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eQ Oyj Interim / Quarterly Report 2020
3263_rns_2020-04-28_fb8a76e7-3797-4979-969e-43c0ddd2eda9.pdf
Interim / Quarterly Report
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Q1 2020
INTERIM REPORT
eQ
eQ PLC
INTERIM REPORT
28 April 2020 at 8:00 AM
eQ PLC'S INTERIM REPORT Q1 2020 – eQ'S RESULT GREW BY 14%
January to March 2020 in brief
- During the period under review, the Group's net revenue totalled EUR 12.0 million (EUR 11.6 million from 1 Jan. to 31 March 2019).
- The Group's net fee and commission income was EUR 11.7 million (EUR 11.3 million).
- The Group's net investment income from own investment operations was EUR 0.3 million (EUR 0.3 million), including the return from private equity fund investments and liquid fixed income funds.
- The Group's operating profit grew by 13% to EUR 6.0 million (EUR 5.3 million).
- The Group's profit was EUR 4.8 million (EUR 4.2 million).
- The consolidated earnings per share were EUR 0.13 (EUR 0.11).
- The net cash flow from the Group's own private equity fund investment operations was EUR 0.5 million (EUR -0.3 million).
- The net revenue of the Asset Management segment increased by 10% to EUR 11.3 million (EUR 10.3 million) and the operating profit by 21% to EUR 6.4 million (EUR 5.3 million).
- The net revenue of the Corporate Finance segment was EUR 0.4 million (EUR 1.1 million) and the operating profit was EUR -0.1 million (EUR 0.3 million). 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.
| Key ratios | 1-3/20 | 1-3/19 | Change | 1-12/19 |
|---|---|---|---|---|
| Net revenue, Group, M€ | 12.0 | 11.6 | 4% | 50.6 |
| Net revenue, Asset Management, M€ | 11.3 | 10.3 | 10% | 44.3 |
| Net revenue, Corporate Finance, M€ | 0.4 | 1.1 | -57% | 5.4 |
| Net revenue, Investments, M€ | 0.6 | 0.2 | 277% | 0.8 |
| Net revenue, Group administration and eliminations, M€ | -0.3 | 0.1 | 0.1 | |
| Operating profit, Group, M€ | 6.0 | 5.3 | 13% | 26.3 |
| Operating profit, Asset Management, M€ | 6.4 | 5.3 | 21% | 25.4 |
| Operating profit, Corporate Finance, M€ | -0.1 | 0.3 | -146% | 1.9 |
| Operating profit, Investments, M€ | 0.6 | 0.2 | 277% | 0.8 |
| Operating profit, Group administration, M€ | -0.9 | -0.4 | -1.8 | |
| Profit for the period, M€ | 4.8 | 4.2 | 14% | 21.0 |
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| Key ratios | 1-3/20 | 1-3/19 | Change | 1-12/19 |
|---|---|---|---|---|
| Earnings per share, € | 0.13 | 0.11 | 13% | 0.55 |
| Equity per share, € | 1.21 | 1.25 | -3% | 1.70 |
| Cost/income ratio, Group, % | 49.9 | 54.3 | -8% | 48.1 |
| Liquid assets, M€ | 35.0 | 32.1 | 9% | 32.3 |
| Private equity fund investments, M€ | 16.4 | 17.4 | -6% | 16.2 |
| Interest-bearing loans, M€ | 0.0 | 0.0 | 0% | 0.0 |
| Assets under management excluding reporting services, € billion | 6.6 | 5.9 | 11% | 6.8 |
| Assets under management total, € billion | 8.0 | 10.5 | -23% | 11.7 |
Janne Larma, CEO
The COVID-19 pandemic took the whole world, including the investment market, by surprise with its huge effect. The impacts of the pandemic on the capital market were exceptionally rapid and large. In February, the daily fluctuations in the capital market were historically large, both upwards and downwards. It is clear that GNPs will experience a major fall this year. At the moment, it is estimated that the GNP will fall globally by 3%, which is considerably more than during the financial crisis 2008 to 2009. In addition, we are now in a situation where nobody knows how the virus will behave and when the economy will begin to normalise. With regard to the economy, it would be of utmost importance that we could gradually begin re-opening economies in order to prevent mass unemployment and a wave of bankruptcies. Fortunately there is already trust in this, which can also be seen in the rather steep rise in share prices from the lowest levels. On 24 April, the world stock exchange index was 12% below the year-end level and the Nasdaq technology index only 4% below the year-end level. The rise of the world stock exchange index from the lowest figures in March is 24%.
eQ's result was very good
eQ's first quarter was very good. The Group's net revenue in the first quarter was EUR 12.0 million and the operating profit was EUR 6.0 million. The Group's operating profit grew by 13%, and we have managed to increase our operating profit already for 6 years, i.e. during 24 consecutive quarters.
eQ Asset Management's strong growth continued
The result of eQ Asset Management was once more excellent. The net revenue of eQ Asset Management increased by 10% on the previous year to EUR 11.3 million. Operating profit grew by 21% to EUR 6.4 million. The management fees of real estate and private equity asset management grew by EUR 1.7 million on the previous year, i.e. by 24%. The management fees from traditional asset management rose by 2%, even though the assets under management fell considerably in March. Performance fees fell considerably from the year before.
The excellent development of eQ Asset Management is due to the large share of alternative investment products. The fee and commission income of the real estate and private equity operations stood for 80% per cent of the fee and commission income in the first quarter. Especially the products of private equity asset management saw a very strong demand. In April, we held the second closings of the eQ PE XII North and eQ PE SF III private equity funds at a total of EUR 272 million. Besides, we obtained four new mandate clients to private equity asset management. Private equity investments increase the diversification and stability of investment portfolios, and this is even more important when the volatility of the equity and bond markets is high. Within real estate asset management, we took new subscriptions from clients only to the eQ Finnish Real Estate Fund in the first quarter, and due to the COVID-19 outbreak, the number of subscriptions was lower than in previous quarters. The returns of the real estate funds were good, especially in relation to the rest of the investment market. The return of the eQ Care Fund was 1.4% and that of the eQ Finnish Real Estate Fund 0.7%.
eQ
In traditional asset management, the fee and commission income grew on the previous year. Due to the extremely challenging market situation, more than half of the funds managed by eQ gave a lower return than the benchmark index in the 12-month period. Despite this, 67% of the funds managed by eQ have surpassed their benchmark indices during an investment period of five years.
Advium's fee and commission income fell
The COVID-19 crisis influenced Advium's operations negatively rather quickly. During the period under review, Advium acted as advisor in two transactions, which were finalised during the period. Advium acted as advisor to pension insurance company Elo, as it sold a storage, business and office property in Jätkäsaari, Helsinki to a fund managed by Corum AM. In addition, Advium acted as advisor in an arrangement signed in the summer of 2019, where the Swedish company Peab acquired YIT's paving and mineral aggregates business. The transaction was finalised at the turn of March and April.
