Norvestia - Interim report (Q1 and Q3)

INTERIM REPORT OF NORVESTIA FOR JANUARY–SEPTEMBER 2016

Helsinki, Finland, 2016-10-27 08:00 CEST (GLOBE NEWSWIRE) -- 

Norvestia Oyj        Interim Report      27 October 2016 at 9:00

INTERIM REPORT OF NORVESTIA FOR JANUARY–SEPTEMBER 2016

In January–September 2016, the result of the Group amounted to EUR 12.9 million
(EUR 10.1 million in the same period previous year). 
Earnings per share was EUR 0.84 (0.66).
Investment income was EUR 17.5 million (12.8).
Net Asset Value (dividend-adjusted) increased during the period by 8.0% (6.8%).
Dividend of EUR 0.79 per share was paid in March for 2015 (0.30).

CAPITAL MARKETS

The third quarter of the year was good for equity investors, even though the
result of the Brexit vote organized in Britain in the end of June was a
disappointment for investors. At the same time, it was somewhat of a relief
that the uncertainty related to the vote was temporarily removed from daily
discussion. After the vote, share prices rose especially in July, and for
example, the value of the OMX Helsinki CAP Yield Index increased by nearly 10%
in total during the third quarter of the year. 

Towards the end of the summer, stock markets calmed down and price volatility
decreased. An indication of this was that the value of VSTOXX Index measuring
the volatility of European shares sank to almost the lowest level in two years
in August, and still remains close to that level. 

The state of the Eurozone economy has hardly improved during the summer. The
European Central Bank’s (ECB) highly accommodative monetary policy has not
worked very well, and the Eurozone economy has not seen the desired growth. The
ECB’s interest policy has pressed the risk-free interest level into negative
territory in many euro countries. A demonstration of the absurdness of the
current economic situation is that in September the State of Finland issued a
seven-year bond with a 0.22% negative yield for the first time in its history.
Consequently, the State earned money by borrowing it. The current negative time
value of money causes peculiar phenomena and cannot be sustainable in the long
term. 

The currently calm situation in the market can change quickly. One sign of the
structural tensions in the Eurozone is that there continue to be significant
differences in interest rates between Germany and certain euro countries, such
as Greece. The alternative that Greece cannot repay its debts is reflected in
interest rates. 

According to the latest forecasts, the Eurozone economy will grow by 1.5% this
year and by 1.3% in 2017, while the Finnish economy is expected to grow by 1.0%
in both 2016 and 2017. The global economy is expected to grow by 2.9% this year
and by 3.1% in 2017. During the current presidential election year, the US
economy is expected to grow by 1.5% and in 2017 by 2.2%. 

Index yields on various exchanges for the first nine months of 2016 were as
follows: 

Finland/OMX Helsinki Index                         0.3%
Finland/OMX Helsinki CAP Yield Index               8.8%
Sweden/OMX Stockholm Index                         2.5%
Norway/OBX Index                                   2.5%
Denmark/OMX Copenhagen Index                      -7.9%
USA/Nasdaq Composite Index                         6.1%
USA/S&P 500 Index                              6.1%
Bloomberg European 500 Index                      -6.9%
MSCI World Index                                   3.8%
Japan/Nikkei 225 Index                           -13.6%
                                                       
Norvestia’s share price (dividend-adjusted)       21.9%
Norvestia’s Net Asset Value (dividend-adjusted)    8.0%

NORVESTIA’S INVESTMENTS

Norvestia’s twofold investment strategy consists of market investments and
Growth Equity. Market investments are made primarily in Nordic listed shares,
funds and bonds. Growth Equity investments are made in unlisted companies,
growth-oriented listed companies and private equity funds. 

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

                                       30/9/2016         30/9/2015
                                 MEUR          %   MEUR          %
Listed shares and share funds*   92.7       50.9   75.3       47.9
Growth Equity                    37.6       20.6   21.3       13.5
Bonds and bond funds             18.1        9.9   16.6       10.6
Hedge funds                      14.3        7.9   18.1       11.5
Cash and other liquid assets     19.4       10.7   26.0       16.5
Total                           182.1      100.0  157.3      100.0

* of which share funds EUR 15.2 million (13.1).

83% of the Group’s assets were in euros, 10% in Swedish krona, 6% in US dollars
and 1% in other currencies. 

