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2017 Annual Report
Moelis AustrAliA liMiteD
ACN 142 008 428
www.moelisaustralia.com
Moelis AustrAliA liMiteD
2017 AnnuAl report
Contents
About Moelis Australia
Chairman & Chief executive officer’s letter
2017 Year in review
overview of Business segments
Additional information on Moelis Australia
Directors’ report
Auditor’s independence Declaration
remuneration report
Financial report
Consolidated statement of profit or loss
and other Comprehensive Income
Consolidated statement of Financial position
Consolidated statement of Changes in equity
Consolidated statement of Cash Flows
notes to the Consolidated Financial statements
Directors’ Declaration
independent Auditor’s report
Additional information
Glossary
Corporate Directory
01
02
03
08
11
12
19
20
26
27
28
29
30
31
78
79
84
86
88
The Moelis Australia Symbol is an award-winning design
that was originally developed for the Moelis Australia Asset
Management division to help facilitate cultural alignment with its
Chinese clients. The design was premised on Chinese tradition,
and its belief that certain numbers are auspicious. The word
for ‘eight’ (
Pinyin: bā) sounds similar to the word that means
‘prosper’ or ‘wealth’. Three eights are considered very lucky.
The symbol was adopted by Moelis Australia upon its public
listing given the significant synergies between Moelis Australia’s
three business divisions and the strong growth forecast by the
Asset Management division.
Moelis AustrAliA liMiteD
2017 AnnuAl report
About Moelis Australia
Moelis Australia is an ASX listed diversified financial services group. Moelis Australia was founded in 2009 and operates
two business segments: Corporate Advisory & Equities and Asset Management.
Moelis Australia employs more than 130 staff in Australia1 and operates offices in Sydney and Melbourne.
Moelis Australia was established with a philosophy to offer unbiased advice of the highest quality to its clients. This
philosophy is fostered throughout the global strategic alliance between Moelis Australia and Moelis & Company.
Moelis Australia creates lasting client relationships by providing strategic and innovative advice through a highly
collaborative and global approach not limited to specific products or particular regions. Moelis Australia believes in
a partnership‑style culture, where momentum and commitment to excellence create an environment that attracts and
retains high-quality talent.
Moelis Australia’s vision, as embodied by the global ‘Moelis Standard’, nurtures a culture of partnership, passion,
innovation, optimism and hard work, which inspires the highest level of quality and integrity in every interaction
with clients and each other.
TheMoelisStandard
We measure our performance by the long-term success of our clients
We foster a culture of partnership, passion, optimism and hard work
We stay ahead of the changing environment to provide the most relevant advice and innovative solutions
We share ideas and experience across our organisations to achieve the best results for our clients
We will not compromise our vision or values
We deliver more
1. As at 12 February 2018 and includes Redcape Hotel Group head office management
01
Moelis AustrAliA liMiteD
2017 AnnuAl report
Chairman & Chief Executive Officer’s Letter
Dear Shareholder
We are delighted to present our maiden 2017 Annual Report as an ASX listed company.
Moelis Australia’s financial result and overall business development was very pleasing. In particular
we are very proud of achieving many milestones in our eighth year of operation. Highlights included:
>
Initial Public Offering on the ASX;
> Record Underlying EBITDA of $41.6 million derived from Underlying Revenue of $107.2 million;
> Underlying EBITDA exceeded Prospectus forecast by 77%;
> Growth in Assets Under Management from $1.1 billion to $2.9 billion; and
> Declaration of a fully franked dividend of 7.0 cents per share.
We would like to thank our Board and executives for all of their hard work and dedication to the business in 2017.
Their efforts, in what was an incredibly busy and fruitful year, were exceptional and we believe our financial
results reflect this.
All of Moelis Australia’s business divisions performed strongly and our overall result demonstrated the power of
our business model and quality of our executives. We are very proud of the stability of our executive team and
believe that the alignment of interests between executives, shareholders and investors in our various managed
funds is of paramount importance.
Moelis Australia executives own approximately 40% of the Company and are subject to long term vesting
restrictions. We believe that this provides appropriate incentive to focus on long term growth, always acting as
owners – rather than employees. We are also delighted that Moelis Australia executives continue to invest in
many of our managed funds out of choice – again demonstrating an alignment of interests with clients and
confidence in our investment process.
We have a strong balance sheet with net assets of $215.6 million, including $118.2 million of cash and liquid
investments. This is a competitive advantage and management is focused on utilising this capital in a judicious
fashion to maximise returns to shareholders. We will not be rushed into deploying this capital. History has taught
us that patience is rewarded and we are confident our investment process will uncover attractive opportunities
for Moelis Australia, its investors and its shareholders.
We believe that our asset management business is well positioned for growth in the coming years. Our
investment in businesses such as Redcape Hotel Group and Infinite Care provide exciting platforms for growth.
Recent market volatility reminds us all that assets can fall in value as readily as go up. However, we play the long
game and believe that hard work, diligence of process and executive alignment will deliver for all stakeholders in
the long term.
Our corporate advisory business performed very strongly in 2017 across most of the sectors we focus on and is
well positioned for another strong year in 2018.
We look forward to the year ahead and thank you for your ongoing support of Moelis Australia.
Yours sincerely,
Jeffrey Browne
Chairman
Andrew pridham
Chief Executive Officer
02
Moelis AustrAliA liMiteD
2017 AnnuAl report
2017 Year in Review
2017 overview
In its eighth year of operation, 2017 was a milestone year for Moelis Australia. On 10 April, the business successfully
listed on ASX with an issue price of $2.35 per Share. We grew assets under management (“AUM”) from $1.1 billion to
$2.9 billion and in the process, invested in three great businesses: Armada Funds Management, Redcape Hotel Group1
and Infinite Care1. Collectively, these businesses represent approximately $1.7+ billion in AUM to Moelis Australia and
we expect their value to grow strongly in the future. Throughout the year, our Corporate Advisory division advised on
some of the largest, most high profile deals in Australia. Examples of these include the sale of Network Ten to CBS,
Hunter Hall’s merger with Pengana Capital and the $1.2 billion restructure of Bis Industries.
We believe that success can ultimately only be measured by results. In 2017 our financial results materially exceeded
the forecasts contained in our Prospectus. This pleasing performance can be attributed to a number of factors:
> Our unique business model and capital structure;
> The synergies between Corporate Advisory, Equities and Asset Management;
> Our strong balance sheet and access to capital (we were opportunistic in acquiring quality businesses that
have long‑term value);
> The strong alignment between executives who own approximately 40% of the Company, many of whom have
a material proportion of their net wealth invested in Moelis Australia;
> The longstanding and active strategic alliance with NYSE listed investment bank Moelis & Company delivering
access to high quality expert bankers located throughout the world;
> The hard work and expertise of our dedicated Board and executive team; and
> The support of our clients and shareholders, many of whom are also investors in our numerous managed funds.
prospectus
Forecast
FY17 result
outperformance
Underlying Revenue
$73.2 million
$107.2 million
Underlying EBITDA
$23.5 million
$41.6 million
Underlying NPAT
$16.8 million
$29.1 million
Underlying Earnings Per Share2
13.5 cents
23.0 cents
EBITDA Margin
32%
39%
AUM
$1.5 billion (by 31/12/17)
$2.9 billion (at 31/12/17)
46%
77%
73%
70%
22%
93%
Moelis Australia is and will always remain a client-centric business and strives to provide the most relevant advice
and most innovative solutions. We achieve this by drawing upon the numerous years of experience in our senior
management, mentoring and developing the best talent from within and providing our staff with the best available
resources. During 2017, our financial services group grew from 693 to 833 fulltime employees.
1. Purchased by a Moelis Australia managed fund. Moelis Australia co-invested on the same terms as clients
2. Based on average annual shares outstanding during 2017
3. Average annual full time employees in financial services and excludes Redcape Hotel Group head office management
03
Moelis AustrAliA liMiteD
2017 AnnuAl report
2017 Year in Review (cont.)
Group perForMAnCe
Moelis Australia generated $107.2 million of Underlying Revenue in 2017, a 73% increase on 2016 (up from $61.8 million).
The business produced Underlying EBITDA of $41.6 million, an increase of 111% on 2016 (up from $19.7 million).
Pleasingly, the Group’s Underlying EBTIDA Margin increased to 39% (up from 32% in 2016), reflecting an increase
in contribution from Asset Management and cost control during a period of high growth.
Moelis AUsTRAliA RevenUe
107.2
43.4
63.8
FY17
61.8
15.6
46.2
FY16
35.3
2.4
32.9
FY14
Corporate Advisory & Equities
Asset Management
42.2
7.1
35.1
FY15
)
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$
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The Company’s IPO and subsequent access to capital markets was a key driver of success in 2017, with the capital
raised acting as a catalyst for attracting and closing transactions. In addition, Moelis Australia is a highly cash generative
business, with monthly recurring cash flows (base management fees, investment income and equities commissions)
more than covering monthly operating expenses (excluding bonuses). This is expected to continue into 2018 and,
combined with the Group’s strong balance sheet ($118.2 million in cash and liquid investments), should help facilitate
transactions and further increase the strength of our balance sheet.
Cross divisional synergies were a highlight for the Group in 2017 and proved highly valuable in achieving positive
outcomes for clients. Our ability to use market leading expertise in Corporate Advisory & Equities and work in conjunction
with Asset Management’s distribution, structuring and investment management capabilities is a key feature of Moelis
Australia’s business model, and was validated this financial year.
CorporAte ADvisorY & equities perForMAnCe
The Corporate Advisory & Equities division generated $63.8 million of Underlying Revenue in 2017, a 38% increase on
2016 (up from $46.2 million). This result was achieved by an increase in productivity of existing executives, not highly
priced hires in Corporate Advisory. Revenue per executive was approximately $1.5 million in 2017 (up from $1.1 million in
2016). This was a great achievement and was well above our long‑term target of $1.1 million to $1.3 million per executive.
CoRpoRATe AdvisoRy & eqUiTies RevenUe
63.8
46.2
32.9
35.1
)
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$
(
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FY14
FY15
FY16
FY17
04
Moelis AustrAliA liMiteD
2017 AnnuAl report
2017 Year in Review (cont.)
Corporate Advisory generated $8.6 million in total monthly retainer fees during 2017. Retainers are an important
component of our revenue model when working on transactions with uncertain outcomes, and are beneficial from a cash
flow perspective. Historically, retainers have represented approximately 20% of annual Corporate Advisory revenue.
A key measure of success in Corporate Advisory is the quality of relationships forged with clients. Moelis Australia
measures this by the number of repeat clients (those advised on more than one prior transaction) accumulated as
multiple engagements serve to solidify relationships and validate work. In 2017, we generated seven additional repeat
clients which is a record equalling result. Since inception in 2009, Corporate Advisory has generated 38 repeat
clients on average achieving five to six additional repeat clients annually.
CoRpoRATe AdvisoRy RepeAT ClienTs
38
31
25
19
15
8
FY12
FY13
FY14
FY15
FY16
FY17
)
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3
FY11
The Equities division performed well and commissions were in line with 2016’s record result. Equities remains focused
on providing the best research and trading services to our clients and was an important enabler for many equity capital
markets transactions throughout 2017. The Equities division is highly valuable to the synergies generated across the Group.
Asset MAnAGeMent perForMAnCe
Asset Management generated $43.4 million of Underlying Revenue in 2017, a 178% increase on 2016 (up from
$15.6 million), increased its AUM by more than $1.8 billion to more than $2.9 billion; and grew its investor base significantly.
Throughout the year Moelis Australia seeded and generated many new managed funds with a primary focus on sectors
that have strong macroeconomic tailwinds in areas which we have market‑leading expertise. Demand for Moelis
Australia managed funds was strong, with many being significantly oversubscribed. The recurring management fees
generated by our managed funds are fundamental to growing long-term shareholder value.
AsseT MAnAgeMenT RevenUe
AsseTs UndeR MAnAgeMenT
43.4
2.9
)
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$
(
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2.4
FY14
15.6
7.1
1.1
0.8
0.4
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$
(
FY15
FY16
FY17
FY14
FY15
FY16
FY17
M
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A
05
Moelis AustrAliA liMiteD
2017 AnnuAl report
2017 Year in Review (cont.)
Base management fees were $29.9 million, a 108% increase on 2016 (up from $14.4 million). Base fees for the second
half of the year were $19.7 million, a 90% increase on the first half of the year (up from $10.3 million). The second half
increase is a reflection of the quality of funds established and the acquisitions made following our listing in April 2017.
A full year of base management fees from 2017’s funds and acquisitions will be reflected in FY18 and beyond.
Income from strategic/co-investments was $5.2 million, and these earnings also represent a part year for many funds,
acquisitions and other investments. Collectively, income on cash yielding investments and base management fees
accounted for approximately 81% of 2017 Asset Management revenue; therefore, Asset Management enters 2018
with a large portion of its revenue highly visible.
Transaction fees of $8.3 million were generated in 2017. Transaction fees are charged on a variety of transactions,
including acquisitions, fund capital raisings and asset due diligence. These fees are generally based on a percentage
of total fund value and therefore, in absolute terms, are highly correlated to the size of a fund. However, fund size, and
overall AUM, is not a key focus of Asset Management. Rather, we focus on the quality of investment opportunities,
taking the view that good fund performance will lead to client loyalty and demand for new investment funds.
No event‑driven performance fees were booked in 2017. Management will not book performance fees prior to a realisation
or similar event, at which time the performance fee would be payable. While management does not provide guidance
on performance fees, they are likely to eventuate as funds mature.
Asset Management’s contribution to Group performance experienced a step‑change in 2017 and management is
focused on its growth. It is expected that earnings growth in Asset Management will remain strong and EBITDA margins
will remain relatively high. Accordingly, an increase in the EBITDA contribution from Asset Management should drive a
higher Group EBITDA margin.
BAlAnCe sheet MAnAGeMent
The management of our strong balance sheet is critically important to our business and to the returns we deliver to
shareholders over the long term. As at 31 December 2017, Moelis Australia had net tangible assets of $190.2 million.
It is our strategy to use our capital in a number of ways:
> Underwriting client‑related capital raisings (debt and equity);
> Co-investing in managed funds to demonstrate alignment and achieve attractive investment returns;
> Taking strategic holdings pending establishment of new funds; and
> Managing liquidity for day-to-day operations.
We operate in a dynamic market where business conditions fluctuate, reflecting underlying economic and political
conditions. Part of our strategy is to maintain a strong balance sheet and to use this capital to facilitate growth in the
business and to take advantage of attractive opportunities as they arise. When managing our day-to-day liquidity we are
mindful to seek investments that can deliver attractive risk‑adjusted returns but at the same time to avoid the temptation
to deploy available capital simply because it is there.
Moelis AustrAliA investors
Moelis Australia has welcomed a large number of investors to its business over the year, including those who invested
in Moelis Australia shares and those who have or are invested in Moelis Australia managed funds. At December 2017,
investors across the Moelis Australia platform included retail investors, high net worth investors, institutional investors
and Moelis Australia staff.
Moelis Australia acknowledges and appreciates the trust that investors have placed in the Group, and takes the
responsibility of being the custodian of their money with great care. Moelis Australia will endeavour to return this trust
with high-quality products and services.
06
Moelis AustrAliA liMiteD
2017 AnnuAl report
2017 Year in Review (cont.)
people
Moelis Australia’s business is based on delivering the highest quality long-term outcomes to clients and investors.
To achieve this, we need outstanding people.
Over 2017, Moelis Australia welcomed a number of very talented executives to the Group, and we continuously search for
additional talent that can complement our current team. In particular, Asset Management grew considerably over 2017,
with a number of senior hires covering marketing and distribution, investment management and legal & compliance.
Finding and retaining the best talent is always a challenge, so we are fortunate that the Group has managed to have
very low staff turnover since its establishment in 2009. We continue to strive to ensure that Moelis Australia is an
employer of choice, and that we maintain an environment that fosters our junior and senior executives to be future
leaders of the Company and the community.
Culture
Moelis Australia’s culture is based on employee and client trust, and we aim to hire innovative people who perpetuate
a culture of partnership, passion, innovation, optimism and hard work. The Board and senior management focus on
developing strong working relationships and creating a safe, inclusive and innovative working environment for all
employees.
The Moelis Australia brand and reputation are core assets of our business and we encourage all employees to
benchmark themselves to the Moelis Standard (see page 1).
Moelis Australia encourages staff to be proactive in giving back to the community, and the Moelis Australia Foundation
is reflective of this belief (see page 11).
07
Moelis AustrAliA liMiteD
2017 AnnuAl report
Overview of Business Segments
CorporAte ADvisorY & equities overview
Corporate Advisory overview
Corporate Advisory provides strategic and financial advice and equity capital markets services to sophisticated and
corporate clients. Corporate Advisory currently employs 37 advisory executives1 with expertise in a range of areas
including mergers & acquisitions, equity capital markets, debt markets, restructuring & recapitalisations, and special
situations advisory.
Corporate Advisory has a strong track record in providing innovative financial advisory solutions to clients, who benefit
from our culture of partnership, passion, optimism and hard work. Moelis Australia strives to set a high standard and our
reputation for excellence in transaction execution continues to grow. The transactions highlighted below are a sample
of transactions advised on in 2017.
December 2017
December 2017
December 2017
December 2017
~A$1.2 billion
A$110 million
~Us$318 million
Capital Restructuring
Purchase of Brownes Dairy
Capital Restructuring
Financial Advisor to
Bis Industries
Financial Advisor to Ground
Food Tech Co. Ltd
Financial Advisor to Noteholders
~A$16 million
Follow-on Funding
Lead Manager and Financial
Advisor
October 2017
August 2017
July 2017
June 2017
A$90 million
~A$609 million Restructure
A$677 million
A$419 million
Acquisition of controlling interest
in Infinite Care
Exclusive Financial Advisor to
Moelis Australia Aged Care Fund
~A$213 million sale
Acquisition of Redcape Group
Capital Restructuring and Sale
Financial Advisor
Exclusive Financial Advisor
to Moelis Australia Redcape
Hotel Group
Merger of Centuria Metropolitan
and Centuria Urban REITs
Financial Advisor
June 2017
June 2017
May 2017
April 2017
Us$26 million
A$330 million
Series “B” financing round
Merger with Pengana Capital
Lead Investor and Financial
Advisor
Financial Advisor to Hunter Hall
Limited
Undisclosed sum
Sale of New Zealand
Steel Mining Asset
Financial Advisor
A$976 million
Takeover of Bradken Limited
Financial Advisor to Hitachi
Construction Machinery
As the Moelis Australia brand, executive team and network mature, we are hopeful of achieving superior productivity
and margins from our Corporate Advisory business.
Corporate Advisory revenue is generated across a broad range of advisory assignments, predominantly in relation to
either financial or strategic advice. Fees charged for Corporate Advisory assignments fall into two main categories:
transaction fees and monthly retainers. Traditionally, the split between transaction fees and monthly retainers has been
around 80%/20%. In FY17, monthly retainers represented 16% of Corporate Advisory revenue.
1. As at 12 February 2017
08
Moelis AustrAliA liMiteD
2017 AnnuAl report
Overview of Business Segments (cont.)
Corporate Advisory’s key performance indicator for productivity is the annual revenue generated per Advisory
executive. Our long‑term productivity has been in the range of $1.1 million to $1.5 million per Advisory executive.
The actual revenue per Advisory executive will vary depending on market activity levels, our market share and the
level of growth in our Advisory team. For example, in years where we add Advisory executives, our revenue per head
productivity measure may be diluted for the period that new executives take to generate material revenue in a new
environment. During 2017, revenue per Advisory executive was approximately $1.5 million, reflecting strong activity
levels and relatively few new hires. There was an average of 34 Advisory executives in 2017, and this number will
continue to grow organically. Moelis Australia is focused on hiring the best graduates and training our current group
of executives to develop them into senior executives.
equities overview
Equities operates a securities business that provides research, sales and trading execution services to institutional
and high net worth clients. Equities also provides equity capital markets and distribution capabilities to facilitate the
execution of equity capital markets transactions.
Revenue is generated in the Equities business through three main sources: securities commissions, fees for research
and equity capital markets revenue.
The environment for equities commissions has undergone significant change in the last 10 years, with new technology
and regulations making market conditions more difficult. The strategy of the Equities business is to be highly focused
on servicing clients, and, in particular, maintaining market leadership in areas of overall focus for Moelis Australia.
These areas include REITS, small cap and emerging companies and technology companies. There was an average
of 19 full-time employees in Equities during 2017.
Asset MAnAGeMent overview
Asset Management provides investment management services to domestic and foreign high net worth and
institutional investors.
We measure our performance by the long-term success of our clients and our investment philosophy is guided
by focusing on asset classes we understand and co-investment by the Group and staff.