The transaction market for both mergers and acquisitions and real estate transactions is in a stand-by situation. Both buyers and seller wait for better visibility into the economic outlook. A large part of the existing projects at Advium have either been interrupted for the time being or postponed, but there are ongoing projects as well. If the operating environment will become more normal during the summer, we believe that the transaction volume will begin to rise towards the end of the year. In the first quarter, Advium's net revenue was EUR 0.4 million (EUR 1.1 million from 1 Jan. to 31 March 2019) and operating profit EUR -0.1 million (EUR 0.3 million).
The operating profit of the Investments segment was positive
The operating profit of the Investments segment was EUR 0.6 million. The net cash flow was EUR 0.5 million. At the end of March, the balance sheet value of the private equity fund investments was EUR 16.4 million. eQ Plc made an investment commitment of EUR 1 million to the eQ PE XII North private equity fund in January. The impact of the COVID-19 crisis on funds of funds and the Investments segment will be seen with a lag.
Outlook
At the moment, it is still extremely unclear when the COVID-19 outbreak will begin to ease off and economies start to return to more normal circumstances. This naturally influences national economies and the development of the capital market during the remaining part of the year.
The outlook for the financial year is still unaltered, however, and we expect the net revenue and operating profit of the Asset Management segment to grow from the previous year. The greatest uncertainty regarding the Asset Management segment is related to performance fees. It is difficult to assess how real estate returns will develop during the remaining part of the year, and it is also possible that the performance fee from the Amanda IV fund will be postponed to 2021.
We do not issue profit guidance for the Corporate Finance and Investment segments. The results of these segments are highly dependent on when the activity in the transaction market will begin to pick up.
eQ's interim report 1 January to 31 March 2020 is enclosed to this release and it is also available on the company website at www.eQ.fi.
Additional information: Janne Larma, CEO, tel. +358 9 6817 8920
Distribution: Nasdaq Helsinki, www.eQ.fi, media
eQ Group is a group of companies that concentrates on asset management and corporate finance business. eQ Asset Management offers a wide range of asset management services (including private equity funds
eQ
and real estate asset management) for institutions and private individuals. The assets managed by the Group total approximately EUR 8.0 billion. Advium Corporate Finance, which is part of the Group, offers services related to mergers and acquisitions, real estate transactions and equity capital markets.
More information about the Group is available on our website www.eQ.fi.
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eQ
eQ PLC'S INTERIM REPORT 1 JAN. TO 31 MARCH 2020
Result of operations and financial position 1 Jan. to 31 March 2020
- During the period under review, the Group's net revenue totalled EUR 12.0 million (EUR 11.6 million from 1 Jan. to 31 March 2019).
- The Group's net fee and commission income was EUR 11.7 million (EUR 11.3 million).
- The Group's net investment income from own investment operations was EUR 0.3 million (EUR 0.3 million), including the return from private equity fund investments and liquid fixed income funds.
- The Group's operating profit grew by 13% to EUR 6.0 million (EUR 5.3 million).
- The Group's profit was EUR 4.8 million (EUR 4.2 million).
- The consolidated earnings per share were EUR 0.13 (EUR 0.11).
- The net cash flow from the Group's own private equity fund investment operations was EUR 0.5 million (EUR -0.3 million).
- The net revenue of the Asset Management segment increased by 10% to EUR 11.3 million (EUR 10.3 million) and the operating profit by 21% to EUR 6.4 million (EUR 5.3 million).
- The net revenue of the Corporate Finance segment was EUR 0.4 million (EUR 1.1 million) and the operating profit was EUR -0.1 million (EUR 0.3 million). 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.
Operating environment
The worst trade policy disputes seemed to be over by the early months of 2020, and the sentiment in both economies and the market was prudently positive after the strong stock exchange year 2019. Towards the end of January, we started hearing news about the spreading of a strange virus in China, and the country initiated extensive measures in order to close its economy and prevent the virus from spreading. As late as in mid-February many western listed companies, for instance, commented that the impacts of the virus would be limited and mainly related to operations in China. At the same time, companies started to consider the risks of the virus spreading more extensively outside China, and soon there were also indications of this. Before the end of February, the epidemic – which was soon called a pandemic – started spreading, first to Korea and Italy, for instance. At this stage, we also started receiving the first news about the serious impacts on growth that the measures taken by China had had.
In March, the COVID-19 virus had spread globally, and almost all countries had introduced extensive isolation measures, which in practice put a stop to large parts of economies. The Fed, ECB and other central banks launched huge securities purchase programmes, eased the capital adequacy requirements of banks, and the majority of governments announced massive support packages to the economy. China, where the epidemic started, was able to re-open its economy and restore activity for large parts towards the end of March.
The impacts of the COVID-19 pandemic on the bond and equity market were dramatic beginning from mid-February. Share prices fell by 30% at their most, and for example in the US, stock exchanges could fluctuate by more than 10% per day. Market volatility rose to the same level as during the financial crisis, partly even higher. Movements were drastic in the bond market as well, and the liquidity of the market deteriorated considerably. Towards the end of March, the worst panic seemed to recede owing to the massive support operations by central banks and governments. The clear improvement of bond market liquidity also contributed to this development.
In the whole quarter, the greatest fall in share prices took place in Europe, where the MSCI Europe index gave a -22.6% return. The return of the emerging markets index was -21.8%, that of Finland -19.1% and the US -17.9%, calculated in euros (in dollars by -19.7%). As for bond indices, high yield loans gave a -14.4%
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return, emerging market loans -8.6% and investment grade bonds a -6.1% return in the whole quarter. The euro government bond index rose by 0.20%, but variations by country were large.
Major events during the period under review
eQ Plc's Annual General Meeting was held on 25 March 2020. Nicolas Berner, Georg Ehrnrooth, Timo Kokkila, Lotta Kopra and Tomas von Rettig were re-elected to the Board. 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 12.0 million (EUR 11.6 million from 1 Jan. to 31 March 2019). The Group's net fee and commission income was EUR 11.7 million (EUR 11.3 million). The Group's net investment income from own investment operations was EUR 0.3 million, including the return from private equity fund investments and liquid fixed income funds (EUR 0.3 million).
The Group's expenses and depreciation totalled EUR 6.0 million (EUR 6.3 million). Personnel expenses were EUR 4.9 million (EUR 5.1 million), other administrative expenses totalled EUR 0.5 million (EUR 0.6 million), and the other operating expenses were EUR 0.3 million (EUR 0.4 million). Depreciation was EUR 0.3 million (EUR 0.2 million).
