BGC Partners has just announced that it produced record revenues in the first quarter of 2015, as volatility on global financial markets has substantially increased. The company also announced that it is raising dividends to shareholders by 16.7% to 14 cents per share. The revenue numbers from foreign exchange have increased over 40% when compared to a year ago.
When it comes to the recent acquisition of the majority of the shares of GFI, BGC has highlighted in its Q1 earnings release that after acquiring 43 million newly issued GFI common shares, its stake has increased to 67%.
pre-tax distributable earnings growth totaled almost 65 percent for our high margin fully electronic businesses
Commenting on the earnings release the Chairman and CEO of BGC Partners Howard W. Lutnick said, “BGC’s first quarter post-tax distributable earnings increased by approximately 32 percent year-over-year to $62 million, which made it the third record quarter in a row in terms of the Company’s overall profits, and the second consecutive quarterly record in terms of revenues.”
“These achievements reflected pre-tax distributable earnings growth of almost 65 percent for our high margin fully electronic businesses, due mainly to the remarkable success our brokers have had in converting voice and hybrid Financial Services desks to much more profitable fully electronic trading,” he explained.
The company’s numbers were significantly affected by a stronger U.S. dollar. The exchange rate reduced the revenues of BGC Partners by more than $20 million in the first quarter of 2015.
Commenting on the GFI deal, Mr Lutnick said, “Although BGC owned approximately 56 percent of GFI’s outstanding common shares at the end of the first quarter, the Company now owns more than two-thirds of GFI’s outstanding common shares. We therefore control timing and process with respect to a full merger.”
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“While the front office operations of GFI and BGC will remain separately branded, we have already begun integrating the support functions, technology, and infrastructure of these two companies. By the first quarter of 2016, we expect to reduce our expense run rate by at least $50 million a year on items including network infrastructure, telephone lines, data centers, vendors, disaster recovery, and interest expense,” he added.
we expect to continue converting voice and hybrid broking to higher margin fully electronic trading
Elaborating on cost savings, the company’s CEO said, “We anticipate producing at least $40 million in further annualized cost savings by the second anniversary of the transaction, for a total of at least $90 million in savings. We also expect to increase productivity per broker and to continue converting voice and hybrid broking to higher margin fully electronic trading, all of which should lead to increased revenues and profitability.
“By freeing up duplicative capital set aside for regulatory and clearing purposes, we will also be able to use our balance sheet more efficiently,” he explained.
The company has retained Cantor Fitzgerald to assist in the sale of the Trayport division of GFI.
Mr Lutnick said, “We expect numerous parties to be interested in acquiring this business at a valuation that reflects its high margins, growth rate, leading technology, and strategic importance in the global energy and commodities markets. We anticipate completing a transaction before the end of 2015.”
“A successful sale of Trayport, combined with increased profits from integrating GFI, growing our fully electronic businesses, and the strength of our Real Estate Services business, will lead to dramatically higher liquidity,” he elaborated.
As the announcement is being digested by the stock market, shares of BGC Partners have traded above $10 for the first time since April 2008.