Greenhill Quarterly Profit Falls 6.1% on Investment Losses
Greenhill & Co. (GHL), the advisory firm founded by Robert Greenhill, said fourth-quarter profit fell 6.1 percent as investment results deteriorated.
Net income slid to $15.1 million, or 50 cents a share, from $16.1 million, or 53 cents, a year earlier, the New York-based company said today in a statement. The average adjusted estimate of seven analysts surveyed by Bloomberg was for per-share profit of 72 cents. The firm posted investment losses of $8.06 million in the quarter, primarily on European bets, compared with $9 million in revenue a year earlier.
Chief Executive Officer Scott Bok, 53, told investors in November that he expects a pickup in mergers and acquisitions in 2013 following a five-year downturn. Global mergers fell about 8 percent in 2012 from the year earlier, the first annual decline since 2009, according to data compiled by Bloomberg.
“Given significant volatility in recent results, and a lower level of activity in recent quarters, the timing of the firm’s recovery may be further out than one-year forward estimates reflect,” Devin Ryan, an analyst at New York-based Sandler O’Neill & Partners LP, said in a Jan. 18 research note.
Greenhill fell 0.8 percent to close at $58.95 in New York. The shares have climbed 13 percent this year, compared with a 6 percent gain by the 83-company Standard & Poor’s Midcap Financials Index. (S4FINL)
Revenue from advising clients rose 17 percent to $100.4 million in the fourth quarter from a year earlier, the firm said. Full-year advising revenue dropped 3.7 percent to $291.5 million from 2011. The firm earned $1 million or more in fees from 66 clients last year, down 11 percent compared to 2011, according to the statement
Greenhill set aside $48.9 million for compensation in the fourth quarter, or 53 percent of revenue, compared with $54.2 million, or 57 percent, a year earlier. Compensation costs for the full year fell 6.6 percent to $151.8 million.
Net income for the full year was $42.1 million, down from $44.6 million in 2011.
Bok has said that the firm experienced a “meaningful pickup” in U.S. mergers-and-acquisition business in the second half of 2012. Greenhill climbed to 19th on the financial advisory league tables in 2012 from 42nd in 2011, according to data compiled by Bloomberg.
Greenhill hired at least seven managing directors last year as bigger bank rivals cut employees. The firm will probably hire between five and 10 more this year, Bok said on a conference call following the results.
Greenhill said in 2009 that it would exit the merchant- banking business and has sought to realize value from its remaining principal investments, primarily its stake in Iridium Communications Inc. (IRDM)
An increase in the firm’s effective tax rate from 35 percent in 2011 to 40 percent in 2012 negatively affected profit, Greenhill said in the statement. This was partially due to one-time capital loss on the sale of European investments in the fourth-quarter, according to the statement.
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