As at 31 December 2017, Asset Management is responsible for the stewardship of approximately $2.9 billion of AUM
across more than 30 funds. These funds are invested in both traditional and alternative asset classes.
Asset Management has an established investment and distribution platform that is capitalising on the broader global
trend of increasing asset allocation into alternative asset classes. Within this trend, Moelis Australia is particularly well
placed to capture equity inflows from the large and growing market of high net worth individuals, both domestically
and abroad. Since its establishment, Asset Management has developed a substantial network of Asian investors and
Asian based marketing channels, with a focus on China.
The investment management philosophy of Asset Management is based on developing focused and bespoke
investment strategies primarily outside of traditional asset classes. This is a key differentiator for the business, as it
is able to provide investors with exposure to alternative asset classes across a range of industry sectors not generally
accessible to individual investors. This focus is supported by Asset Management’s collaboration with Corporate
Advisory which provides, transaction flow and direct access to unique investment opportunities including direct
asset backed investments, special situations, and debt-equity hybrid or credit opportunities. Asset Management
manages funds that invest in the following alternative asset classes:
> Real estate assets (commercial, retail, hotels, gaming hotels and industrial);
> Private equity and venture capital (in a range of sectors, including agriculture, technology, aged care and
childcare); and
> Credit, hybrid securities and structured investments.
Asset Management also manages traditional asset classes, including cash, bonds and listed equities.
09
Moelis AustrAliA liMiteD
2017 AnnuAl report
Overview of Business Segments (cont.)
Asset Management has materially increased its revenue contribution in recent years and is responsible for a significant
proportion of the Group’s revenue growth. For the year ended 31 December 2017, Asset Management contributed
approximately 40% of Group revenue up from 25% in 2016. On an EBITDA basis, 51% of 2017 Group EBITDA came
from Asset Management compared with 36% in 2016.
AsseT MAnAgeMenT RevenUe
ConTRiBUTion To gRoUp
AsseT MAnAgeMenT UndeRlying eBiTdA
ConTRiBUTion To gRoUp
40%
25%
17%
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p
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g
f
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a
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n
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c
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P
7%
FY14
FY15
FY16
FY17
51%
36%
i
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T
B
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e
P
n.m
FY14
8%
FY15
FY16
FY17
There was an average of 20 full time employees in Asset Management during 20171. At 31 December 2017, the
head count was 251, reflecting the strong growth in the business. Management is focused on expanding this business
segment and is constantly looking for quality people who share the firm’s values and can positively contribute to our
culture.
1. Excludes Redcape Hotel Group head office management
10
Moelis AustrAliA liMiteD
2017 AnnuAl report
Additional Information on Moelis Australia
Moelis AustrAliA FounDAtion
The Moelis Australia Foundation (“MAF”) was established following our IPO to support community initiatives that align
with the culture and broader community interests of Moelis Australia and its executives.
The Independent Chairman of the MAF is Mark Nelson. Mark is a founder and chairman of the Caledonia Investment
Group and a director of The Caledonia Foundation. He is the Vice President of the Art Gallery of NSW Board of Trustees,
a deputy chairman of Art Exhibitions Australia and Kaldor Public Art Projects; a trustee of the Sydney Swans Foundation;
and governor of the Florey Institute of Neuroscience. Andrew Pridham and Chris Wyke (Head of Corporate Finance
Advisory) are also directors of the MAF.
Moelis Australia and its executives believe strongly in the importance of giving back to the community via philanthropic
efforts. Corporate giving is a vital element of supporting the community we live in, so we can play our part to make it strong,
fair and caring. Being a good and generous corporate citizen is an important element of Moelis Australia’s core values.
Moelis Australia supports the community in numerous ways. In particular, it encourages staff members to participate in
community focused organisations and events and financially through the MAF. All staff members are eligible to request
that Moelis Australia donate to MAF in lieu of what may otherwise have been compensation paid to them individually
for their services. We believe that this is a win‑win where collectively Moelis Australia and its executives can give
generously to causes of importance to them, under the governance of Moelis Australia, without a material impact
on shareholder returns.
Requests by staff members to direct what otherwise may have been paid to them in 2017 totalled $2.2 million. In addition
Moelis Australia separately contributed $200,000 to MAF in 2017. Participating staff are encouraged to nominate
eligible charitable causes of importance to them for which MAF may provide financial support.
Moelis & CoMpAnY strAteGiC AlliAnCe
Moelis & Company is a leading global independent investment bank listed on the New York Stock Exchange with
a market capitalisation of approximately US$2.7 billion1.
Moelis & Company owns approximately 33% of the issued capital in Moelis Australia1.
The Moelis Australia and Moelis & Company strategic alliance agreement is designed to ensure that Moelis Australia
continues to remain integrated with Moelis & Company in the delivery and execution of corporate advisory services
to its Australian and global clients.
The strategic alliance is highly beneficial to both parties and will continue to benefit Moelis Australia by:
> Providing access to a global network of advisory executives sharing intellectual capital and access to client relationships;
> Allowing cooperation on cross-border or industry specific advisory mandates; and
>
Leveraging a strong and recognisable global brand in Moelis & Company.
CorporAte GovernAnCe stAteMent
Moelis Australia’s Corporate Governance Statement has been approved by the Board and lodged with ASX. A copy
of the Corporate Governance Statement is available at investors.moelisaustralia.com/corporate-governance/
1. As at 31 December 2017
11
Moelis AustrAliA liMiteD
2017 AnnuAl report
Directors’ Report
The Directors of Moelis Australia Limited (“Company”) present their report together with the consolidated financial
report of the Company and its subsidiaries (“Group”) for the year ended 31 December 2017.
DireCtors
The Directors of the Company are:
Mr Jeffrey Browne (Independent Chairman and non‑executive Director) appointed 27 February 2017
Mr Kenneth Moelis (non‑executive)
Mr Joseph Simon (non‑executive)
Mr Andrew Pridham (Chief Executive Officer)
Mr Julian Biggins appointed 2 February 2017
Mr Hugh Thomson resigned 2 February 2017
The Directors have been in office since the start of the financial year to the date of this report unless otherwise noted.
inForMAtion on Current DireCtors AnD CoMpAnY seCretArY
Mr Jeffrey Browne
independent non-executive director and Chairman
experience and expertise
Jeff was appointed to the Board on 27 February 2017.
Jeff was a senior executive at Nine Network Australia from 2006 until 2013, including serving
as Managing Director from 2010 to 2013. Jeff holds a degree in Arts from La Trobe University,
Melbourne and a degree in law from Monash University, Melbourne.
other directorships
Chairman of carsales.com Ltd (ASX: CAR); and
Chairman of Premoso Pty Ltd (owner of the business of “Holden Special Vehicles”).
special responsibilities
Chairman of the Board
Chairman of the Audit and Risk Committee
Chairman of the Nomination and Remuneration Committee
interests in the Company
Share Options: 781,250
12
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2017 AnnuAl report
Directors’ Report (cont.)
Mr Kenneth Moelis
non-executive director
experience and expertise
Ken has served as a Director since the formation of Moelis Australia in 2010.
Ken is Chairman of Moelis & Company Group LP and has served as Chief Executive Officer
of that company since 2007. Ken has over 30 years of investment banking and mergers and
acquisitions experience. Prior to founding Moelis & Company, Ken worked at UBS from 2001 to
2007, where he was most recently President of UBS Investment Bank. Ken holds a Bachelor
of Science and an MBA from the Wharton School at the University of Pennsylvania.
other directorships
Chairman and CEO of Moelis & Company Group LP (“Moelis & Company”)
special responsibilities
Member of the Nomination and Remuneration Committee
interests in the Company
Ken has 86.2% of the combined voting power of Moelis & Company class A and class B common
stock. As a result, Ken has a deemed relevant interest in all Shares held by Moelis & Company.
However, Ken does not have any rights to acquire or control the voting rights attached to the
Shares held by Moelis & Company.
Mr Joseph simon
non-executive director
experience and expertise
Joe was appointed to the Board on 7 June 2016.
Joe is the Chief Financial Officer of Moelis & Company serving in that role since joining in 2010.
Joe has over 25 years of experience as a senior manager of financial controls, operations and
strategy and has particular experience with financial services firms. Joe holds a Bachelor of
Science from Cornell University and an MBA from The University of Michigan. He is a Certified
Public Accountant in the United States.
other directorships
None
special responsibilities
Member of the Audit and Risk Committee
interests in the Company
None
13
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Directors’ Report (cont.)
Mr Andrew pridham
executive director and Ceo
experience and expertise
Andrew has served as a Director since the formation of Moelis Australia in 2010.
Andrew has over 20 years of experience in corporate advisory and prior to the formation of
Moelis Australia he served as Executive Chairman of Investment Banking at JP Morgan
Australia. Andrew holds a Bachelor of Applied Science from the University of South Australia.
other directorships
Chairman of Sydney Swans Limited
special responsibilities
Member of the Nomination and Remuneration Committee
interests in the Company
Shares: Andrew has a beneficial equity interest in 21,807,514 Shares as a result of his holding
in the Existing Staff Trusts. As a result of Andrew’s ownership of the Staff Trustee, Andrew has
a deemed relevant interest in 53,737,567 Shares.
Mr Julian Biggins
executive director
experience and expertise
Julian has served as an executive of Moelis Australia since its formation in 2010 and was
appointed to the Board on 2 February 2017.
Julian has over 17 years of investment banking experience covering the real estate industry
including a senior role within JP Morgan’s Investment Banking division and UBS’ Equities
research division. Julian holds a Bachelor of Business (Real Estate) and a Bachelor of Business
(Banking & Finance) from the University of South Australia.
other directorships
None
special responsibilities
Member of the Audit and Risk Committee
interests in the Company
Shares: Julian has a beneficial equity interest in 6,530,670 shares as a result of his holding
in the Existing Staff Trusts.
Share Rights: 144,326
Company secretary
The Company Secretary, Mr Peter Dixon, was appointed to the position of Company Secretary on 7 February 2017.
Mr Hugh Thomson acted as Company Secretary prior to this.
Peter joined Moelis Australia’s corporate advisory division in 2010, before taking on the role of General Counsel in
August 2015. Peter has over 20 years experience in the legal, funds management and investment banking industries
having previously worked at Macquarie Group, Mallesons Stephen Jacques (now King & Wood Mallesons) and Linklaters.
Peter holds a Bachelor of Commerce (Finance) and a Bachelor of Laws from the University of New South Wales
and is admitted to practice as a solicitor in New South Wales.
14
Moelis AustrAliA liMiteD
2017 AnnuAl report
Directors’ Report (cont.)
DireCtors’ MeetinGs
The following table sets out the number of Directors’ meetings (including meetings of committees of Directors) held during
the financial year and the number of meetings attended by each Director (while they were a Director or committee member).
BoArD MeetinG
AuDit AnD risk
CoMMittee
noMinAtion AnD
reMunerAtion CoMMittee
Mr Jeffrey Browne
Mr Kenneth Moelis
Mr Joseph Simon
Mr Andrew Pridham
Mr Julian Biggins
A
5
5
6
6
6
B
5
6
6
6
6
A
4
#
4
#
4
A = Number of meetings attended
B = Number of meetings held during the time the Director held office during the year
# = Not a member of committee
B
4
#
4
#
4
A
2
2
#
2
#
B
2
2
#
2
#
prinCipAl ACtivities
The Group is a financial services provider established in 2010 with offices in Sydney and Melbourne. The Group’s principal
activities in the course of the year were providing corporate advisory, equities and asset management services.
ChAnGes in stAte oF AFFAirs AnD siGniFiCAnt events
During the year the following significant events occurred:
listing of Moelis Australia
On 10 April 2017 Moelis Australia Limited was listed on the Australian Securities Exchange, issuing 25,000,000 new
shares representing 20% of the expanded issued capital of the Company, and raised $58.8 million.
Termination of onerous Contract
During April 2017, the Group paid out a lump sum of $12.8 million to terminate an agreement with a service provider
associated with the promotion of the Group’s Significant Investor Visa funds (“Onerous Contract”). The Group now
undertakes the promotional activities itself. The net present value of the liability ($12.6 million) was provided for at
31 December 2016.
Acquisition of Armada Funds Management
On 1 June 2017, the Group acquired Rockford Capital Pty Ltd and its subsidiaries (“Armada Funds Management”), a
real estate funds manager, for a total consideration of $30.7 million, comprising $10.5 million in cash and the remainder
in Shares issued on 18 July 2017. Armada Funds Management manages 10 real estate investment funds which in
aggregate own interests in retail shopping centres valued at approximately $800 million.
establishment of Moelis Australia Redcape Hotel group
On 10 July 2017 Moelis Australia Redcape Hotel Group (“Redcape Fund”), a fund managed by the Group, acquired the
Redcape Hotel Group (“Redcape”). Redcape’s portfolio consisted of 25 gaming focused hotels in NSW and Queensland
and was valued at approximately $677 million. Moelis Australia invested $40 million in the Redcape Fund (representing
10% of the Fund’s issued equity), which combined with funds raised from other Moelis Australia managed funds and
third party investors was used to settle the acquisition and associated costs.
equity raising and Unsecured note programme
The Group raised $110 million through a placement of 22 million new shares at an issue price of $5.00 per share
to institutional and wholesale investors, with $59.7 million received in September 2017 and $50.3 million received
in October 2017 after shareholder approval was obtained.
In September 2017 the Group also raised $32 million in debt through the issue of three year unsecured notes.
This is the Group’s only borrowings.
15
Moelis AustrAliA liMiteD
2017 AnnuAl report
Directors’ Report (cont.)
establishment of Moelis Australia senior secured Credit Fund ii
The Group established the Moelis Australia Senior Secured Credit Fund II (“Credit Fund”) with a mandate to invest in
debt instruments. At 31 December 2017 the Credit Fund had $43 million of loans receivable, with these investments
funded by the Group and consolidated in the Group’s results. The loans were provided in December 2017 and
consequently the contribution to the Group’s results is not material. The Credit Fund is currently being marketed to
prospective investors, and it is anticipated the Group’s holding in the Credit Fund will reduce on close of the Credit
Fund’s capital raising. The Group committed a further $85 million in credit facilities in December 2017, of which
$24.6 million was drawn in January 2018.
operAtinG AnD FinAnCiAl review
The Group recorded total comprehensive income for the year of $31.9 million (2016: $9.8 million) and profit after tax
for the year of $29.6 million (2016: $10.1 million). Total comprehensive income and profit after tax have been prepared
in accordance with the Corporations Act 2001 and Australian Accounting Standards, which comply with International
Financial Reporting Standards.
The Group recorded net profit after tax (“NPAT”) of $29.1 million (2016: $13.8 million). Underlying NPAT and other
measures of underlying performance are not prepared in accordance with International Financial Reporting Standards
and are not audited. Underlying NPAT excludes certain items which are disregarded by management when assessing
the Group’s performance. The table below reconciles the Group’s total comprehensive income prepared in accordance
with International Financial Reporting Standards to Underlying NPAT.
yeAR ending 31 deCeMBeR ($’000s)
total comprehensive income for the year (as disclosed in the Financial report)
Management adjustments:
Listing costs1
Termination of Onerous Contract2
Armada Funds Management acquisition adjustments3
Share Rights issued to staff4
Tax on above
underlying npAt
1 The costs relating to the Company’s Initial Public Offering.
2017
31,859
989
189
3,260
(8,444)
1,201
2016
9,762
–
5,727
–
–
(1,661)
29,054
13,828
2 Relates to an agreement accounted for as an onerous contract (refer note 35). The agreement was terminated in April 2017.
3 The adjustment for Armada comprises legal and other acquisition expenses, the amortisation of its intangible assets and the share based payment
expenses relating to the shares issued to the vendors of Armada Funds Management who are now Moelis Australia Group employees.
4
In the financial statements the value of Share Rights granted to employees is amortised over the vesting period (which is up to five years), with only
a portion of the value being expensed in 2017. The underlying result includes the full value of the Share Rights grant as an expense in 2017.
The table below shows the contributions to Underlying NPAT of the Group’s two key business segments:
yeAR ending 31 deCeMBeR ($’000s)
Corporate Advisory and Equities
Asset Management
underlying eBitDA*
Depreciation and amortisation
Net interest income
Tax
underlying npAt
* Earnings before interest, tax, depreciation and amortisation.
16
2017
20,494
21,130
41,624
(266)
452
(12,756)
29,054
2016
12,556
7,140
19,696
(273)
331
(5,926)
13,828
Moelis AustrAliA liMiteD
2017 AnnuAl report
Directors’ Report (cont.)
Please refer to section “2017 Year in Review” on page 03 and “Overview of Business Segments” on page 08 for:
>
>
>
a review of operations during the year and the results of those operations;
likely developments in the operations in future financial years and the expected results of those operations; and
comments on business strategies and prospects for future financial years.
In respect of likely developments, business strategies and prospects for future financial years, material which if included
would be likely to result in unreasonable prejudice to the Group, has been omitted.
earnings per share
Basic EPS (cents/share)
Diluted EPS (cents/share)
Financial position
2017
2016
UndeRlying
sTATUToRy
UndeRlying
sTATUToRy
23.0
22.4
23.4
22.8
13.8
13.8
10.1
10.1
The Group raised approximately $199 million of capital net of costs during the year:
Capital raised (net of Costs)
Initial Public Offering
Placements
Borrowings
total capital raised
TiMing
$ Million
April
October
October
57
110
32
199
The capital raised significantly increased the Group’s ability to participate in transactions and establish new managed
funds. The table below shows the major uses for the capital raised:
Use oF FUnds
Acquisition of Armada Funds Management
Investing in Moelis Australia managed funds
Warehousing assets for Credit Fund II
Termination of Onerous Contract
Investment in listed equities
total use of funds
The summarised financial position at the end of the year is shown in the table below:
$ Millions
Cash and cash equivalents
Listed investments
Unlisted investments*
Goodwill and other intangibles
Other assets
total Assets
Borrowings
Other liabilities
total liabilities
net assets
$ Million
10
52
43
13
27
145
2016
37.2
2.9
6.7
–
26.8
73.6
–
(40.8)
(40.8)
32.8
2017
87.8
30.7
107.0
25.4
34.0
284.9
(32.2)
(37.1)
(69.3)
215.6
*
including equity investments in joint ventures, cornerstone investments in Moelis managed funds, and warehoused assets.
17
Moelis AustrAliA liMiteD
2017 AnnuAl report
Directors’ Report (cont.)
DiviDenDs
A fully franked dividend of $31 million in relation to the pre-IPO retained earnings of the Group was paid to the pre-IPO
shareholders on 18 April 2017.
No dividend was paid or declared in the prior year.
The Directors have declared a fully franked dividend of 7.0 cents per Share for the full year ended 31 December 2017,
payable on 6 March 2018.
shAre options
The Company had 5,807,150 Share Options outstanding at 31 December 2017. For details on Share Options issued
during the year refer to note 34 to the financial statements.
suBsequent events
At 31 December 2017 the Group had commitments of $85.0 million in undrawn credit facilities. In January 2018, the
Group lent $24.6 million under the credit facilities, reducing its commitments to $60.4 million.
A fully franked dividend of 7.0 cents per Share totalling $10,776,684 was declared.
likelY DevelopMents
The Group continues to pursue its strategy of focusing on its core operations. In particular the Group will continue to
market its managed funds, and launch new managed funds with the aim of growing asset management fee revenue.
environMentAl reGulAtion
The Group’s operations are not subject to any significant environmental regulation.
inDeMniFiCAtion oF oFFiCers AnD AuDitors
During the year, the Company paid a premium in respect of a contract insuring the directors and officers of the
Company against liabilities and legal expenses incurred as a result of carrying out their duties as a director or officer.
The Directors have not included details of the nature of the liabilities covered or the amount of premium paid in respect
of this insurance, as such disclosure is prohibited under the terms of the contract.
The Company has agreed to indemnify all current and former directors and company secretaries and certain officers
of the Company and its controlled entities against all liabilities to persons (other than the Company or a related body
corporate) which arise out of the performance of their normal duties as a director, company secretary or officer to the
extent permitted by law and unless the liability relates to conduct involving wilful misconduct, bad faith or conduct
known to be in breach of law.
The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law,
indemnified or agreed to indemnify an officer or auditor of the Company or any related body corporate against a liability
incurred as such an officer or auditor.
NON-AUDITSERVICES
During the financial year, Deloitte Touche Tohmatsu, the Group’s auditor, has performed services in addition to the audit
and review of the financial statements. Details of amounts paid or payable to the auditor are outlined in Note 24 to the
financial statements.
The Directors are satisfied that the provision of non-audit services during the year, by the auditor (or by another person
or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
18
Moelis AustrAliA liMiteD
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Directors’ Report (cont.)
