2020
HALF YEAR REPORT
eQ PLC | HALF YEAR 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 | ||
1
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 | 7.0 | 6.2 | 13% | 7.0 | 6.2 | 13% | 6.8 | ||||||||||
reporting services, € billion | |||||||||||||||||
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.
2
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
Distribution: Nasdaq Helsinki, www.eQ.fi, media
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.
3
eQ PLC'S HALF YEAR REPORT 1 JAN. TO 30 JUNE 2020
Result of operations and financial position 1 Jan. to 30 June 2020
- 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).
Result of operations and financial position 1 April to 30 June 2020
- 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).
Operating environment
The nearly complete closing of the economy, which began in China already in the first months of 2020 due to the COVID-19 virus, spread to the entire Western world in March and April. This caused an almost total halt in several industries globally and lead to a substantial reduction of the BNP, lay-offs, and redundancies. China, which had timewise stood in the frontline of the virus, could, on the other hand, stop the virus and restore a considerable share of its economic activity so that production had already almost returned to the level preceding the crisis by the end of the second quarter.
In the middle of the deep crisis, both central banks and states continued to pump huge sums to the market in order to support economies. Towards the end of the quarter, the debate on EU's common recovery fund intensified but met political opposition in most member states.
Discussions on the gradual opening of economies began at the end of April in Europe and the US as well, as infection rates started to fall in different countries. In May and June, the confidence of industry and consumers began to recover from the COVID-19 chock in western countries as well. The situation in Brazil and Russia, for instance, remained difficult, on the other hand, and the debate in Western countries and China as well about new possible waves of the virus caused concern.
The recovery of equity and bond markets from the steep fall, which began already at the end of March, continued during the second quarter, and the returns of the second quarter were very strong across the board. As a whole, the returns of the first six months remained negative, however. As for shares, the greatest falls were seen in Europe, where the MSCI Europe Index gave a -12.8% return. In the second
4
quarter, the return was +12.6%, however, which shows that the sentiment was changing rapidly. The corresponding figures on the Finnish stock exchange were -3.7% and +19.1%. In the US, the S&P 500 Index gave a -3.4% return in the first quarter, both in dollars and euros, but in the second quarter, the return in dollars was no less than +20.4% and in euros +17.6%. In emerging equity markets, the return of the first half was -9.8%, even though the return of the second quarter was +15.4%.
Among bond indices, high yield loans gave the poorest returns, -5.0% in the six-month period and +11.1% in the second quarter. The corresponding figures for investment grade loans were -1.3% and +5.1% and those of emerging market euro-hedged loans -0.5% and +8.8%. Only euro denominated government bonds gave a positive return of 1.9% in the six-month period, the return of the second quarter being +1.7%.
Major events during the period under review
eQ Plc's Annual General Meeting was held on 25 March 2020. Nicolas Berner, Georg Ehrnrooth, Timo Kokkila, Lotta Kopra and Tomas von Rettig were re-elected to the Board. Georg Ehrnrooth will continue as Chairman of the Board. The decisions by the Annual General Meeting have been presented in a separate chapter below.
Group net revenue and result development
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, including the return from private equity fund investments and liquid fixed income funds (EUR 0.4 million).
The Group's expenses and depreciation totalled EUR 12.2 million (EUR 11.9 million). Personnel expenses were EUR 10.1 million (EUR 9.7 million), other administrative expenses totalled EUR 0.9 million (EUR 1.1 million), and the other operating expenses were EUR 0.6 million (EUR 0.7 million). Depreciation was EUR 0.5 million (EUR 0.5 million).
The Group's operating profit was EUR 11.7 million (EUR 11.0 million) and the profit for the period was EUR 9.4 million (EUR 8.8 million).
Business areas
Asset Management
eQ Asset Management offers versatile and innovative asset management services to both institutions and individuals. The Asset Management segment consists of the investment firm eQ Asset Management Ltd and other Group companies engaged in asset management operations, the most important of which is eQ Fund Management Company Ltd.
Mutual funds and asset management
At the end of the period, eQ had 26 mutual funds registered in Finland. The number of funds increased during the period with two funds that were transferred from Aurejärvi Asset Management. The new funds are eQ Global and eQ Europe Small Cap.
As a result of the widening of credit risk margins, the returns of eQ's fixed income funds were mostly negative during the six-month period. The positive return of government bonds was an exception. After the crash in March, the returns were positive in the second quarter for all parts, however. The best six-moth returns came from the eQ Government Bond and eQ Euro Short Term funds. The best returns as compared with benchmark indices came from the eQ Government Bond and eQ Floating Rate funds. eQ Euro Investment Grade fund was awarded as the best fund measured with a five-year return in this year's Lipper Scandinavian "Bond EUR Corporates" series.
5
The returns of equity funds were also mostly negative during the six-month period due to the crash in March, despite the strong recovery in the second quarter. The eQ Blue Planet fund is an exception, as its value increased strongly during the second quarter and already exceeded the year-end level at the end of the period under review. As compared with their benchmark indices, the eQ Blue Planet, eQ Nordic Small Cap, and eQ Emerging Market Small Cap funds gave excellent returns. On 11 March 2020, eQ Asset Management won one of the major prices awarded by Morningstar. Morningstar recognised the entire equity fund range of eQ with its "Best Equity Fund House" award. This extremely highly esteemed award is based on the five-yearrisk-adjusted returns of eQ's equity funds.
Of the funds managed by eQ, 31% surpassed their benchmark indices in the six-month period, and in the past three years, 62% of the funds managed by eQ have surpassed their benchmark indices. The average Morningstar rating of funds managed by eQ was 3.3 stars at the end of the period under review. The returns of the discretionary asset management portfolios that eQ manages varied between -3.2 and -7.2% during the six-month period, based on the allocation of the investment portfolio. The return of portfolios that are only invest in Finnish shares was -6.6%, which was slightly below the return of the benchmark index.
Private Equity
The first close of the new eQ PE XII North private equity fund was held at the end of January 2020 at EUR 126 million. The second close of the fund took place in April at EUR 157 million, and in the close in June the size of the fund grew to EUR 190 million. The eQ PE XII North fund makes investments in private equity funds that invest in unlisted, small and mid-sized companies in Northern Europe. In January, eQ also established its third secondary market fund eQ PE SF III. The first close of the fund was held at EUR 75 million. The second close of the fund took place in April at EUR 115 million, and in the close in June the size of the fund grew to 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, eQ has launched four new private equity mandates during the first half of the year.
At the end of the period under review, the assets in private equity funds managed by eQ totalled EUR 1 901 million (EUR 1 609 million) and the assets managed under private equity mandates were EUR 868 million (EUR 677 million).
Real estate investments
At the end of the period under review, new net subscriptions worth EUR -49 million were made in the eQ Finnish Real Estate fund. During the six-month period, the subscriptions totalled EUR -22 million. At the end of the quarter, the size of the fund was EUR 656 million, and its real estate property amounted to almost EUR 1.1 billion. The investment operations of the fund have been extremely successful, and the return since establishment is 8.6% p.a. The fund has almost 2 400 unit holders.
