Private Equity Business outlook in the time of change in the CEE Region

Transcription

1 Private Equity Business outlook in the time of change in the CEE Region Prepared for Private Equity Forum & Awards Gala

2 2 Macroeconomic overview Poland and the CEE Region

3 3 Region of Central and Eastern Europe Core CEE Countries: Poland Czech Republic Slovakia Hungary Romania Other countrires: Slovenia Croatia Albania Bosnia-Herzegovina Kosovo Macedonia Montenegro Serbia Bulgaria Moldova Lithuania Latvia Estonia

4 4 Economic growth The year 2014 was characterized by economic growth in the majority of countries from Central and Eastern Europe. 15,00 10,00 GDP y/y quarterly Lehman Brothers buncruptcy begining of the world crisis Relatively small drop in economic growth in Poland Period of stable growth in CEE countries The economic growth in Poland in 2014 reached the level of 3.4%. GDP. The growth for 2015 is forecasted at the level of 3.5%. 5,00 0,00 In other CEE regions GDP growth rate in 2014 stood at: Hungary 3.3%; After the recession in 2012, in the next 2 consecutive years have entered the path of steady growth and consequently became one of the fastest growing economies in Europe. Czech Republic 1.5%; Romania 2.8%. -5,00-10,00 European Union (28 countries) Poland Czech Republic Hungary Romania Source: GUS, Hungarian Central Statistical Office, Romanian National Institute of Statistics, Czech Statistical Office, Eurostat. Data as of

5 2010M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M03 Private Equity business outlook 5 Inflation The growth of GDP dynamics in 2014 was accompanied by further drop in inflation, which was caused primarily by supply factors (decrease in energy prices (mainly fuels) and unprocessed food) and relatively low demand pressure. As a result, core inflation in the CEE region remained at historically low levels. In Bulgaria and Poland, and temporary also in Croatia, Estonia, Slovenia, Slovakia and Hungary, inflation dropped below zero. In Poland, inflation rate as of April 2015 stood at -0.9% compared with December of the previous year. In other CEE regions, inflation rate also remains at low or negative levels (as of the end of April 2015, y/y): Hungary: 0%. Czech Republic: 0.1%. Romania: 0.6%. After the period of historically low inflation levels in the second half of 2014, it is supposed to grow in the second half of Predictions show that in the HICP inflation will remain low, however the slight increase should be caused by expected growth in consumer demand and the increase in core inflation. 10,0 5,0 Harmonized Consumer Price Index y/y 0,0-5,0 European Union (28 countries) Source: NBP Sytuacja gospodarcza w krajach Europy Środkowej i Wschodniej 01/2015, GUS, Hungarian Central Statistical Office, Romanian National Institute of Statistics, Czech Statistical Office, Eurostat. Data as of

6 2005Q1 2005Q2 2005Q3 2005Q4 2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 Private Equity business outlook Public debt 6 80,0 70,0 Lehman Brothers buncruptcy begining of the world crisis 60,0 50,0 Pension Fund Reform in Poland 40,0 30,0 20,0 10,0 0,0 Czech Republic Hungary Poland Romania As of the end of 2014, the public debt in Poland reached the level of 39.50% of GDP. In Romania it was over 10 b.p. lower 27.70%. In Czech Republic it stood at 38.10% of GDP. The highest level in analyzed CEE countries was reported in Hungary, where the public debt stood at 65.90% of GDP. Source: NBP, The Central Bank of Hungary, The Czech National Bank, National Bank of Romania, Eurostat. Data as of

7 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Private Equity business outlook 7 Basic interest rates Extended period of low interest rates Poland Hungary Czech Republic Romania In march, the Polish Monetary Policy Council has decided to lower the interest rate by 0.50 b.p. The reference rates stands now at 1.50% Hungary is in a period of very rapid reductions. MNB, which has been lowering the interest regularly since the August of 2012, has decided in April 2015 to lower interest rates from 1.95% to 1.80%. In Czech Republic, the interest rate has remained at the same level since the end of In Romania, for two years, the interest rate has been systematically lowered. BNR has lowered the interest rate seven times by 25 b.p. - in May to 1.75%. Źródło: NBP, The Central Bank of Hungary, The Czech National Bank, National Bank of Romania. Data as of

8 2010M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M03 Private Equity business outlook 8 Unemployment Rate Unemployment Rate (Eurostat definition) Situation on labor markets in the CEE region has improved in The unemployment rate was falling in all countries, however in the majority of them it still remained higher than before the crisis. Unemployment rate in Poland (according to the Eurostat data) stood at 7.7% as at the end of March 2015 (in comparison with 9.6% a year before). 12,0 11,0 10,0 9,0 8,0 7,0 6,0 5,0 European Union (28 countries) Poland Unemployment rates in the CEE region: Hungary 7.4%; Czech Republic 5.8%; Romania 6.5%. Czech Republic Romania Hungary Source: Eurostat. Data as of r.

