
Accounts payable, accrued liabilities and other
Income taxes payable
Current portion of bank loan
Deferred consideration
Contingent consideration
Bank loan
Deferred tax liabilities
Subordinated debt
Convertible debentures
Non-controlling interests
Shareholders’ equity
Miscellaneous Operational Statistics(1)
As at March 31
Number of employees in Canada
Number in Canaccord Genuity
Number in Canaccord Genuity Wealth Management
Number in Corporate and Other
Total Canada
Number of employees in the UK and Europe
Number in Canaccord Genuity
Number in Canaccord Genuity Wealth Management
Number of employees in the US
Number in Canaccord Genuity
Number of employees in Australia
Number in Canaccord Genuity
Number in Canaccord Genuity Wealth Management
Number of employees in Other Foreign Locations
Number in Canaccord Genuity
Number of employees company-wide
Number of Advisory Teams in Canada(2)
Number of licensed professionals in Canada
Number of investment professionals and fund managers in the
UK and Europe(3)
Number of Advisors − Australia
AUM − Canada (discretionary) (C$ millions)
AUA − Canada (C$ millions)
AUM − UK and Europe (C$ millions)
AUM − Australia (C$ millions)
Total (C$ millions)
Number of companies with Canaccord Genuity
Limited as broker
London Stock Exchange (LSE)
Alternative Investment Market (AIM)
Total broker
Number of companies with Canaccord Genuity
Limited as Nomad(4)
LSE
AIM
Total Nomad
2018
2017
2016
2015
2014
862,838
469,217
2,215,837
1,170
19,941
2,035
30,967
418,731
4,020,736
—
—
301,006
2,647,382
7,851
9,679
9,997
49,844
61,758
13,715
7,500
57,081
13,571
841,352
4,020,736
677,769
784,230
3,395,736
1,085
15,323
2,829
31,479
295,065
5,203,516
25,280
—
645,742
3,681,676
10,093
—
—
—
—
140
7,500
56,442
11,858
764,785
5,203,516
428,329
564,746
2,041,150
12,537
11,221
5,578
37,049
323,936
3,424,546
14,910
—
427,435
2,203,858
4,242
—
—
—
—
450
15,000
8,722
749,929
3,424,546
322,324
848,128
2,491,488
5,295
10,148
8,693
43,373
640,456
4,369,905
20,264
—
654,639
2,541,956
8,172
—
—
—
—
2,057
15,000
10,275
1,117,542
4,369,905
364,296
1,143,201
2,785,898
3,983
9,735
9,977
50,975
646,557
5,014,622
—
—
913,913
2,888,267
10,822
—
—
—
—
3,028
15,000
14,912
1,168,680
5,014,622
2018
2017
2016
2015
2014
189
379
288
856
214
559
256
57
11
3
1,956
142
374
188
7
2,815
15,567
44,877
830
61,274
48
33
81
—
33
33
178
359
279
816
225
313
275
58
11
2
1,700
141
367
118
8
2,637
13,228
24,526
862
38,616
51
32
83
—
32
32
180
354
288
822
282
312
291
55
10
23
1,795
139
392
118
7
1,257
9,192
22,791
731
32,714
67
32
99
—
32
32
201
400
324
925
329
303
269
56
13
33
1,928
152
437
114
9
1,561
10,729
21,763
836
33,328
53
40
93
1
30
31
215
420
316
951
372
294
286
51
12
38
2,004
160
436
118
9
1,204
10,160
20,156
555
30,871
52
43
95
—
33
33
(1)
(2)
(3)
(4)
These miscellaneous operational statistics are non-IFRS measures.
Advisory Teams in Canada are normally comprised of one or more Investment Advisors (IAs) and their assistants and associates, who together manage a shared set of client accounts. Advisory
Teams that are led by, or only include, an IA who has been licensed for less than three years are not included in our Advisory Team count, as it typically takes a new IA approximately three years to
build an average-sized book.
Investment professionals include all staff with direct sales responsibilities, which includes brokers and assistants with direct client contacts. Fund managers include all staff who manage client
assets.
A company listed on AIM is required to retain a Nominated Adviser (commonly referred to as a Nomad) during the company’s life on the market. Among other duties, Nomads are responsible for
warranting that a company is appropriate for joining AIM. A Nomad is similar to a Financial Advisor on the LSE, but is specific to AIM.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
110 Supplemental Information
Quarterly Financial Highlights(1)
(C$ thousands, except for AUM, AUA,
common and preferred share information,
financial measures and percentages)
Financial results
Revenue
Expenses
Income taxes expense (recovery)
Net income (loss)
Net income (loss) attributable to CGGI
shareholders
Net income (loss) attributable to common
shareholders
Business segment
Income (loss) before income taxes
Canaccord Genuity(2)
Canaccord Genuity Wealth Management(3)
Corporate and Other
Geographic segment
Income (loss) before income taxes
Canada(4)
UK and Europe(5)
US(6)
Australia
Other Foreign Locations(7)
Client assets ($ millions)
AUM − Canada (discretionary)
AUA − Canada
AUM − UK and Europe
AUM − Australia
Total
Common share information
Per common share ($)
Basic earnings (loss)
Diluted earnings (loss)
Book value per diluted common share(8)
Common share price ($)
High
Low
Close
Common shares outstanding (thousands)
Issued shares excluding unvested shares
Issued and outstanding
Diluted shares
Average basic
Average diluted
Market capitalization (thousands)
Preferred shares outstanding (thousands)
Shares issued and outstanding
Financial measures
Dividends per common share
Common dividend yield (closing share price)
Common dividend payout ratio
Total shareholder return(9)
Annualized ROE(10)
Price to earnings multiple (11)
Price to book ratio(12)
Fiscal 2018
Fiscal 2017
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
322,080
324,379
7,404
(9,703)
309,442
262,559
10,285
36,598
191,547 199,808
198,613 201,580
788
(2,560)
192
(7,258)
271,656
234,251
6,418
30,987
208,108
202,397
1,167
4,544
193,602
192,845
557
200
206,180
196,169
2,556
7,455
(11,661)
34,432
(7,485)
(2,262)
28,886
3,755
(1,220)
6,682
(14,012)
32,081
(9,836)
(4,802)
26,346
1,215
(4,219)
3,683
(6,977)
8,642
(3,964)
34,266
16,322
(3,705)
(6,773)
919
(1,212)
(7,390)
8,116
(2,498)
36,027
5,723
(4,345)
4,938
6,346
(5,573)
(4,049)
6,894
(2,088)
7,352
5,304
(2,645)
12,282
(10,073)
(11,032)
6,786
(262)
2,815
15,567
44,877
830
61,274
(0.15)
(0.15)
5.71
7.49
5.50
6.93
24,740
8,959
5,111
8,379
(306)
2,838
14,451
43,791
928
59,170
0.35
0.29
5.11
5.91
4.08
5.80
(4,139)
2,387
(6,257)
1,059
(116)
2,688
12,801
40,797
866
54,464
(0.11)
(0.11)
4.74
6.68
4.26
4.29
3,273
(941)
(2,233)
(1,315)
(556)
2,647
12,669
25,755
860
39,284
(0.05)
(0.05)
4.91
5.42
4.17
5.33
6,443
21,370
2,954
7,078
(440)
2,637
13,228
24,526
862
38,616
0.29
0.26
5.08
5.70
4.11
5.09
(4,262)
7,481
678
2,615
(801)
2,527
11,969
23,383
769
36,121
0.01
0.01
4.85
4.81
3.53
4.77
(3,672)
553
(293)
4,876
(707)
1,219
10,334
23,208
845
34,387
(0.05)
(0.05)
4.70
5.11
3.98
4.71
10,095
(2,458)
(733)
2,558
549
1,268
9,817
22,410
742
32,969
0.04
0.04
4.75
5.11
3.63
4.92
93,054
113,523
124,294
92,730
112,187
861,357
92,281
113,511
124,209
92,030
113,613
720,412
91,602
92,904
113,511 113,511
124,141 124,281
93,069
92,529
104,741
n/a
532,565 662,418
92,780
113,511
124,479
91,985
102,296
633,598
91,780
112,777
124,346
91,229
98,647
593,130
91,163
112,057
115,222
92,249
n/a
542,696
96,657
111,601
115,167
89,786
92,849
566,622
8,540
8,540
8,540
8,540
8,540
8,540
8,540
8,540
0.12
1.7%
(97.2)%
21.6%
0.01
0.7%
3.5%
35.4%
(9.5)% 23.7%
14.9
1.1
(346.5)
1.2
0.01
0.9%
0.01
0.8%
(11.5)% (23.6)%
4.9%
(19.3)%
(3.5)%
(7.4)%
31.4
39.0
1.1
0.9
0.10
2.0%
43.1%
6.7%
19.6%
19.6
0.9
—
—
—
1.3%
0.9%
(16.4)
1.0
—
—
—
(4.3)%
(3.2)%
(1.1)
1.0
—
—
—
22.7%
2.8%
(1.2)
1.0
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Certain non-IFRS measures are utilized by the Company as measures of financial performance. Non-IFRS measures do not have any standardized meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other companies. Non-IFRS measures included are: return on average common equity (ROE), book value per diluted common share,
common dividend yield, common dividend payout ratio, total shareholder return, price to earnings multiple (P/E), price to book ratio (P/B), assets under management (AUM) and assets under
administration (AUA).