At the end of the period under review, new net subscriptions worth EUR -7 million were made in the eQ Care fund. During the six-month period, the subscriptions totalled EUR 25 million. At the end of the period under review, the size of the fund was EUR 1 008 million and its real estate property exceeded EUR 1.3 billion. The return of the fund since establishment is 8.9% p.a., and the fund has almost 4 000 unit holders.
In May, eQ established a new real estate fund eQ Residential. Subscription commitments for EUR 33 million have been raised to the fund, which means an investment capacity exceeding EUR 100 million. The investment operations have begun, and the raising of means will continue in autumn. The target size of the fund is EUR 100 million, which will enable investments exceeding EUR 300 million in residential real estate. eQ Residential will make investments in the Helsinki metropolitan area, Tampere, and Turku. The fund targets complete residential buildings and aims to manage approximately 1,500 rental units in total. Unlike eQ Care and eQ Finnish Real Estate funds, eQ Residential is restricted to professional investors only in a closed-end fund structure.
Overall, eQ's real estate funds had real estate property worth almost EUR 2.4 billion at the end of the period under review, and eQ has become a major Finnish real estate investor. Consequently, the real estate team has been expanded to 13 persons.
6
Assets under management and clients
At the end of the period, the assets managed by eQ Asset Management, excluding assets covered by private equity reporting services, were EUR 7 017 million and altogether EUR 8 461 million. The assets increased by EUR 251 million from the beginning of the year, excluding the private equity reporting services, and fell in total by EUR 3 225 million (EUR 6 767 / 11 686 million on 31 Dec. 20109). The considerable fall in the private equity reporting services was in practice due to one large institutional investor, who went over to an international service provider. The transfer has no impact on the result in practice.
At the end of the period, the assets managed by mutual funds registered in Finland totalled EUR 3 108 million (EUR 3 276 million), and the assets decrease by EUR 168 million mainly as a result of the market movement. Mutual funds managed by international partners and assets covered by other asset management operations totalled EUR 1 140 million (EUR 1 206 million). The assets managed under private equity funds and asset management totalled EUR 4 212 million (EUR 7 204 million), the share of eQ funds being EUR
1 901 million (EUR 1 609 million) and that of mandates EUR 868 million (EUR 677 million). The assets covered by the reporting service totalled EUR 1 443 million (EUR 4 919 million).
Result of the Asset Management segment
During the period under review, the net revenue of the Asset Management segment increased by 9% and the operating profit by 15% to EUR 13.0 million (EUR 11.3 million from 1 Jan. to 30 June 2019). The management fees of the real estate and private equity operations increased by 23% during the period. Performance fees fell by 88% as a result of their typical strong fluctuation per quarter and financial period. The cost/income ratio was 42.5% (45.5%). Calculated as full-time resources, the Asset Management segment had 72 employees at the end of the period under review.
Asset Management | 1-6/20 | 1-6/19 | Change | 4-6/20 | 4-6/19 | Change | 1-12/19 | |||||||||||||||
Net revenue, M€ | 22.7 | 20.8 | 9% | 11.4 | 10.6 | 8% | 44.3 | |||||||||||||||
Operating profit, M€ | 13.0 | 11.3 | 15% | 6.6 | 6.0 | 9% | 25.4 | |||||||||||||||
Assets under management excluding | 7.0 | 6.2 | 13% | 7.0 | 6.2 | 13% | 6.8 | |||||||||||||||
reporting services, € billion | ||||||||||||||||||||||
Assets under management total, € billion | 8.5 | 10.9 | -23% | 8.5 | 10.9 | -23% | 11.7 | |||||||||||||||
Cost/income ratio, % | 42.5 | 45.5 | -7% | 41.9 | 42.7 | -2% | 42.7 | |||||||||||||||
Personnel as full-time resources | 72 | 70 | 3% | 72 | 70 | 3% | 69 | |||||||||||||||
Fee and commission income, Asset | 1-6/20 | 1-6/19 | Change | 4-6/20 | 4-6/19 | Change | 1-12/19 | |||||||||||||||
Management, M€ | ||||||||||||||||||||||
Management fees from traditional asset | 3.9 | 3.9 | -2% | 1.8 | 2.0 | -6% | 8.0 | |||||||||||||||
management | ||||||||||||||||||||||
Real estate and private equity management | 18.7 | 15.3 | 23% | 9.6 | 7.9 | 22% | 32.1 | |||||||||||||||
fees | ||||||||||||||||||||||
Other fee and commission income | 0.1 | 0.1 | -18% | 0.0 | 0.0 | -7% | 0.3 | |||||||||||||||
Performance fees | 0.2 | 1.7 | -88% | 0.0 | 0.8 | -98% | 4.4 | |||||||||||||||
Total | 22.9 | 21.0 | 9% | 11.5 | 10.7 | 8% | 44.7 | |||||||||||||||
Corporate Finance
In the Corporate Finance segment, Advium Corporate Finance acts as advisor in mergers and acquisitions, large real estate transactions and equity capital markets.
The global COVID-19 outbreak has had a negative impact on Advium's business operations, but the rise of share prices and recovery of the economic outlook in the second quarter give us confidence that transaction volumes will begin to rise in the second half of the year. Before the transaction volumes can return to former levels, the COVID-19 epidemic must calm down and for instance travel restrictions must be abolished, however. Advium's order base remains good, but due to the challenging operating environment several
7
projects within both traditional M&As and real estate arrangements have still been postponed and partly interrupted.
During the six-month period, Avdium acted as advisor in three finalised transactions. 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 about 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.
Result of the Corporate Finance segment
Advium's net revenue during the period under review was EUR 1.7 million (EUR 1.8 million from 1 Jan. to 30 June 2019). The operating profit was EUR 0.3 million (EUR 0.4 million). The segment had 16 employees at the end of the period.
It is typical of corporate finance business that success fees have a considerable impact on invoicing, due to which the result may vary considerably from quarter to quarter.
Corporate Finance | 1-6/20 | 1-6/19 | Change | 4-6/20 | 4-6/19 | Change | 1-12/19 |
Net revenue, M€ | 1.7 | 1.8 | -4% | 1.3 | 0.7 | 72% | 5.4 |
Operating profit, M€ | 0.3 | 0.4 | -6% | 0.4 | 0.1 | 351% | 1.9 |
Cost/income ratio, % | 80.7 | 80.3 | 0% | 64.8 | 86.6 | -25% | 64.1 |
Personnel as full-time resources | 16 | 15 | 7% | 16 | 15 | 7% | 15 |
Investments
The business operations of the Investments segment consist of private equity fund investments and real estate fund investments made from eQ Group's own balance sheet.
During the period under review, the net revenue of the Investments segment totalled EUR -0.4 million (EUR
- million from 1 Jan. to 30 June 2019). At the end of the period, the fair value of the investments was EUR
- million (EUR 16.2 million on 31 Dec. 2019) and the amount of the remaining investment commitments was EUR 7.9 million (EUR 6.7 million). Of the market value, 86% has been invested in funds managed by eQ. The breakdown of the market value and investment commitments of the investments per fund are presented in the tables section.
