Annual / Quarterly Financial Statement • Feb 12, 2020
Annual / Quarterly Financial Statement
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■ The Board of Directors proposes a dividend per share of SEK 2.20, to be paid in two installments, SEK 1.10 in June, 2020 and SEK 1.10 in December, 2020
EQT AB (PUBL) YEAR-END REPORT 2019 2
" As part of the vision 'to be the most reputable investor and owner', EQT aims to take the lead in ensuring that investments made today contribute to a cleaner, more inclusive and more resilient tomorrow. We believe that the business community in general and the private equity industry in particular, has a unique ability to drive positive change and thus needs to be part of the solution to the challenges that society is facing."
2019 was a milestone year for EQT: We celebrated 25 years as a fi rm, marking a quarter-of-a-century of future-proofi ng companies and making a positive impact. We also listed EQT AB on the Stockholm stock exchange, representing an important step on our journey to continuously improve EQT as a responsible owner, increase transparency and build a foundation for further growth.
As we move into 2020, we enter a new decade in which we believe the private markets industry will be characterized by action to drive sustainable results. In addition to generating returns, we need to focus on ensuring a prosperous future for the EQT funds' portfolio companies and the societies in which we operate.
We are far from alone in realizing that urgent action is critical, and EQT's e orts to support the transformation of companies has a long history. Our work on increased transparency and deeper engagement with a variety of stakeholders began with our roots in the Wallenberg family. When EQT was founded in 1994, our motto was "EQT - more than capital" and we have always strived to be just and fair. However, there is scope for EQT and the industry to do much more. As part of the vision "to be the most reputable investor and owner", EQT aims to take the lead in ensuring that investments made today contribute to a cleaner, more inclusive and more resilient tomorrow. We believe that the business community in general and the private equity industry in particular, has a unique ability to drive positive change and thus needs to be part of the solution to the challenges that society is facing.
We believe EQT's governance model, talent and network make us well positioned to tackle these challenges by helping drive innovation and create jobs. This is a model that EQT has developed over the past 25 years, and the performance achieved over time in terms of returns to investors demonstrates that it works well.
A testament to EQT's model is the capital that fund investors continue to entrust EQT with. In March 2019, EQT's largest ever infrastructure fund, EQT Infrastructure IV, was closed at EUR 9 billion. This
was followed by EQT Ventures II, which closed at EUR 620 million in AUM in November. By year end, the total AUM amounted to approximately EUR 40 billion, representing commitments from professional and prominent investors from all over the world. Having deep long-term relations with these investors is essential for us - we work in close partnership together appreciating the responsibility that the fund investors have to create value for their own clients, in many cases pensioners and insurance holders.
During 2019, the EQT funds invested around EUR 12 billion across investment strategies in market-leading companies such as Galderma in Switzerland, Zayo in the US, inexio in Germany and Metlifecare in New Zealand - all in line with EQT's thematic investment strategy. Whilst the market remained competitive, EQT continued to source good companies and generate returns for the fund investors by utilizing EQT's distinct and proven value creation approach.
At EQT, digitalization and sustainability are becoming fully integrated in the funds' investment process as well as during the ownership period. In the value creation plans, we are guided by the United Nations' Sustainable Development Goals, evaluating where alignment exists. Investments are only made in companies that deliver a positive impact, or that have the potential to deliver a positive impact through transformational support from EQT. We believe that this approach leads to superior, stable and more long-term returns for both fund investors and shareholders. In addition, to stay ahead of the curve, the fi rm has an inhouse Digital Business Development team and an Artifi cial Intelligence team, including the AI platform "Motherbrain", that work to leverage digital expertise and tools across the entire ownership cycle.
In 2019, the EQT funds delivered a record EUR 8 billion in total gross fund exits, including exits such as Press Ganey and Contanda in the US, as well as AutoStore in Norway; the latter delivering the highest return in the EQT Equity funds in more than ten years. But more importantly, these companies have been developed into stronger and more future-proof businesses creating value for both fund investors and society at large - EQT's purpose in a nutshell.
As we look towards 2020 and beyond, we continue to develop EQT's thematic investment approach and elevate our societal ambitions. We have defi ned three key dimensions of focus: Transparency & Accountability, Diversity & Upskilling and Clean & Conscious.
Firstly, in Transparency & Accountability, we are committed to publish EQT's key ESG data and link incentive schemes to sustainability objectives.
Secondly, we know that diverse organizations create both more innovation and more stable and long-term returns. Therefore, our current goal is that 65% of the investment professional recruits in 2020 will be female. We also require EQT's advisors, such as commercial, tax, legal and fi nancial advisors, to have teams with at least 25% of the underrepresented gender. On the Boards of Directors within the portfolio companies, at least 25% of the independent board members should be female. Over the long-term, the only goal to aim for is gender balance across the investment professional, management and board levels.
Thirdly, in Clean & Conscious, we have already shifted to targeting 100% renewable energy in all of EQT's o ces and, where it is currently not possible to reduce emissions, we ensure they are o set in a positive manner. Importantly, we have decided that all portfolio companies will start a transition to using renewable energy.
A new, engaging initiative is the EQT Foundation, launched in 2019 to coordinate EQT's philanthropic e orts. The EQT Foundation's mission is to help create a more inclusive world and to push the frontiers of societal impact. We hope that the EQT Foundation will become a force in contributing to a brighter future for generations to come.
We are operating in a growing industry and believe EQT is well positioned for further growth. There are exciting thematic investment opportunities across EQT's strategies and geographies, and we will continue to nourish the strong relations with the fund investors, as well as invest in the EQT platform, our top-class team and the EQT network. This includes building out the EQT Academy and continuing to grow our company with the EQT values at the core.
Our industry is becoming more competitive by the day, so we will continue to innovate our approach to ensure that EQT creates superior value for the fund investors over the long-term. We look forward to continuing EQT's development journey and using the balance sheet to further strengthen EQT's position as a leading global investment organization. This means investing in strategies where EQT's di erentiators and ability to impact are the main drivers but also ensuring we operate at scale. With initiatives such as capturing the opportunities in the segment between Ventures and Private Equity as well as increasing EQT's presence in APAC with an o ce recently opened in Sydney, we are well underway.
At the end of the day, we all share the same societal and climate challenges and opportunities on this planet and we should ask ourselves and the entire industry - how can we use the power of the private equity business model to make a positive impact with every investment?
Christian Sinding, CEO
| Highlights | CEO Word | Key Figures | Business Review | Other Disclosures | Financial Statements | Notes & Other |
KEY FIGURES
| EURbn | H2 2019 | H2 2018 | 2019 | 2018 |
|---|---|---|---|---|
| Investments by the EQT funds | 5.3 | 5.6 | 11.9 | 8.6 |
| Gross fund exits | 3.1 | 2.1 | 8.0 | 5.1 |
| EURbn | H2 2019 | H2 2018 | 2019 | 2018 |
|---|---|---|---|---|
| AUM (end of period) | 39.9 | 36.6 | 39.9 | 36.6 |
| Avg. AUM (during the period) | 40.2 | 33.6 | 39.6 | 31.2 |
| Effective management fee rate | 1.40% | 1.40% | 1.40% | 1.40% |
PERSONNEL
| # OF | H2 2019 | H2 2018 | 2019 | 2018 |
|---|---|---|---|---|
| FTE (end of period) | 645 | 527 | 645 | 527 |
| FTE+ (end of period) | 706 | 601 | 706 | 601 |
| EURm | H2 2019 | H2 2018 | 2019 | 2018 |
|---|---|---|---|---|
| Financials (adjusted)* | ||||
| Management fees | 294 | 213 | 574 | 384 |
| Adj. carried interest and investment income | 13 | 2 | 31 | 9 |
| Adj. total revenue | 307 | 214 | 606 | 393 |
| Adj. total revenue growth, % | 43% | 54% | ||
| Adj. total operating expenses | 173 | 122 | 331 | 237 |
| Adj. EBITDA | 135 | 93 | 275 | 156 |
| Adj. EBITDA margin, % | 44% | 43% | 45% | 40% |
| Adj. net income | 104 | 77 | 213 | 127 |
| Financials (according to IFRS) | ||||
| Management fees | 294 | 213 | 574 | 384 |
| Carried interest and investment income | 10 | 2 | 25 | 9 |
| Total revenue | 304 | 214 | 600 | 393 |
| Total revenue growth, % | 42% | 53% | ||
| Total operating expenses | 219 | 129 | 392 | 244 |
| EBITDA | 85 | 85 | 208 | 149 |
| EBITDA margin, % | 28% | 40% | 35% | 38% |
| Net income | 64 | 71 | 160 | 121 |
| H2 2019 | H2 2018 | 2019 | 2018 | |
|---|---|---|---|---|
| Number of shares (m, end of period) | 953.0 | 727.6 | 953.0 | 727.6 |
| Number of shares (m, average) | 912.9 | 624.5 | 851.3 | 620.9 |
| Number of shares, diluted (m, average) | 913.3 | 624.5 | 851.7 | 620.9 |
| Adj. earnings per share, basic (EUR)* | 0.114 | 0.123 | 0.251 | 0.204 |
| Adj. earnings per share, diluted (EUR)* | 0.114 | 0.123 | 0.250 | 0.204 |
| Earnings per share, basic (EUR) | 0.070 | 0.114 | 0.188 | 0.195 |
| Earnings per share, diluted (EUR) | 0.070 | 0.114 | 0.187 | 0.195 |
| Proposed dividend per share (SEK)** | 2.20 |
*The adjusted metrics are alternative performance metrics for the EQT AB Group. For a full reconcilation please refer to page 28 and page 29. **Using EUR/SEK rate as of year-end of 10.447, SEK 2.20 per share corresponds to a total amount of approximately EUR 200m
| AUM BY SEGMENT (EURbn) | Private Capital | Real Assets | Credit | Total |
|---|---|---|---|---|
| At June 30, 2019 | 22.3 | 14.5 | 3.3 | 40.1 |
| Gross inflows | 0.8 | 0.3 | 0.8 | 2.0 |
| Step-downs | – | – | – | – |
| Exits | (1.1) | (0.9) | (0.2) | (2.2) |
| FX and other | 0.0 | 0.0 | – | 0.1 |
| At December 31, 2019 | 22.0 | 14.0 | 3.9 | 39.9 |
| Since June 30, 2019 | -1.3% | -3.6% | 19.8% | -0.4% |
| AUM BY SEGMENT (EURbn) | Private Capital | Real Assets | Credit | Total |
|---|---|---|---|---|
| At December 31, 2018 | 22.3 | 11.0 | 3.2 | 36.6 |
| Gross inflows | 2.2 | 4.4 | 1.1 | 7.7 |
| Step-downs | (0.3) | (0.1) | – | (0.4) |
| Exits | (2.3) | (1.3) | (0.4) | (4.0) |
| FX and other | 0.0 | 0.0 | (0.0) | 0.0 |
| At December 31, 2019 | 22.0 | 14.0 | 3.9 | 39.9 |
| Since December 31, 2018 | -1.6% | 26.9% | 23.8% | 9.2% |
Note: Any investment activity in the above tables (part of gross inflows and/or exits) is included based on its impact on fee-generating AUM. Individual deals in a period are therefore included based on remaining or realized cost, timing of transaction closing and only in funds which are generating fees based on net invested capital.
