Evli had a solid first half of the year 2023. Alternative investment funds continued to grow, driven by strong client demand. Fund sales was successful despite the challenging market, and Evli collected the third most fund subscriptions in Finland. In addition, Evli was once again chosen as Finland's best and most used institutional asset manager. As proof of long-term work for investors, the company has been among the top positions for 11 years in a row.
Financial performance January–June 2023 (comparison period 1–6/2022*)
- Net revenue was EUR 52.2 million (EUR 46.2 million).
- Operating profit was EUR 19.1 million (EUR 18.0 million).
- Operating result of the Wealth Management and Investor Clients segment increased to EUR 17.8 million (EUR 15.5 million).
- Operating result of the Advisory and Corporate Clients segment decreased to EUR 1.8 million (EUR 2.0 million).
- At the end of June, assets under management amounted to EUR 16.8 billion (EUR 14.5 billion) on a net basis.
- Return on equity was 22.6 percent (28.6%).
- Earnings per share, fully diluted, was EUR 0.52 (EUR 0.50).
- The ratio of recurring revenues to operational costs was 128 percent (125%).
Financial performance April–June 2023 (comparison period 4–6/2022)
- The Group's net revenue was EUR 26.4 million (EUR 22.9 million).
- The Group's operating profit was EUR 9.8 million (EUR 8.3 million).
- Diluted earnings per share amounted to EUR 0.26 (EUR 0.24).
Uncertainty of the operating environment and increased costs reflected in the result of Evli's business areas
Economic growth slowed down in the early part of the year but remained positive. Higher consumer prices, tighter monetary policy, geopolitical tensions, difficulties in the real estate sector and momentarily elevated banking concerns have so far not led to a broad-based decline in consumer and business confidence, but recession risks are increasing.
Stock prices rose in the second quarter, driven by developed markets, especially US equities. Technology shares, especially the so-called "Magnificent seven" shares (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla) led the way. The combined market capitalization of these companies already exceeded $11 trillion, and their returns in the first half of the year exceeded the 16 percent return of the S&P 500 index. Investor interest in technology shares has been fuelled by enthusiasm for the opportunities and growth prospects of Artificial Intelligence (AI) applications. In other parts of the world, however, the development of equities was more uneven, and in Finland and England, for example, share prices fell.
Fixed income investments developed weaker than equities in the second quarter. Yields on government bonds and higher-rated investment grade bonds were weighed down by rising interest rates, while lower-rated high-yield bonds continued to develop well.
“The uncertainty of the operating environment and the uneven development of international markets, together with increased costs, were reflected in the development and result of Evli's business areas. Net revenue increased due to the merger with EAB Group Plc completed last year and the continued strong growth in commission income from alternative investment products and incentive business. In the second quarter, the Group's net revenue increased by 15 percent from the comparison period and was EUR 26.4 million (EUR 22.9 million). Operating profit, in turn, increased by 17 percent to EUR 9.8 million (EUR 8.3 million). Commission income from traditional funds was also higher than in the previous year. By contrast, commission income from the Corporate Finance and brokerage activities remained lower than in the previous year because of the slowdown in M&A activity and lower trading volumes”, Evli’s CEO Maunu Lehtimäki says.
Evli's return on equity in January–June was 22.6 percent (28.6%). The ratio of recurring revenue to operational costs was 128 percent (125%). The Group's solvency and liquidity were at an excellent level.
“The key drivers of Evli's strategy, international sales and alternative investment products, developed twofold during the quarter. Net subscriptions from international clients amounted to nearly EUR -100 million coming mainly from Evli's corporate bond funds and Evli Europe equity fund. International customers accounted for 19 percent (22%) of Evli's total fund capital, including alternative investment products. Sales of alternative investment products totalled some EUR 90 million (EUR 76 million) in the second quarter. The sales was divided into several funds, of which Evli Private Debt II, Evli Private Equity I and Evli Leveraged Loan funds raised the largest subscription amounts”, Lehtimäki says.
During the second quarter, Evli continued its active work related to climate targets and the joint research project together with UNICEF Finland to discover how investors can promote child rights. In addition, Evli continued its research related to biodiversity indicators regarding portfolio-specific analyses. Evli was also placed first overall in sustainable investments expertise in the recent Kantar Prospera’s "External Asset Management Finland 2023" survey.
Uncertain sentiment in investment markets has persisted due to heightened interest rate and inflation fears, increased geopolitical risks and market volatility.
As a result of the acquisitions made during 2022, Evli has managed to strengthen its position in the market. With synergies from the acquisitions and non-recurring costs allocated to 2022, we estimate that the operating result will be well above the comparison period's level (EUR 30.9 million in 2022).