Moelis profit climbs to $8.9m on advisory division

Local companies increasingly looking at their capital and funding needs as difficult conditions persist in some sectors.

Moelis joint CEO Chris Wyke. Photographer: Adam Yip

Moelis Australia is fielding a wave of inquiries from companies seeking restructuring advice, as they navigate a COVID-19 “sink or swim” scenario and a tapering off in federal government support.

Speaking after handing down first-half results that were cheered by investors, Moelis joint chief executive Chris Wyke said local companies increasingly were looking at their capital and funding needs as difficult conditions persisted in some sectors.

“The dust has not settled from COVID-19 … but the haze is clearing,” he said. “The treading water over the last six months is going to turn into sink or swim.”

Moelis — whose businesses span investment banking, asset management, the pubs and hotel sector, real estate, private credit, childcare and aged care — reported a 28.7 per cent slump in underlying profit to $12.1m for the six months ended June 30.

But statutory net profit climbed 19.4 per cent to $8.9m. The results were buoyed by an increase in assets under management, positive net client fund flows and record revenue in its corporate advisory and equities division.

Moelis’ shares surged 9.4 per cent to close at $3.61 after the earnings result on Wednesday, although they remain well down on a 52-week high of $6.06.

While Moelis didn’t provide earnings guidance, joint chief executive Julian Biggins said the group was “well positioned” to navigate market uncertainty and capitalise on growth opportunities. He remains upbeat even as Moelis undertakes continual reviews about “the future potential” of the retail property asset class.

“It’s just going to change again. It (COVID-19) accelerates those (online shopping) trends, but I don’t think anyone knows where that ends up,” Mr Biggins said.

The earnings presentation said Moelis remained of the view that well-located shopping centres “anchored by non-discretionary retailers” would continue to be important to their respective communities. The company does expect some changes in the valuations of its property assets, which investors will be watching closely.

Moelis’ assets under management rose $160m to $5bn, helped by an increase in base fees.

The corporate advisory and equities division booked record first-half revenue, up 40.2 per cent on the same period last year.

Moelis’s hospitality arm, which operates venues including pubs in NSW and Queensland, did see an impact from COVID-19 lockdowns and restrictions. The earnings presentation said govern­ment trading restrictions placed on its hotels resulted in an estimated loss of about $7.2m to underlying revenue in the first half.

Total underlying revenue dipped 0.8 per cent to $67.4m for the period compared with 2019, while statutory income was up 20.8 per cent to $74.2m in the six months ended June 30.

Moelis settled a $104m purchase of the landmark Beach Hotel in Byron Bay in February. The pub is operated by Moelis Australia Hotel Management, which already runs the listed group Redcape.

Moelis’ results also said it expects its acquisition of a 47.5 per cent stake in non-bank lender MKM Capital to complete in the final months of 2020.

COVID-19 led to Moelis introducing pay cuts for staff and the board, although those came to an end in July. The company made some redundancies but recently has started adding to headcount.