| Start | Committed | Cost of investments | Value of investments | Gross | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (EURbn) | date | AUM | capital | Total | Realized Remaining | Total | Realized | Remaining MOIC | ||
| Private Capital | ||||||||||
| EQT VI | Jun-11 | 1.3 | 4.8 | 4.4 | 3.1 | 1.3 | 10.7 | 8.1 | 2.6 | 2.4x |
| EQT VII | Jul-15 | 5.0 | 6.9 | 6.1 | 1.1 | 5.0 | 11.0 | 2.8 | 8.2 | 1.8x |
| EQT VIII | May-18 | 10.9 | 10.9 | 7.1 | – | 7.1 | 8.0 | – | 8.0 | 1.1x |
| Real Assets | ||||||||||
| EQT Infrastructure II | Oct-12 | 0.7 | 1.9 | 1.7 | 1.0 | 0.7 | 3.5 | 2.7 | 0.8 | 2.1x |
| EQT Infrastructure III | Nov-16 | 3.3 | 4.0 | 3.3 | 0.0 | 3.3 | 4.9 | 0.1 | 4.8 | 1.5x |
| EQT Infrastructure IV | Nov-18 | 9.2 | 9.1 | 3.8 | – | 3.8 | 4.0 | – | 4.0 | 1.1x |
| Other | 9.5 | 10.2 | 12.8 | |||||||
| Total | 39.9 | 36.5 | 54.9 |
Note: Cost and value of investments reflect only closed transactions as per the reporting date.
| Gross MOIC (December 31, 2018) |
Gross MOIC (December 31, 2019) |
Expected Gross MOIC |
|
|---|---|---|---|
| Private Capital | |||
| EQT VI | 2.3x | 2.4x | On plan |
| EQT VII | 1.5x | 1.8x | On plan |
| EQT VIII | 1.0x | 1.1x | On plan |
| Real Assets | |||
| EQT Infrastructure II | 1.9x | 2.1x | On plan |
| EQT Infrastructure III | 1.3x | 1.5x | Above plan |
| EQT Infrastructure IV | 1.0x | 1.1x | On plan |
Note: Data for current Gross MOIC reflects only closed investments and realizations. For Private Equity funds (part of segment Private Capital), "On Plan" refers to expected Gross MOIC between 2.0-2.5x. For Infrastructure funds (part of segment Real Assets), "On Plan" refers to expected Gross MOIC between 1.7-2.2x.
Total investments made by the EQT funds amounted to EUR 11.9bn (EUR 8.6bn) during 2019, an increase of 38% compared to 2018. While competition remained strong for high quality assets in 2019, the investment environment for EQT funds was good.
Of the total investments* made during the period, 41% was invested in Private Capital, 40% in Real Assets and 19% in Credit. While the investment activity may vary between periods, the capital deployed in 2019 exceeded the historical average of 20-25% of a fund's committed capital per year over a cycle.
Total gross fund exits made by the EQT funds amounted to EUR 8.0bn (EUR 5.1bn) during 2019, an increase of 58% compared to 2018. The exit environment in 2019 was good, although buyers were generally selective. Of the total gross fund exits*, 68% was in Private Capital, 18% in Real Assets and 14% in Credit.
As of December 31, 2019, AUM amounted to EUR 39.9bn (EUR 36.6bn). The fundraising environment in 2019 was supportive with good fund investor interest in private markets.
During the fi rst half of 2019, EQT successfully closed the latest Infrastructure fund, EQT Infrastructure IV. The fi nal close of EQT Infrastructure IV was held in March with EUR 9.1bn in fee-generating AUM, which represents a EUR 5.1bn increase compared to its predecessor fund (EQT Infrastructure III), driven by good demand from both new and existing investors.
In addition to continuous client relationship management, fundraising activity in the second half of 2019 focused on EQT Real Estate II and EQT Ventures II. EQT Ventures II held its fi nal close in November 2019 at approximately EUR 620m in feegenerating AUM.
Value creation, measured as Gross MOIC, increased across all key EQT funds in 2019. The expected Gross MOIC developed "On plan" in key EQT funds in Private Capital and Real Assets, except for EQT Infrastructure III which, as per December 31, 2019, continued to develop "Above plan".
The number of employees increased in 2019 across business lines, geographies and central functions. As of December 31, 2019, the number of full-time equivalent employees and on-site consultants (FTE plus) amounted to 706 (601), of which FTEs amounted to 645 (527). The increase was primarily driven by growth in Private Capital and Real Assets, digitalisation initiatives and preparing the organisation for the listing on Nasdaq Stockholm.
EQT expanded its European footprint by opening an o ce in Milan and performed preparatory work for a new o ce to be opened in Paris during the fi rst quarter of 2020. EQT also expanded its footprint in APAC, with the opening of an o ce in Sydney on February 11, 2020.
Adjusted total revenue increased by 54% to EUR 606m in 2019 (EUR 393m). The increase was primarily driven by the full-year e ect of management fees related to EQT Infrastructure IV and EQT VIII. Management fees in 2019 amounted to EUR 574m (EUR 384m). Adjusted carried interest and investment income also increased during the year to EUR 31m (EUR 9m), driven mainly by carried interest recognition in EQT Infrastructure II and EQT VI.
Personnel expenses, excluding items a ecting comparability, amounted to EUR 217m in 2019 (EUR 151m), an increase driven by growth in number of employees and adoption of a new Partner bonus program applied from the beginning of 2019. Other operating expenses, excluding items a ecting comparability, amounted to EUR 115m in 2019 (EUR 86m). Items a ecting comparability within total operating expenses amounted to EUR 60m (EUR 7m) and were primarily related to a oneo provision due to the VAT ruling announced by the Supreme Administrative Court of Sweden and the Group's restructuring and listing on Nasdaq Stockholm.
Adjusted EBITDA amounted to EUR 275m (EUR 156m), corresponding to a margin of 45% (40%).
Adjusted net income amounted to EUR 213m (EUR 127m).
*Total investments and total gross fund exits in terms of capital (EUR).
The business segment Private Capital consists of the business lines Private Equity, Mid Market Asia, Ventures and Public Value
| EURbn | H2 2019 | H2 2018 | 2019 | 2018 |
|---|---|---|---|---|
| Investments by the EQT funds | 2.5 | 3.2 | 4.9 | 5.1 |
| Gross fund exits | 1.6 | 1.1 | 5.5 | 3.5 |
| Adjusted revenue (EURm) | 171 | 147 | 331 | 256 |
| Gross segment result (EURm) | 109 | 103 | 207 | 163 |
| Margin, % | 64% | 70% | 63% | 64% |
| AUM | 22.0 | 22.3 | 22.0 | 22.3 |
| Avg. AUM | 22.1 | 22.9 | 22.2 | 19.6 |
| FTE+ (# of, end of period) | 236 | 226 | 236 | 226 |
| Gross MOIC | Expected | ||
|---|---|---|---|
| 31 Dec 2018 | 31 Dec 2019 | Gross MOIC | |
| EQT VI EQT VII EQT VIII |
2.3x 1.5x 1.0x |
2.4x 1.8x 1.1x |
On pl an On pl an On pl an |
Total investments made by the EQT funds in Private Capital amounted to EUR 4.9bn (EUR 5.1bn). Investments include, among others, Galderma in Europe and Aldevron and Waystar in North America (all in EQT VIII). EQT Ventures and EQT Ventures II continued being active with several new portfolio companies and follow-on investments. EQT Public Value Fund continued investing in listed companies such as Bygghemma during 2019.
