News and research before you hear about it on CNBC and others. Claim your 1-week free trial to StreetInsider Premium here.
EVLI PLC’S STOCK EXCHANGE RELEASE ON JANUARY 26, 2023, AT 11.00 AM (EET/EEST)
A YEAR OF SIGNIFICANT ARRANGEMENTS WENT FAVORABLY
- Evli carried out a successful partial demerger in the spring. In the arrangement, Evli focused on investment services and the banking business was merged with Fellow Finance. Evli is a significant shareholder in Fellow Bank Plc, the new company created by the merger.
- EAB Group Plc merged with Evli at the beginning of October. The transaction further strengthened Evli’s position as Finland’s leading asset manager.
- The alternative investment funds continued to grow, driven by strong client demand. Over the past two years, Evli has managed to more than double the assets under management in alternative investment funds.
Financial performance January-December 2022
- Net revenue was EUR 96.1 million (Carve-out 1–12/2021: EUR 116.2 million).
- Operating profit was EUR 30.9 million (EUR 56.6 million). Operating profit excluding non-recurring items related to mergers and acquisitions was EUR 37.1 million.
- Operating result of the Wealth Management and Investor Clients segment decreased to EUR 27.4 million (EUR 44.8 million).
- Operating result of the Advisory and Corporate Clients segment decreased to EUR 4.2 million (EUR 7.4 million).
- At the end of December, assets under management amounted to EUR 16.0 billion (EUR 17.5 billion) on a net basis.
- Return on equity was 20.4 percent (50.4%).
- Earnings per share, fully diluted, was EUR 0.81 (EUR 1.58). The corresponding earnings per share excluding non-recurring items related to the corporate transactions was EUR 1.00.
- The Board of Directors proposes that a total of EUR 1.15 per share be distributed to shareholders for the financial year 2022, of which EUR 0.80 per share would be dividends and EUR 0.35 per share would be distributed from the reserve for unrestricted equity.
- The ratio of recurring revenues to operational costs was 123 percent (135%).
Financial performance October-December 2022
- The Group’s net revenue was EUR 29.4 million (EUR 35.0 million).
- The Group’s operating profit for the period was EUR 5.0 million (EUR 17.0 million). Operating profit excluding non-recurring items related to mergers and acquisitions was EUR 9.8 million.
- Earnings per share, fully diluted, amounted to EUR 0.12 (EUR 0.49). The corresponding earnings per share excluding non-recurring items related to the corporate transactions was EUR 0.26.
- EAB Group Plc merged into Evli Plc on October 1, 2022. The figures of EAB Group Plc are included for the last quarter of the year in the financial statements bulletin.
Outlook for 2023
The year 2023 will start in an uncertain mood, due to increased interest rate and inflation fears, risen geopolitical risks and a market downturn.
Evli has managed to strengthen its market position as a result of the corporate transactions made during 2022. With synergies from the arrangements and the non-recurring costs allocated to 2022, we expect the operating result to be well above the comparison period (EUR 30.9 million in 2022).
Key figures describing the Group’s financial performance
|Income statement key figures|
|Net revenue, M€||96.1||116.2|
|Operating profit/loss, M€||30.9||56.6|
|Operating profit margin, %||32.1||48.7|
|Profit/loss excl. non-recurring items related to mergers and acquisitions, M€||37.1||–|
|Profit/loss for the financial year, M€||25.1||45.5|
|Profitability key figures|
|Return on equity (ROE), %||20.4||50.4|
|Return on assets (ROA), %||6.8||11.3|
|Balance sheet key figures|
|Equity-to-assets ratio, %||39.1||27.7|
|Key figures per share|
|Earnings per Share (EPS), fully diluted, €||0.81||1.58|
|Earnings per Share (EPS) excl. non-recurring items related to mergers and acquisitions, fully diluted, €||1.0|
|Dividend per share, €||1.15*||–|
|Equity per share, €||5.28||–|
|Share price at the end of the period, €||15.15||–|
|Other key figures|
|Expense ratio (operating costs to net revenue)||0.67||0.52|
|Recurring revenue ratio, %||123||135|
|Permanent personnel at the end of the period||294||283|
|Market value, M€||398.1||–|
*The Board of Directors proposal to the Annual General Meeting
CEO Maunu Lehtimäki
The year 2022 was historically weak for investments. All major asset classes, equities, government bonds and corporate bonds, fell in value as the war in Ukraine, geopolitical tensions, rising energy prices and wildly rampant inflation, plus the policy rate hikes to contain it, all took their toll. The rise in the US dollar also led to higher budget deficits and debt servicing costs in many emerging economies and increased their risk of default. The prices of growth stocks, especially tech companies, which rose to great heights during the era of low interest rates and quantitative easing, fell particularly hard. The few stocks that rose in value were mainly found in the energy and weapons industries.
