EAB GROUP
In January-
The Group's IFRS operating income for the review period of 1 January to
The figures presented in the stock exchange release are unaudited.
The Group's financial performance in January-
** IFRS operating income increased by 21% to approximately
** Comparable operating income** increased by 30% to approximately
** The operating result was approximately
** The net result for the period was approximately
** The reported solvency of the Consolidation Group*** under new legislation was 10.8%.
The amount of assets under management and insurance assets, including investment commitments to private capital funds, increased by 26 percent, and amounted to
The performance of
Despite the increased risk environment caused by the coronavirus, the Group has performed its debt liabilities timely, and the liquidity position has remained stable.
The Group's key figures in brief (more detailed information is provided in the notes)
| Group's key figures | 1-6/2021 | 1-6/2020 | 1-12/2020 |
| Operating income, EUR million | 10.5 | 8.7 | 18.7 |
| Operating profit*, EUR million | 1.1 | -0.8 | 0.6 |
| Operating profit, % of operating income | 10.8 | -9.0 | 3.2 |
| Profit for the period, EUR million | 0.8 | -0.8 | 0.3 |
| Profit for the period, % of operating income | 7.7 | -8.6 | 1.4 |
| Earnings per share, diluted, EUR | 0.06 | -0.06 | 0.02 |
| Comprehensive earnings per share, diluted, EUR | 0.06 | -0.06 | 0.02 |
| Alternative performance measures | 1-6/2021 | 1-6/2020 | 1-12/2020 |
| Comparable operating income**, EUR million | 10.4 | 8.0 | 16.9 |
| Adjusted earnings per share****, diluted, EUR | 0.06 | -0.06 | 0.02 |
| Adjusted comprehensive earnings per share****, diluted, EUR | 0.06 | -0.06 | 0.02 |
| Profitability indicators | |||
| Return on equity (ROE), % | 4.1 | -4.0 | 1.4 |
| Return on assets (ROA), % | 2.4 | -2.2 | 0.8 |
* IAS 1 Presentation of Financial Statements does not define the concept of operating profit. The Group has defined it as follows: The operating profit is the net sum remaining after employee benefit expenses, other administrative expenses, depreciation and impairment losses, other operating expenses, and impairment losses on receivables have been deducted from the operating income. The operating profit also includes the share of the profit or loss of associates.
**) For funds managed on behalf of external partners, comparable operating income is based on net fees, while reported operating income describes gross fees.
*** The Group reports its solvency to the
**** Adjusted earnings per share are based on the number of outstanding shares.
At the end of June, the Group had 93 employees (86 on
The first half of 2021 was overall positive for
The underlying reasons for the improved profit include cost control and operating income growth. The executed reduction of expenses in the past two years has improved profitability significantly. The organisation is now clearly more streamlined, and larger part of employees is working directly at the customer interface to support an excellent customer service experience in line with our strategy. Meanwhile, the increase in profit has also been caused by an increase of asset values and good sales of new products, in particular. Operating income for the first half of the year increased from the slump caused by the corona pandemic by as much as 21 per cent to
We launched our second renewable energy private equity fund and our third real estate development fund early this year. EAB Renewable Energy Infrastructure Fund II Ky procures operating solar and wind power plants or licensed plants that are ready for construction. EAB Value Added Fund III Ky, the third real estate development fund, refines or builds modern and environmentally friendly office, commercial and logistics buildings. Both funds take special care to maintain a high level of social responsibility and governance.
In the spring, we also started a developing market equity fund. We manage this portfolio through Nordic collaboration with
As we stated in May, we have started to search for a new CEO for the
I believe we can achieve the best efficacy and best results for both investors and other stakeholders by directing capital to investment objects outside the listed markets that will assist us in solving sustainability issues and thus in preventing climate change and retaining biodiversity.
