NORVESTIA’S FINANCIAL STATEMENT RELEASE FOR 2016

Helsinki, Finland, 2017-02-01 13:30 CET (GLOBE NEWSWIRE) --  

Norvestia Oyj     Financial Statement Release    1 February 2017 at 14:30

NORVESTIA’S FINANCIAL STATEMENT RELEASE FOR 2016

The result of the Group amounted to EUR 18.9 million in 2016 (EUR 25.0 million in 2015).
Earnings per share was EUR 1.24 (1.63).
Investment income was EUR 27.2 million (30.3).
Net Asset Value per share was EUR 8.13 at year-end (11.04)
Net Asset Value (dividend-adjusted) increased by 11.8% (17.2%).
The Board proposes that no dividend be distributed for 2016 (EUR 4.14 per share for 2015).

NORVESTIA BECAME CAPMAN’S SUBSIDIARY

2016 was a year of big changes for Norvestia and its shareholders. In November, Norvestia’s main owner CapMan Plc made a volun­tary exchange offer to shareholders for Norvestia’s shares. Cap­Man offered to exchange all Norvestia shares for CapMan shares so that one Norvestia share would entitle shareholders to six CapMan shares. Norvestia’s shareholders were paid a dividend of EUR 3.35 per share before the completion of the exchange offer.

A committee comprised of the independent members of Norvestia’s Board of Directors recommended the acceptance of the exchange offer. Norvestia’s largest shareholders also committed themselves in advance to accepting the offer. When the original offer period end­ed 16 December 2016, over 90% of Norvestia’s shareholders had accepted it. Consequently, a right and obligation arose, as per the Finnish Companies Act, for CapMan to redeem the rest of the Nor­vestia shares. CapMan has announced that it will offer EUR 7.14 per share in cash to Norvestia’s minority shareholders. The final redemp­tion price will be determined by the Arbitral Tribunal designated by the Redemption Committee of the Finnish Central Chamber of Com­merce. The redemption is expected to take place during 2017, and the aim is to remove Norvestia shares from the main list of the Hel­sinki stock exchange.

CAPITAL MARKETS

On the capital markets 2016 was a year of big surprises. The year began in very negative sentiment, with share prices falling during January-February on all central stock exchanges. On the Helsinki stock exchange some shares lost over 30% of their value during the first weeks of the year, and the decline in share prices at the begin­ning of the year was indeed one of the worst in the history of the stock exchange. There was no single factor behind the fall although concern about economic growth in China and the uncertain situation in the Eurozone flustered investors and caused a minor panic.

In February the European Central Bank (ECB) stepped in once again and promised to increase its monetary easing further by including company loans with certain conditions in its massive purchasing pro­gram. This calmed the markets and share prices rallied strongly to­wards March.

In the early summer, a new surprise shook the capital markets. A consultative referendum was organized in Great Britain 23 June as to whether or not the country should leave the EU. Contrary to all the pollsters a majority voted in favor of the exit. This caused complete panic on the capital markets which lasted, however, for only one day. Very few analysts predicted that share prices would quickly rally af­ter the initial panic, and fewer still forecast that at the end of July share prices would be up on their pre-referendum levels.

It is difficult to explain the reaction on the capital markets to these events even with the benefit of hindsight. It is undeniable that the growth of the economies of the EU and Great Britain looks weaker since the referendum. The best explanation is probably that after the referendum was over, there was a sense of relief. Fear is the enemy of the capital markets.

The surprises on the capital markets did not, however, end here. Analysts were almost certain that Donald Trump’s election as the President of the US would lead to a meltdown of share prices. Con­trary to almost all forecasts, Trump was elected President in the elec­tion held in November. The post-election market reaction was very surprising and interesting. Share prices declined sharply during the opening of the day and shot right up after that. At the end of the stock exchange day share prices were a couple of percent up on the day. Astonishing many, share prices continued to increase strongly in stock exchanges around the world until the end of the year.

