United Bankers Plc’s Half-Year Financial Report 1 Jan – 30 June 2023: Revenue grew – solid result in turbulent environment

United Bankers Plc

STOCK EXCHANGE RELEASE 25 August 2023 at 09:00 EEST

United Bankers Plc’s Half-Year Financial Report 1 Jan – 30 June 2023: Revenue grew – solid result in turbulent environment

This stock exchange release is a summary of the United Bankers’ Half-Year Financial Report 1 Jan – 30 June 2023. The complete Half-Year Financial Report with tables is attached to this release and is also available on the company’s website at www.unitedbankers.fi.

The figures in this release are unaudited.

January–June 2023 in brief

• The Group’s revenue (income from operations) in the review period amounted to EUR 24.7 million (EUR 23.4 million in 1–6/2022), an increase of 5.9%.
• The Group’s adjusted EBITDA in the review period amounted to EUR 8.0 million (EUR 8.4 million in 1–6/2022), a decrease of 4.1% and adjusted operating profit amounted to EUR 7.0 million (EUR 7.4 million in 1–6/2022), a decrease of 5.8%.
• The Group’s operating profit for the review period amounted to EUR 7.0 million (EUR 7.4 million in 1–6/2022), a decrease of 5.9% and the profit for the review period amounted to EUR 5.4 million (EUR 5.8 million in 1–6/2022), a decrease of 5.5%.
• Earnings per share were EUR 0.50 (EUR 0.53 in 1–6/2022), a decrease of 6.0%.
• Gross fee income from wealth management during the review period amounted to EUR 23.5 million (EUR 22.5 million in 1–6/2022), an increase of 4.4%. Gross fee income from capital markets services amounted to EUR 0.1 million (EUR 1.1 million in 1–6/2022), decreasing by 90.0%.
• Assets under management increased to EUR 4,629 million (EUR 4,411 million on 31 December 2022), increasing by 4.9%.
• United Bankers’ funds received positive net subscriptions in the amount of EUR 112.5 million during the first half of the year. The figure includes the investment commitments in general partnership (LP) funds that generate fees.
• Fees from funds continued to develop steadily. Fixed management fees increased but performance fees decreased from the comparison period.
• In the first half of the year, the Group prepared two major new funds, which started operating after the end of the review period.
• The EBITDA of wealth management segment for the review period amounted to EUR 8.9 million (EUR 9.4 million 1–6/2022), a decrease of 4.9%. The Group's capital markets services business suffered from the difficult operating environment and its EBITDA was negative by EUR 0.4 million.
• The cost-to-income ratio amounted to 0.71 (0.67).
• The company reiterates its guidance for 2023: The company estimates its adjusted operating profit to remain close to the level of 2022. The estimate is conditional upon market conditions not significantly weakening.

Consolidated Key Figures (The figures are presented in more detail in the appendix of the Half-Year Financial Report)

* The percentage change has been calculated using the actual figures, the figures shown in the table have been rounded

** Dividend for the 2022 financial period confirmed by the Annual General Meeting of Shareholders on 22 March 2023: a dividend of EUR 0.75 and an equity repayment of EUR 0.15

*** The number of personnel stated has been converted to full-time personnel

As its key financial figures, United Bankers presents adjusted EBITDA and adjusted operating profit, which the company uses to illustrate the profitability and result of the Group’s business operations as a going concern. Adjusted key figures are used to improve comparability between reporting periods. The adjusted key figures are adjusted for the impacts of corporate transactions influencing comparability, as well as certain material non-operating items. More information on the calculation of the key figures is available in the tables section of the half-year financial report.

Group revenue and profit performance for January-June 2023

(comparison figures 1-6/2022)

The positive development of the assets under management supported the growth of United Bankers’ revenue. During the review period, the revenue of the United Bankers Group (income from operations) increased to EUR 24.7 million (EUR 23.4 million), entailing an increase of 5.9 per cent from the comparison period. Decrease in performance fees and general cost inflation were reflected in the Group's profitability and the operating EBITDA margin was 4.1 per cent lower than in the previous year amounting to EUR 8.0 million (EUR 8.4 million). The adjusted operating profit also decreased from the comparison period to EUR 7.0 million (EUR 7.4 million), with a decrease of 5.8 per cent. The Group’s operating profit, in turn, amounted to EUR 7.0 million (EUR 7.4 million) decreasing by 5.9 per cent from the comparison period in the preceding year. Earnings per share amounted to EUR 0.50 (EUR 0.53). The cost-to-income ratio weakened from the comparison period to 0.71 (0.67).

Fees from funds accounted for a significant share of the Group’s total fee income. Net income from funds accounted for 85 per cent of net fee income from wealth management. As fund capital grew, the amount of management fees generated by funds increased by 12.6 per cent on the comparison period. The positive development in management fees was also driven by the shift of capital from short-term fixed income funds with lower fees to United Bankers’ more profitable funds. A significant part of the increase in management fees came from the management fees of United Bankers’ forest funds and the management fees generated by the new UB Forest Industry Green Growth Fund I LP.