OPERATING ENVIRONMENT
During the first half of 2021, the performance of the investment markets was relatively strong, especially in the stock markets. However, the development of the interest market was two-sided: on one hand, profits remained low on the government bond side as a result of a general increase of the interest rate and on the other, profits from lower credit rating corporate bonds were significantly more positive as a result of smaller risk premiums. The positive return from high-risk investments was driven by the same positive drivers throughout the period under review: calming messages from central banks on future monetary policies, a clarification of the global macro outlook as the mass vaccination campaigns progressed, strong results for the first quarter and a record flow of investments into risky assets.
At the end of the first half of the year, the focus of the markets increasingly shifted to the recovery of the economy and its speed. The level of recovery has an impact on central banks' willingness to stimulate the economy and correspondingly, increasing inflation makes it more likely that the central banks will start to increase their interest rates more quickly than expected. Such a development would be negative, especially in terms of the most highly valued stock market segments like large high-tech companies. The increasing interest rates would have a negative impact on the present value of the future cash flows of these companies. Furthermore, the increased interest rates would make bonds a relatively more attractive option. It is also likely that the increased interest rates would accelerate sector rotation in the stock markets from interest-sensitive segments such as real estate, social service and technology companies into other segments such as oil companies, mining companies and banks. According to our estimate, part of the inflation development has been caused by the pandemic and is temporary in nature, but we believe it is too early to say which part of it is permanent. A lack of supply and increased demand raise prices. The current imbalance of supply and demand reflects the distortions caused by the pandemic, which means it is at least partly temporary. We will continue to closely monitor the consumer inflation expectations and the increase of salaries to assess whether the price pressures will persist after the summer of 2021.
There were few changes in the company's operating environment in early 2021, because the short-term effects of the pandemic eased, and concern switched from the management of the pandemic to an assessment of the increasing inflation expectations and growth prospects. From the perspective of regulation, the Group's operating environment remained stable despite the fact that two important European-level regulation packages were implemented at the beginning of the year. These will influence the company's operating environment in the future.
The first of the EU's financial sustainability regulations entered into force in early March. The regulations in their entirety will be applied at the turn of 2021/2022. In the future, the regulations will necessitate extensive communication regarding the responsibility aspects of investment operations and investment products, for example. The new regulations will not give rise to any significant additional costs or investment needs for the company, and will support the company's strategy, which emphasises responsibility. New solvency regulations for investment service companies entered into force in
During the first half of the year, the company's operations were supported by the strong development of the stock markets and other markets, which increased the value of almost all asset items. The development of the Finnish economy was also more positive than expected, and the feared increase in the unemployment rate was not realised during the first half of the year. No changes that would have a significant impact on the company's operations or the demand for its services took place in taxation during the first half of the year.
DEVELOPMENT OF OPERATING INCOME AND NET PROFIT
The
The Group's on-going operating income (fees from UCITS and private capital funds, as well as income from services) continued to grow strongly (25 percent) and amounted
The total costs for the review period, including depreciation, amounted to
The Group's operating profit for the first half of the year amounted to
MATERIAL EVENTS DURING THE PERIOD
During the period, the
In
In February, March, and April,
In March,
The Annual General Meeting was held through exceptional arrangements without the presence of the shareholders at the company's premises at
In May, the company announced
THE GROUP'S OUTLOOK FOR THE REST OF 2021
The full-year net result is expected to be clearly positive in case the market environment remains stable during the rest of the year.
PERSONNEL
At the end of
The increase in personnel was the result of a moderate increase in the number of employees in sales and asset management, combined with a slight decrease in the number of employees in the other functions: four permanent and one fixed-term employment relationships ended during the first half of the year.
Work at the
In the
A total of 40% of the employees are direct shareholders of
CHANGES IN GROUP STRUCTURE DURING THE PERIOD
On
On
SHARES AND SHARE CAPITAL
At the end of
On
At the end of
RESOLUTIONS ANNUAL GENERAL MEETING
The following matters were adopted and resolved in the Annual General Meeting:
Adoption of the financial statements
The financial statement and related consolidated financial statement for the financial year 2020 were adopted.