Total gross fund exits made by the EQT Funds amounted to EUR 5.5bn (EUR 3.5bn). The increase in exit volume was driven by a good exit environment and good performance in portfolio companies. Exits included IVC in Europe (EQT VI), Press Ganey in North America and AutoStore in Europe (both in EQT VII).
AUM was EUR 22.0bn as of 31 December 2019 (EUR 22.3bn). Gross infl ows of EUR 2.2bn were primarily related to investment activity in EQT VII, which increased net invested capital, and fundraising of EQT Ventures II. The gross infl ows were o set by exits, primarily in EQT VI and EQT VII, which reduced net invested capital by EUR 2.3bn in total. AUM on an average basis increased by 13% in 2019, primarily due to the inclusion of EQT VIII since May 2018.
EQT Ventures II closed in November 2019, with approximately EUR 620m in fee-generating AUM.
The fundraising of EQT Ventures II also resulted in a step-down (management fees generated on net invested capital instead of committed capital) in the predecessor fund EQT Ventures.
EQT VI current Gross MOIC increased to 2.4x (2.3x). EQT VII current Gross MOIC increased to 1.8x (1.5x). EQT VIII started to increase in value and was valued at 1.1x as of December 31, 2019.
Expected value creation (Gross MOIC) remains "On Plan" in the key funds in Private Capital per December 31, 2019, which means an expected Gross MOIC between 2.0-2.5x.
FTE+ at the end of the period amounted to 236 (226). Hirings in 2019 were distributed across investment strategies and regions.
Adjusted revenue amounted to EUR 331m in 2019, corresponding to an increase of 29% compared to EUR 256m in 2018 driven by a full-year e ect of management fees from EQT VIII (start date May, 2018).
Gross segment result increased to EUR 207m (EUR 163m).
The business segment Real Assets consists of the business lines Infrastructure and Real Estate
| EURbn | H2 2019 | H2 2018 | 2019 | 2018 |
|---|---|---|---|---|
| Investments by the EQT funds | 1.5 | 1.8 | 4.7 | 2.4 |
| Gross fund exits | 1.0 | 0.5 | 1.4 | 0.6 |
| Adjusted revenue (EURm) | 114 | 49 | 231 | 95 |
| Gross segment result (EURm) | 85 | 29 | 177 | 58 |
| Margin, % | 75% | 60% | 77% | 61% |
| AUM | 14.0 | 11.0 | 14.0 | 11.0 |
| Avg. AUM | 14.5 | 7.6 | 13.9 | 6.4 |
| FTE+ (# of, end of period) | 106 | 86 | 106 | 86 |
| Gross MOIC | Expected | ||
|---|---|---|---|
| 31 Dec 2018 31 Dec 2019 Gross MOIC | |||
| EQT Infrastructure II EQT Infrastructure III EQT Infrastructure IV |
1.9x 1.3x 1.0x |
2.1x 1.1x |
On pl an 1.5x Above Plan On pl an |
Total investments made by the EQT funds amounted to EUR 4.7bn (EUR 2.4bn). The increase was driven by a favourable investment climate, a strong deal pipeline and increased committed capital to invest from EQT Infrastructure IV. Investments include, among others, Zayo Group in North America and Parques Reunidos and IP-Only in Europe (all in EQT Infrastructure IV).
Total gross fund exits made by the EQT Funds amounted to EUR 1.4bn (EUR 0.6bn). The increase in exit volumes was driven by a good exit environment and good performance in portfolio companies. Exits include DCLI in North America (EQT Infrastructure II & III), Contanda in North America (EQT Infrastructure II) and Charleston and GB Railfreight in Europe (both in EQT Infrastructure II).
AUM increased during the year to EUR 14.0bn (EUR 11.0bn). This was primarily driven by EQT Infrastructure IV, of which EUR 3.5bn was closed in 2019 (fund size EUR 9.1bn). Other contributors to gross infl ows include additional closings in EQT Real Estate II and add-on acquisitions in EQT Infrastructure III.
The gross infl ows were o set by the step-down in EQT Real Estate I (as EQT Real Estate II started to invest) and exits primarily in EQT Infrastructure II and EQT Infrastructure III, reducing the net invested capital with EUR 1.3bn.
EQT Infrastructure II current Gross MOIC increased to 2.1x (1.9x). EQT Infrastructure III current Gross MOIC increased to 1.5x (1.3x). EQT Infrastructure IV started to increase in value, and was valued at 1.1x as of December 31, 2019.
Expected value creation (Gross MOIC) remains "On Plan" in EQT Infrastructure II and EQT Infrastructure IV, which means an expected Gross Moic between 1.7x-2.2x. EQT Infrastructure III continues to develop "Above plan" per December 31, 2019, which means an expected gross MOIC is >2.2x.
FTE+ at the end of the period amounted to 106 (86). The hirings were distributed across Europe, North America and APAC.
Adjusted revenue amounted to EUR 231m, corresponding to an increase of 144% compared to EUR 95m in 2018 driven by a full-year e ect of management fees from EQT Infrastructure IV (start date November, 2018).
Gross segment result increased to EUR 177m (EUR 58m).
The business segment Credit consists of EQT's credit investment platform focused on Direct Lending, Special Situations and Senior Debt
| EURbn | H2 2019 | H2 2018 | 2019 | 2018 |
|---|---|---|---|---|
| Investments by the EQT funds | 1.3 | 0.6 | 2.3 | 1.1 |
| Gross fund exits | 0.5 | 0.5 | 1.1 | 1.0 |
| Adjusted revenue (EURm) | 19 | 16 | 36 | 35 |
| Gross segment result (EURm) | 6 | 8 | 12 | 21 |
| Margin, % | 31% | 49% | 34% | 60% |
| AUM | 3.9 | 3.2 | 3.9 | 3.2 |
| Avg. AUM | 3.6 | 3.1 | 3.5 | 3.1 |
| FTE+ (# of, end of period) | 41 | 34 | 41 | 34 |
Total investments made by the EQT funds and related investment vehicles amounted to EUR 2.3bn (EUR 1.1bn). The increase during 2019 was largely driven by EQT Mid-Market Credit II.
The market was characterised by good deal fl ow across strategies. The EQT funds and related investment vehicles remained cautious and selective, choosing to focus on opportunities where Credit had a clear angle or di erentiator.
Total gross fund exits, including realized investments, amortisations and interest payments, made by the EQT funds and related investment vehicles amounted to EUR 1.1bn (EUR 1.0bn).
AUM in Credit increased during the year to EUR 3.9bn (EUR 3.2bn). Gross infl ows of EUR 1.1bn were primarily a result of increased investments by EQT Mid-Market Credit II, which generates fees on net invested capital, o set by realized investments in Senior Debt and EQT Credit II. Committed capital as per December 31, 2019, was EUR 5.5bn.
During the second half of 2019, Credit initiated the establishment of its CLO platform as an expansion of its Senior Debt strategy.
The number of FTE+ at the end of the period amounted to 41 (34). The hirings during 2019 have primarily been junior team members.
Adjusted revenue amounted to EUR 36m, an increase of 2% compared to EUR 35m in 2018. The increase of 2% is lower than the growth in average AUM as 2018 adjusted revenue included more revenues from carried interest and investment income.
Gross segment result decreased to EUR 12m (EUR 21m), primarily driven by an expansion of the team, a new compensation model for Partners, establishment costs related to CLOs and a lower amount of carried interest and of investment income compared to 2018.
As announced in EQT's quarterly announcement on January 23, 2020, EQT has initiated a review of strategic options for the business segment Credit.
| Highlights | CEO Word | Key Figures | Business Review | Other Disclosures | Financial Statements | Notes & Other |
Central consists of management, client relations and capital raising, fund management, EQT Technology and other specialist functions such as HR and fi nance
| EURm | H2 2019 | H2 2018 | 2019 | 2018 |
|---|---|---|---|---|
| Gross segment result / EBITDA | -66 | -47 | -122 | -86 |
| FTE+ (# of, end of period) | 323 | 256 | 323 | 256 |
FTE+ OVERVIEW
Central provide services to the business segments such as capital raising, sustainability, fund management, technology and digitalisation, HR, risk management, compliance and fi nance. Items reported under Central have not been allocated to the business segments. Central external revenue arises from services provided to fund managers of EQT funds raised before 2012, as well as to certain other non-consolidated entities.
FTE+ at the end of the period amounted to 323 (256). The hirings were distributed across several areas and were related to general growth of operations, preparing the organisation for the listing on Nasdaq Stockholm and investments in digitalization.
The result for the period decreased to EUR -122m in 2019 from EUR -86m in 2018. This was primarily driven by the initiatives mentioned above.
Revenues for the period increased to EUR 600m (EUR 393m), of which management fees accounted for 96%. The increase in revenues has been driven by the signifi cant increase in AUM primarily driven by EQT Infrastructure IV (Nov-18) and full year e ect of EQT VIII (May-18). Adjusted revenues of EUR 606m (EUR 393m) were adjusted by removing fair value adjustment of acquired contractual rights to carried interest.
Total operating expenses during the year amounted to EUR 392m (EUR 244m) driven by further expansion and build-out of the operating platform, mainly through an overall growth of employees.
EBITDA increased by EUR 59m to EUR 208m (EUR 149m) corresponding to a margin of 35% (38%). Adjusted EBITDA was EUR 275m (EUR 156m) corresponding to a margin of 45% (40%).
Depreciation and amortization amounted to EUR 30m (EUR 19m), primarily related to facility lease agreements. The current year depreciation also includes e ects from the new o ces in Stockholm and Milan.
