Acta Holding ASA. Interim Report. 4th quarter th February 2007.

Transcription

1 Acta Holding ASA. Interim Report. 4th quarter th February 2007.

2 Highlights 4th quarter 2006 Very good return on clients investments in 2006 Gross subscriptions of 5,613 million kroner, up 24 percent from 4,510 million kroner in the same period prior year Highest revenues ever of 546 million kroner, up 41 percent from 387 million kroner in the same period prior year High operating earnings of 248 million kroner, up 26 percent from 197 million kroner in the same period prior year Assets under management reached 70 billion kroner at quarter end, driving recurring revenue to best quarterly level ever of 53 million kroner, 212 million kroner on an annual basis The trend from third quarter with increased client demand for real estate and shipping products continued in the fourth quarter The Board intends to propose an annual dividend of 2.65 NOK/share, up 32.5% from prior year Return on clients investments Return on client assets has been very good in The core and spicy mutual fund selections picked up strongly in the fourth quarter and showed returns of 20.6% and 26.2% respectively in 2006, well above benchmark of 9.8%. The two hedge fund-in-fund portfolios returned 9.6% and 15.8% in 2006 compared to a benchmark return of 3.2%. Index linked bonds were up 8.6% on a volume weighted basis compared to a risk free interest rate of 3.0%. Real estate products have yielded significant client returns in The fully invested portfolios returned between 14.2% and 41.7%, highest for the commercial mandates. In October the board of directors of the Acta managed real estate companies Næringsbygg Holding I and Næringsbygg Holding II approved a sale of real estate of 5.5 billion kroner, generating client equity returns of more than 40% net of all costs in less than two years. Clients By the end of the fourth quarter of 2006, the total number of clients reached 73,000, representing a net increase of 4,000 clients from the last quarter end. The gross increase of new clients is encouraging at about 4,500 in the quarter, and 16,500 in 2006, of which 11,500 in Sweden and 5,000 in Norway. The difference between gross and net numbers is mainly to be found in reclassification of clients by Acta. Acta focuses on clients in the strategic segment, defined by the company as clients with investable holdings between 100,000 kroner and 10 million kroner. Few clients in the strategic segment have divested and stopped using Acta as their advisor. Acta has at the quarter end 32,000 clients in Norway and 41,000 clients in Sweden. Subscriptions and Assets under Management Gross subscriptions (MNOK) 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q2006 Strong demand for Acta s savings and investment products resulted in gross subscriptions of 5,613 million kroner, compared with 4,510 million kroner in the fourth quarter of The change in product mix experienced in the third quarter continued in the fourth quarter. Real estate attracted most client interest, followed by index linked bonds. Shipping and private equity products were also popular among clients this quarter, contributing to further client diversification and demonstrating Acta s innovative product development. Gross subscriptions within real estate were 2,470 million kroner, the highest ever within this asset class, reflecting increased client demand after large real estate payouts, attractive mandates and good outlook for projects. Index linked bonds subscriptions amounted to 1,519 million kroner up from 1,058 in third quarter. As a result of the change in product mix compared to fourth quarter 2005, the gearing ratio of gross subscriptions has been reduced. Hence the growth in the client equity proportion of gross subscriptions Page 2 of 10