The Directors are of the opinion that the services as disclosed in note 24 to the financial statements do not compromise
the external auditor’s independence, for the following reasons:
>
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
> none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct
APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards
Board, including reviewing or auditing the auditor’s own work, acting in a management or decision making capacity
for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.
rounDinG oF AMounts
The Group is an entity of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument
2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the directors’ report
and the financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated.
Signed in accordance with a resolution of the Directors.
Jeffrey Browne
Independent Director and Chairman
19 February 2018
Andrew pridham
Managing Director and Chief Executive Officer
19 February 2018
AuDitor’s inDepenDenCe DeClArAtion
As auditor for the audit of Moelis Australia Limited for the year ended 31 December 2017, I declare that to the best
of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the
audit, and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respet of Moelis Australia Limited and the entities it controlled during the period.
Delarey nell
Partner
Deloitte Touche Tohmatsu
Sydney
19 February 2017
Liability limited by a scheme approved under Professional Standards Legislation
19
Moelis AustrAliA liMiteD
2017 AnnuAl report
Directors’ Report (cont.)
DireCtors’ report sCheDule: reMunerAtion report
The remuneration report provides information about the remuneration arrangements for key management personnel (KMP),
which includes Non‑Executive Directors and the Group’s most senior management, for the year to 31 December 2017.
The report includes:
> Details of KMP covered in this report
> Remuneration policy and link to performance
> Remuneration of Non‑Executive Directors
> Remuneration of Executive KMP
> Performance of KMP
> Statutory remuneration table
> Key terms of employment contracts
> KMP equity holdings and other transactions
details of Key Management personnel
The following persons are considered Key Management Personnel of the Group during or since the end of the most
recent financial year:
nAMe
Role
Mr Jeffrey Browne
Mr Kenneth Moelis
Mr Joseph Simon
Mr Andrew Pridham
Mr Julian Biggins
Mr Hugh Thomson
Independent Non‑Executive Director and Chairman
Non‑Executive Director
Non‑Executive Director
Executive Director and CEO
Executive Director and Head of Real Estate Advisory
Chief Operating Officer and Executive Director
The named persons held their roles for the whole of the financial year and since the end of the financial year, except
for Mr Julian Biggins who became an Executive Director on 2 February 2017 and Mr Hugh Thomson who ceased to
be an Executive Director on 2 February 2017.
Remuneration policy and link to performance
The Board recognises the important role people play in achieving the Group’s long‑term objectives and as a key source
of competitive advantage. To grow and be successful, the Group must be able to attract, motivate and retain capable
individuals. When determining remuneration the Board focuses on the following:
> Ensuring competitive rewards are provided to attract and retain talent;
>
Linking remuneration to performance so that higher levels of performance attract higher rewards;
> Aligning rewards of all staff, but particularly senior management, to the creation of long term value to shareholders; and
> Ensuring the overall cost of remuneration allows for an appropriate return to shareholders over the long term.
20
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Directors’ Report (cont.)
Remuneration of non-executive directors
The total amount provided to Non‑Executive Directors for their services must not exceed in aggregate and in any financial
year the amount fixed by the Company at its annual general meeting. This amount has been fixed by the Company
at $500,000 per annum. Any change to the aggregate annual sum is required to be approved by shareholders.
Remuneration of non-executive directors during the year
Mr Kenneth Moelis and Mr Joseph Simon do not receive any remuneration for their role as Non‑Executive Directors.
Mr Jeffery Browne is paid a fixed fee of $150,000 per annum plus reimbursement of expenses for his role as Non‑Executive
Director and Independent Chairman.
Remuneration of executive Key Management personnel
In this Remuneration Report the term “Executive KMP” is used to refer to Mr Pridham, Mr Biggins and Mr Thomson,
being the key management personnel who receive a variable level of remuneration.
To achieve the aims of attracting, motivating and retaining capable individuals remuneration for all employees includes
a mix of fixed and variable remuneration. The fixed component is delivered through a base salary inclusive of
superannuation. The variable component is delivered through the annual bonus scheme. The process for determining
remuneration is the same for all employees, but in this Remuneration Report the process is described to the extent
it applies to Executive KMP.
Each Executive KMP is eligible to participate in the annual bonus scheme. The Executive KMP must be employed
at the time bonuses are paid in order to receive a bonus. Payment of bonuses may be in cash or in equity, or a
combination of both.
The review of salaries and the payment of bonuses to Executive KMP and whether it is delivered in cash and/or equity
is determined annually by the Board on recommendation from the Nomination and Remuneration Committee. In
determining salary increases (if any) and the bonus amounts (if any) for Executive KMP, the Board takes into account a
range of factors including the performance of the Group, market remuneration levels, key metrics such as total compensation
of all employees as a percentage of Group revenue, as well as the performance of each Executive KMP. In determining
what proportion of the aggregate annual bonus is provided in equity, the Board takes into account a number of factors
including the need to align Executive KMP with the goals of the Group as well as market practice.
The Group’s Equity Incentive Plan allows a variety of types of equity to be issued to employees (including to Executive
KMP), including Shares, rights to receive Shares in the future, or Share Options. Such equity is subject to vesting
conditions as determined by the Board including continuation of employment with the Group. Generally employees
who leave before the relevant vesting dates will forfeit their equity. The Board retains discretion to allow employees
to retain their equity upon ceasing employment, and may do so depending on the particular circumstances of an
employee’s departure. Recipients of equity grants are not allowed to hedge their economic interest.
For the 2017 year-end bonus, the Board has granted employees a combination of cash and the right to receive Shares
in the future (“2017 Share Rights”). The 2017 Share Rights are subject to a continuation of employment vesting condition,
with one fifth vesting every year commencing on 1 January 2019, and then each successive year until the last fifth vests
on 1 January 2023. The 2017 Share Rights entitle the recipient to receive a payment equivalent to the dividend paid by
the Company (if any), but excluding the dividend to be paid in March 2018.
The 2017 Share Rights vesting conditions do not include meeting future performance hurdles or targets, as the Board
considers that the 2017 annual bonus, including the 2017 Share Rights granted to Executive KMP and all other
employees is remuneration for performance during the 2017 year.
The value of each 2017 Share Right was $6.08, determined by reference to the trading in the Company’s shares in the
five business days up to and including 22 December 2017, adjusted for the dividend to be paid in March 2018.
21
Moelis AustrAliA liMiteD
2017 AnnuAl report
Directors’ Report (cont.)
The table below sets out the 2017 Share Rights granted to Executive KMP in relation to the 2017 annual bonus:
Key MAnAgeMenT peRsonnel
Andrew Pridham
Julian Biggins
Hugh Thomson
nUMBeR oF 2017
sHARe RigHTs
gRAnTed
vAlUe oF 2017
sHARe RigHTs
gRAnTed
–
144,326
27,632
–
$877,502
$168,003
The 2017 year is the first year that a component of the annual bonus has been delivered in equity, and as such there
were no equity rights vesting or forfeited during 2017.
The 2017 Share Rights vest 1/5th each year and are subject to continuous employment. Should the Executive KMP leave
prior to 31 December 2018, and the Board not exercise any discretion, the Executive KMP would forfeit 100% of their
Share Rights. If the Executive KMP were to remain employed with the group for five years to 1 January 2023, then the
Executive KMP will have received the maximum number of Shares shown in the table above.
The Shares required to discharge the liability under the Share Rights granted to Mr Biggins will be acquired by the Employee
Share Trust through purchases on-market.
The table below provides the relative proportions of 2017 remuneration, including the 2017 annual bonus:
Andrew Pridham
Julian Biggins
Hugh Thomson
Mr Pridham elected not to be considered for a bonus.
performance of Key Management personnel
Fixed
100%
19%
42%
vARiABle
(Cash) Bonus
vARiABle
(equity) Bonus
–%
45%
38%
–%
37%
20%
The review of the performance of the Executive KMPs includes both qualitative and quantitative factors, including the
financial performance of the Group. The performance of each Executive KMP determines his or her annual bonus and
any salary increase. The Independent Chairman receives a fixed fee regardless of performance, and the other two
Non‑Executive Directors receive no remuneration.
For financial performance, a key measurement is how the Group has performed compared to the forecast included
in its Prospectus. As part of the listing 20% of the expanded share capital of the Group was offered to the public at a
price of $2.35. The table below compares the Group’s actual performance for 2017 against the forecast included in the
Prospectus. As 2017 is the first year that the Group has been listed, the table does not include the performance of the
preceding four years.
Statutory EBITDA $ million
Statutory Comprehensive Income $ million
Statutory EPS (cents/share)
Underlying EBITDA $ million
Underlying NPAT $ million
Underlying EPS (cents/share)
Company Share price (ASX Code: MOE)
Dividend declared (cents/Share)
Remuneration of KMP** $ million
* Excludes pre‑IPO dividend of $31 million.
yeAR ended 2017
ipo FoReCAsT
% CHAnge
43.1
31.8
23.4
41.6
29.1
23.0
$6.72
7.0
2017
3.9
25.4
18.0
14.3
23.5
16.8
13.5
$2.35
n/a*
2016
4.4
70%
77%
64%
77%
73%
70%
186%
‑30%
** The remuneration of KMP shown in the table above includes salary and annual bonus, including the value of 2017 Share Rights granted.
22
Moelis AustrAliA liMiteD
2017 AnnuAl report
Directors’ Report (cont.)
statutory remuneration table
The following table discloses total remuneration of Key Management Personnel in accordance with the
Corporations Act 2001:
ShORT-TERMEMplOyEEbENEfITS
lONg-TERM
eMploYee
BeneFits
shAre BAseD
pAYMents
totAl
reMunerAtion
sAlARy & Fees
(inCluding
superannuation)
non-monetary
And oTHeR
Bonus (Cash
Component)
long seRviCe
leAve
Bonus (equity
Component)
& opTions
$450,000
$450,000
$350,000
$151,250
–
–
$37,205
–
–
–
–
–
–
$1,072,500
$312,000
–
–
–
$7,117
$7,112
–
–
–
–
–
$224,873
$43,053
$5,226
–
–
$273,152
$494,322
$1,754,485
$705,053
$156,476
–
–
$3,110,336
2017
Andrew Pridham
Julian Biggins
Hugh Thomson
Jeffrey Browne
Kenneth Moelis
Joseph Simon
total
$1,401,250
$37,205
$1,384,500
$14,229
The annual bonus (both cash and equity components) granted to KMP was determined by the Board as explained in the
preceding sections of this report. Mr Pridham elected to not be considered for a bonus.
2017
Andrew Pridham
Julian Biggins
Hugh Thomson
Jeffrey Browne
total
pAiD DurinG the YeAr *
% vestinG in Future YeArs**
AMoUnT
% oF ToTAl
ReMUneRATion
$487,205
$1,522,500
$662,000
$151,250
$2,822,955
99%
63%
80%
84%
72%
AMoUnT
–
$877,502
$168,003
$29,431
$1,081,655
% oF ToTAl
ReMUneRATion
–
37%
20%
16%
28%
*
Includes cash component of 2017 annual bonus which will be paid in March 2018.
**
In relation to Executive Key Management Personnel, the amount shown as vesting in future years is the 2017 Share Rights which will vest in five
annual equal instalments commencing 1 January 2019 and ending 1 January 2023. Vesting is subject to continuation of employment.
Key terms of employment contracts
Chief executive officer
Mr Andrew Pridham was appointed as Chief Executive Officer of the Group in 2010. The major terms and conditions
of his employment contract are summarised as follows:
> Fixed compensation inclusive of minimum superannuation contributions;
> Car parking within the building occupied by the Group;
> Eligible to participate in the annual bonus incentive scheme, with payment in any one year determined at the
discretion of the Board;
> The Group may terminate this employment contract by providing three months written notice or provide payment
in lieu of the notice period. Any payment in lieu of notice will be based on the total fixed compensation package.
Mr Pridham may terminate this employment contract by providing three months written notice; and
> The Group may terminate the employment contract at any time without notice if serious misconduct has occurred.
When termination with cause occurs the CEO is only entitled to remuneration up to the date of termination.
The terms of Mr Pridham’s contract were agreed when Moelis Australia was established in 2010 and were based on
market conditions at that time. The terms have not been varied since. There are no terms in the contract which affect
compensation in future periods.
23
Moelis AustrAliA liMiteD
2017 AnnuAl report
Directors’ Report (cont.)
other executive KMp
The employment contracts of other Executive KMP are on the same terms as that of the CEO, but with no
car parking entitlement.
KMp equity holdings and other transactions
KMp share holdings
The following table sets out each KMP’s interest in shares in the Company as at the date of this report:
sHARes in THe CoMpAny
Jeffrey Browne
Kenneth Moelis*
Joseph Simon
Andrew Pridham**
Julian Biggins**
Hugh Thomson**
sHARe RigHTs in THe CoMpAny
Jeffrey Browne
Kenneth Moelis
Joseph Simon
Andrew Pridham
Julian Biggins
Hugh Thomson
shAres
BAlAnCe AT
10 ApRil 2017
(date of listing)
ACqUiRed
dURing THe
peRiod
BAlAnCe AT
signing dATe
–
–
–
21,552,456
6,454,411
507,469
–
–
–
255,058
76,260
11,515
–
–
–
21,807,514
6,530,671
518,984
shAre riGhts
BAlAnCe AT
10 ApRil 2017
(date of listing)
ACqUiRed
dURing THe
peRiod
BAlAnCe AT
signing dATe
–
–
–
–
–
–
–
–
–
–
144,326
27,632
–
–
–
–
144,326
27,632
* Mr Moelis has 86.2% of the combined voting power of Moelis & Company class A and class B common stock. As a result, Mr Moelis has a deemed
relevant interest in all Shares held by Moelis & Company. However, Mr Moelis does not have any rights to acquire or control the voting rights
attached to the Shares held by Moelis & Company.
** Each have a beneficial interest in the number of shares set out in this table as a result of their holdings in the Existing Staff Trusts. Shares beneficially
acquired during the year resulted from redemptions of units in the Existing Staff Trusts.
24
Moelis AustrAliA liMiteD
2017 AnnuAl report
Directors’ Report (cont.)
Chairman’s options
Prior to its listing, the Company offered Mr Jeffrey Browne (and Mr Browne accepted) the opportunity to purchase
781,250 Share Options, with each option carrying the right to acquire one Share in the Company at a future date.
The Share Options were offered to Mr Browne to provide him an interest in the Company, and are not subject to any
performance conditions other than continuing to serve as the Company’s Independent Chairman. Details of the Share
Options granted to Mr Browne on 4 April 2017 are shown in the table below. No Share Options held by Mr Browne were
exercised or forfeited during the year.
gRAnT dATe
sHARe pRiCe
exeRCise pRiCe
oF opTion
eARliesT dATe
oF exeRCise
expiRy dATe
vAlUe oF opTions
AT gRAnT dATe
(Cents per
option)
AMoUnT pAid
(Cents per
option)
$2.35
$2.35
$2.80
$3.00
8 April 2019
8 April 2020
7 April 2020
7 April 2021
5.1
4.2
1.7
1.8
nUMBeR oF
opTions issUed
in THe yeAR
390,625
390,625
loans to KMp
In 2015, Mr Hugh Thomson was granted a loan secured by the units he owned in the Existing Share Trusts. The
outstanding loan balance at 31 December 2016 was $179,999. The loan was repaid in full during 2017. The loan was
limited recourse to Mr Thomson’s units in the Existing Share Trusts, carried nil interest and was for a maximum term
of five years. If interest had been charged at an arm’s-length basis on the outstanding loan balance during the year,
it would have amounted to $4,988.
Transactions with KMp
As a matter of Board policy, all transactions with Directors and Director-related entities are conducted on arm’s-length
commercial or employment terms.
During the year, the Group paid fees to entities associated with an Executive KMP totalling $79,500 for capital commitments
provided to the Company in relation to the Company’s underwriting activities.
25
Moelis AustrAliA liMiteD
2017 AnnuAl report
Financial Report
Consolidated statement of profit or loss
and other Comprehensive Income
Consolidated statement of Financial position
Consolidated statement of Changes in equity
Consolidated statement of Cash Flows
notes to the Consolidated Financial statements
1 Summary of significant accounting policies
2 Application of new and revised
Australian Accounting Standards
3 Fee and commission expense
4 Segment information
5
Investment income
6 Other gains and losses
7
Income tax
8
Interest expense
9 Other expenses
10 Receivables
11 Other assets (current)
12 Restricted cash
13 Plant and equipment
14 Goodwill
15 Intangible assets
16 Loans receivable
17 Trade and other payables
18 Borrowings
19 Provisions
20 Contributed equity and share options
21 Dividends
22 Cash and cash equivalents
23 Operating leases
24 Remuneration of auditors
25 Personnel expenses
26 Other financial assets
27 Investments in associates and joint ventures
28 Parent entity disclosures
29 Financial instruments
30 Key management personnel compensation
31 Related party transactions
32 Reserves
33 Business combination –
Armada Funds Management
34 Share based payments
35 Termination of onerous contract
36 Earnings per share
37 Subsidiaries
38 Contingent Liabilities and Commitments
39 Subsequent events
Directors’ Declaration
independent Auditor’s report
Additional information
Glossary
Corporate Directory
27
28
29
30
31
31
42
46
46
48
49
49
50
50
51
51
52
52
53
54
55
55
55
56
56
57
57
58
58
59
59
59
63
63
68
68
70
70
72
75
75
76
77
77
78
79
84
86
88
26
Moelis AustrAliA liMiteD
2017 AnnuAl report
Consolidated Statement of Profit or Loss
and other Comprehensive Income
for the year ended 31 December 2017
Fee and commission income
Fee and commission expense
net fee and commission income
Other gains and losses
Share of profits of associates
Investment income
net income
Personnel expenses
Marketing and business development expenses
Occupancy expenses
Communications, data and information technology expenses
Termination of onerous contract
Depreciation and amortisation
Interest expense
Other expenses
total expenses
profit before income tax
Income tax expense
profit after income tax
other comprehensive income, net of income tax
Items that may be reclassified subsequently to profit or loss:
Share of other comprehensive income of associates
Unrealised (loss)/gain on AFS investments
total comprehensive income
profit is attributable to:
Owners of Moelis Australia Limited
total comprehensive income is attributable to:
Owners of Moelis Australia Limited
eARnings peR sHARe
Basic earnings per share
Diluted earnings per share
noTes
4
3
6
27
5
25
35
13, 15
8
9
7
32
2017
$’000
106,889
(6,781)
100,108
3,447
23
1,257
2016
$’000
70,582
(8,665)
61,917
113
107
453
104,835
62,590
44,925
3,873
2,436
3,377
189
968
488
6,037
62,293
42,542
(12,975)
29,567
35,130
1,755
1,658
2,224
5,728
273
–
1,330
48,098
14,492
(4,405)
10,087
3,625
(1,333)
31,859
–
(325)
9,762
29,567
10,087
31,859
9,762
noTes
CenTs
CenTs
36
36
23.4
22.8
10.1
10.1
The above consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with
the accompanying notes.
27
Moelis AustrAliA liMiteD
2017 AnnuAl report
Consolidated Statement of Financial Position
as at 31 December 2017
Assets
Current assets
Cash and cash equivalents
Receivables
Other financial assets
Other assets
total current assets
Non‑current assets
Restricted cash
Loans receivable
Other financial assets
Property, plant and equipment
Investments in associates and joint ventures
Deferred tax assets
Intangible assets
Goodwill
total non-current assets
total assets
liabilities
Current liabilities
Trade and other payables
Income tax payable
Provisions
total current liabilities
Non‑current liabilities
Creditors
Borrowings
Provisions
Deferred tax liability
Deferred rent
total non-current liabilities
total liabilities
net assets
equity
Contributed equity
Reserves
Retained earnings
total shareholders’ equity
noTes
2017
$’000
2016
$’000
22
10
26
11
12
16
26
13
27
7
15
14
17
7
19
18
19
7
20
32
87,786
17,034
30,459
1,559
136,838
14,239
42,500
4,763
1,205
59,966
–
15,560
9,827
148,060
37,229
17,398
2,703
2,083
59,413
1,773
243
1,630
666
5,242
3,282
–
1,326
14,162
284,898
73,575
10,106
5,957
14,405
30,468
56
32,150
1,389
4,767
437
38,799
5,104
4,498
30,277
39,879
111
–
611
–
221
943
69,267
40,822
215,631
32,753
191,507
8,493
15,631
215,631
14,796
893
17,064
32,753
The above consolidated statement of financial position is to be read in conjunction with the accompanying notes.