Now perhaps this share price reaction can be explained and may even have been foreseeable. In his first speech following his elec­tion Donald Trump promised something to everybody. He promised to reduce taxation, discontinue the expensive ObamaCare, increase several industrial support measures and make America great again. This was all to the stock markets’ liking.

Analysts believe that Trump’s reforms will increase US economic growth and revitalize the world economy. The opinions of econo­mists are clearly divided however as to how sensible it is to increase public spending and reduce taxation by increasing debt. In any case the reaction of the capital markets has been positive at least up un­til now, with the value of the S&P 500 Index, which describes the US stock market, 10% up on its pre-election levels at the end of the year.

All in all, 2016 was a good year on the stock exchange for those in­vestors who held their nerves throughout the various twists of the markets. During the year in question share prices rose on the major­ity of the world’s stock exchanges. The following table illustrates index yields on various exchanges in 2016:

NORVESTIA’S INVESTMENTS

Norvestia’s twofold investment strategy consists of market investments and Growth Equity. Market investments are made primarily in Nordic listed shares, hedge funds and bonds. Growth Equity investments are made in Nordic unlisted companies, growth-oriented listed companies and private equity funds.

Norvestia’s investments excluding cash and other liquid assets were 96% (91%) of total assets at year-end. The fair value breakdown of the investments was as follows:

* of which share funds EUR 6.6 million (14.0).

At year-end, 85.0% of the Group’s assets were in euros, 7.9% in Swedish krona, 6.9% in US dollars and 0.2% in other currencies.

The return of the company’s Net Asset Value during the year was, after expenses and taxes, 11.8% and was achieved with a monthly calculated volatility of 5.5%. At the same time the OMX Helsinki CAP Yield Index yielded 13.3% with a volatility of 11.0%.

Norvestia’s market investments yielded well during 2016. At the be­ginning of the year, Norvestia focused particularly on Finnish stocks with strong dividend yields. At the end of the year, investment activi­ties were adjusted in preparation for the large dividend distribution of over EUR 51 million. Accordingly, various fund investments, corpo­rate bonds and listed shares were sold. Growth Equity investments were the only asset class the amount of which increased during the year. The amounts of all other asset classes decreased. The great­est relative change took place in hedge funds. The proportion of these in the portfolio decreased to approximately 4%. Euro-wise the biggest decline took place in listed shares and funds, the amount of which decreased by approximately EUR 19 million.

Norvestia also succeeded in hedging its market investments. Worth a separate mention are Norvestia’s extensive contingency plans for the possible negative result of the Brexit vote. The dismantling of this hedge was started at just the right time on the day after the Brexit vote. The value of Norvestia’s market portfolio increased by EUR 2 million due to the hedge against Brexit.

GROWTH EQUITY

Return on Norvestia’s Growth Equity portfolio was over 44% in 2016. The highlight of 2016 was the successful exit from Touhula Var­haiskasvatus Oy. The company was an 80% subsidiary of Coronaria Hoitoketju, and was sold to a Nordic private equity investor yielding a good return. Due to the exit, Coronaria distributed an extra divi­dend of EUR 50 million in the spring of 2016, Norvestia’s share of this extra dividend was nearly EUR 10 million. As part of the sale of Touhula by Coronaria, Norvestia reinvested in Touhula as a direct investment. The investment amounted to EUR 2 million, and addi­tionally Norvestia offered EUR 2 million mezzanine financing for the company.

In July Norvestia committed itself to investing approximately EUR 5 million (USD 5.5 million) in Hamilton Lane PE IX Fund, which focuses on US and European small- and medium-sized companies. After the year under review, in January, Norvestia invested EUR 1.6 million in the Finnish Digital Workforce Services Oy which offers robotic pro­cess automation services.

Investments in unlisted companies belong to Norvestia’s Growth Eq­uity portfolio, which is administered by Norvestia’s subsidiary Nor­vestia Industries Oy. The aim of Norvestia’s Growth Equity invest­ment activities is to find interesting companies with strong growth potential, the long-term and active development of which can yield significant increases in value and thereby return to Norvestia’s shareholders. In accordance with the investment strategy, Norvestia aims to find target companies that operate in sufficiently large mar­kets and have the opportunity to take advantage of their service and solution innovations both in Finland and internationally.

