August 7, 2008 / 4:51 PM / 9 years ago

UPDATE 1-GMP Capital profit falls, cuts distribution

(Adds CEO comments from conference call, unit price)

By Lynne Olver

TORONTO, Aug 7 (Reuters) - Quarterly profit fell 59 percent at independent Canadian investment dealer GMP Capital Trust GMP_u.TO as rocky financial markets hurt investment banking and commission revenue, and forced a cut in its monthly cash distribution.

GMP said on Thursday that it will reduce its monthly distribution to 10.42 Canadian cents a unit, from 14 Canadian cents.

Its unit price was down 3.75 percent at C$12.32 on the Toronto Stock Exchange early on Thursday afternoon. GMP units are down about 50 percent year-to-date.

“We believe fundamentally that it can’t get a whole lot worse than Q2 in terms of the market environment,” said Chief Executive Kevin Sullivan.

“We’ve had one of the most difficult quarters for the industry in the past several decades,” he told a conference call.

The lower distribution rate is “a prudent response” to turbulent markets, Sullivan said.

GMP, which focuses on advising resource companies and mid-capitalization companies, earned C$15.7 million ($15 million), or 24 Canadian cents a unit, in the three months ended June 30. That compared with profit of C$38.6 million, or 60 Canadian cents, in the same 2007 period.

Analysts had expected profit of 30 Canadian cents a unit before items, and 27 Canadian cents on a GAAP basis, according to Reuters Estimates.

Quarterly revenue tumbled 30 percent to C$69.8 million, hurt by a 43 percent drop in investment banking revenue from a year earlier, when equity underwriting revenue hit a record high, the company said.

GMP has capital markets, wealth management and alternative investment businesses.

“We seem to be in the right space for what’s going on in Canada right now,” despite a recent drop in commodity prices, Sullivan said.

“Resources continue to be strong,” he said.

GMP reported return on equity of 22.4 percent, down from 51.9 percent a year earlier.

While GMP’s results are closely tied to the health of Canadian capital markets, “we are not simply waiting for a rising tide to raise our results,” Sullivan said.

The company plans to add to its wealth management business, expand its European business, keep expenses controlled, and maintain a strong balance sheet, he said. ($1=$1.05 Canadian) (Reporting by Lynne Olver; Editing by Peter Galloway)

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