28
Moelis AustrAliA liMiteD
2017 AnnuAl report
Consolidated Statement of Changes in Equity
for the year ended 31 December 2017
ConTRiBUTed
eqUiTy
$’000
noTe 20
sHARe BAsed
pAyMenT
ReseRve
$’000
noTe 34
ReTAined
eARnings
$’000
invesTMenTs
RevAlUATion
ReseRve
$’000
noTe 32
Balance at 1 January 2016
Profit/(loss) for the period
Other comprehensive income for the period
Balance at 31 December 2016
Balance at 1 January 2017
Profit/(loss) for the period
Other comprehensive income for the period
Payment of dividends
Issue of ordinary shares
Costs of issuing ordinary shares
Treasury shares
Share based payments
14,796
–
–
14,796
14,796
–
–
–
180,141
(1,419)
(2,011)
–
Balance at 31 December 2017
191,507
–
–
–
–
–
–
–
–
–
–
–
5,308
5,308
6,977
10,087
–
17,064
17,064
29,567
–
(31,000)
–
–
–
–
15,631
1,218
–
(325)
893
893
–
2,292
–
–
–
–
–
3,185
ToTAl
eqUiTy
$’000
22,991
10,087
(325)
32,753
32,753
29,567
2,292
(31,000)
180,141
(1,419)
(2,011)
5,308
215,631
The above consolidated statement of changes in equity is to be read in conjunction with the accompanying notes.
29
Moelis AustrAliA liMiteD
2017 AnnuAl report
Consolidated Statement of Cash Flows
for the year ended 31 December 2017
Cash flows from operating activities
Receipts from customers
Interest and dividends received
Amounts received/(repaid) to affiliates (Moelis & Company)
Payments to suppliers and employees
Cash generated from operations
Interest paid
Income taxes (paid)/refunded
net cash from operating activities
Cash flows from investing activities
Payments to acquire financial assets
Proceeds on sale of financial assets
Amounts (advanced) to third parties
Receipts/(payments) for employee loans
Payments to acquire shares in associates
Capital returns received from associates
Net cash outflows to acquire shares in subsidiary companies
Payments to acquire property, plant and equipment
net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
Proceeds from borrowings
Amounts paid to Employee Share Trust
Proceeds from share based payments
Amounts received/(advanced) to related parties
Dividends paid
net cash used in financing activities
net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on the balance
of cash held in foreign currencies
noTes
2017
$‘000
2016
$‘000
22
33
102,567
2,974
280
(68,144)
37,677
(3)
(9,328)
28,346
(33,280)
4,388
(44,951)
1,497
(54,750)
3,234
(9,645)
(805)
(134,312)
169,150
(2,414)
32,150
(11,105)
133
64
(31,000)
156,978
62,718
733
(202)
(46,044)
17,205
–
763
17,968
(5,640)
1,356
–
(213)
–
–
–
(249)
(4,746)
–
–
–
–
–
(64)
–
(64)
51,012
13,158
37,229
24,009
(455)
62
Cash and cash equivalents at the end of the year
22
87,786
37,229
The above consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
30
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements
for the year ended 31 December 2017
1
a
suMMArY oF siGniFiCAnt ACCountinG poliCies
Basis of preparation
The principal accounting policies adopted in the preparation of this Financial Report and that of the previous financial
year are set out below. These policies have been consistently applied to all the financial years presented, unless
otherwise stated.
This Financial Report is a general purpose financial report which has been prepared in accordance with the Corporations
Act 2001, Australian Accounting Standards and Interpretations, and complies with other requirements of the law. The
Financial Report comprises the consolidated financial statements of the Group and accompanying notes. For the purposes
of preparing the consolidated financial statements, the Company is a for-profit entity.
The Group is an entity of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument
2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the Directors’ Report
and the financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated.
All amounts are presented in Australian dollars.
The financial statements were authorised for issue by Directors on 19 February 2018.
Compliance with international Financial Reporting standards
Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards
ensures that the financial statements and notes of the Company and the Group comply with International Financial
Reporting Standards (‘IFRS’).
Historic cost convention
The consolidated financial statements have been prepared on the basis of historical cost, except for certain financial
instruments that are measured at fair value at the end of the reporting period. Historical cost is generally based on
the fair values of the consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating the fair value of an asset or liability, the Group takes into
account the characteristics of the asset or liability if market participants would take those characteristics into account
when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes
in these consolidated financial statements is determined on such a basis, except for measurements that have some
similarities to fair value but are not fair value, such as value in use in AASB 136 Impairment of Assets.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair
value measurement in its entirety, which are described as follows:
>
>
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability,
either directly or indirectly; and
>
Level 3 inputs are unobservable inputs for the asset or liability.
Critical accounting judgments and key sources of estimation uncertainty
The preparation of the Financial Report requires the use of judgment, estimates and assumptions. Should different
assumptions or estimates be applied, the resulting values may change, impacting the net assets and income of the
Group. These estimates and assumptions are reviewed on an ongoing basis. The nature of the significant estimates
and judgments made are noted below.
31
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
1
a
(i)
SUMMARyOfSIgNIfICANTACCOUNTINgpOlICIES (cont.)
Basis of preparation (cont.)
Assessment of control and significant influence
Three of the funds that the Group manages (Moelis Australia Redcape Hotel Group, Global Wealth Partners Credit
Opportunity Fund I and Moelis Australia Aged Care Fund) (each a “Fund”), have investors that include the Group,
in its corporate capacity, and other funds the Group manages. The accounting treatment of the Group’s investment
in a Fund depends on whether the Group is deemed to control the Fund (in which case the Fund is to be consolidated),
or whether the Group has significant influence over the Fund (in which case the investment in the Fund is to be equity
accounted). AASB 10 Consolidated Financial Statements sets out the factors to be taken into consideration when
determining whether the power that the Group may have over a Fund constitutes control. The factors include considering
the magnitude and variability of returns that the Group may receive by virtue of its remuneration as the Fund’s trustee
or manager, its direct investment in the Fund and the holdings that other Moelis managed funds may have in the Fund.
AASB 10 does not include a prescriptive method of calculation, nor a ‘bright line’ as to the level of magnitude or variability
above which the Group would be deemed to control a Fund. The Group has undertaken the exercise of quantifying
magnitude and variability of returns for each Fund, and has concluded that it does not control any of the Funds but
does retain significant influence for each of them.
Refer to note 27 for financial information on the performance and financial position of each of the Funds.
(ii)
Determining fair value of finite life intangible asset
During the year the Group acquired Armada Funds Management, a real estate funds manager that earns revenue from
existing fund management contracts and has the potential to generate additional revenue from the establishment of new
funds. The aggregate value of the forecast profit generated from each existing fund has been recorded as an intangible
asset. In determining the values of the forecast profit generated from each existing fund, a number of estimates and
assumptions were required to be made including:
>
>
>
>
likely life of each fund;
assumptions as to revaluation of fund assets, maintenance of fee rates and transactional fees;
reduction in overheads as funds are terminated; and
appropriate discount rate to apply to forecast cashflows (refer to note 15 for further information).
(iii)
impairment of intangible assets including goodwill
Determining whether goodwill or other intangible asset is impaired requires an estimation of the fair value less costs
and/or the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation
requires the Group to estimate the future cash flows expected to arise from the cash‑generating unit and a suitable
discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material
impairment loss may arise.
Information on the judgements used in determining the value in use is provided in note 14 for goodwill and note 15
for intangible assets.
The carrying amount of goodwill at 31 December 2017 was $9.8 million (31 December 2016 $1.3 million). The carrying
amount of intangible assets at 31 December 2017 was $15.6 million (31 December 2016 $nil).
(iv)
employee benefits
Employee benefits include share rights granted to staff on commencement of employment and as part of the 2017
bonus, the vesting of which are subject to continuous employment. The value of these grants is amortised over the
vesting period, on the basis that employees do not leave prior to vesting. The value of the grant has been determined by
reference to the trading in the Company’s shares. The amortising period commences from the date employees first had
an expectation of receiving an equity component to their annual bonus, and was assessed as 1 March 2017. Determination
of this date required a degree of judgement. Further information on share based payments is included in note 34.
32
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
(v)
impairment of investments available for sale, interests in associates and joint ventures
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which
is the higher of its fair value less costs to sell and its value in use. The Group assesses impairment of non-financial assets
(other than goodwill and other indefinite life intangible assets) at each reporting date by evaluating conditions specific
to the Group and to the particular asset that may lead to impairment. If an impairment indicator exists, the recoverable
amount of the asset is determined. This involves fair value less costs to sell or value-in-use calculations, which incorporate
a number of key estimates and assumptions. Information about the valuation techniques and inputs used in determining
the fair value of various assets and liabilities is disclosed in notes 27 and 29.
(vi)
impairment of loans and receivables
The recovery of each loan and each account receivable balance is assessed individually. The assessment takes into
account a range of factors including the age of the debt, prior history of the debtor, prior experience in recovery of similar
debts and the particular circumstances of the debtor, for instance if it has entered into administration. Where full
recovery is in doubt a provision for impairment is raised. For further information refer note 10.
(vii) options
The Company granted options to employees and its Chairman prior to its IPO. For accounting purposes, the fair value of
the options is amortised as an expense over the life of the options. Determining the fair value for accounting purposes
required a number of assumptions and judgements to be made, particularly as the Company’s shares had no prior
history of traded price. Refer note 34 for details.
(viii) Revenue recognition
Fees on Corporate Advisory assignments are typically subject to performance criteria and other conditions, including
ones outside of the Group’s control. The Group is required to exercise judgement when recognising revenue, as to
whether it is highly probable that any conditions attached to earning a fee will not affect its ultimate receipt.
b
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by
the Company. Control is achieved when the Company:
> has power over the investee;
>
is exposed to, or has rights, to variable returns from its involvement with the investee; and
> has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power over the investee when
the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally.
The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights
in an investee are sufficient to give it power, including:
>
the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other
vote holders;
> potential voting rights held by the Company, other vote holders or other parties;
>
>
rights arising from other contractual arrangements; and
any additional facts and circumstances that indicate that the Company has, or does not have, the current ability
to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous
shareholders’ meetings.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company
loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year
are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company
gains control until the date when the Company ceases to control the subsidiary.
33
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
1
b
SUMMARyOfSIgNIfICANTACCOUNTINgpOlICIES (cont.)
Basis of consolidation (cont.)
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into
line with the Group’s accounting policies.
All intra‑group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members
of the Group are eliminated in full on consolidation.
c
Revenue recognition
Fee and commission income includes fees from fund management, brokerage, corporate advisory, and underwriting and
is recognised as the related services are performed. Where commissions and fees are subject to clawback or meeting
certain performance hurdles, they are recognised as income when it is highly probable those conditions will not affect
the outcome. Fee and commission income and expenses that are integral to the effective interest rate on a financial
asset or liability are capitalised and included in the effective interest rate and recognised in the income statement over the
expected life of the instrument. Performance fees from Moelis Australia managed unlisted funds are recognised when
the fee can be reliably measured and its receipt is highly probable. Factors that are taken into consideration include:
>
>
the proportion of assets already realised;
returns on assets realised to-date;
> downside valuation on remaining unrealised assets and reliability of those estimates; and
> nature of unrealised investments and their returns.
Dividends and distributions are recognised as income when the Group becomes entitled to the dividend or distribution.
Interest income is brought to account using the effective interest method. The effective interest method calculates the
amortised cost of a financial instrument and allocates the interest income or interest expense over the relevant period.
The effective interest rate is the rate that discounts estimated future cash receipts or payments through the expected
life of the financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset
or liability. Fees and transaction costs associated with loans are capitalised and included in the effective interest rate
and recognised in the income statement over the expected life of the instrument.
Interest income is included with dividend and distribution income as “investment income” in the consolidated statement
of profit or loss and other comprehensive income.
d
operating lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the
lease. In the event that lease incentives are received to enter into operating leases, such incentives are recognised
as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight‑line basis,
except where another systematic basis is more representative of the time pattern in which economic benefits from the
leased asset are consumed.
e
Foreign Currency Transactions
The financial statements of the Group are presented in the currency of the primary economic environment in which the
Group operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial
position of the Group are expressed in Australian dollars (‘$’), which is the functional currency of the Group and the
presentation currency for the consolidated financial statements.
In preparing the consolidated financial statements, transactions in currencies other than the Group’s functional currency
(foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. Foreign exchange
differences arising on translation are recognised in the profit or loss. At the end of each reporting period, monetary items
denominated in foreign currencies are retranslated at the rates prevailing at that date. Non‑monetary items carried at fair
value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was
determined. Non‑monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
The rate used to translate foreign currency denominated assets and liabilities balances at year end was USD 0.7807
and CAD 0.9800.
34
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
f
employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, bonus, annual leave and long
service leave in the period the related service is rendered.
Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using the
remuneration rate expected to apply at the time of settlement.
Liabilities recognised in respect of long term employee benefits are measured as the present value of the estimated
future cash outflows to be made by the Group in respect of services provided by employees up to the reporting date.
g
Taxation
The Group is a tax‑consolidated group (Tax Group) under Australian taxation law, of which Moelis Australia Limited is
the head entity. As a result, Moelis Australia Limited is subject to income tax as the head entity of the Tax Group. The
consolidated current and deferred tax amounts for the Tax Group are allocated to the members of the Tax Group using
the ‘separate taxpayer within group’ approach, with deferred taxes being allocated by reference to the carrying amounts
in the financial statements of each member entity and the tax values applying under tax consolidation. Current tax
liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits arising from this
allocation process are then accounted for as immediately assumed by the head entity, as under Australian taxation
law the head entity has the legal obligation (or right) to these amounts.
Entities within the Tax Group have entered into a tax funding agreement and a tax sharing agreement with the head
entity. Under the terms of the tax funding agreement, Moelis Australia Limited and its subsidiaries have agreed to pay
a tax equivalent payment to or from the head entity equal to the tax liability or asset assumed by the head entity for that
period as noted above. The amount arising under the tax funding arrangement for each period is equal to the tax liability
or asset assumed by the head entity for that period and no contribution from (or distribution to) equity participants arises
in relation to income taxes.
The tax sharing agreement entered into between members of the Tax Group provides for the determination of the
allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations or if an
entity should leave the Tax Group. The effect of the tax sharing agreement is that each company in the Tax Group’s liability
for tax payable by the Tax Group is limited to the amount payable to the head entity under the tax funding arrangement.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported
in the consolidated statement of comprehensive income because of items of income or expense that are taxable or
deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by the end of the reporting period.
deferred Tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the
consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred
tax liabilities are generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that
taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax
assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition
(other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit
nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries
and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets
arising from deductible temporary differences associated with such investments and interests are only recognised
to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the
temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that
it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
35
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
SUMMARyOfSIgNIfICANTACCOUNTINgpOlICIES (cont.)
taxation (cont.)
1
g
deferred tax (cont.)
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the
liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted
by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences
that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle
the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends
to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other
comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from the initial
accounting for a business combination, the tax effect is included in the accounting for the business combination.
h
plant and equipment
Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful
lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed
at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
The depreciation periods are: computer and office equipment 3 years, furniture and fittings 7 years and leasehold
improvements are amortised over the term of the lease.
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the
difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
i
impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation
can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated
to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a post‑tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows
have not been adjusted.
If the recoverable amount of an asset (or cash‑generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash‑generating unit) is reduced to its recoverable amount. An impairment loss is
recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease.
When an impairment loss subsequently reverses, the carrying amount of the asset (or cash‑generating unit) is increased
to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating
unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset
is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
36
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
j
provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event,
it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount
of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation
at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a
provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present
value of those cash flows.
onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract
is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations
under the contract exceed the economic benefits expected to be received from the contract.
loans and receivables
The recovery of each loan and each account receivable balance is assessed individually for any evidence of impairment.
The assessment takes into account a range of factors including the age of the debt, prior history of the debtor, prior
experience in recovery of similar debts and the particular circumstances of the debtor, for instance if it has entered into
administration. Where full recovery is in doubt, a provision for impairment is raised.
k
goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
(i) where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part
of the cost of acquisition of an asset or as part of an item of expense; or
(ii) for receivables and payables that are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables
or payables.
Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from
investing and financing activities that is recoverable from, or payable to, the taxation authority is classified within
operating cash flows.
l
share-based payments transactions of the group
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value
of the equity instruments at the grant date. Details regarding the determination of fair value of equity-settled share-based
transactions are set out in note 34.
The fair value determined at the grant date of the equity‑settled share‑based payments is expensed on a straight‑line
basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a
corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number
of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in
profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment
to the equity-settled employee benefits reserve.
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of
the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured
at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty
renders the service.
37
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
1
m
SUMMARyOfSIgNIfICANTACCOUNTINgpOlICIES (cont.)
Financial instruments
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions
of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at
fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities,
as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised immediately in profit or loss.
Financial assets
Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit
or loss’ (FVTPL), ‘held‑to‑maturity’ investments, ‘available‑for‑sale’ (AFS) financial assets and ‘loans and receivables’.
The classification depends on the nature and purpose of the financial assets and is determined at the time of initial
recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date
basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within
the time frame established by regulation or convention in the marketplace.
Available-for-sale financial assets (AFs financial assets)
AFS financial assets are non‑derivatives that are either designated as AFS or are not classified as (i) loans and receivables,
(i) held‑to‑maturity or (iii) financial assets at fair value through profit or loss.
Listed shares held by the Group that are traded in an active market are classified as AFS and are stated at fair value.
The Group also has investments in unlisted shares that are not traded in an active market but that are also classified
as AFS financial assets and are held at cost. Fair value is determined in the manner described in note 26. Gains and losses
arising from changes in fair value are recognised in other comprehensive income and accumulated in the investments
revaluation reserve, with the exception of impairment losses, which are recognised in profit or loss. Where the investment
is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments
revaluation reserve is reclassified to profit or loss.
impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting
period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more
events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment
have been affected.
For AFS equity instruments, including listed or unlisted shares, objective evidence of impairment includes information
about significant changes with an adverse effect that have taken place in the technological, market, economic or legal
environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may
not be recovered. A significant or prolonged decline in the fair value of the security below its cost is considered
to be objective evidence of impairment for shares classified as available‑for‑sale.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets.
When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other
comprehensive income are reclassified to profit or loss in the period.
In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed through
profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income
and accumulated under the heading of investments revaluation reserve. In respect of AFS debt securities, impairment
losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be
objectively related to an event occurring after the recognition of the impairment loss.
38
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
Financial liabilities and equity instruments
Classification as debt or equity
Debt or equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance
with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by a group entity are recognised at the proceeds received, net of direct issue costs.
Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss
is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.
Financial liabilities
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.
other financial liabilities
Other financial liabilities, including borrowings and trade and other payables, are initially measured at fair value,
net of transaction costs.
n
loans receivable
Loans and receivables are recognised at fair value on settlement date, when cash is advanced to the borrower and are
held at amortised cost. A provision for impairment is recognised when there is objective evidence of impairment, and is
calculated based on the present value of expected future cash flows, discounted using the original effective interest rate.
o
goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of the acquisition of the
business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Company’s cash-generating units (or groups
of cash‑generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently
where there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less
than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated
to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit.
Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill
is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination
of the profit or loss on disposal.
p
investments in associates and joint ventures
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate
in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the
net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial
statements using the equity method of accounting.
39
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
1
p
SUMMARyOfSIgNIfICANTACCOUNTINgpOlICIES (cont.)
investments in associates and joint ventures (cont.)
Under the equity method, an investment in an associate or a joint venture is initially recognised in the consolidated
statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and
other comprehensive income of the associate or joint venture. When the Group’s share of losses of an associate or
a joint venture exceeds the Group’s interest in that associate or joint venture (which includes any long‑term interests
that, in substance, form part of the Group’s net investment in the associate or joint venture), the Group discontinues
recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred
legal or constructive obligations or made payments on behalf of the associate or joint venture. An investment in an
associate or a joint venture is accounted for using the equity method from the date on which the investee becomes
an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the
cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee
is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s
share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment,
is recognised immediately in profit or loss in the period in which the investment is acquired.
The requirements of AASB 139 Financial Instruments: Recognition and Measurement are applied to determine whether
it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate or a joint venture.
When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance
with AASB 136 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and
fair value less costs of disposal) with its carrying amount. Any impairment loss recognised forms part of the carrying
amount of the investment. Any reversal of that impairment loss is recognised in accordance with AASB 136 to the extent
that the recoverable amount of the investment subsequently increases.
q
intangible assets
intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised
at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to their initial recognition, intangible assets acquired in a business combination are reported at cost less
accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over
their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting
period, with the effect of any changes in estimate being accounted for on a prospective basis.
