Evli Oyj - Interim report (Q1 and Q3)

Evli Plc's Interim Report 1-3/2024

EVLI PLC INTERIM REPORT ON APRIL 22, 2024, AT 2:00 PM (EET/EEST)

Evli Plc’s Interim Report 1–3/2024

FAVORABLE BUSINESS DEVELOPMENT – ASSETS UNDER MANAGEMENT AT ALL-TIME HIGH

Highlights of the period

• Evli entered into a strategic partnership with Bregal Milestone to accelerate international growth of the incentive business. In the future, the incentive business will operate under the Allshares brand.
• Net revenue and operating profit increased, driven by a one-time profit impact from the partnership arrangement, positive market development, and performance-related fees earned through successful portfolio management.

Financial performance January-March 2024 (comparison period 1–3/2023)

• Net revenue was EUR 42.9 million (EUR 25.7 million). Comparable net revenue after eliminating the impact from the corporate transaction was EUR 29.1 million.
• Operating profit was EUR 25.1 million (EUR 9.4 million). Comparable operating profit after eliminating the impact from the corporate transaction was EUR 11.3 million.
• Operating result of the Wealth Management and Investor Clients segment increased to EUR 9.6 million (EUR 8.9 million).
• Operating result of the Advisory and Corporate Clients segment increased to EUR 1.1 million (EUR 0.2 million).
• At the end of March, net assets under management amounted to EUR 18.5 billion (EUR 16.7 billion).
• Return on equity was 35.8 percent (22.7%).
• The ratio of recurring revenue to operating costs was 125 percent (128%).
• Earnings per share, fully diluted, were EUR 0.79 (EUR 0.26).

OUTLOOK UNCHANGED FOR 2024

The business environment is expected to remain uncertain and difficult to predict in 2024. The expansion of geopolitical risks, fears of inflation and interest rates, and concerns about the sustainability of economic growth increase uncertainty in the markets.

Despite the challenging market environment, Evli has succeeded in strengthening its position in the market. Growth has been supported by a wide product range and customer base. Due to the one-off impact from the corporate arrangement, the strong position and growth prospects, we estimate that the operating profit will significantly exceed the level of the comparison period.

KEY FIGURES DESCRIBING THE GROUP’S FINANCIAL PERFORMANCE

M€	1–3/2024	1–3/2023	1–12/2023
Income statement key figures
Net revenue, M€	42.9	25.7	108.7
Operating profit/loss, M€	25.1	9.4	40.2
Operating profit margin, %	58.4	36.5	37.0
Profit/loss excl. non-recurring items related to mergers and acquisitions, M€
Profit/loss for the financial year, M€	23.1	7.5	32.0
Profitability key figures
Return on equity (ROE), %	38.5	22.7	22.8
Return on assets (ROA), %	14.5	8.0	9.0
Balance sheet key figures
Equity-to-assets ratio, %	35.8	31.7	39.8
Key figures per share
Earnings per Share (EPS), fully diluted, €	0.79	0.26	1.05
Dividend per share, €			1.16*
Equity per share, €	4.75	4.42	5.02
Share price at the end of the period, €	18.80	18.20	19.70
Personnel figures
Number of permanent employees	270**	300	316
Number of temporary employees	26**	51	38
Share of personnel worked in Finland, %	92.2**	94	94
Other key figures
Expense ratio (operating costs to net revenue)	0.42	0.65	0.63
Recurring revenue ratio, %***	125	128	130
Market value, M€	497.9	478.2	521.8

* Dividend approved by the Annual General Meeting 2024. The dividend has been paid on 25.3.2024.
** The number of employees of Allshares Oy is not included in the 1–3/2024 personnel figures.
*** 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

During the first quarter of 2024, the US economy continued to grow strongly, as last year, but in Europe growth remained sluggish. The rise in consumer prices slowed down in many places, but it was above the central banks’ target level of two percent. However, inflation is expected to fall further in the future, which opens the way for central banks to start cutting interest rates. The European Central Bank is forecast to lower its key interest rate to 4.25 percent at its meeting in June and to continue interest rate cuts to 3.5 percent towards the end of the year. In the US, the first interest rate cuts are not expected until the second half of the year due to inflation being more persistent than in Europe.

Geopolitical tensions, including the tense situation in the Middle East, the war in Ukraine as well as OPEC’s production restraints, increased the price of crude oil in the early part of the year. The price of gold has also risen sharply, and it reached a new high during the first quarter. Gold is traditionally seen as a safe haven from inflation and global economic shocks and crises. Expectations of interest rate cuts have also stimulated investor interest in gold.

Stock prices rose in the early part of the year in the US, Europe, and many emerging markets. In Finland, stock prices mainly moved sideways, with the HEX Portfolio Index being slightly negative. Finland’s development, weaker than in other markets, was largely due to the industry structure of Nasdaq Helsinki, known for its focus on traditional industries and cyclical companies. Also, high interest rates and weakness in construction activity weigh on domestic demand. In fixed income investments, high-yield bonds as well as corporate bonds of emerging markets performed best. Yields on higher-rated Investment Grade bonds were also positive in the early part of the year, whereas yields on government bonds were negative. For real estate investors, the beginning of the year continued to be difficult due to increased return requirements and vacancy rate of offices.

