Acta Holding ASA. Interim Report. 2nd quarter th August 2007.

Transcription

1 Acta Holding ASA. Interim Report. 2nd quarter th August 2007.

2 Highlights 2nd quarter 2007 Acta invests in future growth Best second quarter with gross subscriptions of 6,729 million kroner, up 27 percent from 5,319 million kroner in the same period last year Highest revenues ever of 599 million kroner, up 25 percent from 479 million kroner in the same period last year Best second quarter with operating earnings of 271 million kroner, up 5 percent from 258 million kroner in the same period last year Assets under management at 78 billion kroner at quarter end is the highest ever, increasing annual recurring revenues to the highest level ever of 234 million kroner Acta successfully attracts new branch managers, advisors and trainees at the end of quarter is the highest ever, up from 305 at year end 2006 Return on clients investments Return on clients assets has been very good in the first half of The core and spicy mutual fund selections showed returns of 5.7% and 17.9% respectively year to date, well above the benchmark index (Morgan Stanley s World Index) which yielded 2.6%. The two hedge fund-in-fund portfolios returned 6.9% and 11.3% in the first half year compared to a benchmark return (CSFB Hedge Fund Index) of 8.7%. The return from index linked bonds was 5.9% on a volume weighted basis compared to a risk free interest rate of 1.8%. Real estate products have in average a return in line with the objectives in client mandates. The fully invested portfolios returned between 1.3% and 21.4% in the first half year, with an average return of 4.4%. Real estate project values are updated quarterly, based on estimates from independent brokers, or official bids for single properties or portfolios of properties. Annual dividends and repayment of capital from the real estate companies were distributed to clients in May, and amounted to 889 million kroner. Clients By the end of the second quarter of 2007 the total number of clients reached 78,000, of which 34,000 clients are in Norway and 44,000 clients in Sweden. These numbers represent a gross increase of 4,400 clients from the previous quarter end, with an increase of 3,000 in Sweden and 1,400 in Norway. The net increase of new clients is about 2,600 in the quarter. The difference between gross and net increase in the number of clients is mainly to be found in reclassification of clients by Acta. Acta s focus is on clients in the strategic segment, which consists of clients with investable holdings of between 100,000 kroner and 10 million kroner. During the quarter only a very small number of clients in the strategic segment have been lost Gross subscriptions (MNOK) 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 Subscriptions and Assets under Management The second highest ever quarterly demand for Acta s savings and investment products resulted in gross subscriptions of 6,729 million kroner, compared to 5,319 million kroner in the second quarter of Index linked bonds was the most popular asset class, due to large buy-backs of bond series with high returns to clients where a high proportion of proceeds were reinvested in new bonds with attractive investment themes. Gross subscriptions of index linked bonds were record high at 3,309 million kroner. This compares to 2,688 million kroner in the second quarter of 2006, which was also a strong quarter, and where index linked bonds also constituted a high proportion of total subscriptions. Real estate continued to attract a lot of client interest, and was the second most popular asset class with gross subscriptions of 1,626 million kroner compared to 1,117 million kroner in the second quarter of Up until the current quarter, the client real estate portfolios launched by Acta have focused on value. This has implied that investments have been made in residential, commercial and governmental properties with tenants committed to long term leases, creating a good visibility for cash flows and high annual direct Page 2 of 10

