Q4 2021 Canaccord Genuity Group Inc Earnings Call
Good morning, ladies and gentlemen, thank you for standing by I'd like to welcome everyone to the Canaccord Genuity Group Inc.
And 2021 and fourth quarter and year end results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. She would like to ask a question. During this time simply press Star then the number 1 on your telephone keypad and she would like to withdraw your question.
Please press the pound key if you have any difficulty hearing the conference. Please press Star then zero for operator assistance at any time as a reminder, this conference call is being.
Broadcast live online and recorded I would now like to turn the conference call over to Mr. Gander Aveo precedent and Oh. Please go ahead, Mr. Gaby I'll.
Thank you operator, and thanks for everyone joining us for today's call as always I'm joined by Don Wood.
And our Chief Financial Officer, following the overview of our fourth quarter and fiscal 2021 results, both Don and I will be pleased to answer questions from analysts and institutional investors. During today's discussion will refer to our earnings release and N DNA copies of which was made available for download on SEDAR.
And on the Investor Relations section of our website and C. G. S dot com within our update certain reported information has been adjusted to exclude significant items in order to provide a transparent and comparative view of our operating performance. These adjusted items, our non <unk> financial measures.
Please refer to our notice regarding forward looking statements and the description of non <unk> measures and appears on page 1 of our Investor Relations presentation and also in our MD&A.
I expect that you've all had an opportunity to review our fourth quarter and full fiscal year disclosures that were made available last night, our fiscal fourth quarter was our strongest on record by a wide margin and this contributed to an already exceptional fiscal year performance. During the 3 months period, we are rare.
Firm wide revenue of $692 million a year over year increase of 117%. This brought our full fiscal year revenue to $2 billion up 63% when compared to last year and all time record for Canaccord Genuity.
While broader market tailwind supported increased demand for small and mid cap equities and our core focus sectors. Our results are a testament to the power of our platform and the incredible efforts put forth by our employees and.
Re level of the organization and.
Really cannot be prouder of our team of over 2300 people, who have worked tirelessly from the remote offices around the world to support our clients, while never losing focus of our share and priorities.
Our fourth quarter and fiscal year results clearly demonstrate that we were operating at a higher level than any period and our history when measured by revenue net income profit margins and earnings per share and employee productivity.
The business. We've built is clearly demonstrating that we will have a higher highs and buoyant markets as well as higher lows during softer markets.
And excluding significant items pretax net income for the fourth fiscal quarter amounted to $183 million and amount that exceeds all prior full fiscal year results.
This translates to diluted earnings per share of a dollar and 20 cents.
For the 3 months period, bringing our fiscal 2021 diluted EPS to $2 and 48.
Our highest on record.
Turning to expenses, we benefited from enhanced cost savings driven by the extended remote work environment and the restrictions that are placed on travel and entertainment over the fiscal year.
That said, we've also maintained a strong focus on the efficiencies and cost discipline measures that we implemented prior to the pandemic.
Despite the substantially higher levels of business activity throughout the year on an adjusted basis, our non compensation expense as a percentage of revenue were 19% for the fiscal year, a reduction of 10.6 percentage points from last year.
Looking forward, we expect to maintain and many of the efficiencies that we incorporated over the year as more of our employees and clients return to offices are adjusted firm wide compensation ratio was 57% for the fourth fiscal quarter, a decrease of 5.1 percentage points.
Compared to last year, reflecting the increase in revenue relative to fixed staff costs.
Our compensation ratio for the fiscal year was 61.6%, which reflects the impact of certain share based compensation programs, which are affected by higher share price, including performance share units granted and prior periods. I will also note that our effective tax rate for the fiscal year.
<unk> was 27, 1% compared to 13.5% last year.
Last year's rate was exceptionally low as it reflected the recognition of tax benefits from carryforwards and prior years. This.
And this year's rate reflects the increased profitability earned and our higher tax free jurisdictions.
The dynamic nature of capital markets requires us to maintain a healthy level of capital flexibility to support our business activities and this was especially important in a year, where we experienced record levels of underwriting and trading activity, having said that we are committed to deploying cash.