For intangible assets that have a finite useful life, an assessment is made at each reporting date for indications
of impairment. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and value in
use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash inflows that are largely independent of the cash inflows from other assets or groups of assets (cash-
generating units). Intangible assets (other than goodwill) that suffered impairment are reviewed for possible reversal
of the impairment at each reporting date.
derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal.
Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal
proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.
r
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets
transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests
issued by the Group in exchange for control of the acquiree. Acquisition‑related costs are generally recognised in profit
or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value
at the date of acquisition.
40
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non‑controlling
interests in the acquiree, and the fair value of the acquirer’s previously held equity interests in the acquiree (if any)
over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after
reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed
exceeds the sum of the consideration transferred, the amount of any non‑controlling interests in the acquiree and
the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately
in profit or loss as a bargain purchase gain.
Non‑controlling interests that are present ownership interests and entitle their holders to a proportionate share of the
entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’
proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement
basis is made on a transaction-by-transaction basis.
When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from
a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and
included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent
consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding
adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information
obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and
circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement
period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified
as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity.
Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in
accordance with AASB 139 Financial Instruments, or AASB 137 Provisions, Contingent Liabilities and Contingent Assets,
as appropriate, with the corresponding gain or loss being recognised in profit or loss.
When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured
to its acquisition-date fair value and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from
interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive
income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination
occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional
amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised,
to reflect new information obtained about facts or circumstances that existed at the acquisition date that, if known,
would have affected the amounts recognised at that date.
s
earnings per share
Basic earnings per share is calculated by dividing the Group’s profit after income tax by the weighted average number
of ordinary shares outstanding during the financial year.
Diluted earnings per share is calculated by dividing the Group’s profit after income tax adjusted by profit attributable to
all the dilutive potential ordinary shares by the weighted average number of ordinary shares and potential ordinary shares
that would be issued on the exchange of all the dilutive potential ordinary shares into ordinary shares.
t
Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown
in equity as a deduction from the proceeds. Contributed equity includes shareholder contributions made prior to the
Company’s IPO.
u
Comparatives
Where necessary, comparative information has been restated to conform to changes in presentation in the current year.
41
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
AppliCAtion oF new AnD reviseD AustrAliAn ACCountinG stAnDArDs
2
Amendments to Accounting standards that are mandatorily effective for the current reporting period
The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting
Standards Board (the AASB) that are relevant to its operations and effective for an accounting period that begins
on or after 1 January 2017.
AAsB 2014-9 Amendments to Australian Accounting standards – equity Method in separate Financial statements
The amendments to AASB 127 Separate Financial Statements, allow an entity to account for investments in subsidiaries,
joint ventures and associates in its separate financial statements:
> At cost;
>
In accordance with AASB 9 Financial Instruments (or, where AASB 9 is not applied, AASB 139 Financial Instruments:
Recognition and Measurement); or
> Using the equity method as described in AASB 128 Investments in Associates and Joint Ventures.
The company has continued to account for its investments in subsidiaries, joint ventures and associates at cost in its
separate financial statements.
AAsB 2015-1 Amendments to Australian Accounting standards – Annual improvements to Australian Accounting
standards 2012-2014 Cycle
The Group has applied these amendments for the first time in the current year. The amendments impact various
Accounting Standards, which are summarised below:
The amendments to AASB 134 Interim Financial Reporting make provision for disclosures required by the Standard to be
given either in the interim financial statements or incorporated by cross-reference from the interim financial statements
to some other statement that is available to users of the financial statements on the same terms as the interim financial
statements and at the same time.
The application of these amendments has had no effect on the Group’s consolidated financial statements.
AAsB 2015-2 Amendments to Australian Accounting standards – disclosure initiative: Amendments to AAsB 101
The Group has applied these amendments for the first time in the current year. The amendments clarify that an entity
need not provide a specific disclosure required by an AASB if the information resulting from that disclosure is not material
and give guidance on the bases of aggregating and disaggregating information for disclosure purposes. However,
the amendments reiterate that an entity should consider providing additional disclosures when compliance with the
specific requirements in AASB is insufficient to enable users of financial statements to understand the impact of
particular transactions, events and conditions on the entity’s financial position and financial performance.
In addition, the amendments clarify that an entity’s share of the other comprehensive income of associates and joint
ventures accounted for using the equity method should be presented separately from those arising from the Group,
and should be separated into the share of items that, in accordance with other Accounting Standards:
(a) Will not be reclassified subsequently to profit or loss.
(b) Will be reclassified subsequently to profit or loss when specific conditions are met.
As regards the structure of the financial statements, the amendments provide examples of systematic ordering or grouping
of the notes.
The application of these amendments has not had a material presentation impact on the financial performance or financial
position of the Group.
42
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
standards and interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Group has not applied the following new and revised Australian
Accounting Standards, interpretations and amendments that have been issued but not yet effective. The Group is currently
assessing the impact of these standards.
sTAndARd/inTeRpReTATion
AASB 9 ‘Financial Instruments’, AASB 2010-7 Amendments
to Australian Accounting Standards arising from AASB 9
(December 2010), AASB 2014‑1 Amendments to Australian
Accounting Standards (Part E – Financial Instruments), AASB
2014-7 Amendments to Australian Accounting Standards arising
from AASB 9 (December 2014)
AASB 15 ‘Revenue from Contracts with Customers’ and AASB
2014-5 ‘Amendments to Australian Accounting Standards arising
from AASB 15’, AASB 2015-8 ‘Amendments to Australian Accounting
Standards – Effective date of AASB 15’, AASB 2016-3 ‘Amendments
to Accounting Standards – Clarifications to AASB 15’
AASB 16 ‘Leases’
AASB 2017-1 ‘Amendments to Australian Accounting Standards
– Annual Improvements 2014-2016 Cycle and Other Amendments’
AASB 2016-5 ‘Amendments to Australian Accounting
Standards – Classification and Measurement of Share-based
Payment Transactions’
AASB 2015-10 ‘Amendments to Australian Accounting Standards
– Effective Date of Amendments to AASB 10 and AASB 128
AASB 2017-7 ‘Long Term Interests in Associates and
Joint Ventures’ (amendments to AASB128)
AASB Interpretation 23: ‘Uncertainty Over Income Tax Treatments’
AASB2017-4 amendments to Australian Accounting Standards
– uncertainty over income tax treatments
AASB Interpretation 22: ‘Foreign Currency Transactions
and Advance Considerations’
eFFeCTive FoR AnnUAl
RepoRTing peRiods
Beginning on oR AFTeR
expeCTed To Be
iniTiAlly Applied in THe
FinAnCiAl yeAR ending
1 January 2018
31 December 2018
1 January 2018
1 January 2019
31 December 2018
31 December 2019
1 January 2018
31 December 2018
1 January 2018
31 December 2018
1 January 2018
31 December 2018
1 January 2018
31 December 2018
1 January 2019
31 December 2019
1 January 2018
31 December 2018
AAsB 9 Financial instruments
AASB 9 issued in December 2009 introduced new requirements for the classification and measurement of financial assets.
AASB 9 was subsequently amended in December 2010 to include requirements for the classification and measurement
of financial liabilities and for recognition, and in December 2013 to include the new requirements for general hedge
accounting. Another revised version of AASB 9 was issued in December 2014 mainly to include: (a) impairment requirements
for financial assets (b) limited amendments to the classification and measurement requirements by introducing a ‘fair value
through other comprehensive income’ (FVTOCI) measurement category for certain simple debt instruments.
Key requirements of AASB 9:
> All recognised financial assets that are within the scope of AASB 9 are required to be subsequently measured at
amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is
to collect the contractual cash flows, and that have contractual cash flows that are solely payments for principal and
interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting
periods. Debt instruments that are held within a business model whose objective is achieved both by collecting
contractual cash flows and selling financial assets, and that have contractual terms that give rise on specified dates
to cash flows that are solely payments of principal and interest on the principal amount outstanding, are generally
measured at FVTOCI. All other debt instruments and equity investments are measured at their fair value at the end
of subsequent accounting periods. In addition, under AASB 9, entities may make an irrevocable election to present
subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive
income, with only dividend income generally recognised in profit or loss.
43
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
ApplICATIONOfNEwANDREVISEDAUSTRAlIANACCOUNTINgSTANDARDS (cont.)
2
standards and interpretations in issue not yet adopted (cont.)
aasB 9 financial instruments (cont.)
> With regard to the measurement of financial liabilities designated as at fair value through profit or loss, AASB 9
requires that the amount of changes in the fair value of a financial liability that is attributable to changes in the credit
risk of that liability is presented in other comprehensive income, unless the recognition of such changes in other
comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value
attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under AASB 139
Financial Instruments: Recognition and Measurement, the entire amount of the change in the fair value of the
financial liability designated as fair value through profit or loss is presented in profit or loss.
>
In relation to the impairment of financial assets, AASB 9 requires an expected credit loss model, as opposed to an
incurred credit loss model under AASB 139. The expected credit loss model requires an entity to account for expected
credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk
since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit
losses are recognised.
> The new general hedge accounting requirements retain the three types of hedge accounting mechanisms currently
available in AASB 139. Under AASB 9, greater flexibility has been introduced to the types of transactions eligible
for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the
types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness
test has been overhauled and replaced with the principle of an ‘economic relationship’. Retrospective assessment of
hedge effectiveness is also no longer required. Enhanced disclosure requirements about an entity’s risk management
activities have also been introduced.
AASB 9 applies to annual periods beginning on or after 1 January 2018. The directors of the Company anticipate that the
application of AASB 9 in the future may have a material impact on amounts reported in respect of the Group’s financial
assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of the effect of AASB 9
until the Group undertakes a detailed review.
Based on an analysis of the Group’s financial assets and financial liabilities as at 31 December 2017 on the basis of the
facts and circumstances that exist at that date, the directors of the Company have assessed the impact of AASB 9
to include:
>
Listed shares classified as available for sale as disclosed in note 26: these shares qualify for designation as
measured at FVOCI under AASB 9, however, the fair value gains or losses accumulated in the investment revaluation
reserve will no longer be subsequently reclassified to profit or loss under AASB 9, which is different from the current
treatment. This will affect the amounts recognised in the Group’s profit or loss and other comprehensive income but
will not affect total comprehensive income
> Receivables and loans as disclosed in note 10 and 16: these assets require an assessment of impairment to be based
on an expected credit loss model. While the Group’s history of credit losses on its trade receivables is low, the Group
has recently provided commercial loans. The use of an expected credit loss model may result in a higher provision
for bad debt expense.
AAsB 15 Revenue from Contracts with Customers
The Group recognises revenue from the following major sources:
> Advisory revenue from corporate advisory services
> Commission revenue from institutional stockbroking services
> Asset management fees from asset management services, including performance fees
The Directors have assessed that advisory revenue and performance fees have separate performance obligations
within the stream. Revenue will be recognised when the performance obligations have been satisfied and when the
goods and services underlying the particular performance obligation is transferred to the customer. This is similar to
the current identification of separate revenue components under AASB 118 Revenue.
44
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
AAsB 16 leases
AASB 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for
both lessors and lessees. AASB 16 will supercede the current lease guidance including AASB 117 Leases and the related
interpretations when it becomes effective.
AASB 16 distinguishes leases and service contacts on the basis of whether an identified asset is controlled by a
customer. Distinctions of operating leases (off balance sheet) and finance leases (on balance sheet) are removed for
lessee accounting, and are replaced by a model where a right-of-use asset and a corresponding liability have to be
recognised for all leases by lessees (i.e. all on balance sheet) except for short‑term leases or leases of low value assets.
The right‑of‑use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions)
less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease
liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the
lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others.
Furthermore, the classification of cash flows will also be affected as operating lease payments under AASB 117 are
presented as operating cash flows; whereas under the AASB 16 model, the lease payments will be split into a principal
and an interest portion which will be presented as financing and operating cash flows respectively.
In contrast to lessee accounting, AASB 16 substantially carries forward the lessor accounting requirements in AASB 117,
and continues to require a lessor to classify a lease either as an operating lease or a finance lease.
Furthermore, extensive disclosures are required by AASB 16.
The Group has started an initial assessment of the potential impact on its consolidated financial statements. So far,
the most significant impact identified is that the Group will recognise new assets and liabilities for the operating leases
of its premises. In addition, the nature of the expenses related to those leases will now change as AASB 16 replaces the
straight‑line operating lease expense with a depreciation charge for right‑of‑use assets and interest expense on lease
liabilities. The Group has not yet decided whether it will use the optional exemptions. It is not practicable to provide a
reasonable estimate of the financial effect until the directors complete the review.
AAsB 2016-5 Amendments to Australian Accounting standards – Classification and Measurement of share-Based
payment Transactions
The amendments clarify the following:
1.
In estimating the fair value of a cash-settled share-based payment, the accounting for the effects of vesting and
non-vesting conditions should follow the same approach as for equity-settled share-based payments.
2. Where tax law or regulation requires an entity to withhold a specified number of equity instruments equal to the
monetary value of the employee’s tax obligation to meet the employee’s tax liability which is then remitted to the
tax authority, i.e. the share‑based payment arrangement has a ‘net settlement feature’, such an arrangement should
be classified as equity-settled in its entirety, provided that the share-based payment would have been classified as
equity-settled had it not included the net settlement feature.
3. A modification of a share-based payment that changes the transaction from cash-settled to equity-settled should
be accounted for as follows:
(i) the original liability is derecognised;
(ii) the equity‑settled share‑based payment is recognised at the modification date fair value of the equity instrument
granted to the extent that services have been rendered up to the modification date; and
(iii) any difference between the carrying amount of the liability at the modification date and the amount recognised in
equity should be recognised in profit or loss immediately.
The amendments are effective for annual reporting periods beginning on or after 1 January 2018 with earlier application
permitted. Specific transition provisions apply. The directors of the Company do not anticipate that the application of the
amendments in the future will have a significant impact on the Group’s consolidated financial statements as the Group
does not have any cash‑settled share‑based payment arrangements or any withholding tax arrangements with tax
authorities in relation to share-based payments.
45
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
ApplICATIONOfNEwANDREVISEDAUSTRAlIANACCOUNTINgSTANDARDS (cont.)
2
standards and interpretations in issue not yet adopted (cont.)
AAsB 2014-10 Amendments to Australian Accounting standards – sale or Contribution of Assets between an
investor and its Associate or Joint venture AAsB 10 & AAsB 28 and AAsB 2015-10 Amendments to Australian
Accounting standards – effective date of Amendments to AAsB 10 and AAsB 128
The amendments to AASB 10 Consolidated Financial Statements and AASB 128 Investment in Associates and Joint
Ventures deal with situations where there is a sale or contribution of assets between an investor and its associate or
joint venture. Specifically, the amendments state that gains or losses resulting from the loss of control of a subsidiary
that does not contain a business in a transaction with an associate or joint venture that is accounted for using the equity
method, are recognised in the parent’s profit or loss only to the extent of the unrelated investors’ interests in that associate
or joint venture. Similarly, gains and losses resulting from the remeasurement of investments retained in any former
subsidiary (that has become an associate or joint venture that is accounted for using the equity method) to fair value
are recognised in the former parent’s profit or loss only to the extent of the unrelated investors’ interests in the new
associate or joint venture.
The effective date of the amendments was amended by AASB 2015-10 and now applies for annual reporting periods
beginning on or after 1 January 2018. The directors of the Company do not anticipate that the application of these
amendments will have a significant impact on the Group’s consolidated financial statements.
There are no other standards that are not yet effective and that would be expected to have a material impact on the entity
in the current or future reporting periods and on foreseeable future transactions.
3
Fee AnD CoMMission expense
Costs associated with execution and clearing of securities trading
Commissions and fees paid on asset management revenue
total fee and commission expense
2017
$’000
961
5,820
6,781
2016
$’000
1,075
7,590
8,665
4
4.1
seGMent inForMAtion
services from which reportable segments derive their revenues
AASB 8 Operating Segments requires the ‘management approach’ to disclose information about the Group’s reportable
segments. The financial information is reported on the same basis as used by senior management for evaluating operating
segment performance and for deciding how to allocate resources to operating segments.
The Group is divided into the following two operating segments:
> Corporate advisory and equities (“CA&E”); and
> Asset management.
The corporate advisory and equities segment provides corporate advice, underwriting and institutional stockbroking
services.
The asset management segment provides asset and fund management services to Moelis managed funds and to
individual clients.
Some of the financial information of the two operating segments used by Management is produced using different
measures and different classifications to that used in preparing the statutory statement of comprehensive income.
Differences in measurement may occur if Management disregards one‑off transactions costs or non‑cash expenses
such as intangible amortisation in measuring the operating business’ performance. A description of these differences
and their impact is included in the table below.
46
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
4.2
segment revenues and results
The following is an analysis of the Group’s revenue and results from continuing operations by reportable segment.
2017
CA&e
$000s
AsseT MAn
$000s
ToTAl
opeRATing
segMenTs
$000s
diFFeRenCes in
MeAsUReMenT
$000s
ClAssiFiCATion
oF oTHeR
CoMpReHensive
inCoMe
$000s
sTATeMenT oF
CoMpReHensive
inCoMe
$000s
Fee and commission income
62,859
44,030
106,889
–
–
106,889
Net income1
Expenses2
Earnings before interest, tax
and depreciation & amortisation
Interest income
Interest expense
Depreciation and amortisation
Profit before tax
Tax
Profit after tax
Other comprehensive income
total comprehensive income
63,756
(43,262)
43,412
(22,282)
107,168
(65,544)
–
4,708
(3,274)
–
103,894
(60,836)
20,494
21,130
41,624
4,708
(3,274)
43,058
219
(98)
(186)
20,429
(6,232)
14,197
–
14,197
721
(390)
(80)
21,381
(6,524)
14,857
–
14,857
940
(488)
(266)
41,810
(12,756)
29,054
–
29,054
–
–
(702)
4,006
(1,201)
2,805
–
2,805
–
–
–
(3,274)
982
(2,292)
2,292
–
940
(488)
(968)
42,542
(12,975)
29,567
2,292
31,859
2016
CA&e
$000s
AsseT MAn
$000s
ToTAl
opeRATing
segMenTs
$000s
diFFeRenCes in
MeAsUReMenT
$000s
ClAssiFiCATion
oF oTHeR
CoMpReHensive
inCoMe
$000s
sTATeMenT oF
CoMpReHensive
inCoMe
$000s
Fee and commission income
47,391
23,191
70,582
–
–
70,582
Net income1
Expenses2
Earnings before interest, tax
and depreciation & amortisation
Interest income
Interest expense
Depreciation and amortisation
Profit before tax
Tax
Profit after tax
Other comprehensive income
total comprehensive income
46,193
(33,637)
15,601
(8,461)
61,794
(42,098)
–
(5,727)
12,556
7,140
19,696
(5,727)
263
–
(191)
12,628
(3,788)
8,840
–
8,840
68
–
(82)
7,126
(2,138)
4,988
–
4,988
331
–
(273)
19,754
(5,926)
13,828
–
13,828
–
–
–
(5,727)
1,661
(4,066)
–
(4,066)
464
–
464
–
–
–
464
(139)
325
(325)
–
62,258
(47,825)
14,433
331
–
(273)
14,491
(4,404)
10,087
(325)
9,762
1 Excludes interest income which is shown on a separate line.
2 Excludes interest expense, depreciation and amortisation which are shown on separate lines.
47
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
4
4.2
SEgMENTINfORMATION (cont.)
segment revenues and results (cont.)
diFFeRenCes in MeAsUReMenT
Listing costs1
Termination of Onerous Contract2
Armada acquisition adjustments3
Shares issued to staff as remuneration4
impact on profit before tax
Tax thereon
impact on profit after tax
2017
$’000
(989)
(189)
(3,262)
8,446
4,006
(1,201)
2,805
2016
$’000
–
(5,727)
–
–
(5,727)
1,661
(4,066)
1 The costs relating to the Company’s Initial Public Offering.
2 Relates to an agreement accounted for as an onerous contract (refer note 35). The agreement was terminated in April 2017.
3 The adjustment for Armada comprises legal and other acquisition expenses, the amortisation of its intangible assets and the share based payment
expenses relating to the shares issued to Armada’s vendors (now Group employees).
4
In the financial statements the value of Share Rights granted to employees is amortised over the vesting period (which is up to five years), with only
a portion of the value being expensed in 2017. The underlying result includes the full value of the grant as an expense in 2017.
4.3
Revenue from major products and services
The following is an analysis of the Group’s revenue from continuing operations from its major products and services.
Corporate advice
Equity services
Management fees
Transaction fees
Performance fees
segMenT
CA&E
CA&E
Asset Management
Asset Management
Asset Management
total revenue from major products and services
4.4 geographical information
The Group operates in Australia.