Net fi nancial income and expenses amounted to EUR -6m (EUR -2m). This is comprised of fi nancial income of EUR 3m (EUR 5m) primarily related to currency translation di erences and fi nancial expenses of EUR -8m (EUR -7m) related to both currency translation di erences and lease agreements according to IFRS 16.
Income taxes amounted to EUR 13m (EUR 8m) primarily driven by an increased profi t before tax.
Net income increased to EUR 160m (EUR 121m). Adjustment items a ecting net income, including tax e ects, amounted to EUR 54m (EUR 6m). Adjusted net income was EUR 213m (EUR 127m).
Earnings per share before and after dilution amounted to EUR 0.188 (EUR 0.195) and EUR 0.187 (EUR 0.195), respectively. Adjusted earnings per share before and after dilution amounted to EUR 0.251 (EUR 0.204) and EUR 0.250 (EUR 0.204), respectively.
Adjustment items a ecting EBITDA amounted to EUR 67m (EUR 7m), of which EUR 28m (EUR 7m) were items a ecting comparability related to the reorganization of EQT's corporate structure, preparations for the IPO as well as bonuses in relation to the IPO and EUR 6m (EUR 0m) related to adjustment of revenue due to di erent accounting treatment of the acquired entitlement to carried interest in April 2019. In addition to the above, EUR 15m directly attributable to the issue of new shares in connection with the IPO has been recorded in equity. Items a ecting comparability also include a one-o provision of EUR 32m that has been taken in 2019 due to the VAT ruling announced by the Supreme Administrative Court of Sweden on January 27, 2020.
Goodwill and Other intangible assets amounted to EUR 37m (EUR 29m). The increase in intangible assets primarily relates to the acquisition of entitlement to management fee surplus in EQT VI GP in April 2019, which is amortized linearly over three years.
Property, plant and equipment of EUR 113m (EUR 57m) increased mainly due to new facility lease agreement assets in Stockholm but also the new o ce in Milan.
Financial investments increased by EUR 53m to EUR 71m (EUR 18m) primarily driven by additional investments from EQT AB Group into EQT funds, acquisition of increased revenue entitlement from selected EQT funds in April 2019 and revaluation of existing interests in the EQT funds.
Current assets amounted to EUR 1,193m (EUR 413m), where an increase in cash and cash equivalents contributed EUR 644m mainly related to the IPO. Cash and cash equivalents at the end of the 2019 was EUR 909m (EUR 264m).
Equity increased to EUR 1,082m (EUR 331m). The increase is primarily related to the new share issue in conjunction with the listing but also related to activities to simplify the EQT AB Group's ownership structure and increase in total income.
Non-current liabilities of EUR 78m (EUR 42m) has increased mainly due to new facility lease agreement liabilities.
Current liabilities of EUR 269m (EUR 153m) increased due to increased accrued expenses related to personnel.
The parent company's profi t before tax increased to SEK 1,603m, mainly due to increased dividends from subsidiaries.
A decision to set up a separate treasury entity was taken during the period. In conjuntion with this initiative a shareholder's contribution of EUR 800m has been performed during the year, to be settled in cash during 2020.
Christian Sinding was appointed CEO and Managing Partner of EQT AB and Caspar Callerström was appointed deputy CEO, both with e ect from January 1, 2019. Thomas von Koch was appointed Chairperson of Asia-Pacifi c and Deputy Managing Partner.
On September 24, 2019, EQT AB's ordinary shares were listed on Nasdaq Stockholm under the symbol "EQT". The price in the IPO was set at SEK 67 per share. The IPO attracted strong interest from both Swedish and international institutional investors as well as the general public in Sweden. The IPO was more than 10 times over-subscribed.
All Partners (who in total owned approximately 74% of EQT AB ("the Company") immediately before the O ering) have, with certain exemptions, agreed not to transfer or dispose of their respective shares for a period of fi ve years after the fi rst day of trading, without prior written consent from the Company, except if the employment within the EQT AB Group has not been terminated, the lock-up undertakings will expire with respect to 25% of the shares subject to lock-up after three years and an additional 25% after four years.
Investor AB and related entities as well as the members of the board of directors and executive management who are not Partners and shareholders in the Company also agreed in conjunction with the listing, with certain exceptions, for a period of one year after the fi rst day of trading, not to transfer or dispose of their respective holdings in the Company, without prior written consent.
In December 2018, it was resolved to carry out a reorganization with the main purpose of establishing EQT AB as the ultimate parent company in the EQT AB Group, simplify the ownership interest in the Company as well as prepare for the listing of the Company on Nasdaq Stockholm.
During the fi rst half of 2019 the reorganization continued, including the below events and transactions:
At the annual shareholders meeting held on June 27, 2019, it was resolved to implement a share program for the EQT AB Group employees. In accordance with this the board of directors was authorized to issue convertible and redeemable class C shares in order to transfer these to the participants in the EQT Share Program. During the second half of 2019 a new share issue of 8,663,490 class C shares was carried out at quota value, corresponding to a value of SEK 0.8m.
In April 2019, EQT AB Group, through renegotiations of existing contracts, acquired the contractual right to management fee surplus of EQT VI GP, i.e. management fees reduced by operating and fi nancial expenses (if any) of EQT VI GP.
The acquisition of entitlement to management fee surplus in EQT VI GP was based on fair market value assessed through a discounted cash fl ow valuation. Revenue from the acquired management fee surplus will be recognized in full and the intangible asset will be linearly amortized over three years with no residual value.
At the same time EQT AB Group, also through renegotiations of existing contracts, increased its share of carried interest entitlements in a number of EQT funds, and also acquired 5.73% of the contractual rights to carried interest and investment income generated by the EQT VI fund. The acquisitions of contractual rights to carried interest entitlement were based on net asset value, (i.e. the full contingent mark-to-market value) which is higher than accrued revenue if the acquired contractual right had been valued in accordance with IFRS 15 and the, by the Group, applied discounts. Revenues from carried interest will be recognized once IFRS 15 accrued revenues exceed the fair market value (i.e. deal value).
Following these transactions the EQT AB Group will continue to provide investment advisory services and support services but with a modifi ed compensation model.
Payments for the aforementioned transactions were made in cash (EUR 24m) and through a share issue in kind of 982,669 ordinary shares (SEK 1,337m) corresponding to a value of EUR 128m. The transactions resulted in an intangible assets, fi nancial investments and accrued income.
The shareholders' meeting in June 2019 resolved to implement a share program for the EQT AB Group employees. The objective of the program is to align employees' performance to the interest of the shareholders, based on performance metrics tailored to EQT AB's strategic goals. The share program is divided into fi ve separate annual grants with maximum dilution of approximately 0.3% per annual grant, and approximately 1.0% in total. During the initial year of each grant an amount may be earned, depending on the outcome of the
performance metrics, which after that year is settled in the number of shares in EQT that corresponds to the amount earned. The shares constitute class C shares, with rights to receive dividends and with 1/10 vote, held for three years before being converted into ordinary shares that can be traded. No vesting conditions apply during the three year holding period. The expenses recognized during 2019 amounts to EUR 11m.
In connection with the IPO, a number of employees received additional remuneration, conditional upon the completion of the listing. The expenses recognized amounts to EUR 11m in total.
A number of employees (non-Partners) received a one o bonus payment correlated to any increase in the price of the Company's shares during the approximately fi rst three months following the fi rst day of trading, up to a certain maximum amount. The bonus payment was performed by an entity outside the EQT AB Group which is indirectly owned by certain Partners, and EQT AB Group will be indemnifi ed for any social security cost incurred in connection with such bonus. This payment has not resulted in an outfl ow of resources for EQT AB Group but due to the fact that the payment is made to employees in the EQT AB Group, and that the bonus payment is dependent on the share price of EQT AB, this is, from an accounting perspective, treated as a share based payment. Total expenses for EQT AB Group amounts to EUR 3m (which has been fully reimbursed), with the same amount recognized as an addition to equity.
In light of the investment level of EQT VIII, preperations for the successor fund EQT IX has intensifi ed and the target size for the EQT IX fund has been set at EUR 14.75bn. The actual fund size is dependent on the outcome of the fundraising process and may ultimately be higher or lower than the target size. The EQT IX fund's investment strategy and commercial terms are expected to be materially in line with predecessor fund EQT VIII.
EQT has initiated a review of strategic options for the business segment Credit. The growth prospects of Credit are in avenues further away from EQT's core business of active ownership where EQT can make a strong impact and fully utilize the EQT platform.
On January 27, 2020, the Supreme Administrative Court of Sweden ("SAC") announced its decision on the appealed advance tax ruling regarding VAT for EQT AB's Swedish subsidiary EQT Partners AB. The SAC mainly subscribed to the approach of the Swedish Tax Agency why, as a result of current accounting practice, a one-o provision of EUR 32m has been taken in 2019. The decision is not expected to have a material impact on EQT AB Group's future fi nancial position or result.
Following a new share issue resolved by an extraordinary shareholders' meeting on December 19, 2018 and allotted by the board of directors on April 2, 2019 following the receipt of necessary regulatory approvals Investor AB became a related party to EQT AB. Through the new share issue Investor AB, via its wholly owned subsidiary Investor Investments Holding AB, increased its ownership in EQT AB from approximately 19% to approximately 23%.
