A high level of activity ensures good operations in Agasti
- EBITDA of NOK 11 million and EBIT of NOK 7 million in the first quarter of 2014, an improvement of NOK 10 million and NOK 11 million, respectively, compared with the corresponding quarter of 2013
- Suggested dividends/payments of around NOK 900 million proposed for shareholders in alternative investments, which follows dividends/payments of NOK 700 million in 2013
- High level of activity within the group on all main lines established in 2012. If this level is maintained the Agasti Group will be heading for a positive EBIT for 2014 despite significant restructuring costs
- Cost reductions within Wealth Management of around NOK 100-120 million have been decided upon as part of a realignment of activities
- Sale of individual offices in Navigea on several locations in Norway, which could reduce restructuring costs
- Equity under management remains stable at around NOK 30 billion
- The FSA is considering revoking Navigea’s licences to provide investment services. A potential closing of Navigea is estimated to have a positive effect on the Agasti Group’s profitability
The Agasti Group (Agasti) achieved an EBIT of NOK 7 million in the first quarter of 2014, compared with NOK -4 million in the corresponding quarter of 2013. The result is negatively affected by pre-paid expenses of NOK 2.5 million associated with projects in the Markets segment, which upon complete or partial realisation may be recharged and thereby contribute positively to the result at a later date. Costs associated with the Financial Supervisory Authority’s notice regarding the revocation of Navigea Securities AS’s licences to operate investment services also negatively affect the group’s result for the first quarter of 2014.
“ “The group is continuing the positive development in underlying operations as a result of our ability to carry out planned improvement initiatives and projects. The Capital Markets and Investment Management business areas are continuing to develop positively, and there is a high level of activity within all the main lines that were established in the new business areas in 2012. If we maintain the current level of activity, I am confident that we can expect a positive EBIT for the year, even when the restructuring costs associated with the downscaling of Navigea are taken into account. The activities and result for the quarter show that our model has great potential which is promising for the future,” says Jørgen Pleym Ulvness, CEO of Agasti Holding ASA.
As the market has previously been informed, Agasti has decided to undertake significant cost cuts within the group’s Wealth Management operations. The cuts will be made over a period of time and involve the dismissal of up to 100 employees, as well as cost reductions of between NOK 100 and 120 million. The purpose of the cuts is to improve profitability within the group, and their timing is partially a result of the FSA’s notice regarding the revocation of Navigea’s licenses, and partially a result of the fact that the group has implemented extensive changes since late 2012, including cost reductions and efficiency-improvement measures, which mean that clients can now be served through a more streamlined organisation.
Current analyses indicate that the group’s profitability may be strengthened through the full or partial discontinuation of the activities within Wealth Management, either by workforce reductions or by other structural alternatives.
As previously informed, the restructuring costs are estimated to NOK 40 million, of which NOK 14 million were entered in 2013 and NOK 3 million in the first quarter of 2014. The remaining estimate of NOK 23 million will depend on the outcome of the restructuring process. In connection with this, Agasti has entered into agreements related to the sale of individual offices in Navigea on several locations in Norway.
“The turnaround operation we have undertaken during the past 18 months has enabled clients of the Agasti Group to be served more effectively. At the same time, the effect of the measures currently being undertaken in Navigea will help to improve the group’s profitability. The FSA’s notice regarding the revocation of licences has forced and partially increased the scope of these changes, and we are prepared for the fact that the notice may be enforced. However, we are well prepared for the changes, and the synergies we achieve will be visible as early as in the autumn,” says Ulvness.
Shortly Agasti will have an adjusted commercial alignment of the organisation, where the investment advisory services subject to licences will be significantly reduced or discontinued, but in which customers will be served in the best possible way in continued operations. If the licences are retained, activities within Wealth Management will be continued in a trimmed down version and upon a significantly more efficient cost platform than previously, cf. the efficiency improvement measures undertaken through restructuring and cost cuts since late 2012.
“We are dependent upon our clients and we want to continue to do everything within our power to ensure that we deserve their trust. During the summer we will establish a solid and liquid mutual fund platform (UCITS fund) and distribution capacity, which will meet our clients’ needs for these types of investments. In addition, expanded brokerage services and customer centres will meet clients’ needs for information, follow-up and reporting. Obligo Investment Management has previously established one of the country’s most experienced and competent management teams, which ensures effective management of clients’ investments in real estate and other direct and indirect investments. In sum, this means that clients can feel confident that their investments and future investment needs will be handled in an excellent manner,” says Ulvness.
Going forward, the Agasti Group will prioritise the execution of all cost reductions in Wealth Management and return to normal operations during the autumn of 2014, but with significantly lower costs in addition to improved profitability in Capital Markets and Investment Management.
“When the process of downscaling and/or the partial sale of activities in Navigea is completed, the group will have approximately 140 employees. A vast majority of these, including the entire executive management team and most other managers, will have started work with the group after late 2012. We are now looking forward and wish to create an atmosphere of calmness within the company with respect to our owners, clients and employees,” says Ulvness.
The Agasti Group will however continue to maintain intense focus on ensuring good returns and high quality in the investments offered to clients.
“An improved financing platform for the portfolios, increased liquidity and continued solid dividend payments are what our clients shall be able to expect from us. The boards of various portfolios have recently suggested dividends/payments totalling around NOK 900 million. If these dividends/payments are approved, they follow the dividends/payments of NOK 700 million that were paid in 2013, which was the first year that dividends/payments of significance had been paid in several years,” says Ulvness.
During the quarter, several processes were carried out which are positive for clients in both the short and long term, and which ensure recurring revenues for the group. In Etatbygg I and II, the general assemblies voted in favour of the board’s proposal to carry out a transaction that ensures value for shareholders who wish to terminate their investment at original maturity, while simultaneously offering the opportunity to entirely or partially extend the investment for shareholders who wish to do so through a significantly more liquid structure that ensures shareholders can redeem their units when they wish.
In Sweden, Hyresbostäder i Sverige II AB, a real estate company managed by Obligo Investment Management AS, initiated negotiations with Swedish listed real estate company D. Carnegie & Co AB regarding the possible merging of the two companies’ real estate portfolios into what would become Sweden’s largest listed real estate company within residential housing. The transaction will involve a significantly more liquid structure, which ensures that shareholders can redeem their units whenever they wish.
“I am satisfied that, in a demanding period for large parts of the group, we are managing to provide good results, conducting restructurings, while winning mandates and complete transactions in line with our stated ambitions. This shows a willingness and execution capacity that will really give results when the entire group returns to a normal operating situation,” says Jørgen Pleym Ulvness.
A complete English version of the interim report of the first quarter of 2014 is attached on www.newsweb.no and on Agasti's Investor Relations web pages www.agasti.no.
CEO, Jørgen Pleym Ulvness, phone (+47) 906 67 877
CFO, Christian Dovland, phone (+47) 908 84 730
CCO, Tor Arne Olsen, phone (+47) 900 90 470
This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.