In the first quarter, the Group’s net revenue increased by approximately 67 percent to EUR 42.9 million (EUR 25.7 million). The growth in revenue results from a corporate transaction concerning the incentive business, completed in the beginning of the year, where Evli and the private equity firm Bregal Milestone entered into a strategic partnership to accelerate the international growth of Evli’s subsidiary Evli Alexander Incentives Oy (nowadays Allshares Oy). As a result of the arrangement, Bregal Milestone became the principal owner of Allshares together with Evli. The purpose of the partnership is to make Allshares the leading provider of share-based incentive and compensation plan administration and design in Europe and elsewhere. In relation to the arrangement, Evli will recognize a non-cash accounting gain of approximately EUR 13.8 million in total in fiscal year 2024. Allshares Oy will be treated as an associated company as Evli’s ownership falls to 42 percent. The arrangement is a significant strategic and economic partnership for Evli, and it is expected to increase the value of Evli’s ownership in Allshares over a longer period.

Comparable net revenue after eliminating the impact from the corporate transaction increased by 13 percent and was EUR 29.1 million. The revenue growth was supported by higher fee income from traditional funds, performance-based fees recorded in the quarter as well as the Corporate Finance unit’s invoicing, which was stronger than in the previous year.

The Group’s operating profit increased by 167 percent to EUR 25.1 million (EUR 9.4 million). Comparable operating profit after eliminating the impact of the corporate transaction increased by 20 percent and was EUR 11.3 million. In January–March, Evli’s return on equity was 38.5 percent (22.7%). The ratio of recurring revenue to operational costs was 125 percent (128%). The Group’s solvency and liquidity were at an excellent level.

Net revenue in the Wealth Management and Investor Clients segment increased by 12 percent in the first quarter to EUR 23.3 million (EUR 20.9 million). Client assets under management rose to EUR 18.5 billion (EUR 16.7 billion), driven by positive market developments and net subscriptions. Evli Fund Management Company’s mutual fund capital, including alternative investment products, was approximately EUR 13.4 billion (EUR 11.5 billion). Net subscriptions of investment funds amounted to approximately EUR 250 million during the quarter, mainly from short-term fixed income funds as well as from global equity funds. In March, Evli achieved a historic double win when Morningstar awarded Evli Fund Management Company as the best fund house in both Finland and Sweden.

Evli’s fund range expanded with four new funds during the first quarter, three of which were transferred to Evli as a result of the completion of the Zenito Oy acquisition. The funds transferred from Zenito are among the best in their international asset classes, including the investment funds Evli Hannibal, Zenito UK Value Fund, and the only precious metal mining fund in the Finnish investment market Zenito Silver and Gold.

The Advisory and Corporate Clients segment’s net revenue increased by 48 percent in the first quarter to EUR 5.0 million (EUR 3.4 million). The increase was accounted for by a strong recovery in advisory fees from M&A transactions. The unit’s mandate base is good, and there are clear signs of pickup in the M&A market from the previous year’s exceptionally low level.

Net income from the Incentive business increased to EUR 3.3 million (EUR 3.2 million). In accordance with its strategy, Allshares succeeded in winning new customers from both Swedish listed companies and Finnish unlisted companies, and the company’s overall outlook is good. The income growth of the Incentive business is expected to accelerate in the coming years, due to the more growth-oriented strategy of Allshares, and the concluded corporate transaction and increase in capital, all contributing to the strategy implementation.

The key aspects of Evli's strategy, international sales, and alternative investment products, developed below expectations during the quarter. Net redemptions by international clients totaled EUR 35 million, and international clients accounted for 18 percent (21%) of Evli's total fund capital, including alternative investment products. Sales of alternative investment products totaled EUR 45 million (EUR 83 million) in the quarter. Increased interest rates, lower valuations, slowdown in M&A activity and hence a decrease in returns have reduced investor interest in committing to new private equity fund investments. In the longer term, however, we expect that interest in private equities will once again recover.

In the area of responsibility, Evli continued engaging with the investee companies, both independently and together with other investors. During the first quarter of the year, Evli directly engaged with 19 companies and participated as an active member in the Nature Action 100 investor initiative, which focuses on reducing nature loss. Evli also joined the TNFD Early Adopters and became an endorser of the PRI’s Spring stewardship initiative, in which investors use their influence to halt global biodiversity loss by 2030.

EVLI PLC

Additional information:
Maunu Lehtimäki, CEO, Evli Plc, tel. +358 (0)50 553 3000, maunu.lehtimaki@evli.com
Juho Mikola, CFO, Evli Plc, tel. +358 (0)40 717 8888, juho.mikola@evli.com

Evli Plc

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 18.5 billion in client assets under management (net 3/2024). Evli Plc’s B shares are listed on Nasdaq Helsinki Ltd. More information at www.evli.com.

¹ Morningstar Awards 2024 (c). Morningstar, Inc. All Rights Reserved. Awarded to Evli for the Best Fund House in Finland and Sweden. Lipper Fund Awards 2023, the category Small Fund Companies.
² 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 2017, 2018, 2019, 2020, 2023 Finland.


Distribution: Nasdaq Helsinki, main media, www.evli.com

Attachments:

Interim-Report-Q1-2024-Evli-Plc.pdf