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eQ Plc’s financial statements release 2020 – eQ’s profit increased by 17%, distribution proposal of EUR 0.70 per share to the shareholders

eQ Plc Financial statements release
5 February 2021 at 8:00 A.M.

January to December 2020 in brief

  • The Group's net revenue during the financial period was EUR 56.7 million (EUR 50.6 million from 1 Jan. to 31 Dec. 2019).
  • The Group’s net fee and commission income was EUR 56.7 million (EUR 49.5 million).
  • The Group’s net investment income from own investment operations was EUR 0.0 million (EUR 1.1 million), including the return from private equity and real estate fund investments and liquid fixed income funds.
  • The Group’s operating profit grew by 17% to EUR 30.8 million (EUR 26.3 million).
  • The Group’s profit was EUR 24.6 million (EUR 21.0 million).
  • The consolidated earnings per share were EUR 0.64 (EUR 0.55).
  • The net revenue of the Asset Management segment increased by 19% to EUR 52.8 million (EUR 44.3 million) and the operating profit by 26% to EUR 32.1 million (EUR 25.4 million).
  • The net revenue of the Corporate Finance segment was EUR 4.1 million (EUR 5.4 million) and the operating profit was EUR 1.1 million (EUR 1.9 million).
  • The net cash flow from the Group’s own private equity and real estate fund investment operations was EUR 0.6 million (EUR 1.7 million).
  • Dividend proposal EUR 0.64 (EUR 0.55) and proposal for equity repayment EUR 0.06 (EUR 0.07) per share.

October to December 2020 in brief

  • In the last quarter, the Group’s net revenue totalled EUR 20.1 million (EUR 15.6 million from 1 Oct. to 31 Dec. 2019).
  • The Group’s net fee and commission income was EUR 19.5 million (EUR 15.0 million).
  • The Group’s net investment income from own investment operations was EUR 0.7 million (EUR 0.6 million), including the return from private equity and real estate fund investments and liquid fixed income funds.
  • The Group’s operating profit was EUR 11.5 million (EUR 8.4 million).
  • The Group’s profit was EUR 9.2 million (EUR 6.7 million).
  • The consolidated earnings per share were EUR 0.24 (EUR 0.18).
Key ratios1-12/201-12/19 

  |                                         
Change
10-12/2010-12/19Change
Net revenue, Group, M€56.750.612%20.115.629%
Net revenue, Asset Management, M€52.844.319%18.112.545%
Net revenue, Corporate Finance, M€4.15.4-24%1.42.5-46%
Net revenue, Investments, M€-0.10.8-110%0.60.61%
Net revenue, Group administration and      
eliminations, M€0.00.1 0.00.0 
       
Operating profit, Group, M€30.826.317%11.58.437%
Operating profit, Asset Management, M€32.125.426%11.37.257%
Operating profit, Corporate Finance, M€1.11.9-41%0.41.2-63%
Operating profit, Investments, M€-0.10.8-110%0.60.61%
Operating profit, Group administration, M€-2.4-1.8 -0.8-0.5 
       
Profit for the period, M€24.621.017%9.26.737%
       
Key ratios1-12/201-12/19 

  |                                         
Change
10-12/2010-12/19Change
Earnings per share, €0.640.5516%0.240.1835%
Proposal for dividend and equity repayment per
share, €
0.700.6213%   
Equity per share, €1.741.702%1.741.702%
Cost/income ratio, Group, %45.648.1-5%42.546.0-8%
       
Liquid assets, M€36.332.312%36.332.312%
Private equity and real estate fund investments, M€15.716.2-3%15.716.2-3%
Interest-bearing loans, M€0.00.00%0.00.00%
       
Assets under management excluding reporting services, € billion7.56.810%7.56.810%
Assets under management total, € billion9.011.7-23%9.011.7-23%

Janne Larma, CEO

The year 2020 was very exceptional in the investment market. At the beginning of the pandemic in March, share prices plummeted for a month, but recovered during the year so that equity indices were, as a rule, higher at the end of the year than they had been at the beginning January. The crisis in March raised the VIX index describing volatility almost as high as during the financial crisis, but towards the end of the year the index fell, although not quite to the level at the beginning of year.

eQ succeeded excellently in this challenging market, and our result was once more very good in 2020. The Group's net revenue increased by 12% to EUR 56.7 million. The Group's operating profit was EUR 30.8 million and the profit for the period was EUR 24.6 million, growth on the previous year being 17%. eQ’s profit has already grown for 27 consecutive quarters. The consolidated earnings per share were 64 cents as compared with 55 cents in 2019. The Group’s cost/income ratio continued to fall in 2020 and amounted to 45.6%.

eQ Asset Management’s profit continued to grow very strongly – operating profit grew by 26%

The asset management business continues to drive the Group’s growth. Its operations and profit grew once more exceptionally well. eQ Asset Management’s net revenue grew by 19% and operating profit by 26% in 2020. This was the first time that the cost/income ratio of the Asset Management segment was below 40% during the entire financial period, i.e. 39%.

eQ Asset Management is the leading institutional asset manager in Finland. According to the study conducted by SFR last year, eQ is the most frequently used institutional asset manager in Finland, and what is best, investors regarded eQ as the best company in the entire market quality-wise for the second time in a row. I am very happy that we can offer our clients asset management services of the highest quality in Finland. SFR interviews approximately the 100 largest Finnish institutional asset managers annually.