And ways that will provide increased returns for our shareholders.
Pleased to report that our board of Directors has approved a quarterly common share dividend of 7 and a half cents.
Bringing our full year dividend to <unk> 25, and.
And increase of 25% from last year.
During the fourth quarter, we also announced the planned redemption of our unsecured senior subordinated debentures, which were set to mature in 2023.
This has resulted in a reduction of our average fully diluted shares to 108 million for the current year down from an average of $128 million during our prior fiscal year.
And all our fiscal 2021 capital deployment initiatives will result, and a return of $192 million to CF shareholders and debenture holders.
With that let's turn to the performance of our operating businesses.
Our global capital markets business earned revenue of $1.3 billion for the fiscal year.
And our U S Canadian and Australian businesses, all earned record revenues with year over year increases of 69% and 117% and 376% respectively.
Investment banking accounted for half of our total capital markets revenue for the fiscal year.
We participated and 713 transactions globally, raising proceeds of $86 billion for growth companies during the 12 month period.
The breadth of our capital markets capabilities, including mid Mark and Ipos follow ons, and Spacs and positioned us to capture a meaningful share of the stronger levels of market issuance over the 12 month period with the fourth quarter coming in as our strongest on record for investment banking activities drew.
During the 3 month period, our investment banking division achieved revenue of $266 million almost 7 times. The revenue earned in the same period, a year ago and this was driven by the remarkable new issue environment.
Volatile markets led to reduction and advisory activities over the first half of the fiscal year with.
But the third and fourth quarters presented an opportunity to deliver on a very strong pipeline, bringing our full fiscal year revenue from this segment to $193 million, just 6% lower and the records set in our previous fiscal year.
Fourth quarter advisory revenues amounted to $65 million, the second highest quarterly results and record the strongest contributors to advisory revenues, where our U S and Canadian businesses for both the 3 and 12 month periods.
Based on the existing pipeline, we continue to see robust levels of M&A activity as we begin our new fiscal year.
Our global trading teams outperformed throughout the fiscal year, but most notably in the fourth quarter trading.
Trading revenue for the 3 months period reached $87 million and increase of 148 percentage points compared to the same period a year ago.
Firm wide trading revenue for the full fiscal year amounted to $246 million a year over year improvement of 126%.
The primary driver of this performance was our U S desk through our international Equities group, which contributed revenue of $75 million for the fourth quarter and $210 million for the fiscal year increases of 98 and 109%.
Spectacle.
Our Canadian trading team also delivered outstanding performance with record annual revenue of $23 million.
Firm wide revenue from our commission and fee activities improved by 39% year over year to $212 million. We attribute this increase to the outstanding efforts by all our teams who have worked hard to increase our buy side Commission wallet share as well as the very act.
Trading environment, which drove high volume and volatility.
Over the year C. G pivoted quickly to deliver innovative opportunities for clients and a completely virtual environment.
<unk> corporate access and conferences, which drew record attendance as well as timely and thematic research pieces from our award winning analysts and strategists.
The outstanding performance delivered by all segments of our global capital market Division contributed to record profitability for both the fourth quarter and the full fiscal year.
Excluding significant items the pretax net income contribution from our combined capital markets business amounted to $155 million for the fourth quarter and $325 million for the full fiscal year substantial increases from the $15 million and the 60.
Yeah.
Recorded in the comparable periods last year.
Excluding significant items pretax profit margins and our capital markets segment increased over each of the 4 fiscal quarters, reaching a peak of 32% in the fourth quarter and we ended the fiscal year with a pretax profit margin of 24.8%.
While margins and this segment will fluctuate with the pace of activities and our core sectors and geographies. We are committed to generating a greater proportion of our long term earnings from higher margin activities such as advisory. In addition to the development of ancillary products and services that complement our mid market offering.
And.
Throughout the year, our global wealth management business also continued to deliver impressive growth.
At the end of the fiscal year firm wide client assets grew to a record of $89 billion and increase of 46% compared to the same period a year ago.
Revenue earned by this segment amounted to $199 million for the fourth quarter and $663 million for the fiscal year increases of 44% and 29% respectively.
