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eQ Oyj Interim / Quarterly Report 2019
3263_rns_2019-08-13_b52b4691-d140-4dde-b7fc-584bfb18f930.pdf
Interim / Quarterly Report
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2019
HALF YEAR FINANCIAL REPORT
eQ
eQ PLC
HALF YEAR FINANCIAL REPORT
13 August 2019 at 8:00 AM
eQ PLC'S HALF YEAR FINANCIAL REPORT 2019 – eQ'S STRONG GROWTH CONTINUED – PROFIT GREW BY 17%
January to June 2019 in brief
- During the period under review, the Group's net revenue totalled EUR 22.9 million (EUR 20.4 million from 1 Jan. to 30 June 2018).
- The Group's net fee and commission income was EUR 22.5 million (EUR 19.2 million).
- The Group's net investment income from own investment operations was EUR 0.4 million (EUR 1.2 million).
- The Group's operating profit grew by 15% to EUR 11.0 million (EUR 9.5 million).
- The Group's profit was EUR 8.8 million (EUR 7.5 million).
- The consolidated earnings per share were EUR 0.23 (EUR 0.20).
- The net cash flow from the Group's own private equity fund investment operations was EUR 0.3 million (EUR 1.7 million).
- The net revenue of the Asset Management segment increased by 19% to EUR 20.8 million (EUR 17.5 million) and the operating profit by 26% to EUR 11.3 million (EUR 9.0 million).
- The net revenue of the Corporate Finance segment was EUR 1.8 million (EUR 1.8 million) and the operating profit was EUR 0.4 million (EUR 0.4 million).
April to June 2019 in brief
- In the second quarter, the Group's net revenue totalled EUR 11.3 million (EUR 10.8 million from 1 April to 30 June 2018).
- The Group's net fee and commission income was EUR 11.3 million (EUR 10.3 million).
- The Group's net investment income from own investment operations was EUR 0.0 million (EUR 0.5 million).
- The Group's operating profit grew by 11% to EUR 5.7 million (EUR 5.1 million).
- The Group's profit was EUR 4.6 million (EUR 4.0 million).
- The consolidated earnings per share were EUR 0.12 (EUR 0.11).
| Key ratios | 1-6/19 | 1-6/18 | Change % | 4-6/19 | 4-6/18 | Change % | 1-12/18 |
|---|---|---|---|---|---|---|---|
| Net revenue, Group, M€ | 22.9 | 20.4 | 12% | 11.3 | 10.8 | 5% | 45.4 |
| Net revenue, Asset Management, M€ | 20.8 | 17.5 | 19% | 10.6 | 9.0 | 17% | 36.7 |
| Net revenue, Corporate Finance, M€ | 1.8 | 1.8 | 2% | 0.7 | 1.3 | -43% | 7.1 |
| Net revenue, Investments, M€ | 0.1 | 1.2 | -88% | -0.0 | 0.5 | -105% | 1.8 |
| Net revenue, Group administration and eliminations, M€ | 0.1 | -0.0 | 0.0 | -0.0 | -0.1 | ||
| Operating profit, Group, M€ | 11.0 | 9.5 | 15% | 5.7 | 5.1 | 11% | 22.4 |
| Operating profit, Asset Management, M€ | 11.3 | 9.0 | 26% | 6.0 | 4.7 | 29% | 19.5 |
| Operating profit, Corporate Finance, M€ | 0.4 | 0.4 | -9% | 0.1 | 0.5 | -81% | 3.2 |
| Operating profit, Investments, M€ | 0.1 | 1.2 | -88.% | -0.0 | 0.5 | -105% | 1.8 |
| Operating profit, Group admin., M€ | -0.9 | -1.1 | -16% | -0.5 | -0.6 | -23% | -2.1 |
| Profit for the period, M€ | 8.8 | 7.5 | 17% | 4.6 | 4.0 | 13% | 17.8 |
eQ
| Key ratios | 1-6/19 | 1-6/18 | Change % | 4-6/19 | 4-6/18 | Change % | 1-12/18 |
|---|---|---|---|---|---|---|---|
| Earnings per share, € | 0.23 | 0.20 | 15% | 0.12 | 0.11 | 11% | 0.47 |
| Equity per share, € | 1.37 | 1.37 | 0% | 1.37 | 1.37 | 0% | 1.65 |
| Cost/income ratio, Group, % | 52.1 | 53.5 | -3% | 49.9 | 52.9 | -6% | 50.5 |
| Liquid assets, M€ | 12.2 | 9.2 | 33% | 12.2 | 9.2 | 33% | 25.7 |
| Private equity fund investments, M€ | 16.8 | 18.4 | -9% | 16.8 | 18.4 | -9% | 16.9 |
| Interest-bearing loans, M€ | 0.0 | 0.0 | 0% | 0.0 | 0.0 | 0% | 0.0 |
| Assets under management, € billion | 10.9 | 8.9 | 23% | 10.9 | 8.9 | 23% | 9.5 |
Janne Larma, CEO
The result development of the Group has continued to be excellent. In the first half of 2019, the net revenue of the Group grew by 12% to EUR 22.9 million and the operating profit by 15% to EUR 11.0 million. eQ Group's operating profit has grown for 21 consecutive quarters. The profit of the Group increase by 17% to EUR 8.8 million.
eQ Asset Management made its best quarterly result ever
The sentiment in the equity market was positive in the first half of the year. Stock exchange returns have been very good during the six-month period, and the global index rose by 18.1%. Interest rates have fallen across the board during the first half, and bond investments have also offered good returns.
Within eQ Asset Management, the demand for real estate and private equity asset management products continued to be very strong. We managed to raise USD 214 million to the eQ PE XI US private equity fund investing in the US, which makes it eQ's largest private equity fund. Our previous fund investing in US was less than half the size. The demand for private equity asset management is clearly on the rise. Within real estate asset management, net subscriptions amounted to EUR 174 million in the first six months. In traditional asset management, the returns of the funds managed by eQ continued to be good. During a three-year investment period, 71% of the funds managed by eQ have surpassed their benchmark indices.
The net revenue of eQ Asset Management increased by 19% on the previous year to EUR 20.8 million. Operating profit grew by 26% to EUR 11.3 million. The management fees of real estate and private equity asset management grew by EUR 3.6 million on the previous year, i.e. by 31%.
Advium's fee income at last year's level
In the Corporate Finance segment, Advium has acted as advisor in five transactions during the six-month period. In the second quarter, Advium acted as financial advisor to the owners, as Picnic, Europicnic and La Torrefazione were sold to Sentica Partners. In addition, Advium acted as advisor to Konstsamfundet as it bought the 30.9% share of the Lasipalatsi property in Helsinki that had been held by the city of Helsinki. After the period under review, Advium has acted as advisor in five signed transactions, one of which has been finalised. According to estimates, the remaining four transactions will be finalised by the end of the year.
The market activity in corporate and real estate transactions continues to be good. Advium's net revenue was EUR 1.8 million (EUR 1.8 million) and operating profit EUR 0.4 million (EUR 0.4 million).
The operating profit of the Investments segment slightly positive
The operating profit of the Investments segment was EUR 0.1 million. The net cash flow was EUR 0.3 million. At the end of June, the balance sheet value of the private equity fund investments was EUR 16.8 million.
eQ
Outlook
Outlook for the financial year is the same as previously and we expect the profit of the Asset Management segment to grow clearly more than in 2018.
In the 2018 Financial Statements, we estimated that one of the private equity funds managed by eQ would reach the hurdle rate during the second half of this year and begin to pay a performance fee this year. We still expect that the private equity fund will reach the hurdle rate and begin to pay performance fee. Exits are dependent among other things on the market development and estimating the timing of them is difficult. Considering this, it is possible that the fund would start paying performance fee next year and not at the end of this year.
eQ’s half year financial report 1 January to 30 June 2019 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, media
eQ Group is a Finnish group of companies that concentrates on responsible 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 10.9 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.
eQ
eQ PLC'S HALF YEAR FINANCIAL REPORT 1 JAN. TO 30 JUNE 2019
Result of operations and financial position 1 January to 30 June 2019
- During the period under review, the Group's net revenue totalled EUR 22.9 million (EUR 20.4 million from 1 Jan. to 30 June 2018).
- The Group's net fee and commission income was EUR 22.5 million (EUR 19.2 million).
- The Group's net investment income from own investment operations was EUR 0.4 million (EUR 1.2 million).
