eQ Plc half year report
6 August 2024 at 8:00 AM
January to June 2024 in brief
- During the period under review, the Group's net revenue totalled EUR 34.2 million (EUR 35.7 million from 1 Jan. to 30 June 2023). The Group's net fee and commission income was EUR 33.2 million (EUR 35.2 million).
- The Group's operating profit fell by 9% to EUR 18.1 million (EUR 19.8 million).
- The Group's profit was EUR 14.3 million (EUR 15.7 million).
- The consolidated earnings per share were EUR 0.35 (EUR 0.39).
- The net revenue of the Asset Management segment decreased by 12% to EUR 30.3 million (EUR 34.4 million) and the operating profit by 18% to EUR 17.4 million (EUR 21.2 million). The management fees of the Asset Management segment fell by 11% to EUR 27.9 million (EUR 31.3 million) and the performance fees fell by 18% to EUR 2.7 million (EUR 3.3 million). During the review period, the assets managed by eQ Asset Management grew by 3% to EUR 13.2 billion (EUR 12.9 billion on 31 Dec. 2023).
- The net revenue of the Corporate Finance segment was EUR 2.9 million (EUR 0.9 million) and the operating profit was EUR 1.0 million (EUR -0.7 million).
- The operating profit of the Investments segment was EUR 0.5 million (EUR 0.1 million).
- The net cash flow from the Group's own private equity and real estate fund investment operations was EUR -0.1 million (EUR -0.2 million).
April to June 2024 in brief
- In the second quarter, the Group's net revenue totalled EUR 17.7 million (EUR 18.0 million from 1 April to 30 June 2023). The Group's net fee and commission income was EUR 17.2 million (EUR 17.8 million).
- The Group's operating profit fell by 6% to EUR 9.3 million (EUR 9.8 million).
- The Group's profit was EUR 7.4 million (EUR 7.8 million).
- The consolidated earnings per share were EUR 0.18 (EUR 0.19).
| Key ratios | 1-6/24 | 1-6/23 | Change | 4-6/24 | 4-6/23 | Change | 1-12/23 |
| Net revenue, Group, MEUR | 34.2 | 35.7 | -4% | 17.7 | 18.0 | -2% | 70.9 |
| Net revenue, Asset Management, MEUR | 30.3 | 34.4 | -12% | 15.1 | 17.3 | -13% | 66.9 |
| Net revenue, Corporate Finance, MEUR | 2.9 | 0.9 | 232% | 2.1 | 0.4 | 394% | 3.9 |
| Net revenue, Investments, MEUR | 0.5 | 0.1 | 283% | 0.3 | 0.2 | 40% | -0.6 |
| Net revenue, Group administration and eliminations, MEUR | 0.5 | 0.3 | 0.2 | 0.0 | 0.6 | ||
| Operating profit, Group, MEUR | 18.1 | 19.8 | -9% | 9.3 | 9.8 | -6% | 39.7 |
| Operating profit, Asset Management, MEUR | 17.4 | 21.2 | -18% | 8.6 | 10.5 | -18% | 41.4 |
| Operating profit, Corporate Finance, MEUR | 1.0 | -0.7 | 244% | 0.9 | -0.3 | 403% | 0.7 |
| Operating profit, Investments, MEUR | 0.5 | 0.1 | 283% | 0.3 | 0.2 | 40% | -0.6 |
| Operating profit, Group administration, MEUR | -0.9 | -0.9 | -0.5 | -0.6 | -1.7 | ||
| Profit for the period, MEUR | 14.3 | 15.7 | -9% | 7.4 | 7.8 | -6% | 31.5 |
| Key ratios | 1-6/24 | 1-6/23 | Change | 4-6/24 | 4-6/23 | Change | 1-12/23 |
| Earnings per share, EUR | 0.35 | 0.39 | -10% | 0.18 | 0.19 | -6% | 0.78 |
| Equity per share, EUR | 1.45 | 1.44 | 1% | 1.45 | 1.44 | 1% | 1.85 |
| Cost/income ratio, Group, % | 47.1 | 44.4 | 6% | 47.6 | 45.3 | 5% | 43.8 |
| Liquid assets, MEUR | 19.8 | 12.8 | 55% | 19.8 | 12.8 | 55% | 33.4 |
| Private equity and real estate fund investments, MEUR | 17.3 | 17.3 | 0% | 17.3 | 17.3 | 0% | 16.6 |
| Interest-bearing liabilities, MEUR | 0.0 | 0.0 | 0% | 0.0 | 0.0 | 0% | 0.0 |
| Assets under management excluding reporting services, EUR billion | 10.2 | 9.9 | 3% | 10.2 | 9.9 | 3% | 10.0 |
| Assets under management, EUR billion | 13.2 | 12.8 | 3% | 13.2 | 12.8 | 3% | 12.9 |
Mikko Koskimies, CEO
The first half of 2024 began with anticipation of a slowdown in financial growth and inflation in the US and Europe. The markets expected the central banks of both regions to start reductions of interests rates in spring 2024. The hope for rate cuts in the US in particular quickly, however, as the country's economic growth continued strong and inflation stayed clearly above the Federal Reserve's target level. In market expectations, the US rate cut wished for the strong was postponed to late 2024 and occasionally even to 2025. The central bank in Europe felt that the rate of inflation slowed down sufficiently, and the ECB lowered its key rate by 0.25 percentage points in June. Soon thereafter the European markets were shaken by the early elections in France, and the country's interest spread to Germany clearly widened. At the same time share prices - especially bank stocks - fell. China continued to stimulate its economy, but it has been difficult to buoy up private consumption in particular. Both the US and Europe announced new tariffs on Chinese products.
