eQ Plc interim report
25 October 2022 at 8:00 AM
January to September 2022 in brief
The Group's net revenue during the period was EUR 64.2 million (EUR 57.8 million from 1 Jan. to 30 September 2021).
The Group’s net fee and commission income was EUR 62.8 million (EUR 52.1 million).
The Group’s net investment income from own investment operations was EUR 1.4 million (EUR 5.7 million), including the return from private equity and real estate fund investments and liquid fixed income funds.
The Group’s operating profit grew by 13% to EUR 39.5 million (EUR 35.0 million).
The Group’s profit was EUR 31.4 million (EUR 28.0 million).
The consolidated earnings per share were EUR 0.79 (EUR 0.71).
The net revenue of the Asset Management segment increased by 21% to EUR 58.6 million (EUR 48.5 million) and the operating profit by 27% to EUR 38.4 million (EUR 30.2 million).
The net revenue of the Corporate Finance segment was EUR 4.3 million (EUR 3.7 million) and the operating profit was EUR 1.5 million (EUR 1.1 million).
The net cash flow from the Group’s own private equity and real estate fund investment operations was EUR 2.3 million (EUR 3.7 million).
July to September 2022 in brief
In the third quarter, the Group’s net revenue totalled EUR 20.1 million (EUR 20.9 million from 1 July to 30 September 2021).
The Group’s net fee and commission income was EUR 19.9 million (EUR 18.9 million).
The Group’s net investment income from own investment operations was EUR 0.3 million (EUR 2.1 million), including the return from private equity and real estate fund investments and liquid fixed income funds.
The Group’s operating profit decreased by 11% to EUR 12.4 million (EUR 13.8 million).
The Group’s profit was EUR 9.8 million (EUR 11.1 million).
The consolidated earnings per share were EUR 0.24 (EUR 0.28).
Net revenue, Group, MEUR
Net revenue, Asset Management, MEUR
Net revenue, Corporate Finance, MEUR
Net revenue, Investments, MEUR
Net revenue, Group administration and
Operating profit, Group, MEUR
Operating profit, Asset Management, MEUR
Operating profit, Corporate Finance, MEUR
Operating profit, Investments, MEUR
Operating profit, Group administration, MEUR
Profit for the period, MEUR
Earnings per share, EUR
Equity per share, EUR
Cost/income ratio, Group, %
Liquid assets, MEUR
Private equity and real estate fund investments, MEUR
Interest-bearing loans, MEUR
Assets under management excluding reporting services, EUR billion
Assets under management, EUR billion
Mikko Koskimies, CEO
The war in Ukraine caused the second supply shock after COVID-19 and strongly raised the price of energy in particular. This resulted in a significant acceleration of inflation in countries in the West. The Federal Reserve, the central bank in the US, initiated rate increases back in early 2022 and made two increases of 0.75 percentage points in the third quarter of 2022. The European Central Bank (ECB) started rate increases in the third quarter. The goal of the increase in rates is to slow down demand and thereby inflation.
The US economy has tolerated a tightening of the monetary policy well, and especially the country’s labour market has remained extremely strong. In Europe the strong acceleration of inflation and particularly the savage rise in energy prices undermine consumers’ purchasing power and cut into private consumption. In China inflation has not been a problem in the same way as in Western countries, but the country’s tight pandemic policy and restrictions have slowed down growth there. China stimulates the economy by making investments in infrastructure, and the country’s central bank also slightly lowered its key rate in the third quarter.
In the stock markets the third quarter of 2022 began in a positive atmosphere, as economic data suggested that economic growth in the US would react to rate hikes and slow down. The atmosphere changed in August, however, with the publication of extremely strong employment figures in the US and the continued fierce rise of energy prices in Europe. This caused the stock market to fall into a decline again. From the start of 2022, US stock exchanges have been the best Western market for euro investors and only 11.9% in the negative, due to the strengthening of the dollar. Stock market returns from the beginning of the year were -17.4% in Europe and -21.0% in Finland. Emerging stock markets saw large differences in returns between different countries. The return measured by the emerging markets index from 1 January was -15.4%.
