Taaleri Plc's Half-Year Financial Report OPERATIVELY TAALERI’S DEVELOPMENT WAS GOOD BUT COVID-19 BURDENED EARNINGS FROM INVESTMENT OPERATIONS
Taaleri Oyj
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Taaleri Plc's Half-Year Financial Report 13 August 2020 at 8:30 (EET)
OPERATIVELY TAALERI’S DEVELOPMENT WAS GOOD BUT COVID-19 BURDENED EARNINGS FROM INVESTMENT OPERATIONS
The Group Half-Year Financial Report January-June 2020
Income was EUR 26.3 (30.9) million. Investment operations suffered due to changes in the stock and money market investment caused by the COVID-19 pandemic, resulting in fair value changes.
Continuing earnings grew by 18.2 per cent to EUR 29.0 (24.5) million, growth especially in Energia and Insurance -segments.
Performance fees accrued from several funds totalling EUR 2.2 (-0.5) million.
Earnings from investment operations declined to EUR -5.1 (6.8) million, due to the market development during the period under review.
Operating profit was EUR 2.8 (6.4) million, or 10.6 (20.6) per cent of income. Operating profit excluding investment income was MEUR 7.9. which corresponds to 25.0 percent of net sales.
Earnings per share were EUR 0.04 (0.18).
Assets under management recovered after the spring decline, and totaled EUR 7.1 (31 Dec. 2019: 7.1) billion.
Taaleri Energia successfully exited its first wind farm project in the United States. The profit impacts from the project will be gradually booked later.
Key figures
H1/2020
H1/2019
2019
Long-term target
Earnings key figures
Continuing earnings, MEUR
29.0
24.5
55.3
Growth in continuing earnings, %
18.2
-8.6
6.3
> 15.0
Income, MEUR
26.3
30.9
67.2
Operating profit, MEUR
2.8
6.4
16.5
Operating profit, %
10.6
20.6
24.5
> 20.0
Profit for the period, MEUR
1.4
4.8
11.5
Return on equity*, %
2.4
8.0
9.3
> 15.0
H1/2020
H2/2019
2019
Long-term target
Balance sheet key figures
Equity ratio, %
46.0
48.9
46.6
> 30.0
Group’s capital adequacy ratio, %
203.0
194.6
207.4
Per share key figures
Earnings/share, EUR
0.04
0.18
0.39
Equity/share, EUR
4.24
4.22
4.45
Share closing price, EUR
6.72
7.00
8.42
Other key figures
Cost/income ratio
89.1
79.5
74.7
Cost/income ratio excluding investment operations
73.1
103.3
83.7
Number of full-time employees, average
188
185
186
Market capitalization, MEUR
190.2
198.1
238.3
Assets under management, BEUR
7.1
6.6
7.1
Guaranty insurance portfolio, BEUR
1.8
1.6
1.8
* annualized
Income statement items are compared with figures for the corresponding period last year. The balance sheet is compared to the situation at the end of 2019, unless otherwise stated.
CEO Robin lindahl
”Taaleri's business has developed very well, despite the challenging market conditions caused by the COVID-19 pandemic. Profitability based on commission income developed well – our Group's continuing income increased by 18 percent to EUR 29.0 million thanks to the active involvement of our personnel, and performance fees accrued from several funds totaled EUR 2.2 million during the review period. The pandemic had an impact particularly on changes in the fair value in the equity and money markets and hence on the result of Taaleri's own investments, but also on our clients' assets under management and, indirectly, on project development. Investment income fell sharply in the first quarter of the year, and although there were clear signs of improvement in the second quarter, the investment result stayed at -5.1 million euros. Taaleri's income in the review period was EUR 26.3 million, operating profit EUR 2.8 million and the operating margin was 11 per cent. Personnel expenses decreased mainly due to lower variable salaries and cost/income ratio excluding investment operations strengthened from previous period.
A significant milestone was reached when Taaleri Energia successfully exited its first wind farm project in the United States to Taaleri SolarWind II -fund, infrastructure fund AIP, Ilmarinen and a producer of renewable energy Akuo Energy. BHE Renewables (subsidiary of Berkshire Hathaway Energy), NORD/LB, Mizuho, Santander and Societe Generale act as project financiers, and the project is 336 megawatts in size and represents more than $ 450 million in investment in the North American renewable energy sector.The profit impacts from the project will be gradually booked later. Taaleri Energia continued to raise funds for the international renewable energy fund Taaleri SolarWind II and commitments exceeded EUR 290 million at the end of the review period.
During January-June 2020, new investment commitments of EUR 100 million were collected in Taaleri Biojalostamo, Taaleri Velkarahastot I, Taaleri Kiinteistöt, Aurinkotuuli II and Taaleri Impakti -funds and EUR 25 million to several equity funds. In addition, Taaleri announced Finland's first digital asset management service specializing in impact investments.