4.5
information about major customers
2017
$’000
52,298
10,561
35,745
8,285
–
106,889
2016
$’000
36,737
10,654
21,824
820
547
70,582
Total revenue includes $18.8 million received from one of the funds managed by the Group. No other single customer
contributed 10% or more to the Group’s revenue for both 2017 and 2016.
5
investMent inCoMe
Continuing operations
Interest income on cash and bank balances
Dividends and distributions from investments for available for sale financial assets
total investment income
2017
$’000
940
317
1,257
2016
$’000
331
122
453
Income relating to realised gains/(losses) on financial assets classified at fair value through profit or loss is included
in ‘other gains and losses’ in note 6.
48
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
6
other GAins AnD losses
Gain on disposal of available-for-sale investments
Net foreign exchange gains/(losses)
total other gains and losses
7
7.1
inCoMe tAx
income tax recognised in profit or loss
Profit before tax from continuing operations
Prima facie tax at the Australian tax rate of 30%
Effect of income that is exempt from tax
Non‑deductible expenses
Sundry items
income tax expense
Represented by:
Current tax
Deferred tax
income tax expense
7.2
income tax recognised in other comprehensive income
Deferred tax
Fair value remeasurement of available-for-sale investments
Share of revaluations in associates
income tax expense recognised in other comprehensive income
7.3
Current tax assets and liabilities
Current tax liabilities
income tax payable
7.4
deferred tax balances
Deferred tax assets/(liabilities)
49
2017
$’000
3,902
(455)
3,447
2017
$’000
42,542
(12,763)
207
(784)
365
(12,975)
(10,786)
(2,189)
(12,975)
2017
$’000
572
(1,554)
(982)
2016
$’000
37
76
113
2016
$’000
14,492
(4,348)
–
(57)
–
(4,405)
(4,899)
494
(4,405)
2016
$’000
139
–
139
2017
$’000
2016
$’000
5,957
4,498
2017
$’000
(4,767)
2016
$’000
3,282
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
7
7.4
INCOMETAx (cont.)
deferred tax balances (cont.)
2017
$’000
Plant & equipment
AFS financial assets
Interest in associates
Deferred revenue
Provisions
Doubtful debts
Expense accruals
Intangible assets
Share based payments
Other
total
2016
$’000
Property, plant & equipment
AFS financial assets
Deferred revenue
Provisions
Doubtful debts
Expense accruals
Other
total
8
interest expense
Interest on unsecured notes
total interest expense
opening
BAlAnCes
ReCognised in
pRoFiT oR loss
ReCognised
in oTHeR
CoMpReHensive
inCoMe
(aCquisitions)/
disposAls
Closing
BAlAnCe
44
(383)
–
(1,027)
4,061
16
505
–
–
66
3,282
(9)
–
975
242
(2,818)
227
(1,308)
211
222
435
(1,823)
–
572
(1,554)
–
–
–
–
–
–
–
(982)
–
–
–
–
(365)
–
–
(4,879)
–
–
(5,244)
35
189
(579)
(785)
878
243
(803)
(4,668)
222
501
(4,767)
opening
BAlAnCes
ReCognised in
pRoFiT oR loss
ReCognised
in oTHeR
CoMpReHensive
inCoMe
ACqUisiTions/
disposAls
Closing
BAlAnCe
31
(522)
(328)
3,053
23
321
70
2,648
13
–
(700)
1,009
(7)
184
(4)
495
–
139
–
–
–
–
–
139
–
–
–
–
–
–
–
–
2017
$’000
488
488
2017
$’000
2,400
903
989
1,745
6,037
44
(383)
(1,028)
4,062
16
505
66
3,282
2016
$’000
–
–
2016
$’000
11
611
–
708
1,330
Refer note 18, for more detail on the unsecured note programme.
9
other expenses
Charitable donations
Professional fees
IPO costs
Other
total other expenses
The charitable donations paid by the Group in 2017 were made to the Moelis Australia Foundation, a registered charity,
and were made in response to some Group staff members electing not to receive some or all of the bonus that they might
otherwise have been awarded.
50
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
10
reCeivABles
Accounts receivable
Fees receivable
Interest receivable
Affiliate receivable – Moelis & Company
Associate receivable – GWP Credit Fund
Sundry debtors
Provision for bad debts
total receivables
2017
$’000
836
15,857
26
–
–
1,123
(808)
17,034
2016
$’000
667
15,728
38
185
588
245
(53)
17,398
Fees receivable disclosed above include amounts (see below for aged analysis) that are past due at the end of the
reporting period for which the Group has not recognised an allowance for doubtful debts because the amounts are still
considered recoverable.
Age of receivables that are past due but not impaired
60-90 days
90-120 days
total
Average age (days)
Movement in the allowance for doubtful debts
Balance at beginning of the year
Impairment losses recognised on receivables
Amounts written off during the year as uncollectible
Impairment losses reversed
Balance at end of the year
2017
$’000
303
577
880
113
2017
$’000
53
770
–
(15)
808
2016
$’000
–
114
114
135
2016
$’000
78
–
(25)
53
In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the
trade receivable from the date credit was initially granted up to the end of the reporting period.
Included in the allowance for doubtful debts are individually impaired trade receivables amounting to $770,000
(31 December 2016 $nil) which have been placed under liquidation. The impairment recognised represents the difference
between the carrying amount of these trade receivables and the present value of the expected liquidation proceeds.
11
OThERASSETS(CURRENT)
Prepayments
Loans to employees
Other
total other assets
2017
$’000
686
348
525
1,559
2016
$’000
382
1,602
99
2,083
51
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
2017
$’000
10,000
2,700
1,539
14,239
2017
$’000
257
337
(207)
387
202
45
(22)
225
–
81
(4)
77
207
342
(33)
516
666
805
(266)
1,205
2016
$’000
–
500
1,273
1,773
2016
$’000
241
193
(177)
257
164
56
(18)
202
–
–
–
–
285
–
(78)
207
690
249
(273)
666
12
restriCteD CAsh
Cash held by Employee Share Trust
Collateral held by equities clearing house
Cash supporting premises bonds
total restricted cash
13
plAnt AnD equipMent
office equipment – at cost
Balance at beginning of year
Additions
Depreciation
Balance at end of year
Furniture and fixtures – at cost
Balance at beginning of year
Additions
Depreciation
Balance at end of year
Computer software – at cost
Balance at beginning of year
Additions
Depreciation
Balance at end of year
leasehold improvements – at cost
Balance at beginning of year
Additions
Depreciation
Balance at end of year
Consolidated
Balance at beginning of year
Additions
Depreciation expense
Balance at end of year
52
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
Office equipment – at cost
Less accumulated depreciation
total office equipment
Furniture and fixtures – at cost
Less accumulated depreciation
total furniture and fixtures
Computer software – at cost
Less accumulated depreciation
total computer software
Leasehold improvements – at cost
Less accumulated depreciation
total leasehold improvements
2017
$’000
1,391
(1,005)
386
300
(75)
225
81
(3)
78
804
(288)
516
2016
$’000
1,055
(798)
257
255
(53)
202
–
–
–
462
(255)
207
total plant and equipment
1,205
666
14 GooDwill
Cost
Accumulated impairment losses
total goodwill
Goodwill arose from:
Acquisition of Foresight Securities (2010)
Acquisition of Armada Funds Management (2017)
total goodwill
2017
$’000
9,827
–
9,827
1,326
8,501
9,827
2016
$’000
1,326
–
1,326
1,326
–
1,326
53
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
14 gOODwIll (cont.)
The recoverable amounts of the two items of goodwill are determined based on a value in use calculation which uses
post‑tax cash flow projections based on financial budgets, using the following assumptions:
Timeframe
Post‑tax discount rate
CGU to which goodwill is allocated
Amount of goodwill allocated to CGU (thousands)
FoResigHT
ARMAdA
5 years
7.0%
CA & E
1,326
5 years
8.5%
Asset Mangement
8,501
The following elements have been reflected in the calculation of the value in use:
1. an estimate of future cash flows the entity expects to derive from the asset;
2. the time value of money, represented by the current market risk-free rate of interest;
3. the price for bearing the uncertainty inherent in the asset; and
4. other factors, such as illiquidity, that market participants would reflect in pricing the future cash flows the entity
expects to derive from the asset.
sensiTiviTy
A 5% reduction in cash flows
An increase in the post‑tax discount rate to 15%
A decrease in exit value from 3.5% to 2.5%
15
intAnGiBle Assets
Carrying amounts of:
Identifiable intangible assets – Armada Funds Management
Cost
Balance at 1 January 2017
Acquisitions through business combinations: Armada Funds Management
Balance at 31 December 2017
Accumulated amortisation and impairment
Balance at 1 January 2017
Amortisation expense
Balance at 31 December 2017
iMpACT on iMpAiRMenT
AssessMenT
no impact
no impact
no impact
2017
$’000
2016
$’000
15,560
–
16,262
16,262
–
(702)
(702)
–
–
–
–
–
–
–
During the year, the Group acquired all of the shares in Rockford Pty Ltd, the holding company of Armada Funds
Management a real estate fund manager (refer note 33 for details of the acquisition). Of the total consideration,
$16,262,000 was attributed to the aggregate value of the management rights of each of Armada’s existing funds.
54
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
The aggregate value of intangible assets acquired was determined as the net present value of the forecast management
fees less operating expenses, based on the expected lives of each fund which ranged from 2 years and 7 months to 7 years
and nine months.
The amortisation of the aggregate value of the intangible assets over their useful lives is based on the forecast profile
of the profit generated by the management of the funds, and is reassessed at the end of each reporting period.
The aggregate recoverable amount of the intangible assets is determined based on a value in use calculation which uses
post‑tax cash flow projections based on financial budgets over 8 years and a post‑tax discount rate of 8.5% per annum.
The following elements have been reflected in the calculation of the value in use:
1. expectations as to the likely lives of each fund (ranging from 2 years to 7 years and nine months).
2. expectations about variations to management fee rates, and amount and timing of transactional fees.
3. the reduction in operating costs as individual funds terminate.
4. a discount rate that reflects the relative security of the cashflows.
sensiTiviTy
An increase in the discount rate to 10.5%
A decrease in the expected life of each fund by one year
16
loAns reCeivABle
Loans to employees
Loans to third parties
total loans receivable
iMpACT on iMpAiRMenT
AssessMenT
no impact
$1.3m
2017
$’000
–
42,500
42,500
2016
$’000
243
–
243
Loans to third parties comprise two commercial loans provided to Australian corporates in December 2017. The
loans have terms of between one and three years and are secured against the assets of the borrowers. The loans are
considered non-investment grade and carry a commensurately higher rate of interest. The loans are the initial assets
of a new managed fund, Moelis Australia Senior Secured Credit Fund II, managed by the Group and is currently being
marketed to prospective investors.
17
trADe AnD other pAYABles
Trade creditors
Accounts payable and accrued expenses
Affiliate payable – Moelis & Company
Other liabilities
GST payable (net)
total trade and other payables
18
BorrowinGs
unsecured notes
2017
$’000
101
7,128
164
1,819
894
10,106
2017
$’000
32,150
2016
$’000
35
4,361
69
–
639
5,104
2016
$’000
–
Unsecured notes were issued on 18 September 2017 with an interest rate of 5.25% per annum at $32.15 million principal
value. The maturity date is 18 September 2020. Issue costs of $24,187 were incurred.
55
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
19
provisions
Employee benefits*
Onerous Contract – refer note 35
total provisions
Current
Non‑current
total provisions
2017
$’000
15,794
–
15,794
14,405
1,389
15,794
2016
$’000
17,787
13,101
30,888
30,277
611
30,888
* The provision for employee benefits represents annual leave, long service leave and bonus entitlements accrued. The reduction in the carrying amount
of the current provision relating to employee benefits is due to the reduction in the bonus accrual as a result of part of the current year bonus being
paid in Share Rights rather than cash and therefore being amortised over the vesting period.
20 ContriButeD equitY AnD shAre options
20.1 Contributed equity
ordinary shares – fully paid
Contributed equity at 1 January 2016*
Movements
Contributed equity at 31 December 2016
Initial public offering
Acquisition of Armada Funds Management (refer note 33)
Issue to Redcape executives
Issue to Employee Share Trust
Placements
issue of ordinary shares
Cost of issuing Shares
Treasury shares (shares held by Employee Share Trust)**
Contributed equity at 31 December 2017
2017
$’000
2016
$’000
191,507
14,796
nUMBeR
oF sHARes
100,000,000
–
100,000,000
25,000,000
6,382,979
130,718
296,079
22,000,000
53,809,776
–
153,809,776
(546,079)
153,263,697
ConTRiBUTed
eqUiTy
$’000
14,796
–
14,796
58,750
10,085
400
906
110,000
180,141
(1,419)
193,518
(2,011)
191,507
* Number of Shares for the 2016 comparative is adjusted for the pre‑listing Share split.
** Of the 546,079 Shares held by the Employee Share Trust, 250,000 were acquired on market at an average price of $4.42 per share.
The Company had authorised share capital amounting to 153,809,776 ordinary shares at 31 December 2017
(2016: 100,000,000). Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding
up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary
shares have no par value.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll
each share shall have one vote.
20.2 share options
During the year the Company granted Share Options to employees, giving them the right to acquire Shares at
a future date at a fixed price. As at 31 December 2017 there were 5.8 million Share Options outstanding (2016: nil).
Refer to note 34 for more detail.
56
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
21 DiviDenDs
ordinary shares
Pre‑IPO dividend fully franked at a 30% tax rate
total
2017
$’000
31,000
31,000
2016
$’000
–
–
Adjusted franking account balance
3,249
7,713
22 CAsh AnD CAsh equivAlents
Cash and cash equivalents at the end of the reporting period are reflected in the related items in the statement of
financial position as follows:
Cash and bank balances
reconciliation of profit for the year to net cash flows from operating activities
Profit after income tax
Adjustments to profit after tax:
Income tax expense recognised in profit or loss
Net foreign exchange (gain)/loss
Realised gain on AFS investments
IPO costs
Share based payments
Intangible amortisation
Share of profits of associates less distributions received
Doubtful debts expense
Depreciation of non-current assets
Movements in working capital:
(Increase)/decrease in trade and other receivables
(Increase)/decrease in other assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in other liabilities
Increase/(decrease) in provisions
Cash generated from operations
Income taxes (paid)/refunded
net cash generated by operating activities
2017
$’000
2016
$’000
87,786
37,229
29,567
10,087
12,974
456
(3,902)
989
5,181
703
(23)
685
266
4,405
(76)
(37)
–
–
–
–
(22)
273
46,896
14,630
130
523
5,002
216
(15,093)
37,674
(9,328)
28,346
(7,395)
1,514
263
(12)
8,205
17,205
763
17,968
57
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
23 operAtinG leAses
23.1
leasing arrangements
Moelis Australia Operations Pty Limited signed a tenancy lease on premises at Level 34, 120 Collins Street Melbourne
which commenced in January 2015 and is due to expire in December 2021.
Moelis Australia Operations Pty Limited signed a tenancy lease on premises at Level 27 Governor Phillip Tower,
Sydney which commenced in January 2016 and expires in December 2021. A lease was signed for additional space
on Level 28 Governor Phillip Tower, Sydney which commenced in July 2017 and expires in December 2021.
23.2 payments recognised as an expense
Minimum lease payments
total payments recognised as an expense
23.3 non-cancellable operating lease commitments
Current
2 to 5 years
> 5 years
total non-cancellable operating lease commitments
24 reMunerAtion oF AuDitors
Auditor of the parent entity
Audit or review of the financial report
Advisory related services
Tax related services
total remuneration
The auditor of Moelis Australia Limited is Deloitte Touche Tohmatsu.
2017
$’000
1,808
1,808
2017
$’000
2,168
7,408
–
9,576
2017
$’000
398
454
125
977
2016
$’000
1,555
1,555
2016
$’000
1,633
7,312
–
8,945
2016
$’000
179
–
31
210
58
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
25 personnel expenses
Amortisation of share‑based payments (refer note 34)
Termination benefits
Salary, superannuation and bonuses paid in cash
Other personnel related expenses, including recruitment fees, payroll tax,
insurance, consultants and contractors
total personnel expenses
2017
$’000
5,175
299
34,317
5,134
44,925
2016
$’000
–
–
32,018
3,112
35,130
In 2017 some Group staff members elected not to receive some or all of the bonus that they might otherwise have
been awarded. In recognition of this, the Group chose to donate $2.4 million to the Moelis Australia Foundation,
a registered charity.
26 other FinAnCiAl Assets
Current
Listed securities – available for sale
non-current
Listed securities – available for sale
Unlisted securities
total other financial assets
27
investMents in AssoCiAtes AnD Joint ventures
Acure Asset Management Ltd (Acure)
GWP Credit Opportunity Fund No 1 (Credit Op Fund)
Moelis Australia Redcape Hotel Group (Redcape)
Encore Care Group Pty Ltd (Encore)
Encore Care Trust (Encore Trust)
Moelis Australia Aged Care Fund (Aged Care Fund)
total investments in associates and joint ventures
2017
$’000
2016
$’000
30,459
2,703
277
4,486
4,763
2017
$’000
2,501
1,012
48,147
–
1,440
6,866
59,966
210
1,420
1,630
2016
$’000
1,500
3,742
–
–
–
–
5,242
59
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
INVESTMENTSINASSOCIATESANDjOINTVENTURES (cont.)
27
27.1 details of ownership interest activities
AssoCiATe
Acure
Encore
Encore Trust
Credit Op Fund
Redcape
Aged Care Fund
nATURe oF
inTeResT
Joint Venture
Joint Venture
Joint Venture
Associate
Associate
Associate
plACe oF
opeRATion
Australia
Australia
Australia
Australia
Australia
Australia
ACTiviTy
Fund manager
Aged care facility operator
Aged care facility owner
Investor in debt
Hotel owner and operator
Aged care facility operator
proportion oF ownership
interest AnD votinG
power helD BY the Group
2017
50.0%
50.0%
50.0%*
21.5%
10.1%
10.0%
2016
50.0%
0%
0%
21.5%
0%
0%
*
the % shown is that of ordinary shares. Encore Trust also has preferred equity on issue. The Group’s % of all Encore Trust’s equity as at 31 December
2017 was 7.6%.
27.2 Reconciliation of movements in carrying values
CRediT op
FUnd
enCoRe
enCoRe
TRUsT
RedCApe
Aged CARe
FUnd
$’000
Opening value as at 1 January 2016
Acquisition
Disposals and capital returns
Share of profit/(loss) of associates
and joint ventures for the year
Less dividends/distributions received
ACURe
1,500
–
–
–
4,330
(588)
–
–
107
(107)
Closing value as at 31 December 2016
1,500
3,742
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
ToTAl
1,500
4,330
(588)
107
(107)
5,242
Acquisition
Disposals and capital returns
Share of profit/(loss) of associates
and joint ventures for the year
Share of other comprehensive
income of associates and joint
ventures for the year
Less dividends/distributions received
–
–
–
(3,550)
310
–
1,440
–
46,000
–
7,000
–
54,750
(3,550)
1,001
820
(310)
–
(1,354)
(134)
23
–
–
–
–
–
–
–
–
–
5,179
(1,678)
–
–
5,179
(1,678)
1,440
48,147
6,866
59,966
Closing value as at 31 December 2017
2,501
1,012
60
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
27.3 summarised financial information for the group’s material associates and joint ventures.
$’000
2016
Current assets
Non‑current assets
Current liabilities
Non‑current liabilities
Net assets
The above amounts of assets and liabilities
include the following:
Cash and cash equivalents
Revenue
Profit/(loss) for the year
Other comprehensive income for the year
Total comprehensive income for the year
2017
Assets and liabilities
Current assets
Non‑current assets
Current liabilities
Non‑current liabilities
Net assets
The above amounts of assets and liabilities
include the following:
Cash and cash equivalents
Revenue, expenses and results
Revenue
Profit/(loss) for the year
Other comprehensive income for the year
Total comprehensive income for the year
ACURe
CRediT op
FUnd
enCoRe
enCoRe
TRUsT
RedCApe
Aged
CARe FUnd
3,377
102
(550)
–
2,929
11,119
6,917
(670)
–
17,366
1,323
743
3,461
779
–
779
549
498
–
498
–
–
–
–
–
–
–
–
–
–
4,704
45
(943)
(18)
3,788
4,714
–
(19)
–
4,695
674
35,342
(772)
(35,471)
(227)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,576
27,909
37,869 820,464
(42,495)
(338,241)
467,637
–
(21,382)
18,063
–
–
–
–
–
–
–
–
–
–
186
67,226
–
–
67,412
1,329
49
458
1,575
16,255
186
3,842
859
–
859
3,961
3,805
–
3,805
96
(846)
–
(846)
341
227
–
227
116,855
(13,344)
51,055
37,711
–
(1,344)
–
(1,344)
61
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
INVESTMENTSINASSOCIATESANDjOINTVENTURES (cont.)
