Goldman Sachs NZ sales drop in year of fewer high-profile deals, more offshore work

Thursday 23rd April 2015

Goldman Sachs New Zealand Holdings, the local unit of the New York Stock Exchange listed investment bank, reported a 52 percent drop in revenue and a small loss for 2014, a year marked by fewer high profile deals and more offshore advisory work.

The loss was $2.87 million in calendar 2014, compared to a profit of about $16 million a year earlier, according to the Auckland based company's financial statements. Sales dropped to $23.4 million from $48.9 million.

The 2014 results follow a boom year in 2013, when Goldman Sachs won a share of deals including the floats of Z Energy, Meridian Energy and Synlait Milk, Tower's asset sales, Harvard University's forest sale and the selldown of Air New Zealand, which drove a 63 percent surge in sales. Deals in 2014 included joint lead manager of MightyRiverPower's $300 million bond sale, underwriter and joint lead manager of Evolve Education Group's $132 million initial public offering, adviser to A2 Milk on its ASX listing, arranger of a bond sale for ASB and an adviser to Kathmandu on its capital structure.

The company won't comment on its local results but BusinessDesk understands the drop in sales is at least partly because local investment bankers and analysts were drafted into deals offshore, including Medibank Private's A$5.9 billion IPO in Australia, where Goldman Sachs was a lead manager along with Deutsche Bank and Macquarie Capital. The fees generated from such deals are typically booked by the local Goldman Sachs unit.

Operating expenses for Goldman Sachs NZ fell to $25.1 million from $29 million in 2013. Of that, the biggest decline was in employee related costs, with salaries, bonuses and benefits falling to about $12 million from $13.5 million, and employee incentive plan costs declining to $2.2 million from $3.57 million. Market development costs rose to $1.7 million from $1.46 million.

The bulk of the company's revenue comes from fees and commissions, which fell to $24.4 million from $46.7 million. Trading income was a loss of $293,000, from a small gain of $34,000 in 2013. Investing income was also a negative number at $756,000 from a gain of $2.2 million in the previous year. The company held $42 million of cash and equivalents as at balance date, down from $78 million a year earlier.

Notes to the company's accounts show its various New Zealand units were amalgamated in October last year, under the ownership of the holding company.

Its Wall Street parent last week reported a 40 percent jump in first quarter earnings to US$2.84 billion, beating analyst estimates.

BusinessDesk.co.nz

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