Nicholas Moore is going out on top – literally.
Before Macquarie’s shares dipped 3 per cent on Thursday after Moore announced his retirement, the company’s stock was sitting near its all-time high of $126.70, some 90 per cent higher than when Moore officially started as chief executive in May 2008. Total shareholder return over the period is 274 per cent.
“I’ve had a very good opportunity, I’ve had a very good turn,” Moore tells The Australian Financial Review on Thursday afternoon. “It just feels right now for me and for Macquarie.”
The dark days of GFC, when the stock sunk as low as $15.49 in March 2009, seem an eon ago.
But you don’t have to go back that far to find moments when Moore and the Macquarie model he set up were under real pressure.
In early 2013, Bill Moss, one of the architects of Macquarie’s investment banking powerhouse, went public with criticisms of the group’s board, demanding fresh blood and attacking the group’s returns.
“It’s sad to watch a great iconic Australian business struggling to find the right strategy,” Moss said.
Moss might have been particularly outspoken, but his view wasn’t extreme. Macquarie’s earnings had dipped from $1.9 billion in 2008, before the GFC, to $762 million in the 2012 financial year.
The stock was hovering under $40 and return on equity had fallen from 23.7 per cent in 2008 to around 7 per cent.
Moss would get his fresh blood, with four new directors joining over the next two years, including Gordon Cairns, Patricia Cross, Nicola Wakefield Evans and Professor Gary Banks.
But beneath these board changes, Moore’s remaking of Macquarie was gaining speed.
His appointment couldn’t have come at more difficult time. The GFC shook Macquarie’s business model, and while the group continued to churn out profits, it was exposed as having too much reliance on the performance of capital markets.
Macquarie was able to lean on a government general guarantee of deposits and a special wholesale funding arrangement to help it through the crisis, while two would-be challengers, Babcock & Brown and Allco Financial Group, collapsed.
Former Macquarie board member Helen Nugent, who took a break between meetings on Thursday to call in at the Macquarie annual general meeting and “doff her cap” to Moore and his team, says the GFC demonstrated one of Moore’s great strengths.
“He’s incredibly calm under pressure, which he certainly showed during the GFC,” Nugent says.
“That certainly engenders a great sense of what I would call ‘urgent focus’ … people feel empowered to act.”
Moore says the challenges thrown at him in his early years in the role were made easier by the support of the Macquarie board and the shared ethos of management.
“Everybody knows what we’re about and everybody has signed up to it,” he says.
“We are prepared to invest for the long-term, certainly for the medium term. We don’t expect immediate results, and we fully expect the world to turn out different to how we expect.
“What we are good at is seeing where we get to and changing our plans, changing our focus on an ongoing business.”
A crisis not wasted
This was also shown through the GFC, which, as one long-time Macquarie insider says, helped clarify the direction Moore needed to take the group.
“It’s hard to change things when things are going well. In a crisis you can change things, and change them quickly,” the insider says.
Moore’s great legacy at Macquarie has been the shift from volatile market-facing businesses (such as investment banking, securities broking, capital advisory, fixed income, currencies and commodities) towards annuity-style businesses, such as funds management (run by Moore’s successor Shemara Wikramanayake), banking and financial services and corporate and asset finance.
Before the GFC, annuity-style businesses accounted for 32 per cent of income. Today it sits around 70 per cent.
“I think they’re probably not given enough credit for how they’ve transformed the business away from that investment banking model,” says Matt Haupt, the portfolio manger for WAM Leaders, witch holds Macquarie shares.
A key plank of Moore’s transformation was the $US428 million purchase of Philadelphia-based Delaware Investments in the second half of 2009. It would deliver Macquarie more than $US125 billion in assets under management and more than 500 employees, and set Macquarie on its path to becoming the world’s biggest infrastructure asset manager, with $495 billion under management today.
That deal would also push Macquarie further into offshore markets, which has been the second plank of Moore’s Macquarie model. Today more than two thirds of Macquarie’s earnings are generated offshore, and its empire stretches across almost 30 countries.
Moore has also led the business into new areas such as energy trading (it is now the second biggest gas trader in the United States) and into emerging and lucrative sectors such as renewable energy.
Asked on Thursday to nominate his highlights from a decade in charge, Moore did a good impersonation of a father refusing to choose his favourite child: “It’s hard to pick a particular highlight, there are so many highlights.
“Delaware from Macquarie Asset Management viewpoint is very significant, but just as significant is what’s happened in Macquarie Infrastructure and Real Assets, where we’ve seen the assets step up and totally renew.
“If you look at the Macquarie Capital, if you go back 10 years ago, that business was making less than 10 per cent of what it’s doing today.”
Moore also mentions the doubling of the size of Macquarie’s banking and finance division and the resilience of his markets business as important in taking earnings to a record $2.6 billion in 2017-18.
That desire to share the credit sums up Moore, Nugent says.
“He’s absolutely selfless,” she says. “He’s interested in what’s for the good of the company and making other people give of their best, rather than it being about him. The consequence of that is he just engenders incredible loyalty in his staff.”
Of course, there have been problem areas during Moore’s tenure too. Its acquisition of Thames Water in Britain led to accusations of tax minimisation and the misuse of debt.
Cultural issues that have plagued Macquarie’s wealth-management businesses appear to continue. At Macquarie’s AGM, chairman Peter Warne reported there had been 157 conduct and policy breaches inside the group in the 2018 financial year.
Moore was giving no clues as to his next move, but one former colleague said he was unlikely to disappear from Australian business completely.
“He’s an intellectually curious and energised guy. You couldn’t imagine a more compelling business mind.”