Evli Plc’s Interim Report 1–9/2023
EVLI PLC STOCK EXCHANGE RELEASE ON OCTOBER 26, 2023, AT 4:00 PM (EET/EEST)
NET REVENUE AND OPERATING PROFIT INCREASED ACCORDING TO PLAN
Highlights for the period
- Net revenue and operating profit increased due to good fund performance and the acquisition of EAB Group Plc in the autumn of 2022.
- Demand for traditional investment funds increased – Evli attracted the second most fund subscriptions in Finland.
- Recurring revenue’s share of turnover increased further, improving the quality of the result.
Financial performance January-September 2023 (comparison period 1-9/2022*)
- Net revenue was EUR 78.0 million (EUR 66.7 million).
- Operating profit was EUR 29.3 million (EUR 25.8 million).
- Operating result of the Wealth Management and Investor Clients segment increased to EUR 26.3 million (EUR 22.3 million).
- Operating result of the Advisory and Corporate Clients segment decreased to EUR 1.5 million (EUR 2.8 million).
- At the end of September, assets under management amounted to EUR 17.1 billion (EUR 14.4 billion) on a net basis.
- Return on equity was 22.8 percent (27.3%).
- Earnings per share, fully diluted, was EUR 0.80 (EUR 0.71).
- The ratio of recurring revenues to operational costs was 133 percent (127%).
* Includes carve-out figures for 1-3/2022.
Financial performance July-September 2023 (comparison period 7-9/2022)
- The Group's net revenue was EUR 25.9 million (EUR 20.5 million).
- The Group's operating profit was EUR 10.2 million (EUR 7.8 million).
- Diluted earnings per share amounted to EUR 0.28 (EUR 0.21).
Uncertain sentiment in investment markets has persisted due to heightened interest rate and inflation fears, increased geopolitical risks and market volatility.
As a result of the acquisitions made during 2022, Evli has managed to strengthen its position in the market. With synergies from the acquisitions and non-recurring costs allocated to 2022, we estimate that the operating result will be well above the comparison period's level (EUR 30.9 million in 2022).
KEY FIGURES DESCRIBING THE GROUP’S FINANCIAL PERFORMANCE
|Income statement key figures|
|Net revenue, M€||25.9||20.5||78.0||66.7|
|Operating profit/loss, M€||10.2||7.8||29.3||25.8|
|Operating profit margin, %||39.4||38.0||37.6||38.7|
|Profit/loss excl. non-recurring items related to mergers and acquisitions, M€||27.3|
|Profit/loss for the financial year, M€||8.2||6.7||23.5||20.7|
|Profitability key figures|
|Return on equity (ROE), %||-||-||22.8||27.3|
|Return on assets (ROA), %||-||-||8.4||8.0|
|Balance sheet key figures|
|Equity-to-assets ratio, %||-||-||34.2||31.3|
|Key figures per share|
|Earnings per Share (EPS), fully diluted, €||0.28||0.21||0.80||0.71|
|Dividend per share, €||-||-||1.15**||1.06|
|Equity per share, €||-||-||4.82||4.04|
|Share price at the end of the period, €||-||-||19.3||16.30|
|Number of permanent employees||-||-||310||252|
|Number of temporary employees||-||-||46||44|
|Share of personnel worked in Finland, %||-||-||96||92|
|Other key figures|
|Expense ratio (operating costs to net revenue)||0.61||0.63||0.63||0.62|
|Recurring revenue ratio, %***||-||-||133||127|
|Market value, M€||-||511.2||389.4|
* Includes carve-out figures for 1-3/2022.
** Dividend approved by the General Meeting. The dividend was paid on March 23, 2023.
*** The calculation formula has been changed, which has resulted in an update of the previously reported benchmark figure. In the future, discretionary bonus payments will also be included as part of the operating costs.
CEO MAUNU LEHTIMÄKI
In the third quarter of this year, the US economy continued to grow briskly, and Europe, too, avoided a recession, as a result of which prevailing market expectations of the end of the interest rate hike cycle vanished. Even though consumer prices have come down from last year's peaks, price increases were still above the central banks' long-term target of approximately two percent, thus restricting the central banks' freedom of maneuver. The strong momentum of the US economy came as a surprise, given the recent challenges faced by companies and consumers, such as high interest rates and consumer prices, difficulties of regional banks, weak housing and property markets, and the US domestic policy conflicts, as well as the many challenges of the global economy, including the increased polarization between the superpowers, growing protectionism, and an increase in export restrictions on high-technology goods.