Fixed income markets have experienced a similar rollercoaster as equities both from the start of 2022 and during Q3, as expectations of rate increases by central banks have been priced in. Returns were exceptionally negative down the line from the beginning of the year, between -15% and -20%.
eQ’s result was excellent during the period
eQ’s result during the period under review was excellent despite the state of the operating environment. The net revenue of the Group during the period was EUR 64.2 million and the operating profit was EUR 39.5 million. Operating profit grew by 13% compared with the previous year. eQ Asset Management in particular grew strongly. The result of the Investments segment fell considerably from the exceptionally strong result last year.
eQ Asset Management’s growth continued
eQ Asset Management’s result was once more excellent. During the period under review, the net revenue of the Asset Management segment increased by 21% to EUR 58.6 million. Operating profit grew by 27% per cent to EUR 38.4 million. The strongest growth was experienced in performance fees and the management fees of both real estate asset management and private equity asset management. The assets managed by eQ Asset Management increased by 6% during the period under review and totalled EUR 12.3 billion.
As for traditional investments, the returns of client portfolios were negative in the nine-month period in line with the market. Of the funds that eQ manages itself, 15% gave a better return that its benchmark index, and during a three-year period the corresponding figure was 77%. In discretionary asset management portfolios also, the nine-month returns were negative along with the market. The returns of real estate and private equity operations were, on the other hand, excellent in the first nine months of the year, supporting very well the overall returns of most of our clients during the period.
As for sales, the first nine months of the year was excellent, above all for real estate and private equity asset management. Net subscriptions in the eQ Community Properties and Commercial Properties funds totalled EUR 182 million, and the size of the eQ Residential II Fund grew to EUR 46 million. In 2022, funds are raised to the eQ PE XIV North and eQ PE SF IV funds, which make investments in Norther Europe. Their total size already reached EUR 410 million in the closings made in September. In addition, the size of the eQ VC Fund, established at the end of October 2021, grew to EUR 74 million during the period under review. The eQ VC Fund invests in the best venture capital funds in the US.
Advium’s fee income and profit grew slightly
Advium’s net revenue during the period under review was EUR 4.3 million (EUR 3.7 million). The operating profit was EUR 1.5 million (EUR 1.1 million).
During the period under review, the value of M&As fell globally clearly from the record year 2021 but remained at a relatively high level in long-term comparison. In Finland, the number of M&As remained at a good level, but the number of large transactions was lower than previously. The volume of real estate transactions remained good despite a slowdown after an extremely strong first half of the year.
During the first nine months of the year, Advium acted as advisor in four corporate transactions: the sale of Bluebird to North Alliance, the acquisition of Raksystems by Trillimpact, the sale of Akkurate to Sandvik and the acquisition of Finnamyl by Chemigate (Berner). In real estate transactions, Advium acted as advisor when Ilmarinen, YIT and HGR Property Partners established a joint venture for the development of significant real estate portfolio and in the divestment of Espoo Hospital by the city of Espoo to LähiTapiola Yhteiskuntakiinteistöt Suomi Ky. In July, Advium acted as advisor to Cromwell European REIT in the sale of office property in Helsinki.
Profit of the Investments segment fell considerably
The operating profit of the Investments segment was EUR 1.4 million (EUR 5.5 million) and the net cash flow was EUR 2.3 million (EUR 3.7 million). Operating profit fell by 75% from the exceptionally strong comparison period. The balance sheet value of the private equity and real estate fund investments was EUR 18.0 million at the end of the period. eQ Plc made an investment commitment of EUR 1 million to both eQ PE XIV North and eQ Residential II funds. The value changes in the Amanda III and Amanda V private equity funds, which invest in Eastern Europe, due to the war in Ukraine had a negative impact on the value changes of investments during the period under review.
The outlook for the financial year is still unaltered, and we expect the net revenue and operating profit of the Asset Management segment to grow from the previous year. In accordance with our disclosure policy, we do not issue profit guidance for the Corporate Finance and Investments segments.
eQ’s interim report 1 January to 30 September 2022 is enclosed to this release and it is also available on the company website at www.eQ.fi.
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 12.3 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.