Includes the global capital markets division in Canada, the UK and Europe, the US, Australia, China, Barbados and Singapore. The Company disposed 100% of its shares in Canaccord Genuity
Singapore Pte Ltd. as of June 30, 2016. Commencing in Q3/17, the operating results of Canaccord Genuity (Dubai) are included as Canaccord Genuity UK, Europe, and Dubai.
Operating results of Hargreave Hale are included under Canaccord Genuity Wealth Management (UK & Europe) since the closing date of September 18, 2017
The Company’s Canada geographic segment includes operations for Canaccord Genuity, Canaccord Genuity Wealth Management and Corporate and Other business segments.
The Company’s UK and Europe geographic segment engages in capital markets and wealth management activities. Results of former CSHP entities located in the UK and Europe since March 22,
2012 and the wealth management operations of Eden Financial Ltd. since October 1, 2012 are also included. Commencing in Q3/17, the operating results of Canaccord Genuity (Dubai) are
included as Canaccord Genuity UK, Europe, and Dubai.
The Company’s US geographic segment includes US capital markets and wealth management operations. Results of former CSHP entities located in the US are included since March 22, 2012.
Commencing in Q3/17, the operating results of our Australian operations are disclosed as a separate geography. Prior to Q3/17 Australia was included as part of Other Foreign Locations. Also,
commencing in Q3/17, our Dubai operation, which was previously included in Other Foreign Locations, is now included as part of Canaccord Genuity UK & Europe. The Other Foreign Locations
geographic segment is now comprised of our Asian based operations, including China and Hong Kong and prior to their sale of closure also included Singapore and Barbados.
Book value per diluted common share, a non-IFRS measure, is calculated as total common shareholders’ equity adjusted for assumed proceeds from exercise of options and warrants and
conversion of convertible debentures divided by the number of diluted common shares outstanding including estimated amounts in respect of share issuance commitments including options,
warrants, and convertible debentures, as applicable, and adjusted for shares purchased under the normal course issuer bid and not yet cancelled, and estimated forfeitures in respect of unvested
share awards under share-based payment plans.
Total shareholder return is calculated as the change in share price plus dividends paid to common shares and special distributions paid in the current period as a percentage of the prior period’s
closing common share price, assuming reinvestment of all dividends.
(10) ROE is presented on an annualized basis. Quarterly annualized ROE is calculated by dividing the annualized net income attributable to common shareholders for the three-month period over the
average common shareholders’ equity.
(11) The price to earnings multiple is calculated based on the end of period share price and 12-month trailing diluted EPS.
(12) The price to book ratio is calculated based on the end of period common share price and book value per diluted common share.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Supplemental Information 111
Condensed Consolidated Statements of Operations(1)(2)(3)
(C$ thousands, except per share amounts
and percentages)
Revenue
Fiscal 2018
Q4
Q3
Q2
Q1
Q4
Fiscal 2017
Q3
Q2
Commissions and fees
Investment banking
Advisory fees
Principal trading
Interest
Other
Expenses
Non share based incentive compensation(4)
Share based incentive compensation
Salaries and benefits
Trading costs
Premises and equipment
Communication and technology
Interest
General and administrative
Amortization
Development costs
Restructuring costs(5)
Acquisition-related costs
Acceleration of long-term Incentive plan(6)
Share of loss from associate(7)
Impairment of goodwill
(Loss) income before income taxes
Income tax (recovery) expense
Net (loss) income for the period
Non-controlling interests
Net (loss) income attributable to CGGI
shareholders
Incentive compensation expenses as a % of
135,148
95,514
40,930
36,047
10,045
4,396
322,080
149,255
11,154
28,631
20,428
10,138
14,967
6,090
24,106
6,949
3,187
939
184
48,355
(4)
—
324,379
(2,299)
7,404
(9,703)
1,958
125,709
112,639
31,947
29,138
6,861
3,148
309,442
146,324
12,307
26,537
16,521
10,511
14,558
4,171
23,108
6,916
1,512
—
—
—
94
—
262,559
46,883
10,285
36,598
2,166
96,125
33,356
30,589
22,849
5,793
2,835
191,547
90,725
10,545
21,664
14,008
8,847
14,163
3,731
17,468
5,148
1,486
6,256
4,364
—
208
—
198,613
(7,066)
192
(7,258)
227
104,955
40,696
18,896
25,887
5,176
4,198
199,808
94,065
12,239
22,407
17,252
10,109
12,658
4,445
19,300
4,994
1,479
448
2,184
—
—
—
201,580
(1,772)
788
(2,560)
(298)
105,890
71,595
52,474
31,066
5,217
5,414
271,656
124,839
11,563
22,092
18,563
10,301
13,279
3,884
19,250
5,105
5,375
—
—
—
—
—
234,251
37,405
6,418
30,987
2,101
102,637
46,508
17,127
33,569
4,017
4,250
208,108
96,737
10,204
21,064
16,660
12,723
12,359
2,834
21,478
5,454
2,884
—
—
—
—
—
202,397
5,711
1,167
4,544
789
95,342
40,901
21,554
26,859
4,005
4,941
193,602
94,206
9,874
20,633
15,852
9,514
14,409
2,584
18,735
5,180
1,858
—
—
—
—
—
192,845
757
557
200
1,420
Q1
92,872
37,125
39,594
27,546
3,608
5,435
206,180
98,894
8,681
21,909
14,136
9,748
12,334
3,442
19,548
5,385
2,092
—
—
—
—
—
196,169
10,011
2,556
7,455
773
(11,661)
34,432
(7,485)
(2,262)
28,886
3,755
(1,220)
6,682
revenue
49.8%
51.3%
52.9%
53.2%
50.2%
51.4%
53.8%
52.2%
Total compensation expenses as a % of
revenue(8)
Non-compensation expenses as a % of revenue
Total expenses as a % of revenue
Pre-tax profit margin
Effective tax rate
Net profit margin
Basic (loss) earnings per share
Diluted (loss) earnings per share
Book value per diluted common share(9)
Canaccord Genuity
Canaccord Genuity Wealth Management
Corporate and Other
58.7%
27.0%
100.7%
(0.7)%
(322.1)%
(3.0)%
(0.15)
(0.15)
5.71
200,687
116,378
5,015
322,080
59.8%
25.0%
84.8%
15.2%
21.9%
11.8%
0.35
0.29
5.11
196,203
109,373
3,866
309,442
64.2%
39.5%
103.7%
(3.7)%
(2.7)%
(3.8)%
(0.11)
(0.11)
4.74
118,880
69,563
3,104
191,547
64.4%
36.5%
100.9%
(0.9)%
(44.5)%
(1.3)%
(0.05)
(0.05)
4.91
121,786
74,951
3,071
199,808
58.3%
27.9%
86.2%
13.8%
17.2%
11.4%
0.29
0.26
5.08
193,520
73,333
4,803
271,656
61.5%
35.7%
97.3%
2.7%
20.4%
2.2%
0.01
0.01
4.85
137,268
67,368
3,472
208,108
64.4%
35.2%
99.6%
0.4%
73.6%
0.1%
(0.05)
(0.05)
4.70
127,005
63,690
2,907
193,602
62.8%
32.3%
95.1%
4.9%
25.5%
3.6%
0.04
0.04
4.75
140,598
62,720
2,862
206,180
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Certain non-IFRS measures are utilized by the Company as measures of financial performance. Non-IFRS measures do not have any standardized meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other companies. Non-IFRS measures included are: incentive compensation expenses as a % of revenue, total compensation expenses
as a % of revenue, non-compensation expenses as a % of revenue, total expenses as a % of revenue, and book value per diluted common share.