OTHER DISCLOSURES
In conjunction with the listing a total of 114,358,068 shares was o ered by selling shareholders (in addition to the new shares o ered). As one of the selling shareholders Investor AB, via its wholly owned subsidiary Investor Investments Holding AB sold 26,967,384 shares which decreased its ownership in EQT AB from approximately 23% to 18%. Hence, from the date of the listing Investor AB is no longer a related party to EQT AB Group.
In April 2019, the Company entered into consultancy agreements with the Company's board members Edith Cooper and Gordon Orr. In accordance with these consultancy agreements, Edith Cooper and Gordon Orr shall – in parallel to their respective assignments as members of the board of directors – provide consultancy services as senior advisors to support EQT's administration of its network of Advisors. Both Edith Cooper and Gordon Orr are entitled to an annual fi xed retainer of EUR 35,000 each for the provision of these consultancy services. These consultancy agreements have been entered into for a fi xed period until June 30, 2020, after which the agreements may be renewed. Both EQT AB and the respective consultants may terminate the consultancy agreements by observing one month's notice.
There has been no other signifi cant transactions between EQT and related parties during the period.
There have been no signifi cant changes in pledged assets and contingent liabilities compared to the latest annual report.
The main risks that the EQT AB Group is exposed to are those impacting the performance of the EQT Funds and the EQT AB Group's ability to raise new funds or meet fundraising targets. These include market, business and industry risks a ecting the performance of the EQT funds' investments, as well as trends in the mergers and acquisitions market.
The EQT AB Group is also dependent on key personnel and a network of Advisors and is exposed to the risk of not being able to attract and retain talent or experiencing a dilution of its corporate culture. The EQT AB Group's Human Resources department works closely with business lines and
functions, both centrally and locally, to maintain sta satisfaction and a positive environment supported by strong values.
Regulatory risks are increasingly prominent given the number and scale of regulations the EQT AB Group is subject to via its regulated subsidiaries. These are monitored and mitigated by the Regulatory & Compliance team.
The EQT AB Group is exposed to credit, liquidity, interest, revaluation and foreign exchange risks, which could lead to fi nancial losses if not managed properly. Financial risks are reported to the CFO on a regular basis to ensure they remain in line with the EQT AB Group's risk profi le.
Certain operational risks, including the risk of cyberattacks or fraud, are of particular focus given the rising threat these pose to the fi nancial services industry. In this area the EQT AB Group has implemented a number of measures, both technical and operational, to ensure security risks are minimised.
The EQT AB Group's risks and risk management measures will be described in more detail in the Annual Report.
The management of the EQT AB Group makes estimates and assumptions concerning the future as well as exercises judgment in applying the accounting principles when preparing fi nancial statements. Estimates and judgments are continually evaluated and the assessments are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by defi nition, seldom equal the related actual results. The sources of uncertainty in the assessments given below refer to those that entail a risk that the value of assets or liabilities may have to be signifi cantly adjusted during the following year, together with signifi cant judgments in the application of the EQT AB Group's accounting policies.
Carried interest is a share of profi ts that the EQT AB Group receives through its holdings in the Special Limited Partners as variable consideration fully dependent on the performance of the relevant fund and the development of the fund's underlying investments. The EQT AB Group is entitled to an agreed share of accumulated profi ts exceeding agreed thresholds ("hurdles") over the expected life of each individual fund.
Estimates are needed to assess the risk that achieved earnings will reverse before realization, due to risk of lower future overall performance of the fund, considering the remaining exposure of unrealized investments and time until winding up of the fund.
Management of the Group needs to make assumptions and use estimates when determining whether or not revenue should be recognized including the timing and measurement of revenue from carried interest. Revenue should only be recognized to the extent it is highly probable that the revenue would not result in signifi cant revenue reversal of any accumulated revenue recognized on fi nal settlement. The reversal risk is managed through adjustments of current unrealized fund values by imposing discounts of 30 to 50%. The discounts applied depend on specifi c segment risks and the expected average remaining holding period of each fund. The discounts applied are updated semi-annually.
The carrying amount of the contract asset related to carried interest at December 31, 2019 was EUR 119m (EUR 5m).
Investment income consist primarily of changes in fair value of the EQT AB Group's underlying fund investments. Determining the fair value for the investments require subjective assessment with varying degrees of judgement regarding e.g. liquidity, pricing assumptions, the current economic and competitive environment and the risks a ecting the specifi c fi nancial asset. The valuation is determined based on management's judgment about the assumptions to refl ect what market participants would use in pricing the asset. The valua tion techniques applied by the EQT AB Group for valuing the fi nancial investments are applied consistently, and only change if deemed necessary to refl ect a representative fair value.
The carrying amount of fi nancial investments at December 31, 2019 was EUR 66m (EUR 18m).
According to IFRS 10 Consolidation, an investor that has control over only specifi ed and ring-fenced assets and liabilities within a legal entity, should, for consolidation purposes, treat portions of the entity as a deemed separate entity, a so called "silo". The silo concept means that the EQT AB Group only consolidates the silo and not the whole entity. The specifi ed assets of one silo is not available to meet obligations of other parts of the legal entity. Each silo's assets are the only source of payment for specifi ed obligations of the silo. Silos that are not directly or indirectly controlled by EQT AB are not considered to be subsidiaries and are accordingly not consolidated.
EQT AB is an indirect investor in each EQT fund, typically through separate entities, one separate entity for each EQT fund. These indirectly owned entities have di erent investors with di erent economic rights and responsibilities, where the right to management fees is 100% held by the EQT AB Group and consolidated in full. The right to carried interest is split between the investors and tracks investments and proceeds via a holding in each fund's Special Limited Partner.
EQT AB (publ.), reg.no. 556849-4180, is a company domiciled in Sweden. The visiting address of the Company's o ce is Regeringsgatan 25, 111 53 Stockholm, Sweden. The registered postal address is Box 16409, 103 27 Stockholm, Sweden. The interim consolidated fi nancial statements for the full year and the six months ended on December 31, 2019 and 2018 comprise EQT AB and its direct or indirect subsidiaries, together referred to as the "EQT AB Group".
These interim consolidated fi nancial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and applicable additional provisions of the Swedish Annual Accounts Act.
The interim report for the parent company has been prepared in accordance with the Swedish Annual Accounts Act chapter 9.
The accounting policies applied in these consolidated interim fi nancial statements and the interim separate fi nancial statements for the parent EQT AB are the same as those applied in the annual report 2018.
The e ect of issued standards and interpretations issued by the IASB or the IFRS Interpretations Committee not yet e ective is not expected to have any material e ect on the Group.
Due to rounding, numbers presented throughout this report may not add up precisely to the totals provided and percentages may not precisely refl ect the absolute fi gures.
EQT AB's Financial Reports are published in English and Swedish. In the case of inconsistencies in the translation, the Swedish original version shall prevail.
The Board of Directors proposes a dividend to the shareholders of SEK 2.20 per share for fi scal year 2019. The dividend is proposed to be paid out in two installments, SEK 1.10 with record date June 10, 2020 and SEK 1.10 with record date December 1, 2020.
| Annual Report 2019 | April 3-6 |
|---|---|
| Quarterly Announcement January–March 2020 |
April 24 |
| Annual Shareholders' Meeting 2020 | June 8 |
| Quarterly Announcement April–June 2020 | July 16 |
| Half-year Report 2020 | August 20 |
| Quarterly Announcement July–September 2020 |
October 21 |
| Year-end Report January–December 2020 |
January 26, 2021 |
This year-end report has not been reviewed by EQT's auditor.
Stockholm, February 12, 2020
Christian Sinding CEO
The below table shows fi gures according to IFRS. For adjusted fi gures corresponding to the internal reporting please refer to note 1 and pages 28-29.