The delay in rate cuts was a disappointment specially for the fixed income markets, but information about better than expected growth supported the equity markets also. In the US the strong rise of large technology companies continued and the US also had the clearly strongest stock exchange in the first half; a rise of 15.1% in dollars and as much as 18.6% in euros. Share prices in emerging countries rose by 10.8% from the beginning of the year, led especially by Taiwan and India. Europe was weighed down by the French elections at the end of the quarter, but in all the first half provided a return of 9.1%. The Finnish stock exchange also perked up slightly after a very slow first quarter but clearly lagged the others with a return of 3.5% in the first six months. The Japanese stock exchanged returned 9.5% in the first half as a whole, but the return in the second quarter was 3.1% in the negative especially due to currency problems.
The yield of the Euro Government Bond Index in the first half was almost 2% in the negative, and other interest income remained small as well. Investment Grade corporate loans gave a return of 0.5%, emerging market euro-denominated corporate returned 2.1%, and High Yield loans gave a 3.2% return.
eQ's operating profit EUR 18.1 million
The net revenue of the Group during the review period was EUR 34.2 million and the operating profit was EUR 18.1 million. Operating profit fell by 9 per cent from the previous year.
eQ Asset Management's assets under management increased
eQ Asset Management's net turnover in the review period fell by 12 per cent to EUR 30.3 million. The operating profit of the period fell by 18 per cent to EUR 17.4 million. The assets managed by eQ Asset Management grew by 3 per cent to EUR 13.2 billion during the period under review.
As for traditional interest and equity investments, the returns of client portfolios in the first half were very good. Of the funds that eQ manages itself, 62 per cent surpassed their benchmark indices, and during a three-year period the corresponding figure was also 62 per cent. During the review period eQ's funds also received awards from both Morningstar and Lipper.
As for sales, the year 2024 has begun well especially in Private Equity asset management. In 2024, Private Equity assets are raised to the eQ PE XVI North and eQ PE SF V funds, which make investments in Northern Europe. Their sizes increased to almost EUR 280 million in total at the end June. At the same time, the size the eQ VC II fund, which makes Venture Capital investments and which was started with the first closing of EUR 20 million last October, grew to 46 million dollars.
Advium's profit grew
During the period under review, Advium's net revenue totalled EUR 2.9 million (EUR 0.9 million). Operating profit was EUR 1.0 million (EUR -0.7 million).
In the review period activity in mergers and acquisitions remained low. During the review period an M&A transaction was completed where Advium served as Aspo Plc's advisor regarding a minority investment by OP Suomi Infra. In addition, during the period Advium acted as an advisor for the acquiring consortium in a voluntary public offer to acquire all shares in Purmo Group.
The number of real estate transactions in Finland also remained extremely low during the review period. In the review period Advium acted as an advisor in one real estate transaction where the eQ Commercial Properties fund sold a commercial building in Espoo to an international investor.
Jacob af Forselles was appointed as the Managing Director of Advium Corporate Finance Ltd and as a member to eQ Group's Management Team. He started in his position at the beginning of August.
The operating profit of Investments increased
The operating profit of the Investments segment was EUR 0.5 million (EUR 0.1 million), and the net cash flow was EUR -0.1 million (EUR -0.2 million). The balance sheet value of the private equity and real estate fund investments at the end of the period was EUR 17.3 million (EUR 16.6 million on 31 Dec. 2023). During the period, eQ Plc made a EUR 1 million investment commitment in the new eQ PE XVI North fund.
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 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.
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eQ's half year financial report 1 Jan. to 30 June 2024 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 13.2 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.
