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eQ Plc’s financial statements release 2021 – eQ’s result grew by 55%, distribution proposal of EUR 1.00 per share to the shareholders

eQ Plc financial statements release4 February 2022 at 8:00 AM

January to December 2021 in brief

• The Group's net revenue during the period was EUR 78.9 million (EUR 56.7 million from 1 Jan. to 31 Dec. 2020).
• The Group’s net fee and commission income was EUR 71.6 million (EUR 56.7 million).
• The Group’s net investment income from own investment operations was EUR 7.3 million (EUR 0.0 million), including the return from private equity and real estate fund investments and liquid fixed income funds.
• The Group’s operating profit grew by 55% to EUR 47.7 million (EUR 30.8 million).
• The Group’s profit was EUR 38.1 million (EUR 24.6 million).
• The consolidated earnings per share were EUR 0.97 (EUR 0.64).
• The net revenue of the Asset Management segment increased by 23% to EUR 64.9 million (EUR 52.8 million) and the operating profit by 26% to EUR 40.3 million (EUR 32.1 million).
• The net revenue of the Corporate Finance segment was EUR 6.9 million (EUR 4.1 million) and the operating profit was EUR 2.7 million (EUR 1.1 million).
• The net cash flow from the Group’s own private equity and real estate fund investment operations was EUR 4.1 million (EUR 0.6 million).
• Dividend proposal EUR 0.97 (EUR 0.64) and proposal for equity repayment EUR 0.03 (EUR 0.06) per share.

October to December 2021 in brief

• In the last quarter, the Group’s net revenue totalled EUR 21.1 million (EUR 20.1 million from 1 Oct. to 31 Dec. 2020).
• The Group’s net fee and commission income was EUR 19.5 million (EUR 19.5 million).
• The Group’s net investment income from own investment operations was EUR 1.6 million (EUR 0,7 million), including the return from private equity and real estate fund investments and liquid fixed income funds.
• The Group’s operating profit grew by 10% to EUR 12.7 million (EUR 11.5 million).
• The Group’s profit was EUR 10.1 million (EUR 9.2 million).
• The consolidated earnings per share were EUR 0.26 (EUR 0.24).

Key ratios	1-2/21	1-12/20	Change	10-12/21	10-12/20	Change
Net revenue, Group, M€	78.9	56.7	39%	21.1	20.1	5%
Net revenue, Asset Management, M€	64.9	52.8	23%	16.3	18.1	-10%
Net revenue, Corporate Finance, M€	6.9	4.1	67%	3.2	1.4	132%
Net revenue, Investments, M€	7.1	-0.1	8860%	1.6	0.6	176%
Net revenue, Group administration and
eliminations, M€	0.0	0.0		0.0	0.0
Operating profit, Group, M€	47.7	30.8	55%	12.7	11.5	10%
Operating profit, Asset Management, M€	40.3	32.1	26%	10.1	11.3	-11%
Operating profit, Corporate Finance, M€	2.7	1.1	141%	1.6	0.4	269%
Operating profit, Investments, M€	7.1	-0.1	8860%	1.6	0.6	176%
Operating profit, Group administration, M€	-2.5	-2.4		-0.7	-0.8
Profit for the period, M€	38.1	24.6	55%	10.1	9.2	10%
Key ratios	1-12/21	1-12/20	Change	10-12/21	10-12/20	Change
Earnings per share, €	0.97	0.64	51%	0.26	0.24	7%
Proposal for dividend and equity repayment per share, €	1.00	0.70	43%
Equity per share, €	2.02	1.74	16%	2.02	1.74	16%
Cost/income ratio, Group, %	39.5	45.6	-13%	40.0	42.5	-6%
Liquid assets, M€	56.0	36.3	54%	56.0	36.3	54%
Private equity and real estate fund investments, M€	18.8	15.7	20%	18.8	15.7	20%
Interest-bearing loans, M€	0.0	0.0	0%	0.0	0.0	0%
Assets under management excluding reporting services, € billion	9.2	7.5	23%	9.2	7.5	23%
Assets under management, € billion	11.6	9.0	29%	11.6	9.0	29%

Mikko Koskimies, CEO

The sentiment at the beginning of 2021 was hopeful. In Western countries, population received COVID-19 vaccines and economies could open up. Combined with extensive recovery measures, this clearly accelerated economic growth. China continued to go its own way and managed to keep the number of COVID-19 infections very small with strict lockdown measures. The prognosis for the growth outcome in 2021 was 5.6% in the US, 5.1% in the euro zone and 8.1% in China. Towards the end of the year, the new Omicron variant caused concern and some countries closed their economies once more. This had minor impacts on economic growth and the investment market, however. 

Inflation accelerated clearly in 2021. The supply problems caused by COVID-19 and, simultaneously, the allocation of demand to goods instead of services, so-called green transition, and the strong economic growth accelerated the increase in all prices. Central banks indicated that inflation is a temporary phenomenon that is to a large extent related to COVID-19, but towards the end of the year, the debate on a tighter monetary policy increased, above all in the US. Towards the end of the year, central banks in both the US and Europe announced that they would cut purchase programmes. The Fed indicated that it planned to raise its key policy rate several times in 2022. This announcement, together with situation between Russia and Ukraine, made above all the equity market nervous early in 2022.

