eQ Plc financial statements release
6 February 2024 at 8:00 AM
January to December 2023 in brief
- The Group's net revenue during the period was EUR 70.9 million (EUR 77.8 million from 1 Jan. to 31 Dec. 2022). The Group's net fee and commission income was EUR 70.8 million (EUR 77.1 million).
- The Group's operating profit fell by 13% to EUR 39.7 million (EUR 45.7 million).
- The Group's profit was EUR 31.5 million (EUR 36.3 million).
- The consolidated earnings per share were EUR 0.78 (EUR 0.91).
- The net revenue of the Asset Management segment decreased by 7% to EUR 66.9 million (EUR 71.8 million) and the operating profit by 10% to EUR 41.4 million (EUR 45.9 million). The management fees of the Asset Management segment grew by 1% to EUR 62.0 million (EUR 61.5 million) and the performance fees fell by 50% to EUR 5.4 million (EUR 10.8 million).
- The net revenue of the Corporate Finance segment was EUR 3.9 million (EUR 5.4 million) and the operating profit was EUR 0.7 million (EUR 1.7 million).
- The operating profit of the Investments segment was EUR -0.6 million (EUR 0.7 million).
- The net cash flow from the Group's own private equity and real estate fund investment operations was EUR -0.1 million (EUR 2.8 million).
- The proposed dividend is EUR 0.80 per share (EUR 1.00). The dividend is proposed to be paid in two instalments.
October to December 2023 in brief
- In the last quarter, the Group's net revenue totalled EUR 18.5 million (EUR 13.6 million from 1 Oct. to 31 Dec. 2022). The Group's net fee and commission income was EUR 19.3 million (EUR 14.3 million).
- The Group's operating profit rose by 56% to EUR 9.8 million (EUR 6.3 million).
- The Group's profit was EUR 7.8 million (EUR 4.9 million).
- The consolidated earnings per share were EUR 0.19 (EUR 0.12).
| Key ratios | 1-12/23 | 1-12/22 | Change | 10-12/23 | 10-12/22 | Change |
| Net revenue, Group, MEUR | 70.9 | 77.8 | -9 % | 18.5 | 13.6 | 36 % |
| Net revenue, Asset Management, MEUR | 66.9 | 71.8 | -7 % | 16.6 | 13.3 | 25 % |
| Net revenue, Corporate Finance, MEUR | 3.9 | 5.4 | -27 % | 2.7 | 1.0 | 163 % |
| Net revenue, Investments, MEUR | -0.6 | 0.7 | -187 % | -1.0 | -0.7 | -35 % |
| Net revenue, Group administration and eliminations | ||||||
| MEUR | 0.6 | -0.1 | 0.2 | 0.0 | ||
| Operating profit, Group, MEUR | 39.7 | 45.7 | -13 % | 9.8 | 6.3 | 56 % |
| Operating profit, Asset Management, MEUR | 41.4 | 45.9 | -10 % | 9.7 | 7.5 | 30 % |
| Operating profit, Corporate Finance, MEUR | 0.7 | 1.7 | -62 % | 1.6 | 0.2 | 631 % |
| Operating profit, Investments, MEUR | -0.6 | 0.7 | -187 % | -1.0 | -0.7 | -35 % |
| Operating profit, Group administration, MEUR | -1.7 | -2.6 | -0.5 | -0.7 | ||
| Profit for the period, MEUR | 31.5 | 36.3 | -13 % | 7.8 | 4.9 | 57 % |
| Key ratios | 1-12/23 | 1-12/22 | Change | 10-12/23 | 10-12/22 | Change |
| Earnings per share, EUR | 0.78 | 0.91 | -14 % | 0.19 | 0.12 | 55 % |
| Proposal for dividend and equity repayment per share, EUR | 0.80 | 1.00 | -20 % | |||
| Equity per share, EUR | 1.85 | 2.02 | -8 % | 1.85 | 2.02 | -8 % |
| Cost/income ratio, Group, % | 43.8 | 41.1 | 7 % | 47.1 | 53.7 | -12 % |
| Liquid assets, MEUR | 33.4 | 43.8 | -24 % | 33.4 | 43.8 | -24 % |
| Private equity and real estate fund investments, MEUR | 16.6 | 16.8 | -2 % | 16.6 | 16.8 | -2 % |
| Interest-bearing liabilities, MEUR | 0.0 | 0.0 | 0 % | 0.0 | 0.0 | 0 % |
| Assets under management excluding reporting services, EUR billion | 10.0 | 9.7 | 3 % | 10.0 | 9.7 | 3 % |
| Assets under management, EUR billion | 12.9 | 12.6 | 3 % | 12.9 | 12.6 | 3 % |
Mikko Koskimies, CEO
Inflation was the key theme in the investment markets in 2023. At the same time, talk continued on how much central banks should further raise interest rates to curb inflation. Both the Federal Reserve (Fed) in the US and the European Central Bank (ECB) continued to raise their key interest rates during the year. In 2023 the Fed raised its key interest rate from 4.5% to 5.5% and the ECB from 2.5% to 4.0%.
Economic growth in Europe and especially in the US withstood the continued rise in interest rates surprisingly well. In China inflation has not been a problem but there concerns have mostly involved economic growth, as both private consumption and exports have been weaker than expected.
Towards the end of the year countries in the West began to see a slowdown in both inflation and growth, which gave the markets faith that interest rates would be lowered during 2024. In the final quarter of 2023 market expectations for both the speed and volume of interest rate reductions were intensified, well indicated as positive returns in both the fixed income and equity markets.
