Global Slowdown Impacts Second Quarter Results Revenues drop 35% and Pre-tax Profits decrease 40% in Q2

Transcription

1 Press Release ABG Sundal Collier Second Quarter Report to Shareholders Global Slowdown Impacts Second Quarter Results Revenues drop 35% and Pre-tax Profits decrease 40% in Q2 Oslo, 24 July 2008 Despite improved sentiment in the first two months of the second quarter, Nordic equity markets succumbed to renewed concerns about slowing growth and higher inflation in the final month of the quarter. This market environment has negatively affected ABGSC s results for yet another quarter as a significantly reduced level of ECM activity and lower market turnover on the Nordic stock exchanges, have had a negative impact on the revenues in the Equities division. Within the Corporate Finance division, the trend established in the first quarter of a shift away from ECM and capital raising activities to M&A and corporate restructuring projects continued in the second quarter. Although activity levels within Corporate Finance remain high, this shift results in lower revenues in the short-term and higher uncertainty regarding future revenues for the division. On a positive note, excluding ECMrelated revenues, the fall in Equities Division revenues compared to last year improved in the second quarter (-9%) versus the first quarter (-18%). This improvement in the relative trend was also reflected in a further improved market share. Q2 Highlights Second Quarter revenues were NOK 349 mil vs. NOK 535 mil last year, a decline of 35%. For the first half of 2008, total revenues were NOK 720 mil vs. NOK 1,104 mil last year, a decline of 35%. Second Quarter Earnings Per Share fell by 46% to NOK 0.24 vs. NOK 0.44 last year on 19% greater shares outstanding. For the first half year of 2008, EPS was NOK 0.49 vs. NOK 0.93 last year, a decline of 47%. Stockbroking revenues in the second quarter were NOK 188 mil vs. NOK 202 mil last year (-7%). For the first half of 2008, Stockbroking revenues were NOK 395 mill vs. NOK 451 mil last year (-12%). The decrease in Q2 reflects lower traded volumes on Nordic stock exchanges. Equities division revenues excluding ECM-related revenues improved its year-on-year comparison in the second quarter versus the first quarter. Corporate Finance revenues were NOK 137 mil in the second quarter vs. NOK 313 mil in the same period last year (-56%). For the first half of 2008 Corporate Finance revenues were NOK 281 mill vs. NOK 611 mil in 2007 (-54%). Our overall Nordic market share of traded volumes increased to 4.07% in the second quarter this year versus 3.08% in the same quarter last year and from 3.52% in the first quarter this year Nordic Companies/Global Money 1

2 Summary Financial Data Operating data and key ratios 2. quarter 2. quarter YTD 30. June YTD 30. June Year Average number of shares in 1,000 (1) 406, , , , ,859 Shares outstanding end of period 357, , , , ,480 Forward contracts for shares outstanding end of pe 49,546 35,910 49,546 35,910 36,665 Earnings per share (in NOK) (2) Pre-tax income (in NOK 1,000) 126, , , , ,241 Book value per share (in NOK) (3) Operating cost / Income ratio (4) 45.1 % 24.7 % 42.3 % 23.7 % 24.9 % Total cost / Income ratio (5) 73.5 % 63.4 % 71.9 % 62.8 % 64.1 % Compensation / Income ratio (6) 50.8 % 51.2 % 51.0 % 51.2 % 51.7 % Pre-tax pre bonus profit margin (7) 64.8 % 78.8 % 65.4 % 79.7 % 79.6 % Return on Equity (12 months) (8) 32.7 % 64.2 % 32.7 % 64.2 % 49.1% Number of employees at period end (1) Adjusted for treasury shares and shares on forward contracts (2) Net result for the period + interest element in forward contracts divided by the average number of shares (3) Book equity at end of period divided by the total number of shares (adjusted for treasury shares) (4) Operating expenses as a percentage of operating revenues (5) Total expenses including bonus expense and profit to partners as a percentage of operating revenues (6) Personnel expenses plus bonus expense and profit to partners as a percentage of operating revenues (7) Earnings before tax adjusted for bonus expense and profit to partners as a percentage of operating revenues (8) Net result for the last 12 month period as a percentage of average shareholders' equity. Nordic Companies/Global Money 2