Use of the profit shown on the balance sheet and resolution on the payment of dividend
The parent company's distributable funds on the
The Company will publish any possible decisions on dividend payment by the Board of Directors separately, and simultaneously confirm the dividend record and payment dates. Possible dividend will be paid to shareholders who on the applicable record date for the dividend payment will be recorded in the Company's shareholders' register maintained by
Resolution on discharge from liability for the members of the Board of Directors and the CEO
The members of the Board of Directors and the Chief Executive Officer were discharged from liability for the financial year 1 January-
Remuneration Report for Governing Bodies
The Remuneration Report was approved.
Resolution on the remuneration of the members of the Board of Directors
The members of the Board of Directors will be paid remuneration as follows:
Board members independent of the Company are paid
Chair of the Board is paid
Members of the Audit Committee are paid
Forty (40) % of yearly remuneration is settled with the Company's shares. Remaining amount of remuneration is settled with cash.
Shares for remuneration are acquired from the
In case the acquisition of shares is not possible for example due the lack of liquidity of the shares at the time and by the mean mentioned above. The portion of the remuneration that cannot be paid in shares may be paid in cash.
The shares acquired for Board members are not to be sold before three years from the purchase, or before the membership of the Board has ended, whichever is later.
Resolution on the number of members of the Board of Directors
The number of the members of the Board of Directors was confirmed as eight (8).
Election of the members of the Board of Directors
Resolution on the remuneration of the Auditor
The elected auditor will be reimbursed in accordance with the auditor' invoice approved by the company.
Election of the Auditor
Authorised Public Accountant Firm KPMG Oy Ab was elected as the Company's Auditor, with APA Tuomas Ilveskoski as an auditor in charge, until the close of the next Annual General Meeting.
Authorising the Board of Directors to decide on the acquisition of the Company's own shares
The Board of Directors was authorised to decide on the acquisition or acceptance as pledge, of a maximum of 1,300,000 of the Company's shares (corresponding to 9.39% of the Company's shares).
The shares may be acquired in public trading on the marketplace maintained by
There must be a weighty economic reason for the acquisition of shares, such as the use of shares or special rights to develop the Company's capital structure, as consideration in corporate acquisitions or other restructuring, to finance investments, as part of the Company's incentive plan or remuneration of board of directors.
The acquisition or acceptance as pledge of Company's own shares will reduce the amount of the Company's reserves of unrestricted equity.
The authorisation is valid until
The authorisation superseded the authorisation for acquisition of the Company's own shares issued on
RISK MANAGEMENT AND RISK POSITION
The Group is exposed to a market risk that mainly arises from the market-based investment products and services provided by the
The atmosphere in the real economy of developed countries, in particular, is optimistic at the end of the period under review. In general, the worldwide coronavirus pandemic is now better managed thanks to extensive and efficient vaccination programmes. The opening up of societies has continued, and pent-up demand caused by the stricter restrictions has been realised in the fields of cultural, restaurant and accommodation services, for example.
On the other hand, the worst stages of the pandemic accelerated geopolitical polarisation and made the geopolitical relations between the key superpowers even tenser. For example, the EU and
During the period under review, key economic areas such as
Targeting the recovery measures at structural reforms is absolutely necessary to renew the drivers of economic growth in each Member State and add more sustainable development aspects. A recovery of the current structures without a more critical assessment or clear sustainability goals would be short-sighted and compromise the long-term competitive advantage of the economic area. In addition, inappropriate allocation of the recovery funds could be fatal, considering the high debt ratio of general government finances and the corporate sector in the EU Member States, particularly in a situation where the plan is to tighten the monetary policy. Time will tell how successfully the extensive recovery packages can be allocated.
