Evli Oyj - Half Year financial report

Evli Plc's Half Year Financial Report January-June 2024

EVLI PLC HALF YEAR FINANCIAL REPORT ON JULY 15, 2024, AT 2:00 PM (EET/EEST)

Evli Plc’s Half Year Financial Report January–June 2024

POSITIVE DEVELOPMENT IN ALL BUSINESS AREAS

Highlights of the period

• 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.
• Despite the challenging market environment, funding for alternative investment funds proceeded successfully. Evli collected more than EUR 80 million in net subscriptions in the second quarter.
• Cooperation with Bregal Milestone to accelerate the international growth of Allshares’ incentive business progressed as expected and the first acquisitions in Sweden were completed.

Financial performance January-June 2024 (comparison period 1–6/2023)

• Net revenue was EUR 72.2 million (EUR 52.2 million). Comparable net revenue after eliminating the effects from the corporate transaction was EUR 55.0 million (45.7 million).
• Operating profit was EUR 37.2 million (EUR 19.1 million). Comparable operating profit after eliminating the effects of the from the corporate transaction was EUR 22.2 million (16.9 million).
• Operating result of the Wealth Management and Investor Clients segment increased to EUR 18.2 million (EUR 17.8 million).
• Operating result of the Advisory and Corporate Clients segment increased to EUR 2.2 million (EUR 1.8 million).
• At the end of June, net assets under management amounted to EUR 18.7 billion (EUR 16.8 billion), including assets managed by associated companies. Assets under management excluding the associated companies amounted to EUR 16.4 billion (EUR 14.7 billion).
• Return on equity was 37.9 percent (22.6%).
• The ratio of recurring revenue to operating costs was 125 percent (128%).
• Earnings per share, fully diluted, were EUR 1.10 (EUR 0.52).

Financial performance April-June 2024 (comparison period 4-6/2023)

• The Group's net revenue was EUR 29.3 million (EUR 26.4 million).
• The Group's operating profit was EUR 12.1 million (EUR 9.8 million).
• Diluted earnings per share amounted to EUR 0.31 (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€	4–6/2024	4–6/2023	1–6/2024	1–6/2023	1–12/2023
Income statement key figures
Net revenue, M€	29.3	26.4	72.2	52.2	108.7
Operating profit/loss, M€	12.1	9.8	37.2	19.1	40.2
Operating profit margin, %	41.4	36.9	51.5	36.7	37.0
Profit/loss excl. non-recurring items related to mergers and acquisitions, M€	12.2	8.7	22.2	16.9	-
Profit/loss for the financial year, M€	9.8	7.8	32.9	15.3	32.0
Profitability key figures
Return on equity (ROE), %	-	-	37.9	22.6	22.8
Return on assets (ROA), %	-	-	13.8	8.4	9.0
Balance sheet key figures
Equity-to-assets ratio, %	-	-	33.3	35.4	39.8
Key figures per share
Earnings per Share (EPS), fully diluted, €	0.31	0.26	1.10	0.52	1.05
Dividend per share, €	-	-	-	-	1.16*
Equity per share, €	-	-	5.08	4.66	5.02
Share price at the end of the period, €	-	-	19.5	19.4	19.70
Personnel figures
Number of permanent employees	-	-	273**	304	316
Number of temporary employees	-	-	39**	53	38
Share of personnel worked in Finland, %	-	-	92.3**	94	94
Other key figures
Expense ratio (operating costs to net revenue)	0.58	0.63	0.49	0.64	0.63
Recurring revenue ratio, %	-	-	125	128	130
Market value, M€	-	-	516.5	513.8	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 1–6/2024 personnel figures.


