0DK7 Eq Oyj

eQ Plc interim report26 April 2022 at 8:00 AM

January to March 2022 in brief

• The Group's net revenue during the period was EUR 21.7 million (EUR 18.0 million from 1 Jan. to 31 March 2021).
• The Group’s net fee and commission income was EUR 21.4 million (EUR 15.8 million).
• The Group’s net investment income from own investment operations was EUR 0.3 million (EUR 2.2 million), including the return from private equity and real estate fund investments and liquid fixed income funds.
• The Group’s operating profit grew by 23% to EUR 13.0 million (EUR 10.6 million).
• The Group’s profit was EUR 10.3 million (EUR 8.4 million).
• The consolidated earnings per share were EUR 0.26 (EUR 0.22).
• The net revenue of the Asset Management segment increased by 32% to EUR 19.6 million (EUR 14.8 million) and the operating profit by 43% to EUR 12.6 million (EUR 8.8 million).
• The net revenue of the Corporate Finance segment was EUR 1.8 million (EUR 1.1 million) and the operating profit was EUR 0.7 million (EUR 0.3 million).
• The net cash flow from the Group’s own private equity and real estate fund investment operations was EUR 0.3 million (EUR 0.7 million).

Mikko Koskimies, CEO

The year 2022 started off with increasing economic growth, accelerating inflation and tighter monetary policy. Above all in the US, inflation increased on a broad front and the FED prepared itself for several increases of interest rates in 2022. Growth figures were good in Europe as well, and the ECB also prepared itself for cutting purchase programmes due to the increasing inflation. China announced a strong growth target of 5.5% for its part.

The crisis between Russia and Ukraine began emerging to headlines towards the end of January, and in mid-February it started to raise concerns in the market. As Russia attacked Ukraine on 24 February, Western countries rapidly introduced and expanded sanctions on Russian banks, the central bank’s currency reserve and politically influential persons, for instance. A constantly increasing number of Western companies began closing down operations in Russia.

In addition to being a human catastrophe, the war has major impacts on economic development, above all in Europe. In addition to exports, several European countries and especially Germany are highly dependent on Russian energy. Both the price of energy that has risen due to the war and the risk of availability problems further increase inflation and have a negative impact on growth. The US is clearly less dependent on Russia, and its growth outlook is therefore stronger than Europe’s. During the war, China has been opportunely quite reluctant to take a stand, not wishing to openly support Russia in order not to risk trade relations with Western countries.

Western share prices fell already in January due to the expected interest increases, and the fall speeded up as the war in Ukraine began. Like in several previous geopolitical crises, stock exchanges also recovered rapidly. The return of the entire first quarter at index level was -5.3% in Europe, -2.6% in US and -4.9% in emerging markets. The Finnish stock exchange fell clearly more that the rest of Europe, giving a return of -10.5%. Russia shares were removed totally from central share indices.

Interest returns were also negative across the board. The return of euro government bonds was -5.3%, that of investment grade loans -5.3% as well, the return of high yield loans was -4.5% and that of emerging market euro-hedged corporate loans as much as -9.7%. Russian loans were removed from major interest rate indices.

eQ’s year started of excellently

The result of eQ’s first quarter was excellent, and the result has grown already for 32 consecutive quarters. The net revenue of the Group during the period under review was EUR 21.7 million and the operating profit EUR 13.0 million. Net revenue grew by 20% and operating profit by 23% on the previous year. Above all eQ Asset Management and Advium grew strongly while the result of the Investments segment clearly reduced from the year before.

eQ Asset Management’s growth continued

The result of eQ Asset Management was once more excellent. The net revenue of eQ Asset Management increased by 32% during the period under review to EUR 19.6 million. Operating profit grew by 43% to EUR 12.6 million. The strongest growth was experienced in performance fees and the management fees of both real estate asset management and private equity asset management.

As for traditional investments, the returns of client portfolios were negative in the first quarter of 2022 in line with the negative market. Of the funds that eQ manages itself, 31% gave a better return than its benchmark index, and during a three-year period, the corresponding figure was 62%. In discretionary asset management portfolios, the returns in the first quarter were also negative along with the market. The returns of real estate and private equity operations were, on the other hand, excellent in the first quarter of the year, supporting very well the overall returns of most of our clients during the first months of the year.

As for sales, the year 2022 began very strongly, above all for real estate and private equity asset management. Net subscriptions in the eQ Community Properties and Commercial Properties funds were EUR 123 million, and the firs closing of the eQ Residential II Fund took place at EUR 27 million. In 2022, funds are raised to the eQ PE XIV North and eQ PE SF IV funds, which make investments in Norther Europe. During the first quarter, their sizes grew already to a total of EUR 331 million. In addition, the size of the eQ VC Fund, established at the end of October 2021, grew to USD 59 million during the first quarter. The eQ VC Fund invests in the best venture capital funds in the US.

Advium’s fee income and profit grew strongly

Advium’s net revenue was EUR 1.8 million (EUR 1.1 million) and operating profit EUR 0.7 million (EUR 0.3 million) during the period under review.

During the first quarter, the value of M&As remained high globally, even though some slowing-down could be detected from the record year 2021. The number of M&As remained good in Finland as well, even though the impacts of the latest geopolitical events were already reflected on the numbers. The volume of real estate transactions remained good, and we expect the market to stay active.

The major transaction in which Advium acted as advisor during the first quarter was the divestment of Espoo Hospital by the city of Espoo to LähiTapiola Yhteiskuntakiinteistöt Ky. The value of the transaction is about EUR 295 million.

The operating profit of the Investments segment fell

The operating profit of the Investments segment was EUR 0.4 million (EUR 2.1 million) and the net cash flow was EUR 0.3 million (EUR 0.7 million). The balance sheet value of the private equity and real estate fund investments was EUR 19.0 million at the end of the period. eQ Plc made an investment commitment of EUR 1 million to the eQ PE XIV North and eQ Residential II funds. The write-downs made in the Amanda III and Amanda V private equity funds, which invest in Eastern Europe, due to the war in Ukraine had a negative impact on the value changes of investments during the period under review.

Outlook

The outlook for the financial year is still unaltered, and we expect the net revenue and operating profit of the Asset Management segment to grow from the previous year. In accordance with our disclosure policy, we do not issue profit guidance for the Corporate Finance and Investments segments.

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eQ’s interim report 1 January to 31 March 2022 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,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 12.0 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.

Attachment

• eQ Plc Interim Report Q1 2022

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