CapMan Plc 1–6 2020 Half-Year Report

CapMan Plc Stock Exchange Release / H1 2020 Half-Year Report
6 August 2020 at 8:30 a.m. EEST

CapMan Plc 1–6 2020 Half-Year Report

Results and significant events in January–June 2020:

• Group turnover was MEUR 20.7 1 Jan–30 Jun 2020 (MEUR 22.6
• 1 Jan–30 Jun 2019), a decrease of 9 per cent from the comparison period.
• Management Company business turnover was MEUR 13.7 (MEUR 12.8), growth was 7 per cent from the comparison period, and operating profit MEUR 3.5 (MEUR 1.7).
• Service business turnover was MEUR 7.0 (MEUR 9.8), decrease was 29 per cent from the comparison period, and operating profit MEUR 3.4 (MEUR 6.6).
• Investment business operating profit was MEUR -5.7 (MEUR 4.9) in the first half of 2020 due to fair value changes of own investments. In the second quarter, fair value changes were MEUR +3.2 (MEUR +1.7).
• Operating profit was MEUR -1.8 (MEUR 10.5).
• Diluted earnings per share were -3.2 cents (4.3 cents).
• CapMan established Special Situations, a new investment area focusing on financial turnarounds and development of unlisted companies.
• The new CapMan Nordic Real Estate III fund was established with a target size of MEUR 500 (after the review period).
• The new CapMan Growth II fund was established with a target size of is MEUR 85 (after the review period).

This stock exchange release is a summary of CapMan Plc’s 1–6 2020 Half-Year 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:

” The first half of 2020 was eventful both in terms of CapMan’s business and market development. During the past few months, we have completed several growth and development initiatives that support our chosen strategic direction and help us build an even stronger CapMan. Our Management Company and Services businesses developed well considering the circumstances, fee-based profitability was on a good level and the impact of recurring fees to our earnings mix is growing. The fair values of our fund investments have developed positively in the second quarter following the decrease brought on by the Covid-19 pandemic in the beginning of the spring.

Our Management Company business grew by 7 per cent following new products and funds under management. The operating profit of the Management Company business was MEUR 3.5, more than doubling from the comparison period due to both growth in fees and improved cost efficiency. We grow our Management Company business with determination and are currently raising several funds. We expect growth in 2020 in capital under management as well as management fees from last year’s comparable levels. The market situation has impacted the ability of investors to take new investment decisions and many fundraising projects have been delayed from their original plans. The latest developments point to a returning confidence among investors and a willingness to make additional commitments.

After the end of the review period we have established CapMan Nordic Real Estate III fund, which invests in Nordic real estate assets  as well as growth company focused CapMan Growth II fund. Both funds’ predecessor funds have been successful and demand for the new funds has been strong. The target size for NRE III is MEUR 500, making it the largest fund in CapMan’s history to date. The target size for the Growth II fund is MEUR 85 is expected to be reached by the end of the year. In addition, we have established Special Situations, a new investment area focused on financial turnarounds and development of unlisted companies. CapMan Special Situations is the first local team in Finland with this investment focus and is a continuation of CapMan’s growth strategy.

Our Service business turnover fell by 29 per cent in the review period compared to last year due to lower transaction-based services in all services areas during the second quarter of the year. The exceptional market situation following the Covid-19 pandemic provided a backdrop to the lower transaction activity. The Service business operating profit was MEUR 3.4.

We are reorganising our service business. In June we launched JAY Solutions as a new independent service area. JAY Solutions offers its customers technology-driven reporting, analytics and back office services. We are also establishing a new CapMan Wealth Service business area that offers comprehensive wealth advisory services covering both listed and unlisted markets to family offices, smaller institutional investors and high net worth individuals, as well as access for these investors to the best product solutions. JAMs wealth advisory services as well as part of Scala’s investor-focused services are combined in the new CapMan Wealth Services entity. Following the reorganisation, Scala’s and JAMs operations cease to exist in their current forms and the respective brands are no-longer in use. Going forward, CapMan’s Service business includes wealth advisory business CapMan Wealth Services, reporting service JAY Solutions and procurement service CaPS.

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. Our reported fair values increased by MEUR 3.2 in the second quarter of the year as valuations saw an upward correction following a turbulent early spring. The decrease in fair value of our own investments was as such MEUR 5.3 for the first six months of the year.

Despite the disturbance brought on by the Covid-19 pandemic, we have successfully developed our existing business as well as created new initiatives. Measures taken now build earnings growth for the coming years. Our liquidity situation is good, our balance sheet is strong and our objective is to pay an annually increasing dividend to our 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

Press, analyst and institutional investor conference and webcast today at 10.00 a.m. EEST

CapMan’s management will present the result for the review period to press, analysts and institutional investors in a press conference to be held at 10.00 a.m. EEST at CapMan’s head office in Helsinki, address Ludviginkatu 6. To join the conference in person, please register with linda.tierala@capman.com. Please refrain from attending in person in case you experience symptoms of a respiratory tract infection or suspect a Covid-19 infection.

The conference is also accessible over a live webcast at https://capman.videosync.fi/2020-q2-results/. The conference will be held in English. A replay of the webcast will be available on the company’s website after the event.

Helsinki, 6 August 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 1-6 2020 Half-Year Report Final

About CapMan

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, wealth management, and analysis, reporting and back office services. Altogether, CapMan employs around 150 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. Read more at www.capman.com.