The operating results of the Australian operations have been fully consolidated, and a 42% non-controlling interest has been recognized for the year ended March 31, 2018 [year ended March 31,
2017 — 42% and March 31, 2016 — 40%.].
Data includes the results of Hargreave Hale since the closing date of September 18, 2017.
Incentive compensation expenses include the National Insurance Tax applicable to the UK.
Restructuring costs for the year ended March 31, 2018 related to termination benefits incurred as a result of the closing of certain trading operations in our UK & Europe capital markets
operations, staff reductions in our Canadian and US capital markets operations, as well as real estate costs related to the acquisition of Hargreave Hale. Restructuring costs for the year ended
March 31, 2016 were related to staff reductions in our US capital markets operations and the closure of our Barbados office in Other Foreign Locations, as well as charges related to changes in
our Corporate and Other segment.
Effective as of March 31, 2018 the Plan was changed to remove certain employment-related conditions for the vesting of RSU awards made as part of the normal course incentive compensation
payment cycle. As a result of this change, the costs of RSUs granted as part of the normal course incentive compensation payment cycle will now be expensed in the period in which those awards
are deemed to be earned, instead of recognizing the costs over the vesting period. This change led to the acceleration of the remaining expense for certain awards made under the LTIP which had
not been fully amortized as of March 31, 2018. The total charge recorded during the year ended March 31, 2018 in respect of awards granted prior to fiscal 2018 was $48.4 million.
Represents the Company’s equity portion of the net loss of its investment in Canaccord Genuity Acquisition Corp. for the year ended March 31, 2018.
Total compensation expenses include incentive compensation and salaries and benefits, but exclude hiring incentives, which are included in development costs.
Book value per diluted common share, a non-IFRS measure, is calculated as total common shareholders’ equity adjusted for assumed proceeds from exercise of options and warrants and
conversion of convertible debentures divided by the number of diluted common shares outstanding including estimated amounts in respect of share issuance commitments including options,
warrants, and convertible debentures, as applicable, and adjusted for shares purchased under the normal course issuer bid and not yet cancelled, and estimated forfeitures in respect of unvested
share awards under share-based payment plans.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
112 Supplemental Information
Condensed Consolidated Statements of Financial Position
Miscellaneous Operational Statistics(1)
(C$ thousands)
Assets
Cash and cash equivalents
Securities owned
Accounts receivable
Income taxes recoverable
Deferred tax assets
Investments
Equipment and leasehold
improvements
Goodwill and other intangibles
Liabilities and shareholders’ equity
Bank indebtedness
Short Term credit facility
Securities sold short
Accounts payable, accrued liabilities
and other
Income taxes payable
Current portion of bank loan
Deferred consideration
Contingent consideration
Bank loan
Deferred tax liabilities
Subordinated debt
Convertible debentures
Non-controlling interests
Shareholders’ equity
Number of employees in Canada
Number in Canaccord Genuity
Number in Canaccord Genuity
Wealth Management
Number in Corporate and Other
Total Canada
Number of employees in the UK and
Europe
Number in Canaccord Genuity
Number in Canaccord Genuity
Wealth Management
Number of employees in the US
Number in Canaccord Genuity
Number of employees in Australia
Number in Canaccord Genuity
Number in Canaccord Genuity
Wealth Management
Number of employees in Other Foreign
Locations
Number in Canaccord Genuity
Number of employees company-wide
Number of Advisory Teams in Canada(2)
Number of licensed professionals in
Canada
Number of investment professionals
and fund managers in the UK and
Europe(3)
Number of Advisors − Australia
AUM − Canada (discretionary)
(C$ millions)
AUA − Canada (C$ millions)
AUM − UK and Europe (C$ millions)
AUM − Australia (C$ millions)
Total (C$ millions)
Number of companies with Canaccord
Genuity Limited as broker
London Stock Exchange (LSE)
Alternative Investment Market (AIM)
Total broker
Number of companies with Canaccord
Genuity Limited as Nomad(4)
LSE
AIM
Total Nomad
Q4
Fiscal 2018
Q3
Q2
Q1
Q4
Fiscal 2017
Q3
Q2
862,838
469,217
2,215,837
1,170
19,941
2,035
592,873
514,220
1,758,532
242
12,412
2,030
543,109
469,433
1,944,939
2,716
15,006
2,321
30,967
418,731
4,020,736
31,966
404,929
3,317,204
30,717
405,157
3,413,398
521,725
585,258
677,769
784,230
317,527
651,068
2,171,795 3,395,736 1,534,449 2,629,075
11,429
9,950
5,264
4,586
11,442
5,197
1,085
15,323
2,829
884
16,231
2,960
470,243
421,181
30,592
293,805
32,815
303,773
3,623,250 5,203,516 2,776,098 3,960,901
31,479
295,065
30,991
298,009
Q1
282,170
726,857
2,704,228
9,870
9,790
5,330
34,728
310,134
4,083,107
—
—
301,006
2,767
—
342,754
27,300
—
316,003
—
—
410,303
25,280
—
645,742
11,577
—
299,508
49,069
—
491,483
89,878
—
580,665
2,647,382
7,851
9,679
9,997
49,844
61,758
13,715
7,500
57,081
13,571
841,352
4,020,736
1,982,336
12,988
4,529
9,958
46,643
62,230
10,220
7,500
56,916
12,031
766,332
3,317,204
2,130,560
9,666
4,463
10,030
45,969
61,244
10,170
7,500
56,755
13,354
720,384
3,413,398
2,383,957 3,681,676 1,648,727 2,670,764
4,957
—
—
—
—
208
7,500
—
8,992
727,928
3,623,250 5,203,516 2,776,098 3,960,901
7,269
—
—
—
—
—
7,500
56,263
9,651
735,603
10,093
—
—
—
—
140
7,500
56,442
11,858
764,785
10,394
—
—
—
—
141
7,500
56,597
12,481
741,877
Q4
189
379
288
856
214
559
256
57
11
3
1,956
142
374
188
7
2,815
15,567
44,877
830
61,274
48
33
81
Fiscal 2018
Q3
189
352
282
823
214
574
257
56
12
3
1,939
134
353
197
8
2,838
14,451
43,791
928
59,170
50
32
82
Q2
194
353
276
823
217
586
258
55
12
2
1,953
134
356
200
8
2,688
12,801
40,797
866
54,464
47
31
78
Q1
190
351
274
815
222
314
275
58
11
2
1,697
135
355
119
8
2,647
12,669
25,755
860
39,284
48
35
83
Q4
178
359
279
816
225
313
275
58
11
2
1,700
141
367
118
8
2,637
13,228
24,526
862
38,616
51
32
83
Fiscal 2017
Q3
Q2
178
342
274
794
250
312
297
60
11
3
1,727
139
356
118
7
1,219
10,334
23,208
845
34,387
50
28
78
184
354
281
819
250
309
282
59
11
3
1,733
139
367
115
7
2,527
11,969
23,383
769
36,121
51
31
82
2,655,093
4,324
—
—
—
—
77
7,500
—
9,892
735,678
4,083,107
Q1
177
342
277
796
255
310
303
56
11
6
1,737
138
392
117
7
1,268
9,817
22,410
742
32,969
49
29
78
—
33
33
These miscellaneous operational statistics are non-IFRS measures.
Advisory Teams are normally comprised of one or more Investment Advisors (IAs) and their assistants and associates, who together manage a shared set of client accounts. Advisory Teams that
are led by, or only include, an IA who has been licensed for less than three years are not included in our Advisory Team count, as it typically takes a new IA approximately three years to build an
average-sized book.
Investment professionals include all staff with direct sales responsibilities, which includes brokers and assistants with direct client contacts. Fund managers include all staff who manage client assets.
A company listed on AIM is required to retain a Nominated Adviser (commonly referred to as a Nomad) during the company’s life on the market. Among other duties, Nomads are responsible for
warranting that a company is appropriate for joining AIM. A Nomad is similar to a Financial Advisor on the LSE, but is specific to AIM.