3 yields. In the second quarter of 2007 Acta launched its first growth portfolio that will be more opportunistic in nature, and as such focus more on real estate value appreciation. The portfolio is expected to give Acta s clients interesting investment opportunities. It was well received by clients, and the first investments have already been made Assets under management (BN NOK) Q06 2Q06 3Q06 4Q06 1Q07 2Q07 Assets under management increased from 75 to 78 billion kroner during the second quarter, primarily driven by high subscriptions and real estate investments. This is partly offset by buy-backs and maturity of index linked bonds series totalling approximately three billion kroner, and client real estate dividends and capital repayment of 0,9 billion kroner. The high index linked bonds and real estate subscriptions of 3,309 and 1,626 respectively have, together with the real estate and shipping investments of 1,800 and 0,250 respectively, substantially outweighed the reduction in assets under management from the index linked bonds buy-backs and the real estate dividends. Positive subscription volumes in other asset classes, especially mutual funds and hedge funds in Sweden that combined almost reached 650 million kroner, have also contributed to the growth in assets under management. Real estate is the largest asset class with total assets of 41.5 billion kroner, of which 15.8 billion kroner represent clients equity and 25.7 billion kroner represent project related debt. The debt portion of the real estate investments which where announced to the Oslo Stock Exchange on August 7 th, will increase assets under management in the third quarter. Acta expects a satisfactory deal flow going forward and funds available for investments in real estate and shipping projects have increased from approximately 2 billion kroner to approximately 3 billion kroner at the end of the quarter. Financial Summary (MNOK) 2Q07 2Q06 1-2Q07 1-2Q 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 Revenues (figures for 2006 in parenthesis) Total revenues for the second quarter were record high of 599 million kroner, compared to 479 million kroner in the same period last year. Transaction related revenues were 538 million kroner (429 million kroner), with revenues from real estate and index linked bonds being the major contributors Revenue (MNOK) Q 2Q 3Q 4Q Gross margins transaction related revenues to gross subscriptions were 8.0% and 8.1% for the second quarter of 2007 and the second quarter of 2006 respectively. Acta stated in the first quarter report of 2007 that the board of NBH I AS had accepted a bid for the last property in the portfolio and that a success fee, given certain covenants, would be booked in the second quarter. Acta has booked revenue of 37 million kroner in the second quarter from this transaction. Acta further announced in the first quarter report of 2007 that the company and Acta s clients would be eligible to a break up fee following the withdrawal from the bidding process for the US listed company Winston Hotels. Acta s share of the break up fee amounted to 12 million kroner, which has been booked as income in the second quarter. Page 3 of 10

4 Recurring revenues were at a record high level of 58 million kroner in the second quarter, an increase of 19 million kroner from 39 million kroner in the same period last year. The increase is a result of the strong growth in assets under management from 60 billion kroner to 78 billion kroner. By the end of the second quarter over 90% of all assets under management include a recurring revenue element, and close to 100% of all new products distributed contain such an element. Other revenues amounted to 2 million kroner, down from 12 million kroner in the second quarter of The large posting in the second quarter last year is mainly due to a hedge fund success fee of eight million kroner. Operating costs Total operating costs in the second quarter were 328 million kroner (221 million kroner). The increase of 107 million kroner from the second quarter of 2006 is due to an increase of 76 million kroner in variable operating costs, and an increase in fixed operating costs of 31 million kroner. The increase in variable costs of 76 million kroner primarily reflects higher subscription volumes (47 million kroner), and increased provisions for the K2 incentive program (29 million kroner) as Acta expects strong operating results for the remainder of the year. Acta stated both in the fourth quarter report of 2006 and in the first quarter report of 2007 that the K2 accumulated operating earnings target for would be revised from the current target of 2,300 million kroner. As a result of the strong financial performance in the first half year of 2007 and the outlook for the rest of the year, the K2 target has been increased from 2,300 to 2,700 million kroner. The second quarter provision amounted to 46 million kroner, compared to 17 million kroner in the second quarter of Accumulative provisions made for the program by the second quarter end of 2007 totals 139 million kroner. Fixed personnel costs increased from 57 million kroner in the second quarter of 2006 to 77 million kroner in the second quarter of Of the total increase of 20 million kroner, five million kroner relates to increased fixed personnel costs from new branch offices launched after the second quarter of The total number of employees has increased by 106 from 389 to 495. Of the 106 new employees 65 are branch managers, advisors or trainees. Other fixed operating costs were 12 million kroner higher compared to the equivalent quarter previous year reaching 61 million kroner. New offices contributed to 6 million kroner of the increase, while generally higher activity in existing offices represented 6 million kroner. Depreciations were two million kroner, at the same level as the second quarter the previous year. There is an overall cost increase compared to the second quarter of 2006, however this is in line with internal plans. In spite of Acta s strong organic growth the last couple of years, the company is still a low cost operator. 57% of the total second quarter costs are variable and highly correlated with gross subscriptions and as such revenue dependent, while 37% of fixed costs are noncontractual and thus scalable. Recurring revenues covered 42% of total fixed costs in the second quarter of 2007 compared with 36% in the comparable quarter of Operating earnings Operating earnings (MNOK) 1Q 2Q 3Q 4Q Operating earnings in the second quarter were 271 million kroner, compared to 258 million kroner in the equivalent quarter in The improvement from 2006 is, as commented above, driven by higher revenues, partly offset by higher variable and fixed costs. Net income in the second quarter was 200 million kroner (187 million kroner). Norway Acta Norway showed a very strong development in the second quarter, both with regards to subscriptions, revenues and operating earnings. Second quarter gross subscriptions were 4,220 million kroner, 1,464 million kroner higher than the 2,756 million kroner in the second quarter of The increase is mainly driven by increased client subscriptions in index linked bonds following large buy-backs of series that have performed strongly, but also continued high interest for real estate investments. Subscriptions were thus the highest within index linked bonds followed by real estate. Total revenues for the quarter ended at 401 million kroner (289 million kroner), and operating earnings at 212 million kroner (171 million kroner). The 41 million kroner higher operating earnings reflects Page 4 of 10