9 9 Capital Market Selected key stock indices 160% 140% 120% 100% 80% 60% WIG20 (Warsaw) PX (Prague) BET (Bucharest) BUX (Budapest) ATX (Vienna) Source: Stooq. Data as of

10 2010M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M 2010M 2011M 2011M 2012M 2012M 2013M 2013M 2014M 2014M 2015M Private Equity business outlook 10 Exchange rates (EUR/national currencies) 4,60 4,40 4,20 4,00 3,80 1,5000 1,4000 1,3000 1,2000 1,1000 1,0000 PLN USD 4,60 4,40 4,20 4,00 320,00 300,00 280,00 260,00 30,00 28,00 26,00 24,00 RON HUF CZK Situation on the foreign exchange markets in the CEE region has been relatively stable in the second half of Fluctuations of the exchange rates, caused by the Ukraine-Russia conflict, led to the depreciation of the regional currencies, especially Polish zloty and Hungarian forint. Situation on foreign exchange markets has significantly ameliorated in the first quarter of Polish and Hungarian currencies have strengthened significantly vs. EUR (by 5% and 4%). There was also a slight appreciation of Czech koruna and Romanian leu (1%). Source: Eurostat, data as of

11 11 Basic data for selected Central European Countries Country GDP (USD billion)* Inflation rate (y/y) Industrial output (annual change, February 2015) Central Bank Rates (march 2015) EUR/currency Unemployment rate (February 2015) Poland % 5.2% 1.50% % Czech Republic % 4.5% 0.05% % Hungary % 6.0% 1.80% % Romania % 3.7% 1.75% % Estonia % 4.9% 0.05% Eurozone 5.9% Bulgaria % 2.5% 0.01% % Croatia % 1.8% 5.00% % Serbia % -3.9%** 6.50% %** Sweden % -3.8% -0.25% % Austria % (p) 1.6% (p) 0.05% Eurozone 5.4% Source: Eurostat, Statistical Office of the Republic of Serbia, National Bank of Serbia. Data for if not stated otherwise. *-Data for the end of 2013, (p) = provisional, ** - For Serbia data as of the end of 2014

12 12 Private Equity business outlook in Poland and the CEE Region

13 13 Sources of corporate financing in Poland The main source of corporate financing in Poland is still own capital of entrepreneurs. National credits and loans remain the second most important source of capital in Poland Sources of corporate financing in Poland in ,36% 3,82% 5,47% 3,68% 6,44% 70,23% Source: GUS own capital national credits and loans other sources budget funds direct foreign funds non-financed investments

14 14 Sources of corporate financing as GDP percentage in Poland 45,00% 40,00% 35,00% 30,00% 25,00% 20,00% 15,00% 10,00% 5,00% 0,20% 0,18% 0,16% 0,14% 0,12% 0,10% 0,08% 0,06% 0,04% 0,02% Capitalisation of national companies Corporate loans Private Equity Investments (right axis) 0,00% ,00% Source:

15 Warsaw Stock Exchange in comparison with other CEE markets Companies on WSE , ,00 Comparison of WSE Market Capitalization with selected European Countries (in mln EUR) ,00 Warsaw , ,00 Prague , ,00 Bucharest ,00 Mediolan Number of Companies Market capitalisation of national companies (mln PLN) - right axis 0, , , , , , Source:

16 16 Initial Public Offerings on European markets ,50 14,00 7,10 26,30 27,10 11,30 26,50 49,50 Source: - IPO Watch Europe *Excludes IPOs on Borsa Istanbul and Bucharest Yearly European IPO activity Total value of IPOs (in bln EUR) Volume of IPOs In 2014, activity on European IPO market has been the highest since the beginning of the global financial crisis it has been the most successful year since The number of IPOs has doubled in comparison with 2013, and their total value has increased by 34%. 68% of proceeds were raised in the first half of The second half of the year saw a cooling of the market, especially in London, Europe s most active market, where only 18% of total proceeds for the year were raised in the second half Overall activity in 2014 has therefore become more geographically balanced with exchanges in continental Europe strongly improving versus prior year, with two of the top 5 IPOs listing on Euronext Amsterdam.