Norvestia invests in minority shares or can be in the majority togeth­er with another investor. At the end of 2016, the Growth Equity port­folio consisted of six unlisted companies: Aste Helsinki which offers media production and consulting, Coronaria Hoitoketju which offers health care services, Fluido which offers cloud services consulting, Idean Enterprises which offers customer experience design services, Polystar Instruments which develops telecommunications business intelligence software solutions, and Touhula Varhaiskasvatus which offers early childhood and preschool education. The total fair value of the interests in these companies amounted to EUR 34.8 million.

Growth Equity also includes investments in private equity funds. Nor­vestia has committed itself to investing EUR 2.0 million in the Aman­da V East private equity fund, of which EUR 1.4 million is now invest­ed; approximately EUR 5 million (USD 5.5 million) in Hamilton Lane PE Fund IX, of which EUR 1.2 million is now invested; EUR 2.0 million in Lifeline Ventures Fund I, of which EUR 1.7 million is now invested; EUR 5.0 million in Lifeline Ventures Fund III, of which EUR 0.5 million is now invested; and EUR 3.0 million in Open Ocean Fund 2015, of which EUR 0.4 million is now invested. In addition, Norvestia has in­vested EUR 0.1 million in Lifeline Ventures Fund III AB.

VOLUNTARY CHANGE IN ACCOUNTING PRINCIPLE

In April 2016 Norvestia’s Board decided to apply the venture capital organization exemption of the IAS 28 standard and to value associ­ates and joint ventures at fair value through profit or loss in Norves­tia’s consolidated IFRS financial statements according to the IAS 39 standard from 1 January 2016. As a result, all Norvestia’s investments will be valued at fair value through profit or loss. Norvestia considers the valuation of investments at fair value to give more meaningful in­formation about the real value of investments and to better describe the company’s business, the company’s way of reviewing its invest­ments and making decisions relating to them.

Similarly, investments in unlisted private equity funds previously booked as available-for-sale financial assets will be reclassified as fi­nancial assets at fair value through profit or loss. Thus, in future any change in value will be recognized directly in profit or loss, and not in the statement of comprehensive income. Norvestia believes that classifying investments as assets at fair value through profit or loss better describes their nature and the accumulation of returns taking into account the company’s business.

The change in question is a voluntary change in accounting principle according to the IAS 28 standard which requires that comparative figures be presented retrospectively according to the new account­ing principles, including the balance sheet at thebeginning of the first comparative period. Norvestia published 14 April 2016 a sepa­rate stock exchange release in which thecomparative periods have been adjusted.

NET ASSET VALUE AND SHARE PRICE

31 December 2016, Norvestia’s Net Asset Value stood at EUR 124.6 million or EUR 8.13 per share (EUR 169.1 million or EUR 11.04 per share at the end of 2015). Taking into account the dividend of EUR 0.79, which was distributed in March 2016 and the extra dividend of EUR 3.35, which was distributed in December, the company’s Net Asset Value increased by EUR 1.24 per share (1.63) in the year under review, equal to a 11.8% increase (17.2%) from the beginning of the year. In the last quarter, the increase in Net Asset Value amounted to EUR 0.40 per share (0.98).

Amended Net Asset Value will no longer be published, as after the change in the accounting principle, which came into force 1 January 2016, it corresponds to Norvestia’s Net Asset Value and the Group’s shareholders’ equity. The comparative figures in the previous para­graph have been adjusted to correspond with the change in the ac­counting principle.

The dividend-adjusted price of Norvestia’s share rose by 44.6% (12.0%) during the year. The price of the share stood at EUR 7.41 (7.99) 31 December 2016, corresponding to a discount in Net Asset Value of 8.9% (27.6%). The market capitalization of the shares 31 De­cember 2016 was EUR 113.5 million (122.4).