The Group's operating profit was EUR 6.0 million (EUR 5.3 million), and the profit for the period was EUR 4.8 million (EUR 4.2 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 period, eQ had 26 mutual funds registered in Finland. The number of funds increased during the quarter with two funds that were transferred from Aurejärvi Asset Management. The new funds are eQ Global and eQ Europe Small Cap.
As a result of the widening of credit risk margins and the increase in the interest rate level, the returns of eQ's fixed income funds were negative during the period. Above in in March, the returns were negative and the liquidity of the market was also partly poor towards the end of the month. The smallest value decreases were seen in the eQ Euro Short Term and eQ Government Bond funds. The best return as compared with benchmark indices came from the eQ Government Bond fund. Of eQ's five Morningstar rated fixed income funds three have the best rating, e.g. five stars, and one has four stars. In addition, the eQ Euro Investment Grade fund was awarded as the best fund measured with a five-year return in this year's Lipper Scandinavian "Bond EUR Corporates" series.
The returns of equity funds were also negative as a result of the crash experienced in March. The eQ Blue Planet showed the smallest negative value change. The eQ Blue Planet, eQ Emerging Markets Small Cap and eQ Europe Property funds gave excellent returns compared with their benchmark indices. On 11 March 2020, eQ Asset Management won one of the major prices awarded by Morningstar. Morningstar recognised the entire equity fund range of eQ with its "Best Equity Fund House" award. This extremely highly esteemed award is based on the five-year risk-adjusted returns of eQ's equity funds.
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Of the funds managed by eQ, 23 per cent surpassed their benchmark indices in the three-month period, and in the past three years, 42 per cent of the funds managed by eQ have surpassed their benchmark indices. The average Morningstar rating of funds managed by eQ was 4.1 stars at the end of the period. The returns of the discretionary asset management portfolios that eQ manages varied between -7.9 and -21.0% during the three-month period, based on the allocation of the investment portfolio. The return of the portfolios that are only invest in Finnish shares exceeded -20%, which was below the return of the benchmark index.
Private Equity
The first close of the new eQ PE XII North private equity fund was held at the end of January 2020 at EUR 126 million. The second close of the fund was held in April at EUR 157 million, and the aim is to hold the final close in June. The eQ PE XII North fund makes investments in private equity funds that invest in unlisted, small and mid-sized companies in Northern Europe. In January, eQ also established its third secondary market fund eQ PE SF III. The first close of the fund was held at EUR 75 million. The second close of the fund was held in April at EUR 115 million, and the aim is to hold the final close in June.
At the end of the period under review, the assets in private equity funds managed by eQ totalled EUR 1 760 million (EUR 1 609 million) and the assets managed under private equity mandates were EUR 777 million (EUR 677 million).
Real estate investments
At the end of the third quarter, new subscriptions for EUR 27 million were made in the eQ Finnish Real Estate Fund. At the end of the quarter, the size of the fund was EUR 701 million, and its real estate property amounted to almost EUR 1.1 billion. The investment operations of the fund have been extremely successful, and the return since establishment is 8.9% p.a. The fund already has almost 2 700 unit holders.
The eQ Care Fund was closed for new subscriptions in the first quarter, but net subscriptions worth EUR 32 million were made in the fund with paid profit distribution shares. At the end of the period under review, the size of the fund was EUR 996 million and its real estate property amounted to almost EUR 1.3 billion. The return of the fund since establishment is 8.9% p.a., and the fund has more than 4 000 unit holders.
Overall, eQ's real estate funds had real estate property worth more than EUR 2.4 billion 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 13 persons.
Assets under management and clients
At the end of the period, the assets managed by eQ Asset Management, excluding assets covered by private equity reporting services, were EUR 6 581 million and altogether EUR 8 016 million. The assets fell by EUR 186 million from the beginning of the year excluding private equity reporting services, and altogether by EUR 3 670 million (EUR 8 016 / 11 686 million on 31 Dec. 2019). The considerable fall in the private equity reporting services was in practice due to one large institutional investor, who went over to an international service provider. The transfer has no impact on the result in practice.
At the end of the period, the assets managed by mutual funds registered in Finland totalled EUR 2 991 million (EUR 3 276 million), and the assets decrease by EUR 286 million as a result of the market movement. Mutual funds managed by international partners and assets covered by other asset management operations totalled EUR 1 053 million (EUR 1 206 million). The assets managed under private equity funds and asset management totalled EUR 3 972 million (EUR 7 204 million), the share of eQ funds being EUR 1 760 million (EUR 1 609 million) and that of mandates EUR 777 million (EUR 677 million). The assets covered by the reporting service totalled EUR 1 435 million (EUR 4 919 million).
Result of the Asset Management segment
During the period under review, the net revenue of the Asset Management segment increased by 10% and the operating profit by 21% to EUR 6.4 million (EUR 5.3 million from 1 Jan. to 31 March 2019). The management fees of the real estate and private equity operations increased by 24% during the period.
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Performance fees fell by 80% as a result of their typical strong fluctuation per quarter and financial period. The cost/income ratio was 43.1% (48.3%). Calculated as full-time resources, the Asset Management segment had 72 employees at the end of the period under review.
| Asset Management | 1-3/20 | 1-3/19 | Change | 1-12/19 |
|---|---|---|---|---|
| Net revenue, M€ | 11.3 | 10.3 | 10% | 44.3 |
| Operating profit, M€ | 6.4 | 5.3 | 21% | 25.4 |
| Assets under management excluding reporting services, € billion | 6.6 | 5.9 | 11% | 6.8 |
| Assets under management total, € billion | 8.0 | 10.5 | -23% | 11.7 |
| Cost/income ratio, % | 43.1 | 48.3 | -11% | 42.7 |
| Personnel as full-time resources | 72 | 69 | 4% | 69 |
| Fee and commission income, Asset Management, M€ | 1-3/20 | 1-3/19 | Change | 1-12/19 |
| --- | --- | --- | --- | --- |
| Management fees from traditional asset management | 2.0 | 2.0 | 2% | 8.0 |
| Real estate and private equity management fees | 9.1 | 7.4 | 24% | 32.1 |
| Other fee and commission income | 0.1 | 0.1 | -24% | 0.3 |
| Performance fees | 0.2 | 0.9 | -80% | 4.4 |
| Total | 11.4 | 10.4 | 10% | 44.7 |
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.
The global COVID-19 outbreak has also had a clear impact on Advium's business. Advium's order base remains good, but due to the challenging operating environment several projects within both traditional M&As and real estate transactions have been postponed and partly interrupted. If the COVID-19 outbreak will calm down, the stalled economy begins to function and the operating environment becomes more normal towards the end of the first half of the year, Advium believes that the transaction volumes will also begin to revive during the second half.