3 is even higher than the 24% increase in gross subscriptions would indicate. Gross subscriptions in 2006 were 20,475 million kroner, compared to 14,559 in The strong growth of 41% is a result of a larger advisory organization, improved advisor productivity and strong savings markets in both Norway and Sweden Assets under management (BN NOK) Revenues (figures for 2005 in parenthesis) Total revenues in the fourth quarter were 546 million kroner, compared to 387 million kroner in the same period last year. Transaction related revenues were 487 million kroner (348 million kroner), with revenues from real estate syndication as the largest contributor, followed by revenues from index linked bonds gross margins transaction related revenues to gross subscriptions were 7.9% and 7.7% for 2006 and 2005 respectively. The increase reflects a change in product mix in the second half of 2006 from index linked bonds to the higher margin real estate products Q06 2Q06 3Q06 4Q06 The structure of fee payments from the real estate companies to Acta has in 2006 included a larger portion of the revenue at point of subscriptions and a smaller portion when real estate transactions are completed compared to prior mandates. This causes a positive impact in the fourth quarter on revenues, as well as earnings, of about 65 million kroner. Assets under management increased from 66 to 70 billion kroner during the fourth quarter. The reduction due to the sale of properties at a total transaction value of over five billion kroner in October, has been outweighed by high gross subscriptions, a satisfactory volume of real estate projects completed and value appreciation in all asset classes. Real estate is the largest asset class with total assets of 37 billion kroner, of which 15 billion kroner represent clients equity and 22 billion kroner represent project related debt. Real estate project values are calculated quarterly, based on estimates from independent brokers and official bids for properties. Financial Summary (MNOK) 4Q06 4Q Transaction related revenue Recurring revenue Other revenue Total revenue Variable operating costs Fixed operating costs Depreciations a.o Operating earnings Net financial items Net income before tax Tax Net income As mentioned in the third quarter report, Acta would be entitled to a success fee of up to 30 million kroner from the divestment of properties made in October. A total of 32 million kroner has been booked in the fourth quarter related to this transaction. Recurring revenues were in the fourth quarter at a record high level of 53 million kroner, an increase of 23 million kroner from 30 million kroner in the same period last year. The increase is driven by higher assets under management. By the end of the fourth quarter over 90% of all assets under management provide a recurring revenue element, while close to 100% of all new products distributed contain such an element. Other revenues amounted to six million kroner, down from eight million kroner in the fourth quarter of Operating costs Total operating costs in the fourth quarter were 298 million kroner (190 million kroner). The increase of 108 million kroner from the fourth quarter of 2005 is primarily due to an increase of 61 million kroner in variable costs and increased fixed operating costs of 40 million kroner. The increase in variable costs of 60 million kroner reflects higher subscription volumes (+ 36 million kroner) and increased provision for the incentive program K2 (+ 24 million kroner). The K2 accumulated operating earnings target for was revised in the second quarter of 2006 from 1,700 to 1,850 million kroner. As indicated in Page 3 of 10

4 the third quarter report, Acta would make a further revision of the target at year end and continue to make revisions every half year. The fourth quarter K2 provision reflects that the estimate has been adjusted from 1,850 to 2,300 million kroner due to the strong development in operating earning in the second half of Fourth quarter provisions were 39 million kroner compared to 15 million kroner fourth quarter Accumulative provisions by year end 2006 total 83 million kroner. The increased K2 provisions are a result of the earnings development, which the Board is pleased to see is significantly above original targets. Operating earnings Operating earnings (MNOK) Fixed personnel costs increased from 49 million kroner in the fourth quarter of 2005 to 75 million kroner in the fourth quarter of Of the total increase of 26 million kroner, eight million kroner relates to new operations launched after the fourth quarter The total number of employees has in 2006 increased by 69 from 356 to 425. Of the increase of 69 employees, 48 employees are branch managers or advisors, while 21 employees are in support and management positions. Other fixed operating costs were up 14 million kroner to 60 million kroner. Increased marketing costs from campaigns positioning Acta as the main challenger to traditional banks, represent three million kroner of the increase, while the impact from new offices is estimated at three million kroner. The balance of eight million kroner is attributable to generally higher activities related to existing offices. Depreciations were 2 million kroner, compared with -5 million kroner the previous year. The reason for the negative five million in fourth quarter 2005 was a reversal of a 10 million receivable write-down made in second quarter Total operating costs in 2006 amount to 895 million kroner, compared to 588 million kroner in The increase is a result of increased subscriptions, incentive program K2 provision, a fast growing organisation both with respect to offices and employees, increased marketing and higher activities related to existing offices. The overall cost increase compared to the prior year was 52%. However, variable costs which are revenue dependent and correlated with subscriptions are up 41%. Fixed costs are rising in accordance with Acta s budgets and strategy which focuses on organic growth and brand building. 49% of operating costs were variable in 2006 and 39% of fixed costs are non-contractual and thus scalable. Recurring revenues covered 38% of total fixed costs in 2006 compared to 33% in Q 2Q 3Q 4Q Operating earnings in the fourth quarter were 248 million kroner, compared to 197 million kroner in the same quarter in The improvement from 2005 is, as commented above, driven by significantly higher revenues, partly offset by higher variable and fixed costs. Net income in the fourth quarter was 177 million kroner (143 million kroner). Operating earnings in 2006 were 919 million kroner, up 273 million kroner from 646 million kroner in 2005, an increase of 42%. Net income in 2006 was 667 million kroner, compared to 469 million kroner in Earnings per share amounted to 2.65 kroner and 1.86 kroner respectively. Norway Acta Norway showed a very strong development in the fourth quarter both with regards to subscriptions, revenues and operating earnings. Fourth quarter gross subscriptions were 3,422 million kroner, 486 million kroner higher than the 2,936 million kroner in the fourth quarter of The increase is mainly driven by increased client demand for real estate, but also increased attention to shipping. Subscriptions were highest within real estate, followed by index linked bonds and shipping. The product mix with a relatively higher share of unlevered client gross subscriptions in real estate products and a relatively lower share of levered client gross subscriptions in index linked bonds compared to fourth quarter 2005, implies that the client equity proportion of gross subscriptions has increased more than the numbers above reflect. Total revenues for the quarter ended at 371 million kroner (279 million kroner) and operating earnings at 170 million kroner (173 million kroner). The three million kroner decrease reflects 92 million kroner in higher revenues, primarily offset by 65 million kroner in higher variable costs from a higher subscription volume and allocation of the accumulated K2 provision of 83 million kroner from segment Corporate to Page 4 of 10