Garantia's net income from guarantee insurance operations increased by 27 per cent to EUR 6.9 million and claims incurred remained low. Net investment income decreased significantly due to the market effects caused by COVID-19 and investment income at fair value ended at -4.5 per cent during the period under review.
The implementation of Taaleri’s strategy proceeds well in all business segments and during the first half of 2020 Taaleri Group’s Executive Management Team was strengthened, since Essi Sten was appointed Head of Taaleri Real Estate business as of 1 April 2020. During past few months we have executed several development projects, which support our growth strategy and help us in building even stronger Taaleri.
The COVID-19 pandemic is far from over and the level of uncertainty remains high. Our skilled and motivated personnel will continue creating interesting investment opportunities, and, in addition to economic returns, we want to offer our customers a way to positively impact the surrounding society and the environment also in the current business environment”.
Half-Year Review 1 JANUARY–30 June 2020
Operating environment
The public health and economy were globally affected by the COVID-19 pandemic during the first half of 2020. The impact on financial markets was extreme, especially during the first quarter. Financial markets have since recovered faster than expected. While economic activity has started to recover, the pandemic will have long lasting effects on global economy.
The outlook for the Finnish property investment and rental markets deteriorated rapidly in the beginning of 2020, and in April, most of the property market indicators turned negative. The real estate transactions market remained active in the first quarter of the year, but volumes slowed down significantly during the second quarter.
Countries around the world are taking steps to support the energy sector and to mitigate the negative effects of the crisis, and measures have also been taken to support the renewables sector in EU. Countries around the world are also helped to accelerate the energy revolution as part of their pandemic relief efforts. In the EU, for example, the Green Deal and investment in renewable energy have been at the heart of stimulus measures.
The EU and the European Central Bank (ECB) have taken action to support the recovery and to mitigate a financial crisis. Early signs indicate that the EU was responding rapidly, as many European governments have been increasing their spending to compensate for the economic losses of lockdowns. Interest rates have stayed low, ECB has kept borrowing costs low for all eurozone countries. In March, the ECB created a Pandemic Emergency Purchase Programme, a temporary EUR 750 billion scheme involving both government and private debt. In June, the amount of purchases was increased to a total of EUR 1,35 trillion. In July, European Commission put forward yet one proposition for an EUR 750 billion recovery plan to repair economic damages of pandemic.
financial result
Income and operating profit
Segment-specific income and operating profit
H1/2020
H1/2019
Change, %
2019
EUR million
Group income
26.2
30.9
-15.2
67.2
Wealth Management
20.2
17.2
17.3
42.9
Insurance
3.6
10.4
-65.8
21.3
Energia
4.2
1.4
197.1
4.6
Business segments, total
28.0
29.1
-3.8
68.8
Other Operations
-1.8
1.8
-198.8
-1.6
Group operating profit/loss
2.8
6.4
-56.1
16.5
Wealth Management
6.3
2.0
210.9
11.8
Insurance
0.8
6.1
-87.7
12.7
Energia
0.1
-1.6
na
-2.6
Business segments, total
7.2
6.5
10.1
21.9
Other Operations
-4.4
-0.1
na
-5.3
The Group's share of the result of associated companies is taken into account in the segment-specific income. Segment information is presented on page 31.
January–June 2020
All business segments developed operatively well in the first half of the year, regardless of challenging market conditions. The Group’s income in January-June 2020 was EUR 26.3 (30.9) million, a decrease of 14.7 per cent compared to the same period in 2019. The decrease in income was due to the development of the investment market caused by COVID-19 in the first quarter of the year, which was directly reflected in changes in the fair value of investment activities.
Taaleri's continuing income, which considers all the Group's other income except income fees and investment income, increased by 18.2 percent to EUR 29.0 (24.5) million. The Group's commission income increased by 30.5 percent to EUR 23.0 (17.6) million, of which performance fees totaled EUR 2.2 (-0.5) million. Net income from insurance operations grew 26.5 per cent to EUR 6.9 (5.5) million, of which investment operations generated EUR -3.4 (5.0) million. Net insurance income thus decreased by a total of EUR 3.5 (10.4) million. the euro. The Group’s other investment operations and other earnings totaled EUR -0.2 (2.8) million.
The Group’s operating profit was EUR 2.8 (6.4) million and represented 10.6 (20.6) per cent of the Group's income.
The Group’s cost/income ratio excluding investment operations developed positively and was 73.1 (103.3) per cent in the period under review. The total administrative costs decreased to EUR 14.8 (17.1) million. Personnel costs totaled EUR 10.5 (12.3) million. The decrease in personnel costs was mainly due to changes in variable personnel costs. Other administrative expenses totaled EUR 4.3 (4.7) million and other operating expenses EUR 2.9 (2.4) million.