17 17 Initial Public Offerings on Warsaw Stock Exchange in Number of IPOs in Poland ,00 15,00 10, Total value of IPOs in Poland (in bln PLN) Warsaw Stock Exchange has dropped in the ranking of European stock exchanges. The activity on IPO market during the last 3 years has been significantly lower than in the majority of Europe. Total value of IPOs on WSE has dropped by 72% and stood at 313 mln EUR has been the worst year in terms of public offerings since ,00 0, Source Own analysis based on

18 18 Investments of Polish Pension Funds on foreign stock exchanges 9 000, , , , , , , , , , ,00 Stocks of companies listed on foreign regulated markets (mln PLN) 6,00% 5,50% 5,00% 4,50% 4,00% 3,50% 3,00% 2,50% 2,00% Stocks of companies listed on foreign regulated markets - share of total investment portfolio Source: Own analysis based on KNF

19 Value of Private Equity/Venture Capital investments in Poland , , , ,00 Private Equity investments in Poland , Total investments (in thousands EUR) Number of companies in which PE funds invested (right axis) Private Equity investments in 2014 by sectors Total investments (in thousands EUR) Number of companies in which PE funds invested (right axis) Source:

20 Private Equity investments as percentage of GDP in CEE Region 20 1,00% 0,90% 0,80% 0,70% 0,60% 0,50% 0,40% 0,30% 0,20% 0,10% 0,00% Private equity investment as % of GDP Bulgaria Czech Republic Hungary Romania Poland Europe The value of private equity investments in relations to GDP is still significantly lower in the CEE region than in the Western Europe. However, it is expected that, together with further GDP per capita growth, the value of PE investments should also grow, especially in Poland.

21 21 Characteristics of the Polish Private Equity market Private Equity investment in Poland (in thousands EUR) In recent years, institutional frames that support private equity activity have developed in Poland. In that, Poland is becoming more similar to countries from Western Europe, hence offering to investors the growth potential Investments by local private equity firms (-) Foreign investments by local private equity firms (+) Local investments by foreign private equity firms Total nvestment in Poland Source: EVCA, KPMG Total investment = investments by local private equity firms foreign investments by local private equity firms + local investments by foreign private equity firms

22 22 The value of IPOs in comparison with Private Equity/Venture Capital investments in Poland 6,00 5,00 5,13 4,00 4,09 3,00 2,00 2,91 1,80 2,23 1,00 0,00 0,43 0,64 1,16 0,82 0,65 0,68 0,47 0,27 0,38 0,32 0, Total value of IPOs (in bln EUR) Tolal PE investment in Poland (in bln EUR) Source: GPW

23 Annual investments of Private Equity business in the CEE region* Private equity investment in the CEE region totalled 783m in 2013, a 22% fall on the 2012 level. However, the number of companies receiving investments increased by 7% to 241. Poland Czech Hungary Slovakia Bulgaria Ukraine 23 Poland is considered to be the most important and the most attractive private equity market among the CEE countries. Croatia Romania Estonia Lithuania Slovenia Latvia Serbia Source: EVCA Central and Eastern Europe Statistics 2013, KPMG W POLSCE Rynek Private Equity w Polsce: fakty a opinie *no bank leverage included (in million EUR)

24 Mar-03 Oct-03 May-04 Dec-04 Jul-05 Feb-06 Sep-06 Apr-07 Nov-07 Jun-08 Jan-09 Aug-09 Mar-10 Oct-10 May-11 Dec-11 Jul-12 Feb-13 Sep-13 Apr Private Equity business outlook Assessment of Private Equity/Venture Capital sector in Europe Central Europe PE Confidence Index* Confidence continues to rise, with 18 months of unbroken improvement seeing the index at its highest level since The index is nearing its 2007 peak, with respondents optimistic about the economy, market activity and leverage availability. Portfolio management is giving way to new investments as deal doers increased confidence gives them courage to originate again. Poland has the highest VC/PE attractiveness rank within CEE countries. The 2013 VC/PE Country Attractiveness Index Ranking** Rank Country Score 1. United States Canada United Kingdom Poland Turkey Czech Republic Hungary Lithuania Slovakia Slovenia Bulgaria Latvia Romania Croatia Source: Delloite - Hitting the right notes Central Europe Private Equity confidence survey, The Venture Capital and Private Equity Country Attractiveness Index 2013 Annual - Alexander Groh, Heinrich Liechtenstein and Karsten Lieser *The PE Confidence Index is based upon answers received from PE professionals focused on Central Europe. It is composed from answers to the first seven questions of the survey. For each period the average of positive answer ratios over the sum of positive and negative answers is computed. This average is compared to the base period, which in our case is spring ** Ranking based on the following factors : 1. Economic Activity, 2. Depth of Capital Market, 3. Taxation, 4. Investor Protection & Corporate Governance, 5. Human & Social Environment, and 6. Entrepreneurial Culture & Deal Opportunities

25 25 Prepared by DFCM Research and Analysis Unit Jarosław Dąbrowski CEO Tel.: DF Capital & Management Sp. z o.o. Aleje Jerozolimskie 134, X floor Warsaw Tel