During the period under review, the slack monetary policy and expectations of growth in companies supported a global increase of share valuation levels. Consumers' purchasing power has remained stable, especially in developed countries. Although the development of the real economy in developed countries has still been modest after the pandemic, expectations of economic growth have clearly improved, as the consequences of the pandemic have proven less severe than feared and life with the stricter precautions has become the new normal. As a result of the lockdowns and restrictions, consumers have savings that they are expected to use to purchase the services for which they have yearned.
Naturally, the flip side and a risk of the high economic growth expectations is the real economy developing more slowly than expected. Such a development could be reflected as weaker liquidity of the relatively highly indebted companies and households, which could lead to a larger correction in the stock markets. Another risk that has emerged during the period under review, particularly as the result of the extensive recovery measures, is overheating of the economy and inflation. For the time being, however, the increase in consumer prices has been moderate and no tightening of the monetary policy, such as an increase of the key interest rates by the central banks, is expected in the near future.
A significant part of the Group's operating income is market-determined. If realised, the risks mentioned above could have a significant impact on the fee income from the Group's market-based services and products. The alternative investment solutions offered by the Group still constitute a significant portion of the business operations, which, as a counterbalance for the market-based services and products, partly mitigates the impact of a potential market decline on the Group's operating income and result.
The Group's operations are exposed to a considerable operational risk, which mainly consists of factors related to information systems and information security, as well as factors related to internal processes. The Group acknowledges the significance of operational risks and is continuously developing methods to manage the operational risks. The Group identifies, assesses, measures and monitors operational risks in relation to its approved level of risk-taking. The Group actively seeks to reduce the impact of materialised operational risks, taking the approved level of risk taking and risk appetite into account.
The market and operational risks to which the Group is subjected are actively and proactively managed in accordance with internal risk management principles. Risks and assessments of their potential effects are an integral part of the Group's solvency management and the related risk profiling.
The Group's liquidity risk arises from an imbalance of cash flows. Liquidity risk refers to the risk that the Group's liquid cash assets and the availability of additional financing are not sufficient to cover its business needs. The purpose of the Group's effective liquidity position management is to maintain sufficient liquid assets in such a way that financing for the Group's business operations is continuously ensured and that the Group is able to fulfil its payment obligations regardless of external factors and factors dependent on other market operators.
The Group limits its liquidity risk by monitoring the liquidity position of the Group and each Group company on a regular basis. In addition, the Group maintains and regularly accumulates a buffer of unencumbered liquid assets in case of a quick and unexpected weakening of the liquidity position. At the end of the period under review, the Group's funding package included
With continuity planning, the Group prepares for any future disruptions in the operating environment. Based on modelling carried out at the end of the period under review, the Group's liquidity and solvency level will also remain safe in the event of a significant market disturbance. The Group has performed its debt liabilities without disturbances, and the availability of financing has remained good.
In compliance with the Group's continuity plan, a Crisis Team has been actively engaged in ensuring the Group's operations as a result of the pandemic and the disturbance caused by it. During these exceptional circumstances, continuity of the operations has been secured by extensive remote working capacity and a switch to working from home, arranged and managed by the Crisis Team. The Crisis Team has closely monitored the exceptional operating environment and assessed its impact on the Group's operations. Furthermore, development of the Group's resources and the level of working capacity have been subject to continuous monitoring. The organisation of the Group's operations has been actively guided by internal guidelines, which are based on continuous situation assessments and scenario analyses carried out by the Crisis Team, as well as on official guidelines and recommendations.
For more information about the risks related to the Group's business operations and the monitoring of these risks, please see the Group's annual report.
MATERIAL EVENTS AFTER THE REVIEW PERIOD
There were no events with a material effect on the Group's or the parent company's position between
PUBLICATION OF THE FINANCIAL STATEMENTS BULLETIN
Board of Directors
Further information:
+358 50 569 3416
daniel.pasternack@eabgroup.fi
+358 40 544 2502
therese.cedercreutz@miltton.com
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