eQ PLC’S HALF YEAR REPORT 2020 – eQ IMPROVED ITS RESULT DESPITE THE CHALLENGING MARKET SITUATION – OPERATING PROFIT GREW BY 7%
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eQ PLC HALF YEAR FINANCIAL REPORT 11 August 2020 at 8:00 AM
eQ PLC’S HALF YEAR REPORT 2020 – eQ IMPROVED ITS RESULT DESPITE THE CHALLENGING MARKET SITUATION – OPERATING PROFIT GREW BY 7%
January to June 2020 in brief
During the period under review, the Group's net revenue totalled EUR 23.9 million (EUR 22.9 million from 1 Jan. to 30 June 2019).
The Group’s net fee and commission income was EUR 24.3 million (EUR 22.5 million).
The Group’s net investment income from own investment operations was EUR -0.4 million (EUR 0.4 million), including the return from private equity funds and liquid fixed income funds.
The Group’s operating profit grew by 7% to EUR 11.7 million (EUR 11.0 million).
The Group’s profit was EUR 9.4 million (EUR 8.8 million).
The consolidated earnings per share were EUR 0.24 (EUR 0.23).
The net cash flow from the Group’s own private equity fund investment operations was EUR -0.2 million (EUR 0.3 million).
The net revenue of the Asset Management segment increased by 9% to EUR 22.7 million (EUR 20.8 million) and the operating profit by 15% to EUR 13.0 million (EUR 11.3 million).
The net revenue of the Corporate Finance segment was EUR 1.7 million (EUR 1.8 million) and the operating profit was EUR 0.3 million (EUR 0.4 million).
April to June 2020 in brief
In the second quarter, the Group’s net revenue totalled EUR 11.9 million (EUR 11.3 million from 1 April to 30 June 2019).
The Group’s net fee and commission income was EUR 12.7 million (EUR 11.3 million).
The Group’s net investment income from own investment operations was EUR -0.8 million (EUR 0.0 million), including the return from private equity funds and liquid fixed income funds.
The Group’s operating profit was EUR 5.7 million (EUR 5.7 million).
The Group’s profit was EUR 4.6 million (EUR 4.6 million).
The consolidated earnings per share were EUR 0.12 (EUR 0.12).
Key ratios
1-6/20
1-6/19
Change
4-6/20
4-6/19
Change
1-12/19
Net revenue, Group, M€
23.9
22.9
4%
11.9
11.3
5%
50.6
Net revenue, Asset Management, M€
22.7
20.8
9%
11.4
10.6
8%
44.3
Net revenue, Corporate Finance, M€
1.7
1.8
-4%
1.3
0.7
72%
5.4
Net revenue, Investments, M€
-0.4
0.1
-345%
-1.0
0.0
-4063%
0.8
Net revenue, Group administration and
eliminations, M€
-0.2
0,1
0.2
0.0
0.1
Operating profit, Group, M€
11.7
11.0
7%
5.7
5.7
0%
26.3
Operating profit, Asset Management, M€
13.0
11.3
15%
6.6
6.0
9%
25.4
Operating profit, Corporate Finance, M€
0.3
0.4
-6%
0.4
0.1
351%
1.9
Operating profit, Investments, M€
-0.4
0.1
-345%
-1.0
0.0
-4063%
0.8
Operating profit, Group administration, M€
-1.3
-0.9
-0.4
-0.5
-1.8
Profit for the period, M€
9.4
8.8
7%
4.6
4.6
0%
21.0
Key ratios
1-6/20
1-6/19
Change
4-6/20
4-6/19
Change
1-12/19
Earnings per share, €
0.24
0.23
6%
0.12
0.12
0%
0.55
Equity per share, €
1.33
1.37
-3%
1.33
1.37
-3%
1.70
Cost/income ratio, Group, %
51.0
52.1
-2%
52.3
49.9
5%
48.1
Liquid assets, M€
13.8
12.2
13%
13.8
12.2
13%
32.3
Private equity fund investments, M€
16.1
16.8
-4%
16.1
16.8
-4%
16.2
Interest-bearing loans, M€
0.0
0.0
0%
0.0
0.0
0%
0.0
Assets under management excluding reporting services, € billion
7.0
6.2
13%
7.0
6.2
13%
6.8
Assets under management total, € billion
8.5
10.9
-22%
8.5
10.9
-22%
11.7
Janne Larma, CEO
The second quarter was very strong in the capital market. Share prices rose by about 15 to 20% depending on the market, and the interest rates of above all corporate loans fell strongly. By the beginning of August, the global stock exchange index was only about 6% below the level at the beginning of the year. In the second quarter, the development of economies was strongly negative, however, and uncertainty still prevails. The capital market believes that the COVID-19 pandemic can be kept under control in autumn and the vaccine will be here during the first months of 2021.
eQ has succeeded excellently in its business operations, even though the pandemic has slowed down our growth. All our funds have been open in a normal manner, neither have there been any interruptions in our functions. Our personnel have worked in an excellent manner in these challenging circumstances.
