eQ Plc’s financial statements release 2022 – eQ´s result for the financial period was good

eQ Plc financial statements release
7 February 2023 at 8:00 AM

January to December 2022 in brief

• The Group's net revenue during the period was EUR 77.8 million (EUR 78.9 million from 1 Jan. to 31 Dec. 2021).
• The Group’s net fee and commission income was EUR 77.1 million (EUR 71.6 million).
• The Group’s operating profit fell by 4 per cent to EUR 45.7 million (EUR 47.7 million).
• The Group’s profit was EUR 36.3 million (EUR 38.1 million).
• The consolidated earnings per share were EUR 0.91 (EUR 0.97).
• The net revenue of the Asset Management segment increased by 11 per cent to EUR 71.8 million (EUR 64.9 million) and the operating profit by 14 per cent to EUR 45.9 million (EUR 40.3 million).
• The net revenue of the Corporate Finance segment was EUR 5.4 million (EUR 6.9 million) and the operating profit was EUR 1.7 million (EUR 2.7 million).
• The net revenue of the Investments segment was EUR 0.7 million (EUR 7.1 million) and the effect of the result decrease to the Earnings per share was EUR -0.13.
• The net cash flow from the Group’s own private equity and real estate fund investment operations was EUR 2.8 million (EUR 4.1 million).
• Dividend proposal EUR 0.91 (EUR 0.97) and proposal for equity repayment EUR 0.09 (EUR 0.03) per share.

October to December 2022 in brief

• In the last quarter, the Group’s net revenue totalled EUR 13.6 million (EUR 21.1 million from 1 Oct. to 31 Dec. 2021).
• The Group’s net fee and commission income was EUR 14.3 million (EUR 19.5 million).
• The Group’s operating profit fell by 50 per cent to EUR 6.3 million (EUR 12.7 million).
• In the last quarter, the result of the Asset Management segment was affected by reversal of the accrued performance based fee of the real estate funds, EUR -3.9 million.
• The Group’s profit was EUR 4.9 million (EUR 10.1 million).
• The consolidated earnings per share were EUR 0.12 (EUR 0.26).

Key ratios	1-12/22	1-12/21	Change	10-12/22	10-12/21	Change
Net revenue, Group, MEUR	77.8	78.9	-1%	13.6	21.1	-36%
Net revenue, Asset Management, MEUR	71.8	64.9	11%	13.3	16.3	-19%
Net revenue, Corporate Finance, EUR	5.4	6.9	-22%	1.0	3.2	-67%
Net revenue, Investments, MEUR	0.7	7.1	-91%	-0.7	1.6	-145%
Net revenue, Group administration and
eliminations, MEUR	-0.1	0.0		0.0	0.0
Operating profit, Group, MEUR	45.7	47.7	-4%	6.3	12.7	-50%
Operating profit, Asset Management, MEUR	45.9	40.3	14%	7.5	10.1	-26%
Operating profit, Corporate Finance, MEUR	1.7	2.7	-37%	0.2	1.6	-87%
Operating profit, Investments, MEUR	0.7	7.1	-91%	-0.7	1.6	-145%
Operating profit, Group administration, MEUR	-2.6	-2.5		-0.7	-0.7
Profit for the period, MEUR	36.3	38.1	-5%	4.9	10.1	-51%
Earnings per share, EUR	0.91	0.97	-6%	0.12	0.26	-52%
Proposal for dividend and equity repayment per share, EUR	1.00	1.00	0%
Equity per share, EUR	2.02	2.02	0%	2.02	2.02	0%
Cost/income ratio, Group, %	41.1	39.5	4%	53.7	40.0	34%
Liquid assets, MEUR	43.8	56.0	-22%	43.8	56.0	-22%
Private equity and real estate fund investments, MEUR	16.8	18.8	-11%	16.8	18.8	-11%
Interest-bearing loans, MEUR	0.0	0.0	0%	0.0	0.0	0%
Assets under management excluding reporting services, EUR billion	9.7	9.2	5%	9.7	9.2	5%
Assets under management, EUR billion	12.6	11.6	8%	12.6	11.6	8%

Mikko Koskimies, CEO

The year 2022 started off with strong economic growth and accelerating inflation. The central banks in the US and the eurozone were increasingly concerned about the pace of inflation and anticipated interest rate increases from the zero level, which has prevailed for a long time. Russia’s war against Ukraine, which began in February, created a new supply chock after COVID-19 and increased the prices of above all energy and food. The labour market remained strong in both the US and Europe, and the rise of service prices accelerated as well. The US Consumer Price Index increased by 8.0 per cent in 2022 and the Eurozone Consumer Price Index by 8.4 per cent. In 2022, the Fed raised its key interest rate no less than seven times, from 0.25 to 4.5 per cent, and the European Central Bank four times from 0 to 2.5 per cent.

Gross Domestic Product grew by a little over 3 per cent in the eurozone and by approximately 2 per cent in the US during the year. The growth in Europe was largely driven by the revival of tourism and other service sectors after the pandemic. China kept its strict COVID-19 restrictions in force the whole year, which hampered the country’s growth. China’s estimated GDP growth in 2022 is about 3 per cent. Unlike in the West, inflation remained moderate, and there was no need to raise interest rates. Towards the end of the year, China decided to start easing COVID-19 restrictions.

