CapMan Plc 1–3 2020 Interim Report

April 23, 2020

CapMan Plc Stock Exchange Release / Q1 2020 Interim Report
23 April 2020 at 8:30 a.m. EEST

CapMan Plc 1–3 2020 Interim Report

Results and significant events in January–March 2020:

  • Group turnover was MEUR 11.9 1 Jan–31 Mar 2020 (MEUR 9.3
  • 1 Jan–31 Mar 2019), growth was 28 per cent from the comparison period.
  • Management Company business turnover was MEUR 7.2 (MEUR 6.4), growth was 12 per cent from the comparison period, and operating profit MEUR 1.9 (MEUR 0.8), growth was 134 per cent from the comparison period.
  • Service business turnover was MEUR 4.8 (MEUR 2.9), growth was 66 per cent from the comparison period, and operating profit MEUR 3.0 (MEUR 1.8), growth was 69 per cent from the comparison period.
  • Investment business operating profit was MEUR -8.4 (MEUR 3.9) due to fair value changes of own investments.
  • Operating profit was MEUR -6.0 (MEUR 4.7).
  • Diluted earnings per share were -5.3 cents (2.4 cents).
  • CapMan paid a total of EUR 0.13 per share in dividends and equity repayment for 2019 (EUR 0.12 per share for 2018).

This stock exchange release is a summary of CapMan Plc’s 1–3 2020 Interim Report. The complete report is available in pdf-format as an attachment to this release and on the company’s website at https://www.capman.com/shareholders/financial-reports/.

Joakim Frimodig, CEO:

”We are in an unprecedented situation due to the covid-19 crisis. The effects of the crisis are visible on a personal, corporate and societal level in our international business environment. Market turbulence has depressed asset values significantly during the last few months, which is also reflected as negative fair value changes of CapMan’s own investments during the first quarter of 2020.

However, our Management Company and Service businesses are on a solid footing and have developed favourably despite the crisis. Our turnover grew by 28% and our fee-based profitability almost doubled in the first quarter 2020 from the comparison period.

Our Management Company business grew by 12% following several completed strategic projects. Management fees are long-term in nature, which provides stability and predictability to our business. The operating profit of the Management Company business was MEUR 1,9 and grew more than 100% from the comparison period due to growth in fees and improved cost efficiency. The market conditions affect investors’ willingness to make new investment decisions and many fundraising projects have been delayed from their original schedules as a result. Despite this, we expect our assets under management as well as management fees to grow during the year from comparable levels last year. Due to the uncertain market situation some funds may experience delay in reaching carry.

Our Service business grew by 66% from the comparison period and operating profit grew to 3.0 million during the first quarter of 2020. Fees from CaPS and JAM are mostly recurring. Scala has completed several projects during the first quarter of 2020 and its deal flow remains good, but the business depends on fundraising conditions.

Fair value changes of our own investments form a significant portion of CapMan’s results and account for variability in our earnings model to a large extent. We reported a MEUR 8.4 decline in fair values for the first quarter of 2020. The covid-19 crisis has hit our private equity investments the hardest with fair values declining by 20% on average since the beginning of the year. In comparison, our infrastructure and real estate investments declined on average by4 % in the first quarter. Fair value changes are largely unrealised as our funds focus on long-term value creation and exit their assets in line with their respective value creation plans. The realised fair value change was positive during the first quarter of 2020. Our balance sheet is well-equipped to cope with market turbulence. Following the sale of the market portfolio we have allocated more assets over the recent years to infrastructure and real estate investments, which are more defensive asset classes in times of crisis.

Our liquidity situation is good and our balance sheet and financial situation is strong. At the end of the first quarter, our cash and cash equivalents were MEUR 53.8. In addition, the company has a credit facility of MEUR 40, of which MEUR 20 has been drawn. We have also focused on our expenses and have taken swift measures to adapt our cost structure in order to support profitability in the near future.