Throughout 2023, the best equity market was the US where the return of the S&P 500 Index, measured in dollars, was as high as 25.7%. The US gave a 21.4% return in euros, due to the weaker dollar. Measured by the MSCI Index, Japanese shares returned 16.2%, European stocks 15.8% and shares in emerging countries 6.1%. Behind all of these came the Finnish equity market where the index return was 0.6% in the negative. After large negative returns in 2022, interest rates provided good returns in 2023. The European High Yield Index returned 12.1%, IG corporate loans 8.0%, euro zone government bonds 6.7%, and euro-denominated corporate loans in emerging countries 5.4%.
eQ's result for the financial period fell
eQ's result for the financial period fell in the challenging operating environment. The net revenue of the Group during the period under review was EUR 70.9 million and the operating profit was EUR 39.7 million. Operating profit fell by 13 per cent from the previous year.
eQ Asset Management's performance fees declined
The management fees of eQ Asset Management grew by 1 per cent despite the partly challenging operating environment. Performance fees, on the other hand, fell by 50 per cent to EUR 5.4 million from last year's EUR 10.8 million. During the period under review, the net revenue of the Asset Management segment fell by 7 per cent to EUR 66.9 million. The operating profit of the period fell by 10 per cent to EUR 41.4 million. The assets managed by eQ Asset Management grew by 3 per cent to EUR 12.9 billion during the period under review.
Responsibility and sustainability are a key part of eQ Asset Management's investment activities and processes. We measure the implementation of sustainability ourselves, but in 2023 we again received recognition from outside parties, such as PRI, GRESB, and professionals in the private equity sector.
In addition, Finnish institutional clients stated for the fifth year in a row in the 2023 SFR survey that eQ Asset Management is the most high-quality asset manager in Finland.
As for traditional interest and equity investments, the returns of client portfolios in 2023 were excellent. Of the funds that eQ manages itself, 69 per cent gave a better return that its benchmark index, and during a three-year period the corresponding figure was also 69. The returns of private equity funds were slightly positive as well. The returns of the real estate funds were slightly negative for the first time, on the other hand, due to an increase of the yields resulting from the strong rise in the interest rate level.
As for sales, the year 2023 was good especially in private equity asset management. In 2023, private equity assets were raised to the eQ PE XV US Fund, which makes investments in Northern America. Its size in final closing grew to USD 283 million. In October we also made the first closing in the eQ VC II Fund, which makes Venture Capital investments and is the second fund in size at USD 20 million.
Advium had a strong final quarter
During the period under review, Advium's net revenue totalled EUR 3.9 million (EUR 5.4 million). Operating profit was EUR 0.7 million (EUR 1.7 million).
In 2023, the value of corporate acquisitions fell world-wide from the previous year, but a small pickup could be observed at the end of the quarter. This was affected by the rise in share prices late in the year and expectations of a lowering of the interest rate level in 2024. Activity in Finnish real estate transactions slowed down considerably in 2023, leading to a decline of more than 60 per cent in overall transaction volume compared with the previous year. The most significant factor contributing to a slowdown in activity is the rapid rise in interest rate levels and weaker availability of financing.
In 2023, Advium acted as advisor in four M&A acquisitions completed: a Fairness Opinion to Musti Group, advising Aspo Plc regarding a minority investment by OP Suomi Infra, sale of shares in Caverion, and advising Otava on a mandatory public offer. In real estate transactions, Advium also acted as advisor for the global fund manager Schroders which sold an office building in central Turku.
The operating profit of Investments fell
The operating profit of the Investments segment was EUR -0.6 million (EUR 0.7 million), and the net cash flow was EUR -0.1 million (EUR 2.8 million). The balance sheet value of the private equity and real estate fund investments at year end was EUR 16.6 million (EUR 16.8 million on 31 Dec. 2022). During the year, eQ Plc made a USD 1 million investment commitment in both the eQ PE XV US and the eQ VC II funds.
Outlook
The asset management market in Finland has grown strongly, and eQ's growth has outpaced the market. We estimate that the long-term outlook for growth in the asset management market and for eQ in Finland is still good.
For eQ's real estate funds, 2023 was a difficult year due to an increase of the yields resulting from a strong rise in the interest rate level. As yields rose, values of properties clearly declined. Also, net subscriptions in funds were negative. The limited availability of real estate financing also contributed to a significant decrease in real estate transactions. With regard to the real estate funds, we expect 2024 to be a challenging year, although the long-term outlook for growth is good. Sales of eQ's Private Equity products has continued to be strong, and the desire of Finnish asset management clients to increase Private Equity allocations in their portfolios will continue to support the growth of eQ's Private Equity products. We also anticipate a growth in performance fees from 2025 onwards, due to the predicted transfer of several Private Equity products to a performance fee stage. eQ's competitive position in traditional asset management products and discretionary asset management is good thanks to excellent returns on investments. We believe that traditional asset management has great potential for growth in future years, considering however its characteristic short-term variation according to market conditions.
eQ has updated its disclosure policy and, as a rule, will not issue a result forecast for the Asset Management segment in the future but instead describe its outlook in a general manner. Results in the Corporate Finance and Investments segments are largely dependent on factors beyond the company's control, which is why no result forecast has been issued for these segments before.
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eQ's financial statements release 1 Jan. to 31 Dec. 2023 is enclosed to this release and it is also available on the company website at www.eQ.fi.
eQ Plc
Additional information:
Mikko Koskimies, CEO, tel. +358 9 6817 8799
Antti Lyytikäinen, CFO, tel. +358 9 6817 8741
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 12.9 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.
