Stay on target

7 February 2013 By Antony Currie Follow @AntonyMCurrie

The Wall Street firm’s Q4 suggests it is making progress with its promise to boost margins. It also returned cash to investors a year earlier than planned. And business is looking robust under CEO Ken Jacobs. The likes of Nelson Peltz have little, if anything, to complain about.

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Lazard on Feb. 7 reported a fourth-quarter loss of $5 million after booking a pre-tax charge of $103 million relating to a previously announced cost-saving initiative that could rack up to $130 million in one-off expenses. Excluding the charge, net income for the quarter was $82 million, or 61 cents a share, beating the consensus estimate of sell-side analysts of 33 cents. Revenue for the quarter was $574 million, compared with expectations of $477.2 million.
Full-year 2012 net income was $195 million, or $1.44 a share on revenue of $1.97 billion. Reported compensation, excluding the fourth-quarter charge and $25 million to cover redundancies earlier in the year, was $1.22 billion, or 61.8 percent of revenue. Awarded compensation for the year, which excludes the cost to the firm of deferrals from 2008, was $1.17 billion, or 59.4 percent of revenue, down from 62 percent in 2011.
Non-compensation costs for the year were $421 million, excluding restructuring charges, or 21.4 percent of revenue - similar to the level seen in 2011. Lazard is targeting 16 percent to 20 percent for this measure over the cycle.
Lazard returned $540 million to shareholders in 2012, including $200 million of surplus cash, which was a 2013 target. Returns included a $23 million special dividend in the fourth quarter as well as an early payment of the $23 million regular fourth-quarter dividend.
The firm’s operating margin, based on awarded compensation for 2012, was 19.2 percent, compared with 16.8 percent in 2011. Lazard is targeting a 25 percent operating margin for 2014.
This item has been corrected to include clarification from Lazard on the early dividend and special dividend payments in paragraph five; a dropped digit has also been restored in the awarded compensation figure in the Context News.

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