eQ PLC INTERIM REPORT
28 April 2020 at 8:00 AM
January to March 2020 in brief
- During the period under review, the Group's net revenue totalled EUR 12.0 million (EUR 11.6 million from 1 Jan. to 31 March 2019).
- The Group’s net fee and commission income was EUR 11.7 million (EUR 11.3 million).
- The Group’s net investment income from own investment operations was EUR 0.3 million (EUR 0.3 million), including the return from private equity fund investments and liquid fixed income funds.
- The Group’s operating profit grew by 13% to EUR 6.0 million (EUR 5.3 million).
- The Group’s profit was EUR 4.8 million (EUR 4.2 million).
- The consolidated earnings per share were EUR 0.13 (EUR 0.11).
- The net cash flow from the Group’s own private equity fund investment operations was EUR 0.5 million (EUR -0.3 million).
- The net revenue of the Asset Management segment increased by 10% to EUR 11.3 million (EUR 10.3 million) and the operating profit by 21% to EUR 6.4 million (EUR 5.3 million).
- The net revenue of the Corporate Finance segment was EUR 0.4 million (EUR 1.1 million) and the operating profit was EUR -0.1 million (EUR 0.3 million). It is typical of corporate finance business that success fees have a considerable impact on invoicing, due to which the result of the segment may vary considerably.
| Key ratios | 1-3/20 | 1-3/19 | Change | 1-12/19 |
| Net revenue, Group, M€ | 12.0 | 11.6 | 4% | 50.6 |
| Net revenue, Asset Management, M€ | 11.3 | 10.3 | 10% | 44.3 |
| Net revenue, Corporate Finance, M€ | 0.4 | 1.1 | -57% | 5.4 |
| Net revenue, Investments, M€ | 0.6 | 0.2 | 277% | 0.8 |
| Net revenue, Group administration and | ||||
| eliminations, M€ | -0.3 | 0.1 | 0.1 | |
| Operating profit, Group, M€ | 6.0 | 5.3 | 13% | 26.3 |
| Operating profit, Asset Management, M€ | 6.4 | 5.3 | 21% | 25.4 |
| Operating profit, Corporate Finance, M€ | -0.1 | 0.3 | -146% | 1.9 |
| Operating profit, Investments, M€ | 0.6 | 0.2 | 277% | 0.8 |
| Operating profit, Group administration, M€ | -0.9 | -0.4 | -1.8 | |
| Profit for the period, M€ | 4.8 | 4.2 | 14% | 21.0 |
| Key ratios | 1-3/20 | 1-3/19 | Change | 1-12/19 |
| Earnings per share, € | 0.13 | 0.11 | 13% | 0.55 |
| Equity per share, € | 1.21 | 1.25 | -3% | 1.70 |
| Cost/income ratio, Group, % | 49.9 | 54.3 | -8% | 48.1 |
| Liquid assets, M€ | 35.0 | 32.1 | 9% | 32.3 |
| Private equity fund investments, M€ | 16.4 | 17.4 | -6% | 16.2 |
| Interest-bearing loans, M€ | 0.0 | 0.0 | 0% | 0.0 |
| Assets under management excluding reporting services, € billion | 6.6 | 5.9 | 11% | 6.8 |
| Assets under management total, € billion | 8.0 | 10.5 | -23% | 11.7 |
Janne Larma, CEO
The COVID-19 pandemic took the whole world, including the investment market, by surprise with its huge effect. The impacts of the pandemic on the capital market were exceptionally rapid and large. In February, the daily fluctuations in the capital market were historically large, both upwards and downwards. It is clear that GNPs will experience a major fall this year. At the moment, it is estimated that the GNP will fall globally by 3%, which is considerably more that during the financial crisis 2008 to 2009. In addition, we are now in a situation where nobody knows how the virus will behave and when the economy will begin to normalise. With regard to the economy, it would be of utmost importance that we could gradually begin re-opening economies in order to prevent mass unemployment and a wave of bankruptcies. Fortunately there is already trust in this, which can also be seen in the rather steep rise in share prices from the lowest levels. On 24 April, the world stock exchange index was 12% below the year-end level and the Nasdaq technology index only 4% below the year-end level. The rise of the world stock exchange index from the lowest figures in March is 24%.