The low market rates and the willingness to decentralise investment portfolios have contributed to the continuing increase in the demand for alternative investment products. This is true both in Finland and internationally.

Considerable growth continued in eQ’s private equity asset management last year. We managed to raise altogether EUR 375 million to our private equity funds. We raised EUR 205 million to the eQ PE XII North Fund and EUR 170 million to the eQ PE SF III Secondary Fund. In addition, we also obtained new private equity asset management programmes. The assets managed under the private equity funds and programmes totalled EUR 2.7 billion at the close of the year. In addition to private equity, we raised EUR 36 million to the eQ Private Credit III Fund, and the raising of means to the Private Credit Fund will continue during the spring of 2021.
The COVID-19 crisis increased redemptions in eQ’s real estate funds above all in March, but after this the interest in our real estate funds has once more been strong: subscriptions in our real estate funds totalled EUR 125 million in 2020. COVID-19 had a negative impact on the volume of the real estate market. In Finland, the sales of commercial properties fell by 84% in the second quarter of the year, compared with the corresponding period the year before. Despite COVID-19, the returns of our two open real estate funds were also excellent for investors last year, i.e. the eQ Care Fund 9.0% and the eQ Finnish Real Estate Fund 4.6%. Last year, we expanded our real estate asset management portfolio by launching the eQ Residential Fund. We will continue to raise means to the fund during the first months of 2021. The assets managed under real estate asset management were EUR 1.9 billion at the end of the year, and the real estate assets of the funds totalled almost EUR 2.4 billion.

We are also very pleased with the returns of our traditional asset management operations. During the past three years, 77% of eQ’s fixed income and equity funds registered in Finland that it manages itself have surpassed their benchmark indices. In 2020, 71% of the funds surpassed their benchmark indices. Consequently, Morningstar recognised eQ Asset Management with its "Best Fund House" award last year based on the five-year risk adjusted return of the funds.

Advium’s fee income and profit fell

The transaction activity in the M&A and real estate market increased considerably in the second half, compared with the first half of the year. The overall volumes were lower than the year before, however. The other half was more active for Advium as well, but as for the whole year, Advium’s fee and commission income and revenue fell from the previous year. Last year, Advium acted as advisor in nine published transactions. Among these can be mentioned, for instance, the merger of Cargotec and Konecranes, which still needs to be approved by competition authorities among others, Solidium’s sale of its holding in Neles Corporation to Valmet, as well as Peab AB, which acquired YIT’s paving- and mineral aggregates business. Advium also acted as financial advisor to Elo Mutual Pension Insurance Company, as a fund managed by Corum AM bought a storage, business and office property in Jätkäsaari in Helsinki.

Advium’s net revenue was EUR 4.1 million, which is 24% less than the year before. Advium’s operating profit was EUR 1.1 million, compared with previous year’s EUR 1.9 million.

The result of the Investments segment lower than last year

Last year, the operating profit of the Investments segment was EUR 0.1 million negative (EUR 0.8 million in 2019). The net cash flow of the segment was EUR 0.6 million (EUR 1.7 million). The market value of the private equity and real estate investments was EUR 15.7 million at the end of the year (EUR 16.2 million on 31 Dec. 2019).

Group balance sheet and dividend proposal

The Group has no interest-bearing liabilities, and its balance sheet is very strong. The Group’s profit in 2020 was 64 cents per share and its cash flow was strong. Due to the strong balance sheet and capital adequacy, the Board of Directors have decided to propose to the Annual General Meeting that a dividend of 64 cents and an equity repayment of 6 cents per share be paid to the shareholders.

Outlook

The year 2021 started off in a positive tone in the equity market. The eQ PE XIII US private equity fund raised a record amount of USD 131 million in its first closing in January. This only strengthens our view that the demand for alternative investment products continues to be strong. With regard to the above, we expect the net revenue and operating profit of the Asset Management segment to grow in 2021.

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. Consequently, their operating profits may vary considerably and are difficult to foresee.

***

eQ’s financial statements release 1 January to 31 December 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,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 9.0 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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