Norvestia - Interim report (Q1 and Q3)

INTERIM REPORT OF NORVESTIA FOR JANUARY–SEPTEMBER 2015

Helsinki, Finland, 2015-10-27 08:45 CET (GLOBE NEWSWIRE) -- 

Norvestia Oyj             Interim Report 27 October 2015 at 9:45

INTERIM REPORT OF NORVESTIA FOR JANUARY-SEPTEMBER 2015

In January-September 2015, the result of the Group amounted to EUR 6.5 million
(EUR 4.9 million in the same period previous year). 
Earnings per share were EUR 0.42 (0.32).
Trading gains were EUR 8.1 million (5.6).
Net Asset Value (dividend-adjusted) increased during the period by 5.0% (3.5%).
Amended Net Asset Value (dividend-adjusted) increased during the period by 4.5%
(3.4%). 
In April 2015 EUR 0.30 per share was distributed as dividend (0.35).

NEW INVESTMENT STRATEGY FOR NORVESTIA

As a result of the Group's strategy process Norvestia Oyj's Board of Directors
has 26 October 2015 approved a new investment strategy for the company. The
company has also updated its financial targets. Norvestia will publish a
separate stock exchange release concerning the Board's strategic decisions. 

CAPITAL MARKETS

So far 2015 has been fairly contradictory on the European capital markets.
Share prices rose strongly during the first quarter of the year, before heading
south in April and continuing to fall ever since. The decline in share prices
was particularly strong in August-September. The value of the OMX Helsinki CAP
Yield Index decreased by 7.9% during the third quarter of the year. At the end
of the third quarter, the yield of the index was 3.1% up from the beginning of
the year when it was over 20% at its April high. 

There have been several factors behind the decline in share prices. At the end
of the spring Greece's debt negotiations and financial situation pushed share
prices down. In the summer and early fall concern over the growth outlook of
the world economy and in particular the slowdown in China's growth raised
general uncertainty on the capital markets. Negative sentiment increased when
the US Federal Reserve System (FED) did not, against expectations, raise its
key interest rate at its 17 September meeting. This decision was interpreted as
the FED expecting weaker US growth than had been previously forecast. 

The latest statistics support this view. Several forecasting institutions have
lowered their forecasts for global economic growth since the summer. Yet at the
beginning of the year the global economy was forecast to grow by 3.6% during
2015. That number has now been revised downwards to a lowly 3.0%, with 2016
global economic growth forecast to be 3.5%. China's annual economic growth is
forecast to be over 6% for the next few years. 

In addition, some separate news shook the stock market in the third quarter. In
September the world's biggest car manufacturer Volkswagen was caught illegally
manipulating the exhaust emissions of its diesel cars in the US. As a result,
the company lost nearly 40% of its market capitalization in just two days,
which corresponded to approximately EUR 30 billion. This scandal, the biggest
in the European economy for a long time, further weakened the uncertain
sentiment on the stock market and also negatively impacted the share prices of
other car manufacturers. 

The extent of the decline in share prices during the third quarter is well
illustrated by the fact that over half of the shares on the OMX Helsinki 25
Index fell during the quarter by more than 10%. The biggest decline was
witnessed by Outokumpu shares which lost 54% of their value. Tieto shares saw
the biggest upside as their value increased by 8%. 

The fundamentals of the interest market remained unchanged during the third
quarter of the year. Interest rates remain at record lows and even the interest
level of debt securities considered risk-free declined somewhat. For example,
the interest rate of German government bonds is currently negative all the way
to a five-year maturity. This decrease in interest levels results from the fact
that investors protecting themselves from the turbulence of the stock markets
look for safe havens for their investments and are even ready to accept a
negative interest rate rather than a stock risk. 

Index yields on various exchanges for the first nine months of 2015 were as
follows: 

Finland/OMX Helsinki Index                               -1.0%
Finland/OMX Helsinki CAP Yield Index                      3.1%
Sweden/OMX Stockholm Index                                0.4%
Norway/OBX Index                                         -1.1%
Denmark/OMX Copenhagen Index                             18.6%
USA/Nasdaq Composite Index                               -2.4%
USA/S&P 500 Index                                    -6.7%
Bloomberg European 500 Index                              0.5%
MSCI World Index                                         -7.5%
Japan/Nikkei 225 Index                                   -0.4%
Norvestia's share price (dividend-adjusted)               3.0%
Norvestia's Net Asset Value (dividend-adjusted)           5.0%
Norvestia's Amended Net Asset Value (dividend-adjusted)   4.5%

GROWTH EQUITY

The new investment strategy approved by Norvestia's Board of Directors 26
October 2015 will have a significant effect on the role of growth equity
investment activities (previously industrial investments) in the Group as their
share of total investments will be increased from the current 10% to
approximately 50% during 2016-2018. 

Investments in unlisted or growth-oriented listed companies belong to
Norvestia's growth equity portfolio, which is administered by Norvestia's
subsidiary Norvestia Industries Oy. The aim of Norvestia's growth equity
investment activities is to find interesting companies with strong growth
potential, the longterm and active development of which can yield significant
increases in value and thereby return to Norvestia's shareholders. In
accordance with its investment strategy, Norvestia aims to find target
companies that operate in sufficiently large markets and have the opportunity
to take advantage of their service and solution innovations both in Finland and
internationally. 