GROUP RESULT

The result of the Group in 2016 amounted to EUR 18.9 million (25.0/2015; 6.2/2014), and operating expenses to EUR 4.5 million (2.7/2015; 2.0/2014). Operating expenses were 3.6% (1.6%/2015; 1.3%/2014) of Net Asset Value. In 2016 the Group had non-recurring expenses related to the exchange offer amounting to EUR 1.6 mil­lion. The result for the last quarter was EUR 6.1 million (15.0/2015; 1.1/2014). The return on equity was 12.9% (15.8%) and the return on in­vestment 14.9% (17.1%).

LIQUIDITY AND SOLVENCY

Norvestia Group’s cash and cash equivalents totalled EUR 4.9 million at year-end (15.3/2015; 14.1/2014). The equity ratio stood at 88.6% (96.6%/2015; 98.8%/2014). The Group’s shareholders’ equity totalled EUR 124.6 million (169.0/2015; 148.6/2014).

PERSONNEL

In 2016, Norvestia Group employed an average of 7 (7/2015, 6/2014) people. Personnel expenses were EUR 2.0 million (1.7/2015; 1.1/2014).

NORVESTIA GROUP

Norvestia Oyj is the parent company of Norvestia Industries Oy and Norventures Oy. Norvestia Industries Oy was established in Sep­tember 2007 in order to realize the Group’s Growth Equity strategy. Norvestia Oyj became CapMan Group’s subsidiary on 19 December 2017.

SHARES AND SHARE CAPITAL

Norvestia Oyj’s share capital is divided into 15,316,560 shares with one vote each. All shares have an equal right to dividend and the assets of the company. Norvestia Oyj’s share is listed on Nasdaq Helsinki.

SHAREHOLDERS

At the end of 2016, Norvestia Oyj had 1,679 shareholders (5,226). 0.4% (8.8%) of the shares were in foreign ownership and 0.4% (8.4%) were nominee-registered.

Norvestia’s largest shareholder is CapMan Plc with a holding of 90.7% (28.7) of shares and votes at year-end. The ten major share­holders held a total of 93.2% (53.6%) of shares and votes.

ANNUAL GENERAL MEETING

The Annual General Meeting (AGM) held 15 March 2016 decided to distribute EUR 0.79 per share as dividend for 2015. The dividend was paid out 24 March 2016.

The following persons were re-elected to the Board:
Heikki Westerlund, Chairman
Hannu Syrjänen, Vice Chairman
Georg Ehrnrooth, member
Niko Haavisto, member
Arja Talma, member.

PricewaterhouseCoopers Oy was re-elected as auditor, with APA Lauri Kallaskari as main responsible auditor and APA Mikko Nieminen as deputy auditor. The AGM unanimously decided to dis­charge the Board of Directors and the Managing Director from liabil­ity for 2015.

The AGM authorized the Board of Directors to decide on a repur­chase of own shares, publicly on the Helsinki stock exchange. The authorization gives the right to acquire up to 1,531,656 shares by 31 May 2017. No acquisitions were made in 2016. The Board of Direc­tors was also authorized to decide upon a share issue and on an is­sue of special rights entitling to shares. The maximum amount that may be issued is 1,531,656 shares. The authorization is effective until 31 May 2017.

EXTRAORDINARY GENERAL MEETING

The Extraordinary General Meeting held 8 December 2016 resolved to distribute a dividend of EUR 3.35 per share on the condition that all conditions of CapMan’s voluntary exchange offer, published 3 No­vember 2016, concerning Norvestia’s shares are fulfilled or their ful­filment has been waived.

CapMan announced 19 December 2016 that it will complete the ex­change offer, whereafter Norvestia’s Board of Directors decided on the extra dividend payment. The dividend was paid 29 December 2016.

RISKS IN INVESTMENT ACTIVITIES

In addition to pursuing steady asset growth, one of the guiding prin­ciples of Norvestia’s investment activities is to diversify investments and thereby reduce overall risks. From time to time a significant pro­portion of investments may be focused on certain types of invest­ments and securities, the possible negative development of which may substantially decrease Norvestia’s result. Norvestia occasionally hedges its investments with options and futures, although there may be situations where such hedges are not effective.

