WALL Street titan Blackstone shot the lights out with its quarterly results yesterday, shattering analysts’ profit expectations after prospering from a bout of multi-billion deals including the UK float of Legoland owner Merlin Entertainments.
The group, which offers an array of private equity and real estate funds for the world’s biggest investors, said pre-tax profits rose 130 per cent year on year for the three months ending December, to $1.5bn.
Initial public offerings (IPO) of shares in Blackstone-backed companies like Merlin Entertainments in London and hotel chain Hilton International in New York helped quadruple performance fees and increase the value of the funds which still hold stock in the firms post-IPO.
The float of Hilton has delivered Blackstone with one of the highest paper profits on a private equity deal ever, worth about $9.8bn.
Revenue from these activities helped drive an 82 per cent increase in profits at its private equity segment, up to $360m for the quarter. Overall, economic net income – a common value of measure for private equity firms – was $1.35 per share, surging past estimates of 86 cents.
Chief executive Steve Schwarzman delivered a strong rebuke to analysts after the results for putting Blackstone at 10 times earnings.
“If people want to keep us at 10 times ... that just doesn’t last,” he said. “Once the public gets to see the magnitude of earnings power... they’ll become believers too. Those who figure that out late will make less.”
Total assets under management rose seven per cent in the quarter to $266bn, a new record, with $17bn coming in new commitments from investors.
The company also said it had plans for a further seven or eight floats of portfolio companies this year, as it taps the opening up of IPO markets in Europe and the US. However, the firm said it was more difficult to find decent companies to buy. Chief operating officer Tony James said: “It’s frustrating for our guys going after things and keep getting outbid.”