- The Group's operating profit grew by 15% to EUR 11.0 million (EUR 9.5 million).
- The Group's profit was EUR 8.8 million (EUR 7.5 million).
- The consolidated earnings per share were EUR 0.23 (EUR 0.20).
- The net cash flow from the Group's own private equity fund investment operations was EUR 0.3 million (EUR 1.7 million).
- The net revenue of the Asset Management segment increased by 19% to EUR 20.8 million (EUR 17.5 million) and the operating profit by 26% to EUR 11.3 million (EUR 9.0 million).
- The net revenue of the Corporate Finance segment was EUR 1.8 million (EUR 1.8 million) and the operating profit was EUR 0.4 million (EUR 0.4 million).
Result of operations and financial position 1 April to 30 June 2019
- In the second quarter, the Group's net revenue totalled EUR 11.3 million (EUR 10.8 million from 1 April to 30 June 2018).
- The Group's net fee and commission income was EUR 11.3 million (EUR 10.3 million).
- The Group's net investment income from own investment operations was EUR 0.0 million (EUR 0.5 million).
- The Group's operating profit grew by 11% to EUR 5.7 million (EUR 5.1 million).
- The Group's profit was EUR 4.6 million (EUR 4.0 million).
- The consolidated earnings per share were EUR 0.12 (EUR 0.11).
Operating environment
In the second quarter of 2019, the market was influenced by the same themes as in the first quarter and already in 2018. The most important of these was the fear for an international trade war. Still at the beginning of the second quarter, above all equity market prices seemed to rely on the possibility of rather quickly reaching a solution that would satisfy all parties. In addition, the market believed that if growth problems occurred, both the ECB and Fed would rapidly initiate fiscal stimulus measures. Economic growth continued above in the US and China even at a surprisingly strong pace, but towards the very end of the quarter we received softer economic data from the US. Europe performed more weekly, as usual. Company results for the first quarter were widely better than expected in Europe as well, however.
The sentiment changed in the first weeks of May, when Mr Trump suddenly announced that he would increase the 10% tariffs placed on Chinese imports to the US to 25%, as the trade negotiations did not advance in the manner he wished. Tariff increases were announced for Europe as well, but at a slower pace. The equity market reacted negatively to these measures. Once more, the central banks came to the rescue. Both the ECB and Fed indicated that they would launch support measures rapidly, if economic growth starts to slow down more markedly.
As a whole, the first half of the year was very positive for the equity market. In the US, the S&P 500 index rose by 18.2% calculated in dollars (18.6% in euros). In the second quarter, the corresponding figures were 4.2 and 2.7%. Calculated with the MSCI Europe index, Europe rose by 16.2% (Q2 3.0%). Despite the weaker result development, the Finnish stock exchange rose by 13.1% during the first half of the year, even
eQ
though the Q2 increase had only been 1.1%. In emerging markets, share prices fell by 0.8% in the second quarter as a result of trade war fears. In the first half, the increase was 11.0%.
The first half of the year was also strong for the bond market. The government bond index rose by 6.0% (Q2 3.4%), the Euro Investment Grade index by 5.4% (2.1%), the High Yield index by no less than 7.4% (2.2%) and the emerging market index as euro-hedged by 6.7% (2.3%).
Major events during the period under review
During the period under review, on 28 February 2019, the number of eQ Plc's shares increased by 350 000 with new shares subscribed for with option rights.
On 25 March 2019, the Board of Directors of eQ Plc approved the subscriptions of options made by the option right recipients of the 2018 option scheme with a subscription price. The number of options subscribed for based on the option scheme with a subscription price was 1 875 000, and the payments of the subscription price made to eQ Plc in March 2019 totalled EUR 1 350 000.
eQ Plc's Annual General Meeting was held on 25 March 2019. Nicolas Berner, Georg Ehrnrooth and Timo Kokkila were re-elected to the Board. New members of the Board were Lotta Kopra and Tomas von Rettig. Georg Ehrnrooth will continue as Chairman of the Board. The decisions by the Annual General Meeting have been presented in a separate chapter below.
Group net revenue and result development
During the period under review, the Group's net revenue totalled EUR 22.9 million (EUR 20.4 million from 1 Jan. to 30 June 2018). The Group's net fee and commission income was EUR 22.5 million (EUR 19.2 million). The Group's net investment income from own investment operations was EUR 0.4 million (EUR 1.2 million).
The Group's expenses and depreciation totalled EUR 11.9 million (EUR 10.9 million). Personnel expenses were EUR 9.7 million (EUR 8.7 million), other administrative expenses totalled EUR 1.1 million (EUR 1.1 million), and the other operating expenses were EUR 0.7 million (EUR 1.0 million). Depreciation was EUR 0.5 million (EUR 0.1 million). The depreciation includes the depreciation for leases according to the new IFRS 16 standard from the beginning of 2019.
The Group's operating profit was EUR 11.0 million (EUR 9.5 million) and the profit for the period was EUR 8.8 million (EUR 7.5 million).
Business areas
Asset Management
eQ Asset Management offers versatile and innovative asset management services to both institutions and individuals. The Asset Management segment consists of the investment firm eQ Asset Management Ltd and other Group companies engaged in asset management operations, the most important of which is eQ Fund Management Company Ltd.
Mutual funds and asset management
At the end of the financial period, eQ had 26 mutual funds registered in Finland.
As a result of the fall in interest rates and the narrowing of credit risk margins, the returns of eQ's fixed-income funds were very good with regard to the interest rate level. The best returns came from the eQ Emerging Markets Corporate Bond LC and eQ High Yield funds. As compared with benchmark indices, the best returns came from the eQ Floating Rate and eQ High Yield funds. Of eQ's five Morningstar rated fixed-income funds one has the best rating, i.e. five stars, and three have four stars.
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The returns of equity funds were very good in the first half after the weak last quarter of 2018. The eQ Blue Planet and eQ Russia funds gave the best returns, even about 25%. As compared with benchmark indices, the eQ Emerging Markets Small Cap, eQ Blue Planet, eQ Europe Property, eQ Nordic Small Cap and eQ Finland funds gave excellent returns.
Of the funds managed by eQ, 53% surpassed their benchmark indices in the six-month period, and in the past three years, 71% of the funds managed by eQ have surpassed their benchmark indices. The average Morningstar rating of funds managed by eQ was 3.5 stars at the end of the period. The returns of the discretionary asset management portfolios that eQ manages varied between 2.8 and 17.0% during the first half, based on the allocation of the investment portfolio. The return of portfolios that are only invested in Finnish shares exceeded 18%.
On 6 March 2019, eQ Asset Management won one of the major prices awarded by Morningstar. Morningstar recognised eQ's entire fund range with the "Best Fund House" award. This extremely highly esteemed award is based on the five-year risk-adjusted returns of eQ's equity, fixed-income and balanced funds.
Private Equity
The first close of the new eQ PE XI US private equity fund was held at the end of January 2019 at USD 113 million. The second close of the fund was held in April at USD 172 million, and in the final close held in June the size of the fund grew to USD 214 million. The eQ PE XI US Fund makes investments in private equity funds that invest in unlisted small and mid-sized companies in Northern America. In addition, the final closing of the eQ Private Credit II Fund, the second private credit fund investing in unlisted European corporate loans, was held in April at EUR 73.5 million.
At the end of the period under review, the assets in private equity funds managed by eQ totalled EUR 1 625 million (EUR 1 420 million) and the assets managed under private equity mandates were EUR 678 million (EUR 611 million).
Real estate investments
The growth of the eQ Finnish Real Estate fund continued in the first months of the year. At the end of the second quarter, new net subscriptions for EUR 20 million, and during the first half for EUR 57 million were made in the fund. At the end of the quarter, the size of the fund was EUR 653 million, and its real estate property amounted to approximately EUR 960 million. The investment operations of the fund have been extremely successful, and the return since establishment is 9.1% p.a. The fund already has almost 2 700 unit holders.
The eQ Care Fund also grew strongly. At the end of the second quarter, new net subscriptions for EUR 44 million, and during the first half for EUR 117 million were made in the fund. At the end of the quarter, the size of the fund was EUR 856 million and its real estate property amounted to almost EUR 1.1 billion. The return of the fund since establishment is 9.0% p.a., and the fund has more than 3 700 unit holders.
Overall, eQ's real estate funds had property worth more than two billion euros at the end of the period under review, and eQ has become a major Finnish real estate investor. Consequently, the real estate team has been expanded to ten persons.
