FIM GROUP CORPORATION’S PROFITABILITY IMPROVED CLEARLY IN Q2
FIM Group Corporation STOCK EXCHANGE RELEASE July 31, 2007
FIM GROUP CORPORATION’S PROFITABILITY IMPROVED CLEARLY IN Q2
Key figures for April-June 2007 (2006)
Net sales: EUR 28.2 million (21.8)
Growth in net sales: 29%
Operating profit: EUR 9.2 million (5.6)
Operating profit margin: 32% (26%)
Earnings per share: EUR 0.17 (0.10)
Key figures for January-June 2007 (2006)
Net sales: EUR 51.3 million (43.1)
Growth in net sales: 19% (63%)
Operating profit: EUR 12.7 million (11.8)
Operating profit margin: 25% (27%)
Net profit: EUR 10.8 million (8.3)
Earnings per share: EUR 0.25 (0.21)
OPERATING ENVIRONMENT
Share prices showed strong momentum in the second quarter. The world equity
index rose by 6.7 percent in euro terms in January-June 2007. In the first
quarter the increase was only 1.4 percent whereas in the second quarter the
growth accelerated to 5.2 percent. The rise in share prices was even stronger
than this in the emerging markets in the second quarter. The emerging market’s
equities index rose in the second quarter by 12.5 percent against a rise of
only 0.6 percent in the first quarter. The world’s emerging markets index rose
altogether by 13.2 percent in January-June. The strong share price trend on the
OMX Helsinki Stock Exchange has held up well. From the beginning of the year to
the end of June, the OMX Helsinki Cap Index rose by 18.0% in euro terms.
In the Eurozone, economic growth was strong in the first half of the year.
Unemployment has been falling steadily, and economic forecasts have been
revised upward. In the equity markets, the positive outlook has translated into
a strong rise in share prices. In the fixed income market, there was a
continuation of the upward trend in long bonds that got under way in the first
part of the year. The corporate bond market was robust all the way up to just
before the summer. Strong economic growth in the Eurozone bolstered the euro’s
exchange rate against the United States dollar.
Trade volume continued to rise strongly on the OMX Helsinki Stock Exchange. In
the H1, trade volume grew by 28 percent compared with the same period of 2006
and was approximately EUR 196 billion (153). The average intra-day volume was
about EUR 1.6 billion.
Demand in the structured products market has remained very strong.
INCOME AND FINANCIAL PERFORMANCE IN JANUARY-JUNE 2007
(comparison figures are for January-June 2006)
FIM Group's total income from investment services in January-June grew by 19
percent to EUR 51.3 million (EUR 43.1 million in 2006).
FIM has changed its financial reporting from the beginning of 2007. Segment
reporting covers the business areas FIM Asset Management and FIM Brokerage. FIM
Investment Banking is reported as part of the group Others. The sales of
structured products were moved from investment banking division to FIM Asset
Management in the beginning of the year. Comparison figures have been adjusted
to the new reporting structure.
FIM Asset Management’s total income in January-June grew by 22 percent to EUR
37.2 million (30.5). FIM Brokerage’s total income in the report period grew by
17 percent to EUR 16.1 million (13.8).
The Group’s operating profit in the report period was EUR 12.7 million and the
operating profit margin 25 per cent. Due to the Glitnir transaction, the option
costs of EUR 2.2 million for FIM’s both option series that were originally
scheduled for 4 years, were booked in the first quarter of 2007. Before this
non-recurring booking the operating profit for the review period would have
been EUR 14.9 million and operating profit margin 29 %.
The Group’s H1 expenses, excluding fee and interest expenses, came to EUR 31.8
million (26.3). Expenses increased by 21 percent compared with the same period
of 2006. The greatest single factor behind the growth in expenses was the
effect of the Glitnir acquisition – announced in February – on the recognition
of stock option expenses.
The Group’s taxes in the January-June period amounted to EUR 1.9 million (3.6).
Profit in January-June was EUR 10.8 million (8.3).
Earnings per share for the review period were EUR 0.25 (0.21).
BALANCE SHEET
Total assets as of June 30, 2007 stood at EUR 170.5 million (130.3). Total
assets as of December 31, 2006 stood at EUR 142.4 million.