During the period, the investment objects returned capital for EUR 0.6 million (EUR 1.3 million from 1 Jan. to 30 June 2019) and distributed a profit of EUR 0.0 million (EUR 0.7 million). Capital calls totalled EUR 0.8 million (EUR 1.6 million). The net cash flow from investments during the period was EUR -0.2 million (EUR
0.3 million). The value changes recognised through profit or loss and final losses of the investments were EUR -0,3 million during the period (EUR -0,4 million). During the period under review, the COVID-19 crisis influenced the profit distribution and value changes of investments. The Group's internal management fee expenses, which are included in the result of the Investments segment, totalled EUR 0.1 million (EUR 0.1 million).
During the period under review, eQ Plc made a EUR 1.0 million investment commitment in the eQ PE XII North private equity fund. The eQ PE XII North fund makes investments in private equity funds that invest in unlisted, small and mid-sized companies in Northern Europe. eQ Plc also made an investment commitment of EUR 1.0 million in the eQ Residential real estate fund. eQ Residential is a closed-end fund that makes investments in residential property in the Helsinki metropolitan area, Tampere, and Turku.
The income of eQ's Investments segment is recognised due to factors independent of the company. Due to this, the segment's result may vary considerably. eQ only makes new investments in funds managed by eQ.
8
Investments | 1-6/20 | 1-6/19 | Change | 4-6/20 | 4-6/19 | Change | 1-12/19 |
Operating profit, M€ | -0.4 | 0.1 | -345% | -1.0 | 0.0 | -4063% | 0.8 |
Fair value of investments, M€ | 16.1 | 16.8 | -4% | 16.1 | 16.8 | -4% | 16.2 |
Investment commitments, M€ | 7.9 | 7.4 | 7% | 7.9 | 7.4 | 7% | 6.7 |
Net cash flow of investments, M€ | -0.2 | 0.3 | -152% | -0.6 | 0.6 | -198% | 1.7 |
Balance sheet and capital adequacy
At the end of the financial period, the consolidated balance sheet total was EUR 67.2 million (EUR 85.4 million on 31 Dec. 2019) and the shareholders' equity was EUR 50.8 million (EUR 65.1 million). During the period, the shareholders' equity was influenced by the profit for the period of EUR 9.4 million, the dividend distribution of EUR -21.1 million, the repayment of equity of EUR -2.7 million from the reserve for invested unrestricted equity, and the accrued expense of EUR 0.1 million related to an option scheme and enter in the shareholders' equity. The changes are specified in detail in the tables attached to this release.
At the end of the period, liquid assets totalled EUR 8.0 million (EUR 22.4 million) and liquid investments in mutual funds EUR 5.8 million (EUR 9.9 million). In order to safeguard the availability of financing, the Group has access to a credit limit of EUR 4.0 million. At the end of the period, the Group's short-term receivables amounted to EUR 4.9 million (EUR 4.7 million).
The lease liability entered in the balance sheet was EUR 2.5 million (EUR 2.6 million) at the end of the period, the share of short-term liabilities being EUR 0.9 million (EUR 0.6 million). Interest-freeshort-term debt was EUR 13.8 million (EUR 17.7 million). The Group had no interest-bearing loans at the end of the period (EUR - million). eQ's equity to assets ratio was 75.7% (76.2%).
A subsidiary called eQ Asset Management Ltd, which is engaged in investment firm operations and fully owned by eQ Plc, is part of the Group. eQ Asset Management Ltd, as investment firm, and eQ Plc as the holding company, apply the CRR/CRD regulations. The requirement for eQ Group's and eQ Asset Management Ltd's own funds is calculated according to article 95 of EU's Capital Requirements Regulation. The amount of the total risk exposure is calculated as the larger of the following: a) total amount of credit and market risks or b) the total risk based on fixed overheads.
The Group's CET1 (Common Equity Tier 1) and capital adequacy ratio of the own funds was 22.3% (22.2% on 31 Dec. 2019) at the end of the period. According to regulations, the absolute minimum requirement for own funds is 8%. At the end of the period, the Group's own funds based on capital adequacy calculations totalled EUR 11.6 million (EUR 11.9 million on 31 Dec. 2019), and the total risk exposure was EUR 51.9 million (EUR 53.5 million). In capital adequacy calculations, the amount of the total risk exposure is based on the total risk exposure based on fixed overheads, as the total credit and market risks was lower at the end of the period. Detailed information on the Group's capital adequacy can be found in the tables section.
Shares and share capital
At the end of the period on 30 June 2020, the number of eQ Plc's shares was 38 307 198 and the share capital was EUR 11 383 873. There were no changes in the number or shares or share capital during the period.
The closing price of eQ Plc's share on 30 June 2020 was EUR 13.20 (EUR 12.45 on 31 Dec. 2019). The market capitalisation of the company was thus EUR 505.7 million (EUR 476.9 million) at the end of the period. During the period, 1 734 664 shares were traded on Nasdaq Helsinki (858 179 shares from 1 Jan. to 30 June 2019). In euros, the turnover was EUR 21.9 million (EUR 7.6 million).
Own shares
On 30 June 2020, eQ Plc held no own shares.
9
Shareholders
Ten major shareholders on 30 June 2020
Shares | Share, % | ||
1 | Fennogens Investments S.A. | 7 943 137 | 20.74 |
2 | Chilla Capital S.A. | 5 945 275 | 15.52 |
3 | Anchor Oy Ab | 5 803 677 | 15.15 |
4 | Teamet Oy | 4 100 000 | 10.70 |
5 | Oy Cevante Ab | 1 419 063 | 3.70 |
6 | Fazer Jan Peter | 1 298 306 | 3.39 |
7 | Lavventura Oy | 650 000 | 1.70 |
8 | Linnalex Ab | 631 652 | 1.65 |
9 | Procurator-Holding Oy | 623 892 | 1.63 |
10 | Pinomonte Ab | 529 981 | 1.38 |
10 major shareholders, total | 28 944 983 | 75.56 | |
Nominee registered | 414 495 | 1.08 | |
Other shares | 8 947 720 | 23.36 | |
Total | 38 307 198 | 100.00 |
On 30 June 2020, eQ Plc had 6 774 shareholders (5 945 shareholders on 31 Dec. 2019).
Option schemes
At the end of the period, eQ Plc had two valid option schemes. The option schemes are intended as part of the commitment system of the Group's key personnel.
Option scheme 2015
At the end of the period, altogether 1 575 000 options had been allocated from option scheme 2015. The subscription period of shares with option rights 2015 began on 1 April 2019 and will end on 1 April 2021. The options have been listed on Nasdaq Helsinki.
Of these options, altogether 250 000 had been exercised by the end of the period. The number of outstanding options was 1 325 000 at the end of the period. No options of the option scheme 2015 can any longer be allocated.
The terms and conditions of the option scheme have been published in a stock exchange release of 5 November 2015, and they can be found in their entirety on the company website at www.eQ.fi.
Option scheme 2018
At the end of the period, altogether 1 775 000 options had been allocated from option scheme with a purchase price 2018. The subscription period of shares with option rights 2018 will begin on 1 April 2022 and end on 1 April 2024.