Most important for us in this prevailing situation is the health and well-being of our employees. I want to extend my thank you to all CapMan employees for their efforts and flexibility lately. We are an active and supportive owner of our portfolio companies focused on ensuring short and long-term success of our investments. The societal impact of our business is highlighted during these challenging times. We now seek to take comprehensive and sustainable measures that help us create significant long-term value for our customers, employees, business partners and shareholders.”

Financial objectives

CapMan’s objective is to pay an annually increasing dividend to its shareholders.

The combined growth objective for the Management Company and Service businesses is more than 10 per cent p.a. on average. The objective for return on equity is more than 20 per cent p.a. on average. CapMan’s equity ratio target is more than 60 per cent.

CapMan maintains its outlook estimate for 2020

CapMan expects to achieve these financial objectives gradually and key figures are expected to show fluctuation on an annual basis considering the nature of the business. CapMan expects management fees and fees from services to continue growing in aggregate in 2020. Our objective is to improve the aggregate profitability of Management Company and Service businesses before carried interest income and any possible items affecting comparability.

Carried interest income from funds managed by CapMan and the return on CapMan’s investments have a substantial impact on CapMan’s overall result. In addition to portfolio company and asset-specific development and exits from portfolio companies and assets, various factors outside of the portfolio’s and CapMan’s control influence fair value development of CapMan’s overall investments as well as the magnitude and timing of carried interest.

CapMan’s objective is to improve results in the longer term, taking into consideration annual fluctuations related to the nature of the business. For these and other above-mentioned reasons, CapMan does not provide numeric estimates for 2020.

Items affecting comparability are described in the Tables section of this report.

Key figures

MEUR 1-3/20 1-3/19
Operating loss (profit) -6,0 4,7
Items affecting comparability
Acquisition related costs 0,8
Donations 0,1
Items affecting comparability, total 0,9
Adjusted operating loss (profit) -6,0 5,6
Result for the period -7,4 4,0
Items affecting comparability
Acquisition related costs 0,7
Donations 0,1
Items affecting comparability, total 0,8
Adjusted result for the period -7,4 4,8
Earnings per share, cents -5,4 2,4
Items affecting comparability, cents 0,6
Adjusted earnings per share, cents -5,4 3,0
Earnings per share, diluted, cents -5,3 2,4
Items affecting comparability, cents 0,5
Adjusted earnings per share, diluted, cents -5,3 2,9
% 31.3.20 31.3.19
Return on equity, % -26,0 12,2
Return on equity, comparable, % -26,0 15,0
Equity ratio, % 47,4 52,6

Result webcast today at 10.00 a.m. EEST

CapMan’s management will present the result for the review period in a webcast to be held at 10.00 a.m. EEST. Please access the webcast at https://capman.videosync.fi/2020-q1-results/. The conference will be held in English. A replay of the webcast will be available on the company’s website after the event. Due to the ongoing covid-19 outbreak, CapMan will not arrange an in-person conference.

Helsinki, 23 April 2020

CAPMAN PLC
Board of Directors

Further information:
Niko Haavisto, CFO, CapMan Plc, tel. +358 50 465 4125

Distribution:
Nasdaq Helsinki Ltd
Principal media
www.capman.com

Appendix: CapMan Plc 1-3 2020 Interim Report

About CapMan www.capman.com 

CapMan is a leading Nordic private asset expert with an active approach to value creation. We offer a wide selection of investment products and services. As one of the Nordic private equity pioneers, we have developed hundreds of companies and real estate assets and created substantial value in these businesses and assets over the past 30 years. With over €3 billion in assets under management, our objective is to provide attractive returns and innovative solutions to investors. We have a broad presence in the unlisted market through our local and specialised teams. Our investment strategies cover Private Equity, Real Estate and Infra. We also have a growing service business that includes procurement services, fundraising advisory, and analysis, reporting and wealth management services. Altogether, CapMan employs 140 people in Helsinki, Stockholm, Copenhagen, London and Luxembourg. We are a public company listed on Nasdaq Helsinki since 2001 and a signatory of the UN Principles for Responsible Investment (PRI) since 2012.