| EURm | H2 2019 | H2 2018 | 2019 | 2018 |
|---|---|---|---|---|
| Management fees | 294 | 213 | 574 | 384 |
| Carried interest and investment income | 10 | 2 | 25 | 9 |
| Total revenue | 304 | 214 | 600 | 393 |
| Personnel expenses | -123 | -77 | -230 | -151 |
| Other operating expenses | -96 | -52 | -161 | -93 |
| Total operating expenses | -219 | -129 | -392 | -244 |
| Operating profi t before depreciation and amortization (EBITDA) |
85 | 85 | 208 | 149 |
| Depreciation and amortization | -17 | -9 | -30 | -19 |
| Operating profi t (EBIT) | 68 | 76 | 178 | 130 |
| Financial income | 0 | 1 | 3 | 5 |
| Financial expenses | -3 | -5 | -8 | -7 |
| Net fi nancial income and expenses | -2 | -3 | -6 | -2 |
| Profi t before income tax | 66 | 73 | 173 | 128 |
| Income taxes | -2 | -2 | -13 | -8 |
| Net income | 64 | 71 | 160 | 121 |
| Attributable to: Owners of the parent company Non-controlling interests |
64 – |
71 – |
160 – |
121 – |
| Earnings per share, EUR before dilution after dilution |
0.070 0.070 |
0.114 0.114 |
0.188 0.187 |
0.195 0.195 |
| Average number of shares before dilution after dilution |
912,885,670 913,345,106 |
624,481,424 624,481,424 |
851,289,562 851,748,997 |
620,912,290 620,912,290 |
| EURm | H2 2019 | H2 2018 | 2019 | 2018 |
|---|---|---|---|---|
| Net income | 64 | 71 | 160 | 121 |
| Other comprehensive income | ||||
| Items that are or may be reclassifi ed subsequently to income statement |
||||
| Foreign operations - foreign currency translation di erences |
1 | 1 | -2 | -1 |
| Other comprehensive income for the period | 1 | 1 | -2 | -1 |
| Total comprehensive income for the period | 65 | 72 | 158 | 120 |
| Attributable to: | ||||
| Owners of the parent company | 65 | 72 | 158 | 120 |
| Non-controlling interests | – | – | – | – |
| 65 | 72 | 158 | 120 |
| EURm Note |
2019 | 2018 |
|---|---|---|
| ASSETS | ||
| Non-current assets | ||
| Goodwill | 15 | 15 |
| Other intangible assets Property, plant and equipment |
22 113 |
15 57 |
| Financial investments 3 |
71 | 18 |
| Other fi nancial assets | 3 | 3 |
| Other non-current assets | 4 | 6 |
| Deferred tax assets | 8 | 0 |
| Total non-current assets | 236 | 113 |
| Current assets | ||
| Current tax assets | 8 | 5 |
| Accounts receivable | 6 | 1 |
| Other current assets Prepaid expenses and accrued income |
113 158 |
116 26 |
| Cash and cash equivalents | 909 | 264 |
| Total current assets | 1,193 | 413 |
| Total assets | 1,429 | 526 |
| EQUITY AND LIABILITIES | ||
| Equity | ||
| Share capital | 9 | 0 |
| Other paid in capital | 837 | 228 |
| Reserves | -7 | -5 |
| Retained earnings including net income | 242 | 108 |
| Total equity attributable to owners of the parent company | 1,082 | 331 |
| Non-controlling interest | – | 0 |
| Total equity | 1,082 | 331 |
| Liabilities | ||
| Non-current liabilities | ||
| Lease liabilities | 76 | 38 |
| Deferred tax liabilities | 2 | 4 |
| Total non-current liabilities | 78 | 42 |
| Current liabilities | ||
| Interest-bearing liabilities | 9 | 15 |
| Lease liabilities | 14 | 8 |
| Current tax liabilities Accounts payable |
19 12 |
7 13 |
| Other liabilities | 74 | 24 |
| Accrued expenses and deferred income | 140 | 85 |
| Total current liabilities | 269 | 153 |
| Total liabilities | 347 | 195 |
| Total equity and liabilities | 1,429 | 526 |
| Attributable to owners of the parent comp | |||||||
|---|---|---|---|---|---|---|---|
| EURm | Share capital |
Other paid in capital |
Trans lation reserve |
Retained earnings |
Total equity attr to owners of the parent company |
Non con trolling interest |
Total equity |
| Opening balance at January 1, 2019 | 0 | 228 | -5 | 108 | 331 | 0 | 331 |
| Total comprehensive income for the period Net income Other comprehensive income for the period |
-2 | 160 | 160 -2 |
160 -2 |
|||
| Total comprehensive income for the period | – | – | -2 | 160 | 158 | – | 158 |
| Transactions with owners of the parent company Dividends Share issues Transaction costs (net of tax) Bonus issue Share based bonus Purchase of own shares and/or participations Acquisition of minority Total transactions with owners of the parent company |
1 8 9 |
715 -12 -93 610 |
– | -30 -8 12 0 -26 |
-30 716 -12 – 12 -93 0 593 |
-0 -0 |
-30 716 -12 – 12 -93 – 593 |
| Closing balance at December 31, 2019 | 9 | 837 | -7 | 242 | 1,082 | - | 1,082 |
| Opening balance at January 1, 2018 | 0 | 74 | -4 | 44 | 114 | 0 | 114 |
| Total comprehensive income for the period Net income Other comprehensive income for the period |
-1 | 121 | 121 -1 |
121 -1 |
|||
| Total comprehensive income for the period | – | – | -1 | 121 | 120 | – | 120 |
| Transactions with owners of the parent company Dividends Share issues Purchase of own shares and/or participations Total transactions with owners of the parent |
– | 154 154 |
– | -51 -6 -57 |
-51 154 -6 97 |
– | -51 154 -6 97 |
| company | |||||||
| Closing balance at December 31, 2018 | 0 | 228 | -5 | 108 | 331 | 0 | 331 |
| EURm | 2019 | 2018 |
|---|---|---|
| Cash fl ows operating activities | ||
| Operating profi t (EBIT) | 178 | 130 |
| Adjustments: | ||
| Depreciation and amortization | 30 | 19 |
| Changes in fair value | -11 | -1 |
| Foreign currency exchange di erences | -5 | -0 |
| Other non-cash adjustments | 12 | – |
| Increase (-) /decrease (+) in accounts receivable and other receivables | -32 | -16 |
| Increase (+) /decrease (-) in accounts payable and other payables | 82 | 15 |
| Income taxes paid | -10 | -13 |
| Net cash from operating activities | 244 | 134 |
| Cash fl ows investing activities | ||
| Investment in intangible assets | -1 | -4 |
| Acquisition of property, plant and equipment | -17 | -3 |
| Investment in fi nancial investments | -34 | -8 |
| Acquisition of entitlement | -24 | – |
| Proceeds from disposals of fi nancial investments | 9 | 1 |
| Investment in non current assets | 23 | -28 |
| Net cash from (+) / used in (-) investing activities | -45 | -41 |
| Cash fl ows fi nancing activities | ||
| Dividends paid | -30 | -51 |
| Repayment of borrowings | -6 | -5 |
| Proceeds from borrowings | - | 15 |
| Investment in short term loan receivable | 6 | -15 |
| Payment of lease liabilities | -11 | -7 |
| Net of interest received and interest paid | -3 | -1 |
| Share issues | 575 | 154 |
| Purchase of own shares and/or participations | -93 | -6 |
| Net cash from (+) / used in (-) fi nancing activities | 437 | 84 |
| Net increase (+) / decrease (-) in cash and cash equivalents | 636 | 176 |
| Cash and cash equivalents at the beginning of the period | 264 | 89 |
| Translation di erences | 8 | -1 |
| Cash and cash equivalents at the end of the period | 909 | 264 |
| SEKm | H2 2019 | H2 2018 | 2019 | 2018 |
|---|---|---|---|---|
| Net sales | 595 | 213 | 900 | 426 |
| Other operating income | 3 | 3 | 6 | 11 |
| Total revenue | 598 | 216 | 906 | 437 |
| Personnel expenses | -191 | -80 | -305 | -159 |
| Other external expenses | -282 | -214 | -566 | -355 |
| Depreciation and amortization | -8 | 0 | -15 | -1 |
| Operating profi t/loss | 117 | -79 | 20 | -77 |
| Profi t/loss from shares in subsidiaries | 1,742 | 1,135 | 1,828 | 1,151 |
| Interest income and similar profi t/loss items | 44 | 46 | 87 | 60 |
| Interest expense and similar profi t/loss items | -190 | -30 | -203 | -33 |
| Profi t/loss after fi nancial items | 1,713 | 1,072 | 1,732 | 1,100 |
| Group contribution, paid | -130 | – | -130 | – |
| Profi t/loss before tax | 1,583 | 1,072 | 1,603 | 1,100 |
| Income taxes | 33 | 15 | 40 | 8 |
| Net income | 1,616 | 1,087 | 1,642 | 1,109 |
| SEKm | 2019 | 2018 |
|---|---|---|
| ASSETS Non-current assets Intangible assets |
||
| Trademarks | 0 | 0 |
| Total intangible assets | 0 | 0 |
| Property, plant and equipment | ||
| Leasehold improvements Equipment |
73 10 |
15 1 |
| Total property, plant and equipment | 82 | 15 |
| Financial assets | ||
| Shares in subsidiaries | 11,941 | 1,402 |
| Other securities held as non-current assets | 14 | 12 |
| Deferred tax | 83 | - |
| Other long-term receivables | 4 | 2 |
| Total fi nancial assets | 12,042 | 1,415 |
| Total non-current assets | 12,124 | 1,431 |
| Current assets | ||
| Current receivables | ||
| Accounts receivable | 11 | 10 |
| Receivables from subsidiaries | 2,783 | 1,543 |
| Current tax assets Other receivables |
13 294 |
17 250 |
| Prepaid expenses and accrued income | 37 | 19 |
| Total current receivables | 3,138 | 1,839 |
| Cash and bank | 8,620 | 2,036 |
| Total current assets | 11,758 | 3,875 |
| Total assets | 23,882 | 5,306 |
| EQUITY AND LIABILITIES | ||
| Restricted equity | ||
| Share capital | 96 | 0 |
| Total restricted equity | 96 | 0 |
| Non-restricted equity | ||
| Share premium reserve | 8,984 | 1,355 |
| Profi t or loss brought forward | 942 | 1,127 |
| Net income | 1,642 | 1,109 |
| Total non-restricted equity | 11,568 | 3,590 |
| Total equity | 11,664 | 3,590 |
| Current liabilities | ||
| Accounts payable | 25 | 9 |
| Liabilities to subsidiaries | 11,965 | 1,539 |
| Other liabilities | 41 | 32 |
| Accrued expenses and deferred income | 188 | 135 |
| Total current liabilities | 12,218 | 1,715 |
| Total equity and liabilities | 23,882 | 5,306 |
The CEO of EQT AB Group has been identifi ed as the chief operating decision-maker. EQT AB Group is divided into operating segments based on how the CEO reviews and evaluates the operation. The operating segments correspond to the internal reporting used to assess perfor mance and to allocate resources.