The Group’s shareholders’ equity at the end of the fiscal period was EUR 107.3
million (65.7), or EUR 2.52 per share (1.69). The annualized return on equity
was 20.8 percent (33.7).
The Group’s equity ratio was 62.9 percent (50.4) and the Tier 1 ratio (BASEL
II) was 32.8 percent.
FIM’s derivatives exposure at the end of the reporting period consisted mainly
of equity derivatives held for trading. The value of the underlying assets of
equity derivatives was EUR 54.3 million and they had a fair value of EUR -1.4
million. In addition, receivables denominated in foreign currency were hedged
with forward exchange contracts, the underlying assets of which had a value of
EUR 20.2 million, their fair value being EUR 0.0 million.
INVESTMENTS
The Group’s investments in tangible and intangible assets (including goodwill)
during the review period came to EUR 2.0 million (14,3).
PERSONNEL
The number of employees has grown greatly in recent years. In January-June
2007, the Group had an average payroll of 300 employees (247). The number of
employees at the end of June was 323 (271).
At the end of the review period, the personnel were divided by business area as
follows: FIM Asset Management, 156 persons, FIM Brokerage, 106 persons. The
number of employees working in Finland was 288, with 32 employees in Russia and
3 in Sweden. Personnel figures are stated converted to full-time staff.
FIM GROUP ACQUIRED BY GLITNIR BANKI HF
In accordance with an agreement made by Glitnir and FIM Group Corporation’s 11
largest shareholders on February 5, 2007, Glitnir banki hf purchased 68.1
percent of FIM Group Corporation’s shares in transactions completed on March
16, 2007. The public tender offer Glitnir made for the shares and option
warrants issued by FIM ended on May 16, 2007. Glitnir announced on May 25,
2007, that its holding of FIM’s shares and voting rights had exceeded 98
percent. Glitnir has initiated the arbitration procedure under the Companies
Act in order to redeem the remaining FIM shares. The redemption price offered
by Glitnir is EUR 8.00 per share.
FIM APPLIES FOR A DELISTING
On June 1, 2007, the Board of Directors of FIM Group Corporation submitted to
the Helsinki Stock Exchange an application for the cessation of trading in the
FIM share and delisting of the share from the Main List of the Helsinki Stock
Exchange. The delisting of FIM’s share will be carried out after Glitnir has
received title to all of FIM’s shares and the Helsinki Stock Exchange has
decided to delist the share.
RESOLUTIONS OF FIM GROUP CORPORATION’S ANNUAL GENERAL MEETING
FIM Group Corporation’s Annual General Meeting, held on March 15, 2007, adopted
the 2006 financial statements and discharged the members of the Board of
Directors and the President and CEO from liability. The Annual General Meeting
decided on the payment of dividends, the composition of the Board of Directors
and the election of the auditor.
It was resolved that a dividend of EUR 0.14 per share would be paid as proposed
by the Board of Directors, to a total of EUR 5.97 million. The dividend was
paid out on March 27, 2007.
The following persons were re-elected as members of the Board of Directors:
Niklas Geust, Vesa Honkanen, Antti Kivimaa, Risto Perttunen and Jukka Ylitalo.
However, the term of service of these members of the Board of Directors ended
when Glitnir banki hf. acquired 68.11 percent of FIM Group Corporation’s shares
and voting rights. Due to this change of ownership, the Annual General Meeting
elected Bjarni Ármannsson, Frank Ove Reite and Sverrir Örn Thorvaldsson to the
Board of Directors as representatives of Glitnir banki hf. as well as re-
elected Niklas Geust and Vesa Honkanen. Their term of service started from the
transfer of ownership on March 21, 2007. At its organization meeting on March
22, 2007, the Board of Directors elected Frank Ove Reite as the Chairman.
After the change in the ownership, the majority of the members of the company’s
Board of Directors do not meet the criteria of independence as set forth in the
Corporate Governance recommendation of the Helsinki Stock Exchange, the Central
Chamber of Commerce of Finland and the Confederation of Finnish Industries EK.
The Authorized Public Accountants Kim Karhu and Kaija Leppinen were re-elected
as the company's auditors. PricewaterhouseCoopers Oy, Authorized Public
Accountants, was elected as the deputy auditor, with Authorized Public
Accountant Jarmo Álen as chief auditor.