In the second quarter, the eQ Care Fund sold to Samhällsbyggnadsbolaget i Norden AB (publ) (SBB) 48 properties, mainly day-care centres and intensive sheltered housing units. The transaction price was about EUR 142 million.
Assets under management and clients
At the end of the period, the assets managed by eQ Asset Management totalled EUR 10 918 million. The assets increased by EUR 1 433 million from the beginning of the year (EUR 9 485 million on 31 Dec. 2018). At the end of the period, the assets managed by mutual funds registered in Finland totalled EUR 2 836 million (EUR 2 484 million), and the assets increased by EUR 352 million. Mutual funds managed by international partners and assets covered by other asset management operations totalled EUR 1 091 million (EUR 952 million). The assets managed under private equity funds and asset management totalled EUR
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6 991 million (EUR 6 049 million), the share of eQ funds being EUR 1 625 million (EUR 1 420 million) and that of mandates EUR 678 million (EUR 611 million). The assets covered by the reporting service totalled EUR 4 689 million (EUR 4 019 million).
Result of the Asset Management segment
During the period under review, the net revenue of the Asset Management segment increased by 19% and the operating profit by 26% to EUR 11.3 million (EUR 9.0 million from 1 Jan. to 30 June 2018). The management fees of real estate and private equity operations increased by 31% during the period. Performance fees increased by 32% as a result of their typical strong fluctuation per quarter and financial period. The cost/income ratio was 45.5% (48.6%). Calculated as full-time resources, the Asset Management segment had 70 employees at the end of the period under review.
| Asset Management | 1-6/19 | 1-6/18 | Change % | 4-6/19 | 4-6/18 | Change % | 1-12/18 |
|---|---|---|---|---|---|---|---|
| Net revenue, M€ | 20.8 | 17.5 | 19% | 10.6 | 9.0 | 17% | 36.7 |
| Operating profit, M€ | 11.3 | 9.0 | 26% | 6.0 | 4.7 | 29% | 19.5 |
| Assets under management, € billion | 10.9 | 8.9 | 23% | 10.9 | 8.9 | 23% | 9.5 |
| Cost/income ratio, % | 45.5 | 48.6 | -6% | 42.7 | 48.0 | -11% | 46.9 |
| Personnel as full-time resources | 70 | 69 | 1% | 70 | 69 | 1% | 67 |
| Fee and commission income, Asset Management, M€ | 1-6/19 | 1-6/18 | Change % | 4-6/19 | 4-6/18 | Change % | 1-12/18 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Management fees from traditional asset management | 3.9 | 4.5 | -13% | 2.0 | 2.3 | -13% | 8.6 |
| Real estate and private equity management fees | 15.3 | 11.7 | 31% | 7.9 | 6.2 | 28% | 25.5 |
| Other fee and commission income | 0.1 | 0.2 | -45% | 0.0 | 0.1 | -67% | 0.3 |
| Performance fees | 1.7 | 1.3 | 32% | 0.8 | 0.6 | 29% | 2.7 |
| Total | 21.0 | 17.7 | 19% | 10.7 | 9.1 | 17% | 37.1 |
Corporate Finance
In the Corporate Finance segment, Advium Corporate Finance acts as advisor in mergers and acquisitions, large real estate transactions and equity capital markets.
As a result of the low interest rate level, rising share prices and the large amount of uninvested money in private equity funds, the activity in corporate and real estate transactions has remained at a high level in 2019.
During the first six months of the year, Advium has acted as advisor in five finalised transactions. After the period under review, we have acted as advisor in one finalised real estate transaction and in four transactions that have been signed but not yet finalised.
During the period under review, Advium acted, for instance, as financial advisor when Picnic, Europicnic and La Torrefazione were sold to a fund managed by Sentica Partners. Picnic and La Torrefazione are leading café operators in Finland, while Europicnic is a wholesale company. We also acted as advisor as Konstsamfundet bought the 30.9% share of the Lasipalatsi property that had been held by the city of Helsinki. According to estimates, the transaction will be finalised during the remaining part of the year. After the period under review, Advium acted as advisor, for instance, as Peab agreed to purchase YIT's Nordic paving and mineral aggregates business. The acquired business has about 1 700 employees, and its 2018 net sales amounted to EUR 572 million. The debt-free sales prices is estimated as EUR 282 million. The transaction is expected to be completed on 1 January 2020.
It is typical of corporate finance business that success fees have a considerable impact on invoicing, due to which the result of the segment may vary considerably from quarter to quarter.
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Result of the Corporate Finance segment
Advium's net revenue during the period under review was EUR 1.8 million (EUR 1.8 million from 1 Jan. to 30 June 2018). The operating profit was EUR 0.4 million (EUR 0.4 million). The segment had 15 employees at the end of the period.
| Corporate Finance | 1-6/19 | 1-6/18 | Change % | 4-6/19 | 4-6/18 | Change % | 1-12/18 |
|---|---|---|---|---|---|---|---|
| Net revenue, M€ | 1.8 | 1.8 | 2% | 0.7 | 1.3 | -43% | 7.1 |
| Operating profit, M€ | 0.4 | 0.4 | -9% | 0.1 | 0.5 | -81% | 3.2 |
| Cost/income ratio, % | 80.3 | 78.0 | 3% | 86.6 | 59.4 | 46% | 54.7 |
| Personnel as full-time resources | 15 | 14 | 7% | 15 | 14 | 7% | 14 |
Investments
The business operations of the Investments segment consist of private equity fund investments made from eQ Group's own balance sheet.
During the period under review, the net revenue of the Investments segment totalled EUR 0.1 million (EUR 1.2 million from 1 Jan. to 30 June 2018). At the end of the period, the fair value of the private equity fund investments was EUR 16.8 million (EUR 16.9 million on 31 Dec. 2018) and the amount of the remaining investment commitments was EUR 7.4 million (EUR 7.8 million). Of the market value, 86% has been invested in private equity funds managed by eQ. The breakdown of the market value and investment commitments of private equity fund investments per fund are presented in the tables section on page 20. The return of eQ's own private equity fund investment operations since the beginning of operations has been 21% p.a. (IRR).
During the period, the investment objects returned capital for EUR 1.3 million (EUR 1.6 million from 1 Jan. to 30 June. 2018) and distributed a profit of EUR 0.7 million (EUR 1.0 million). Capital calls totalled EUR 1.6 million (EUR 0.9 million). The net cash flow from investments during the period was EUR 0.3 million (EUR 1.7 million). The value changes of the private equity fund investments recognised through profit or loss were EUR -0,3 million (EUR 0.3 million) during the period. The Group's internal management fee expenses, which are included in the result of the Investments segment, totalled EUR 0.1 million (EUR 0.1 million).
During the period under review, eQ Plc made a USD 1.0 million investment commitment in the eQ PE XI US private equity fund. The eQ PE XI US Fund makes investments in private equity funds that make equity capital investments in unlisted small and mid-sized companies located in the US and Canada.
The income of eQ's own investment operations is recognised due to factors independent of the company. Due to this, the segment's result may vary considerably. eQ only makes new investments in funds managed by eQ.
| Investments | 1-6/19 | 1-6/18 | Change % | 4-6/19 | 4-6/18 | Change % | 1-12/18 |
|---|---|---|---|---|---|---|---|
| Net revenue, M€ | 0.1 | 1.2 | -88% | -0.0 | 0.5 | -105% | 1.8 |
| Operating profit, M€ | 0.1 | 1.2 | -88% | -0.0 | 0.5 | -105% | 1.8 |
| Fair value of investments, M€ | 16.8 | 18.4 | -9% | 16.8 | 18.4 | -9% | 16.9 |
| Investment commitments, M€ | 7.4 | 8.6 | -14% | 7.4 | 8.6 | -14% | 7.8 |
| Net cash flow of investments, M€ | 0.3 | 1.7 | -80% | 0.6 | 1.0 | -36% | 3.9 |
Balance sheet and capital adequacy
At the end of the period under review, the consolidated balance sheet total was EUR 67.3 million (EUR 78.2 million on 31 Dec. 2018) and the shareholders' equity was EUR 52.0 million (EUR 62.2 million). During the period, the shareholders' equity was influenced by the profit for the period of EUR 8.8 million, the dividend distribution of EUR -17.9 million, the repayment of equity of EUR -2.7 million from the reserve for invested
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unrestricted equity, the subscription for new shares with option rights of EUR 0.04 million, the subscription of options within the 2018 option scheme with a subscription price of EUR 1.4 million and the accrued expense of EUR 0.2 million related to the option scheme and enter in the shareholders' equity. The changes are specified in detail in the tables attached to this release.
