Canaccord says Australian acquisition will help as it deals with lumpy earnings

VANCOUVER – Canaccord Financial Inc. (TSX:CF) expects “lumpy” earnings for the next several quarters as global economic uncertainty continues, but says buying an Australian company will help it increase its presence among Hong Kong investors.

The company said in a conference call Thursday that this week’s purchase of Australia’s BGF Equities for $41 million will grow its distribution capabilities through licences to operate on the Australian and Hong Kong stock exchanges.

CEO Paul Reynolds said buying BGF and its licences, when combined with Canaccord’s acquisition of Beijing’s Balloch Group earlier this year, will help it work with Chinese companies.

“We will be gearing up to use those licences to bring mainland Chinese companies to the Hong Kong market so, over time, we’ll be looking at a strategy to grow our Hong Kong presence and our listing capabilities in that market,” he said.

Reynolds said Canaccord’s is currently in a challenging environment where companies may shy away from mergers and acquisitions because of global economic uncertainty due to the European and U.S. debt crises. Canaccord makes money assisting clients with these transactions.

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“Our pipeline of business in the U.K. remains strong. However, the market environment is still providing only sporadic opportunities to facilitate transactions for our clients,” Reynolds said.

“While we’re confident our operations in each of these markets has the potential to provide significant returns to our business, we expect revenue to be lumpy for the next several quarters,” he said, adding that Canaccord is positioned for an economic upswing.

Reynolds said the company is looking into Latin America and further expansion into smaller businesses in Hong Kong and the United Kingdom.

“I don’t think we see ourselves going into the United States because scale is such a large number and it would be too big for us in our current state, but there could be opportunities like we saw in Australia where they’ve got a high net worth part to their business on the wealth management side that looks very attractive to us.”

Canaccord Financial Inc. on Wednesday reported a 154 increase in quarterly profits, though the results fell shy of analyst expectations.

“Lower trading volumes, waning investor confidence and ongoing worries about the global economy have all had an impact on our results this quarter,” Paul Reynolds, the company’s chief executive said on a conference call Thursday.

“We expect there will be a sustained market recovery once we see some clarity around U.S. markets and European debt concerns.”

The Vancouver-based financial services firm (TSX:CF) said it earned $13.1 million, or 16 cents per share, during the first quarter of its 2012 fiscal year.

During the same period a year earlier, Canaccord earned $5.2 million, or seven cents per share.

Without acquisition-related items, Canaccord earned $14.1 million, or 17 cents per share, down slightly from $14.2 million, or 19 cents per share.

The profits missed the average analyst estimate of 26 cents per share, according to a survey by Thomson Reuters.

Revenues during the quarter were $159.8 million, up five per cent from $151.9 million a year earlier.

The company said it sees opportunities for business through growth initiatives and believes it is well positioned for markets to rebound by the end of the year.