1
22
23
—
28
28
—
32
32
—
35
35
—
31
31
—
32
32
—
29
29
(1)
(2)
(3)
(4)
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Glossary
Acquisition-related expense items
Acquisition-related expense items include costs incurred to
acquire Genuity Capital Markets. The Balloch Group Limited,
50% interest in BGF Capital Pty Ltd, Collins Stewart Hawkpoint
plc, certain assets and liabilities of Kenosis Capital Partners,
Hargreave Hale Limited, and the wealth management business
of Eden Financial Ltd., as well as the amortization of intangible
assets related to these acquisitions. Acquisition-related
expense items also include costs incurred for prospective
acquisitions not pursued. Figures that exclude
acquisition-related items are considered non-IFRS measures.
Advisory fees
Revenue related to the fees the Company charges for corporate
advisory, mergers and acquisitions or corporate restructuring
services is recorded as Advisory fees.
Advisory Teams (IA Teams)
Advisory Teams are normally comprised of one or more IAs and
their assistants and associates, who together manage a
shared set of client accounts. Advisory Teams that are led by,
or only include, an IA who has been licensed for less than
three years are not included in our Advisory Team count, as it
typically takes a new IA approximately three years to build an
average-sized book. As Independent Wealth Management
branches are led by one advisor (with a team), each IWM
branch is counted as a single Advisory Team.
Alternative Investment Market (AIM)
The junior arm of the London Stock Exchange (LSE), AIM
provides a global market for smaller, growing companies.
Assets under administration (AUA) Canada
AUA is the market value of client assets administered by the
Company, for which the Company earns commissions or fees.
This measure includes funds held in client accounts, as well as
the aggregate market value of long and short security
positions. Management uses this measure to assess
operational performance of the Canaccord Genuity Wealth
Management business segment. This measure is non-IFRS.
Assets under management (AUM) Canada
AUM consists of assets that are beneficially owned by clients
and discretionarily managed by the Company as part of the
Complete Canaccord Investment Counselling Program and
Complete Canaccord Private Investment Management. Services
provided include the selection of investments and the provision
of investment advice. AUM is also administered by the
Company and is therefore included in AUA. This measure is
non-IFRS.
Assets under management (AUM) UK and Europe
AUM is the market value of client assets managed and
administered by the Company, for which the Company earns
commissions or fees. This measure includes both discretionary
and non-discretionary accounts. This measure is non-IFRS.
113
Book value per diluted common share
A measure of common equity per share calculated as total
common shareholders’ equity adjusted for assumed proceeds
from exercise of options and warrants and conversion of
convertible debentures divided by the number of diluted
common shares outstanding including estimated amounts in
respect of share issuance commitments including options,
warrants, and convertible debentures, as applicable, and
adjusted for shares purchased under the normal course issuer
bid and not yet cancelled, and estimated forfeitures in respect
of unvested share awards under share-based payment plans.
Canaccord Genuity
Canaccord Genuity refers to the Company’s global capital
markets division.
Canaccord Genuity Asia
Canaccord Genuity Asia is the brand used for Canaccord
Genuity’s operations in the Asia-Pacific region.
Canaccord Genuity Wealth Management (CGWM)
Canaccord Genuity Wealth Management refers to the
Company’s global wealth management operations.
Collins Stewart Hawkpoint plc (CSHP)
Canaccord Genuity Group acquired Collins Stewart Hawkpoint
plc (CSHP) on March 21, 2012. CSHP was a leading
independent financial advisory group with operations in the UK,
the US, Europe and Singapore. Subsequent to the acquisition,
CSHP was rebranded Canaccord Genuity.
Common equity
Also referred to as common shares, which are, as the name
implies, the most usual and commonly held form of stock in a
corporation. Dividends paid to the stockholders must be paid
to preferred shares before being paid to common stock
shareholders.
Corporate and other
Corporate and other refers to the Company’s administrative
segment.
Correspondent brokerage services
The provision of secure administrative, trade execution and
research services to other brokerage firms through the
Company’s existing technology and operations infrastructure
(Pinnacle Correspondent Services).
Dilution
The change in earnings and book value per share resulting
from the exercise of all warrants and options and conversion of
convertible securities.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
114 Glossary
Dividend yield
A financial ratio that shows how much a company pays out in
dividends each year relative to its share price. It is calculated
as total annual dividends per share divided by the company
share price.
Investment professionals and fund managers
Investment professionals include all staff with direct sales
responsibilities, which include brokers and assistants with
direct contacts. Fund managers include all staff who manage
client assets.
Earnings (loss) per share (EPS), diluted
Net income (loss) attributable to common shareholders divided
by the weighted average number of shares outstanding
adjusted for the dilutive effects of stock options and other
share-based compensation.
Employee Stock Purchase Plan (ESPP)
Voluntary plan that provides eligible employees with the ability
to purchase shares in the Company through payroll deductions,
with an additional contribution by the Company.
Escrowed securities
Common shares in the Company that are subject to specific
terms of release.
Fair value adjustment
An estimate of the fair value of an asset (or liability) for which a
market price cannot be determined, usually because there is
no established market for the asset.
Fixed income trading
Trading in new issues, government and corporate bonds,
treasury bills, commercial paper, strip bonds, high-yield debt
and convertible debentures.
Incentive-based revenue
A percentage of incentive-based revenue earned is directly paid
out as incentive compensation expense, including commission,
investment banking, advisory fees, and principal trading
revenue.
Independent Wealth Management (IWM)
An independent operating platform of Canaccord Genuity
Wealth Management, under which Investment Advisors operate
as independent agents of the Company. Each IWM branch is
classified as one Advisory Team, which is comprised of one or
more Investment Advisors and their assistants and associates,
who together manage a shared set of client accounts.
Institutional sales and trading
A capital markets business segment providing market
information and research, advice and trade execution to
institutional clients.
International Equities Group (IEG)
The International Equities Group is a premium, low cost, order
routing destination for both US listed securities and foreign
listed ordinary shares for local market execution in the US
operations.
International trading
Executing trades in Canadian securities on behalf of US
brokerage firms.
Investment banking
Assisting public and private businesses and governments to
obtain financing in the capital markets through the issuance of
debt, equity and derivative securities on either an underwritten
or an agency basis.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Liquidity
The total of cash and cash equivalents available to the
Company as capital for operating and regulatory purposes.
London Stock Exchange (LSE)
One of the world’s largest stock exchanges, the LSE has been
in existence for more than 300 years and has over 3,000 listed
companies. The exchange has four main sectors: the Main
Market; the AIM Market; the Professional Securities Market;
and the Specialist Fund Market.
Long-term incentive plan (LTIP)
A reward system designed to align employee and external
shareholder interests. Under the Company’s LTIP, a portion of
an eligible employee’s annual compensation is held back to
purchase restricted share units (RSUs) of the Company. The
RSUs are topped up by the firm and generally vest over
three years.
National Insurance (NI) tax
Payroll tax applicable to UK employees based on a percentage
of incentive compensation payout.
Nominated Adviser (NOMAD)
A company approved by the LSE to act as an adviser for
companies who wish to be admitted to AIM. A Nomad warrants
to the LSE that the company is appropriate for admission and
assists the listed company on an ongoing basis with disclosure
and other market-related matters.
Non-cash charges
Charges booked by a company that do not impact its cash
balance or working capital.
Non-IFRS Measures
Non-IFRS Measures do not have any standardized meaning
prescribed by International Financial Reporting Standards
(IFRS) and are therefore unlikely to be comparable to similar
measured presented by other companies. See page 14 of this
Annual Report.
Preferred shares
A class of ownership in a corporation that has a higher claim
on the assets and earnings than common stock. Preferred
shares generally do not have voting rights; however, preferred
shareholders receive a dividend that must be paid out before
dividends are paid to common stockholders.
Principal trading
Trading in equity securities in principal and inventory accounts.
Revenue is generated through inventory trading gains and losses.
Registered trading
Trading in equity securities in principal and inventory accounts
by registered traders who operate by taking positions, trading
and making markets in equity securities including securities of
companies with small to medium-sized market capitalizations.
Revenue is generated through inventory trading gains and
losses.
Glossary 115
Syndicate participation
A group of investment banking firms coordinating the
marketing, distribution, pricing and stabilization of equity
financing transactions.
Trading services
Quotation services, trade reconciliation, execution
management, order book management and trade reporting.
Underwriter − investment banking
Purchases securities or other instruments from a corporate
issuer for resale to investors.
Value-at-Risk (VaR)
VaR is a generally accepted risk measurement concept that is
defined as the predicted minimum loss in market value of a
portfolio at a specific confidence level (e.g., 95%) over a
certain period of time (e.g., daily).
Wrap accounts
A type of brokerage account in which a single or flat fee covers
all administrative, research, advisory and management
expenses.