Excluding significant items, our combined wealth management businesses contributed pretax net income of $45 million in the fourth quarter and $135 million for the fiscal year, representing year over year increases of 170% and 70%.
And outstanding performance was achieved by our Canadian wealth business, which reported total client assets of $32 billion and increase of $14 billion or 75% compared to the end of the previous fiscal year.
Excluding significant items this business achieved record pretax profit margins of almost 22% in the fourth fiscal quarter with pre tax net income of $23 million for the 3 month period, bringing the full year adjusted pretax net income contribution to 63.
$3 million.
The excellent partnership between our capital markets and wealth management businesses, and Canada, Creedon and opportunity for investment advisers to participate in the robust environment for new issue activity.
This drove 171% year over year increase and the investment banking revenue earned by this division to $107 million for the fiscal year.
The average book per eye 18 grew by 75% over fiscal $2000.21 million to $222 million. This team also achieved impressive growth and it's discretionary assets under management, which grew by 57% compared to last year.
The advantages and opportunities provided by our platform had been consistently evidenced in the growth of this business.
Multiple consecutive years of growth and profitability and critical investments to advance our technology offerings have continued to be instrumental and attracting established IAA teams to the CG platform.
As you know during this past quarter, we reached out to the board of RF capital and an effort to discuss a possible combination of our Canadian wealth businesses.
While we continue to believe that a business combination with RF capital would provide a compelling value creation opportunity for the employees and shareholders of both businesses. We've made the decision not to continue and our efforts to try to engage with the RF Capital's board of directors.
We will continue to focus on our recruiting strategy and organic growth opportunities, which have outpaced the broader industry.
Our wealth business and the U K and Crown dependencies has been a steady contributor of growth and profitability through a range of market environments and fiscal 2021 was no exception.
Client assets and this business increased 31% year over year to $52 billion, excluding significant items fourth quarter pre tax net income grew to a record of $19 million, bringing the full year contribution to $65 million and increase of 15% from the.
The prior year.
During the past quarter. We were also pleased to announce a significant investment from H P. S, which adds a partner to provide flexibility and options for funding the future growth of this business at the regional level.
We expect that this investment will close and the next several weeks.
In April we announced the acquisition of the investment management business, and Adam and company, marking our entry to the Scottish market with a deeply established brand and client assets of $2.9 billion.
The acquisition is expected to be accretive to our adjusted earnings and is on track to close around the end of our second fiscal quarter.
And finally managed assets and our Australian wealth business increased by 76% year over year to $4.2 billion as C. G gains momentum as the Premier brand for small and mid cap and investors in the region.
Fourth quarter revenue in this business increased by 34% year over year to $17 million, bringing full year revenue to $62 million up from $24 million and the prior year, which included about 5 months of activity. Following the acquisition of Patterson and October.
<unk> 2019.
The addition of Paterson Securities last year, which we purchased for $23 million significantly expanded our Australian wealth platform.
This business has continued to be a positive contributor of adjusted pre tax net income, which amounted to $7.3 million for the fiscal year.
The strong performance of this business is also driving compelling recruiting opportunities and key Australian markets.
Looking ahead, we will continue to invest with discipline and the growth of all our wealth management businesses, which are fundamental to our strategy of enhancing our long term earnings potential.
We will be opportunistic and our approach to capital deployment with a disciplined focus on initiatives to increase the long term value of our business, while upholding our commitment of returning excess capital to our shareholders well.
And while several factors point towards the continuance of the supportive marketplace for growth and value stocks and our core focus sectors.
We expect that some of these tailwind could moderate in the coming quarters and that activity will return to previous levels.
Having said that we are very pleased to be starting fiscal 2022, with a stronger wealth management franchise and fewer common shares on a fully diluted basis.
Across our operations, we have a market, leading franchise and our core sectors and geographies and compelling prospects for expanding our product capabilities. We continue to see strong engagement from our institutional and retail clients and have a solid pipeline of ECM and advisory mandates.