5 112 million kroner in higher revenues, offset by 60 million kroner in higher variable costs from an increased subscription volume and an increase in accrued provisions for the K2 incentive programme. The increase in accrued provisions is due to the increase in the K2 operating earnings target for the period , and re-allocation of accrued provisions for the programme previously posted centrally within the Corporate segment. The increase in operating earnings is also offset by an increase of 12 million in higher fixed costs from a larger organisation and higher market activities, and primarily from client acquisition costs due to growth in the number of clients. The success fee following the divestment of NBH I was allocated in its entirety to segment Norway, and contributed with 37 million kroner to both revenues and operating earnings. The K2 charge to segment Norway was 22 million kroner in the second quarter. The number of branch managers, advisors and trainees increased from 159 at the end of the first quarter to 178 at the second quarter end. Sweden Acta Sweden reported another good quarter, with gross subscriptions of 2,509 million kroner (2,563 million kroner), but has used some time in order to absorb the growth of new offices and advisors. Subscriptions were highest within index linked bonds, followed by mutual funds and real estate products, and are as such comparable to the equivalent quarter last year. Shipping and private equity also made considerable contributions to gross subscriptions this quarter, with a combined subscription of close to 475 million kroner, reflecting Acta s innovative launches of these two asset classes. Revenues were up from 190 million kroner in the second quarter of 2006 to 198 million kroner in the equivalent period in Operating earnings amounted to 74 million kroner, down from 107 million kroner achieved in the second quarter of The decrease reflects a lower volume of real estate investments completed, a growing organisation, and an increase in accruals for provisions for the K2 incentive programme. The latter is due to a raised K2 operating earnings target for , and re-allocation of accruals for the programme previously Corporate segment. From the fourth quarter last year and onwards K2 provisions were accrued directly to the Swedish segment. The K2 provision charged to segment Sweden amounted to 16 million kroner for the quarter. Acta Sweden s contribution to Acta s total gross subscriptions and operating earnings was 38% and 29% respectively for the first six months of Corporate Acta Holding and Acta Corporate Services (IT, Finance, HR and Marketing) had operating earnings of -10 million kroner in the second quarter, after allocation of shared costs, compared to -20 million kroner in the same period last year. The increase primarily reflects a decreased provision to the incentive program K2 charged to segment Corporate, from 17 million kroner the corresponding period prior year to 9 million kroner in the current quarter. New Markets New Markets include Acta s start-up of operations in Denmark which is reflected in the negative operating earnings in the second quarter of -6 million kroner compared to the break even result in the corresponding quarter in The Danish operations started in Copenhagen in the first quarter of 2007, and emphasis going forward will be on product set-up, product development, client acquisition and hiring more advisors. Balance sheet Total assets at the end of the second quarter were 1,187 million kroner, down from 1,710 million kroner at the end of the first quarter. The decrease primarily reflects annual dividends of 667 million kroner paid to shareholders in April. Consolidated equity by the end of the second quarter was 529 million kroner, compared to 767 million kroner at year end The reduction of 238 million kroner reflects the dividends of 667 million kroner, partly offset by current year s positive net income of 429 million kroner. Acta has very limited risk on its balance sheet and has no direct exposure to loans in the subprime markets. The group s liquidity situation is very good, with net bank deposits and short term government papers of 896 million kroner at quarter end. 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. Outlook Acta expects the Nordic market to remain favourable for the company s savings and investment products in the medium term, due to the strong economic development in Scandinavia Page 5 of 10

6 especially in Norway and Sweden. Activities are concentrated on the core business of advisory services and the sale of savings and investment products, and the growing organisation is motivated and functioning efficiently at all levels. The board believes the most significant risk for Acta going forward would be negative developments in the saving and investment market, but the turbulence in the equity and subprime markets has not had any significant impact on activity. The third quarter will as usual be seasonally impacted by the holiday season in July and partly in August. Operating costs will correspondingly be lower. Acta will continue to pursue winning market shares from the banks within the strategic client segment and focus on continued strong organic growth. Nine new offices, including the start-up in Denmark, will be opened in 2007, of which seven has already opened. The number of advisors in all three countries will grow accordingly and lay the foundation for continued growth of the business. Stavanger, 14th August 2007 The Board of Acta Holding ASA Page 6 of 10