At the end of the period, liquid assets totalled EUR 8.0 million (EUR 15.8 million) and liquid investments in mutual funds EUR 4.2 million (EUR 9.9 million). In order to safeguard the availability of financing, the Group has access to a credit limit of EUR 4.0 million. At the end of the period, the Group's short-term receivables amounted to EUR 5.7 million (EUR 5.8 million).
The lease liability entered in the balance sheet as a result of the new IFRS 16 standard was EUR 2.9 million (EUR - million) at the end of the period, the share of short-term liabilities being EUR 0.4 million (EUR - million). Interest-free short-term debt was EUR 12.3 million (EUR 15.9 million). The Group had no interest-bearing loans at the end of the period (EUR - million). eQ's equity to assets ratio was 77.4% (79.6%).
A subsidiary called eQ Asset Management Ltd, which is engaged in investment firm operations and fully owned by eQ Plc, is part of the Group. eQ Asset Management Ltd, as investment firm, and eQ Plc as the holding company, apply the Basel III/CRD IV regulations. The Group's CET1 (Common Equity Tier 1) and capital adequacy ratio of the own funds was 11.0% at the end of the period (9.6% on 31 Dec. 2018). According to regulations, the absolute minimum requirement for own funds is 8%. At the end of the period, the Group's own funds based on capital adequacy calculations totalled EUR 13.8 million (EUR 12.4 million on 31 Dec. 2018), and the risk-weighted items were EUR 126.4 million (EUR 129.0 million). Detailed information on the Group's capital adequacy can be found in the tables section.
Shares and share capital
At the end of the period on 30 June 2019, the number of eQ Plc's shares was 38 057 198 and the share capital was EUR 11 383 873.00.
During the period under review, on 28 February 2019, the number of eQ Plc's shares increased by 350 000 shares subscribed for with option rights 2010. The last option rights 2010 were thereby all exercised as a result of the share subscriptions made. The subscription price of the new shares totalled EUR 38 500. The entire subscription was entered in the reserve for invested unrestricted equity. There were no changes in the share capital during the period.
The closing price of eQ Plc's share on 30 June 2019 was EUR 9.14 (EUR 7.60 on 31 Dec. 2018). The market capitalisation of the company was thus EUR 347.8 million (EUR 286.6 million) at the end of the period. During the period, 858 179 shares were traded on Nasdaq Helsinki (4 656 819 shares from 1 Jan. to 30 June 2018). In euros, the turnover was EUR 7.6 million (EUR 38.7 million).
Own shares
On 30 June 2019, eQ Plc held no own shares.
9
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Shareholders
Ten major shareholders on 30 June 2019
| Shares | Share, % | ||
|---|---|---|---|
| 1 | Fennogens Investements SA | 7 943 137 | 20.87 |
| 2 | Chilla Capital S.A. | 5 945 275 | 15.62 |
| 3 | Anchor Oy Ab | 5 803 677 | 15.25 |
| 4 | Teamet Oy | 4 100 000 | 10.77 |
| 5 | Oy Cevante Ab | 1 419 063 | 3.73 |
| 6 | Fazer Jan Peter | 1 298 306 | 3.41 |
| 7 | Lavventura Oy | 650 000 | 1.71 |
| 8 | Linnalex Ab | 631 652 | 1.66 |
| 9 | Pinomonte Ab | 529 981 | 1.39 |
| 10 | Procurator-Holding Oy | 473 892 | 1.25 |
| 10 major shareholders, total | 28 794 983 | 75.66 | |
| Nominee registered | 371 254 | 0.98 | |
| Other shares | 8 890 961 | 23.36 | |
| Total | 38 057 198 | 100.00 |
On 30 June 2019, eQ Plc had 5 782 shareholders (5 451 shareholders on 31 Dec. 2018).
Option schemes
At the end of the period, eQ Plc had two valid option schemes. The option schemes are intended as part of the commitment system of the Group's key personnel.
Option scheme 2015
At the end of the period, altogether 1 575 000 options had been allocated from option scheme 2015. The subscription period of shares with option rights 2015 began on 1 April 2019, and the options have been listed on Nasdaq Helsinki since said date.
The terms and conditions of the option scheme have been published in a stock exchange release of 5 November 2015, and they can be found in their entirety on the company website at www.eQ.fi.
Option scheme 2018
On 25 October 2018, the Board of Directors of eQ Plc decide on a new option scheme with a subscription price based on the authorisation by the Annual General Meeting 2018. Altogether 1 875 000 shares were subscribed for in the option scheme with a subscription price, and the payments for the subscription price to eQ Plc in March 2019 totalled EUR 1 350 000. On 25 March 2019, the Board of Directors of eQ Plc approved the option subscriptions made by the option right recipients based on the subscription rights. The entire subscription price of the options was entered in the reserve for invested unrestricted equity.
The terms and conditions of the option scheme have been published in a stock exchange release of 26 October 2018, and they can be found in their entirety on the company website at www.eQ.fi.
Decisions by the Annual General Meeting
9Q Plc's Annual General Meeting (AGM), held on Thursday 25 March 2019 in Helsinki, decided upon the following:
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Confirmation of the financial statements
eQ Plc's AGM confirmed the financial statements of the company, which included the consolidated financial statements, the report by the Board of Directors, and the auditors' report for the financial year 2018.
Decision in respect of the result shown on the balance sheet and the distribution of assets from the reserve for invested unrestricted equity
The AGM confirmed the proposal by the Board of Directors that a dividend of EUR 0.47 per share and a repayment of equity of EUR 0.07 from the reserve for invested unrestricted equity be paid out. The dividend and equity repayment were paid to shareholders who, on the record date for the dividend payment, i.e. 27 March 2019, were recorded in the shareholder register of eQ Plc held by Euroclear Finland Ltd. The payment date of the dividend and equity repayment was 3 April 2019.
Discharge from liability to the Board of Directors and the CEO
The AGM decided to grant discharge from liability to the Board of Directors and the CEO.
Number of directors, appointment of directors, and the remuneration of directors
According to the decision of the AGM, five members shall be elected to eQ Plc's Board of Directors. Nicholas Berner, Georg Ehrnrooth, and Timo Kokkila were re-elected and Lotta Kopra and Tomas von Rettig were elected as new members for a term of office that will end at the close of the next Annual General Meeting. The AGM decided that the directors would receive remuneration as follows: the Chairman of the Board will receive EUR 3 500 and the other directors EUR 2 000 per month. The Directors will also be paid EUR 500 for each Board meeting that they attend. Travel and lodging costs will be compensated in accordance with the company's expense policy. The Board elected Georg Ehrnrooth Chairman of the Board at its meeting held immediately after the AGM.
Auditors and auditors' compensation
The AGM decided to elect the corporation of authorised public accountants KPMG Oy Ab auditor of the company. The auditor with main responsibility appointed by the company is Marcus Tötterman, APA. It was decided to compensate the auditor according to an invoice approved by eQ Plc.
Authorising the Board of Directors to decide on the issuance of shares as well as the issuance of special rights entitling to shares
The AGM authorised the Board of Directors to decide on a share issue or share issues and/or the issuance of special rights entitling to shares referred to in Chapter 10 Section 1 of the Limited Liability Companies Act, in one or several transactions, comprising a maximum total of 5 000 000 new shares. The amount of the authorisation corresponded to approximately $13.26\%$ of all shares in the company on the date of the notice of the AGM.
The authorisation can be used in order to finance or carry out potential acquisitions or other business transactions, to strengthen the balance sheet and the financial position of the company, to carry out the company's incentive schemes or for any other purposes decided by the Board. Based on the authorisation, the Board shall decide on all matters related to the issuance of shares and special rights entitling to shares referred to in Chapter 10 Section 1 of the Limited Liability Companies Act, including the recipients of the shares or the special rights entitling to shares and the amount of the consideration to be paid. Therefore, based on the authorisation, shares or special rights entitling to shares may also be issued to certain persons, i.e. in deviation of the shareholders' pre-emptive rights as described in said Act. A share issue may also be executed without payment in accordance with the preconditions set out in the Limited Liability Companies Act. The authorisation cancels all previous corresponding authorisations and is effective until the next AGM, no longer than 18 months, however.