In the first quarter of 2020, 25 000 options with a purchase price of EUR 18 000.00 were returned to eQ Plc due to the termination of employment. The purchase price of the returned options was entered in its entirety at the original subscription price in the reserve for invested unrestricted equity. The number of outstanding options was 1 775 000 at the end of the period. No options of the option scheme 2018 can any longer be allocated.
The terms and conditions of the option scheme have been published in a stock exchange release of 26 October 2018, and they can be found in their entirety on the company website at www.eQ.fi.
10
Decisions by the Annual General Meeting
eQ Plc's Annual General Meeting (AGM), held on Monday 25 March 2020 in Helsinki, decided upon the following:
Confirmation of the financial statements
eQ Plc's AGM confirmed the financial statements of the company, which included the consolidated financial statements, the report by the Board of Directors, and the auditors' report for the financial year 2019.
Decision in respect of the result shown on the balance sheet and the distribution of assets from the reserve for invested unrestricted equity
The AGM confirmed the proposal by the Board of Directors that a dividend of EUR 0.55 per share and a repayment of equity of EUR 0.07 from the reserve for invested unrestricted equity be paid out. The dividend and equity repayment were paid to shareholders who, on the record date for the dividend payment, i.e. 27 March 2020, were recorded in the shareholder register of eQ Plc held by Euroclear Finland Ltd. Payment date of the dividend and equity repayment was 3 April 2020.
Discharge from liability to the Board of Directors and the CEO
The AGM decided to grant discharge from liability to the Board of Directors and the CEO.
Remuneration Policy for governing bodies
The Annual General Meeting adopted the Remuneration Policy for the governing bodies.
Number of directors, appointment of directors, and the remuneration of directors
According to the decision of the AGM, five members shall be elected to eQ Plc's Board of Directors. Nicholas Berner, Georg Ehrnrooth, Timo Kokkila, Lotta Kopra and Tomas von Rettig were re-elected for a term of office that will end at the close of the next Annual General Meeting. The AGM decided that the directors would receive remuneration as follows: the Chairman of the Board will receive EUR 4 000 and the other directors EUR 2 500 per month The Directors will also be paid EUR 500 for each Board meeting that they attend. Travel and lodging costs will be compensated in accordance with the company's expense policy. The Board elected Georg Ehrnrooth Chairman of the Board at its meeting held immediately after the AGM.
Auditors and auditors' compensation
The AGM decided to elect the corporation of authorised public accountants KPMG Oy Ab auditor of the company. The auditor with main responsibility appointed by the company is Marcus Tötterman, APA. It was decided to compensate the auditor according to an invoice approved by eQ Plc.
Authorising the Board of Directors to decide on the issuance of shares as well as the issuance of special rights entitling to shares
The AGM authorised the Board of Directors to decide on a share issue or share issues and/or the issuance of special rights entitling to shares referred to in Chapter 10 Section 1 of the Limited Liability Companies Act, in one or several transactions, comprising a maximum total of 3 500 000 new shares. The amount of the authorisation corresponded to approximately 9,14% of all shares in the company on the date of the notice of the AGM.
The authorisation can be used in order to finance or carry out potential acquisitions or other business transactions, to strengthen the balance sheet and the financial position of the company, to carry out the company's incentive schemes or for any other purposes decided by the Board. Based on the authorisation,
11
the Board shall decide on all matters related to the issuance of shares and special rights entitling to shares referred to in Chapter 10 Section 1 of the Limited Liability Companies Act, including the recipients of the shares or the special rights entitling to shares and the amount of the consideration to be paid. Therefore, based on the authorisation, shares or special rights entitling to shares may also be issued to certain persons, i.e. in deviation of the shareholders' pre-emptive rights as described in said Act. A share issue may also be executed without payment in accordance with the preconditions set out in the Limited Liability Companies Act. The authorisation cancels all previous corresponding authorisations and is effective until the next AGM, no longer than 18 months, however.
Personnel and organisation
At the end of the period, the number of Group personnel calculated as full-time resources was 93 (89 persons on 31 December 2019). Calculated as full-time resources, the Asset Management segment had 72
- employees and the Corporate Finance segment 16 (15) employees. Group administration had 5 (5) employees.
The overall salaries paid to the employees of eQ Group during the period totalled EUR 10.1 million (EUR 9.7 million from 1 Jan. to 30 June 2019).
Major risks and short-term uncertainties
The major single risk of the Group is the dependence of the operating income on changes in the external operating environment. The result of the Asset Management segment depends on the development of the assets under management, which is dependent of the development of the capital market, for instance. On the other hand, the management fees of private equity funds are based on long-term agreements that produce a stable cash flow. The realisation of the performance fee income that is dependent on the success of the investment operations also influences result development. The performance fees of the asset management operations may consist of performance fees paid by mutual funds and real estate funds, profit shares that private equity funds pay to the management company, and performance fees from asset management portfolios. Performance fees may vary considerably by quarter and financial period.
Success fees, which depend on the number of mergers and acquisitions and real estate transactions and the execution of transactions, have a considerable impact on the result of the Corporate Finance segment. These vary considerably within one year and are dependent on economic trends.
The risks related to the operations of eQ Group's Investments segment are the market risk and currency risk, for instance. Of said risks, the market risk has the greater impact on investments. The company's own investments are well diversified, which means that the impact of one investment made by one individual fund in one single investment object on the return is often small. The income from eQ Group's Investments segment is recognised in different quarters due to factors independent of the company, depending on the exits from funds. The income from investment operations and changes in value may vary considerably from quarter to quarter.
Events after the period under review
After the period under review, Advium has acted as advisor in two transactions, which have already been finalised.
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
12
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 Plc
Board of Directors
13
TABLES
Principles for drawing up the report
The interim report has been prepared in accordance with IFRS standards and the IAS 34 Interim Reports standard, approved by the EU.
The income of eQ Group's Investments segment is recognised due to factors independent of the company. As a result, the net income from financial assets may vary considerably.
The report has not been audited.