I am confident that the strategic decisions that we've made to transformer business mix, coupled with disciplined investments and our growth and relentless dedication of our teams will continue to deliver outstanding results for our shareholders.
Thank you for your continued support with that Don and I will be pleased to take your questions. Operator, Please open the lines.
Thank you, ladies and gentlemen, we will now conduct a question and answer session Covid.
Like to ask a question press star and the number 1 on your telephone keypad. If you would like to withdraw your question press the pound Kay and it'll be a brief pause while we compile the Q&A roster.
Your first question comes Shamrock, Rob Goff from client your line is open.
Thank you Robin day.
Good morning, congratulations on the quarter and the year interest.
Incredible performance.
So much of our Eugene.
And you've made some references to it and this may sound like a bit of a macro question, but yes.
And all that has happened over the last quarter a year can you discuss how that may have and pack a year cash.
Capital allocation stance.
And offence and priority of capital markets be it wealth management.
Yeah I'll answer it at the most broad level, it's a great question, Rob, but I'll answer that growth broad level, and maybe turn it over and the dawn to be a little bit more specific on our capital. We've obviously made a lot of money.
We've made a lot and net income and we've made a lot of cash and you can see that net results.
We've obviously been through a very buoyant capital markets period, where you know we use our capital to support our underwriting and trading activity and you can see the results of that.
That being said our fundamental strategy has not changed.
We are going to deploy our excess capital to grow our wealth business and that Hasnt change, we're going to continue to do that and we've got opportunities throughout the globe to grow our wealth business and to the extent that we don't have and intelligent place to deploy our capital with excess returns and we're going to return it to shareholders you've seen and inquiry.
And our dividend twice this year, you've seen a huge buyback of our convert we continue to buyback our stock and that activity hasnt changed either so our fundamental priorities and we just got our board meeting the other day have not changed from a capital allocation perspective, Don do you want to provide other details around you know.
Excess capital and and alike.
Well I think I think what you've articulated Dan is exactly the strategy and the plan that we.
Yes.
First specifically articulated a couple of years ago, and we've started progressed along that plan and as you said nothing has really changed.
And you know the capital.
Derived from profit obviously resides and.
And the capital U S or in the in Canada, and U S and Australia. So we have strategies to move those.
And capital.
Around the globe, so to speak and areas, where it's most opportunistic but.
As Dan said the strategy and the.
Plan is to operating.
Opportunistically and all.
Deploy capital towards growing the wealth business, and then excess capital through dividends and share buybacks.
And they are.
A follow up just a little bit more micro.
And you discussed some of the factors behind the $87 million and principal trading.
And I guess the internet.
That's a platform aspect of it and the sustainability of that.
Okay.
Yes that market price.
You know, we've got lots of what we call principal trading books, and they're not particularly as you know, Rob but risk risk taking das faded there a principal trading because theyre, making markets and and various things the largest driver for that is in the United States and that is through our international equity group a group that's been <unk>.
They're for literally decades, and been with us for over a decade.
You know it was and it was incredibly active market. They tend to participate they tend to do very well when there's volatility and the market and when and when there's large retail flows our biggest customers and that business at a large retail shops in the U S and we aggregate and and.
And trade their international flows and their over the counter flows like you've seen and robinhood and other situations like that you've seen immense amount of retail interest we've benefited from that and obviously your throat that group has gotten bigger and taken market share as well. So some of those gains are and our view relatively permanent from a market share.
For perspective, but that business has continued to grow materially for the past 8 quarters from about you know.
And as low as $20 million and revenue of quarter do as much as last quarter $75 million.
So you've seen the benefits of that plus the expansions that we've done and that business and some of our other deaths. So you know it really is a function of the retail flow and the volatility you know at the end of the day is it going to be at that level in perpetuity I doubt it but.
It's going to be elevated from where you may have seen it.
6 quarters ago, or 4 quarters ago, it'll it'll continue to operate and elevated pace.
Great. Thank you very much I'll jump back and kit.
Thanks, Rob.
And your next question will come from Jeff Fenwick from.
Mark Securities Your line is open.
Hi, good morning, everybody.
Hey, Jeff.
So Dan when we can see.