Return on average common equity (ROE)
Net income expressed as a percentage of average common
equity. This measure is non-IFRS.
Risk
Financial institutions face a number of risks that may expose
them to losses, including market, credit, operational, regulatory
and legal risk.
Separately managed accounts (SMAs)
Investment portfolios available to clients that are managed by a
senior portfolio manager. In SMAs, clients own the individual
securities within the portfolio, rather than a portion of a pooled
fund.
Significant items
Financial statement items that exclude significant items are
non-IFRS measures. Charges not considered to be recurring or
indicative of operating earnings. Significant items for the
Company includes restructuring costs, amortization of
intangible assets acquired in connection with a business
combination, impairment of goodwill and other assets, and
acquisition-related expense items, which include costs
recognized in relation to both prospective and completed
acquisitions, gains or losses related to business disposals
including recognition of realized translation gains on the
disposal of foreign operations, certain accounting charges
related to the change in the Company’s long-term incentive
plan, incentive-based payments related to the acquisition of
Hargreave Hale, as well as certain expense items, typically
included in development costs, which are considered by
management to reflect a singular charge of a non-operating.
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
116
Corporate Governance
The Board of Directors (Board) assumes responsibility for the stewardship of the Company, acting as a whole and through its
committees, and has approved a formal Board Governance Manual (Mandate) including terms of reference for the Board and
setting forth the Board’s stewardship responsibilities and other specific duties and responsibilities. The Board’s responsibilities
are also governed by:
(cid:129) The Business Corporations Act (British Columbia)
(cid:129) The Company’s articles
(cid:129) The charters of its committees
(cid:129) Other corporate policies and applicable laws
Communication with Independent Members of the Board
Terrence Lyons has been appointed by the Board of Directors of Canaccord Genuity Group Inc. as its Lead Director. One of his
responsibilities is to receive and determine appropriate action on any communications from interested parties that are
addressed to the independent directors of the Board. Such communications can be sent to Mr. Lyons in writing by mail to
2039 West 35th Avenue, Vancouver, BC, Canada, V6M 1J1.
Strategic Planning Process
The Board’s Mandate provides that the Board is responsible for ensuring that the Company has an effective strategic planning
process. As such, the Board reviews, approves, monitors and provides guidance on the Company’s strategic plan.
Identification and Management of Risks
The Board’s Mandate includes:
(cid:129) Assisting management to identify the principal business risks of the Company
(cid:129) Taking reasonable steps to ensure the implementation of appropriate systems to manage and monitor those risks
(cid:129) Reviewing plans for evaluating and testing the Company’s internal financial controls
(cid:129) Overseeing the external auditors, including the approval of the external auditors’ terms of reference
Succession Planning and Evaluation
The Board’s Mandate includes keeping in place adequate and effective succession plans for the Chief Executive Officer (CEO) and
senior management.
(cid:129) The Corporate Governance and Compensation Committee (CGCC) receives periodic updates on the Company’s succession
plan at the senior officer level and monitors the succession planning process
(cid:129) The succession plan is reviewed, at least annually, by the CGCC
(cid:129) On the recommendation of the Chairman & CEO, the Board appoints the senior officers of the Company
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Corporate Governance 117
Communications and Public Disclosure
The Company’s Disclosure Controls Policy (DCP) addresses the accurate and timely communication of all important information
relating to the Company and its interaction with shareholders, investment analysts, other stakeholders and the public generally.
(cid:129) The DCP is reviewed annually by the Board
(cid:129) The DCP, public securities regulatory filings, press releases and investor presentations are posted on the Company’s website
(cid:129) The Board reviews all quarterly and annual consolidated financial statements and related management discussion and
analysis, the Company’s earnings releases, management information circulars, annual information forms (AIFs) and financing
documents
Internal Controls
The Board requires management to maintain effective internal controls and information systems. The Board, with the assistance
of the Audit Committee, oversees the integrity of the Company’s internal control and information systems.
(cid:129) The Audit Committee meets no less than four times a year with the Company’s Chief Financial Officer (CFO) and senior
finance staff to review internal controls over financial reporting and related information systems
(cid:129) External auditors provide recommendations to the Audit Committee on an annual basis in relation to the Company’s internal
controls and information systems
As of March 31, 2018 an evaluation was carried out, under the supervision of and with the participation of management, including
the President & CEO and the Executive Vice President & CFO, of the effectiveness of our disclosure controls and procedures as
defined under National Instrument 52-109. Based on that evaluation, the President & CEO and the Executive Vice President & CFO
concluded that the design and operation of these disclosure controls and procedures were effective as of March 31, 2018.
Governance
The Board is currently composed of eight directors, six of whom are independent of management as determined under applicable
securities legislation. In order to facilitate the exercise of independent judgment by the Board of Directors, the Board has
appointed a lead director and holds regular meetings without management directors present.
(cid:129) The CGCC is responsible for periodically reviewing the composition of the Board and its committees
(cid:129) A formal annual assessment process has been established to include feedback by all the directors to the full Board,
including the completion of a confidential survey
(cid:129) New directors are provided with substantial reference material on the Company’s strategic focus, financial and operating
history, corporate governance practices and corporate vision
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
118 Corporate Governance
Summary of Charters and Committees
The Board has delegated certain of its responsibilities to two committees, each of which has specific roles and responsibilities as
defined by the Board. Both of these Board committees are made up of independent directors.
AUDIT COMMITTEE
The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities by monitoring the Company’s financial
reporting practices and financial disclosure. It comprises four independent directors. All members of the Audit Committee are
financially literate; that is, they are able to read and understand a set of financial statements that present a breadth and level of
complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be
expected to be raised by the Company’s financial statements. The current members of the Audit Committee are Messrs. Lyons
(Chair), Bralver, Carello and Shah.
The Audit Committee has adopted a charter which specifically defines the roles and responsibilities of the Audit Committee.
The Audit Committee Charter can be found in the Company’s AIF filed on SEDAR. The Audit Committee has direct communication
channels with the external auditors and CFO and senior finance staff and discusses and reviews issues with each of them on a
regular basis. The Audit Committee’s mandate was updated in Fiscal 2015 to better reflect the Audit Committee’s oversight of the
Company’s risk management function.
The Audit Committee is responsible for ensuring management has designed and implemented an effective system of internal
control. The external auditors are hired by and report directly to the Audit Committee. After consultation with management, the
Audit Committee is responsible for setting the external auditors’ compensation. The external auditors attend each meeting of the
Audit Committee, and a portion of each meeting is held without the presence of management. The Audit Committee annually
reviews and approves the external auditors’ audit plan and must approve any audit and non-audit work performed by the external
auditors. The CFO and senior finance staff attend each meeting of the Audit Committee other than the portion of the meeting
which is held without management present to allow more open discussion. The Audit Committee annually reviews and approves
the internal audit plan.
CORPORATE GOVERNANCE AND COMPENSATION COMMITTEE
The Corporate Governance and Compensation Committee is responsible for developing the Company’s approach to governance
issues, reviewing the Company’s overall governance principles and recommending changes to those principles from time to time.
It comprises four unrelated directors: Messrs. Harris (Chair), Bralver and Lyons, and Ms. Desai. The committee has full access to
staff and resources. At all regular committee meetings during the year, a portion of each meeting is held without management
present to allow more open discussion.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Board of Directors
Charles N. Bralver (2010)
Audit Committee
Corporate Governance and Compensation Committee
Charles N. Bralver, age 66, is a financial services executive
with over thirty years of capital markets experience. For more
than 23 years — from 1984 to 2007 — Mr. Bralver was a
founder and Vice Chairman of management consultancy Oliver,
Wyman & Co. where he specialized in strategy, risk and
operational work for leading investment banks, asset
managers, exchanges and other market utilities. He continues
to serve as a member of the senior advisory board of Oliver
Wyman and is also a Senior Advisor to the hedge fund
Silverpoint Capital. Mr. Bralver served as Senior Associate
Dean for International Business and Finance at the Fletcher
School of Law and Diplomacy from 2007 to 2010, and from
2007 to 2009 as a strategic advisor to Warburg Pincus LLC.
Mr. Bralver serves as a director of the Company, as a director
and member of the risk committee of NewStar Financial, Inc.
and on the Board of Visitors of the Fletcher School. Mr. Bralver
started his career at Booz Allen Hamilton. He is a US citizen
and a graduate of the Fletcher School of Law and Diplomacy
and Dartmouth College.