14
CONSOLIDATED INCOME STATEMENT, EUR 1 000
1-6/20 | 1-6/19 | 4-6/20 | 4-6/19 | 1-12/19 | |
Fee and commission income | 24 569 | 22 733 | 12 767 | 11 366 | 49 933 |
Interest income | 0 | 3 | 0 | - | 4 |
Net income from financial assets | -425 | 373 | -769 | 44 | 1 132 |
Operating income, total | 24 144 | 23 109 | 11 997 | 11 410 | 51 069 |
Fee and commission expenses | -222 | -212 | -106 | -106 | -428 |
Interest expenses | -12 | -13 | -6 | -7 | -26 |
NET REVENUE | 23 910 | 22 884 | 11 886 | 11 297 | 50 614 |
Administrative expenses | |||||
Personnel expenses | -10 126 | -9 661 | -5 215 | -4 553 | -19 758 |
Other administrative expenses | -940 | -1 096 | -405 | -515 | -2 185 |
Depreciation on tangible and intangible assets | -154 | -111 | -80 | -62 | -219 |
Depreciation on leases | -369 | -374 | -184 | -187 | -749 |
Other operating expenses | -641 | -691 | -330 | -326 | -1 411 |
OPERATING PROFIT (LOSS) | 11 680 | 10 950 | 5 672 | 5 655 | 26 292 |
Income tax | -2 297 | -2 166 | -1 080 | -1 068 | -5 257 |
PROFIT (LOSS) FOR THE PERIOD | 9 383 | 8 784 | 4 592 | 4 587 | 21 035 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
1-6/20 | 1-6/19 | 4-6/20 | 4-6/19 | 1-12/19 | |||
Other comprehensive income: | - | - | - | - | - | ||
Other comprehensive income after taxes | - | - | - | - | - | ||
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 9 383 | 8 784 | 4 592 | 4 587 | 21 035 | ||
Profit for the period attributable to: | |||||||
Equity holders of the parent company | 9 383 | 8 784 | 4 592 | 4 587 | 21 035 | ||
Non-controlling interests | - | - | - | - | |||
Comprehensive income for the period attributable to: | |||||||
Equity holders of the parent company | 9 383 | 8 784 | 4 592 | 4 587 | 21 035 | ||
Non-controlling interests | - | - | - | - | - | ||
Earnings per share calculated from the | |||||||
profit of equity holders of the parent company: | |||||||
Earnings per average share, EUR | 0.24 | 0.23 | 0.12 | 0.12 | 0.55 | ||
Diluted earnings per average share, EUR | 0.23 | 0.21 | 0.11 | 0.11 | 0.51 |
15
CONSOLIDATED BALANCE SHEET, EUR 1 000
30 June | 30 June | 31 Dec. | |||
2020 | 2019 | 2019 | |||
ASSETS | |||||
Liquid assets | 69 | 9 | 72 | ||
Claims on credit institutions | 7 935 | 7 984 | 22 303 | ||
Financial assets | |||||
Financial securities | 5 807 | 4 250 | 9 956 | ||
Private equity and real estate fund investments | 16 053 | 16 817 | 16 156 | ||
Intangible assets | |||||
Fair value and brands | 29 212 | 29 212 | 29 212 | ||
Client agreements | 358 | - | - | ||
Other intangible assets | 300 | 210 | 253 | ||
Tangible assets | 310 | 268 | 261 | ||
Leases | 2 090 | 2 808 | 2 433 | ||
Other assets | 4 318 | 4 941 | 4 151 | ||
Accruals and prepaid expenditure | 443 | 494 | 528 | ||
Income tax receivables | 185 | 256 | 58 | ||
Deferred tax assets | 79 | 12 | 34 | ||
TOTAL ASSETS | 67 160 | 67 262 | 85 418 | ||
LIABILITIES AND EQUITY | |||||
LIABILITIES | |||||
Other liabilities | 5 068 | 4 183 | 4 780 | ||
Accruals and deferred income | 8 592 | 7 914 | 12 057 | ||
Lease liabilities | 2 485 | 2 868 | 2 604 | ||
Income tax liabilities | 165 | 217 | 831 | ||
Deferred tax liabilities | 29 | 31 | 29 | ||
TOTAL LIABILITIES | 16 339 | 15 212 | 20 301 | ||
EQUITY | |||||
Attributable to equity holders of the parent company: | |||||
Share capital | 11 384 | 11 384 | 11 384 | ||
Reserve for invested unrestricted equity | 23 783 | 25 759 | 26 482 | ||
Retained earnings | 6 271 | 6 122 | 6 215 | ||
Profit (loss) for the period | 9 383 | 8 784 | 21 035 | ||
TOTAL EQUITY | 50 821 | 52 049 | 65 117 | ||
TOTAL LIABILITIES AND EQUITY | 67 160 | 67 262 | 85 418 |
16
CONSOLIDATED CASH FLOW STATEMENT, EUR 1 000
1-6/2020 | 1-6/2019 | 1-12/2019 | |
CASH FLOW FROM OPERATIONS | |||
Operating profit | 11 680 | 10 950 | 26 292 |
Depreciation and write-downs | 522 | 486 | 968 |
Interest income and expenses | 12 | 10 | 22 |
Transactions with no related payment transactions | 449 | 430 | 904 |
Financial assets' cash flow - private equity and real estate fund | |||
investments | -193 | -336 | -61 |
Change in working capital | |||
Business receivables, increase (-) / decrease (+) | -81 | 254 | 1 157 |
Interest-free debt, increase (+) / decrease (-) | -4 008 | -3 821 | 919 |
Total change in working capital | -4 089 | -3 568 | 2 076 |
Cash flow from operations before financial items and taxes | 8 383 | 7 973 | 30 202 |
Interests received | 0 | 3 | 4 |
Interests paid | -12 | -13 | -26 |
Taxes | -2 304 | -2 081 | -4 532 |
CASH FLOW FROM OPERATIONS | 6 067 | 5 882 | 25 648 |
CASH FLOW FROM INVESTMENTS | |||
Investments in intangible and tangible assets | -609 | -53 | -197 |
Investments/redemptions in other investments - liquid mutual funds | 4 084 | 5 793 | 93 |
CASH FLOW FROM INVESTMENTS | 3 475 | 5 740 | -103 |
CASH FLOW FROM FINANCING | |||
Dividends paid/equity repayments | -23 750 | -20 551 | -20 551 |
Option issue with a subscription price | -18 | 1 350 | 816 |
Subscription of new shares | - | 39 | 1 296 |
Decrease in the lease liability capital | -144 | -314 | -578 |
CASH FLOW FROM FINANCING | -23 913 | -19 477 | -19 017 |
INCREASE/DECREASE IN LIQUID ASSETS | -14 371 | -7 855 | 6 527 |
Liquid assets on 1 Jan. | 22 375 | 15 848 | 15 848 |
Liquid assets on 31 June/31 Dec. | 8 004 | 7 993 | 22 375 |
17
CHANGE IN CONSOLIDATED SHAREHOLDERS' EQUITY, EUR 1 000
Equity attributable to equity holders of the parent company
Reserve for | ||||||||
invested | ||||||||
unrestricted | Retained | |||||||
Share capital | equity | earnings | Total | Total equity | ||||