During the first quarter, Avdium acted as advisor in one finalised transaction, where Advium acted as
- advisor to the seller, when pension insurance company Elo sold a storage, business and office property in Jătkăsaari, Helsinki to a fund managed by Corum AM.
In addition, an arrangement signed in the summer of 2019, where the Swedish company Peab acquired YIT's paving and mineral aggregates business, was finalised at the turn of March and April.
Result of the Corporate Finance segment
Advium's net revenue during the period under review was EUR 0.4 million (EUR 1.1 million from 1 Jan. to 31 March 2019). The operating profit was EUR -0.1 million (EUR 0.3 million). The segment had 14 employees at the end of the period.
It is typical of corporate finance business that success fees have a considerable impact on invoicing, due to which the result may vary considerably from quarter to quarter.
| Corporate Finance | 1-3/20 | 1-3/19 | Change | 1-12/19 |
|---|---|---|---|---|
| Net revenue, M€ | 0.4 | 1.1 | -57% | 5.4 |
| Operating profit, M€ | -0.1 | 0.3 | -146% | 1.9 |
| Cost/income ratio, % | 125.9 | 75.9 | 66% | 64.1 |
| Personnel as full-time resources | 14 | 15 | -7% | 15 |
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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 was EUR 0.6 million (EUR 0.2 million from 1 Jan. to 31 March 2019). At the end of the period, the fair value of the private equity fund investments was EUR 16.4 million (EUR 16.2 million on 31 Dec. 2019) and the amount of the remaining investment commitments was EUR 7.7 million (EUR 6.7 million). Of the market value, 87% 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.
During the period, the investment objects returned capital for EUR 0.5 million (EUR 0.2 million from 1 Jan. to 31 March 2019) and distributed a profit of EUR 0.0 million (EUR 0.1 million). Capital calls totalled EUR 0.1 million (EUR 0.6 million). The net cash flow from investments during the period was EUR 0.5 million (EUR - 0.3 million). The value changes of the private equity fund investments recognised through profit or loss were EUR 0.6 million during the period (EUR 0.1 million). The Group's internal management fee expenses, which are included in the result of the Investments segment, totalled EUR 0.04 million (EUR 0.05 million).
During the period under review, eQ Plc made a EUR 1.0 million investment commitment in the eQ PE XII North private equity fund. The eQ PE XII North fund makes investments in private equity funds that invest in unlisted, small and mid-sized companies in Northern Europe.
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 | 1-3/20 | 1-3/19 | Change | 1-12/19 |
|---|---|---|---|---|
| Operating profit, M€ | 0.6 | 0.2 | 277% | 0.8 |
| Fair value of investments, M€ | 16.4 | 17.4 | -6% | 16.2 |
| Investment commitments, M€ | 7.7 | 8.2 | -6% | 6.7 |
| Net cash flow of investments, M€ | 0.5 | -0.3 | 252% | 1.7 |
Balance sheet and capital adequacy
At the end of the period under review, the consolidated balance sheet total was EUR 88.4 million (EUR 85.4 million on 31 Dec. 2019) and the shareholders' equity was EUR 46.2 million (EUR 65.1 million). During the period, the shareholders' equity was influenced by the profit for the period of EUR 4.8 million, the decided dividend distribution of EUR -21.1 million, the decided repayment of equity of EUR -2.7 million from the reserve for invested unrestricted equity, and the accrued expense of EUR 0.04 million related to an option scheme and entered 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 25.4 million (EUR 22.4 million) and liquid investments in mutual funds EUR 9.6 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 4.4 million (EUR 4.7 million).
The lease liability entered in the balance sheet was EUR 2.6 million (EUR 2.6 million) at the end of the period, the share of short-term liabilities being EUR 0.8 million (EUR 0.6 million). Interest-free short-term debt was EUR 39.5 million (EUR 17.7 million), including a liability of EUR 23.8 million (EUR 0.0 million) related to the dividend distribution and return of equity. The Group had no interest-bearing loans at the end of the period (EUR - million). eQ's equity to assets ratio was 52.3% (76.2%).
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 CRR/CRD regulations. The requirement for eQ Group's and eQ Asset Management Ltd's own funds is calculated according to article 95 of EU's Capital Requirements Regulation.
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The amount of the total risk exposure is calculated as the larger of the following: a) total amount of credit and market risks or b) the total risk based on fixed overheads.
The Group's CET1 (Common Equity Tier 1) and capital adequacy ratio of the own funds was 20.5% (22.2% on 31 Dec. 2019) at the end of the period. 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 11.4 million (EUR 11.9 million on 31 Dec. 2019), and the total risk exposure was EUR 55.9 million (EUR 53.5 million). In capital adequacy calculations, the amount of the total risk exposure is based on credit and market risks, as the total risk exposure based on fixed overheads was lower at the end of the period. The total risk exposure based on fixed overheads was EUR 51.9 million at the end of the period. 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 31 March 2020, the number of eQ Plc's shares was 38 307 198 and the share capital was EUR 11 383 873. There were no changes in the number or shares or share capital during the period.
The closing price of eQ Plc's share on 31 March 2020 was EUR 11.55 (EUR 12.45 on 31 Dec. 2019). The market capitalisation of the company was thus EUR 442.4 million (EUR 476.9 million) at the end of the period. During the period, 1 165 103 shares were traded on Nasdaq Helsinki (604 231 shares from 1 Jan. to 31 March 2019). In euros, the turnover was EUR 14.6 million (EUR 5.4 million).
Own shares
On 31 March 2020, eQ Plc held no own shares.
Shareholders
Ten major shareholders on 31 March 2020
| Shares | Share, % | |
|---|---|---|
| 1 Fennogens Investements SA | 7 943 137 | 20.74 |
| 2 Chilla Capital S.A. | 5 945 275 | 15.52 |
| 3 Anchor Oy Ab | 5 803 677 | 15.15 |
| 4 Teamet Oy | 4 100 000 | 10.70 |
| 5 Oy Cevante Ab | 1 419 063 | 3.70 |
| 6 Fazer Jan Peter | 1 298 306 | 3.39 |
| 7 Lavventura Oy | 650 000 | 1.70 |
| 8 Linnalex Ab | 631 652 | 1.65 |
| 9 Procurator-Holding Oy | 623 892 | 1.63 |
| 10 Pinomonte Ab | 529 981 | 1.38 |
| 10 major shareholders, total | 28 944 983 | 75.56 |
| Nominee registered | 453 787 | 1.18 |
| Other shares | 8 908 428 | 23.26 |
| Total | 38 307 198 | 100.00 |
On 31 March 2020, eQ Plc had 6 365 shareholders (5 945 shareholders on 31 Dec. 2019).