27
27.4 Further information on Moelis Australia Aged Care Fund
The Aged Care Fund holds a controlling stake in the Infinite Care Group, an operator of aged care facilities.
The magnitude and variability of returns the Group receives from the Aged Care Fund, including the fees it earns as
trustee and asset manager and the investment return on its 10% holding, is such that the Group is not considered to
control the Aged Care Fund. Its 10% direct holding in addition to its roles as trustee and asset manager is considered
sufficient for the Group to retain significant influence over the Aged Care Fund.
27.5 Further information on Moelis Australia Redcape Hotel group
Moelis Australia Redcape Hotel Group (“Redcape”) owns and operates 25 hotels, offering food & beverage, takeaway
liquor and gaming. The Moelis Australia Group is the trustee of Redcape and performs hotel operating and asset
management services.
In July 2017 Redcape raised $393.5 million in equity in order to acquire the Redcape hotel portfolio for a price of
$677 million, plus associated business assets and liabilities and acquisition costs. In December 2017 Redcape raised
a further $60 million to assist with funding additional hotel acquisitions. The Group subscribed for $40 million of
equity in July 2017 and $6 million in December 2017.
A summary of Redcape’s balance sheet at 31 December 2017 is as follows:
Cash
Freehold going concern hotels
Other assets
Total assets
Creditors and accruals
Borrowings
Provision for distributions
Other liabilities
Total liabilities
Net assets
A summary of Redcape’s income statement for the period ending 31 December 2017 is as follows:
Operating profit
Acquisition costs
Portfolio revaluation
total comprehensive income
2017
$’000
16,255
807,815
24,303
848,373
(32,181)
(337,050)
(9,021)
(2,483)
(380,736)
467,637
16,014
(29,359)
51,055
37,710
Redcape comprises two trusts, Moelis Australia Redcape Hotel Trust No. 1 and No. 2. The Group owns an equal number
of units in both trusts and invested in Redcape to gain exposure to the risks and returns flowing from Redcape’s hotel
portfolio, without regard to how the returns may be realised in the individual trusts. Further the Group has provided an
undertaking to the trustee of the two trusts, that it will not sell any of the units it owns in one trust without also selling
an equal number of units in the other trust. Consequently the Group considers its investment in Redcape as a single
investment. Accordingly the financial information provided in this note 27 has been prepared on a consolidated basis,
as if the two trusts were stapled.
As at 31 December 2017 the Group owned 10.1% of Redcape and funds managed by the Group own 41.8% of Redcape.
The magnitude and variability of returns the Group receives from the Redcape, including the fees it earns as trustee, asset
manager and hotel operator, the increase in fees it earns through the 41.8% owned by other Moelis managed funds and
the investment return on its direct 10.1% holding, is such that the Group is not considered to control Redcape. Its 10.1%
direct holding in addition to its roles as trustee, asset manager and hotel operator is considered sufficient for the Group
to retain significant influence over Redcape.
62
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
28 pArent entitY DisClosures
As at, and throughout, the financial year ended 31 December 2017 the parent entity of the group was Moelis Australia Limited.
result of the parent entity
Profit/(loss) for the period
Other comprehensive income
total comprehensive income/(loss) for the period
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
total equity of the parent entity comprising of:
Contributed equity
Reserves
Retained earnings
total equity
2017
$’000
31,421
63
31,484
201,239
208,673
6,673
6,673
191,507
7,716
2,777
202,000
2016
$’000
4,042
(158)
3,884
14,208
21,642
4,556
4,556
14,796
0
2,290
17,086
parent entity contingencies
The parent entity had no contingencies at year end other than those already disclosed in the financial statements.
parent entity guarantees in respect of the debts of its subsidiaries
There are no guarantees currently in place in relation to the debts of the parent entity’s subsidiaries.
29
FinAnCiAl instruMents
29.1 Financial risk management objectives
The Group’s principal financial assets comprise cash and cash equivalents, trade and other receivables, commercial loans
and investments in listed and unlisted securities. The Group’s principal financial liabilities comprise trade and other creditors
and borrowings.
The Group’s activities expose it to a variety of financial risks: for example, market risk (including interest rate risk
and foreign currency risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the
unpredictability of financial markets and seeks to ensure the potential adverse effects on the financial performance
of the Group are kept to within acceptable limits. The Group uses different methods to measure different types of risk
to which it is exposed. These methods include sensitivity analysis in the case of interest rate risk, and ageing analysis
for credit risk.
Risk management is carried out by senior management and the Board. The Board identifies and monitors the risk
exposure of the Group and determines appropriate procedures, controls and risk limits. Senior management identifies,
evaluates and monitors financial risks within the Group’s operations.
There has been no change to the nature of the financial risks the Group is exposed to, or the manner in which these
risks are managed and measured, other than the risks introduced as a result of the issuance of loan notes. The issuance
of loan notes introduces an additional level of liquidity risk and an additional consideration for the management of the
Group’s capital.
63
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
fINANCIAlINSTRUMENTS (cont.)
29
29.1 financial risk management objectives (cont.)
CATegoRies oF FinAnCiAl insTRUMenTs
Financial assets
Cash and bank balances
Commercial loans
Other receivables
Listed and unlisted equity securities
Other assets
Financial liabilities
Creditors including tax payable
Unsecured notes
29.2 Capital management
2017
$’000
2016
$’000
102,025
42,500
17,034
35,222
874
39,002
–
17,397
4,333
1,944
16,119
32,150
9,714
–
The capital structure of the Group consists of net cash (cash and bank balances offset by the unsecured notes detailed
in note 18) and equity (comprising contributed equity, retained earnings and reserves).
The Group manages its capital with the aim of ensuring that the Group will be able to continue as a going concern while
maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s overall
strategy remains unchanged from 2016.
The Group’s borrowings comprise unsecured loan notes (2017 $32 million, 2016 Nil) repayable on 18 September 2020.
Except for the obligation to pay periodic interest and repay the principal at the end of the term, the terms of the loan
notes do not include any material undertakings or obligations that, if not complied with, would result in the acceleration
of the amount owing.
A subsidiary of the Group, Moelis Australia Securities Pty Ltd, is a market participant on the ASX and therefore has an
externally imposed capital requirement. In addition, the subsidiaries Moelis Australia Securities Pty Ltd, Moelis Australia
Advisory Pty Ltd, Moelis Australia Asset Management Ltd and Mendoza Ltd all have Australian Financial Services
Licenses which require the maintenance of a minimum level of net assets.
29.3 Foreign currency risk
The Group undertakes transactions denominated in foreign currencies, including fees on corporate advisory engagements
and expenditure, principally on information technology and data services. The Group does not manage its exposure to
advisory revenue denominated in foreign currency until fees are invoiced, as generally the receipt of revenue is too
uncertain prior to invoicing. Foreign currency debtors and foreign currency bank balances are periodically reviewed
relative to the Group’s balance sheet and liquidity requirements. Revenue received in foreign currency is sometimes
retained in those currencies rather than converted into Australian dollars, in order to meet future foreign currency
denominated expenses or to take advantage of potential future movements in exchange rates. While holding foreign
currency balances assists in reducing exposure to adverse movements in exchange rates on future foreign currency
denominated expenditure, it also creates exposure to adverse unrealised losses upon revaluation of the foreign currency
balances themselves, and realised losses should the Group choose to convert the foreign currency balances into
Australian dollars at a future date rather than retain them to satisfy future foreign currency denominated expenditure.
64
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end
of the reporting period are as follows:
Currency of USA
Currency of USA
Currency of Canada
2017
$’000
2016
$’000
liABilities
216
69
Assets
8,189
1,286
5,041
1,300
Foreign currency sensitivity analysis
The following table details the Group’s sensitivity to a 10% increase and decrease in the Australian dollar against the
relevant foreign currencies. 10% represents management’s assessment of the reasonably possible change in foreign
exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and
adjusts their translation at the year end for a 10% change in foreign currency rates. A negative number below indicates
a reduction in profit where the Australian dollar strengthens 10% against the relevant currency. For a 10% weakening
of the Australian dollar against the relevant currency, there would be a comparable impact on the profit, and the
balances below would be positive.
Profit or loss
Profit or loss
2017
$’000
2016
$’000
usD iMpACt
(797)
(497)
CAD iMpACt
(129)
(130)
The Group’s sensitivity to foreign currency has increased during the current year mainly due to the receipt of US dollar
receivables that have been maintained in a US dollar denominated bank account.
29.4
interest rate risk
The Group is exposed to decrease in interest rates reducing the interest income earned on its cash at bank and its
commercial loans.
The Group’s borrowings via unsecured notes (refer note 18) are subject to a fixed rate of interest.
interest rate sensitivity analysis
A 1% increase or decrease in interest rates represents management’s assessment of the reasonably possible change
in interest rates.
If interest rates had been 1% higher or lower and all other variables were held constant, the Group’s profit for the year
ended 31 December 2017 would be impacted by $612,000 (2016: $258,000).
The Group’s sensitivity to interest rates has increased during the current year due to the increase in cash at bank.
65
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
fINANCIAlINSTRUMENTS (cont.)
29
29.5 equity investment market price risk
The Group is exposed to decreases in the market prices of its equity investments, which would cause a decrease in their
carrying value and may result in a lower realised profit on sale.
If market prices had been 5% higher or lower:
> profit for the year ended 31 December 2017 and 2016 would have been unaffected, as the investments are classified
as available-for-sale and no investments were disposed of or impaired; and
> other comprehensive income for the year ended 31 December 2017 would be impacted by $1,761,100 (2016: $433,000)
as a result of changes in fair value of available-for-sale shares.
The Group’s sensitivity to market prices increased from the prior year, due to higher value of equity investments.
29.6 Credit risk management
Credit risk management is the risk that a counterparty defaults on its contractual obligations resulting in financial loss to
the Group. A default may arise through a counterparty failing to repay loans and interest thereon, and through failing to
meets it obligation to pay invoiced fees.
(i)
invoices for services
The credit worthiness of clients is taken into account when accepting client assignments, however the nature of the
Group’s advisory work includes engaging with clients that are under financial stress and where the risk of non-payment
of invoices is elevated.
Receivables consist of a number of customers, spread across diverse industries and geographical areas. Ongoing
credit evaluation is performed on the financial condition of accounts receivable.
As at 31 December 2017 the Group does not have a significant credit risk exposure to any single customer. Note 10
includes an ageing of receivables past due.
(ii)
Commercial loans
The Group provided two commercial loans in December 2017 for $25.5 million and $17.0 million. The loans are secured by
charges over the assets of the borrowers. The loans are considered non-investment grade and carry a commensurately
higher rate of interest.
Credit risk analysis is focussed on ensuring that risks have been fully identified and that the downside risk is properly
understood and acceptable.
(iii)
Cash balances
The credit risk of the banks holding the Group’s cash is considered limited because the banks have high credit ratings
assigned by international credit rating agencies.
29.7 liquidity risk management
Liquidity risk is the risk that financial obligations of the Group cannot be met as and when they fall due without incurring
significant costs. The Group manages liquidity risk by monitoring forecast cash requirements, both short and longer term,
against its current liquid assets (primarily cash and listed investments). In determining the level of liquidity to maintain,
regard is had to cash flows required over the next 12 months, regulatory obligations such as Australian Financial Services
Licence requirements and financial covenants attached to any relevant contractual obligations of the Group.
66
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
liquidity and interest rate tables
The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities.
The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date
on which the Group can be required to pay.
liABiliTies $'000
31 December 2017
Non‑interest bearing
Fixed interest rate
instruments*
total
31 December 2016
non-interest bearing
WeigHTed
AveRAge
eFFeCTive
inTeResT
RATe
less THAn
1 MonTH
1-3 months
3-12 months
1-5 years
5+ yeARs
ToTAl
–
6,500
1,788
7,291
489
5.3%
–
6,500
–
1,788
–
7,291
32,150
32,639
56
–
56
16,124
32,150
48,274
–
3,625
880
655
55
0
5,215
The following table details the Group’s expected maturity for its non‑derivative financial assets. The table has been
drawn up based on the undiscounted contractual maturities of the financial assets. The inclusion of information on
non-derivative financial assets is necessary in order to understand the Group’s liquidity risk management as the liquidity
is managed on a net asset and liability basis.
AsseTs $'000
31 December 2017
Non‑interest bearing
Variable interest rate
instruments*
total
31 December 2016
Non‑interest bearing
Variable interest rate
instruments*
total
WeigHTed
AveRAge
eFFeCTive
inTeResT
RATe
less THAn
1 MonTH
1-3 months
3-12 months
1-5 years
5+ yeARs
ToTAl
4,475
10,938
34,494
14,698
5.4%
87,786
92,261
12,000
22,938
17,000
51,494
27,739
42,437
13,973
2,271
3,367
4,063
2.0%
37,229
51,202
–
2,271
–
3,367
1,774
5,837
–
–
–
–
–
–
64,605
144,525
209,130
23,674
39,003
62,677
*
interest receivable or payable on interest bearing assets and liabilities is included in the non-interest bearing cash flows.
The amounts included above for variable interest rate instruments for both non-derivative financial assets and liabilities
is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end
of the reporting period.
67
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
fINANCIAlINSTRUMENTS (cont.)
29
29.8 Fair value of financial instruments
This note provides information about how the Group determines fair values of various financial assets and financial liabilities.
29.8.1 Fair value of the group’s financial assets and financial liabilities that are measured at fair value
on a recurring basis
Some of the Group’s financial assets and financial liabilities are measured at fair value at the end of each reporting
period. The following table gives information about how the fair values of these financial assets and financial liabilities
are determined (in particular, the valuation technique(s) and inputs used).
FAir vAlue
hierArChY
VAlUATIONTEChNIqUE(S)
ANDkEyINpUT(S)
FAir vAlue
2017
$’000
2016
$’000
Financial assets
1) Listed investments
2) Unlisted investments
30,736
4,486
2,913
1,419
Level 1
Level 2
Quoted bid prices in an active market
Based on recent transactions
29.8.2 Fair value of financial assets and financial liabilities that are not measured at fair value (but fair value
disclosures are required)
The directors consider that the carrying amounts of financial assets and financial liabilities recognised in the
consolidated financial statements approximate their fair values.
30 keY MAnAGeMent personnel CoMpensAtion
The aggregate compensation made to Directors and other members of key management personnel of the Company
and the Group is set out below:
Short‑term employee benefits (including superannuation)
Share-based payment
Long service leave
total
2017
$’000
2,823
273
14
3,110
2016
$’000
4,340
–
14
4,354
relAteD pArtY trAnsACtions
31
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have
been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other
relates parties are disclosed below.
31.1
loans to related parties
Loans to Existing Staff Trusts
Loans to employees
2017
$’000
–
348
2016
$’000
64
1,845
The Group has provided several employees with loans for investment into the Existing Staff Trusts. The loans are
repayable over a maximum term of five years. The loans are limited recourse and the ability of the Group to recover the
outstanding loan balance is limited to the value of the Existing Staff Trusts’ units held by each borrower. The value of
the units held by each borrower is sufficient such that full recovery of the loan amounts outstanding is highly probable.
During the prior year the Group made a loan to one of the Existing Staff Trusts. The balance of the loan as at
31 December 2017 was $Nil (31 December 2016: $64,000). The loan carried an interest rate of 5.6%.
68
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
31.2 Transactions with overseas Moelis & Company entities
Moelis & Company Group LP (Moelis & Company) is a global financial institution with subsidiaries and offices in a number
of countries. Moelis & Company owns 32.5% of the Group. During the year the Group worked with Moelis & Company
offices to execute cross‑border transactions with the revenue shared based on the roles of the teams involved. There
were also costs allocated from Moelis & Company for global technology and market data expenses.
Net revenue shares to Moelis & Company
Net expenses allocated from Moelis & Company
The main expense categories were:
Service level agreement
Information services
IT infrastructure
Other
2017
$’000
888
2016
$’000
146
(1,014)
(1,091)
(195)
(535)
(283)
(1)
(202)
(505)
(259)
(125)
31.3 Transactions with key management personnel
There were fees paid to entities associated with key management personnel of the Group during the year totalling
$79,500 for capital commitments provided by the KMP in relation to the Group’s underwriting activities.
31.4 Transactions with funds managed by the group
The Group is involved in the management of various funds, through it roles as a trustee, manager, financial adviser
and underwriter, and charges fees for doing so. The Group also invests in some of the funds which it manages.
Investments made during the year are shown in the table below:
related party investments
Acure Asset Management Pty Ltd
Encore Care Trust
Encore Care Group Pty Ltd
Moelis Australia Redcape Hotel Group
Moelis Australia Aged Care Fund
Moelis Australia Secured Loan Priority Fund
total
kMp
2017
$’000
–
–
–
11,450
2,150
80
13,680
Group
2017
$’000
–
310
1,440
46,000
7,000
652
55,402
kMp
2016
$’000
Group
2016
$’000
–
–
–
–
–
–
–
1,500
–
–
–
–
–
1,500
The above amounts are recorded at the entry price paid or committed for the relevant investment in accordance with
AASB 124 Related Party Disclosures and have not been adjusted for subsequent valuation changes.
69
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
RElATEDpARTyTRANSACTIONS (cont.)
31
31.4 transactions with funds managed by the group (cont.)
related party fees
Trustee and management fees
Financial advisory and underwriting
total
receivables from related parties
Current trade and other receivables from related parties
32 reserves
Investments revaluation reserve
Share based payments reserve (refer note 34)
total reserves
investments revaluation reserve
Balance at beginning of year
Revaluations of associates included as other comprehensive income
Income tax relating the revaluations of Associates
share of other comprehensive income of associates
Net gain/(loss) arising on revaluation of available‑for‑sale financial assets
Cumulative (gain)/loss reclassified to profit or loss on sale of available‑for‑sale
financial assets
Income tax relating to gain/(loss) arising on revaluation of available‑for‑sale
financial assets
unrealised (loss)/gain on AFs investments
Balance at end of year
2017
$000
2016
$000
9,102
12,139
21,241
1,010
2017
$’000
3,185
5,308
8,493
–
–
–
–
2016
$’000
893
–
893
893
1,218
5,179
(1,554)
3,625
–
–
–
(605)
(428)
(1,300)
572
(1,333)
3,185
(37)
140
(325)
893
33 bUSINESSCOMbINATION–ARMADAfUNDSMANAgEMENT
33.1 subsidiary acquired
On 1 June 2017, the Group acquired 100% of Armada Funds Management (comprising Rockford Capital Pty Ltd and its
subsidiaries, including Armada Funds Management Pty Ltd). Armada Funds Management is a real estate funds
management business. The acquisition assists in the growth of the Group’s asset management business. The Group
paid for the acquisition through a combination of cash and shares in the Company.
The accounting standards provide a measurement period for the acquisition accounting of up to 12 months following
the acquisition date. This acknowledges the time required to gain access to and consolidate information for both entities
and to make certain valuations as at the acquisition date.
70
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
33.2 Consideration transferred
Cash
Shares(i)
total
1 JUne 2017
$’000
10,523
20,170
30,693
(i) The 6,382,979 Moelis shares that form part of the consideration were issued to the two Armada Funds Management principals on 18 July 2017.
Half of these shares are restricted. Of the restricted shares, 1,595,745 will become unrestricted after two years, and 1,575,745 after three years.
As a result, $10,085,105 of the shares value has been deemed to be deferred remuneration (refer note 34 for treatment of share based payments).
Acquisition related costs of $105,786 are not included in the consideration transferred and have been recognised
as an expense in profit or loss within the ‘other expenses’ line item.
33.3 Assets acquired and liabilities assumed at the date of acquisition
The table below shows the fair value of the identifiable assets acquired and liabilities assumed.
Current assets
Cash and cash equivalents
Receivables*
Other assets
non-current assets
Identifiable intangible assets
Current liabilities
Trade and other payables
Deferred tax liability
Provisions
total
1 JUne 2017
$’000
879
248
46
16,263
(243)
(4,879)
(207)
12,107
*
the fair value of $248,000 is the same as the gross contractual receivable amount. At acquisition, the best estimate of the contractual cash flows not
expected to be collected was nil.
The identifiable intangible assets relate to the net present value of the right to receive management fees from its existing
funds less operating expenses.