In addition to Canaccord Genuity Group Inc., Mr. Bralver is a
director of the following public company: the Co-operative
Bank p.l.c.
Massimo Carello, is a corporate director and a private investor
in public companies. Dr. Carello was the Chairman and Chief
Executive Officer of Diners Club UK Ltd. from 2001 to 2004
and he was the Chairman and Chief Executive Officer of Fiat UK
Ltd. from 1990 to 2001. He served as a member of the
Confederation of British Industry (CBI) President’s Committee
from 1998 to 2003 and was a member of the CBI European
Committee. From 1998 to 2005, he was Vice President of the
Italian Chamber of Commerce in the UK. He is Honorary
Vice-President of CLIC Sargent, a leading UK based cancer
charity. From 1978 to 1990, prior to moving to the UK, Dr.
Carello was CEO of Carello Lighting Group, one of the largest
European manufacturers of lighting for the automotive industry.
In addition to Canaccord Genuity Group Inc., Dr. Carello is a
director of the following public company: Canadian Overseas
Petroleum Limited. Until 2010, he was a director and member
of the Audit Committee of Uranium One Inc. and until 2016, he
was a director of Orsu Metals Corporation.
Daniel Daviau (2015)
Dan Daviau, age 53, was appointed President and Chief
Executive Officer and a director of the Company and Chief
Executive Officer of Canaccord Genuity Corp. effective on
October 1, 2015. Mr. Daviau served as President of Canaccord
Genuity’s North American capital markets business from
February 2015. From 2012 to 2015, he was President of the
firm’s US capital markets business, where he helped to
structure the firm’s investment banking, research, sales and
trading operations in the region and improve cross-border
capabilities. From 2010 to 2012, Mr. Daviau was Head of
Investment Banking for Canaccord Genuity. Before the
Canaccord/Genuity merger that was announced in 2010,
Mr. Daviau was a Principal and Founder of Genuity Capital
Markets, where he held a variety of senior roles since 2005.
119
Before 2005, Mr. Daviau was Co-Head of Investment Banking at
CIBC World Markets, a firm he joined in 1991. While at CIBC
World Markets, Mr. Daviau also served as the Head of the Media
and Telecommunications Group since 2000 and Head of the
Technology Investment Banking Group in Canada since 1997.
Having started his career as a securities lawyer with
Goodman & Co., Mr. Daviau has extensive experience in a broad
range of financing transactions and M&A assignments.
Mr. Daviau is based in Toronto, Canada. He holds an MBA from
York University, an LL.B. from Osgoode Hall/York University and a
B.A. (Math and Statistics) from the University of Western Ontario.
Mr. Daviau is not currently a director of any other public
companies.
Kalpana Desai (2014)
Corporate Governance and Compensation Committee
Kalpana Desai, age 51, is a corporate director and advisor. She
has over 25 years of international investment banking and
advisory experience. She was Head of Macquarie Capital Asia,
the investment banking division of Macquarie Group, an
Executive Director and a member of the Global Macquarie
Capital Operations Committee from 2010 to 2013. Before
joining Macquarie Group in 2009, Ms. Desai was Head of the
Asia-Pacific Mergers & Acquisitions Group and a Senior
Managing Director in the investment banking division of Bank
of America Merrill Lynch based in Hong Kong, having joined
Merrill Lynch in 1998. Earlier, Ms. Desai worked in the
investment banking divisions of Barclays de Zoete Wedd (now
part of Credit Suisse) and J. Henry Schroder Wagg (now part of
Citibank) in London, having started her career in the financial
services consulting division of PricewaterhouseCoopers.
Ms. Desai was a member of the Takeovers and Mergers Panel
of the Securities and Futures Commission in Hong Kong from
2007 to 2014.
Born in Kenya and educated in the United Kingdom, Ms. Desai
lived in Hong Kong from 1997 to 2017 and now lives in the
United Kingdom. Ms. Desai holds a B.Sc. (honours) from the
London School of Economics and Political Science and is an
Associate Member of the Institute of Chartered Accountants of
England and Wales.
In addition to Canaccord Genuity Group Inc., Ms. Desai is a
non-executive director of Janus Henderson Group plc which is
listed on the New York Stock Exchange (NYSE), the London
Stock Exchange and the Australian Securities Exchange (ASX).
Michael D. Harris, ICD.D. (2004)
Corporate Governance and Compensation Committee
Michael Harris, ICD.D, age 73, is the President of his own
consulting firm, Steane Consulting Ltd., and, in this capacity, acts
as a consultant to various Canadian companies, including Fasken
Martineau DuMoulin LLP. Before joining Fasken Martineau in
September 2013, he was a senior business advisor with the law
firm of Cassels Brock & Blackwell in Toronto.
Mr. Harris was born in Toronto in 1945 and was raised in
Callander and North Bay, Ontario. Before his election to the
Ontario Legislature in 1981, Mr. Harris was a schoolteacher, a
school board trustee and chair and an entrepreneur in the
Nipissing area. On June 8, 1995, Mr. Harris became the 22nd
Premier of Ontario following a landslide election victory. In 1999,
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
120 Board of Directors
he was re-elected — making him the first Ontario Premier in over
30 years to form a second consecutive majority government.
In addition to sitting on several boards of Canadian
corporations, he has also served as a director of the Manning
Centre for Building Democracy and as the Honorary Chair of the
North Bay District Hospital Capital Campaign and the Nipissing
University and Canadore College Capital Campaign. Mr. Harris
is also a Senior Fellow of the Fraser Institute and a director of
the New Haven Housing Centre. He has received his ICD.D
certification from the Institute of Corporate Directors.
In addition to Canaccord Genuity Group Inc., Mr. Harris is a
director of the following public companies: Chartwell
Retirement Residences (Chair), Colliers International Group Inc.
(CIGI) and Routel Inc. (Chair).
David Kassie (2010)
David Kassie, age 62, became Group Chairman and a director
of the Company on the closing of the acquisition of Genuity
Capital Markets, a Canadian investment bank, on April 23,
2010, and became Chairman on April 1, 2012. He was the
Principal, Chairman and Chief Executive Officer of Genuity
Capital Markets from 2004 until May 9, 2010, when the
integration of the businesses of Genuity Capital Markets and
Canaccord Financial Ltd. was completed under the name
Canaccord Genuity. Before 2004, he was Chairman and Chief
Executive Officer of CIBC World Markets and the Vice Chairman
of CIBC. On the death of Paul Reynolds on April 1, 2015,
Mr. Kassie was appointed as the Chief Executive Officer of the
Company and on October 1, 2015, upon succession,
Mr. Kassie became the Executive Chairman.
Mr. Kassie has extensive experience as an advisor, underwriter
and principal. He sits on a number of corporate boards.
Mr. Kassie is actively involved in community and charitable
organizations and is the Chairman of the Board of Baycrest
Health Sciences and is on the board of the Richard Ivey School
of Business and was formerly on the boards of the Toronto
International Film Festival Group and the Hospital for Sick
Children.
Mr. Kassie holds a B.Comm. (Honours) in Economics from
McGill University (1977), and an MBA from the University of
Western Ontario (1979).
In addition to Canaccord Genuity Group Inc., Mr. Kassie is a
director of the following public company: Reitmans (Canada)
Limited.
Terrence A. Lyons, ICD.D. (2004)
Audit Committee
Corporate Governance and Compensation Committee
Terrence (Terry) Lyons, ICD.D, age 68, is a corporate director.
He is a director of several public and private corporations
including Sprott Resource Holdings Inc. (Chairman) and
Martinrea International Inc. Mr. Lyons is a retired Managing
Partner of Brookfield Asset Management, past Chairman of
Northgate Minerals Corporation which was acquired by AuRico
Gold Inc. (now Alamos Gold Inc.), past Chairman of Eacom
Timber Corporation which was sold to a private equity firm, past
Chairman of Westmin Mining, past Vice-Chairman of Battle
Mountain Gold and past Chairman of Polaris Materials
Corporation.
Mr. Lyons is a Civil Engineer (UBC) with an MBA from the
University of Western Ontario (1974). He sits on the Advisory
Board of the Richard Ivey School of Business and is active in
sports and charitable activities, is a past Governor of the
Olympic Foundation of Canada, past Chairman of the Mining
Association of B.C., past Governor and member of the
Executive Committee of the B.C. Business Council and a past
director of the Institute of Corporate Directors (B.C.). In 2007,
Mr. Lyons was awarded the INCO Medal by the Canadian
Institute of Mining and Metallurgy for distinguished service to
the mining industry.