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.
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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 will end on 1 April 2021. The options have been listed on Nasdaq Helsinki.
Of the granted options, altogether 250 000 had been exercised by the end of the period. The number of outstanding options was 1 325 000 at the end of the period. No options of the option scheme 2015 can any longer be allocated.
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
At the end of the period, altogether 1 775 000 options had been allocated from 2018 option scheme with a purchase price. The subscription period of shares with option rights 2018 will begin on 1 April 2022 and end on 1 April 2024.
In the first quarter of 2020, 25 000 options with a purchase price of EUR 18 000.00 were returned to eQ Plc due to the termination of employment. The purchase price of the returned options was entered in its entirety at the original subscription price in the reserve for invested unrestricted equity. The number of outstanding options was 1 775 000 at the end of the period. No options of the option scheme 2018 can any longer be allocated.
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
eQ Plc's Annual General Meeting (AGM), held on Monday 25 March 2020 in Helsinki, decided upon the following:
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 2019.
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 0.55 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 2020, were recorded in the shareholder register of eQ Plc held by Euroclear Finland Ltd. Payment date of the dividend and equity repayment was 3 April 2020.
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.
Remuneration Policy for governing bodies
The Annual General Meeting adopted a Remuneration Policy for the governing bodies.
eQ
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, Timo Kokkila, Lotta Kopra and Tomas von Rettig were re-elected 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 4 000 and the other directors EUR 2 500 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, comprising a maximum total of 3 500 000 new shares. The amount of the authorisation corresponded to approximately 9.14% 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.
Personnel and organisation
At the end of the period, the number of Group personnel calculated as full-time resources was 91 (89 persons on 31 December 2019). Calculated as full-time resources, the Asset Management segment had 72 (69) employees and the Corporate Finance segment 14 (15) employees. Group administration had 5 (5) employees.
The overall salaries paid to the employees of eQ Group during the period totalled EUR 4.9 million (EUR 5.1 million from 1 Jan. to 31 March 2019).
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, for instance. 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 the management company, and performance fees from asset management portfolios. Performance fees may vary considerably by quarter and financial period.
12
eQ
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 and currency risk, for instance. Of said risks, the market risk has the greater 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 on 24 April 2020, the eQ PE XII North private equity fund held its second close at EUR 157 million. The second close of the eQ PE SF III fund was also held at EUR 115 million.
Outlook
At the moment, it is still extremely unclear when the COVID-19 outbreak will begin to ease off and economies start to return to more normal circumstances. This naturally influences national economies and the development of the capital market during the remaining part of the year.
The outlook for the financial year is still unaltered, however, and we expect the net revenue and operating profit of the Asset Management segment to grow from the previous year. The greatest uncertainty regarding the Asset Management segment is related to performance fees. It is difficult to assess how real estate returns will develop during the remaining part of the year, and it is also possible that the performance fee from the Amanda IV fund will be postponed to 2021.
We do not issue profit guidance for the Corporate Finance and Investment segments. The results of these segments are highly dependent on when the activity in the transaction market will begin to pick up.
eQ Plc
Board of Directors
13
eQ
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.
14
eQ
CONSOLIDATED INCOME STATEMENT, EUR 1 000
| 1-3/20 | 1-3/19 | 1-12/19 | |
|---|---|---|---|
| Fee and commission income | 11 802 | 11 366 | 49 933 |
| Interest income | - | 3 | 4 |
| Net income from financial assets | 344 | 329 | 1 132 |
| Operating income, total | 12 146 | 11 699 | 51 069 |
| Fee and commission expenses | -116 | -106 | -428 |
| Interest expenses | -6 | -7 | -26 |
| NET REVENUE | 12 024 | 11 586 | 50 614 |
| Administrative expenses | |||
| Personnel expenses | -4 911 | -5 108 | -19 758 |
| Other administrative expenses | -535 | -581 | -2 185 |
| Depreciation on tangible and intangible assets | -74 | -49 | -219 |
| Depreciation on leases | -184 | -187 | -749 |
| Other operating expenses | -311 | -366 | -1 411 |
| OPERATING PROFIT (LOSS) | 6 009 | 5 296 | 26 292 |
| Income tax | -1 217 | -1 098 | -5 257 |
| PROFIT (LOSS) FOR THE PERIOD | 4 791 | 4 197 | 21 035 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| 1-3/20 | 1-3/19 | 1-12/19 | |
|---|---|---|---|
| Other comprehensive income: | - | - | - |
| Other comprehensive income after taxes | - | - | - |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 4 791 | 4 197 | 21 035 |
