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eQ Plc’s interim report Q1 2021 – eQ's growth was very strong
eQ Plc interim report
27 April 2021 at 8:00 AM
January to March 2021 in brief
The Group's net revenue during the period was EUR 18.0 million (EUR 12.0 million from 1 Jan. to 31 March 2020).
The Group’s net fee and commission income was EUR 15.8 million (EUR 11.7 million).
The Group’s net investment income from own investment operations was EUR 2.2 million (EUR 0.3 million), including the return from private equity and real estate fund investments and liquid fixed income funds.
The Group’s operating profit grew by 76% to EUR 10.6 million (EUR 6.0 million).
The Group’s profit was EUR 8.4 million (EUR 4.8 million).
The consolidated earnings per share were EUR 0.22 (EUR 0.13).
The net revenue of the Asset Management segment grew by 31% to EUR 14.8 million (EUR 11.3 million) and the operating profit by 38% to EUR 8.8 million (EUR 6.4 million).
The net revenue of the Corporate Finance segment was EUR 1.1 million (EUR 0.4 million) and the operating profit was EUR 0.3 million (EUR -0.1 million).
The net cash flow from the Group’s own private equity and real estate fund investment operations was EUR 0.7 million (EUR 0.5 million).
Key ratios | 1–3/21 | 1–3/20 | Change | 1–12/20 |
Net revenue, Group, M€ | 18.0 | 12.0 | 50% | 56.7 |
Net revenue, Asset Management, M€ | 14.8 | 11.3 | 31% | 52.8 |
Net revenue, Corporate Finance, M€ | 1.1 | 0.4 | 137% | 4.1 |
Net revenue, Investments, M€ | 2.1 | 0.6 | 236% | -0.1 |
Net revenue, Group administration and | ||||
eliminations, M€ | 0.0 | -0.3 | 0.0 | |
Operating profit, Group, M€ | 10.6 | 6.0 | 76% | 30.8 |
Operating profit, Asset Management, M€ | 8.8 | 6.4 | 38% | 32.1 |
Operating profit, Corporate Finance, M€ | 0.3 | -0.1 | 334% | 1.1 |
Operating profit, Investments, M€ | 2.1 | 0.6 | 236% | -0.1 |
Operating profit, Group administration, M€ | -0.7 | -0.9 | -2.4 | |
Profit for the period, M€ | 8.4 | 4.8 | 76% | 24.6 |
Key ratios | 1–3/21 | 1–3/20 | Change | 1–12/20 |
Earnings per share, € | 0.22 | 0.13 | 74% | 0.64 |
Equity per share, € | 1.26 | 1.21 | 4% | 1.74 |
Cost/income ratio, Group, % | 41.3 | 49.9 | -17% | 45.6 |
Liquid assets, M€ | 43.6 | 35.0 | 25% | 36.3 |
Private equity and real estate fund investments, M€ | 17.2 | 16.4 | 5% | 15.7 |
Interest-bearing loans, M€ | 0.0 | 0.0 | 0% | 0.0 |
Assets under management excluding reporting services, € billion | 8.1 | 6.6 | 24% | 7.5 |
Assets under management, total, € billion | 9.9 | 8.0 | 23% | 9.0 |
Mikko Koskimies, CEO
The year 2021 started off with a hopeful, yet uncertain sentiment. Well-functioning COVID-19 vaccines had been developed in record time, but there were problems with the production and distribution of the vaccines. Both central banks and politicians in all central countries concentrated on continued recovery measures and even their expansion. A good example of this is the US, where President Biden drove through a massive USD 1 900 billion additional support package.
During the first quarter of the year, both the impacts of the recovery measures and the speeding up of the vaccination rates began to reflect positively on economic growth, particularly in the US. Economic growth in China also looks strong, while Europe – once more – lags behind. The closing of economies has continued longer in Europe and the vaccination pace has been slower.