3 Nordic Equity Markets Review The market recovery of April/May proved a false dawn as Nordic equity prices succumbed to renewed macro worries in the final month of the quarter, this time centring on the spiking oil price and its implications for higher inflation and slowing growth. As a consequence, the FT Norex 30 index ended the quarter down by 6% for an accumulated half-year loss of 21%. Among the Nordic markets, fortunes were mixed. In Norway the recovery held up throughout the quarter and the main index gained 12%, partly making up for the loss in the first quarter, taking the half-year performance to only -6%. Sweden and Finland were harder hit by the late quarter selling and recorded losses in the quarter of 11% and 12%, respectively, taking first half losses to 21% for the Swedish market and 18% for Finland. The Danish market had a smaller loss of 1% in the second quarter, bringing first half performance to -9. Apart from Norway, all Nordic markets underperformed the North American, European and Japanese main indices for both the quarter and first half. With the oil price reaching new highs, and with both hard and soft commodity prices continuing to rally, it was no surprise to find the winning stocks among companies with exposure to these areas. Having sorted out its company specific problems earlier in the year, StatoilHydro rebounded strongly in the quarter (+22%). Also benefitting from the higher oil price was Lundin Petroleum (+12% in the quarter and +42% for the year). As a transporter of oil, Frontline also benefitted from the high oil demand, its stock gaining 56% in the second quarter. With an indirect exposure to the higher oil price, and to demand for energy in general, both Vestas Wind Systems and REC performed well in the quarter, rising 26% and 17%, respectively. On the back of continued robust development in metals and steel prices SSAB was up 21% and Norsk Hydro gained 19% in the quarter. But, yet again, the stellar performer in Nordic markets was Yara. With agriculture prices soaring, the stock continued to rally another 60% in the quarter for a total gain of 85% since the beginning of the year. On the other end of the spectrum, the negative performance within Nordic equity markets was dominated by four sectors: Consumer Goods, Machinery & Engineering, Banks, and Pulp & Paper. Weakness in its Q1 report and further worrying signs from its competitors and subsuppliers about future growth continued to put pressure on Nokia shares which fell 19% in the quarter. Fear of a consumer slowdown as well as a real threat of much higher input prices for steel drove Electrolux down 22% in the quarter. Machinery & Engineering stocks held up well during the first quarter although, concerns over growth and higher input prices resulting in earnings weakness in the coming years started to take their toll on the sector during the second quarter. SKF fell 15%, Sandvik fell 16% and Assa Abloy fell 21%, to name but a few. Having performed reasonably well during the winter months, after the poor performance during last autumn, financial stocks yet again took centre stage among the underperformers. Concerns regarding the health of the Nordic economies in general, coupled with company specific matters, saw some bank stocks fall sharply in the second quarter. Den Danske Bank fell 21% fuelled by fears about its Irish lending portfolio. SEB fell 28% with its high exposure to investment banking in general and the fast-weakening Baltic region. Swedbank fell -29% on the back of its high exposure to the Baltic region. Finally there seems to be no light at the end of the tunnel for Pulp & Paper companies. Several profit warnings within the sector in the quarter pushed UPM down 14% and Stora Enso down 25%. Nordic Companies/Global Money 3

4 Business Segments Review Equities Division Measured in Norwegian kroner (NOK), traded volumes on Nordic stocks exchanges fell by 23% during the second quarter. This represented a continued deterioration compared to the trend in the first quarter of this year when volumes fell by 18%. In total, for the first half, traded volumes on the Nordic stock exchanges fell by 21%. Against this backdrop, it is a positive development that ABGSC s traded volumes actually increased by +1% in the second quarter, having fallen by 15% in the first quarter. For the first half, our traded volumes were down 7%. This development in traded volumes was reflected in our improved market share, which increased to 4.07% in Q from 3.08% in Q and from 3.52% in Q For the first half-year of 2008, our market share was 3.78% versus 3.32% for the same period last year. The relative improvement in traded volumes was also reflected in the division s revenues. Excluding ECM revenues, revenues within the division declined by 9% in the second quarter compared to the same period last year, representing an improvement compared to the first quarter when comparable revenues fell by 18% versus last year. The slowdown in market activity will inevitably lead to a more challenging environment for our Corporate Access team (CAG), particularly in light of the near absence of ECM-related roadshow activities. Having delivered consistent growth over the last five years, the overall number of roadshow days fell by 21% in the second quarter compared to the same period last year. On a more positive note, however, excluding ECM-related roadshow marketing, the underlying number of roadshow days actually increased by 10%. This is a testament to our continuous effort to broaden management exposure to our clients. We continued to expand our special seminar offering, hosting a Danish Pharmaceutical seminar, a special Nordic Real Estate tour and a Swedish small cap Machinery & Engineering seminar. As we noted in our first quarter 2008 report, the downturn in markets has opened up a real opportunity to hire senior personnel and speed up the generational shift within the division. During the second quarter this process continued as we hired a new senior Consumer Goods analyst in our Stockholm research team as well as a senior small cap analyst in our Danish research group. In addition, we have had a change of leadership within the research department during the second quarter. Espen Bruu Syversen has left his role as Global Head of Research and will focus entirely on his job as Norwegian strategist. With Espens move, Malene Brondberg has been appointed Global Head of Research. Malene has been a senior analyst with the firm for several years and her appointment to the new position should mean an important continuity of leadership for what is a core area of the firm. Within Equities Hans Øyvind Haukeli will move from London to replace Petter Bjertnæs as head of Oslo Sales during Q3. Petter Bjertnæs will return to his former position within Oslo Corporate Finance. Nordic Companies/Global Money 4