| Profit for the period attributable to: | |||
| Equity holders of the parent company | 4 791 | 4 197 | 21 035 |
| Non-controlling interests | - | - | - |
| Comprehensive income for the period attributable to: | |||
| Equity holders of the parent company | 4 791 | 4 197 | 21 035 |
| Non-controlling interests | - | - | - |
| Earnings per share calculated from the profit of equity holders of the parent company: | |||
| Earnings per average share, EUR | 0.13 | 0.11 | 0.55 |
| Diluted earnings per average share, EUR | 0.12 | 0.10 | 0.51 |
eQ
CONSOLIDATED BALANCE SHEET, EUR 1 000
| 31 March 2020 | 31 March 2019 | 31 Dec. 2019 | |
|---|---|---|---|
| ASSETS | |||
| Liquid assets | 65 | 54 | 72 |
| Claims on credit institutions | 25 307 | 21 875 | 22 303 |
| Financial assets | |||
| Financial securities | 9 632 | 10 233 | 9 956 |
| Private equity fund investments | 16 368 | 17 435 | 16 156 |
| Intangible assets | |||
| Fair value and brands | 29 212 | 29 212 | 29 212 |
| Client agreements | 479 | - | - |
| Other intangible assets | 253 | 204 | 253 |
| Tangible assets | 311 | 295 | 261 |
| Leases | 2 274 | 2 995 | 2 433 |
| Other assets | 3 711 | 3 190 | 4 151 |
| Accruals and prepaid expenditure | 608 | 657 | 528 |
| Income tax receivables | 62 | 149 | 58 |
| Deferred tax assets | 86 | 6 | 34 |
| TOTAL ASSETS | 88 369 | 86 306 | 85 418 |
| LIABILITIES AND EQUITY | |||
| LIABILITIES | |||
| Other liabilities | 31 542 | 27 715 | 4 780 |
| Accruals and deferred income | 7 866 | 8 006 | 12 057 |
| Lease liabilities | 2 627 | 3 025 | 2 604 |
| Income tax liabilities | 121 | 110 | 831 |
| Deferred tax liabilities | 29 | 37 | 29 |
| TOTAL LIABILITIES | 42 186 | 38 894 | 20 301 |
| EQUITY | |||
| Attributable to equity holders of the parent company: | |||
| Share capital | 11 384 | 11 384 | 11 384 |
| Reserve for invested unrestricted equity | 23 783 | 25 759 | 26 482 |
| Retained earnings | 6 225 | 6 073 | 6 215 |
| Profit (loss) for the period | 4 791 | 4 197 | 21 035 |
| TOTAL EQUITY | 46 183 | 47 413 | 65 117 |
| TOTAL LIABILITIES AND EQUITY | 88 369 | 86 306 | 85 418 |
16
eQ
CONSOLIDATED CASH FLOW STATEMENT, EUR 1 000
| 1-3/2020 | 1-3/2019 | 1-12/2019 | |
|---|---|---|---|
| CASH FLOW FROM OPERATIONS | |||
| Operating profit | 6 009 | 5 296 | 26 292 |
| Depreciation and write-downs | 259 | 237 | 968 |
| Interest income and expenses | 6 | 3 | 22 |
| Transactions with no related payment transactions | -281 | -81 | 904 |
| Financial assets' cash flow – private equity fund investments | 437 | -429 | -61 |
| Change in working capital | |||
| Business receivables, increase (-) / decrease (+) | 361 | 1 841 | 1 157 |
| Interest-free debt, increase (+) / decrease (-) | -2 211 | -748 | 919 |
| Total change in working capital | -1 850 | 1 093 | 2 076 |
| Cash flow from operations before financial items and taxes | 4 579 | 6 119 | 30 202 |
| Interests received | - | 3 | 4 |
| Interests paid | -6 | -7 | -26 |
| Taxes | -1 152 | -1 001 | -4 532 |
| CASH FLOW FROM OPERATIONS | 3 421 | 5 115 | 25 648 |
| CASH FLOW FROM INVESTMENTS | |||
| Investments in intangible and tangible assets | -404 | -13 | -197 |
| Investments/redemptions in other investments – liquid mutual funds | - | -252 | 93 |
| CASH FLOW FROM INVESTMENTS | -404 | -265 | -103 |
| CASH FLOW FROM FINANCING | |||
| Dividends paid/equity repayments | - | - | -20 551 |
| Option issue with a subscription price | -18 | 1 350 | 816 |
| Subscription of new shares | - | 39 | 1 296 |
| Decrease in the lease liability capital | -2 | -157 | -578 |
| CASH FLOW FROM FINANCING | -20 | 1 232 | -19 017 |
| INCREASE/DECREASE IN LIQUID ASSETS | 2 997 | 6 081 | 6 527 |
| Liquid assets on 1 Jan. | 22 375 | 15 848 | 15 848 |
| Liquid assets on 31 March/31 Dec. | 25 372 | 21 929 | 22 375 |
17
eQ
CHANGE IN CONSOLIDATED SHAREHOLDERS' EQUITY, EUR 1 000
| Equity attributable to equity holders of the parent company | |||||
|---|---|---|---|---|---|
| Share capital | Reserve for invested unrestricted equity | Retained earnings | Total | Total equity | |
| Shareholders' equity on 1 Jan. 2019 | 11 384 | 27 034 | 23 831 | 62 249 | 62 249 |
| Profit (loss) for the period | 4 197 | 4 197 | 4 197 | ||
| Other comprehensive income | |||||
| Financial assets | - | - | - | ||
| Total comprehensive income | 4 197 | 4 197 | 4 197 | ||
| 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 | 129 | 129 | 129 | ||
| Shareholders' equity on 31 March 2019 | 11 384 | 25 759 | 10 270 | 47 413 | 47 413 |
| Shareholders' equity on 1 Jan. 2020 | |||||
| --- | --- | --- | --- | --- | --- |
| 11 384 | 26 482 | 27 251 | 65 117 | 65 117 | |
| Profit (loss) for the period | 4 791 | 4 791 | 4 791 | ||
| Other comprehensive income | |||||
| Financial assets | - | - | - | ||
| Total comprehensive income | 4 791 | 4 791 | 4 791 | ||
| Dividend/equity repayment | -2 682 | -21 069 | -23 750 | -23 750 | |
| Option issue with a subscription price | -18 | -18 | -18 | ||
| Options granted, cost accrual | 44 | 44 | 44 | ||
| Shareholders' equity on 31 March 2020 | 11 384 | 23 783 | 11 016 | 46 183 | 46 183 |
eQ
FEE AND COMMISSION INCOME, GROUP, EUR 1 000
| 1-3/20 | 1-3/19 | 1-12/19 | |
|---|---|---|---|
| Asset management fees | |||
| Management fees from traditional asset management | 2 030 | 1 985 | 8 003 |
| Real estate and private equity management fees | 9 080 | 7 327 | 31 852 |
| Other fee and commission income | 53 | 69 | 281 |
| Performance fees | 190 | 931 | 4 379 |
| Total | 11 352 | 10 311 | 44 514 |
| Corporate finance fees | 450 | 1 055 | 5 419 |
| Fee and commission income, total | 11 802 | 11 366 | 49 933 |
NET INCOME FROM FINANCIAL ASSETS, GROUP, EUR 1 000
| 1-3/20 | 1-3/19 | 1-12/19 | |
|---|---|---|---|