Shareholders' equity on 1 Jan. 2019 | 11 384 | 27 034 | 23 831 | 62 249 | 62 249 | |||
Profit (loss) for the period | 8 784 | 8 784 | 8 784 | |||||
Other comprehensive income | ||||||||
Financial assets | - | - | - | |||||
Total comprehensive income | 8 784 | 8 784 | 8 784 | |||||
Dividend/equity repayment | -2 664 | -17 887 | -20 551 | -20 551 | ||||
Option issue with a subscription price | 1 350 | 1 350 | 1 350 | |||||
Subscription of shares | 39 | 39 | 39 | |||||
Options granted, cost accrual | 178 | 178 | 178 | |||||
Shareholders' equity on 30 June 2019 | 11 384 | 25 759 | 14 907 | 52 049 | 52 049 | |||
Shareholders' equity on 1 Jan. 2020 | 11 384 | 26 482 | 27 251 | 65 117 | 65 117 | |||
Profit (loss) for the period | 9 383 | 9 383 | 9 383 | |||||
Other comprehensive income | ||||||||
Financial assets | - | - | - | |||||
Total comprehensive income | 9 383 | 9 383 | 9 383 | |||||
Dividend/equity repayment | -2 682 | -21 069 | -23 750 | -23 750 | ||||
Option issue with a subscription price | -18 | -18 | -18 | |||||
Options granted, cost accrual | 89 | 89 | 89 | |||||
Shareholders' equity on 30 June 2020 | 11 384 | 23 783 | 15 654 | 50 821 | 50 821 |
18
FEE AND COMMISSION INCOME, GROUP, EUR 1 000
1-6/20 | 1-6/19 | 4-6/20 | 4-6/19 | 1-12/19 | |
Asset management fees | |||||
Management fees from traditional asset management | 3 877 | 3 942 | 1 848 | 1 957 | 8 003 |
Real estate and private equity management fees | 18 666 | 15 181 | 9 586 | 7 854 | 31 852 |
Other fee and commission income | 89 | 109 | 37 | 40 | 281 |
Performance fees | 208 | 1 704 | 18 | 773 | 4 379 |
Total | 22 840 | 20 935 | 11 489 | 10 624 | 44 514 |
Corporate finance fees | 1 728 | 1 798 | 1 278 | 742 | 5 419 |
Fee and commission income, total | 24 569 | 22 733 | 12 767 | 11 366 | 49 933 |
NET INCOME FROM FINANCIAL ASSETS, GROUP, EUR 1 000
1-6/20 | 1-6/19 | 4-6/20 | 4-6/19 | 1-12/19 | |
Private equity and real estate fund investment operations | |||||
Profit distribution of funds | 19 | 671 | - | 551 | 1 810 |
Changes in fair value and losses | -295 | -427 | -944 | -525 | -813 |
Total | -276 | 243 | -944 | 26 | 996 |
Other investment operations - liquid mutual funds | |||||
Changes in fair value | -65 | 175 | 259 | 63 | 181 |
Sales profit/loss | -84 | -45 | -84 | -45 | -45 |
Total | -149 | 130 | 175 | 17 | 135 |
Net income from financial assets, total | -425 | 373 | -769 | 44 | 1 132 |
19
FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES, EUR 1 000
30 June 2020 | 30 June 2019 | 31 Dec. 2019 | ||||||
Fair | Book | Fair | Book | Fair | Book | |||
valu | value | value | value | value | value | |||
Financial assets | ||||||||
Investments | ||||||||
Private equity and real estate fund | ||||||||
investments | 16 053 | 16 053 | 16 817 | 16 817 | 16 156 | 16 156 | ||
Financial securities | 5 807 | 5 807 | 4 250 | 4 250 | 9 956 | 9 956 | ||
Accounts receivable and other receivables | 1 100 | 1 100 | 585 | 585 | 1 655 | 1 655 | ||
Liquid assets | 8 004 | 8 004 | 7 993 | 7 993 | 22 375 | 22 375 | ||
Total | 30 964 | 30 964 | 29 645 | 29 645 | 50 142 | 50 142 | ||
Financial liabilities | ||||||||
Accounts payable and other liabilities | 245 | 245 | 379 | 379 | 166 | 166 | ||
Lease liabilities | 2 485 | 2 485 | 2 868 | 2 868 | 2 604 | 2 604 | ||
Total | 2 729 | 2 729 | 3 247 | 3 247 | 2 769 | 2 769 |
The table shows the fair values and book values of financial assets and liabilities per balance sheet item. The assessment principles of fair values are presented in the accounting principles. The original book value of accounts receivable and accounts payable corresponds to their fair value, as the impact of discounting is not essential taking into account the maturity of the receivables and liabilities.
Value of financial instruments across the three levels of the fair value hierarchy
30 June 2020 | 30 June 2019 | 31 Dec. 2019 | |||||
Level | Level | Level | |||||
1 | Level 3 | 1 | Level 3 | 1 | Level 3 | ||
Financial assets | |||||||
Private equity and real estate fund | |||||||
investments | - | 16 053 | - | 16 817 | - | 16 156 | |
Financial securities | 5 807 | - | 4 250 | - | 9 956 | - | |
Total | 5 807 | 16 053 | 4 250 | 16 817 | 9 956 | 16 156 | |
Level 3 reconciliation: Private equity and real estate fund investments | |||||||
1-6/2020 | |||||||
Opening balance on 1 Jan. 2020 | 16 156 | ||||||
Calls | 825 | ||||||
Returns | -632 | ||||||
Value change and loss through profit or loss | -295 | ||||||
Closing balance on 30 June 2020 | 16 053 | ||||||
1-6/2019 | |||||||
Opening balance on 1 Jan. 2019 | 16 909 | ||||||
Calls | 1 619 | ||||||
Returns | -1 283 | ||||||
Value change and loss through profit or loss | -427 | ||||||
Closing balance on 30 June 2019 | 16 817 |
20
1-12/2019
Opening balance on 1 Jan. 2019 | 16 909 |
Calls | 2 407 |
Returns | -2 346 |
Value change and loss through profit or loss | -813 |
Closing balance on 31 Dec. 2019 | 16 156 |
Level 1 comprises liquid assets the value of which is based on quotes in the liquid market. A market where the price is easily available on a regular basis is regarded as a liquid market.
The fair values of level 3 instruments are based on the value of the fund according to the management company of the fund and their use in widely used valuation models. Private equity fund investments are valued in accordance with a practice widely used in the sector, International Private Equity and Venture Capital Guidelines. During the period under review, no transfers took place between the levels of the fair value hierarchy.