SHARES AND SHARE CAPITAL
FIM Group Corporation’s share capital as of June 30, 2007, was EUR 2,813,505.
The company’s issued shares consist of one share class that is divided into a
total of 42,683,690 shares.
The trade volume of the FIM Group Corporation share on the OMX Helsinki Stock
Exchange in the January-June 2007 period was EUR 460.0 million and 53.7 million
shares. Trade volume includes the block trade carried out on March 16, 2007, in
which 29,071,813 shares were transferred to Glitnir banki hf. During the report
period the share registered a high of EUR 8.30 in February and a low of EUR
5.86 in January. The volume-weighted average share price was EUR 8.00. At the
end of the reporting period on June 30, 2007, the share price was EUR 8.00 and
the company had a market capitalization of EUR 341.5 million. The company had
in its possession a total of 36,000 treasury shares as of June 30, 2007, and
they had a market value of EUR 0.3 million. The share of all shares and votes
was below 0.1 per cent.
RISK MANAGEMENT
Risk management is an essential part of internal control, and its aim is to
reduce the probability of unforeseeable losses or a threat to the reputation of
FIM. Risk management covers all material risks connected with FIM’s operations,
such as operational risks, market risks, liquidity and financing risks, credit
risks and strategic risks.
The management of operational risks is part of the FIM Group’s overall risk
management, and it generally involves minimizing risks. In addition to
preventive work that is carried on to avert operational risks, the FIM Group
seeks to maintain sufficient insurance coverage for the purpose of
compensating, say, loss or damage resulting from malfeasance, intrusion into
information systems, or other criminal actions. Continuity plans have been put
in place to cope with major disturbances to operations.
Limits and other operational instructions have been set for the taking of
market risks, bearing in mind the sufficiency of equity and capital adequacy
planning within the FIM Group.
To support liquidity management, FIM Securities Ltd has the possibility, in the
form of credit extended by customers (so-called cash account customers), to
improve its liquidity, and, additionally, the company has credit facilities
that have been agreed with banks and can be drawn down as the need arises. In
practice, despite the increase in trading, it has been possible to attend to
liquidity management mainly without having recourse to bank credit facilities.
Across FIM units, the contractual counterparties in accordance with the adopted
definition of credit risk are customers and other trading counterparties as
well as other partners in cooperation. In line with the lending policy approved
by the Board of Directors, FIM carries on only lending activities in which risk-
taking can be limited to a small amount and the risk is manageable. Lending is
primarily to private individuals.
NEAR-TERM OUTLOOK
The trend in FIM’s operations during the first months of 2007 has proceeded as
expected and the growth in full-year net sales is expected to reach the long-
term growth target of 20 percent. Full-year operating profit is estimated to
exceed that reported for 2006.
Cyclical sensitivity is typical of investment service operations and FIM’s
business operations are also characterized by a marked dependence on the trend
in the global securities markets. In the short term, performance fees in
discretionary asset management are the type of income that is the most
sensitive of all to both positive and negative moves in the market.
FIM submitted a license application for banking operations to the Finnish
Financial Supervision Authority during the review period. The retail banking
operations are scheduled to commence during 2007.
The full report including tables can be downloaded from the enclosed link.
FIM Group Corporation
Risto Perttunen
CEO
For additional information,
please contact:
Risto Perttunen, CEO, tel. +358 9
6134 6303
Timo T. Laitinen, CFO, tel. +358
9 6134 6525
Distribution:
Helsinki Stock Exchange
The main media
www.fim.com
FIM is a growing investment
services group that offers asset
management, brokerage and
investment banking services for
private individuals and
organizations. Since March 2007
FIM is part of Icelandic
financial group Glitnir
(www.glitnirbank.com). In
addition to the head office in
Helsinki, FIM has regional
offices in Espoo, Jyväskylä,
Kuopio, Lahti, Oulu, Riihimäki,
Tampere, Turku and Vaasa. FIM
also operates in Stockholm and
Moscow. The company had net sales
in 2006 of EUR 82.0 million, and
it posted operating profit of EUR
19.1 million. FIM had a payroll
of 284 employees at the end of
2006. www.fim.com