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Personnel and organisation
At the end of the period, the number of Group personnel calculated as full-time resources was 90 (86 persons on 31 December 2018). Calculated as full-time resources, the Asset Management segment had 70 (67) employees and the Corporate Finance segment 15 (14) employees. Group administration had 5 (5) employees.
The overall salaries paid to the employees of eQ Group during the period totalled EUR 9.7 million (EUR 8.7 million from 1 Jan. to 30 June 2018).
Major risks and short-term uncertainties
The major single risk of the Group is the dependence of the operating income on changes in the external operating environment. The result of the Asset Management segment depends on the development of the assets under management, which is dependent of the development of the capital market. On the other hand, the management fees of private equity funds are based on long-term agreements that produce a stable cash flow. The realisation of the performance fee income that is dependent on the success of the investment operations also influences result development. The performance fees of the asset management operations may consist of performance fees paid by mutual funds and real estate funds, profit shares that private equity funds pay to management companies, and performance fees from asset management portfolios. Performance fees may vary considerably by quarter and financial period.
Success fees, which depend on the number of mergers and acquisitions and real estate transactions and the execution of transactions, have a considerable impact on the result of the Corporate Finance segment. These vary considerably within one year and are dependent on economic trends.
The risks associated with eQ Group's own private equity investment operations are the market risk, currency risk and liquidity risk. Among these, the market risk has the greatest impact on investments. The company's own investments are well diversified, which means that the impact of one investment in a company, made by one individual fund, on the return of the investments is often small. The income from eQ Group's own investment operations is recognised for eQ in different quarters due to factors independent of the company, depending on the exits from private equity funds. The income from investment operations and changes in value may vary considerably from quarter to quarter.
Events after the period under review
After the period under review, Advium acted as advisor, for instance, as Peab agreed to purchase YIT's Nordic paving and mineral aggregates business.
Outlook
Outlook for the financial year is the same as previously and we expect the profit of the Asset Management segment to grow clearly more than in 2018.
In the 2018 Financial Statements, we estimated that one of the private equity funds managed by eQ would reach the hurdle rate during the second half of this year and begin to pay a performance fee this year. We still expect that the private equity fund will reach the hurdle rate and begin to pay performance fee. Exits are dependent among other things on the market development and estimating the timing of them is difficult. Considering this, it is possible that the fund would start paying performance fee next year and not at the end of this year.
eQ Plc
Board of Directors
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TABLES
Principles for drawing up the report
The interim report has been prepared in accordance with IFRS standards and the IAS 34 Interim Reports standard, approved by the EU.
The income of eQ's own investment operations is recognised due to factors independent of the company. As a result, the net income from financial assets may vary considerably.
The report has not been audited.
New IFRS standards and interpretations
IFRS 16 Leases:
The new IFRS 16 standard Leases shall be applied from 1 January 2019 or from financial periods beginning after said date. As a result of IFRS 16, almost all leases will be recognised on the balance sheet, as the distinction between operating and finance leases will be removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals will be recognised. The only exceptions are short-term and low-value leases. The major leases concluded by eQ Group concern rented premises. eQ Group will apply a simplified method when introducing IFRS 16, which means that the figures of the comparison period will not been adjusted.
The present value of the leases transferred to the balance sheet on 1 January 2019 as a result of IFRS 16 was EUR 3.2 million and the present value of lease liabilities correspondingly EUR 3.2 million. The straight-line depreciation for leases entered to the income statement is about EUR 0.7 million annually and the calculated interest expense for the lease liabilities in 2019 about EUR 0.03 million. The expense impact in the income statement will be front-loaded, compared with the former IFRS treatment. As a result, the costs for premises including depreciation and interests will increase by about EUR 0.1 million in 2019, as compared with the IFRS treatment in 2018.
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CONSOLIDATED INCOME STATEMENT, EUR 1 000
| 1-6/19 | 1-6/18 | 4-6/19 | 4-6/18 | 1-12/18 | |
|---|---|---|---|---|---|
| Fee and commission income | 22 733 | 19 395 | 11 366 | 10 391 | 43 971 |
| Interest income | 3 | 0 | - | - | 3 |
| Net income from financial assets | 373 | 1 219 | 44 | 517 | 1 794 |
| Operating income, total | 23 109 | 20 613 | 11 410 | 10 908 | 45 768 |
| Fee and commission expenses | -212 | -207 | -106 | -102 | -400 |
| Interest expenses | -13 | -1 | -7 | -1 | -1 |
| NET REVENUE | 22 884 | 20 406 | 11 297 | 10 806 | 45 367 |
| Administrative expenses | |||||
| Personnel expenses | -9 661 | -8 741 | -4 553 | -4 598 | -18 327 |
| Other administrative expenses | -1 096 | -1 089 | -515 | -561 | -2 234 |
| Depreciation on tangible and intangible assets | -111 | -93 | -62 | -50 | -216 |
| Depreciation on leases | -374 | - | -187 | - | - |
| Other operating expenses | -691 | -994 | -326 | -503 | -2 141 |
| OPERATING PROFIT (LOSS) | 10 950 | 9 489 | 5 655 | 5 095 | 22 450 |
| Income tax | -2 166 | -1 968 | -1 068 | -1 051 | -4 651 |
| PROFIT (LOSS) FOR THE PERIOD | 8 784 | 7 521 | 4 587 | 4 044 | 17 799 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| 1-6/19 | 1-6/18 | 4-6/19 | 4-6/18 | 1-12/18 | |
|---|---|---|---|---|---|
| Other comprehensive income: | - | - | - | - | - |
| Other comprehensive income after taxes | - | - | - | - | - |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 8 784 | 7 521 | 4 587 | 4 044 | 17 799 |
| Profit for the period attributable to: | |||||
| Equity holders of the parent company | 8 784 | 7 521 | 4 587 | 4 044 | 17 799 |
| Non-controlling interests | - | - | - | ||
| Comprehensive income for the period attributable to: | |||||
| Equity holders of the parent company | 8 784 | 7 521 | 4 587 | 4 044 | 17 799 |
| Non-controlling interests | - | - | - | ||
| Earnings per share calculated from the profit of equity holders of the parent company: | |||||
| Earnings per average share, EUR | 0.23 | 0.20 | 0.12 | 0.11 | 0.47 |
| Diluted earnings per average share, EUR | 0.21 | 0.19 | 0.11 | 0.10 | 0.45 |
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CONSOLIDATED BALANCE SHEET, EUR 1 000
| 30 June 2019 | 30 June 2018 | 31 Dec. 2018 | |
|---|---|---|---|
| ASSETS | |||
| Liquid assets | 9 | 20 | 48 |
| Claims on credit institutions | 7 984 | 7 672 | 15 800 |
| Financial assets | |||
| Financial securities | 4 250 | 1 523 | 9 869 |
| Private equity fund investments | 16 817 | 18 367 | 16 909 |
| Intangible assets | 29 422 | 29 479 | 29 446 |
| Tangible assets | 268 | 293 | 303 |
| Leases | 2 808 | - | - |
| Other assets | 4 941 | 4 103 | 5 087 |
| Accruals and prepaid expenditure | 494 | 613 | 602 |
| Income tax receivables | 256 | 124 | 148 |
| Deferred tax assets | 12 | - | - |
| TOTAL ASSETS | 67 262 | 62 194 | 78 211 |
| LIABILITIES AND EQUITY | |||
| LIABILITIES | |||