5 Market share in the Nordic NOKm Traded ABGSC volume in the Nordic 4.5% 300, % 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Q104 Q204 Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q , , , ,000 50,000 0 Q104 Q204 Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 Stockbroking Revenues Revenues (NOKm) :1 2006:2 2006:3 2006:4 2007:1 2007:2 2007:3 2007:4 2008:1 2008:2 Nordic Companies/Global Money 5

6 Corporate Finance Division Corporate Finance revenues fell by 56% to NOK 137 mil in Q vs. NOK 313 mil in Q2 2007, reflecting tougher market conditions. The trend outlined in our first quarter report of a shift to fewer ECM transactions and a greater focus on M&A and corporate restructuring projects continued in the second quarter. The longer lead times for the latter type of projects means that revenues will be affected in the near-term and that there will be more uncertainty in the timing of future revenue flows. Despite this trend and the challenging market environment, the activity level has remained high throughout the quarter and we are pleased to have concluded a number of projects within different areas of our division, some of which are highlighted below. Polarcus is an ongoing project, similar to last year s success story Eastern Echo. The company is a pure play within marine geophysics with a pioneering environmental agenda, specialising in high-end towed streamer data acquisition. Despite the very challenging markets in the last month of the second quarter, we managed to raise around USD 140 mil for the company in a combined equity, convertible bond and secured bond issue. Also during the quarter, we were involved with the prestigious assignment to financially restructure Norske Skog as well as advising GGS in the spinning off and separate listing of its Spectrum operation. Within M&A we acted as advisor to Cash Guard in its merger with PSI. In the second quarter we concluded placements of new shares in both Petromena and Morphic. The variety of this project portfolio shows our continuous efforts over recent years to diversify our corporate finance revenue stream into new areas and industries as well as to expand geographically. Another business unit within our Corporate Finance division which has been fast-growing over the last five years is our real estate and shipping products business. This business has grown to be an important unit within our Corporate Finance department. Distribution in this area is undertaken through several channels with our long-standing cooperation agreement with ACTA playing a major part. Over the last few months, there has been negative press about ACTA, a source of concern to us and with a negative impact on ACTAs as well as our business. The impact is limited to lower activity related to structuring of new investments while management of existing projects and portfolios are not affected. Corporate Finance Revenues (NOKm) :1 2006:2 2006:3 2006:4 2007:1 2007:2 2007:3 2007:4 2008:1 2008:2 Nordic Companies/Global Money 6

7 Financial Review While revenues fell in the second quarter and first half, operating expenses increased by 19%, reflecting ongoing investment in both people and systems. Consequently operating profit before bonuses and profit to partners fell by 52% in Q2. For the first half-year, operating profit before bonuses and profit to partners fell by 51% as revenues decreased by 35% and operating costs rose by 16%. The movement in revenues and costs results in a cost/income ratio for the second quarter of 45% versus 25% in the second quarter last year. For the first half, the cost/income ratio was 42% versus 24% in the first half of last year. The increase in operating expenses can be explained by a number of smaller items. The net effect of all this items is that operating expenses for the second quarter have increased approximately in line with the increase in the average headcount for the same period of 18%. Net financial income was NOK 34 mil in the second quarter compared to NOK 19 mil in the same period last year. The improvement came largely from dividends received on strategic shareholdings. With a higher net financial result, and with our normal accrual for bonuses, pretax profit was NOK 127 mil in the second quarter versus NOK 215 mil in the second quarter last year, representing a fall of 41%. For the first half, pre-tax profit fell by 43% to NOK 258 mil versus NOK 449 mil in the same period last year. Reflecting the increase in shares outstanding after last summer s rights issue, EPS fell by a slightly higher 47% to NOK 0.24 per share in Q from NOK 0.44 per share in Q During the quarter value adjustments attributable to available for sale investments led to a negative value adjustment equal to NOK 0.44 per share for the first half of 2008 that was recorded directly towards equity (adjustment with 0.00 per share in 1H 2007). In the second quarter, return on equity was 33%, well above our target, but lower than in previous periods due to both lower earnings and higher equity. The company remains in a very strong capital position with a Group capital adequacy ratio of 19% (ex-dividend), compared with the 8% requirement of the Financial Supervisory Authority of Norway, and a liquid balance sheet. 100% 100% 80% 60% 68% 69% 70% 73% 63% 63% 65% 62% 63% 63% 80% 60% 76% 75% 76% 77% 75% 78% 69% 68% 60% 71% 70% 70% 55% 68% 64% 61% 58% 40% 40% 49% 20% 20% 22% 20% 39% 33% 0% 13% 12% 16% 11% 12% 13% 16% 11% 2006:1 2006:3 2007:1 2007:3 2008:1 0% 2006:1 2006:3 2007:1 2007:3 2008:1 Cost/Income ratio Salary & Benefits/Income Ratio Operating Profit M argin Return on Equity Nordic Companies/Global Money 7