Norvestia’s five largest investments as of 31 December 2016, con­sisted of the Lifeline Ventures Fund III Ky and RAM One funds, SPDR S&P 500 ETF Trust share index, and the growth investments in Coro­naria Hoitoketju Oy and Idean Enterprises Oy.

Norvestia’s result is greatly affected by economic developments and changes in share prices both in Finland and abroad. Changes in ex­change rates also impact the company’s result. General uncertainty on the capital markets increases the volatility of Norvestia’s invest­ments and therefore also increases their risks.

INTERNAL SUPERVISION AND RISK MANAGEMENT

More information about the company’s principles of internal supervi­sion and risk management can be found in Norvestia Group’s sepa­rate corporate governance statement.

DIVIDEND POLICY

Norvestia aims to distribute an annual dividend in excess of the Finn­ish stock market average. The long-term objective is to distribute on average approximately 60% of earnings per share as dividends.

PROPOSED DIVIDEND DISTRIBUTION

Due to the extra dividend paid in 2016, the Board of Directors proposes that no dividend be distributed for 2016.

FUTURE PROSPECTS

The situation on the capital markets remains difficult to assess. The surest forecast is that the low interest level of those euro countries considered risk-free will remain extremely low during 2017. The larg­er unknowns, the significance of which is difficult to forecast for now, will be the various elections in Europe, and the development in the US during the era of the new president.

Norvestia’s market portfolio will be managed according to previous principles. The aim is to achieve the best possible risk-adjusted re­turn. The expectations of the Growth Equity portfolio for the current year look good.

Norvestia’s prospects for 2017 will be governed by the ongoing re­demption proceedings for Norvestia shares by CapMan Plc. CapMan currently owns 92.5% of the shares and has the right and obligation to redeem the rest of the shares. This is expected to happen some­time during 2017. The redemption schedule is bound to the resolu­tion of the Arbitral Tribunal. After the redemption CapMan will own 100% of Norvestia shares. According to the plan, Norvestia’s Board of Directors will apply for a delisting of the Norvestia share from the Helsinki stock exchange during the spring. Until the delisting all the obligations and responsibilities of a listed company will apply to Norvestia. After the delisting Norvestia’s journey as an independent stock-listed company will end, and from then on Norvestia’s future will be bound to CapMan’s policies and decisions.

The Board of Directors of Norvestia wants to thank Norvestia’s shareholders for the trust they have placed in the Board. The Board also wants to thank Norvestia’s personnel and management for the professional and excellent work done over the years.

KEY FIGURES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

NOTES TO THE FINANCIAL STATEMENT RELEASE

ACCOUNTING PRINCIPLES

The Group’s financial statement release has been prepared in accordance with the IAS 34 Interim Report standard adopted by the EU. The same accounting principles have been used in the financial statement release as in the 2016 consolidated financial statements. Formulas for calculating key figures remain the same as in the financial statements and annual report 2016. The diluted earnings per share is not shown, as the company has issued no instruments with a diluting effect.

New and revised IFRS standards and interpretations effective from 1 January 2016 did not have a material effect on Norvestia’s financial statement release for 2016.

CONTINGENT LIABILITIES

INVESTMENTS 31 DECEMBER 2016

The table does not include cash and cash equivalents of the Group.

* The fair value of unlisted Growth Equity investments is presented as the total fair value of the Growth Equity portfolio, not as fair value of individual investments.

The financial statement release is based on the audited financial statements 2016. The 2016 annual report will be published during week 7.

The Board of Directors proposes to the Annual General Meeting that no dividend be distributed.

The Annual General Meeting will be held on Tuesday 14 March 2017 at 11:00.

Helsinki 1 February 2017

NORVESTIA OYJ
Board of Directors

Additional information: Juha Kasanen, Managing Director, tel. +358 9 6226 380

DISTRIBUTION
Nasdaq Helsinki
Main media
www.norvestia.fi