PRIVATE EQUITY AND REAL ESTATE FUND INVESTMENTS, EUR 1 000
Market value | ||
30 June 2020 | 31 Dec. 2019 | |
Funds managed by eQ: | ||
Private equity funds of funds: | ||
eQ PE XII North LP | 0 | - |
eQ PE XI US LP | 51 | 32 |
eQ PE XII North LP | 5 | - |
eQ PE X North LP | 256 | 199 |
eQ PE IX US LP | 367 | 266 |
eQ PE VIII North LP | 1 802 | 1 586 |
eQ PE VII US LP | 1 720 | 1 786 |
eQ PE VI North LP | 1 930 | 1 935 |
Amanda V East LP | 4 303 | 4 387 |
Amanda IV West LP | 788 | 982 |
Amanda III Eastern PE LP | 2 527 | 2 743 |
Total | 13 750 | 13 917 |
Real estate funds: | ||
eQ Residential | - | - |
Private equity funds managed by others: | ||
Large buyout funds | 1 067 | 994 |
Midmarket funds | 475 | 531 |
Venture funds | 762 | 715 |
Total | 16 053 | 16 156 |
21
REMAINING INVESTMENT COMMITMENTS OF PRIVATE EQUITY AND REAL ESTATE FUND INVESTMENTS, EUR 1 000
Investment commitment | ||
30 June 2020 | 31 Dec. 2019 | |
Funds managed by eQ: | ||
Private equity funds of funds: | ||
eQ PE XII North LP | 1 000 | 0 |
eQ PE XI US LP | 819 | 846 |
eQ PE X North LP | 661 | 761 |
eQ PE IX US LP | 588 | 686 |
eQ PE VIII North LP | 859 | 1 183 |
eQ PE VII US LP | 596 | 727 |
eQ PE VI North LP | 477 | 602 |
Amanda V East LP | 595 | 595 |
Amanda IV West LP | 427 | 427 |
Amanda III Eastern PE LP | 348 | 348 |
Total | 6 369 | 6 175 |
Real estate funds: | ||
eQ Residential | 1 000 | - |
Real estate funds managed by others: | ||
Large buyout funds | 132 | 132 |
Midmarket funds | 418 | 433 |
Venture funds | 0 | 0 |
Total | 7 919 | 6 740 |
22
SEGMENT INFORMATION, EUR 1 000
1-6/20 | Asset | Corporate | Invest- | Elimin- | Group | ||
Man. | Finance | ments | Other | ations | total | ||
Fee and commission income | 22 840 | 1 728 | - | - | 24 569 | ||
From other segments | 75 | - | - | - | -75 | - | |
Interest income | - | - | - | - | - | ||
Net income from financial assets | - | - | -276 | -149 | -425 | ||
Other operating income | - | - | - | - | - | ||
From other segments | - | - | - | 38 | -38 | - | |
Operating income, total | 22 915 | 1 728 | -276 | -111 | -113 | 24 144 | |
Fee and commission expenses | -218 | - | - | -4 | -222 | ||
To other segments | - | - | -75 | - | 75 | - | |
Interest expenses | -7 | -2 | - | -2 | -12 | ||
NET REVENUE | 22 690 | 1 726 | -351 | -117 | -38 | 23 910 | |
Administrative expenses | |||||||
Personnel expenses | -8 171 | -1 109 | - | -846 | -10 126 | ||
Other administrative expenses | -678 | -142 | - | -159 | 38 | -940 | |
Depreciation on tangible and intangible | |||||||
assets | -136 | -6 | - | -11 | -154 | ||
Depreciation on leases | -251 | -77 | -41 | -369 | |||
Other operating expenses | -446 | -59 | - | -136 | -641 | ||
OPERATING PROFIT (LOSS) | 13 008 | 333 | -351 | -1 309 | 0 | 11 680 | |
Income tax | -2 297 | -2 297 | |||||
PROFIT (LOSS) FOR THE PERIOD | -3 606 | 9 383 | |||||
1-6/19 | Asset | Corporate | Invest | Elimin- | Group | ||
Man. | Finance | ments | Other | ations | total | ||
Fee and commission income | 20 935 | 1 798 | - | - | 22 733 | ||
From other segments | 100 | - | - | - | -100 | - | |
Interest income | - | - | - | 3 | 3 | ||
Net income from financial assets | - | - | 243 | 130 | 373 | ||
Other operating income | - | - | - | - | - | ||
From other segments | - | - | - | 38 | -38 | - | |
Operating income, total | 21 035 | 1 798 | 243 | 171 | -138 | 23 109 | |
Fee and commission expenses | -208 | - | - | -4 | -212 | ||
To other segments | - | - | -100 | - | 100 | - | |
Interest expenses | -9 | -3 | - | -2 | -13 | ||
NET REVENUE | 20 819 | 1 795 | 143 | 165 | -38 | 22 884 |
23
1-6/19 | Asset | Corporate | Invest | Elimin- | Group | |
Man. | Finance | ments | Other | ations | total | |
Administrative expenses | ||||||
Personnel expenses | -7 824 | -1 104 | - | -733 | -9 661 | |
Other administrative expenses | -836 | -170 | - | -128 | 38 | -1 096 |
Depreciation on tangible and intangible | ||||||
assets | -83 | -10 | - | -18 | -111 | |
Depreciation on leases | -255 | -79 | -41 | -374 | ||
Other operating expenses | -477 | -78 | - | -137 | -691 | |
OPERATING PROFIT (LOSS) | 11 345 | 354 | 143 | -892 | 0 | 10 950 |
Income tax | -2 166 | -2 166 | ||||
PROFIT (LOSS) FOR THE PERIOD | -3 058 | 8 784 | ||||
4-6/20 | Asset | Corporate | Invest | Elimin- | Group | |
Man. | Finance | ments | Other | ations | total | |
Fee and commission income | 11 489 | 1 278 | - | - | 12 767 | |
From other segments | 38 | - | - | - | -38 | - |
Net income from currency operatioms | - | - | - | - | - | |
Interest income | - | - | - | 0 | 0 | |
Net income from financial assets | - | - | -944 | 175 | -769 | |
Other operating income | - | - | - | - | - | |
From other segments | - | - | - | 19 | -19 | - |
Operating income, total | 11 526 | 1 278 | -944 | 194 | -57 | 11 997 |
Fee and commission expenses | -104 | - | - | -2 | -105 | |
To other segments | - | - | -38 | - | 38 | - |
Interest expenses | -4 | -1 | - | -1 | -6 | |
NET REVENUE | 11 419 | 1 277 | -981 | 191 | -19 | 11 886 |
Administrative expenses | ||||||
Personnel expenses | -4 095 | -716 | - | -404 | -5 215 | |
Other administrative expenses | -296 | -40 | - | -89 | 19 | -405 |
Depreciation on tangible and intangible | ||||||
assets | -70 | -3 | - | -6 | -80 | |
Depreciation on leases | -125 | -39 | -20 | -184 | ||
Other operating expenses | -221 | -30 | - | -80 | -330 | |
OPERATING PROFIT (LOSS) | 6 612 | 449 | -981 | -408 | 0 | 5 672 |
Income tax | -1 080 | -1 080 | ||||
PROFIT (LOSS) FOR THE PERIOD | -1 488 | 4 592 |
24
4-6/19 | Asset | Corporate | Invest | Elimin- | Group | |
Man. | Finance | ments | Other | ations | total | |
Fee and commission income | 10 624 | 742 | - | - | 11 366 | |
From other segments | 50 | - | - | - | -50 | - |
Interest income | - | - | - | - | - | |
Net income from financial assets | - | - | 26 | 17 | 44 | |
Other operating income | - | - | - | - | - | |
From other segments | - | - | - | 19 | -19 | - |
Operating income, total | 10 674 | 742 | 26 | 36 | -69 | 11 410 |
Fee and commission expenses | -104 | - | - | -2 | -106 | |
To other segments | - | - | -50 | - | 50 | - |
Interest expenses | -4 | -1 | - | -1 | -7 | |
NET REVENUE | 10 566 | 741 | -24 | 33 | -19 | 11 297 |
Administrative expenses | ||||||
Personnel expenses | -3 733 | -486 | - | -334 | -4 553 | |
Other administrative expenses | -396 | -64 | - | -74 | 19 | -515 |
Depreciation on tangible and intangible | ||||||
assets | -44 | -7 | - | -10 | -62 | |
Depreciation on leases | -127 | -39 | -21 | -187 | ||
Other operating expenses | -216 | -44 | - | -65 | -326 | |
OPERATING PROFIT (LOSS) | 6 049 | 100 | -24 | -471 | 0 | 5 655 |
Income tax | -1 068 | -1 068 | ||||
PROFIT (LOSS) FOR THE PERIOD | -1 538 | 4 587 | ||||
1-12/19 | Asset | Corporate | Invest | Elimin- | Group | |
Man. | Finance | ments | Other | ations | total | |
Fee and commission income | 44 514 | 5 419 | - | - | 49 933 | |
From other segments | 200 | - | - | - | -200 | - |
Net income from currency operatioms | - | - | - | - | - | |
Interest income | - | - | - | 4 | 4 | |
Net income from financial assets | - | - | 996 | 135 | 1 132 | |
Other operating income | - | - | - | - | - | |
From other segments | - | - | - | 77 | -77 | - |
Operating income, total | 44 714 | 5 419 | 996 | 217 | -277 | 51 069 |
Fee and commission expenses | -420 | - | - | -8 | -428 | |
To other segments | - | - | -200 | - | 200 | - |
Interest expenses | -17 | -5 | - | -4 | -26 | |
NET REVENUE | 44 276 | 5 413 | 796 | 205 | -77 | 50 614 |
Administrative expenses | ||||||
Personnel expenses | -15 620 | -2 770 | - | -1 368 | -19 758 | |
Other administrative expenses | -1 646 | -367 | - | -248 | 77 | -2 185 |
Depreciation on tangible and intangible | ||||||
assets | -167 | -18 | - | -34 | -219 | |
Depreciation on leases | -509 | -157 | -82 | -749 | ||
Other operating expenses | -971 | -159 | - | -281 | -1 411 | |
OPERATING PROFIT (LOSS) | 25 363 | 1 941 | 796 | -1 809 | 0 | 26 292 |
Income tax | -5 257 | -5 257 | ||||
PROFIT (LOSS) FOR THE PERIOD | -7 065 | 21 035 |
25
The fee and commission income of the Asset Management segment from other segments comprises the management fee income from eQ Group's own investments in private equity funds. The corresponding expenses are allocated to the Investments segment. Under the item Other, income from other segments comprises the administrative services provided by Group administration to other segments and the undivided interest income and expenses. The item Other also includes the undivided personnel, administration and other expenses allocated to Group administration. The taxes not distributed to the segments are also presented under the item Other.
