Good profitability maintained in an exceptional market.
Financial performance January-September 2022
- Operating income was EUR 66.7 million (1-9/2021: EUR 81.2 million)
- Operating profit was EUR 25.8 million (EUR 39.7 million. Operating profit excluding non-recurring items related to mergers and acquisitions was 27.3 million euros.
- Operating result of the Wealth Management and Investor Clients segment decreased to EUR 22.3 million (EUR 29.8 million)
- Operating result of the Advisory and Corporate Clients segment decreased to EUR 2.8 million (EUR 6.5 million)
- At the end of September, assets under management amounted to EUR 14.4 billion (EUR 16.1 billion) on a net basis
- Return on equity was 27.3 percent (46.0%)
- Earnings per share, fully diluted, was EUR 0.71. The corresponding earnings per share excluding non-recurring items related to mergers and acquisitions was EUR 0.77.
Financial performance July-September 2022
- The Group's net revenue was EUR 20.5 million (EUR 25.4 million)
- The Group's operating profit was EUR 7.8 million (EUR 13.3 million)
- Earnings per share, fully diluted, amounted to EUR 0.21.
EAB Group Plc merged with Evli Plc on October 1, 2022, i.e. after the end of the review period. Consequently, the figures of EAB Group Plc are not taken into account in this interim report.
Outlook for 2022 unchanged
The year 2022 has continued in a challenging market, due to heightened interest rate and inflation fears, increased geopolitical risks and a declining market.
Despite increased risks, we estimate that the result for 2022 will be at a good level.
CEO Maunu Lehtimäki
As in the start of the year, the third quarter was marked by an exceptionally weak market environment for investments. All major asset classes, from government bonds to corporate bonds and equities, fell in value compared to the beginning of the year. Even gold, traditionally seen as a safe haven, lost value. The fall in prices was fuelled by the war in Ukraine, rising geopolitical tensions, higher energy prices, especially for electricity and natural gas in Europe, as well as accelerating inflation and higher key policy rates. The appreciation of the US dollar against almost all other currencies added to the pressure on the global economy. The International Monetary Fund (IMF) estimates that around 40 percent of world trade is denominated in dollars, regardless of whether the US is a trading partner, which means that dollar appreciation raises import prices, increases government deficits and raises debt servicing costs. Several emerging market countries have recently come close to defaulting and the situation is still expected to worsen.
In the third quarter, Evli's business reflected the historically weak performance of the capital markets. Net revenue fell by around 19 percent to EUR 20.5 million. The Group's operating profit decreased by around 41 percent to EUR 7.8 million. Fee income from alternative investment products and the incentives business increased, but fee income from traditional funds and the Corporate Finance unit were well below the previous year. The decline in fee income was driven by a weaker market and operating environment, which caused asset values to fall, redemptions to increase, and M&A activity to slow down.
In January-September, Evli's return on equity was good at 27.3 percent (46.0%). The ratio of recurring income to operating expenses was 134 percent (141%). The Group's solvency and liquidity were at an excellent level.
Operating income in the Wealth Management and Investor Clients segment decreased by 21 percent to EUR 16.3 million. Client assets under management fell to EUR 14.4 billion (EUR 16.1 billion), reflecting the weak market development and increased net redemptions. Evli Fund Management Company’s investment fund capital, including alternative investment products, amounted to EUR 10.1 billion (EUR 12.0 billion). Net redemptions of traditional investment funds amounted to around EUR 1 billion for the year to date and were mainly in short-term fixed income funds, corporate bond funds and European equities. However, fee income from alternative investment products increased by 34 percent, already accounting for around 27 percent of total fund fee income.
Operating income in the Advisory and Corporate Clients segment increased by 14 percent to EUR 3.6 million. Invoicing in the Corporate Finance unit remained at the same level as in the comparison period and amounted to EUR 1.4 million (EUR 1.4 million) in the quarter. The unit has a good mandate base and the outlook is reasonable despite the weakened operating environment. Revenue in the Incentives business increased to EUR 1.9 million (EUR 1.6 million). The company has continued to win new clients for incentive plan design and administration, and the outlook is good.
The key drivers of Evli's strategy, international sales and alternative investment products, developed in two different ways during the quarter. International sales, with Evli's corporate bond funds at its core, suffered in the year to date 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 Evli’s total fund capital, including alternative investment products, fell to 21 percent (25%).
Sales of alternative investment products in the third quarter amounted to a total of EUR 111 million (EUR 140 million). The sales were spread across several funds, with the Evli Infrastructure II fund, which had its first closing, attracting the largest subscription volume. We expect demand for alternative investment products to remain at a good level also during the rest of the year.
Responsibility is one of Evli's strategic focus areas. In the third quarter, as part of our work in line with our climate goals, we signed the Net Zero Asset Managers initiative, which will further improve our climate change milestones and reporting. In addition to the climate commitment, we strengthened our work on biodiversity by becoming the first Finnish asset manager to join the Taskforce on Nature-related Financial Disclosures forum.
After the quarter, a corporate reorganisation took place as planned, in which EAB Group Plc merged with Evli Plc. The combined company is one of Finland's leading providers of investment and wealth management services, with a broad range of expertise and a client base that includes institutional, corporate and private clients. The combined company has a strong financial position and excellent prospects for future growth in line with Evli's strategy. Its larger size will allow Evli to operate its business operationally more efficiently. For our clients, the combined company will offer a broader range of products and services and more comprehensive expert resources.
Read the report:
Evli Plc's interim report 1-9/2022