33.4 goodwill arising on acquisition
Consideration transferred
Less: amount deemed remuneration (restricted shares)
Less: fair value of identifiable net assets acquired
Goodwill arising on acquisition
2017
$’000
30,693
(10,085)
(12,107)
8,501
Goodwill arose in the acquisition of Armada Funds Management because the acquisition included Armada Funds
Management’s customer relationships, investment track record, and expertise of staff, which may combine to enable
new funds to be established in the future. These assets could not be separately recognised from goodwill because they
are not capable of being separated and sold, transferred, licensed, rented or exchanged, either individually or together
with any related contracts
None of the goodwill arising on this acquisition is expected to be deductible for tax purposes.
71
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
bUSINESSCOMbINATION–ARMADAfUNDSMANAgEMENT (cont.)
33
33.5 net cash outflow arising on acquisition
Consideration paid in cash
Less: cash and cash equivalent balances acquired
total
33.6
impact of acquisition on the results of the group
2017
$’000
(10,523)
878
(9,645)
The results of the Group include revenue of $2,437 thousand and a loss before tax of $2,398 thousand from Armada Funds
Management since its acquisition on 1 June 2017.
Had the acquisition of Armada Funds Management been effected at 1 January 2017, net income of the Group
for the year ended 31 December 2017 would have been $111.4 million and the profit before tax for the year would
have been $43.2 million.
34 shAre BAseD pAYMents
share based payment reserve
Balance at beginning of year
Share Option premium received
Amortisation of Share Option fair value
Amortisation of Share Rights
Amortisation of Armada Funds Management deferred remuneration
Balance at end of year
(i)
employee share options
2017
$’000
–
133
11
2,733
2,431
5,308
2016
$’000
–
–
–
–
–
–
Prior to the listing of the Company, a number of employees were provided the opportunity to purchase options (“Share
Option”), with each Share Option carrying the right to acquire one Share in the Company at a future date. As a result of
the offer, the Company issued 5,468,750 Share Options on 4 April 2017.
At the same time, the Company offered the Chairman and Non‑Executive Director Mr Jeffrey Browne (and Mr Browne
accepted) the opportunity to purchase 781,250 Share Options, with each Share Option carrying the right to acquire one
Share in the Company at a future date.
Each Share Option is exercisable for a period of one year, commencing on the first exercise date applicable to the
relevant tranche (exercise window) as set out in the table below. Each Share Option expires if it is not exercised within
the relevant exercise window.
Unless otherwise determined by the Board, a Share Option holder must continue to be employed by the Group in order
to exercise the Share Option.
Share Options do not carry any dividend entitlement. Shares issued on exercise of a Share Option will rank equally with
other Shares of the Company on and from issue. There are no inherent participating rights or entitlements inherent in
the Share Options and the Share Option holders will not be entitled to participate in new issues of capital offered to
shareholders during the life of the Share Options.
The offer price is paid or is payable by the recipient on receipt of the Share Option.
72
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
The table below provides the details of Share Options issued on 4 April 2017:
nUMBeR oF
opTions
issUed in
THe yeAR ACqUiRed By
1,822,917 Employees
1,822,917 Employees
1,822,916 Employees
390,625 J Browne
390,625 J Browne
6,250,000
gRAnT dATe
sHARe pRiCe
$2.35
$2.35
$2.35
$2.35
$2.35
exeRCise
pRiCe oF
opTion
$3.00
$3.15
$3.36
$2.80
$3.00
issUe pRiCe
$0.03
$0.03
$0.01
$0.02
$0.02
eARliesT
dATe oF
exeRCise
8-Apr-21
8-Apr-22
8-Apr-23
8-Apr-19
8-Apr-20
expiRy dATe
7-Apr-22
7-Apr-23
7-Apr-24
7-Apr-20
7-Apr-21
opTions
FoRFeiTed
dURing THe
yeAR
147,617
147,617
147,616
–
–
nUMBeR oF
opTions AT
yeAR end
1,675,300
1,675,300
1,675,300
390,625
390,625
442,850
5,807,150
The Share Options acquired by employees shown in the table above include 500,000 Share Options (divided equally
across the three exercise dates) granted to Mr Andrew Martin. Mr Martin is one of the top five employees of the Group
ranked by remuneration.
Fair value of share options granted in the period
The weighted average value of the Share Options at the time of grant is $0.0375.
The fair value of the Share Options has been calculated using a Black Scholes model, adjusted for expectations of
forfeiture due to employee departures. The assumptions used in calculating the fair value are shown below and are
common to all tranches of Share Options, unless otherwise stated:
> Dividend yield 4.0%
> Risk‑free rate 2.5%
> Expected volatility of 13.8%, based on the volatity of the ASX Small Cap Index at the time of the grant
> Expected life of option is the maximum term up to last day of the exercise window
> Forfeiture assumptions for the options granted to employees are that 16%, 20% and 23% of options are forfeited
for tranches 1, 2 and 3 respectively. No allowance for forfeiture has been made for the Share Options granted
to the Chairman.
The table below shows the Share Options granted and forfeited during the year.
nuMBer oF shAre options
weiGhteD AverAGe
ExERCISEpRICE($)
eMployees
CHAiRMAn
ToTAl
eMployees
CHAiRMAn
Share Options outstanding at 1 January 2017
Granted during the year
Forfeited or lapsed during the year
–
5,468,750
(442,850)
–
781,250
–
–
6,250,000
(442,850)
share options outstanding at 31 December 2017 5,025,900
781,250
5,807,150
–
3.17
3.17
3.17
–
2.90
–
2.90
No Share Options were issued, forfeited or exercised since year end. No Share Options were exercisable at year end.
73
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
34 ShAREbASEDpAyMENTS (cont.)
share based payment reserve (cont.)
(ii)
share Rights
2017 year-end allocated share rights
At the end of the year, the Board of Directors determined the annual bonus pool to be paid to employees, and the
components to be paid in cash and to be paid through granting Share Rights.
The Share Rights granted to employees in connection with the 2017 annual bonus (“2017 Share Rights”) entitle the
employees to Shares in the Company in the future for no payment. The Share Rights vest in equal amounts over a five
year period. Vesting is conditional on continuous service, unless otherwise determined by the Board.
The fair value of each Share Right at grant date (27 December 2017) was $6.08, determined by reference to the trading
in the Company’s shares.
2017 year-end unallocated equity compensation
In addition to the 2017 Share Rights, the Group paid $3.5 million to the Moelis Australia Employee Share Plan Trust
(Employee Share Trust), with this amount to be used to acquire Shares in the Company and deliver them to employees
(via Share Rights or some other method) as determined by the trustee of the Employee Share Trust. The $3.5 million
transferred to the Employee Share Trust cannot be returned to the Group. The $3.5 million expense is accounted for as
a share based payment with the amortisation period commencing on the same date as the allocated Share Rights grant.
share rights granted as sign-on incentives
In addition to the 2017 Share Rights, the Company granted Share Rights to senior executives commencing employment
with the Group, including 296,079 Share Rights granted to senior executives joining the Company from Redcape Group
Limited. These Share Rights are priced with reference to the trading price of the Company’s shares at the time the offer
of employment is made. Vesting is subject to continuous employment, with terms varying on a case by case basis.
Amortisation of the expense commences on the day the senior executive starts their employment.
The average fair value of all Share Rights granted during the year was $4.90/Share Right. There were no Share Rights
granted in 2016 or prior years. It is anticipated that the Share Rights will be equity settled.
Opening balance
Issued during the year
Closing balance
nUMBeR oF
sHARe RigHTs
vAlUe oF
sHARe RigHTs
–
1,545,823
1,545,823
–
7,576,916
7,576,916
(iii)
Armada Funds Management acquisition
As part of the acquisition of Armada Funds Management, 6,382,979 Shares in the Company were issued to the two
Armada Funds Management principals, now employed by the Group. Half of these shares are restricted (3,191,489) and,
as a result, have been deemed to be a share based payment and are being amortised over the restriction period, being
two years for 1,595,745 and three years for the remaining 1,595,745. The value was based on a traded price of the
Company’s shares on the day of acquisition of $3.16. The grant date was 1 June 2017.
74
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
35 terMinAtion oF onerous ContrACt
Moelis Australia’s asset management business includes the provision of funds marketed to overseas persons wishing
to apply for a significant investor visa (“SIV FM Business”). This business was established in 2013 through the collaboration
with two parties (Service Providers), each of whom were engaged on 4 July 2013 to perform specific roles. On 30 June 2015,
MAVFM agreed with the respective Service Providers to terminate their service and management arrangements.
In consideration for the termination, the second Service Provider entered into a new agreement (“Second Services
Agreement”) on 30 June 2015. The Second Services Agreement has been classified as an onerous contract and a liability
(“Second Services Agreement Liability”) for the fair value of the future payments to the Second Service Provider has
been recognised in the balance sheet as at 31 December 2015.
The forecast cashflows relating to the Second Service Agreement Liability was re-assessed as at 31 December 2016,
and the difference between the value as 31 December 2015 less payments made to the Second Service Provider in
the year ($5.7 million) was recorded in the Consolidated Statement of Profit or Loss and Comprehensive Income as
an expense in the year ended 31 December 2016.
The provision for the Onerous Contract disclosed in note 19 relates to the restructure of the SIV FM Business. The Group
terminated the contract in April 2017 and paid the service provider $12.8 million. The Group now undertakes the
promotional activities itself.
36 eArninGs per shAre
Basic earnings per share
Diluted earnings per share
2017 CenTs
peR sHARe
2016 CenTs
peR sHARe
23.4
22.8
10.1
10.1
The earnings used in the calculation of basic and diluted earnings per share is profit after tax.
Weighted average number of ordinary shares (net of treasury shares)
used in calculating basic earnings per share
potential equity shares:
Share Options**
Share Rights
Weighted average number of ordinary shares (net of treasury shares)
and potential equity shares used in calculating diluted earnings per share
2017
2016*
126,261,993
100,000,000
2,836,938
319,644
–
–
129,418,575
100,000,000
* number of shares for the 2016 comparative is adjusted for pre‑listing share split.
** The number of shares assumed to be issued on exchange of options is calculated using the difference between the option exercise price
and the average traded price of the Company’s shares during the year.
75
Moelis AustrAliA liMiteD
2017 AnnuAl report
Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
suBsiDiAries
37
Details of the Group’s subsidiaries at the end of the reporting period are as follows:
nAMe oF sUBsidiARy
A.C.N. 167 316 109 Pty Ltd
Armada Funds Management Pty Ltd
Global Wealth Aged Care Pty Ltd
Global Wealth Partners Fund Pty Ltd
Global Wealth Residential Pty Ltd
KC Finance Pty Ltd
KCF ST Pty Ltd
MAAM GP Pty Ltd
MAAM Holdings Pty Ltd
MACDF TT Pty Ltd
MAHPT TT Pty Ltd
MARAM TT Pty Ltd
Mendoza Ltd
Moelis Australia Advisory Pty Ltd
Moelis Australia Asset Management Ltd
Moelis Australia Finance Pty Ltd
Moelis Australia Foundation Pty Ltd
Moelis Australia Funds Management Pty Ltd
Moelis Australia Hotel Management Pty Ltd
Moelis Australia Operations Pty Ltd
Moelis Australia Partners Holdings Pty Ltd
Moelis Australia Partners Pty Ltd
Moelis Australia Retail Asset Management Ltd
Moelis Australia Securities Pty Ltd
Moelis Australia Share Plan Pty Ltd
Moelis Australia Visa Fund Manager Pty Ltd
R88A Finance Pty Ltd
R88B Finance Pty Ltd
Rockford Capital Pty Ltd
TMASL Finance Pty Ltd
Western Funds Management Pty Ltd
pRinCipAl ACTiviTy
Investment
Asset management
Asset management
Asset management
Asset management
Lending
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Corporate advisory
Asset management
Financing
Trustee
Asset management
Asset management
Administration entity
Asset management
Asset management
Asset management
Equities
Administration entity
Asset management
Lending
Lending
Asset management
Asset management
Investment
proportion oF ownership
interest AnD votinG power
helD BY the Group
plACe oF
inCoRpoRATion
And opeRATion 31 deCeMBeR 2017 31 deCeMBeR 2016
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
99%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
99%
99%
100%
100%
100%
100%
99%
99%
100%
100%
100%
100%
0%
0%
100%
100%
0%
0%
100%
0%
100%
0%
0%
0%
100%
100%
0%
0%
0%
0%
100%
0%
0%
100%
100%
0%
100%
0%
0%
0%
0%
100%
Moelis Australia Limited is the head entity within the tax‑consolidated group.
The wholly‑owned subsidiaries are members of the tax‑consolidated group.
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Notes to the Consolidated Financial Statements (cont.)
for the year ended 31 December 2017
Composition of the group
pRinCipAl ACTiviTy
Corporate Advisory and Equities
Asset management
Administration
total
38 ContinGent liABilities AnD CoMMitMents
Commitments exist in respect of:
– Undrawn credit facilities
39 suBsequent events
The Company declared a dividend of 7.0 cents per Share.
NUMbEROfwhOlly-
owneD suBsiDiAries
plACe oF
inCoRpoRATion
And opeRATion 31 deCeMBeR 2017 31 deCeMBeR 2016
Australia
Australia
Australia
3
19
4
26
3
5
1
9
2017
$’000
2016
$’000
85,000
–
At 31 December 2017, the Group had commitments of $85.0 million in undrawn credit facilities. In January 2018, the
Group lent $24.6 million under the credit facilities, reducing its commitments to $60.4 million.
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Directors’ Declaration
for the year ended 31 December 2017
In the Directors’ opinion:
(a) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable; and
(b) the attached financial statements and notes thereto are in accordance with the Corporations Act 2001 (Cth),
including complying with accounting standards and giving a true and fair view of the financial position and
performance of the consolidated entity.
Note 1(a) includes a statement that the financial report complies with International Financial Reporting Standards.
The Directors have been given declarations by the CEO and COO required by section 295A of the Corporations
Act 2001.
Signed in accordance with a resolution of the Directors
Jeffrey Browne
Independent Chairman
Andrew pridham
Chief Executive Officer
Sydney
19 February 2017
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Independent Auditor’s Report
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
Tel: +61 2 9322 7000
Fax: +61 2 9322 7001
www.deloitte.com.au
Independent Auditor’s Report to the Members of Moelis
Australia Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Moelis Australia Limited (the “Company”) and its
subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at
31 December 2017, the consolidated statement of profit or loss and other comprehensive income,
the consolidated statement of changes in equity and the consolidated statement of cash flows for
the year then ended, and notes to the financial statements, including a summary of significant
accounting policies and other explanatory information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 31 December 2017 and of
their financial performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have
also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has
been given to the directors of the Company, would be in the same terms if given to the directors as
at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial report for the current period. These matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
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Independent Auditor’s Report (cont.)
Key Audit Matter
Investment in Redcape Hotel Group
On 10 July 2017, the Group acquired a
direct investment of 10% in Moelis
Australia Hotel I and Moelis Australia Hotel
II, which acquired Redcape Group Limited
as disclosed in Note 27.5.
Through the investments in the Trusts, the
Group has the direct 10% ownership as
well as indirect ownership through the
Moelis managed funds.
Management have classified the
investments in Moelis Australia Hotel I and
Moelis Australia Hotel II as investments in
associates. In making this classification,
management have applied judgement in
assessing the link between power and
returns.
Acquisition of Armada
In June 2017, Moelis completed the
acquisition of Rockford Capital Pty Limited
and its subsidiaries (Armada) for $20.6m
as disclosed in Note 33.
Acquisition accounting gives rise to the
following key areas of management
judgement:
Determination of the acquisition
date,
Determination of the fair value of
identifiable net assets acquired,
and
The fair valuation of consideration
transferred.
Goodwill Impairment
As at 31 December 2017 the Group’s
goodwill balance totals $9.8 million which
comprises goodwill relating to the
acquisition of Armada of $8.5 million as
well as $1.3 million of goodwill recognised
on acquisition of Moelis Australia Securities
Pty Limited as disclosed in Note 14.
The assessment of the recoverability of
goodwill requires significant judgement due
to the assumptions and estimates used in
preparing a discounted cash flow model
(‘value in use’), including determination of:
How the scope of our audit responded to the
Key Audit Matter
Our procedures included, but were not limited to:
Challenging management’s accounting
position paper on the appropriate
accounting treatment for the investment
in Moelis Australia Hotel I and Moelis
Australia Hotel II including:
-
Inspecting the purchase and sale
agreement, Hotel Investment Fund
Constitutions, Hotel Fund Operating
Agreement, Hotel Group Information
Memorandum and other relevant legal
documentation for consistency with
managements’ assessment,
Enquiries with management and
inspection of documents to assess the
nature of the financial information
obtained and used by management in
monitoring the performance of the
investment, and
-
- Recalculating the variability and
magnitude of returns from direct and
indirect streams to assess linkage
between power and returns.
We have also assessed the appropriateness of the
disclosures in Note 27.5 to the financial
statements.
Our procedures included, but were not limited to:
Assessing the purchase and sale
agreements, board minutes, and
management paper on the transaction for
appropriateness of managements key
judgements,
Evaluating the purchase price allocation
performed by management including the
assessment of the fair values applied to
the assets and liabilities acquired,
Engaging internal specialists for the
review of the discounted cash flow model
supporting the recognition of the
intangible asset.
We have also assessed the appropriateness of the
disclosures in Note 33 to the financial statements.
Our procedures included, but were not limited to:
Evaluating the appropriateness of
management’s identification of the
Group’s CGUs to which the goodwill is
allocated,
Assessing the reasonableness of cash flow
projections and growth rates against
external economic and financial data and
the Group’s own historical performance,
Engaging our valuation specialists to
assess the key assumptions and
methodology used by management in the
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Independent Auditor’s Report (cont.)
Identification of Cash Generating
Units (“CGU’s”),
Future cash flows for the CGU’s,
Discount Rates, and
Terminal value growth rates.
Investment Banking Revenue
Recognition
The revenue generated by the Corporate
Advisory Segment within the group is
primarily from investment banking
transactions. This revenue stream is
recognised by reference to the stage of
completion of the transaction at the end of
the reporting period as disclosed in Note
1(a).
Revenue recognition requires management
judgement where not all stages of the
transaction are complete.
Share based payments
The Group utilises share based payments
as part of its remuneration strategy. The
share based payments expense for the year
then ended 31 December 2017 is $5.2m as
disclosed in Note 34.
Recognition and measurement of incentive
schemes involves significant management
judgement to calculate the fair value of
options granted and to assess whether it is
likely that vesting conditions will be
satisfied.
impairment model, in particular the
discount rate and the cost of debt, and
Testing the mathematical accuracy of the
impairment model.
We have also assessed the appropriateness of the
disclosures in Note 14 to the financial statements.
Our procedures included, but were not limited to:
Evaluating management’s controls over
the revenue recognition process,
Testing, on a sample basis, the calculation
of the fees recognised to the key
milestones as outlined in the client
engagement letters,
Reviewing subsequent period invoices and
bank statements, to assess whether
revenue has been recorded in the correct
period, and
Reviewing management reporting, board
minutes, market available information and
making enquiries of management to
support the revenue recognised.
We have also assessed the appropriateness of the
disclosures in Note 1(a) to the financial
statements.
Our procedures included, but were not limited to:
Evaluating management’s methodology
used against requirements of accounting
standards for share options issued,
Verifying the number of grants, grant
dates and corresponding exercise price to
supporting documentation for a sample of
share based payments, and
Challenging management assumptions
used to calculate the fair value in the
share based payments.
We also assessed the appropriateness of the
related disclosures in Note 34 to the financial
statements.
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 31 December 2017, but does
not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
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Independent Auditor’s Report (cont.)
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of
the financial report that gives a true and fair view and is free from material misstatement, whether
due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Group or to
cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as
intentional omissions,
involve collusion,
fraud may
misrepresentations, or the override of internal control.
forgery,
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial report.
We are responsible for the direction, supervision and performance of the Group’s audit. We
remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
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Independent Auditor’s Report (cont.)
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 20 to 25 of the Directors’ Report for
the year ended 31 December 2017.
In our opinion, the Remuneration Report of Moelis Australia Limited, for the year ended 31 December
2017, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
Delarey Nell
Partner
Chartered Accountants
Sydney, 19 February 2018
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Moelis AustrAliA liMiteD
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Additional Information
DiviDenD DetAils
Moelis Australia generally pays a dividend on its fully paid ordinary Shares once a year following its full-year financial
results announcement.
The payment date for the dividend following the announcement of the 2017 results is 6 March 2018.
shAre reGistrY inForMAtion
The following information is correct as at 1 February 2018.
20 lArGest shAreholDers
RegisTeRed HoldeR
MOELIS & CO INTERNATIONAL HOLDINGS LLC
MAGIC TT PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
TOUCHARD PTY LTD
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