There is a particular risk worth considering, which could impact the next one or two results, namely how much of the fees that are earned drop through to the bottom-line after bonus provisions have been made to keep the company's bankers and traders happy and motivated enough to keep rocking up for work.
Remember this is a "neck-up" business model; the only real assets are the key people and there is the never-ending chance of some of them getting into the lift on Friday evening and not coming back on Monday morning.
The FY2023 and FY2024 years were lean ones for stock trading volumes, IPOs, secondary market activity and corporate deal flow, which means that stockbrokers and investment bankers will not have enjoyed their usual bonus largesse for quite a while.
Knowing stockbrokers, investment bankers and corporate finance advisers like I do, there is therefore a non-trivial chance that EZL divisional managers will be arguing for a disproportionately large bonus pool to be set aside this year, as sort of "make-good" incentives, especially given the view that you don't want big fee earners to jump ship to competitors or start-ups when the cycle upturn has only just started.
So, to avoid being disappointed, I feel one should brace for an element of "Shareholders-Subsidising-Key Employees" in the upcoming result or two.
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EZL Price at posting:
95.0¢ Sentiment: None Disclosure: Held
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