In addition to Canaccord Genuity Group Inc., Mr. Lyons is a
director of the following public companies: Martinrea
International Inc. and Sprott Resource Holdings Inc.
Dipesh Shah (2012)
Audit Committee
Dipesh Shah, OBE, FRSA, age 65, is Chairman of Notting Hill
Genesis and Genesis Housing Association and a director on
the boards of The Crown Estate and the two 2020 European
Funds for Energy, Climate Change and Infrastructure (‘‘EU
Marguerite Fund I’’ and ‘‘EU Marguerite Fund II’’, for each of
which he is Chairman of the Investment Committee). He is also
a Trustee of the British Youth Opera and a Governor of
Merchant Taylors’ School.
Mr. Shah was formerly the Chief Executive of the UK Atomic
Energy Authority and of various large businesses in BP Plc,
where he was a member of the Group Leadership for more than
a decade and latterly also the Global Head of Acquisitions and
Divestitures. Mr. Shah was Chairman, inter alia, of Viridian
Group plc, HgCapital Renewable Power Partners LLP and the
European Photovoltaic Industry Association. He was the Senior
Independent Director and Chair of the Remuneration
Committee of JKX Oil & Gas Plc from 2008 to 2015, the Senior
Independent Director and Chair of the Nominations Committee
of Equus Petroleum Plc from 2013 to 2016 and a Director of
Thames Water from 2007 to August 2017 and of Cavendish
Fluor Partnership from 2014 to August 2017. In addition, he
has been a Director of several major organizations, including
Babcock International Group Plc and Lloyd’s of London, the
insurance market. He was also a member of the UK
Government’s Renewable Energy Advisory Committee from
1994 to 2002. Earlier, Mr. Shah was the Chief Economist for
BP Oil UK.
Born in India, and brought up in Uganda, Mr. Shah is a graduate
of the University of London, the University of Warwick and the
Harvard Business School management program. He was
appointed an Officer of the Order of the British Empire (OBE) in
the 2007 New Year Honours and is a Life Fellow of the Royal
Society of Arts (FRSA).
Mr. Shah is not currently a director of any other public
companies.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
121
UK, Europe and Dubai
London
88 Wood Street
London, UK
EC2V 7QR
Telephone: 44.20.7523.8000
Dublin
Huguenot House
35-38 St Stephen’s Green
Dublin 2
Ireland
Telephone: 353.1.635.0210
Paris
Washington Plaza
29 rue de Berri
75008 Paris
France
Telephone: 33.1.56.69.66.66
Dubai
Unit 402, Level 4,
Gate Village Building 4,
DIFC, PO Box 507023,
Dubai, UAE
Telephone: 971.4.454.1209
Fax: 971.4.454.1239
Locations
Capital Markets
CANACCORD GENUITY
Canada
Toronto
Brookfield Place
161 Bay Street, Suite 3000
P.O. Box 516
Toronto, ON
Canada M5J 2S1
Telephone: 416.869.7368
Toll free (Canada): 1.800.382.9280
Toll free (US): 1.800.896.1058
Vancouver
Pacific Centre
609 Granville Street, Suite 2200
P.O. Box 10337
Vancouver, BC
Canada V7Y 1H2
Telephone: 604.643.7300
Toll free (Canada): 1.800.663.1899
Toll free (US): 1.800.663.8061
Calgary
Centennial Place − East Tower
Suite 2400, 520 3rd Ave. SW
Calgary, AB
Canada T2P 0R3
Telephone: 403.508.3800
Montréal
1250 René-Lévesque Boulevard West
Suite 2930
Montréal, QC
Canada H3B 4W8
Telephone: 514.844.5443
Toll free: 1.800.361.4805
United States
New York
535 Madison Avenue
New York, NY
USA 10022
Telephone: 212.389.8000
Boston
99 High Street, Suite 1200
Boston, MA
USA 02110
Telephone: 617.371.3900
Toll free: 1.800.225.6104
San Francisco
101 Montgomery Street, Suite 2000
San Francisco, CA
USA 94104
Telephone: 415.229.7171
Toll free: 1.800.225.6104
Nashville
1033 Demonbreun Street, Suite 620
Nashville, TN
USA 37203
Telephone: 615.490.8500
Chicago
1880 Oak Avenue, Suite 135
Evanston, IL
USA 60201
Telephone: 847.864.1139
Minneapolis
45 South 7th Street, Suite 2640
Minneapolis, MN
USA 55402-1648
Telephone: 805.205.0589
Washington
1200 G Street, NW
Suite 725
Washington, DC 20036
USA
Telephone: 202.849.4100
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
Hong Kong
1505, 15/F, ICBC Tower, Three
Garden Road, Central, Hong Kong
Telephone: 852.3919.2500
Fax: 852.3919.2599
Québec
Montréal
1250 René-Lévesque Boulevard West,
Suite 2930
Montreal, QC
Canada H3B 4W8
Telephone: 514.844.5443
Toll free: 1.800.361.4805
Nova Scotia
Halifax
Purdy’s Wharf Tower II
Suite 2004
1969 Upper Water Street
Halifax, NS
Canada B3J 3R7
Telephone: 902.442.3162
Toll free: 1.866.371.2262
122 Locations
Asia-Pacific
Beijing
Unit 2401-33, Level 24, China World
Office 2, 1 Jianguomenwai Avenue,
Chaoyang District
Beijing 100004
China
Telephone: 8610.5929 8650
Wealth Management
CANACCORD GENUITY WEALTH
MANAGEMENT
Canada
British Columbia
Vancouver
Pacific Centre
609 Granville Street, Suite 2200
P.O. Box 10337
Vancouver, BC
Canada V7Y 1H2
Telephone: 604.643.7300
Toll free (Canada): 1.800.663.1899
Toll free (US): 1.800.663.8061
Kelowna
Landmark 5, 320 − 1620 Dickson
Avenue
Kelowna, BC
Canada V1Y 9Y2
Telephone: 250.712.1100
Toll free: 1.888.389.3331
Penticton
200 − 498 Ellis Street
Penticton, BC
Canada V2A 4M2
Telephone: 855.643.7770
Ontario
Toronto
Brookfield Place, Suite 2900
P.O. Box 516
161 Bay Street
Toronto, ON
Canada M5J 2S1
Telephone: 416.869.7368
Toll free (Canada): 1.800.382.9280
Toll free (US): 1.800.896.1058
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Melbourne
Level 4, 60 Collins Street
Melbourne, VIC, 3000, Australia
Telephone: 61.3.8688.9100
Perth
1292 Hay Street
Suite 2.4, Level 2
West Perth 6005 WA
Singapore
Level 42, Six Battery Road
Singapore 049909
Telephone: 65.6232.2187
Sydney
Level 26, 9 Castlereagh Street
Sydney, NSW, 2000, Australia
Telephone: 61.2.9263.2700
Waterloo
80 King Street South, Suite 101
Waterloo, ON
Canada N2J 1P5
Telephone: 519.886.1060
Toll free: 1.800.495.8071
Alberta
Calgary
Centennial Place − East Tower
520 3rd Avenue SW, Suite 2400
Calgary, AB
Canada T2P 0R3
Telephone: 403.508.3800
Toll free: 1.800.818.4119
Edmonton
Manulife Place
10180 − 101st Street, Suite 2700
Edmonton, AB
Canada T5J 3S4
Telephone: 780.408.1500
Toll free: 1.877.313.3035
Manitoba
Winnipeg
1010-201 Portage Avenue
Winnipeg, MB
Canada R3B 3K6
Telephone: 204.259.2850
Toll free: 1.877.259.2888
Canaccord Genuity Wealth Management
(USA), Inc.