eQ’s result was very good
eQ’s first quarter was very good. The Group's net revenue in the first quarter was EUR 12.0 million and the operating profit was EUR 6.0 million. The Group’s operating profit grew by 13%, and we have managed to increase our operating profit already for 6 years, i.e. during 24 consecutive quarters.
eQ Asset Management’s strong growth continued
The result of eQ Asset Management was once more excellent. The net revenue of eQ Asset Management increased by 10% on the previous year to EUR 11.3 million. Operating profit grew by 21% to EUR 6.4 million. The management fees of real estate and private equity asset management grew by EUR 1.7 million on the previous year, i.e. by 24%. The management fees from traditional asset management rose by 2%, even though the assets under management fell considerably in March. Performance fees fell considerably from the year before.
The excellent development of eQ Asset Management is due to the large share of alternative investment products. The fee and commission income of the real estate and private equity operations stood for 80% per cent of the fee and commission income in the first quarter. Especially the products of private equity asset management saw a very strong demand. In April, we held the second closings of the eQ PE XII North and eQ PE SF III private equity funds at a total of EUR 272 million. Besides, we obtained four new mandate clients to private equity asset management. Private equity investments increase the diversification and stability of investment portfolios, and this is even more important when the volatility of the equity and bond markets is high. Within real estate asset management, we took new subscriptions from clients only to the eQ Finnish Real Estate Fund in the first quarter, and due to the COVID-19 outbreak, the number of subscriptions was lower than in previous quarters. The returns of the real estate funds were good, especially in relation to the rest of the investment market. The return of the eQ Care Fund was 1.4% and that of the eQ Finnish Real Estate Fund 0.7%.
In traditional asset management, the fee and commission income grew on the previous year. Due to the extremely challenging market situation, more than half of the funds managed by eQ gave a lower return than the benchmark index in the 12-month period. Despite this, 67% of the funds managed by eQ have surpassed their benchmark indices during an investment period of five years.
Advium’s fee and commission income fell
The COVID-19 crisis influenced Advium’s operations negatively rather quickly. During the period under review, Advium acted as advisor in two transactions, which were finalised during the period. Advium acted as advisor to pension insurance company Elo, as it sold a storage, business and office property in Jätkäsaari, Helsinki to a fund managed by Corum AM. In addition, Advium acted as advisor in an arrangement signed in the summer of 2019, where the Swedish company Peab acquired YIT’s paving and mineral aggregates business. The transaction was finalised at the turn of March and April.
The transaction market for both mergers and acquisitions and real estate transactions is in a stand-by situation. Both buyers and seller wait for better visibility into the economic outlook. A large part of the existing projects at Advium have either been interrupted for the time being or postponed, but there are ongoing projects as well. If the operating environment will become more normal during the summer, we believe that the transaction volume will begin to rise towards the end of the year. In the first quarter, Advium’s net revenue was EUR 0.4 million (EUR 1.1 million from 1 Jan. to 31 March 2019) and operating profit EUR -0.1 million (EUR 0.3 million).
The operating profit of the Investments segment was positive
The operating profit of the Investments segment was EUR 0.6 million. The net cash flow was EUR 0.5 million. At the end of March, the balance sheet value of the private equity fund investments was EUR 16.4 million. eQ Plc made an investment commitment of EUR 1 million to the eQ PE XII North private equity fund in January. The impact of the COVID-19 crisis on funds of funds and the Investments segment will be seen with a lag.
Outlook
At the moment, it is still extremely unclear when the COVID-19 outbreak will begin to ease off and economies start to return to more normal circumstances. This naturally influences national economies and the development of the capital market during the remaining part of the year.
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 uncertainty regarding the Asset Management segment is related to performance fees. It is difficult to assess how real estate returns will develop during the remaining part of the year, and it is also possible that the performance fee from the Amanda IV fund will be postponed to 2021.
We do not issue profit guidance for the Corporate Finance and Investment segments. The results of these segments are highly dependent on when the activity in the transaction market will begin to pick up.
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eQ’s interim report 1 January to 31 March 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 8.0 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.
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