7 PROFIT AND LOSS (MNOK) 2Q2007 2Q Q Q Transaction related revenue Recurring revenue Other revenue Total revenue Variable operating costs Fixed personnel costs Depreciations a.o Other fixed operating costs Total operating costs Operating earnings Financial income Financing costs Net financial items Net income before tax Tax Net Income Earnings per share (NOK) Earnings per share diluted (NOK) SEGMENT INFORMATION (MNOK) Norway Sweden Corporate New markets Sum Acta Revenue 2Q Q Q Q Variable operating cost 2Q Q Q Q Fixed operating cost 2Q Q Q Q Depreciations a.o. 2Q Q Q Q Operating Earnings (EBIT) 2Q Q Q Q Page 7 of 10

8 BALANCE SHEET (MNOK) Long Term Assets Goodwill Other intangible assets Deferred tax asset Sum intangible assets Fixed assets Sum tangible assets Sum Long Term Assets Short term assets Trade receivables Other receivables Bank deposits a.o Sum Short Term Assets TOTAL ASSETS Equity Paid in equity Paid in capital, other Other equity Retained earnings Sum Equity Short term debt Accounts payable Taxes payable Overdraft facilities Other taxes and duties payable Dividend payable Vacation pay, salaries and commissions payable Other short term debt Sum Short term debt TOTAL EQUITY AND DEBT EQUITY RECONCILIATION (MNOK) Equity January Approved dividend Currency translation loss/gain Net income for the period Equity at the end of the period Page 8 of 10

9 CASH FLOW ANALYSIS (MNOK) 2Q2007 2Q Q Q Operating activities Profit (loss) before tax Taxes paid Depreciation a.o Net change in accounts receivable Net change in accounts payable Net change in other balance sheet items Net cash flow from operating activities Investing activities Investments in tangible fixed assets Net cash flow from investing activities Financing activities Increase in equity Dividends paid Net cash flow from financing activities Net cash flow for the reporting period Cash Opening Balance Effect from exchange rate changes to cash and cash equivalents Cash Closing Balance Net change in Cash # Shareholders as of 6 August 2007 Shares % 1 SPRING CAPITAL AS % 2 STATE STREET BANK AND TRUST CO % 3 PICTET & CIE BANQUIERS % 4 JAN PETTER COLLIER % 5 GLITNIR BANKI HF % 6 BANK OF NEW YORK, BRUSSELS BRANCH % 7 BANK OF NEW YORK, BRUSSELS BRANCH % 8 JPMORGAN CHASE BANK % 9 CITIBANK INTL. PLC. (LUX BRANCH) % 10 FORTIS GLOBAL CUSTODY SERVICES NV % 11 JPMORGAN CHASE BANK % 12 JPMORGAN CHASE BANK % 13 MELLON BANK AS AGENT FOR CLIENTS % 14 UBS AG, LONDON BRANCH % 15 STATE STREET BANK AND TRUST CO % 16 BNP PARIBAS SEC. SERVICES PARIS % 17 BJELLAND TRADING AS % 18 VITAL FORSIKRING ASA % 19 DNB NOR MARKETS, AKSJEHAND/ANALYSE % 20 JPMORGAN CHASE BANK % 20 largest shareholders % Remaining shareholders % SUM % Page 9 of 10

10 Key financial figures Acta 2Q2007 2Q Q Q Key financial figures Earnings per share (NOK) Earnings per share diluted (NOK) Paid out dividend per share (NOK) Cash flow (net income + depreciations) per share (NOK) Equity per share (NOK) Gross margin (transaction revenue / gross subscriptions) 8.0 % 8.1 % 7.8 % 7.0 % 7.9 % Operating margin (%) (operating earnings / revenues) 45 % 54 % 49 % 51 % 51 % Net margin (%) (net income before tax / revenue) 46 % 54 % 50 % 51 % 52 % Average return on capital employed, annualized (%) 252 % 329 % 176 % 174 % 132 % Return on equity, annualized (%) 259 % 331 % 185 % 178 % 139 % Equity ratio (%) 45 % 49 % 45 % 49 % 52 % 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 employees - New markets Number of branch manager/advisor - Total Number of branch manager/advisor - Norway Number of branch manager/advisor - Sweden Number of branch manager/advisor - New markets Number of advisors - Total Number of advisors - Norway Number of advisors - Sweden Number of advisors - New markets Page 10 of 10