During the first quarter of 2024, Evli’s business developed favorably and assets under management reached a new all-time high. 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. The Group’s 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.
During the first quarter of 2024, Evli’s business developed favorably and assets under management reached a new all-time high. 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. The Group’s 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 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).
Net revenue increased as a result of a M&A activity concerning the incentive business
During the first quarter of 2024, the US economy continued to grow strongly, as last year, but in Europe growth has remained sluggish. The rise in consumer prices slowed down in many places. 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. 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, but in Finland, stock prices mainly moved sideways. Finland’s development, weaker than in other markets, largely results from 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. For real estate investors, the beginning of the year has 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. The growth in revenue results from a corporate transaction concerning the incentive business, 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. 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,” Evli’s CEO Maunu Lehtimäki says.
Comparable operating profit after eliminating the impact of the corporate transaction increased by 13 percent and was EUR 29.1 million.
“The operating profit 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,” Lehtimäki says.
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.
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. 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.
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.
Read more: Evli Plc’s Interim Report 1–3/2024