Pacific Centre, Suite 2200
P.O. Box 10337
609 Granville Street
Vancouver, BC
Canada V7Y 1H2
Telephone: 604.743.7300
Independent Wealth Management
Branches
Ontario
Kitchener
4281 King Street East, Unit E
Kitchener, ON
Canada N2P 2E9
Telephone: 519.219.6611
Toll free: 1.866.232.1894
British Columbia
Prince George
101 − 1840 Third Avenue
Prince George, BC
Canada V2M 1G4
Telephone: 250.614.0888
Trail
1277 Cedar Avenue
Trail, BC
Canada V1R 4B9
Telephone: 250.368.3838
Alberta
Calgary
#207 − 322 11th Avenue SW
Calgary, AB
Canada T2R 0W7
Telephone: 403.531.2444
Toll free: 1.866.531.2444
Calgary
1409 − 2nd Street SW
Calgary, AB
Canada T2R 0W7
Telephone: 403.263.7999
Toll free: 1.877.263.7999
UK & Europe
London
41 Lothbury
London, UK
EC2R 7AE
Telephone: 44.20.7665.4500
Jersey
37 The Esplanade
St Helier
Jersey JE4 0XQ
Telephone: 44.1534.708090
Guernsey
Trafalgar Court,
Admiral Park,
St. Peter Port GY1 2JA
Telephone: 44.1481.733900
Isle of Man
Anglo International House
Bank Hill
Douglas
Isle of Man IM1 4LN
Telephone: 44.1624.690100
Blackpool
Talisman House
Boardmans Way
Blackpool FY4 5FY
Telephone: 44.1253.621575
Carlisle
10b Clifford Court
Cooper Way
Parkhouse
Carlisle CA3 0JG
Telephone: 44.1228.515224
Lancaster
25 Brock Street
Lancaster LA1 1UR
Telephone: 44.1524.541560
Locations 123
Norwich
13-15 St Georges Street
Norwich
Norfolk NR3 1AB
Telephone: 44.1603.567120
Llandudno Junction
Anson House
1 Cae’r Llynen
Llandudno Junction
Conwy LL31 9LS
Telephone: 44.1492.558359
Nottingham
The Point
Loughborough Road
West Bridgford,
Nottingham NG2 7QW
Telephone: 44.1158.965840
Worcester
Saggar House
Princes Drive
Worcester WR1 2PG
Telephone: 44.1905.723551
York
23 High Petergate
York YO1 7HS
Telephone: 44.1904.232780
OTHER LOCATIONS
Pinnacle Correspondent Services
Vancouver
Pacific Centre
609 Granville Street, Suite 2200
P.O. Box 10337
Vancouver, BC
Canada V7Y 1H2
Telephone: 604.643.7300
Toronto
Brookfield Place
161 Bay Street, Suite 3000
P.O. Box 516
Toronto, ON
Canada M5J 2S1
Telephone: 416.869.7368
2018 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
124
Shareholder Information
Common Share Trading Information (Fiscal 2018)
Stock exchange
Toronto TSX
Diluted shares
outstanding at
March 31, 2018
Year-end price
March 31, 2018
High
113,522,629
$
6.93
$
7.49
$
Ticker
CF
Low
5.50
Total volume
of shares
50,465,674
Fiscal 2018 Preferred Dividend Dates and Amounts
Quarter end date
June 30, 2017
September 30, 2017
December 31, 2017
March 31, 2018
Preferred
dividend
record date
September 15, 2017
December 22, 2017
March 16, 2018
June 22, 2018
Preferred
dividend
payment date
October 2, 2017
January 2, 2018
April 2, 2018
July 3, 2018
Series A
preferred
dividend
0.24281
0.24281
0.24281
0.24281
0.97124
$
$
$
$
$
Series C
preferred
dividend
0.31206
0.31206
0.31206
0.31206
1.295555
$
$
$
$
$
$
$
$
$
$
Total
preferred
dividend
0.55487
0.55487
0.55487
0.55487
2.21948
Fiscal 2018 Common Dividend Dates and Amounts
Quarter end date
June 30, 2017
September 30, 2017
December 31, 2017
March 31, 2018
Common dividend
record date
Common dividend
payment date
Common
dividend
September 1, 2017
September 15, 2017
December 1, 2017
December 15, 2017
March 2, 2018
June 22, 2018
March 15, 2018
July 3, 2018
$
$
$
$
$
0.01
0.01
0.01
0.12
0.15
Fiscal 2019 Expected Dividend(1) and Earnings Release Dates
Expected earnings
release date
Preferred dividend
record date
Preferred dividend
payment date
Common dividend
record date
Common dividend
payment date
Q1/19
Q2/19
Q3/19
Q4/19
August 1, 2018
September 14, 2018
October 1, 2018
August 31, 2018
September 10, 2018
November 6, 2018
December 14, 2018
December 31, 2018
November 30, 2018
December 10, 2018
February 7, 2019
March 15, 2019
June 5, 2019
June 21, 2019
April 1, 2019
July 2, 2019
March 1, 2019
June 21, 2019
March 15, 2019
July 2, 2019
(1) Dividends are subject to Board of Directors approval. All dividend payments will depend on general business conditions and the Company’s financial conditions, results of operations, capital
requirements and such other factors as the Board determines to be relevant.
CANACCORD GENUITY GROUP INC. / 2018 ANNUAL REPORT
Shareholder
Information
STOCK EXCHANGE LISTING
TSX: CF
FISCAL YEAR END
March 31
WEBSITE AND FINANCIAL INFORMATION
For TSX required corporate governance
disclosures and current financial
information, please visit
www.canaccordgenuitygroup.com.
REGULATORY FILINGS
To view Canaccord Genuity Group Inc.’s
regulatory filings on SEDAR, please visit
www.sedar.com.
MEDIA RELATIONS AND
INQUIRIES FROM INSTITUTIONAL
INVESTORS AND ANALYSTS
Christina Marinoff
Vice President, Investor Relations &
Communications
Telephone: 416.687.5507
Email: christina.marinoff@canaccord.com
GENERAL SHAREHOLDER INQUIRIES
For all general shareholder info or to
request a copy of this report.
INVESTOR RELATIONS
161 Bay Street, Suite 3000
Toronto, ON, Canada
Telephone: 416.869.7293
Email: investor.relations@
canaccordgenuitygroup.com
TRANSFER AGENT AND REGISTRAR
For information about stock transfers,
address changes, dividends, lost stock
certificates, tax forms and estate
transfers, contact:
COMPUTERSHARE
INVESTOR SERVICES INC.
100 University Avenue, 8th Floor
Toronto, ON M5J 2Y1
Telephone toll free (North America):
1.800.564.6253
International: 514.982.7555
Fax: 1.866.249.7775
Toll free fax (North America) or
International fax: 416.263.9524
Email: service@computershare.com
Website: www.computershare.com
ELIGIBLE DIVIDEND DESIGNATION:
INCOME TAX ACT (CANADA)
In Canada, the Federal Income Tax
Act and most provincial income tax
legislation provide lower levels of
taxation for Canadian individuals
who receive eligible dividends. All of
the common share dividends paid
by Canaccord Genuity Group Inc.
since 2006 are eligible, as are common
share dividends paid hereafter, unless
otherwise indicated.
CORPORATE HEADQUARTERS
STREET ADDRESS
Canaccord Genuity Group Inc.
609 Granville Street, Suite 2200
Vancouver, BC, Canada
MAILING ADDRESS
Pacific Centre
609 Granville Street, Suite 2200
P .O. Box 10337
Vancouver, BC V7Y 1H2 Canada
INDEPENDENT AUDITOR
Ernst & Young LLP
Chartered Professional Accountants
Vancouver, BC
For information about fees paid to
shareholders’ auditors, refer to our
Annual Information Form.
QUALIFIED FOREIGN CORPORATION
Canaccord Genuity Group Inc. is a
“qualified foreign corporation” for US tax
purposes under the Jobs & Growth Tax
Reconciliation Act of 2003.
ANNUAL GENERAL MEETING
Thursday, August 2, 2018
at 10:00 a.m. (Eastern time)
Bay Adelaide Centre
333 Bay Street
34th Floor
Toronto, ON, Canada
EDITORIAL AND DESIGN SERVICES
The Works Design Communications Ltd.
C
A
N
A
C
C
O
R
D
G
E
N
U
I
T
Y
G
R
O
U
P
I
N
C
.
2
0
1
8
A
N
N
U
A
L
R
E
P
O
R
T
Beijing
Blackpool
Boston
Calgary
Carlisle
Dubai
Dublin
Edmonton
Guernsey
Halifax
Hong Kong
Isle of Man
Jersey
Kelowna
Kitchener
Lancaster
Llandudno
London
Melbourne
Minneapolis
Montréal
Nashville
New York
Norwich
Nottingham
Paris
Penticton
Perth
Trail
Prince George
Vancouver
San Francisco
Washington
Singapore
Sydney
Toronto
Waterloo
Winnipeg
Worcester
York
More information about Canaccord Genuity Group Inc., including the Company’s
Fiscal 2018 online Annual Report, can be found at canaccordgenuitygroup.com.
FRUKUSUAEAUCA