| Other liabilities | 4 183 | 3 681 | 4 066 |
| Accruals and deferred income | 7 914 | 6 489 | 11 106 |
| Lease liabilities | 2 868 | - | - |
| Income tax liabilities | 217 | 264 | 746 |
| Deferred tax liabilities | 31 | 50 | 44 |
| TOTAL LIABILITIES | 15 212 | 10 484 | 15 962 |
| EQUITY | |||
| Attributable to equity holders of the parent company: | |||
| Share capital | 11 384 | 11 384 | 11 384 |
| Reserve for invested unrestricted equity | 25 759 | 27 034 | 27 034 |
| Retained earnings | 6 122 | 5 771 | 6 032 |
| Profit (loss) for the period | 8 784 | 7 521 | 17 799 |
| TOTAL EQUITY | 52 049 | 51 710 | 62 249 |
| TOTAL LIABILITIES AND EQUITY | 67 262 | 62 194 | 78 211 |
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CONSOLIDATED CASH FLOW STATEMENT, EUR 1 000
| 1-6/2019 | 1-6/2018 | 1-12/2018 | |
|---|---|---|---|
| CASH FLOW FROM OPERATIONS | |||
| Operating profit | 10 950 | 9 489 | 22 450 |
| Depreciation and write-downs | 486 | 93 | 216 |
| Interest income and expenses | 10 | 1 | -2 |
| Transactions with no related payment transactions | 430 | 48 | 564 |
| Financial assets' cash flow – private equity fund investments | -336 | 681 | 2 011 |
| Change in working capital | |||
| Business receivables, increase (-) / decrease (+) | 254 | -1 435 | -2 376 |
| Interest-free debt, increase (+) / decrease (-) | -3 821 | -3 632 | 1 370 |
| Total change in working capital | -3 568 | -5 067 | -1 005 |
| Cash flow from operations before financial items and taxes | 7 973 | 5 244 | 24 233 |
| Interests received | 3 | 0 | 3 |
| Interests paid | -13 | -1 | -1 |
| Taxes | -2 081 | -1 824 | -4 087 |
| CASH FLOW FROM OPERATIONS | 5 882 | 3 420 | 20 148 |
| CASH FLOW FROM INVESTMENTS | |||
| Investments in intangible and tangible assets | -53 | -126 | -224 |
| Investments/redemptions in other investments – liquid mutual funds | 5 793 | 8 500 | 27 |
| CASH FLOW FROM INVESTMENTS | 5 740 | 8 374 | -197 |
| CASH FLOW FROM FINANCING | |||
| Dividends paid/equity repayments | -20 551 | -18 754 | -18 754 |
| Option issue with a subscription price | 1 350 | - | |
| Subscription of new shares | 39 | 22 | 22 |
| Decrease in the lease liability capital | -314 | - | |
| CASH FLOW FROM FINANCING | -19 477 | -18 732 | -18 732 |
| INCREASE/DECREASE IN LIQUID ASSETS | -7 855 | -6 937 | 1 219 |
| Liquid assets on 31 Jan. | 15 848 | 14 629 | 14 629 |
| Liquid assets on 30 June/31 Dec. | 7 993 | 7 692 | 15 848 |
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CHANGE IN CONSOLIDATED SHAREHOLDERS' EQUITY, EUR 1 000
| Equity attributable to equity holders of the parent company | ||||||
|---|---|---|---|---|---|---|
| Share capital | Reserve for invested unrestricted equity | Fair value reserve | Retained earnings | Total | Total equity | |
| Shareholders' equity on 1 Jan. 2018 | 11 384 | 29 638 | -193 | 21 832 | 62 661 | 62 661 |
| Profit (loss) for the period | 7 521 | 7 521 | 7 521 | |||
| Other comprehensive income | - | - | ||||
| Financial assets | ||||||
| Total comprehensive income | 0 | 7 521 | 7 521 | 7 521 | ||
| Dividend/equity repayment | -2 626 | -16 128 | -18 754 | -18 754 | ||
| Share issue | 22 | 22 | 22 | |||
| Options granted, cost accrual | 261 | 261 | 261 | |||
| IFRS 9 change | 193 | -193 | 0 | 0 | ||
| Other changes | -1 | -1 | -1 | |||
| Shareholders' equity on 30 June 2018 | 11 384 | 27 034 | 0 | 13 292 | 51 710 | 51 710 |
| Shareholders' equity on 1 Jan. 2019 | 11 384 | 27 034 | 0 | 23 831 | 62 249 | 62 249 |
| --- | --- | --- | --- | --- | --- | --- |
| Profit (loss) for the period | 8 784 | 8 784 | 8 784 | |||
| Other comprehensive income | ||||||
| Financial assets | - | - | - | - | ||
| Total comprehensive income | 0 | 8 784 | 8 784 | 8 784 | ||
| Dividend/equity repayment | -2 664 | -17 887 | -20 551 | -20 551 | ||
| Option issue with a subscription price | 1 350 | 1 350 | 1 350 | |||
| Subscription of shares | 39 | 39 | 39 | |||
| Options granted, cost accrual | 178 | 178 | 178 | |||
| Shareholders' equity on 30 June 2019 | 11 384 | 25 759 | 0 | 14 907 | 52 049 | 52 049 |
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FEE AND COMMISSION INCOME, GROUP, EUR 1 000
| 1-6/19 | 1-6/18 | 4-6/19 | 4-6/18 | 1-12/18 | |
|---|---|---|---|---|---|
| Asset management fees | |||||
| Management fees from traditional asset management | 3 942 | 4 545 | 1 957 | 2 250 | 8 611 |
| Real estate and private equity management fees | 15 181 | 11 602 | 7 854 | 6 114 | 25 266 |
| Other fee and commission income | 109 | 196 | 40 | 119 | 321 |
| Performance fees | 1 704 | 1 293 | 773 | 598 | 2 690 |
| Total | 20 935 | 17 636 | 10 624 | 9 081 | 36 887 |
| Corporate finance fees | 1 798 | 1 759 | 742 | 1 311 | 7 083 |
| Fee and commission income, total | 22 733 | 19 395 | 11 366 | 10 392 | 43 971 |
NET INCOME FROM FINANCIAL ASSETS, GROUP, EUR 1 000
| 1-6/19 | 1-6/18 | 4-6/19 | 4-6/18 | 1-12/18 | |
|---|---|---|---|---|---|
| Private equity fund investment operations | |||||
| Profit distribution of funds | 671 | 1 006 | 551 | 487 | 1 863 |
| Changes in fair value and losses | -427 | 256 | -525 | 41 | 128 |
| Total | 243 | 1 261 | 26 | 528 | 1 991 |
| Other investment operations | |||||
| Changes in fair value | 175 | -43 | 63 | -11 | -170 |
| Sales profit/loss | -45 | - | -45 | - | -27 |
| Total | 130 | -43 | 17 | -11 | -197 |
| Net income from financial assets, total | 373 | 1 219 | 44 | 517 | 1 794 |
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FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES, EUR 1 000
| 30 June 2019 | 30 June 2018 | 31 Dec. 2018 | ||||
|---|---|---|---|---|---|---|
| Fair value | Book value | Fair value | Book value | Fair value | Book value | |
| Financial assets | ||||||
| Investments | ||||||
| Private equity fund investments | 16 817 | 16 817 | 18 367 | 18 367 | 16 909 | 16 909 |
| Financial securities | 4 250 | 4 250 | 1 523 | 1 523 | 9 869 | 9 869 |
| Accounts receivable and other receivables | 585 | 585 | 689 | 689 | 3 439 | 3 439 |
| Liquid assets | 7 993 | 7 993 | 7 692 | 7 692 | 15 848 | 15 848 |
| Total | 29 645 | 29 645 | 28 270 | 28 270 | 46 064 | 46 064 |
| Financial liabilities | ||||||
| Accounts payable and other liabilities | 379 | 379 | 311 | 311 | 322 | 322 |
| Lease liabilities | 2 868 | 2 868 | - | - | - | - |
| Total | 3 247 | 3 247 | 311 | 311 | 322 | 322 |
The table shows the fair values and book values of financial assets and liabilities per balance sheet item. The assessment principles of fair values are presented in the accounting principles. The original book value of accounts receivable and accounts payable corresponds to their fair value, as the impact of discounting is not essential taking into account the maturity of the receivables and liabilities.
Value of financial instruments across the three levels of the fair value hierarchy
| 30 June 2019 | 30 June 2018 | 31 Dec. 2018 | ||||
|---|---|---|---|---|---|---|
| Level 1 | Level 3 | Level 1 | Level 3 | Level 1 | Level 3 | |
| Financial assets | ||||||
| Private equity fund investments | - | 16 817 | - | 18 367 | - | 16 909 |
| Financial securities | 4 250 | - | 1 523 | - | 9 869 | - |
| Total | 4 250 | 16 817 | 1 523 | 18 367 | 9 869 | 16 909 |
Level 3 reconciliation: Private equity fund investments
| 1-6/2019 | |
|---|---|
| Opening balance on 1 Jan. 2019 | 16 909 |
| Calls | 1 619 |
| Returns | -1 283 |
| Value change and loss through profit or loss | -427 |
| Closing balance on 30 June 2019 | 16 817 |
| 1-6/2018 | |
| --- | --- |
| Opening balance on 1 Jan. 2018 | 18 792 |
| Calls | 901 |
| Returns | -1 581 |
| Value change and loss through profit or loss | 256 |
| Closing balance on 30 June 2018 | 18 367 |
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| 1-12/2018 | |
|---|---|
| Opening balance on 1 Jan. 2014 | 18 792 |
| Calls | 1 976 |
| Returns | -3 987 |
| Value change and loss through profit or loss | 128 |
| Closing balance on 31 Dec. 2018 | 16 909 |
Level 1 comprises liquid assets the value of which is based on quotes in the liquid market. A market where the price is easily available on a regular basis is regarded as a liquid market.