Long interest rates rose above all in the US during the quarter, and as a result, the returns of interest investment were mainly negative. The returns of the equity market were, on the other hand, excellent in all parts of the world, the world index return being over 9%. Since the last quarter of 2020, sector rotation in the equity market has been strong from growth shares towards more cyclical industrial shares and the finance sector. In addition, especially small companies have given an excellent return.
eQ’s growth very strong
eQ’s growth in the first quarter was very strong. The Group's net revenue in the first quarter was EUR 18.0 million and the operating profit was EUR 10.6 million. Net revenue grew by 50% and operating profit by as much as 76% on the previous year.
eQ Asset Management’s growth accelerated
The result of eQ Asset Management was once more excellent. eQ Asset Management’s net revenue grew by 31% on the first quarter of 2020 to EUR 14.8 million. The operating profit grew by 38% to EUR 8.8 million. The management fees of traditional asset management and private equity asset management as well as performance fees experienced the strongest growth.
The returns of client portfolios were excellent during the first quarter. No less than 93% of the funds that eQ manages itself exceeded their benchmark indices, and during a three-year period the corresponding figure was 77%. Within discretionary asset management portfolios, both absolute and relative returns were also exceptionally good. The excellent returns from traditional asset management were complemented by the good real estate and private equity returns.
The quarter was also very good with regard to sales, above all for real estate and private equity asset management. Net subscriptions in the eQ Care and eQ Finnish Real Estate funds were EUR 130 million, and the size of the eQ Residential Fund grew to EUR 86 million. The investment operations of the fund also advanced well. In 2021, means are raised to the eQ PE XIII US Fund, the size of which already grew to USD 200 million in its second closing on 15 April. In addition, we have launched three new private equity asset management programmes at the beginning of the year, and the size of two old, renewed programmes has grown markedly.
During the quarter, we made some amendments to the rules of the eQ real estate funds, which entered into force on 15 April. At the same time, we changed the name of the popular eQ Care Fund to eQ Community Properties Fund to better correspond to the use of the properties owned by the fund.
Advium’s fee income and profit grew
In the first quarter, Advium’s net revenue was EUR 1.1 million (EUR 0.4 million) and operating profit EUR 0.3 million (EUR -0.1 million).
Advium acted as advisor in two finalised transactions. We acted as advisor to Avain Yhtiöt, as Ahlström Capital acquired a share of about 25% of Avain Yhtiöt Oy. We also acted as advisor to Alma Media Corporation in a transaction where Alma Media acquired Nettix Oy, the leading marketplace for motor vehicles, from Otava Group for EUR 170 million.
The development of Advium’s operating environment was two-fold. In the first quarter, the number of M&As was record high globally, and even in Finland growth was strong. Real estate transactions have, on the other hand, recovered from the COVID-19 crises more slowly, and particularly in comparison with the first quarter of 2020, the value of real estate transactions in Finland fell by about 70%.
Net revenue of Investments increased threefold
The operating profit of the Investments segment was EUR 2.1 million (EUR 0.6 million) and the net cash flow EUR 0.7 million. The balance sheet value of the private equity and real estate fund investments was EUR 17.2 million at the end of March. eQ Plc made an investment commitment of USD 1 million to the eQ PE XIII US private equity fund in January. The considerable increase the M&A activity of unlisted companies had a positive impact on the portfolio’s cash flow and realised profits. As there is a lag of about three months in the valuation of funds, the positive value change in the first quarter is in practice a result of the positive development of target fund values during the last quarter of 2020.
Outlook
The strong market development at beginning of the year and the anticipated easing-off of the COVID-19 crisis are positive factors for eQ’s operating environment.
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.
***
eQ’s interim report 1 January to 31 March 2021 is enclosed to this release and it is also available on the company website at www.eQ.fi.
Additional information: Mikko Koskimies, CEO, tel. +358 9 6817 8799
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 9.9 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.
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