5 segments where employees entitled to the bonus are employed, thus better reflecting where the actual costs to the program originate. The K2 charge to segment Norway was 41 million kroner in fourth quarter. Fixed costs and depreciations were 23 and 7 million kroner higher respectively, the latter due to the reversal of a receivable write-down of 10 million kroner commented on earlier, of which segment Norway s allocated amount was seven million kroner. The number of branch managers and advisors increased from 137 in the third quarter 2006 to 141 at year end. Sweden Acta Sweden continues the growth in quarterly year over year gross subscriptions. Gross subscriptions amounted to 2,191 million kroner (1,574 million kroner) and were highest within real estate, followed by index linked bonds and mutual funds. Private equity also made a significant contribution to both gross subscriptions and operating earnings this quarter with gross subscriptions ending at 318 million kroner. Revenues in the fourth quarter of 2006 were 175 million kroner, 67 million kroner higher than during the same period in Operating earnings were 66 million kroner, 43% above the 46 million that was achieved in fourth quarter The K2 provision charged to segment Sweden amounted to 16 million kroner. Acta Sweden s contribution to Acta s total gross subscriptions and operating earnings has in 2006 been 43% and 35% respectively, providing a solid level of diversification to the Norwegian operations. However, gross and operating margins are still somewhat lower in Sweden due to a product mix with less real estate syndication than in Norway. The number of branch managers and advisors increased from 157 in the third quarter 2006 to 164 at year end. Acta s three new offices in Stockholm and Gävle launched fourth quarter 2005 have in total produced positive operating earnings in Corporate Acta Holding and Acta Corporate Services (IT, Finance, HR and Marketing) had operating earnings of 15 million kroner in the fourth quarter, after allocation of shared costs, compared to -21 million kroner in the same period last year. The increase reflects the reallocation of the accumulated K2 provision of 83 million kroner to segments Norway and Sweden mentioned above. The K2 provision charged to segment Corporate was 15 million kroner in fourth quarter 2005 and accumulated provisions amounted to 43 million kroner as of third quarter The reallocation of the K2 provisions implies that the accumulated charge to segment Corporate is 26 million kroner as of year end 2006, thus 17 million kroner has been reversed in fourth quarter contributing to the positive operating earnings of 15 million kroner. New Markets New Markets had operating earnings in the fourth quarter of -2 compared to -1 million kroner in the fourth quarter of The Danish operations are planned opened in Copenhagen in February Acta will focus on product set-up, product development, client acquisition and hiring of more advisors in the coming months. Balance sheet Total assets at the end of the quarter were 1,459 million kroner, up from 1,048 million kroner at the end of the third quarter. The increase primarily reflects an increase in net income before tax of 255 million kroner. Consolidated equity by the end of the fourth quarter 2006 was 763 million kroner, an increase of 174 million kroner during This is a result of the current year s positive net income of 667 million kroner, partly offset by the dividend paid in April 2006 of 503 million kroner. The group s liquidity situation is very good, with net bank deposits and short term government papers of million kroner at year end. Acta has since 2005 communicated a dividend policy stating that the highest possible portion of net income will be paid out as dividend, given sufficient regulatory capital adequacy, satisfactory liquidity and solidity. New rules for capital adequacy (Basel 2), which Acta will implement from 1 January 2008, will slightly reduce Acta s dividend potential for fiscal year 2007 as the company will retain sufficient capital for operational risk. The effect of the new regulations on Acta s dividend capacity for fiscal year 2006 would have been a reduction of approximately 0.2 kroner per share. Acta will in 2007 evaluate instruments to increase regulatory capital in order to be able to continue the same dividend policy. The Board of Acta Holding ASA intends to propose an annual dividend of 667 million kroner, 2.65 kroner per share, payable to shareholders in April This is equal to earnings per share in Principles for interim reporting This interim report has been prepared in accordance with the same accounting principles that will be used for annual reporting for The interim report is developed in line with IAS 34 Interim Financial Reporting. Page 5 of 10