Expectations on increasing interest rates raised concerns in the equity market. In the autumn, additional worries were caused by the second largest real estate developer in China, which ended up in a debt crisis and deteriorated the outlook of the entire real estate sector. The strong economic growth and increasing profits of companies calmed down the market, however, and equities gave an excellent return for the whole year. The highest return in euros came from S&P 500, no less than 37.9%. European equities gave a 25.1% return and Finnish equities a 25.3% return, calculated with the MSCI index. The return of emerging markets remained at 4.9%. The reason for this was, above all, the slow pace of COVID-19 vaccinations in other countries than China, and as for China, its own regulatory measures directed to different sectors.

Interest income was negative in 2021 with the exception of high yield loans and corporate loans in local currencies of emerging economies. The euro government bond index gave a return of -3.4%, the euro IG corporate loan index -1.0% and the euro hedged emerging market corporate loan index -2.2%. The index return of high yield loans was 3.2%.

eQ’s growth very strong

eQ’s growth in 2021 was very strong, and its profit has already grown for 31 consecutive quarters. The net revenue of the Group during the period under review was EUR 78.9 million and the operating profit EUR 47.7 million. Net revenue grew by 39% and operating profit by almost EUR 17 million, which is an increase of 55% on the previous year.

eQ Asset Management’s growth continued

The result of eQ Asset Management was once more excellent. During the period under review, the net revenue of eQ Asset Management increased by 23% to EUR 64.9 million. Operating profit increased by 26%, more than EUR 8 million, to EUR 40.3 million. The management fees of traditional asset management as well as performance fees experienced the strongest growth. Part of the performance fees (EUR 3.1 million) accrued from the Amanda IV private equity fund.

The returns of client portfolios were excellent in 2021. No less than 85% of the funds that eQ manages itself exceeded their benchmark indices, and during a three-year period the corresponding figure was 83%. Within the discretionary asset management portfolios, both absolute and relative returns were also exceptionally good. The excellent returns from traditional asset management were complemented by the good real estate and private equity returns.

The year 2021 was also very good with regard to sales, above all within real estate and private equity asset management. Net subscriptions in the eQ Community Properties and Commercial Properties funds totalled almost EUR 330 million, and the size of the eQ Residential Fund grew to its target size of EUR 100 million. The investment operations of the eQ Residential Fund advanced excellently, and the entire investment capacity of the fund was in practice used by the end of the year. Therefore, we decided to establish a new eQ Residential II Fund during the first quarter of 2022. In 2021, private equity assets were raised to the eQ PE XIII US Fund. In the final close the size of the fund grew to a record amount of USD 318 million. The assets raised to the US PE funds since 2015 exceed USD 700 million. In addition, we launched three new private equity asset management programmes at the beginning of 2021, and the size of three old, renewed programmes grew markedly. The first close of the eQ VC Fund was held at the end of October at EUR 36 million. The eQ VC fund invests in the best venture capital funds in the US.

Advium’s fee income and profit grew

In 2021, Advium’s net revenue amounted to EUR 6.9 million (EUR 4.1 million) and its operating profit was EUR 2.7 million (EUR 1.1 million).

In 2021, the size of the M&A market developed favourably in general. The positive development of the equity and bond markets contributed to the execution of transactions planned by companies and private equity actors.

Advium’s market position and share remained strong, and during the financial year, we acted as advisor in seven finalised M&A transactions. The most important of these were the divestment of Nordkalk to SigmaRoc for EUR 500 million, the merger of Purmo with Virala Acquisition Company (VAC) and the purchase of Nettix Oy by Alma Media.

The real estate transaction activity grew from 2020. Advium acted as advisor to the seller in two published transactions in 2021.The major transaction towards the end of the year was the divestment of Espoo Hospital, where the city of Espoo sold the hospital for about EUR 300 million. This deal was signed immediately at the beginning of 2022.

Operating profit of the Investments segment excellent

The operating profit of the Investments segment was EUR 7.1 million (EUR -0.1 million) and the net cash flow was EUR 4.1 million. The balance sheet value of the private equity and real estate fund investments was EUR 18.8 million at the end of the year. eQ Plc made an investment commitment of USD 1 million to the eQ PE XIII US and eQ VC private equity funds. In addition, eQ decided to make an investment commitment of EUR 1 million to the eQ PE XIV North Fund, which was established at the end of January 2022. The considerable increase in the M&A activity of unlisted companies had a positive impact on the portfolio’s cash flow, value changes and realised profits.

Outlook

As for sales, the year 2021 was very good for eQ Asset Management. In January 2022, the eQ PE XIV North and eQ PE SF IV private equity funds raised a record amount of EUR 281 million in the first closings of the funds, and the eQ VC Fund grew to USD 56 million. This strengthens our view that the demand for alternative investment products continues to be strong among investors. In addition, eQ will begin to accrue the catch up share of private equity funds’ performance fee in the income statement in 2022, which will support eQ’s result.

Consequently, we expect the net revenue and operating profit of the Asset Management segment to grow in 2022. In accordance with our disclosure policy, we do not issue profit guidance for the Corporate Finance and Investments segments. The results of these segments are highly dependent on factors that are not dependent on the company. Therefore, their operating profits may vary considerably and are difficult to foresee.

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eQ’s financial statements release 1 January to 31 December 2021 is enclosed to this release and it is also available on the company website at www.eQ.fi.

eQ Plc

Additional information: Mikko Koskimies, CEO, tel. +358 9 6817 8799Antti Lyytikäinen, CFO, tel. +358 9 6817 8741

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 and real estate asset management) for institutions and private individuals. The assets managed by the Group total approximately EUR 11.6 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.

Attachment

• eQ Plc Financial Statements Release 2021