| Private equity fund investment operations | |||
| Profit distribution of funds | 19 | 119 | 1 810 |
| Changes in fair value and losses | 648 | 98 | -813 |
| Total | 668 | 217 | 996 |
| Other investment operations – liquid mutual funds | |||
| Changes in fair value | -324 | 112 | 181 |
| Sales profit/loss | - | - | -45 |
| Total | -324 | 112 | 135 |
| Net income from financial assets, total | 344 | 329 | 1 132 |
19
eq
FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES, EUR 1 000
| 31 March 2020 | 31 March 2019 | 31 Dec. 2019 | ||||
|---|---|---|---|---|---|---|
| Fair value | Book value | Fair value | Book value | Fair value | Book value | |
| Financial assets | ||||||
| Investments | ||||||
| Private equity fund investments | 16 368 | 16 368 | 17 435 | 17 435 | 16 156 | 16 156 |
| Financial securities | 9 632 | 9 632 | 10 233 | 10 233 | 9 956 | 9 956 |
| Accounts receivable and other receivables | 1 499 | 1 499 | 100 | 100 | 1 655 | 1 655 |
| Liquid assets | 25 372 | 25 372 | 21 929 | 21 929 | 22 375 | 22 375 |
| Total | 52 871 | 52 871 | 49 697 | 49 697 | 50 142 | 50 142 |
| Financial liabilities | ||||||
| Accounts payable and other liabilities | 219 | 219 | 426 | 426 | 166 | 166 |
| Lease liabilities | 2 627 | 2 627 | 3 025 | 3 025 | 2 604 | 2 604 |
| Total | 2 847 | 2 847 | 3 451 | 3 451 | 2 769 | 2 769 |
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
| 31 March 2020 | 31 March 2019 | 31 Dec. 2019 | ||||
|---|---|---|---|---|---|---|
| Level 1 | Level 3 | Level 1 | Level 3 | Level 1 | Level 3 | |
| Financial assets | ||||||
| Private equity fund investments | - | 16 368 | - | 17 435 | - | 16 156 |
| Financial securities | 9 632 | - | 10 233 | - | 9 956 | - |
| Total | 9 632 | 16 368 | 10 233 | 17 435 | 9 956 | 16 156 |
Level 3 reconciliation: Private equity fund investments
| 1-3/2020 | |
|---|---|
| Opening balance on 1 Jan. 2020 | 16 156 |
| Calls | 65 |
| Returns | -502 |
| Value change and loss through profit or loss | 648 |
| Closing balance on 31 March 2020 | 16 368 |
| 1-3/2019 | |
| --- | --- |
| Opening balance on 1 Jan. 2019 | 16 909 |
| Calls | 612 |
| Returns | -183 |
| Value change charged to profit or loss | 98 |
| Closing balance on 31 March 2019 | 17 435 |
eQ
| 1-12/2019 | |
|---|---|
| Opening balance on 1 Jan. 2019 | 16 909 |
| Calls | 2 407 |
| Returns | -2 346 |
| Value change and loss through profit or loss | -813 |
| Closing balance on 31 Dec. 2019 | 16 156 |
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 | 31 March 2020 | 31 Dec. 2019 |
|---|---|---|
| Funds managed by eQ: | ||
| Funds of funds: | ||
| eQ PE XI US LP | 30 | 32 |
| eQ PE X North LP | 202 | 199 |
| eQ PE IX US LP | 304 | 266 |
| eQ PE VIII North LP | 1 661 | 1 586 |
| eQ PE VII US LP | 1 760 | 1 786 |
| eQ PE VI North LP | 1 914 | 1 935 |
| Amanda V East LP | 4 627 | 4 387 |
| Amanda IV West LP | 904 | 982 |
| Amanda III Eastern PE LP | 2 782 | 2 743 |
| Total | 14 182 | 13 917 |
| Funds managed by others: | ||
| Large buyout funds | 995 | 994 |
| Midmarket funds | 477 | 531 |
| Venture funds | 714 | 715 |
| Total | 16 368 | 16 156 |
eQ
REMAINING INVESTMENT COMMITMENTS OF PRIVATE EQUITY FUND INVESTMENTS, EUR 1 000
| Investment commitment | 31 March 2020 | 31 Dec. 2019 |
|---|---|---|
| Funds managed by eQ: | ||
| Funds of funds: | ||
| eQ PE XII North LP | 1 000 | 0 |
| eQ PE XI US LP | 866 | 846 |
| eQ PE X North LP | 761 | 761 |
| eQ PE IX US LP | 652 | 686 |
| eQ PE VIII North LP | 1 183 | 1 183 |
| eQ PE VII US LP | 744 | 727 |
| eQ PE VI North LP | 602 | 602 |
| Amanda V East LP | 595 | 595 |
| Amanda IV West LP | 427 | 427 |
| Amanda III Eastern PE LP | 348 | 348 |
| Total | 7 178 | 6 175 |
| Funds managed by others: | ||
| Large buyout funds | 132 | 132 |
| Midmarket funds | 423 | 433 |
| Venture funds | 0 | 0 |
| Total | 7 734 | 6 740 |
22
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SEGMENT INFORMATION, EUR 1 000
| 1-3/20 | Asset Man. | Corporate Finance | Invest-ments | Other | Elimin-ations | Group total |
|---|---|---|---|---|---|---|
| Fee and commission income | 11 352 | 450 | - | - | 11 802 | |
| From other segments | 38 | - | - | - | -38 | - |
| Interest income | - | - | - | - | - | |
| Net income from financial assets | - | - | 668 | -324 | 344 | |
| Other operating income | - | - | - | - | - | |
| From other segments | - | - | - | 19 | -19 | - |
| Operating income, total | 11 389 | 450 | 668 | -304 | -57 | 12 146 |
| Fee and commission expenses | -114 | - | - | -2 | -116 | |
| To other segments | - | - | -38 | - | 38 | - |
| Interest expenses | -4 | -1 | - | -1 | -6 | |
| NET REVENUE | 11 271 | 449 | 630 | -307 | -19 | 12 024 |
| Administrative expenses | ||||||
| Personnel expenses | -4 077 | -392 | - | -442 | -4 911 | |
| Other administrative expenses | -382 | -102 | - | -70 | 19 | -535 |
| Depreciation on tangible and intangible assets | -66 | -3 | - | -6 | -74 | |
| Depreciation on leases | -125 | -39 | -20 | -184 | ||
| Other operating expenses | -226 | -29 | - | -56 | -311 | |
| OPERATING PROFIT (LOSS) | 6 396 | -116 | 630 | -901 | 0 | 6 009 |
| Income tax | -1 217 | -1 217 | ||||
| PROFIT (LOSS) FOR THE PERIOD | -2 119 | 4 791 | ||||
| 1-3/19 | Asset Man. | Corporate Finance | Invest-ments | Other | Elimin-ations | Group total |
| --- | --- | --- | --- | --- | --- | --- |
| Fee and commission income | 10 311 | 1 055 | - | - | 11 366 | |
| From other segments | 50 | - | - | - | -50 | - |
| Interest income | - | - | - | 3 | 3 | |
| Net income from financial assets | - | - | 217 | 112 | 329 | |
| Other operating income | - | - | - | - | - | |
| From other segments | - | - | - | 19 | -19 | - |
| Operating income, total | 10 361 | 1 055 | 217 | 135 | -69 | 11 699 |