6 Outlook In light of the strong current market conditions, Acta s dynamic product innovation and the relatively low interest environment, the Board of Acta Holding ASA views the outlook for Acta as good in the medium term. Based on the strong subscription levels in the fourth quarter of 2006 and the start of January 2007, the Board expects that first quarter 2007 will be another strong quarter. The major real estate investments made in February confirm that Acta has been successful in its real estate strategy. The deal flow of future real estate investments is good. Acta aims to take increased market shares from the banks in the Nordic savings market in 2007 and focuses on continued strong organic growth. This includes expansion of the advisory network, increasing the number of advisors, as well as looking for acquisitions of smaller IFA networks. Acta plans to add more advisors in existing offices and open a total of nine new offices in 2007, three in Norway and five in Sweden in addition to the office to be opened in Copenhagen in February. Stavanger, 6 February 2007 The Board of Acta Holding ASA Page 6 of 10

7 PROFIT AND LOSS (MNOK) 4Q2006 4Q Transaction related revenue 487,2 348, , ,4 Recurring revenue 52,6 30,5 167,0 100,4 Other revenue 6,4 8,3 23,5 15,3 Total revenue 546,2 386, , ,1 Variable operating costs 161,8 101,4 440,1 269,4 Fixed personnel costs 74,5 48,5 245,0 166,7 Depreciations a.o. 2,1-5,1 9,1 13,8 Other fixed operating costs 59,4 45,2 201,0 137,9 Total operating costs 297,9 189,9 895,1 587,8 Operating earnings 248,3 196,8 918,8 646,2 Net financial items 6,8 3,1 17,9 6,4 Net income before tax 255,1 199,9 936,7 652,7 Tax 78,6 56,8 269,4 183,6 Net Income 176,5 143,1 667,3 469,1 Earnings per share (NOK) 0,70 0,57 2,65 1,86 Earnings per share diluted (NOK) 0,70 0,57 2,65 1,86 SEGMENT INFORMATION (MNOK) Norway Sweden Corporate New markets Sum Acta Revenue ,1 668,9 0,0 0, , ,3 326,8 1,0 0, ,1 4Q ,2 175,0 0,0 0,0 546,2 4Q ,1 107,7 0,0 0,0 386,8 Variable operating cost ,0 143,0 16,3 0,8 440, ,9 60,6 19,9 0,0 269,4 4Q ,7 50,5-15,2 0,8 161,8 4Q ,4 24,1 16,8 0,0 101,4 Fixed operating cost ,5 194,5 0,0 2,0 446, ,9 121,4 2,6 2,7 304,6 4Q ,5 57,8-0,8 1,5 134,0 4Q ,5 36,8 3,1 1,2 93,7 Depreciations a.o ,1 2,4 4,6 0,0 9, ,0 2,0 5,8 0,0 13,8 4Q2006 0,3 0,6 1,2 0,0 2,1 4Q2005-7,2 0,6 1,4 0,0-5,1 Operating Earnings (EBIT) ,9 328,7-20,9-2,8 918, ,5 142,8-27,4-2,7 646,2 4Q ,0 65,8 14,8-2,4 248,3 4Q ,3 46,1-21,4-1,2 196,8 Page 7 of 10

8 BALANCE SHEET (MNOK) Long Term Assets Goodwill 6,1 8,1 Other intangible assets 0,0 0,0 Deferred tax asset 30,7 8,9 Sum intangible assets 36,8 17,0 Fixed assets 22,3 17,7 Sum tangible assets 22,3 17,7 Sum Long Term Assets 59,1 34,7 Short term assets Trade receivables 66,8 51,5 Other receivables 16,5 26,1 Bank deposits a.o ,0 870,9 Sum Short Term Assets 1 400,3 948,5 TOTAL ASSETS 1 459,4 983,2 Equity Paid in equity 45,3 45,3 Paid in capital, other 11,2 11,2 Other equity 706,1 532,9 Sum Equity 762,5 589,4 Short term debt Accounts payable 24,3 10,7 Taxes payable 290,9 128,0 Overdraft facilities 29,5 13,6 Other taxes and duties payable 33,3 43,4 Vacation pay, salaries and commissions payable 287,5 128,8 Other short term debt 31,3 69,2 Sum Short term debt 696,9 393,8 TOTAL EQUITY AND DEBT 1 459,4 983,2 EQUITY RECONCILIATION (MNOK) Equity January 1 589,4 434,3 Approved dividend -503,4-314,6 Currency translation loss/gain 9,3 0,5 Net income for the period 667,3 469,1 Equity at the end of the period 762,5 589,4 Page 8 of 10