Stock prices dropped in the third quarter in many places. The sluggish performance of equities and government bonds was due to investors' U-turn on interest rate expectations in late summer, in particular on hopes for a quick end to monetary policy tightening. High raw material prices, especially the price of crude oil, as well as declining corporate earnings also added to investors' caution. Higher-rated Investment Grade bonds as well as lower-rated High Yield bonds, however, performed strongly, which indicates that recession risks will remain at a low level.
The uncertainty of the operating environment and the uneven development of international markets, together with increased costs, were reflected in the development and result of Evli's business areas. Net revenue increased due to the merger with EAB Group Plc completed last year and the continued strong growth in commission income from alternative investment products and incentive business.
In the third quarter, the Group's net revenue increased by 26 percent from the comparison period and was EUR 25.9 million (EUR 20.5 million). Operating profit, in turn, increased by 31 percent to EUR 10.2 million (EUR 7.8 million). Commission income from traditional funds increased, being 12 percent higher throughout the early part of the year than in the previous year. By contrast, commission income from the Corporate Finance unit and brokerage activities remained lower during the quarter than in the previous year because of the slowdown in M&A activity and lower trading volumes.
In January–September, Evli's return on equity was 22.8 percent (27.3%). The ratio of recurring revenue to operational costs was 133 percent (127%). The Group's solvency and liquidity were at an excellent level.
Net revenue in the Wealth Management and Investor Clients segment increased by 30 percent in the third quarter to EUR 21.2 million (EUR 16.3 million). Client assets under management rose to EUR 17.1 billion (EUR 14.4 billion), driven by positive market developments and net subscriptions. Evli Fund Management Company's mutual fund capital, including alternative investment products, was approximately EUR 12 billion (EUR 10.1 billion). Net subscriptions of investment funds amounted to approximately EUR 235 million during the quarter, mainly from short-term fixed income funds as well as from domestic and global equity funds.
Net revenue in the Advisory and Corporate Clients segment decreased by 30 percent in the third quarter to EUR 2.5 million (EUR 3.6 million). The decrease was impacted by the decrease in advisory fees from M&A transactions. The unit's mandate base is reasonable, but tighter access to funding has made project completion more uncertain than before. Income from the Incentive business increased to EUR 2.2 million (EUR 2.0 million). In line with its strategy, the company has succeeded in winning new clients from both Swedish listed companies and domestic unlisted companies, and as a whole, the outlook for the company is good.
As in the early part of the year, the key drivers of Evli's strategy, international sales, and alternative investment products, developed twofold during the quarter. Net redemptions by international clients amounted to EUR 15 million. International clients accounted for 19 percent (21%) of Evli's total fund capital, including alternative investment products. Sales of alternative investment products totaled EUR 19 million (EUR 111 million) in the third quarter.
In the third quarter, Evli signed the investor statement on the European Sustainability Reporting Standards (ESRS). Evli continued its joint research project together with UNICEF Finland to explore how investors can promote child rights. In addition, Evli submitted its interim targets to Net Zero Asset Managers initiative and joined the global Nature Action 100 investor engagement initiative.
Maunu Lehtimäki, CEO, Evli Plc, tel. +358 (0)50 553 3000, firstname.lastname@example.org
Juho Mikola, CFO, Evli Plc, tel. +358 (0)40 717 8888, email@example.com
We see wealth as an engine to drive sustainable progress. We draw on our heritage, broad expertise, and Nordic values to grow and manage wealth for institutions, corporations and private persons in a responsible way.
We are the best fund house in the Nordics1 and the leading asset manager in Finland2 offering a broad range of services including mutual funds, asset management and capital markets services, alternative investment products, equity research, share plan design and administration as well as Corporate Finance services. Responsible investing is integrated in every investment decision and our expertise is widely acknowledged by our clients. Evli has Finland's best expertise in responsible investment3.
Evli Group employs around 300 professionals and Evli has approximately EUR 17.1 billion in client assets under management (net 9/2023). Evli Plc’s B shares are listed on Nasdaq Helsinki Ltd.
1 Lipper Fund Awards 2023.
2 Morningstar Awards 2023 (c). Morningstar, Inc. All Rights Reserved. Awarded to Evli for the Best Fund House in Finland. Kantar Prospera External Asset Management Finland 2015, 2016, 2017, 2018, 2019, 2021, 2022, 2023. Kantar Prospera Private Banking 2019, 2020 Finland.
3 SFR Scandinavian Financial Research Institutional Investment Services Finland 2021, 2022.Kantar Prospera External Asset Management Finland 2023.
Distribution: Nasdaq Helsinki, main media, www.evli.com
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