8 ABG SUNDAL COLLIER GROUP Profit & Loss % % Amount in NOK 1, quarter 2. quarter change YTD 30. June YTD 30. June change Year Operating revenues Stockbroking revenues 188, , % 395, , % 884,436 Corporate Finance revenues 136, , % 281, , % 1,224,445 Proprietary Trading revenues 23,813 19, % 43,724 42, % 81,955 Other revenues ,508 Total operating revenues 348, , % 720,313 1,103, % 2,192,344 Operating expenses Salaries and NI expenses (78,340) (66,891) 17.1 % (153,679) (133,749) 14.9 % (275,829) Other operating expenses (73,830) (62,113) 18.9 % (141,612) (121,673) 16.4 % (255,859) Depreciation (5,155) (3,259) 58.2 % (9,296) (6,362) 46.1 % (14,051) Total operating expenses (157,325) (132,263) 18.9 % (304,588) (261,785) 16.4 % (545,739) EBIT Pre-bonus and profit to partners 191, , % 415, , % 1,646,604 Bonus and profit to partners (98,922) (206,860) % (213,519) (431,354) % (858,498) EBIT Post-bonus and profit to partners 92, , % 202, , % 788,107 Net financial result 34,402 18, % 55,583 37, % 99,134 Pre-tax income 126, , % 257, , % 887,241 Taxes (35,503) (68,708) % (74,759) (143,525) % (262,134) Net result for the period 91, , % 183, , % 625,107 Balance Sheet 30. June 30. June 31. December Amount in NOK 1, Total intangible assets 76,674 79,811 81,336 Plant and equipment 50,246 27,056 38,417 Financial non-current assets 67,072 65,005 60,324 Total non-current assets 193, , ,078 Receivables 4,997,712 5,971,803 4,039,198 Investments 364, , ,310 Cash and bank deposits 429, , ,028 Total current assets 5,791,565 6,947,092 5,371,536 Total assets 5,985,556 7,118,964 5,551,614 Paid-in capital 675, , ,078 Retained earnings 446, ,778 1,030,518 Total equity 1,121, ,096 1,647,596 Long-term liabilities 388, , ,837 Current liabilities 4,475,577 5,836,863 3,519,181 Total liabilities 4,863,589 6,220,868 3,904,018 Total equity and liabilities 5,985,556 7,118,964 5,551,614 Nordic Companies/Global Money 8