Uncertainty in the operating environment, and rising interest rates in particular, increased investor caution in the first half of the year, which was reflected in a slowdown in sales of the Group’s investment services. The rapid rise in interest rates particularly impacted the demand for real estate funds as return expectations weakened in the real estate market in general. United Bankers’ real estate funds’ (UB Finnish Properties (AIF) and UB Nordic Property Fund (AIF)) net subscriptions were negative in the first half of the year, compared to the comparative period when the funds were among United Bankers’ most popular. The real estate funds’ performance was slightly negative, and thus did not generate any performance fees. Overall, the amount of fund performance fees declined 9.6 per cent compared to the same period last year, even though the performance fees received from forest funds continued to grow. 

Income from asset management, which includes discretionary management, fell to a slightly lower level than in the previous year, while market conditions for structured investment products continued to develop favourably. Indeed, fee income from the structured products clearly increased during the period. In addition, the general rise in interest rates improved the interest margin on client assets, which also had a positive impact on the performance of the wealth management business.

Activity in the capital markets services segment was exceptionally low in the spring, and no significant transactions were completed during the first half of the year. The segment’s revenue decreased on the comparison period and EBITDA was clearly in the negative at EUR -0.4 million.

The promotion of strategically important growth projects took on an important role during the spring. The UB Forest Industry Green Growth Fund I, which invests in sustainable and resource-efficient forest and bio-based industries, was launched in January. It is United Bankers’ first real private equity fund and its unique investment strategy is also expected to attract investors from abroad.

During the spring, the company invested in the future growth of the forest fund business by preparing a new fund for professional investors, UB Nordic Forest Fund IV LP, which started its operations in July, after the end of the reporting period. During the first half of the year, United Bankers also focused on a completely new area in its fund selection by setting up a fund that invests in renewable energy. The new fund, UB Renewable Energy (AIF), invests primarily in wind and solar power plants. The fund invests in renewable energy development projects and power plants, and it is expected to form an important new basis for United Bankers’ business. The first subscription date for the fund is at the end of August.

Investments made to build future growth were partly reflected in United Bankers’ performance. Several projects required significant investment in the first half of the year, but their returns are expected to materialise to a significant extent only during the second half and in the years to come. The work involved in setting up new funds and their marketing preparations, as well as promoting international sales, contributed to costs. General cost inflation was also reflected in the development of consolidated costs. Administrative costs including personnel and other administrative costs were EUR 13.4 million (EUR 12.0 million), an increase of 11.1 per cent. Personnel costs increased by 12.7 per cent on the comparison period to EUR 9.7 million (EUR 8.6 million). The rise in personnel costs is explained not only by the increase in the number of employees, but also by the salary increases implemented in the Group. As a result of the general trend in inflation, employees’ salaries were increased across the board in the first half of the year. In addition, a one-off “inflation allowance” of EUR 1,000 was paid to all employees in January to help them cope with soaring costs in their daily life. Improvements in the terms of the bonus scheme for administrative personnel contributed to an increase in variable salaries compared to the reference period. The increase in the Group’s salary costs is also due to a change in the system, which made the accrual policy for holiday pay more precise.

At the end of June, the number of full-time equivalent personnel was 163 (148 at 31 December 2022). Of these, a total of 14 were temporary employees (6 at 31 December 2022). A significant part of the increase in personnel is related to the resourcing of the new funds and their support functions. The increase in the number of temporary workers is partly explained by the normal increase in the number of seasonal workers during the summer period.

United Bankers continued to develop its IT systems and digital services. A major project to simplify the system infrastructure is underway, among others, with the first phases due to be completed in the near future. This reform is also expected to facilitate and accelerate the development of digital services for customers in the future.

CEO’s review

Patrick Anderson

It is our mission to build wealth in a responsible way. This is happening now, and increasingly in the future through asset classes and alternative investment funds that allow us to get actively involved in solving the current and future challenges the world may encounter. Forest management plays an important role as one of the global solutions to carbon sequestration. Replacing plastics and metals with timber fibre is the key to transitioning away from the fossil economy and towards plastic-free oceans. Renewable energy is not only required to enable the electrification of society, but also to achieve our emancipation from fossil energy. On the one hand, energy production requires both lands and building roofs. Despite the differences in the investment objects, there is a surprisingly many similarities and synergies between our forest, real estate, renewable energy and PE funds. Our guiding principle is to leverage these synergies for the benefit of our clients and for a better tomorrow.

