It's showtime for Macquarie Group and hasn't the Millionaires Factory put on a gala performance in the annual deluge to the ASX with their full-year results.
While most companies release the annual report and all the executive pay details several weeks after the full-year result, Macquarie prefers to dump it all at the same time. Today.
Throw in a $1 billion-plus capital raising which future-proofs the bank and you've got an awful lot to digest.
Net profit is down 52% to $871 million, but the headline news today is the biggest pay cuts in Australian corporate history.
Macquarie CEO Nicholas Moore has seen his bonus slashed from $18.7 million to just $2.12 million and his overall package is down by 98.9% from $26.75 million to a miserable $290,756, although this partly reflects some accounting quirks and reversals of previous bonus entitlements.
Negative pay
The biggest bonus at Macquarie this year was $3.96 million for treasury and commodities boss Andrew Downe, who managed the highest overall pay packet of just $3.7 million.
Go to pages 98 and 99 of the annual report to see these astonishing pay drops in all their glory. (For a sense of the scale of today's release - 408 pages in five announcements. Still, it's an easier climb than last year's 432 pages in six separate releases).
The top 12 executives together collected only $11.36 million in the year to March 30, 2009, down from $124.75 million previously.
We even have the unprecedented situation of a company reporting negative salaries from departed executives.
Former CEO Allan Moss didn't really collect $24.75 million in his final year because he pops up in this year's annual report with a negative salary of $3.08 million.
Sure there was still a $1.5 million bonus for Moss, but the ''earnings on prior year restricted profit share'' went backwards to the tune of $4.75 million. This reflects the long-term incentive scheme in which cash bonuses are invested in instruments that reflect the performance of some Macquarie funds. These have performed badly so Australia has its first negative salaries under the accounting standards.
Raining cash
But don't feel too sorry for Macquarie's biggest rainmakers. Here is a list of the 25 times a Macquarie executive has earned more than $10 million in a single year;
$33.49m: Allan Moss, CEO, 2007
$32.89m: Nicholas Moore, investment banking boss, 2007
$27.26m: Nicholas Moore, investment banking boss, 2008
$24.83m: Allan Moss, CEO, 2008
$22.92m: Michael Carapiet, joint head corporate finance, 2007
$21.49m: Andrew Downe, head of treasury, 2007
$21.21m: Allan Moss, CEO, 2006
$20.58m: Nicholas Moore, investment banking boss, 2006
$19.15m: Michael Carapiet, investment banking boss, 2008
$18.97m: David Clarke, executive chairman, 2007
$18.71m: Kim Burke, head of equity markets, 2008
$18.56m: Allan Moss, CEO, 2005
$18.23m: Nicholas Moore, head of investment banking, 2005
$15.88m: Michael Carapiet, joint head corporate finance, 2006
$15.15m: Bill Moss, head of property, 2005
$15.01m: Bill Moss, head of property, 2006
$14.85m: Andrew Downe, head of treasury and commodities, 2008
$14.65m: Kim Burke, head of equity markets, 2007
$14.26m: Andrew Downe, head of treasury and commodities, 2006
$12.40m: Ottmar Weiss, former head equity markets, 2006
$11.52m: Ottmar Weiss, head of equity markets, 2005
$11.4m: David Clarke, executive chairman, 2006
$10.26m: Andrew Downe, head of treasury and commodities, 2005
$10.26m: Richard Sheppard, deputy managing director, 2007
The figures break down as follows:
2005: five executives above $10 million, average $14.76 million
2006: seven executives above $10 million, average $15.82 million
2007: seven executives above $10 million, average $22.1 million
2008: five executives above $10 million, average $20.25 million
2009: highest paid executive Kim Burke with $3.7 million
You've got to hand it to Macquarie - they are true to the 'factory label.
Bulging pay packets
The staff profit share system hasn't changed much since the early 1970s, so pay packets soared during that wonderful 17-year run of consecutive profit rises.