CEO MAUNU LEHTIMÄKI

Economic growth in the United States continued to be strong in the second quarter, as in the early part of the year, but remained subdued in Europe. Consumer price growth in the United States slowed less than expected, resulting in expectations of interest rate cuts shifting further into the future. In Europe, on the other hand, consumer price growth slowed in line with the European Central Bank's (ECB) wishes, and the ECB lowered its key interest rate to 4.25 percent in June. Interest rate cuts are expected to continue, reaching 3.5 percent at the end of this year and 3.0 percent at the end of next year.

As at the beginning of the year, the tense situation in the Middle East, the war in Ukraine, increased tensions between NATO and Russia as well as the competition between the United States and China for strategic leadership dominated the geopolitical discussion. The US presidential election in November is also expected to become an increasingly central theme affecting market sentiment during the rest of the year.

Share prices rose slightly in April-June in the United States, Europe, and emerging markets. Share prices also rose in Finland. In fixed income investments, high-yield bonds and emerging market loans performed best during the period. The return on higher-rated Investment Grade bonds was slightly positive, while the yield on government bonds was negative, as in the early part of the year. In the real estate market, the decline in prices levelled off, but vacancy rates in rental apartments and business premises as well as low transaction activity in the real estate market are likely to postpone the recovery in prices until next year.

Evli Group's net revenue in the second quarter increased by approximately 11 percent to EUR 29.3 million (EUR 26.4 million). Revenue growth was supported by increased commission income from traditional funds, performance-based fees recognized during the quarter, stronger invoicing in the Corporate Finance unit than in the previous year, and income from the company's own balance sheet. Net revenue growth was dampened by the corporate restructuring carried out in March, in which private equity firm Bregal Milestone and Evli entered into a strategic partnership to grow the business of Evli Alexander Incentives Oy (currently Allshares Oy). As a result of the arrangement, Allshares Oy will be reported as an associated company in the future. Going forward, Evli will recognize the share of the result of the incentive business directly in operating profit, and operating income and expenses will no longer be combined line by line in the consolidated financial statements.

The Group's operating profit for the second quarter increased by 24 percent to EUR 12.1 million (EUR 9.8 million). Evli's return on equity for the first half of the year was 37.9 percent (22.6%). The ratio of recurring revenue to operating expenses was 125 percent (128%). The Group's solvency and liquidity were at an excellent level.

The Wealth Management and Investor Clients segment's net revenue increased by 16 percent in the second quarter and was EUR 24.1 million (EUR 20.8 million). As a result of positive market development and net subscriptions, managed client assets increased to EUR 18.7 billion (EUR 16.8 billion). Evli Fund Management Company's mutual fund capital, including alternative investment products, was approximately EUR 13.3 billion (EUR 12.2 billion). Net subscriptions of traditional investment funds amounted to approximately EUR -120 million during the quarter. The largest net subscriptions were received by Evli Europe Growth fund, which invests in European growth stocks, and Evli Emerging Frontier fund, which invests in emerging and frontier market equities.

The Advisory and Corporate Clients segment's net revenue decreased by 60 percent in the second quarter to EUR 2.0 million (EUR 5.0 million). The decrease in net revenue is a consequence of the corporate arrangement in which the incentive business became an associated company of the Group and is therefore no longer part of segment reporting. Advisory fees received from M&A activities increased compared to the corresponding period of the previous year. 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.

The key areas of Evli's strategy, international sales and alternative investment products, developed twofold during the quarter. Net redemptions by international clients totaled EUR 30 million and international clients accounted for 18 percent (19%) of Evli's total fund capital, including alternative investment products. Sales of alternative investment products totaled EUR 82 million (EUR 90 million) during the quarter. Higher 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 second quarter of the year, Evli engaged directly with four companies and participated in 16 General Meetings. Evli also participated in the collaborative engagement through the CDP 2024 Non-Disclosure Campaign. In addition, Evli signed the investor letter Finance Statement on Plastic Pollution to support a global plastics treaty.


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 18.7 billion in client assets under management (net 6/2024). 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:

Half Year Financial Report-Q2-2024-Evli-Plc-acc.pdf