The first half of 2023 represented a natural continuum to the events of 2022. The phenomena that were in focus last year: high inflation, rising interest rates as well as Russia’s theft and destruction operation in Ukraine persisting from month to month played an important role in the first part of 2023. As a company, we experience inflation on the one hand through rising costs, and on the other hand through the investment returns of our timberland investments. Rising interest rates, in turn, are reflected in strongly improved running yields in our fixed income funds, while the resulting higher yield requirements in the real estate market weighed on the values of our real estate funds. For us, the persistence of the war has signified the continuation of our support for the defence battle of Ukraine and of the free Europe, both financially and via direct volunteering activities. Despite these three macro phenomena and slower economic growth ensuing from same, the first part of the year witnessed the recovery of both the equity and the fixed income market from their decline last year. The performance of the Finnish equity market was an unfortunate exception to that rule. The assets of Finnish mutual funds increased by 6 per cent in the first half of the year, and net subscriptions turned positive again. As concerns alternative investment funds, the development was two-fold. The price pressure that exhibited itself in the real estate market particularly in relation to apartments was similarly reflected in other real estate categories. On the other hand, timberland, renewable energy and private equity, for instance, performed well  on average also during the review period.

For United Bankers, the first half of 2023 proved to be the second-best first half of the year in its entire operating history. The revenue of the company increased during the first half of the year by 5.9 per cent, to EUR 24.7 million. The operating profit, in turn, decreased by 5.8 per cent, to EUR 7.0 million and earnings per share decreased by 6.0 per cent, to EUR 0.50. The cost-to-income ratio weakened to 0.71 (0.67). In the wealth management segment, the net fee income increased by 5.3 per cent, to EUR 21.1 million, with the EBITDA declining by 4.9 per cent, to EUR 8.9 million. The net fee income of the capital markets services segment, in turn, decreased by 90.0 per cent, to EUR 0.1 million, with the operating margin becoming negative by EUR 0.4 million. In an environment characterised by inflation, rising interest rates and war, we succeeded in raising for our funds EUR 112.5 million worth of net subscriptions, with our assets under management increasing by 4.9 per cent, to EUR 4.6 billion. Fixed management fees for funds increased by 12.6 per cent, with fund net fee income representing 85 per cent of all the net fee income in the Group.

Also the costs of the company increased during the first part of the year. Alongside the growing number of personnel, costs were also on the rise in the first part of the year particularly as relates to internationalisation and new funds (UB Renewable Energy and UB Nordic Forest Fund IV), as well as the general increase in costs and salaries. The new funds and markets are expected to generate new revenue flows already during the current year. Thanks to the positive development of the company’s business in the first part of the year, paired with the strategic investments we have made into growth, the near-future outlook remains stable, and no adjustments are being made to the financial guidance for the entire year as concerns the level of the company’s adjusted operating profit: we continue to estimate, as we did in February, that our adjusted operating profit will remain close to the record-breaking level of 2022.

I would like to extend my gratitude to United Bankers’ clients, business partners and shareholders for their relentless trust also in the current year. Many thanks also to the fantastic UB team, of which I am especially proud. The efforts we have exerted in the first part of 2023 will allow our company to witness an interesting future at the forefront of responsible European wealth management. We are living out our mission together!

Financial guidance for 2023

The company estimates its adjusted operating profit to remain close to the level of 2022. The estimate is conditional upon market conditions not significantly weakening.

Financial Statements Bulletin

The Financial Statements Bulletin of the United Bankers Group for the financial period 2023 will be published on or about 16 February 2024 and will be available on the company’s website under the “Investors” section at www.unitedbankers.fi.

Press conference

Result presentation to analysts and press will be held at the company headquarters, Aleksanterinkatu 21 A, 4th floor, Helsinki on Friday 25 August 2023 at 11.30 am in Finnish. It is also possible to participate the press conference virtually. To participate in the event, please sign up in advance to ir@unitedbankers.fi.

For further information, please contact:

Patrick Anderson, CEO, United Bankers Plc
patrick.anderson@unitedbankers.fi
Tel. +358 400 244 544, +358 9 25 380 236

Investor Relations: ir@unitedbankers.fi

United Bankers in brief:

United Bankers Plc is a Finnish expert on wealth management and investment markets, established in 1986. United Bankers Group’s business segments include wealth management and capital markets services. In asset management, the Group specializes in real asset investments. United Bankers Plc is majority-owned by its key personnel and the Group employs 163 employees (FTE) and 31 agents (30 June 2023). In 2022, the United Bankers Group’s revenue totalled EUR 48.6 million and its adjusted operating profit amounted to EUR 16.6 million. The Group’s assets under management amount to approximately EUR 4.6 billion (30 June 2023). United Bankers Plc’s shares are listed on Nasdaq Helsinki Ltd. The Group companies are subject to the Finnish Financial Supervisory Authority’s supervision. For further information on United Bankers Group, please visit www.unitedbankers.fi.

DISTRIBUTION:

Nasdaq Helsinki

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