And you wanted to back capital and utilization theme there as.
And as you stated you're you're not going to continue to pursue our capital for now so what's the plan for Canada and you'd have.
A lot of success, just poaching advisor teams and I assume that that's probably your focus for now but do you think there are some other maybe there's some other independents out there I know, it's not a long list, but I assume you can perhaps shedding and as well and is that something that might be of interest to do a tuck in with 1 of those groups.
I mean, we have multiple paths for growth for our Canadian wealth business, obviously, you've seen our Canadian wealth business, you've seen what it's done average book per advisors 222 million up 18% over the last 5 years, each and every year and you know a compound annual growth of 18%.
And that book is over $32 billion, we've made.
Over $65 million pre tax and that business is very profitable successful business and I don't and I don't need to remind you.
This is a business that broke even on a good day 4 years ago. So it's a very very profitable business for us. We think we've got unique advantages in that business, we've invested and momentum mountain technology and that business. So that's fantastic. We obviously are married that business to our capital markets business and there's an incredible amount.
And the synergies in that and and we feel that there's a great offer and we own our back office. So we feel that there's a great amount of things, we can do and our wealth business. Yes. We can continue to recruit advisors, and we will and we cabinet and a reasonably active pipeline in that respect we've spent.
$135 million on recruiting advisors, we've invested $350 million and growing our wealth platform globally.
And you know we've continued to put a lot of capital that but there's other paths for growth as well you've mentioned acquisitions, and clearly would be and the market for those but theres other alternative wealth paths that we need to consider.
At the high end and the low and that we're going to continue to pursue there is other ways to deliver wealth advice that we're going to continue to pursue selling them and being a little.
A little opaque and my statements intentionally Jeff, but rest assured we have 5 or 6 different paths to grow or.
To grow our Canadian wealth business, you know at the end of the day.
We thought Richardson's would be a great acquisition, we thought it would be a great merger partner, we think there's huge synergies and doing the business I mean, when we approached them. Initially our stock was 11 or 11 and 50, our stock is clearly substantially higher than that.
Sure.
And and maybe 1 other point here you continue to talk about.
Building, a greater contribution of fee based revenue.
Clearly the capital markets activity has helped you.
I'll drive day performance this year with the commission revenue.
And you get down and the path further on more of a fee based level and the Canadian group. There I mean, it's not an easy thing to ship.
Clients over or advisers over to different models.
Is this a long term goal or or hobby, and how do you head down that path.
Yes, great Great question.
I'd make a couple of comments number 1 and in the current environment you correctly identified them and we did a $100 million almost a third of our overall revenue was.
Deal based revenue new issue based revenue in this environment. So obviously when you look at the overall shift between you know it.
Fee based and not fee based and you're going to see a dip and this particular year because of the men's amount of new issue activity, but the vast majority.
Of the advisers that we brought onboard and remember we brought on and 46 teams now have 47 teams of advisers. The vast majority of them are fee based advisors. So there is a just a natural evolution as we bring on people towards the fee based advisory system. The other point to make is in the context of and you know a pretty active new issue.
Market and are pretty active and improving.
<unk>.
Small cap market most of our most senior advisors are very very well versed in kind of taking chips off the table and and by that I mean, when you've made a lot of money and the market appeal is significant portion of your clients assets into something that's a lot more stable arguably fee based argue.
<unk> managed and that's a trend that we certainly encourage and support so I think youre going to continue to see the growth of fee based assets now as a percentage of our overall revenue you havent seen it but certainly.
From a absolute dollar perspective, seeing huge growth and our fee based assets and that's not going to change we're going to continue to improve that and there's programs in place and our entire wealth platform to encourage that the other point I would make is we do have a global wealth platform outside of Canada. We're obviously using the best practices and both the UK and us.
Derailleur to and to encourage more fee based assets globally.
Okay, and maybe 1 last 1 and on the on the wealth side of things.
And you've done a great job of building and the UK Australia is now.
It seems to be.
And maturing as a business and you have expanded there have you ever thought about.
Looking first at the border.
And 1 area, where you have and they haven't done and done anything.