EQT's operations are divided into three business segments: Private Capital, Real Assets and Credit. The operations of all three business segments consists of providing investment management services in the private investment markets. The investment management ser vices comprise i.a. structuring and investment advice, investment management and monitoring as well as reporting and administrative services.
The business segment Private Capital consists of business lines Private Equity, Mid Market Asia, Ventures and Public Value. The business segment Real Assets consists of business lines Infrastructure and Real Estate. The business segment Credit consists of EQT's credit investment platform.
The CEO assesses the operating segments based on the line items presented below, primarily on revenue and Gross segment results. Segment revenues has been adjusted by removing the fair value adjustment of acquired contractual rights to carried interest. Accord ingly, the acquired contractual right to carried interest refl ects the sellers carrying amount adjusted to EQT AB Group's accounting poli cies, i.e. the accrued income excluding the fair value uplift made at the acquisition date in the consolidated accounts of EQT AB Group. The di erence between the carrying amount and fair value of accrued carried interest is primarily due to the constraint requirements of IFRS 15 of variable performance-based income refl ected through the application of the Group's prudent revenue recognition model for carried interest. Expenses directly incurred by each respective business segment are included in gross segment result, whereas items reported under Central have not been allocated to any business segment. Central consists of management, client relations and capital raising, fund management, EQT Technology and other specialist functions such as HR and fi nance. Central reve nue arises from services provided to Fund Managers of EQT funds raised before 2012, as well as to certain other non-consolidated enti ties.
Reconciliations consists of revenue adjustments (see above) as well as items a ecting comparability. Items a ecting comparability re lates to costs as a result of the preparatory work as well as bonuses in relation to the IPO process and the restructuring of the EQT AB Group including i.a. costs for legal, fi nancial, commercial and other advisors. Items a ecting comparability also include a one-o provision of EUR 32m that has been taken in 2019 due to the VAT ruling announced by the Supreme Administrative Court of Sweden on January 27, 2020.
Gross segment result together with central items and reconciliations constitute EQT AB Group's EBITDA. EBITDA is defi ned as Operating profi t excluding depreciation and amortization of property, plant and equipment and intangible assets.
| H2 2019 EURm |
Private Capital |
Real Assets |
Credit | Central | Total adjusted |
Items affecting com parab. |
Revenue adjust ment |
IFRS reported |
|---|---|---|---|---|---|---|---|---|
| Total revenues | 171 | 114 | 19 | 4 | 307 | -3 | 304 | |
| Personnel expenses Other operating expenses |
-113 -59 |
-10 -37 |
-123 -96 |
|||||
| Total operating expenses | -62 | -28 | -13 | -69 | -173 | -47 | – | -219 |
| Gross segment result1) / EBITDA2) Margin, % Depreciation and amortization |
109 64% |
85 75% |
6 31% |
-66 | 135 44% -17 |
-47 | -3 | 85 28% -17 |
| EBIT Net financial income and expenses Income taxes |
118 -2 -12 |
-47 10 |
-3 | 68 -2 -2 |
||||
| Net income | 104 | -37 | -3 | 64 |
1) Gross segment result relates to the segments Private Capital, Real Assets and Credit.
2) EBITDA relates to Central, Total adjusted and IFRS reported.
| H2 2018 EURm |
Private Capital |
Real Assets |
Credit | Central | Total adjusted |
Items affecting com parab. |
Revenue adjust ment |
IFRS reported |
|---|---|---|---|---|---|---|---|---|
| Total revenues | 147 | 49 | 16 | 3 | 214 | 214 | ||
| Personnel expenses Other operating expenses |
-77 -45 |
-7 | -77 -52 |
|||||
| Total operating expenses | -44 | -20 | -8 | -50 | -122 | -7 | – | -129 |
| Gross segment result1) / EBITDA2) | 103 | 29 | 8 | -47 | 93 | -7 | – | 85 |
| Margin, % | 70% | 60% | 49% | 43% | 40% | |||
| Depreciation and amortization | -9 | -9 | ||||||
| EBIT | 84 | -7 | – | 76 | ||||
| Net financial income and expenses | -3 | -3 | ||||||
| Income taxes | -3 | 2 | -2 | |||||
| Net income | 77 | -6 | – | 71 |
1) Gross segment result relates to the segments Private Capital, Real Assets and Credit.
| 2) EBITDA relates to Central, Total adjusted and IFRS reported. | ||||||||
|---|---|---|---|---|---|---|---|---|
| Items affecting |
Revenue | |||||||
| 2019 | Private | Real | Total | com | adjust | IFRS | ||
| EURm | Capital | Assets | Credit | Central | adjusted | parab. | ment | reported |
| Total revenues | 331 | 231 | 36 | 8 | 606 | -6 | 600 | |
| Personnel expenses | -217 | -14 | -230 | |||||
| Other operating expenses | -115 | -46 | -161 | |||||
| Total operating expenses | -124 | -54 | -24 | -130 | -331 | -60 | – | -392 |
| Gross segment result1) / EBITDA2) | 207 | 177 | 12 | -122 | 275 | -60 | -6 | 208 |
| Margin, % | 63% | 77% | 34% | 45% | 35% | |||
| Depreciation and amortization | -30 | -30 | ||||||
| EBIT | 245 | -60 | -6 | 178 | ||||
| Net financial income and expenses | -6 | -6 | ||||||
| Income taxes | -26 | 13 | -13 | |||||
| Net income | 213 | -47 | -6 | 160 |
1) Gross segment result relates to the segments Private Capital, Real Assets and Credit.
2) EBITDA relates to Central, Total adjusted and IFRS reported.
| 2018 EURm |
Private Capital |
Real Assets |
Credit | Central | Total adjusted |
Items affecting com parab. |
Revenue adjust ment |
IFRS reported |
|---|---|---|---|---|---|---|---|---|
| Total revenues | 256 | 95 | 35 | 7 | 393 | – | 393 | |
| Personnel expenses Other operating expenses |
-151 -86 |
-7 | -151 -93 |
|||||
| Total operating expenses | -93 | -37 | -14 | -93 | -237 | -7 | – | -244 |
| Gross segment result1) / EBITDA2) | 163 | 58 | 21 | -86 | 156 | -7 | – | 149 |
| Margin, % Depreciation and amortization |
64% | 61% | 60% | 40% -19 |
38% -19 |
|||
| EBIT | 137 | -7 | – | 130 | ||||
| Net financial income and expenses Income taxes |
-2 -9 |
2 | -2 -8 |
|||||
| Net income | 127 | -6 | – | 121 | ||||
| 1) Gross segment result relates to the segments Private Capital, Real Assets and Credit. |
2) EBITDA relates to Central, Total adjusted and IFRS reported.
EQT AB Group's business of providing fund management services cannot reliably and fairly be reviewed by geographical areas. EQT AB Group's fund investors may often be located in multiple jurisdictions and the funds through which the fund investors invest are located in a few centers where fund management services are provided, principally Luxembourg.
EQT has commitments of future cash outfl ows based on signed agreements relating to committed amounts regarding fi nancial investments. At December 31, 2019, the EQT AB Group had remaining commitments to invest in multiple EQT funds and fund related vehicles of a total amount of EUR 71m (EUR 75m). The commitments are called over time, normally between one to fi ve years following the commitment.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
EQT AB Group measures fair values using the following fair value hierarchy that refl ects the signifi cance of the inputs used in making the measurements:
EQT AB Group measure investments in investment programs at fair value in the balance sheet. The fair values for these investments at December 31, 2019 was EUR 66m (EUR 18m) are using inputs that are not based on observable market data and are therefore classifi ed as level 3 in the fair value hierarchy. There has not been any transfers between levels in the fair value hierarchy during the periods presented.
The table below shows a reconciliation of level 3 fair values.
| EURm | 2019 | 2018 |
|---|---|---|
| Opening balance | 18 | 10 |
| Net change in fair value | 11 | 1 |
| Acquisitions | 16 | - |
| Investments | 29 | 8 |
| Divestments | -9 | -1 |
| Balance end of period | 66 | 18 |
Net change in fair value is included in "Carried interest and investment income" in the income statement.
From an EQT AB Group perspective, fi nancial investments are normally measured at fair value applying the adjusted net asset values of the investment programs. A reasonable possible change of 10% in the adjusted net asset value would a ect the fair values of the investments at December 31, 2019 was EUR 7m (EUR 2m). The e ect would be recognized in profi t or loss.
Although the EQT AB Group believes that its estimates of fair values are appropriate, the use of di erent methodologies and di erent unobservable inputs in the underlying investments of investment programs, could lead to di erent measurements of fair value. Due to the number of unobservable input factors used in the valuation of the investment programs' direct investments and their broad range, in particular concerning the earnings multiples, a sensitivity analysis on these underlying unobservable input factors does not result in meaningful outcomes.
EQT AB Group's other fi nancial instruments consist mainly of short-term receivables, accounts payable, deposits in commercial banks. The Group considers the carrying amounts of those fi nancial instruments to be reasonable approximations of their fair values.
To increase the understanding of the development of the operations and the fi nancial position of EQT AB Group, EQT presents some alternative performance measures in addition to fi nancial measures defi ned by IFRS. EQT believes these measures provide a better understanding of the trends of the fi nancial performance and that such measures, which are not calculated in accordance with IFRS are useful information to investors combined with other measures that are calculated in accordance with IFRS.