The fair values of level 3 instruments are based on the value of the fund according to the management company of the fund and their use in widely used valuation models. Private equity fund investments are valued in accordance with a practice widely used in the sector, International Private Equity and Venture Capital Guidelines. During the period under review, no transfers took place between the levels of the fair value hierarchy.
PRIVATE EQUITY FUND INVESTMENTS, EUR 1 000
| Market value | 30 June 2019 | 31 Dec. 2018 |
|---|---|---|
| Funds managed by eQ: | ||
| Funds of funds: | ||
| eQ PE XI US LP | 0 | 0 |
| eQ PE X North LP | 142 | 43 |
| eQ PE IX US LP | 162 | 20 |
| eQ PE VIII North LP | 1 573 | 1 232 |
| eQ PE VII US LP | 1 829 | 1 486 |
| eQ PE VI North LP | 1 754 | 1 581 |
| Amanda V East LP | 4 233 | 4 194 |
| Amanda IV West LP | 1 520 | 1 902 |
| Amanda III Eastern PE LP | 3 236 | 3 751 |
| European Fund Investments LP (EFI II) | 0 | 33 |
| Total | 14 450 | 14 242 |
| Funds managed by others: | ||
| Large buyout funds | 1 040 | 1 094 |
| Midmarket funds | 602 | 691 |
| Venture funds | 724 | 881 |
| Total | 16 817 | 16 909 |
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REMAINING INVESTMENT COMMITMENTS OF PRIVATE EQUITY FUND INVESTMENTS, EUR 1 000
| Investment commitment | 30 June 2019 | 31 Dec. 2018 |
|---|---|---|
| Funds managed by eQ: | ||
| Funds of funds: | ||
| eQ PE XI US LP | 878 | 0 |
| eQ PE X North LP | 850 | 950 |
| eQ PE IX US LP | 773 | 914 |
| eQ PE VIII North LP | 1 258 | 1 595 |
| eQ PE VII US LP | 856 | 1 085 |
| eQ PE VI North LP | 773 | 1 002 |
| Amanda V East LP | 595 | 682 |
| Amanda IV West LP | 427 | 472 |
| Amanda III Eastern PE LP | 348 | 448 |
| European Fund Investments LP (EFI II) | 35 | 35 |
| Total | 6 793 | 7 185 |
| Funds managed by others: | ||
| Large buyout funds | 155 | 174 |
| Midmarket funds | 421 | 422 |
| Venture funds | 12 | 12 |
| Total | 7 380 | 7 791 |
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SEGMENT INFORMATION, EUR 1 000
| 1-6/19 | Asset Man. | Corporate Finance | Invest-ments | Other | Elimin-ations | Group total |
|---|---|---|---|---|---|---|
| Fee and commission income | 20 935 | 1 798 | - | - | 22 733 | |
| From other segments | 100 | - | - | - | -100 | - |
| Interest income | - | - | - | 3 | 3 | |
| Net income from financial assets | - | - | 243 | 130 | 373 | |
| Other operating income | - | - | - | - | - | |
| From other segments | - | - | - | 38 | -38 | - |
| Operating income, total | 21 035 | 1 798 | 243 | 171 | -138 | 23 109 |
| Fee and commission expenses | -208 | - | - | -4 | -212 | |
| To other segments | - | - | -100 | - | 100 | - |
| Interest expenses | -9 | -3 | - | -2 | -13 | |
| NET REVENUE | 20 819 | 1 795 | 143 | 165 | -38 | 22 884 |
| Administrative expenses | ||||||
| Personnel expenses | -7 824 | -1 104 | - | -733 | -9 661 | |
| Other administrative expenses | -836 | -170 | - | -128 | 38 | -1 096 |
| Depreciation on tangible and intangible assets | -83 | -10 | - | -18 | -111 | |
| Depreciation on leases | -255 | -79 | -41 | -374 | ||
| Other operating expenses | -477 | -78 | - | -137 | -691 | |
| OPERATING PROFIT (LOSS) | 11 345 | 354 | 143 | -892 | 0 | 10 950 |
| Income tax | -2 166 | -2 166 | ||||
| PROFIT (LOSS) FOR THE PERIOD | -3 058 | 8 784 | ||||
| 1-6/18 | Asset Man. | Corporate Finance | Invest-ments | Other | Elimin-ations | Group Total |
| --- | --- | --- | --- | --- | --- | --- |
| Fee and commission income | 17 636 | 1 759 | - | - | 19 395 | |
| From other segments | 100 | - | - | - | -100 | - |
| Interest income | - | - | - | 0 | ||
| Net income from financial assets | - | - | 1 261 | -43 | 1 219 | |
| Other operating income | - | - | - | - | - | |
| From other segments | - | - | - | 38 | -38 | - |
| Operating income, total | 17 736 | 1 759 | 1 261 | -4 | -138 | 20 613 |
| Fee and commission expenses | -203 | - | - | -4 | -207 | |
| To other segments | - | - | -100 | - | 100 | - |
| Interest expenses | - | - | - | -1 | -1 | |
| NET REVENUE | 17 533 | 1 759 | 1 161 | -9 | -38 | 20 406 |
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| 1-6/18 | Asset Man. | Corporate Finance | Invest-ments | Other | Elimin-ations | Group Total |
|---|---|---|---|---|---|---|
| Administrative expenses | ||||||
| Personnel expenses | -6 929 | -1 067 | - | -745 | -8 741 | |
| Other administrative expenses | -841 | -151 | - | -135 | 38 | -1 089 |
| Depreciation on tangible and intangible assets | -74 | -7 | - | -12 | -93 | |
| Other operating expenses | -685 | -146 | - | -163 | -994 | |
| OPERATING PROFIT (LOSS) | 9 004 | 387 | 1 161 | -1 064 | 0 | 9 489 |
| Income tax | -1 968 | -1 968 | ||||
| PROFIT (LOSS) FOR THE PERIOD | -3 032 | 7 521 | ||||
| 4-6/19 | Asset Man. | Corporate Finance | Invest-ments | Other | Elimin-ations | Group Total |
| --- | --- | --- | --- | --- | --- | --- |
| Fee and commission income | 10 624 | 742 | - | - | 11 366 | |
| From other segments | 50 | - | - | - | -50 | - |
| Interest income | - | - | - | - | - | |
| Net income from financial assets | - | - | 26 | 17 | 44 | |
| Other operating income | - | - | - | - | - | |
| From other segments | - | - | - | 19 | -19 | - |
| Operating income, total | 10 674 | 742 | 26 | 36 | -69 | 11 410 |
| Fee and commission expenses | -104 | - | - | -2 | -106 | |
| To other segments | - | - | -50 | - | 50 | - |
| Interest expenses | -4 | -1 | - | -1 | -7 | |
| NET REVENUE | 10 566 | 741 | -24 | 33 | -19 | 11 297 |
| Administrative expenses | ||||||
| Personnel expenses | -3 733 | -486 | - | -334 | -4 553 | |
| Other administrative expenses | -396 | -64 | - | -74 | 19 | -515 |
| Depreciation on tangible and intangible assets | -44 | -7 | - | -10 | -62 | |
| Depreciation on leases | -127 | -39 | -21 | -187 | ||
| Other operating expenses | -216 | -44 | - | -65 | -326 | |
| OPERATING PROFIT (LOSS) | 6 049 | 100 | -24 | -471 | 0 | 5 655 |
| Income tax | -1 068 | -1 068 | ||||
| PROFIT (LOSS) FOR THE PERIOD | -1 538 | 4 587 |
23
eq
| 4-6/18 | Asset Man. | Corporate Finance | Invest-ments | Other | Elimin-ations | Group Total |
|---|---|---|---|---|---|---|
| Fee and commission income | 9 080 | 1 311 | - | - | 10 391 | |
| From other segments | 50 | - | - | - | -50 | - |
| Interest income | - | - | - | - | - | |
| Net income from financial assets | - | - | 527 | -11 | 516 | |
| Other operating income | - | - | - | - | - | |
| From other segments | - | - | - | 19 | -19 | - |
| Operating income, total | 9 130 | 1 311 | 527 | 8 | -69 | 10 908 |
| Fee and commission expenses | -100 | - | - | -2 | -102 | |
| To other segments | - | - | -50 | - | 50 | - |
| Interest expenses | - | - | - | -1 | -1 | |