Yeah, I mean, we've thought about it we're not doing it.
And.
And you and I think I've talked about the chip.
And just don't think we're big enough number 1 to do it and number 2 I don't see the synergies.
And the marriage between having a strong wealth platform and the U S and a strong capital markets business and the U S. We've got an incredibly profitable capital markets platform. It is our highest revenue business and until the over performance and Gander. This year. It was our most profitable capital markets business and we do that all without retail when we look at our.
Direct competitors and the U S and most of them don't do not have wealth platforms, either you don't really need a wealth platform to beat and exceed and the U S capital market space that tends not to be a lot of synergies between the 2 businesses. So it's not a strategic priority I'll never say never.
Got it.
And it's not on the top list of 5 strategic priorities in terms of things we're thinking about at this stage.
Okay, and then maybe 1 quick 1 here I mean, we're now well into your <unk>.
Second our sort of your first quarter of fiscal quarter. This year and the second calendar quarter. I mean, you mentioned momentum maybe tapering a bit here, but it seems like still very strong so far year to date. So I know, it's always hard to read the tea leaves, but it seems like.
Momentum has continued.
To help you out here and get into the B into the sort of middle part of 2021 any any commentary on what you can say.
Yeah, I mean, we obviously have very good visibility around our M&A pipeline and and I think I've made the comment and our prepared remarks that we continue to see a pretty active M&A market.
And our Q4 was our second highest M&A quarter on record and we continue to see a pretty good pipeline of executing mandates both our U S and our Canadian businesses from an M&A perspective, we're up.
Quarter over quarter year over year.
The only business that was really damage our U K M&A business. So we continue to see a pretty active M&A pipeline going into this year from a new issue perspective, you have as much visibility quite frankly is as I have yet.
The comment that we see it tapering is meant to be.
More of a future comment than a comment that we're seeing and the market. Today. We continue to launch Ipos. We continue to watch block deals we continue to launch marketed transactions.
Throughout our entire global platform. So that that you know that continues to be and incredibly busy environment. I guess the point I was trying to allude to when I say it softens and we did a billion 3 and capital markets revenue. We did 6 almost 650 million almost half of that and new issue revenue at the end of.
This year do I see us doing $650 million of new issue revenue again.
And I love that to happen and I, just realistically don't see that happening as we get later in the year and.
We missed this market recovery kind of Peters out a little bit.
Great. Okay. Thanks for that I'll re queue.
And your next question comes from Graham Ryding from TD Securities. Your line is open.
Hi, good morning.
Alright, great and how are you.
Good good good growth and the <unk>.
Canadian wealth management.
Division and the quarter.
Was that in part related to some recruitment.
And <unk>.
Was that a factor or was that just net flows, but what's driving the strong growth quarter over quarter.
Hi, Graham it's dawn.
Yes, I think it's a combination of all those things I think the we're seeing the benefits from the recruiting activity over the years.
And we see that a lot and the and.
And the commissions and fees revenue, but also the new issue.
Revenue and the ECM activity through our wealth advisors and their client base.
It's also a tremendous contributor to the Q4 activity and for the activity and the year and you can see that sort of.
Tracking and parallel to the ECM activity and our Canadian capital markets business.
It would be great and when you look at our commission and fee line I think that gives you a pretty good representation of of asset growth, whether it be market asset growth or.
Hiring asset growth.
And that's up from 430 million to roughly $522 million year over year.
Yeah, Okay fair enough and then how about on the UK side growth was I.
I would say more modest this quarter compared to what we've seen and the path, where there and he was very sort of advisor and client attrition there or any color.
Right.
I think.
Graham.
The UK is highly fee based revenue in terms of its revenue base and at the start of this year remember asset values were.
And quite significantly at March 2020, with the turmoil and the market at that particular point and time and it took several months for that to recover so during the first part of the year. The first half of the year revenue was startup.
And somewhat depressed or had was reduced because of the lower client asset values and the fee based revenue derived from that it picked up during the course of the year as asset recoveries as asset levels recovered and we got back to that.
Started to exceed where we.
And where we were prior to the downdraft with last year.