Profit for January-June 2020 amounted to EUR 1.4 (4.8) million. Comprehensive income was EUR -1.4 (6.6) million.
Balance sheet, investments and financing
The Group’s balance sheet totaled EUR 259.1 (31 Dec. 2019: 269.7) million. The Group’s cash and cash equivalents totaled EUR 33.3 (29.1) million and investments EUR 172.3 (173.5) million, corresponding to 66.5 (64.3) per cent of the Group’s balance sheet total.
The Group’s interest-bearing liabilities amounted to EUR 75.7 (75.6) million, which consisted of EUR 34.9 (34.9) million in Taaleri Plc bond programmes. EUR 25.9 (25.9) million in liabilities to credit institutions and EUR 14.8 (14.8) million in Taaleri Plc Tier 2 bond. A 20 EUR million bank loan was also renegotiated during the period and loan repayments during 2020 were eased. Liabilities totaled EUR 140.0 (144.0) million and equity stood at 119.2 (124.7) million.
The dividend for the financial year 2019, totaling EUR 4.5 million, was paid in May 2020. In addition, the Annual General Meeting authorized Taaleri Corporation's Board of Directors to decide on a payment of a maximum dividend of EUR 0.16 per share for the financial year 2019 with a payment at one or more occasions, by the next Annual General Meeting.
The equity ratio remained strong and was 46.0 (46.6) per cent.
Outlook
COVID-19 pandemic
Taaleri reacted to Finnish Government’s recommendations regarding COVID-19 pandemic measures and most of Taaleri’s personnel was working remotely already in early March. Taaleri has prepared a plan to start normal operations at the offices in August if the situation of the epidemic allows it. Work related travel to foreign countries is restricted and no travelling is allowed to countries or areas that are not approved for travel by authorities.
Short-term risks and concerns
The most significant external uncertainties affecting the Group’s operating profit are changes in the operating and regulatory environment and the development of the financial markets globally and especially in Finland. The negative effects of the COVID-19 pandemic on the development of the Finnish and the world economy are exceptionally challenging and this will directly and indirectly affect Taaleri's business. The new EU-level solvency regulation for investment firms will enter into force on 26 June 2021, and the preparation of lower-level regulations of the regulation package is still in progress. Therefore, it is not yet possible to assess the full impact of the new regulation on Taaleri and its business.
The results of the Wealth Management and the Energia segments are influenced by the development of assets under management, which depends among other things on the progress of private equity fund projects and the development of capital markets. Profit development is also influenced by the realization of performance fees, which are tied to the success of the investment operations. The Energia segment’s earnings are also affected by the success of its own investments in energy projects.
The Insurance segment’s guaranty insurance business and investment activities have a major impact on Taaleri’s operational income and capital adequacy.
The Other Operations returns consist of the market value changes in investments and of sales profits/losses gained as well as returns of loans granted. The earnings and results of the Other Operations may thus vary significantly between periods under review.
Long-term financial targets
Taaleri’s long-term targets are
Continuing earnings growth at least 15 percent,
Operating profit at least 20 per cent of income,
Return-on-equity target at least 15 per cent and
Equity ratio target at least 30 per cent.
The company strives to increase the amount of dividend it distributes and to annually distribute a competitive dividend, with consideration to the company’s financial and financing situation as well as the Group’s capital adequacy requirement.
Dividend PAyment for year 2019
The Annual General Meeting 2020 decided to pay a dividend of EUR 0.16 per share for the financial year that ended 31 December 2019. The record date for the dividend was 20 May 2020 and the dividend payment date was 28 May 2020. In addition, the General Meeting authorised the Board of Directors to at a later date decide on a payment of a maximum dividend of EUR 0.16 per share for the financial year 2019 with a payment at one or more occasions. The authorisation is in force until the Annual General Meeting 2021.
Helsinki, 13 August 2020 Taaleri Plc Board of Directors
Taaleri publishes its Half-Year Financial Report 2020 as a PDF file attached to this stock exchange release. The report is also available at https://www.taaleri.com/en/investor-relations/reports-and-presentations.
Web cast presentation in Finnish
An English presentation will be available today, 13 August 2020, from 14:00 CET at https://www.taaleri.com/en/investor-relations/reports-and-presentations. The web cast is conducted in Finnish.
Taaleri in brief
Taaleri is a Finnish financial services company, whose parent company, Taaleri Plc, is listed on Nasdaq Helsinki main market. The Taaleri Group comprises three business areas: Wealth Management, Financing, and Energy. In addition, the Group makes investments from its own balance sheet. At the end 2019, Taaleri had assets under management totalling EUR 7.1 billion and 5,500 wealth management customers. Taaleri Plc has some 4,700 shareholders. Taaleri’s operations are supervised by the Finnish Financial Supervisory Authority.