| NET REVENUE | 9 031 | 1 311 | 477 | 6 | -19 | 10 806 |
| Administrative expenses | ||||||
| Personnel expenses | -3 527 | -631 | - | -439 | -4 598 | |
| Other administrative expenses | -424 | -69 | - | -87 | 19 | -561 |
| Depreciation on tangible and intangible assets | -39 | -4 | - | -7 | -50 | |
| Other operating expenses | -348 | -74 | - | -80 | -503 | |
| OPERATING PROFIT (LOSS) | 4 692 | 533 | 477 | -608 | 0 | 5 094 |
| Income tax | -1 051 | -1 051 | ||||
| PROFIT (LOSS) FOR THE PERIOD | -1 659 | 4 043 | ||||
| 1-12/18 | Asset Man. | Corporate Finance | Invest-ments | Other | Elimin-ations | Group Total |
| --- | --- | --- | --- | --- | --- | --- |
| Fee and commission income | 36 887 | 7 083 | - | - | 43 971 | |
| From other segments | 200 | - | - | - | -200 | - |
| Interest income | - | - | - | 3 | 3 | |
| Net income from financial assets | - | - | 1 991 | -197 | 1 794 | |
| Other operating income | - | - | - | - | - | |
| From other segments | - | - | - | 77 | -77 | - |
| Operating income, total | 37 087 | 7 083 | 1 991 | -117 | -277 | 45 768 |
| Fee and commission expenses | -392 | - | - | -8 | -400 | |
| To other segments | - | - | -200 | - | 200 | - |
| Interest expenses | - | - | - | -1 | -1 | |
| NET REVENUE | 36 696 | 7 083 | 1 791 | -126 | -77 | 45 367 |
| Administrative expenses | ||||||
| Personnel expenses | -13 824 | -3 238 | - | -1 265 | -18 327 | |
| Other administrative expenses | -1 730 | -326 | - | -255 | 77 | -2 234 |
| Depreciation on tangible and intangible assets | -167 | -15 | - | -34 | -216 | |
| Other operating expenses | -1 478 | -292 | - | -371 | -2 141 | |
| OPERATING PROFIT (LOSS) | 19 498 | 3 211 | 1 791 | -2 051 | 0 | 22 450 |
| Income tax | -4 651 | -4 651 | ||||
| PROFIT (LOSS) FOR THE PERIOD | -6 701 | 17 799 |
24
eQ
The fee and commission income of the Asset Management segment from other segments comprises the management fee income from eQ Group's own investments in private equity funds. The corresponding expenses are allocated to the Investments segment. Under the item Other, income from other segments comprises the administrative services provided by Group administration to other segments and the undivided interest income and expenses. The item Other also includes the undivided personnel, administration and other expenses allocated to Group administration. The taxes not distributed to the segments are also presented under the item Other.
The highest operative decision-making body does not follow assets and liabilities at segment level, due to which the Group's assets and liabilities are not presented as divided between the segments.
PROFIT DEVELOPMENT OF SEGMENTS PER QUARTER, EUR 1 000
| Q2/19 | Q1/19 | Q4/18 | Q3/18 | Q2/18 | |
|---|---|---|---|---|---|
| Asset Management | |||||
| Net revenue | 10 566 | 10 253 | 9 849 | 9 313 | 9 031 |
| Operating profit | 6 049 | 5 296 | 5 107 | 5 387 | 4 692 |
| Corporate Finance | |||||
| Net revenue | 741 | 1 054 | 4 829 | 496 | 1 311 |
| Operating profit | 100 | 255 | 2 765 | 59 | 533 |
| Investments | |||||
| Net revenue | -24 | 167 | 196 | 434 | 478 |
| Operating profit | -24 | 167 | 196 | 434 | 478 |
| Other segments and eliminations | |||||
| Net revenue | 14 | 113 | -153 | -3 | -14 |
| Operating profit | -471 | -422 | -676 | -311 | -608 |
| Group total | |||||
| Net revenue | 11 297 | 11 586 | 14 721 | 10 240 | 10 806 |
| Operating profit | 5 655 | 5 296 | 7 392 | 5 569 | 5 095 |
| Profit for the period | 4 587 | 4 197 | 5 851 | 4 427 | 4 044 |
eQ
CAPITAL ADEQUACY, EUR 1 000
| | CRR
30 June
2019
eQ Group | CRR
31 Dec.
2019
eQ Group |
| --- | --- | --- |
| Equity | 52 049 | 62 249 |
| Common equity tier 1 (CET 1) before deductions | 52 049 | 62 249 |
| Deductions from CET 1 | | |
| Intangible assets | -29 422 | -29 446 |
| Unconfirmed profit for the period | -8 784 | -17 799 |
| Dividend proposal by the Board* | | -2 563 |
| Common equity tier 1 (CET1) | 13 843 | 12 441 |
| Additional tier 1 (AT1) | 0 | 0 |
| Tier 1 (T1 = CET1 + AT1) | 13 843 | 12 441 |
| Tier 2 (T2) | 0 | 0 |
| Total capital (TC = T1 + T2) | 13 843 | 12 441 |
| Risk-weights, total | 126 415 | 128 956 |
| of which credit risk | 45 052 | 48 464 |
| of which market risk - currency risk | 5 447 | 4 576 |
| of which operational risk | 75 916 | 75 916 |
| Common equity tier 1 (CET1) / risk-weights, % | 11.0% | 9.6% |
| Tier 1 (T1) / risk-weights, % | 11.0% | 9.6% |
| Total capital (TC) / risk-weights, % | 11.0% | 9.6% |
| Leverage ratio, % | 30.6% | 22.0% |
| Excess of total capital compared with the minimum level (8% capital adequacy ratio) | 3 729 | 2 125 |
| Excess of total capital compared with the target level (10% capital adequacy ratio) | 1 201 | -454 |
*The dividend and equity repayment proposed by the Board exceeding the profit for the period.
26
eQ
GROUP KEY RATIOS
| 30 June 2019 | 30 June 2018 | 31 Dec. 2018 | |
|---|---|---|---|
| Profit (loss) for the period to the equity holders of the parent company, EUR 1 000 | 8 784 | 7 521 | 17 799 |
| Earnings per average share, EUR | 0.23 | 0.20 | 0.47 |
| Diluted earnings per average share, EUR | 0.21 | 0.19 | 0.45 |
| Equity per share, EUR | 1.37 | 1.37 | 1.65 |
| Equity per average share, EUR *) | 1.37 | 1.39 | 1.66 |
| Return on investment, ROI % p.a. | 30.0 | 26.3 | 28.5 |
| Return on equity, ROE % p.a. | 30.7 | 26.3 | 28.5 |
| Equity to assets ratio, % | 77.4 | 83.1 | 79.6 |
| Cost/income ratio, Group, % | 52.1 | 53.5 | 50.5 |
| Share price at the end of the period, EUR | 9.14 | 8.38 | 7.60 |
| Market value, EUR million | 347.8 | 316.0 | 286.6 |
| Personnel calculated as full-time resources at the end of the period | 90 | 88 | 86 |
*) Weighted average number of shares outstanding.
eQ applies the guidelines of the European Securities and Markets Authority, ESMA, on alternative performance measures. An alternative performance measure is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework (IFRS). eQ presents alternative measures in order to describe the financial development of its operations. The calculation principles and formulae of the key ratios are presented in the company's 2018 financial statements, which are available on the company website at www.eQ.fi. The key ratios presented by eQ can be directly calculated with the calculation formulae based on the information in the income statement, balance sheet and notes thereto.
REMAINING COMMITMENTS
On 30 June 2019, eQ's remaining investment commitments in private equity funds totalled EUR 7.4 million (EUR 7.8 million on 31 Dec. 2018). Other commitments at the end of the period totalled EUR 0.1 million (EUR 3.3 million on 31 Dec. 2018).
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