And great and I know you know this but when as interest rates kind of came down throughout the course of the year, we probably lost about $6 million and revenue.
Year over year from lower interest rates and that and that market and that would have impacted our overall revenue as well.
And.
Okay fair enough and that was more referring to the to the asset growth quarter over quarter and lower.
That's fine.
Maybe I could use that theme.
The acquisition that I think as clothing.
Shortly.
Is there a time.
September Okay. Thanks, how does it compare to your existing platform and is there anything unique.
From an operational and.
And financial perspective or is it fairly consistent with what you've got already.
Yeah, and incredibly low risk consistent acquisition from our perspective. They are on the same back office systems. As we are on its effectively and asset deal not a company deal, we're bringing on the people and the assets.
And as opposed to a whole company with related liabilities. So it's very very easy integration very very easy transition. The only thing unique about it which is obviously why we wanted is it gets us into the Scottish marketplace, which historically, we havent been and so it gives us a strong foothold there with a fantastic brand to kind of expand and.
And to that marketplace, all discretionary assets obviously.
Okay.
Understood and then you mentioned the excess capital.
How are you measuring that and think about.
Proceeds that are coming through from the HPE Fs deal and then youre going to be paying off the convertible.
And then you've got this acquisition of items and co.
After factoring all those sort of pieces.
And is there anything you can quantify in terms of how much excess capital and you think it would be sitting on.
Graham I think the as.
As we always said the excess capital is really a function of the business activity and the business activity levels.
Capital and profit system deployed in the business to support underwriting activity trading activity.
And client activity, so as business gets really active cash.
Capital is utilized to do that just to support that activity and as business.
Moderates then.
Capital gets it gets it gets freed up because it's not required to support and active underwriting calendar are busy trading desks.
No.
We always.
You know what.
And we'd always maintain a buffer and a healthy capital levels to support renewed activity levels as that ebbs and flows but.
As we've always said it's to support the business.
And acquisitions, such as Adam and co and then.
Excess capital through share buybacks and.
And strategy always has been to maintain a consistent but growing dividend pace.
Yeah, and and just a couple of a couple of things number 1 as you think about growth and our U K wealth business, our UK and crown dependency wealth business.
Adams and co will probably be funded by our existing bank facility, they're probably not going to require our own capital for that and even future acquisitions for the most part remember we do have a partner and that business now and you know.
The whole concept of developing a partner and that business was number 1 to give us capital back at the at the parent level to pursue things like buying back the convert and other and other.
Return of capital to shareholders, but also it gave us access to a higher currency to facilitate acquisitions and that market. So.
And though we certainly have the right to continue to write checks to support that business. We also have a partner that has a desire to put up more capital and so we'll have to see how that plays out not on items and coke because it's relatively bite size, but potentially on future acquisitions and that market, we don't see that business requiring parent co capital for the FERC.
<unk> future to grow it.
Okay understood.
And my last 1 if I could just development cost and the quarter.
Some increases and the capital markets Division and also within the corporate Division, what does that relate to and.
And I guess overall.
These low run rate for development costs.
On a consolidated with development.
Yes, I mean development costs and it will naturally be somewhat bumpy.
Sorry, and so it's hard to look at it quarter over quarter I think we saw some technology initiatives flow through that through the development cost line as well as new higher.
Acquisition costs related to new hires and and.
Recruiting activity also flow through that particular line.
It's not sort of singly..1 particular event is just sort of a combination of things that ebb and flow.
And from quarter over quarter.
And with technology and new hires principally.
Okay.
Okay. That's helpful. Thank you.
Good day, and if our Q&A session today, I would like to turn the call over to Mr. Dan Oh for closing remarks.
Thanks, operator, and and thank you everybody for for joining this call today, it's obviously, a very exciting time for our company and quite frankly for our overall industry.
This is our year end results. So we'll put out results again and in August look forward to speaking to you all again then and for.
For that we will see you soon and we obviously have an investor day later today. So operator, if you can close the lines I'd appreciate it.
Okay, Ladies and gentlemen, this concludes the call for today, Thank you for participating.
Please disconnect your lines.