Norvestia invests in minority shares or can be in the majority together with
another investor. At the end of September 2015, the growth equity portfolio
consisted of four unlisted companies: Aste Holding which offers media
production and consulting, Coronaria Hoitoketju which offers health care
services (includes also the fast growing independent Touhula Group which offers
early childhood and preschool education), Idean Enterprises which offers
customer experience design services and Polystar Instruments which develops
business intelligence software solutions for telecommunications. The total
balance value of interests in these companies amounted to EUR 12.0 million. The
development of growth equity investments continued strongly in 2015, with
companies able to increase their revenues faster than the markets. 

Growth equity also includes investments in private equity funds. Norvestia has
committed itself to investing EUR 2.0 million in Lifeline Ventures Fund I, of
which EUR 1.4 million is now invested. In addition, Norvestia has committed
itself to investing EUR 2.0 million in the Amanda V East private equity fund,
of which EUR 1.1 million is now invested. Norvestia has also invested EUR 0.1
million in Lifeline Ventures Fund III. 

NORVESTIA'S INVESTMENTS

Norvestia's investments excluding cash and other liquid assets were 83% (89%)
of total assets at the end of September. The market value breakdown of the
investments was as follows: 

                                       30/9/2015         30/9/2014
                                 MEUR          %   MEUR          %
Listed shares and share funds*   75.3       49.6   73.3       50.7
Industrial investments           16.0       10.5   13.7        9.5
Hedge funds                      18.1       11.9   20.2       14.0
Bonds and bond funds             16.6       10.9   21.2       14.6
Cash and other liquid assets     26.0       17.1   16.2       11.2
In total                        152.0      100.0  144.6      100.0

* of which share funds EUR 13.1 million (13.3).

79% of the Group's assets were in euros, 14% in Swedish krona, 6% in US dollars
and 1% in other currencies. 

The third quarter of the year constituted a difficult investment environment.
The investment portfolio was hedged by selling shares and index futures, and by
increasing the amount of cash. The values of listed shares, share funds and
hedge funds declined. The values of bonds remained fairly unchanged and growth
equity investments yielded positively. The biggest single returns were due to
the increase in the value of Elisa's and Finnair's shares. 

Norvestia's Net Asset Value fluctuated less month on month than the stock
market in general. Approximately half of the Swedish krona currency risk was
hedged with a currency future. 

FUTURE PROSPECTS

It is exceptionally difficult to forecast the development of the capital
markets during the last quarter of the year. In the midst of uncertainty, the
most certain thing is that the interest levels of risk-free loans will remain
at record lows. 

The European Central Bank (ECB) announced at its 23 October meeting that it
would further increase the amount of liquidity if growth in Europe remains
sluggish. The low interest rate level and the ECB's support activities are
clearly buoying the stock market. Downward pressure is being exerted on share
prices, however, by the fact that company specific third quarter results have
been weaker than expected and the prices of many shares have fallen following
earnings announcements. The stock market is now indeed in a very contradictory
situation. The company specific results make any rise in share prices unlikely,
however prices may well still rise anyway, due to the support measures of the
central bank. 

Concern over future growth of the global economy is stifling share prices,
however. The economic figures published by China are being followed
particularly closely at the moment. The markets would probably react positively
if the FED raised its key interest rate this year. The key interest rate of the
US central banking system has remained at its record low of 0.25% for almost
seven years. Even a small rise in the interest rate would indicate the FED's
belief in a stronger, recovering US economy in the coming years. 

In this sensitive investment environment, Norvestia aims to take into account
various possible scenarios in the economy and on the stock market, based on the
latest economic figures. Investment levels between shares, funds and
interest-yielding investments are assessed on the basis of the prevailing
situation. 

KEY FIGURES

                                         1/1-30/9/   1/1-30/9/  1/1-31/12/
                                              2015        2014        2014
Earnings per share, EUR                       0.42        0.32        0.35
                                         30/9/2015   30/9/2014  31/12/2014
Equity ratio, %                               97.3        97.7        99.0
Shareholders' equity per share, EUR           9.78        9.55        9.59
Net Asset Value per share, EUR                9.78        9.55        9.59
Amended Net Asset Value per share, EUR        9.88        9.64        9.73
Net Asset Value, EUR million                 149.8       146.2       146.9
Amended Net Asset Value, EUR million         151.4       147.7       149.0
Share price, EUR                              7.32        7.32        7.40
Number of shares                        15,316,560  15,316,560  15,316,560

DISCLOSURE PROCEDURE

This stock exchange release is a summary of Norvestia's January-September 2015
interim report. The full interim report including tables is attached to this
release and available on Norvestia's web pages at
www.norvestia.fi/en/investors. 

The interim financial information has been reviewed by Norvestia's auditor.

Helsinki 27 October 2015

NORVESTIA OYJ
Board of Directors

On behalf Juha Kasanen
Managing Director
Tel. +358-9-6226 380

DISTRIBUTION
Nasdaq Helsinki
Main media
www.norvestia.fi

Attachments:

Norvestia Oyj Interim Report 1.1.-30.9.2015.pdf