The rapid and drastic increase in central bank rates from around zero also lead to a steep rise of long-term interest rates. This meant exceptionally negative returns for those who had invested in fixed income funds. The return of euro government bonds for the entire year was -18.2 per cent, i.e. record weak. The return of the Investment Grade Index was -14.0 per cent and that of the High Yield Index -11.7 per cent.

Like the fixed-income market, the equity market reacted strongly to the war and, above all, the increase in interest rates. Both markets experienced major fluctuations during the year, when fears for inflation, increasing interest rates and slowing economic growth alternately increased and receded. As for the whole year, the US Stock Exchange return in dollars was -18.5 per cent and in euros -13.2 per cent. The dollar grew stronger during the year but deteriorated clearly in the last quarter of 2022. The return of the MSCI Europe equity index was -9.5 per cent, the return of the Finnish stock exchange was -12.7 per cent and that of the emerging markets equity index -14.9 per cent.

eQ’s result for the financial year was good

eQ’s result for the financial year was good despite the challenging operating environment. The net revenue of the Group during the period under review was EUR 77.8 million and the operating profit was EUR 45.7 million. The operating profit fell by 4 per cent from the previous year. The growth of eQ Asset Management continued. The result of the Investments segment fell considerably from the exceptionally strong previous year.

eQ Asset Management’s growth continued

The result of eQ Asset Management continued to grow despite the weak operating environment. During the period under review, the net revenue of the Asset Management segment increased by 11 per cent to EUR 71.8 million. Operating profit grew by 14 per cent to EUR 45.9 million. The strongest growth was experienced in the management fees of real estate asset management and private equity asset management and the performance fees of private equity asset management. The assets managed by eQ Asset Management grew by 8 per cent to EUR 12.6 billion during the period under review.

As for traditional investments, the returns of client portfolios were negative in 2022 in line with the market. Of the funds that eQ manages itself, 23 per cent surpassed their benchmark indices, and during a three-year period the corresponding figure was 77 per cent. In discretionary asset management portfolios, the returns in 2022 were also negative along with the market. The returns of real estate and private equity operations were, on the other hand, excellent in 2022, supporting very well the overall returns of most of our clients for the year.

As for sales, 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 were EUR 165 million, and the eQ Residential II Fund grew to EUR 53 million. In 2022, assets were raised to the eQ PE XIV North and eQ PE SF IV funds, which make investments in Norther Europe. Their size totalled almost EUR 440 million in the final closings. In addition, the size of the eQ VC Fund, established at the end of October 2021, grew to EUR 77 million in the final closing. The eQ VC Fund invests in the best venture capital funds in the US.

Advium’s fee income and profit fell

Advium’s net revenue during the period under review was EUR 5.4 million (EUR 6.9 million). The operating profit was EUR 1.7 million (EUR 2.7 million).

In 2022, the value of corporate acquisitions fell world-wide from the record year 2021. Above all the last quarter showed signs of clear slowing-down. The number of corporate acquisitions decreased in Finland as well. There was also a slowdown in the real estate transaction market due to increasing interest rates and uncertain economic growth, for instance.

In 2022, Advium acted as advisor in five M&A transactions: Advisor to a consortium led by Bain in the public cash tender offer for Caverion, the divestment of Bluebird to The North Aliance, the acquisition of Raksystems by Trillimpact, the divestment of Akkurate to Sandvik, and the acquisition of Finnamyl by Chemigaten (Berner). Advium’s market position and market share remained good. 

Advium’s real estate transaction activity increased in 2022. Advium acted as advisor in five published transactions. The most important of them were the establishment of a joint venture for the development of a real estate portfolio by Ilmarinen, YIT and HGR Property Partners, the divestment of Espoo Hospital and the fire station portfolio owned by the city of Espoo, and the divestment of Cromwell European REIT’s office property in Helsinki to Julius Tallberg Real Estate Corporation.

The operating profit of Investments fell considerably

The operating profit of the Investments segment was EUR 0.7 million (EUR 7.1 million) and the net cash flow was EUR 2.8 million (EUR 4.1 million). The operating profit fell by 91 per cent from the exceptionally strong comparison period. The balance sheet value of the private equity and real estate fund investments was EUR 16.8 million at the end of the period. eQ Plc made an investment commitment of EUR 1 million to 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, had a negative impact on the value changes of investments during the period under review due to the war in Ukraine.

Outlook

As for sales, the year 2022 was very good for eQ Asset Management. In January 2023, the eQ PE XV US private equity fund raised a record amount of assets in the first closing of the fund, i.e. almost USD 180 million, which is 35 per cent more than our previous fund investing in the US in its first closing. This strengthens our view that the demand for alternative investment products continues to be strong among investors and the increase in fixed management fees will continue. The returns of real estate funds are linked to the development of the yields and their possible performance fees for 2023 involve uncertainty. The performance fees of private equity funds will, on the other hand, be at the same level due to the catch up accrual.

Consequently, we expect the net revenue and operating profit of the Asset Management segment to be at the same level as last year or to grow in 2023. In accordance with our disclosure policy, we do not issue profit guidance for the Corporate Finance and Investments segments. The results of these segments are highly dependent on factors that are not dependent on the company. Therefore, their operating profits may vary considerably and are difficult to foresee.

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eQ’s financial statements release 1 Jan. to 31 Dec. 2022 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 12.6 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.

Attachment

• eQ Plc Financial Statements Release 2022