These alternative performance measures should not be considered in isolation or as a substitute to performance measures derived in accordance with IFRS. In addition, such measures, as defi ned by EQT, may not be comparable to other similarly titled measures used by other companies.
| Measure | Defi nition | Reason for use |
|---|---|---|
| Adjusted total revenue |
Total revenue adjusted for fair value step up on acquired contractual right to carried interest from EQT VI and selected funds. For revenue adjustments related to the accounting treatment of change of entitle ment to revenue from EQT VI and selected funds, see note 1. |
Total revenue adjusted for fair value step up on acquired contractual right to carried interest from EQT VI and selected funds, implying that (i) revenue recognition from the date of the acquisition will be consistent with the valuation principles used for previously owned right to carried interest entitlements and (ii) closer correlation between recognized revenues from carried interest and investment income and expected cash to be received. |
| Gross segment result |
Total revenue adjusted for fair value step up on acquired contractual rights to carried interest from EQT VI and selected funds less directly incurred expenses by business segment. For revenue adjustments related to the accounting treatment of change of entitle ment to revenue from EQT VI and selected funds, see note 1. |
Gross segment result provides an overview of the direct contribution of each business segment. |
| Gross segment margin |
Gross segment result divided by Adjusted total revenues by business segment. |
Gross segment margin provides an overview of the profi tability by each business segment. |
| EBITDA | EBIT excluding depreciation and amorti zation of property plant and equipment and intangible assets. |
EBITDA provides an overview of the profi tability of the operations. |
| EBITDA margin, % |
EBITDA divided by Total revenue. | EBITDA margin is a useful measure for showing the profi tability of the operations relative to total revenue generated by the Group during the period. |
| Adjusted EBITDA |
EBITDA adjusted for items a ecting com parability and revenue adjustments. Items a ecting comparability means items that are reported separately due to their character and amount. For a specifi cation of items a ecting comparability, see note 1. For revenue adjustments related to the accounting treatment of change of entitle ment to revenue from EQT VI and selected funds, see note 1. |
Adjusted EBITDA is a useful measure for showing profi tability of the operations and increases the comparability between periods. |
| Adjusted EBITDA margin, % |
Adjusted EBITDA divided by Adjusted total revenue. |
Adjusted EBITDA margin is a useful measure for showing the profi tability of the operations and increases the comparability between periods, relative to total revenue generated by the Group during the period. |
| Adjusted net income |
Net income adjusted for items a ecting comparability and revenue adjustments. |
Adjusted net income is a useful measure for showing the profi tability generated by the |
|---|---|---|
| Items a ecting comparability means items that are reported separately due to their character and amount, see note 1. |
Group as this measure is adjusted for items a ecting comparability between periods. |
|
| Revenue adjustments related to the ac counting treatment of change of entitlement to revenue from EQT VI and selected funds, see note 1. |
||
| Adjusted earnings per share |
Adjusted net income in relation to average number of shares. |
Adjusted earnings per share is a useful measure for showing the profi tability per share generated by the Group as this measure is adjusted for items a ecting comparability between periods. |
| Financial net cash |
Cash, cash equivalents and short-term loan receivable less short-term loans. |
Financial net cash / (net debt) is used to assess the Group's fi nancial position in terms of the possibility to make strategic investments, payment of dividend and fulfi llment of fi nancial commitments. |
| EURm | H2 2019 | H2 2018 | 2019 | 2018 |
|---|---|---|---|---|
| Total revenue Revenue adjustments |
304 3 |
214 - |
600 6 |
393 - |
| Adjusted total revenue | 307 | 214 | 606 | 393 |
| Adjusted EPS | H2 2019 | H2 2018 | 2019 | 2018 |
|---|---|---|---|---|
| Net income | 64 | 71 | 160 | 121 |
| Income taxes Net financial income and expenses |
2 2 |
2 3 |
13 6 |
8 2 |
| Operating profit (EBIT) | 68 | 76 | 178 | 130 |
| Depreciation and amortization | 17 | 9 | 30 | 19 |
| EBITDA | 85 | 85 | 208 | 149 |
| Revenue adjustments Items affecting comparability |
3 47 |
- 7 |
6 60 |
- 7 |
| Adjusted EBITDA | 135 | 93 | 275 | 156 |
| Depreciation and amortization Net financial income and expenses Income taxes (including tax on adjustments) |
-17 -2 -12 |
-9 -3 -3 |
-30 -6 -26 |
-19 -2 -9 |
| Adjusted net income | 104 | 77 | 213 | 127 |
| Adjusted earnings per share, basic | H2 2019 | H2 2018 | 2019 | 2018 |
|---|---|---|---|---|
| Adjusted net income, EURm Average number of shares, basic |
104 912,885,670 |
77 624,481,424 |
213 851,289,562 |
127 620,912,290 |
| Adjusted earnings per share, basic, EUR | 0.114 | 0.123 | 0.251 | 0.204 |
| Adjusted earnings per share, diluted | H2 2019 | H2 2018 | 2019 | 2018 |
| Adjusted net income, EURm Average number of shares, diluted |
104 913,345,106 |
77 624,481,424 |
213 851,748,997 |
127 620,912,290 |
| Adjusted earnings per share, diluted, EUR | 0.114 | 0.123 | 0.250 | 0.204 |
| Financial net cash / (Net debt) | ||||
| EURm | 2019 | 2018 | ||
| Cash and cash equivalents Short term loan receivable1) Interest-bearing liabilities - current |
909 9 -9 |
264 15 -15 |
||
| Financial net cash / (Net debt) | 909 | 265 | ||
1) Short term loan receivable is a subtotal of Other current assets.
Assets Under Management ("AUM") represent the total assets and commitments from fund investors based on which EQT AB Group is entitled to receive management fees. All of the Group's AUM is feegenerating
Funds currently investing or with not yet realized investments
Business segment comprised of EQT's platform for credit investments comprised of Special Situations, Direct Lending and Senior Debt
The total amounts that fund investors agree to make available to a fund during a specifi ed time period
First phase of a fund lifecycle after fundraising, in which most of a fund's committed capital is invested into portfolio companies. Management fees are normally based on committed capital during this period
Current Gross MOIC (Multiple of Invested Capital) A fund's Gross MOIC based on the current total value and cost of its underlying investments
Measures the share of a fund's total commitments that has been utilized. Calculated as the sum of (i) closed and/or signed investments, including announced public o ers, (ii) any earn-outs and/or purchase price adjustments and (iii) less any expected syndication, as a % of a fund's Committed capital
Weighted average management fee rate for all EQT funds contributing to AUM in a specifi c period EQT
Where used on its own, is an umbrella term and may refer interchangeably to the EQT AB Group, SEP Holdings Group and/or EQT funds, as the context requires
EQT AB and/or any one or more of its direct or indirect subsidiaries (excl. the EQT funds and their portfolio companies)
Cost amount of realized investments (Realized cost) from an EQT fund
A fund's expected Gross MOIC at termination, when a fund is fully realized, based on the estimated total value and cost of its underlying investments upon realization
The number of full-time equivalent personnel on EQT AB Group's payroll
The number of full-time equivalent personnel and contracted personnel working for EQT AB Group
Total committed capital for a specifi c fund
New commitments through fundraising activities or increased investments in funds charging fees on net invested capital
Value of realized investments (Realized value) from an EQT fund
Total value of investments divided by total cost of investments
Signed investments by an EQT fund
Funds with commitments that represent more than 5% of total commitments in active funds, respectively, as well as EQT Infrastructure II
Total cost of investments not yet realized (Remaining cost). Management fees are generally based on Net invested capital after the Commitment period / Investment period
Business segment comprised of business lines Private Equity, Mid Market Asia, Ventures and Public Value
Business segment comprised of business lines Infrastructure and Real Estate
Realized value / (Realized cost)
Value (cost) of an investment, or parts of an investment, that at the time has been realized
Remaining value / (Remaining cost)
Value (cost) of an investment, or parts of an investment, currently owned by the EQT funds
A fund's start date is the earlier of the fi rst closed investment or the date when management fees are charged from fund investors
Step-downs in AUM generally resulting from the end of the investment period in an existing fund or when a subsequent fund starts to invest. Fees in a specifi c fund will normally be based on net invested capital post step-down
Measure used in fundraising of an EQT fund as a fund's target level of investment return based on Gross MOIC
EQT is a di erentiated global investment organization with a 25-year track-record of consistent investment performance across multiple geographies, sectors and strategies. With strong values and a distinct corporate culture, EQT manages and advises funds and vehicles that invest across the world with the mission to generate attractive returns to the fund investors. EQT's talent base and network allow it to pursue a unique value creation approach and thematic investment strategy, with the aim of future-proofi ng the companies which EQT invests in, creating superior returns and making a positive impact with everything EQT does.
EQT has more than EUR 62 billion in raised capital since inception, currently around EUR 40 billion in assets under management across 19 active funds within three business segments – Private Capital, Real Assets and Credit. EQT is a thought leader within the private markets industry with deep expertise in responsible and long-term ownership, corporate governance, operational excellence, digitalization and sustainability. EQT has o ces in 16 countries across Europe, Asia-Pacifi c and North America with more than 700 employees.
The EQT AB group comprises EQT AB (publ) and its direct and indirect subsidiaries, which includes general partners and fund managers of EQT funds as well as entities advising EQT funds.
Kim Henriksson CFO +46 8 506 55 300 [email protected] Åsa Riisberg Head of Shareholder Relations +46 8 506 55 342 [email protected] Nina Nornholm Head of Communications +46 70 855 03 56 [email protected]
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