In the first half of the year, the net revenue of the Group grew by 4% to EUR 23.9 million and the operating profit by 7% to EUR 11.7 million. eQ Group’s operating profit has grown for 25 consecutive quarters. The profit of the Group increased to EUR 9.4 million.
eQ Asset Management improved its operating profit by 15%
eQ Asset Management succeeded excellently in these difficult circumstances. The net revenue of eQ Asset Management increased by 9% on the previous year to EUR 22.7 million. The operating profit grew by 15% to EUR 13.0 million. The result of the Asset Management segment was supported by the 23% growth of real estate and private equity management fees. Traditional asset management also made an excellent result in relative terms, as the management fee income only fell by 2% from the year before. Performance fees fell by almost 90%, on the other hand.
We managed to raise a record amount of capital to our private equity asset management. We raised altogether EUR 345 million to our two private equity funds during the six-month period. The eQ PE XII North private equity fund, which makes investments in private equity investment funds that invest in unlisted, small and mid-sized companies in Northern Europe, raised EUR 190 million. Our third secondary market fund eQ PE SF III private equity fund raised EUR 155 million. Both new funds are clearly larger than their predecessors, and they are still expected to grow during the remaining part of the year. In addition, we have launched four new private equity mandates during the first half of the year.
Within real estate asset management, we established a new real estate fund eQ Residential. The fund has raised EUR 33 million of subscription commitments and its target size is EUR 100 million. The eQ Residential Fund is intended for professional investor and it is a closed-end fund. In our open-end real estate funds, i.e. eQ Care and eQ Finnish Real Estate, net subscriptions were slightly positive during the first half of the year. As a result of the worst COVID-19 crisis, redemptions were made in March, in the midst of the worst crisis, at the value of the end of June. By the end of June, the situation had returned to normal, and we received new subscriptions for EUR 49 million.
Advium’s fee and commission income at last year’s level
In the Corporate Finance segment, Advium has acted as advisor in three transactions during the first six months. In the second quarter, Advium acted, for instance, as advisor to Solidium Oy, as it sold its entire holding of about 14.9% in Neles Corporation to Valmet Corporation for EUR 179 million. In addition, Advium acted as financial advisor to Tamturbo, as Sulzer AG, one of the major experts in fluid technology in the world, made a strategic investment in Tamturbo Plc, which is a Finnish industrial cleantech start-up. After the period under review, Advium has acted as advisor in two transactions, which have already been finalised.
Advium’s order base remains good, but due to the challenging operating environment several projects within both traditional M&As and real estate transactions have still been postponed and partly interrupted. Advium’s net revenue was EUR 1.7 million (EUR 1.8 million) and operating profit EUR 0.3 million (EUR 0.4 million).
The operating profit of Investments was negative
The operating profit of the Investments segment was EUR 0.4 million negative. The net cash flow was EUR 0.2 million negative. At the end of June, the balance sheet value of the private equity fund investments was EUR 16.1 million.
Outlook
The outlook of national economies for the remaining part of the year is still rather uncertain. In addition, it is difficult to foresee how the COVID-19 pandemic will develop during the autumn.
The outlook for the financial year is still unaltered, however, and we expect the net revenue and operating profit of the Asset Management segment to grow from the previous year. The greatest uncertainties regarding the Asset Management segment are related to performance fees. At the moment, it is difficult to assess whether we will get any performance fees from our open-end real estate funds. As for the performance fee from the Amanda IV Fund, it is likely that it will be postponed to 2021.
***
eQ’s half year financial report 1 January to 30 June 2020 is enclosed to this release and it is also available on the company website at www.eQ.fi.
Additional information: Janne Larma, CEO, tel. +358 9 6817 8920
eQ Group is a group of companies that concentrates on asset management and corporate finance business. eQ Asset Management offers a wide range of asset management services (including private equity funds and real estate asset management) for institutions and private individuals. The assets managed by the Group total approximately EUR 8.5 billion. Advium Corporate Finance, which is part of the Group, offers services related to mergers and acquisitions, real estate transactions and equity capital markets.
More information about the Group is available on our website www.eQ.fi.