| Fee and commission expenses | -104 | - | - | -2 | -106 | |
| To other segments | - | - | -50 | - | 50 | - |
| Interest expenses | -4 | -1 | - | -1 | -7 | |
| NET REVENUE | 10 253 | 1 054 | 167 | 132 | -19 | 11 586 |
eq
| 1-3/19 | Asset Man. | Corporate Finance | Invest-ments | Other | Elimin-ations | Group total |
|---|---|---|---|---|---|---|
| Administrative expenses | ||||||
| Personnel expenses | -4 091 | -618 | - | -399 | -5 108 | |
| Other administrative expenses | -440 | -107 | - | -54 | 19 | -581 |
| Depreciation on tangible and intangible assets | -38 | -3 | - | -8 | -49 | |
| Depreciation on leases | -127 | -39 | -21 | -187 | ||
| Other operating expenses | -261 | -33 | - | -71 | -366 | |
| OPERATING PROFIT (LOSS) | 5 296 | 255 | 167 | -422 | 0 | 5 296 |
| Income tax | -1 098 | -1 098 | ||||
| PROFIT (LOSS) FOR THE PERIOD | -1 520 | 4 197 | ||||
| 1-12/19 | Asset Man. | Corporate Finance | Invest-ments | Other | Elimin-ations | Group total |
| --- | --- | --- | --- | --- | --- | --- |
| Fee and commission income | 44 514 | 5 419 | - | - | 49 933 | |
| From other segments | 200 | - | - | - | -200 | - |
| Interest income | - | - | - | 4 | 4 | |
| Net income from financial assets | - | - | 996 | 135 | 1 132 | |
| Other operating income | - | - | - | - | - | |
| From other segments | - | - | - | 77 | -77 | - |
| Operating income, total | 44 714 | 5 419 | 996 | 217 | -277 | 51 069 |
| Fee and commission expenses | -420 | - | - | -8 | -428 | |
| To other segments | - | - | -200 | - | 200 | - |
| Interest expenses | -17 | -5 | - | -4 | -26 | |
| NET REVENUE | 44 276 | 5 413 | 796 | 205 | -77 | 50 614 |
| Administrative expenses | ||||||
| Personnel expenses | -15 620 | -2 770 | - | -1 368 | -19 758 | |
| Other administrative expenses | -1 646 | -367 | - | -248 | 77 | -2 185 |
| Depreciation on tangible and intangible assets | -167 | -18 | - | -34 | -219 | |
| Depreciation on leases | -509 | -157 | -82 | -749 | ||
| Other operating expenses | -971 | -159 | - | -281 | -1 411 | |
| OPERATING PROFIT (LOSS) | 25 363 | 1 941 | 796 | -1 809 | 0 | 26 292 |
| Income tax | -5 257 | -5 257 | ||||
| PROFIT (LOSS) FOR THE PERIOD | -7 065 | 21 035 |
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.
24
eq
PROFIT DEVELOPMENT OF SEGMENTS PER QUARTER, EUR 1 000
| Q1/20 | Q4/19 | Q3/19 | Q2/19 | Q1/19 | |
|---|---|---|---|---|---|
| Asset Management | |||||
| Net revenue | 11 271 | 12 511 | 10 947 | 10 566 | 10 253 |
| Operating profit | 6 396 | 7 200 | 6 818 | 6 049 | 5 296 |
| Corporate Finance | |||||
| Net revenue | 449 | 2 529 | 1 090 | 741 | 1 054 |
| Operating profit | -116 | 1 180 | 407 | 100 | 255 |
| Investments | |||||
| Net revenue | 630 | 579 | 74 | -24 | 167 |
| Operating profit | 630 | 579 | 74 | -24 | 167 |
| Other segments and eliminations | |||||
| Net revenue | -327 | 0 | 2 | 14 | 113 |
| Operating profit | -901 | -533 | -384 | -471 | -422 |
| Group total | |||||
| Net revenue | 12 024 | 15 618 | 12 112 | 11 297 | 11 586 |
| Operating profit | 6 009 | 8 426 | 6 916 | 5 655 | 5 296 |
| Profit for the period | 4 791 | 6 730 | 5 521 | 4 587 | 4 197 |
eQ
CAPITAL ADEQUACY, EUR 1 000
| | CRR
31 March 2020
eQ Group | CRR
31 March Dec.
eQ Group |
| --- | --- | --- |
| Equity | 46 183 | 65 117 |
| Common equity tier 1 (CET 1) before deductions | 46 183 | 65 117 |
| Deductions from CET 1 | | |
| Intangible assets | -29 944 | -29 465 |
| Unconfirmed profit for the period | -4 791 | -21 035 |
| Dividend proposal by the Board* | - | -2 715 |
| Common equity tier 1 (CET1) | 11 447 | 11 901 |
| Additional tier 1 (AT1) | 0 | 0 |
| Tier 1 (T1 = CET1 + AT1) | 11 447 | 11 901 |
| Tier 2 (T2) | 0 | 0 |
| Total capital (TC = T1 + T2) | 11 447 | 11 901 |
| Risk-weighted items total – Total risk exposure | 55 944 | 53 499 |
| of which credit risk | 50 628 | 48 183 |
| of which market risk - currency risk | 5 316 | 5 316 |
| Common equity tier 1 (CET1) / risk weights, % | 20.5% | 22.2% |
| Tier 1 (T1) / risk weights, % | 20.5% | 22.2% |
| Total capital (TC) / risk weights, % | 20.5% | 22.2% |
| Excess of total capital compared with the minimum level (8% capital adequacy ratio) | 6 972 | 7 621 |
| Excess of total capital compared with the target level (10% capital adequacy ratio) | 5 853 | 6 551 |
*The dividend and equity repayment proposed by the Board exceeding the profit for the period.
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eQ
GROUP KEY RATIOS
| 31 March 2020 | 31 March 2019 | 31 Dec. 2019 | |
|---|---|---|---|
| Profit (loss) for the period to the equity holders of the parent company, EUR 1 000 | 4 791 | 4 197 | 21 035 |
| Earnings per average share, EUR | 0.13 | 0.11 | 0.55 |
| Diluted earnings per average share, EUR | 0.12 | 0.10 | 0.51 |
| Equity per share, EUR | 1.21 | 1.25 | 1.70 |
| Equity per average share, EUR *) | 1.21 | 1.25 | 1.71 |
| Return on investment, ROI % p.a. | 32.9 | 29.8 | 32.4 |
| Return on equity, ROE % p.a. | 34.4 | 30.6 | 33.0 |
| Equity to assets ratio, % | 52.3 | 54.9 | 76.2 |
| Cost/income ratio, Group, % | 49.9 | 54.3 | 48.1 |
| Share price at the end of the period, EUR | 11.55 | 8.56 | 12.45 |
| Market value, EUR million | 442.4 | 325.8 | 476.9 |
| Personnel calculated as full-time resources at the end of the period | 91 | 89 | 89 |
*) 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 2019 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 31 March 2019, eQ's remaining investment commitments in private equity funds totalled EUR 7.7 million (EUR 6.7 million on 31 Dec. 2019). Other commitments at the end of the period totalled EUR 0.0 million (EUR 0.0 million on 31 Dec. 2019).
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