The weak market development levelled off in the last quarter of the year as investors saw the first signs of a possible slowdown in inflation. Despite this, the normalisation of the interest rate environment, the weakened purchasing power for consumers, as well as global economic uncertainties and the continuation of the war, are all expected to push Europe into a recession during the current year.
The year 2022 was particularly significant for Evli with two large and successful M&A transactions. In the spring, Evli carried out a partial demerger. In the transaction, Evli focused on providing investment services and merged its banking operations with Fellow Finance to form a new digital bank, Fellow Bank Plc. Evli is a significant owner of the bank created by the merger. In the autumn, Evli strengthened its position as Finland’s leading asset manager by the merger of EAB Group Plc into Evli. The corporate transactions contributed to the negative impact on Evli’s profitability during the 2022 financial year, but positive synergies are expected in the coming years.
The weakness in the market and operating environment was reflected in Evli’s performance in the fourth quarter. Net turnover decreased by approximately 16 percent to EUR 29.4 million and the Group’s operating profit fell by about 70 percent to EUR 5.0 million. Fee income from alternative investment products and the incentive business increased, but fee income from traditional funds and the Corporate Finance unit was well below the previous year. The decline in fee income was driven by lower asset values, increased redemptions, and a slowdown in M&A activity. In addition, the result for the fourth quarter was negatively impacted by non-recurring items related to the merger with EAB Group Plc.
In January-December, Evli’s return on equity was 20.4 percent (50.4%). The ratio of recurring income to operating expenses, on the other hand, was 123 percent (135%). The Group’s solvency and liquidity were at an excellent level.
Net turnover in the Wealth Management and Investor Clients segment decreased by 17 percent to EUR 75.7 million in the reporting period. Client assets under management, including EAB Group Plc’s client assets, decreased to EUR 16 billion (EUR 17.5 billion) due to the weak market development and increased net redemptions. Evli Fund Management Company’s mutual fund capital, including alternative investment products, amounted to EUR 11.1 billion (EUR 12.2 billion). Net redemptions of traditional investment funds amounted to around EUR 1 billion during the beginning of the year. Redemptions were mainly in short dated fixed income funds, corporate bond funds and European equities. However, fee income from alternative investment products increased by approximately 50 percent and thus already accounted for around 30 percent of total fund fees.
Net turnover in the Advisory and Corporate Clients segment decreased by 19 percent to EUR 16.4 million. Corporate Finance invoicing fell by over 50 percent from the comparative period to EUR 5.8 million in the quarter (EUR 11.7 million). The mandate base of the Corporate Finance unit is good, and the outlook has brightened to some extent. Income from the Incentive business increased to EUR 10.4 million (EUR 8.5 million). The company has continued to win new incentive plan design and administration clients and the outlook is also good.
The key drivers of Evli’s strategy, international sales and alternative investment products, showed a mixed performance during the quarter. International sales, with Evli’s corporate bond funds at its core, suffered in the first half of the year from rising interest rates and general market uncertainty. Redemptions by international clients amounted to almost EUR 670 million and the share of international clients in total fund capital, including alternative investment products, fell to 20% (27%).
In the fourth quarter, sales of alternative investment products reached a total of EUR 120 million (EUR 153 million). The sales were spread across several funds, with the largest subscription amount coming from the Evli Private Equity III fund.
Responsibility is one of Evli’s strategic focus areas. In the fourth quarter, as part of its work to support human rights, Evli launched a research project together with UNICEF Finland to explore how investors and asset managers can promote the fulfilment of children’s rights. Evli’s work on responsibility was again praised by clients, who rated Evli as the best asset manager in Finland in terms of responsible investing in a survey of institutional clients conducted by SFR Scandinavian Financial Research.
I want to thank our clients, shareholders and my colleagues at Evli. Let’s continue our journey together for a better future!
Maunu Lehtimäki, CEO, Evli Plc, tel. +358 (0)50 553 3000, [email protected]
Juho Mikola, CFO, Evli Plc, tel. +358 (0)40 717 8888, [email protected]
We see wealth as an engine to drive 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 leading asset manager in Finland* 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 investment**.
Evli Group employs around 300 professionals and Evli has a total of EUR 16.0 billion in client assets under management (net 12/2022). Evli Plc’s B shares are listed on Nasdaq Helsinki Ltd.
* Kantar Prospera External Asset Management Finland 2015, 2016, 2017, 2018, 2019, 2021, Kantar Prospera Private Banking 2019, 2020 Finland
** SFR Scandinavian Financial Research Institutional Investment Services Finland 2021, 2022
Distribution: Nasdaq Helsinki, main media, www.evli.com
Attachment: Evli Plc Financial Statements Bulletin 2022