So when the full-year net profit suddenly plunged 52% to just $871 million, pay packets were savaged. Indeed, this is how total employment costs have run over the past six years:
2004: $1.22 billion
2005: $1.94 billion
2006: $2.41 billion
2007: $3.73 billion
2008: $4.17 billion
2009: $2.36 billion
The overall employment costs are back to 2006 levels, but Macquarie is now employing many thousands more staff, so the average Macquarie pay packet is at its lowest point in many years.
Macbank vs Westfield
If you go back to 2002 before the credit bubble really took off and when Macquarie shares were last trading in the range we've seen so far in 2009, then CEO Allan Moss collected just $6.13 million whilst his understudy Nicholas Moore was paid $5.84 million.
So whilst the shares have crashed from more than $80 in November 2007 to as low as $15 in March, the top brass have suffered even bigger pay cuts.
This is in stark contrast to Westfield where the share price has halved but the Lowy family have only cut their collective salaries by 10% to $32 million. Inexplicably, the proxy advisory firm Risk Metrics, which took on the Macquarie pay model in 2007, has somehow recommended clients back the Westfield remuneration report at next week's AGM in Sydney.
Australia has never seen pay cuts like this before and Macquarie is to be commended, unlike Westfield.
This will also help the atmospherics of today's opportunistic Macquarie capital raising, after the stock more doubled in seven weeks to yesterday's close of $33.48, which valued the group at $9.5 billion.
While Macquarie's defenders always point out that the shares first traded at around $6 when they went public in 1996, you have to factor in the recent capital raisings at higher prices.
After all, the investors who stumped up $750 million for a placement at $87 a share two years ago are well under water, as are the group who shelled out $700 million at $66 a share in May 2006.
Macquarie took a holiday from its traditional results day capital raising last year when the shares were still trading at about $65, but after a tumultuous year it has gone back to the markets at much cheaper prices this year, despite earlier denying any such plans.
Blemishs
Last year the only major blemish in the results was the property division which tumbled from a $507 million profit to a loss of $81 million thanks to $293 million in write-down on its investments in the likes of Macquarie Office ($99 million), Macquarie Countrywide ($113 million) and a Japanese fund which dropped $72 million.
It's a very different story this year with a staggering $2.5 billion in write-downs. The breakdown is laid out on page 11 of the presentation to analysts but here are the main places that Macquarie lost money.
$496 million in dud loans, primarily for property and resources exposures
$248 million on Italian mortgage business
$193 million on real estate equity investments
$153 million on tollroad fund Macquarie Infrastructure Group
$120 million on resources equity investments
$113 million on Macquarie Communications Infrastructure Group
$101 million on an unnamed US listed investment
$93 million on Macquarie Media
Other write-downs which weren't comprehensively broken down included BrisConnections, the Canadian casino joint venture with James Packer, Japan Airports, European Directories and Spirit France.
Low tax
As an investor in 14 different Macquarie managed securities, the overall experience of this correspondent has been sharply negative, but the parent company is travelling a lot better than many of its debt-laden funds.
Indeed, base fees from the Macquarie funds only fell $5 million to $518 million although the performance fees dropped from $321 million to $219 million.
As Wayne Swan contemplates plunging company tax receipts, he isn't getting much relief from Macquarie which will only pay $15 million in tax globally, representing just 1.7% of the overall $871 million net profit.
However, the government is certainly helping Macquarie which managed to raise a staggering $21.5 billion in term funding over the 12 months to March, well up on the extra $6.8 billion in deposits which came through the door.
And borrowing cheap with a government guarantee is highly profitable because, like all banks, Macquarie is expanding its margins as net interest income for the year jumped from $817 million to $938 million.
Stephen Mayne is a shareholder activist and publisher of The Mayne Report who contributed this article to BusinessDay. He owns shares in 14 ASX-listed securities managed by Macquarie with a combined value of about $2000. See the full portfolio.