9 NOTES TO THE FINANCIAL STATEMENTS Note 1 - Accounting principles The quarterly report is prepared in accordance with the International Financial Reporting Standard (IFRS) published by the International Accounting Standards Board (IASB) and all interpretations from the Financial Reporting Interpretations Committee (IFRIC), which have been endorsed by the EU commission for adoption within the EU. The quarterly report is unaudited. Note 2 - Change in equity 2. quarter 2. quarter 30. June 30. June Year Shareholders equity - opening balance 1,663,353 1,166,251 1,647, , ,153 Net result for the period 91, , , , ,107 Dividend paid (577,847) (472,438) (577,847) (472,438) (472,438) New issuing of shares 40,039 59,486 61,700 86, ,710 Change in own shares - (565) - (591) 275 Investments available for sale - valuation effect (94,849) - (189,111) - (20,193) FX-conversions/ other (163) (642) (3,402) (1,013) (16,017) Shareholders equity - ending balance 1,121, ,096 1,121, ,096 1,647,596 Note 3 - Information about Segments and Geographical Markets The Group's three business segments are Equities, Corporate Finance and Trading & Risk. The internal management system is matrix-based. Revenues and expenses are recorded both by business segment and geographical markets. Assets and liabilities except from directly allocatable items, and equity and cash flow are recorded by geographical markets. Operating profit reported by primary segment (business segment) Operating Revenues Operating expenses Operating profit before bonus and profit to partners 2. quarter 2. quarter 2. quarter 2. quarter 2. quarter 2. quarter Equities 208, ,149 86,061 73, , ,223 Corporate Finance 116, ,890 62,235 47,204 54, ,686 Trading & Risk 23,806 19,825 9,029 11,133 14,777 8,692 Total 348, , , , , ,601 Operating Revenues Operating expenses Operating profit before bonus and profit to partners YTD 30. June YTD 30. June Year YTD 30. June YTD 30. June Year YTD 30. June YTD 30. June Year Equities 418, ,562 1,047, , , , , , ,496 Corporate Finance 257, ,236 1,062, ,765 85, , , , ,896 Trading & Risk 43,724 42,181 81,955 29,882 23,684 49,742 13,842 18,497 32, ,313 1,103,979 2,192, , , , , ,195 1,646,604 Operating profit reported by secondary segment (geographical segment) Operating Revenues Operating expenses Operating profit before bonus and profit to partners 2. quarter 2. quarter 2. quarter 2. quarter 2. quarter 2. quarter Norway 194, ,038 75,030 63, , ,616 Sweden 39,572 45,907 27,831 26,809 11,741 19,098 Denmark 5,329 8,444 3,514 4,050 1,815 4,394 UK 70,706 88,759 30,904 25,281 39,802 63,478 US 38,994 36,716 20,047 12,701 18,947 24,015 Total 348, , , , , ,601 Operating Revenues Operating expenses Operating profit before bonus and profit to partners YTD 30. June YTD 30. June Year YTD 30. June YTD 30. June Year YTD 30. June YTD 30. June Year Norway 373, ,276 1,285, , , , , ,817 1,053,151 Sweden 113, , ,914 64,376 57, ,069 48,786 64, ,845 Denmark 9,337 17,570 31,207 6,319 7,743 15,033 3,018 9,827 16,174 UK 142, , ,355 56,839 52, ,034 85, , ,321 US 81,793 91, ,589 37,736 29,439 69,476 44,057 61, ,114 Total 720,313 1,103,979 2,192, , , , , ,194 1,646,604 Cash Flow Statement 2. quarter 2. quarter 30. June 30. June Year Net cash flow from operating activities (524,090) 87,773 (954,310) (150,125) 1,029,807 Net cash flow from investing activities 259,927 (10,394) 124,779 (14,779) (524,373) Net cash flow from financing activities 84,008 (21,346) 453, ,032 (315,099) Net change in cash and cash equivalents (180,155) 56,033 (376,227) 174, ,334 Cash and cash equivalents - opening balance 609, , , , ,694 Cash and cash equivalents - ending balance 429, , , , ,028 Nordic Companies/Global Money 9

10 Shareholder Information ABG Sundal Collier is listed on the Oslo Stock Exchange with the ticker symbol "ASC". 31 Dec June 2008 Share price NOK NOK 7.60 Dividend Payment (AGM April 24 th 2008): NOK 1.70 per share. The share traded ex dividend from April 25 th. High - Low 2008 (closing prices): NOK Ownership Structure Shares % Directors & Staff 140,882, Treasury shares 76, All other 217,038, Total Shares at 30 June ,998, ABGSC has forward contracts with partners purchasing 49,546,250 shares with settlement in ABGSC owns 76,750 Treasury shares. ABGSC has authorisation to re-purchase its shares in the market or to issue new shares. Share Price Development - Closing Prices 1,000 shares 6,000 NOK ,000 4,000 3,000 2,000 1, Jan 21-Jan 10-Feb 1-Mar 21-Mar 10-Apr 30-Apr 20-May 9-Jun 29-Jun 0.00 Volume Price Nordic Companies/Global Money 10

11 Responsibility statement We confirm to the best of our knowledge that the condensed set of financial statements for the period 1 January 2008 to 30 June 2008 has been prepared in accordance with the IAS 34 Interim Financial Reporting and gives a true and fair view of the Group s assets, liabilities, financial position and results for the period viewed in their entirety, and that the interim Board of Directors report includes a fair review of any significant events that arose during the six months period and their effect on the half-yearly financial report and any significant related parties transactions. The report includes, to the best of our knowledge a description of the material risks that the Board of Directors, at the time of this report deem that might have a significant impact on the financial performance of the Group. Oslo, 23 June 2008 Judy Bollinger (sign) Cecilie Lind (sign) Arild Engh (sign) Anders Grudén (sign) Arnold Rørholt (sign) Nordic Companies/Global Money 11