9 CASH FLOW ANALYSIS (MNOK) 4Q2006 4Q Operating activities Profit (loss) before tax 255,1 199,9 936,7 652,7 Taxes paid -38,3 0,0-128,3 0,0 Depreciation a.o. 2,1-5,1 9,1 13,8 Net change in accounts receivable 94,5 9,9-5,7-29,4 Net change in accounts payable 15,1 0,0 13,5 4,3 Net change in other balance sheet items 131,0 141,8 122,0 138,4 Net cash flow from operating activities 459,5 346,5 947,3 779,7 Investing activities Investments in tangible fixed assets -4,1 5,0-13,7-9,3 Net cash flow from investing activities -4,1 5,0-13,7-9,3 Financing activities Increase in equity 0,0 0,0 0,0 0,0 Dividends paid 0,0 0,0-503,4-314,6 Net cash flow from financing activities 0,0 0,0-503,4-314,6 Net cash flow for the reporting period 455,4 351,4 430,2 455,9 Cash Opening Balance 832,1 505,8 857,2 401,4 Cash Closing Balance 1 287,5 857, ,5 857,2 Net change in Cash 455,4 351,4 430,3 455,9 # Shareholders as of 2 February 2007 Shares % 1 SPRING CAPITAL AS ,8 % 2 STATE STREET BANK AND TRUST CO ,0 % 3 JAN PETTER COLLIER / SANDEN ,9 % 4 JPMORGAN CHASE BANK ,7 % 5 JPMORGAN CHASE BANK ,5 % 6 JPMORGAN CHASE BANK ,5 % 7 MELLON BANK AS AGENT FOR CLIENTS ,2 % 8 FORTIS GLOBAL CUSTODY SERVICES NV ,0 % 9 BANK OF NEW YORK, BRUSSELS BRANCH ,9 % 10 JPMORGAN CHASE BANK ,8 % 11 BROWN BROTHERS HARRIMAN & CO ,6 % 12 JPMORGAN CHASE BANK ,4 % 13 JPMORGAN CHASE BANK ,3 % 14 BANK OF NEW YORK, BRUSSELS BRANCH ,1 % 15 THE NORTHERN TRUST CO ,0 % 16 BJELLAND TRADING AS ,9 % 17 VITAL FORSIKRING ASA ,9 % 18 STATE STREET BANK AND TRUST CO ,9 % 19 BANK OF NEW YORK, BRUSSELS BRANCH ,8 % 20 BANQUE FRANCK SA ,8 % 20 largest shareholders ,0 % Remaining shareholders ,0 % SUM ,0 % Page 9 of 10

10 4Q2006 4Q Key financial figures Earnings per share (NOK) 0,70 0,57 2,65 1,86 Earnings per share diluted (NOK) 0,70 0,57 2,65 1,86 Paid out dividend per share (NOK) 0,00 0,00 2,00 1,25 Cash flow (net income + depreciations) per share (NOK) 0,71 0,55 2,69 1,92 Equity per share (NOK) 3,03 2,34 3,03 2,34 Gross margin (transaction revenue / gross subscriptions) 8,7 % 7,7 % 7,9 % 7,7 % Operating margin (%) (operating earnings / revenues) 45 % 51 % 51 % 52 % Net margin (%) (net income before tax / revenue) 47 % 52 % 52 % 53 % Average return on capital employed, annualized (%) 145 % 148 % 132 % 124 % Return on equity, annualized (%) 152 % 154 % 139 % 126 % Equity ratio (%) 52 % 60 % 52 % 60 % Number of shares by end of period Number of shares fully dilluted by end of period Average number of shares in reporting period Average number of shares fully dilluted in reporting period Key operating figures Number of clients - Total Number of clients - Norway Number of clients - Sweden Assets under management - Total (MNOK) Assets under management - Norway (MNOK) Assets under management - Sweden (MNOK) Gross subscription - Total (MNOK) Gross subscription - Norway (MNOK) Gross subscription - Sweden (MNOK) Gross subscription per branch manager/advisor - Total (MNOK) Gross subscription per branch manager/advisor - Norge (MNOK) Gross subscription per branch manager/advisor - Sverige (MNOK) Assets under management per client - Total (KNOK) Assets under management per client - Norway (KNOK) Assets under management per client - Sweden (KNOK) Number of employees - Total Number of employees - Norway Number of employees - Sweden Number of branch manager/advisor - Total Number of branch manager/advisor - Norway Number of branch manager/advisor - Sweden Number of advisors - Total Number of advisors - Norway Number of advisors - Sweden Page 10 of 10