The value of Norvestia’s market portfolio developed well during the third
quarter of the year with total return for the portfolio after hedging reaching
EUR 7.9 million. An individual share worth a special mention is Nordea. The
Nordea share benefitted especially from the decrease in general market risks,
and its price increased by nearly 30% from the rock bottom of early July. In
Norvestia’s portfolio, this corresponded to a return of EUR 0.8 million during
the third quarter. Also the values of funds developed favorably. Didner & Gerge
Aktiefond offered the best yield. 

The return on Norvestia’s Net Asset Value fluctuated less month on month than
the stock market in general. During the third quarter, the portfolio was
hedged, according to hedging policy, with Euro Stoxx Index futures.
Approximately half of the Swedish krona currency risk was hedged with a
currency future. 

GROWTH EQUITY

During the third quarter of the year, the value of Norvestia’s Growth Equity
portfolio increased by EUR 1.0 million due the unrealized fair value movements
of investments in the portfolio. During the third quarter, Norvestia committed
itself to investing approximately EUR 5 million in Hamilton Lane PE IX Fund,
which focuses on US and European small- and medium-sized companies. 

Investments in unlisted 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 long-term 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 2016, the Growth Equity portfolio
consisted of six unlisted companies: Aste Helsinki which offers media
production and consulting, Coronaria Hoitoketju which offers health care
services, Fluido which offers cloud services consulting, Idean Enterprises
which offers customer experience design services, Polystar Instruments which
develops telecommunications business intelligence software solutions, and
Touhula Varhaiskasvatus which offers early childhood and preschool education.
The total fair value of the interests in these companies amounted to EUR 28.3
million. 

Growth Equity also includes investments in private equity funds. Norvestia has
committed itself to investing EUR 2.0 million in the Amanda V East private
equity fund, of which EUR 1.3 million is now invested; approximately EUR 5
million in Hamilton Lane PE Fund IX, of which EUR 0.8 million is now invested;
EUR 2.0 million in Lifeline Ventures Fund I, of which EUR 1.5 million is now
invested; EUR 5.0 million in Lifeline Ventures Fund III, of which EUR 0.4
million is now invested; and EUR 3.0 million in Open Ocean Fund 2015, of which
EUR 0.3 million is now invested. In addition, Norvestia has invested EUR 0.1
million in Lifeline Ventures Fund III AB. 

FUTURE PROSPECTS

It looks like the US presidential election to be held 8 November will be the
most significant factor in the capital markets in the near future. According to
opinion polls, the election will be fairly even. 

For the capital markets, Clinton represents continuity and visibility. Trump’s
political agenda is more unclear and unpredictable. According to many analysts,
the election of Trump as President would increase uncertainty and complicate,
at least initially, the predictability of the US economy. Typically markets
react negatively to increasing uncertainty. Therefore, from the perspective of
the capital markets, the election of Clinton would be a better choice. 

The European economic environment remains challenging. Despite the ECB’s
powerful support purchases and interest stimulus, the euro economy has not
taken a proper step towards growth. The overall situation in Europe is made
difficult by the fact that Britain’s negotiations to leave the EU are only
about to start. It is too early to estimate the impact of Brexit on the
European economy, but the impact will nevertheless be negative. In addition to
unfavorable economic effects, the result of the Brexit vote has already caused
political turmoil in other EU countries, with demands for a similar referendum
on EU membership being made in Italy and France, among others. Such referenda
would probably be extremely difficult for the future of the EU. 

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. According to the chosen strategy, the amount of Growth
Equity investments will be increased during 2016–2018. Otherwise investment
levels between shares, funds and interest-yielding investments will be assessed
on the basis of the prevailing situation. 

KEY FIGURES

                                      1/1-30/9/   1/1-30/9/  1/1-31/12/
                                           2016        2015        2015
Earnings per share, EUR                    0.84        0.66        1.63
                                                                       
                                      30/9/2016   30/9/2015  31/12/2015
Equity ratio, %                            92.8        96.7        96.6
Shareholders’ equity per share, EUR       11.09       10.06       11.04
Net Asset Value per share, EUR            11.09       10.06       11.04
Net Asset Value, EUR million              169.8       154.1       169.1
Share price, EUR                           8.95        7.32        7.99
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 2016
Interim Report. The full Interim Report including tables is attached to this
release and available on Norvestia’s website at www.norvestia.fi/reports. 

The interim financial information is unaudited.

Helsinki, 27 October 2016

NORVESTIA OYJ
Board of Directors

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

DISTRIBUTION
Nasdaq Helsinki
Main media
www.norvestia.fi

Viðhengi:

Norvestia Oyj Interim Report 1.1.-30.9.2016.pdf