The highest operative decision-making body does not follow assets and liabilities at segment level, due to which the Group's assets and liabilities are not presented as divided between the segments.
PROFIT DEVELOPMENT OF SEGMENTS PER QUARTER, EUR 1 000
Q2/20 | Q1/20 | Q4/19 | Q3/19 | Q2/19 | |
Asset Management | |||||
Net revenue | 11 419 | 11 271 | 12 511 | 10 947 | 10 566 |
Operating profit | 6 612 | 6 396 | 7 200 | 6 818 | 6 049 |
Corporate Finance | |||||
Net revenue | 1 277 | 449 | 2 529 | 1 090 | 741 |
Operating profit | 449 | -116 | 1 180 | 407 | 100 |
Investments | |||||
Net revenue | -981 | 630 | 579 | 74 | -24 |
Operating profit | -981 | 630 | 579 | 74 | -24 |
Other segments and eliminations | |||||
Net revenue | 171 | -327 | 0 | 2 | 14 |
Operating profit | -408 | -901 | -533 | -384 | -471 |
Group total | |||||
Net revenue | 11 886 | 12 024 | 15 618 | 12 112 | 11 297 |
Operating profit | 5 672 | 6 009 | 8 426 | 6 916 | 5 655 |
Profit for the period | 4 592 | 4 791 | 6 730 | 5 521 | 4 587 |
26
CAPITAL ADEQUACY, EUR 1 000
CRR | CRR | |
30 June | 31 Dec. | |
2020 | 2019 | |
eQ Group | eQ Group | |
Equity | 50 821 | 65 117 |
Common equity tier 1 (CET 1) before deductions | 50 821 | 65 117 |
Deductions from CET 1 | ||
Intangible assets | -29 871 | -29 465 |
Unconfirmed profit for the period | -9 383 | -21 035 |
Dividend proposal by the Board* | 0 | -2 715 |
Common equity tier 1 (CET1) | 11 566 | 11 901 |
Additional tier 1 (AT1) | 0 | 0 |
Tier 1 (T1 = CET1 + AT1) | 11 566 | 11 901 |
Tier 2 (T2) | 0 | 0 |
Total capital (TC = T1 + T2) | 11 566 | 11 901 |
Risk-weighted items total - Total risk exposure | 51 890 | 53 499 |
of which credit risk | 44 356 | 48 183 |
of which market risk - currency risk | 5 144 | 5 316 |
of which extra risk due to fixed expenses | 2 390 | - |
Common equity tier 1 (CET1) / risk weights, % | 22.3% | 22.2% |
Tier 1 (T1) / risk weights, % | 22.3% | 22.2% |
Total capital (TC) / risk weights, % | 22.3% | 22.2% |
Excess of total capital compared with the minimum level (8% capital | ||
adequacy ratio) | 7 415 | 7 621 |
Excess of total capital compared with the target level (10% capital adequacy | ||
ratio) | 6 377 | 6 551 |
*The dividend and equity repayment proposed by the Board exceeding the profit for the period.
27
GROUP KEY RATIOS
30 June | 30 June | 31 Dec. | |
2020 | 2019 | 2019 | |
Profit (loss) for the period to the equity holders of the parent | |||
company, EUR 1 000 | 9 383 | 8 784 | 21 035 |
Earnings per average share, EUR | 0.24 | 0.23 | 0.55 |
Diluted earnings per average share, EUR | 0.23 | 0.21 | 0.51 |
Equity per share, EUR | 1.33 | 1.37 | 1.70 |
Equity per average share, EUR *) | 1.33 | 1.37 | 1.71 |
Return on investment, ROI % p.a. | 31.1 | 30.0 | 32.4 |
Return on equity, ROE % p.a. | 32.4 | 30.7 | 33.0 |
Equity to assets ratio, % | 75.7 | 77.4 | 76.2 |
Cost/income ratio, Group, % | 51.0 | 52.1 | 48.1 |
Share price at the end of the period, EUR | 13.20 | 9.14 | 12.45 |
Market value, EUR million | 505.7 | 347.8 | 476.9 |
Personnel calculated as full-time resources at the end of the period | 93 | 90 | 89 |
*) Weighted average number of shares outstanding.
eQ applies the guidelines of the European Securities and Markets Authority, ESMA, on alternative performance measures. An alternative performance measure is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework (IFRS). eQ presents alternative measures in order to describe the financial development of its operations. Capital adequacy performance measures are presented based on European legislation concerning companies in the finance sector. The calculation principles and formulae of the key ratios are presented in the company's 2019 financial statements, which are available on the company website at www.eQ.fi. The key ratios presented by eQ can be directly calculated with the calculation formulae based on the information in the income statement, balance sheet and notes thereto.
REMAINING COMMITMENTS
On 30 June 2020, eQ's remaining investment commitments in private equity funds totalled EUR 7.9 million (EUR 6.7 million on 31 Dec. 2019). Other commitments at the end of the period totalled EUR 0.0 million (EUR 0.0 million on 31 Dec. 2019).
28
Attachments
- Original document
- Permalink
Disclaimer
eQ Oyj published this content on 11 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 August 2020 09:18:07 UTC