Finnish Industry Investment in 2014 – Boosting international growth

Events, Impact - 17.4.2015

Finnish Industry Investment made new investments in 2014 amounting to slightly less than €83m. New investment commitments, totalling €42m, were made to seven venture capital and private equity funds and new direct investments, totalling €40m, were paid out during the year. Income from private equity and venture capital investments was booked as €21.6m. However, the reductions in the valuations of investments, as well as the exit losses and sales losses resulting from exits entered in the accounts, pushed the result for the financial year into a loss of €43.2m. The largest individual loss, €14.8m, was Finnprotein Oy’s bankruptcy.

“In terms of volume, Finnish Industry Investment was very active in 2014. Positive developments included the acquisition of Turku shipyard together with Meyer, a family-owned German company, and the record volume of venture capital that Finnish Industry Investment channelled through its investment network into Finnish businesses. In June 2014, the €100m Industrial Renewal investment programme was successfully launched. The result for the year was nevertheless unsatisfactory. The company’s development was adversely affected by the financially challenging situation faced by Finland, coupled with the general impact of the Russian crisis on the business community towards the end of the year,” says President & CEO Martin Backman.

Business environment

The economic climate, both in Finland and globally, remained weak and expectations for recovery were not fulfilled. Investment by small and medium-sized industrial companies in particular decreased in Finland, presenting further challenges to industrial renewal in the future.

Finnish funds raised almost €600m of new capital on Finland’s private equity and venture capital market. Fundraising reached its highest level since the financial crisis. The prevailing economic climate reduced the number of exits to the lowest figure since 2009. There was a visible upward trend in the number of write-downs included in exit statistics, the highest number in four years.

Investment activities

The deal flow grew during 2014. Finnish Industry Investment screened approx. 260 (approx. 250) new investment projects during the year and made new investments amounting to slightly less than €83m. The parent company made new investments, totalling €42m, in seven venture capital and private equity funds. Investment commitments were given to five venture capital funds and two late-stage growth funds. The company exited from five funds at the end of their terms. New direct investments amounting to €40m (€37m) were paid out in 2014. Most direct investment was in growth companies focusing on international growth and exports and in medium-sized industrial companies. The broad direction for investment operations is guided by the medium-term targets for industrial and ownership policy that the Ministry of Employment and the Economy sets for the company.

The Group’s loss for the financial year was €43.2m (€7.6m loss). Income from private equity and venture capital investments was booked as €21.6m. However, the value reductions of investments as well as the exit and sales losses from exits entered in the accounts pushed the result for the financial year into loss. The largest loss was caused by Finnprotein Oy’s bankruptcy. The net impact of write-downs of investments on the result for 2014 was €-49.4m (€-27.9m). The reported loss is partly attributable to the fact that Finnish Industry Investment follows Finland’s Accounting Act (not IFRS practices) in its financial reporting. Under the Finnish Act, reductions in the value of investments are booked against the financial result whereas increases in value to over the acquisition price are not. At the end of the review period, the difference between the fair value and the book value of Finnish Industry Investment’s investments – i.e. the uncapitalised rise in value – was €59.8m.

The net amount of Finnish Industry Investment’s cumulative financial results throughout its period of operation (1995-2014) amounts to €62m. The cumulative amount with which the Finnish government has capitalised Finnish Industry Investment from the very start of its operations totals €549.8m (as at 31 December 2014). The consolidated shareholders’ equity on 31 December 2014 stood at €596.6m.

Administration and personnel

Board Chairman Jukka Alho resigned from the Board of Directors on 31 August 2014. Sakari Tamminen (honorary counsellor, born 1953) was elected as the new Chairman of the Board of Directors with effect from 1 September 2014.

Finnish Industry Investment Ltd’s President & CEO until 31 August 2014 was Juha Marjosola, (M.Sc. (Econ.), born 1952). As from 1 September 2014 the company’s President & CEO has been Martin Backman (M.Sc. (Econ.), M.Sc. (Eng.), born 1969).

Events after the financial year

Finnish Industry Investment made a number of exits from its investment portfolio in 2015, and has sustained a good cash flow in the first quarter of 2015.

In line with its updated strategy, Finnish Industry Investment will in future focus its direct investments more clearly on companies needing later-stage venture capital financing and on medium-sized Finnish enterprises seeking international growth. The company will focus its fund investment operations on continuing to finance Finnish private equity and venture capital investment funds and on working towards internationalising Finland’s private equity and venture capital industry.

Finnish Industry Investment is preparing a new co-investment programme aimed at catalysing the capital and business expertise of foreign later-stage venture capital funds into Finnish growth-stage companies seeking to internationalise their operations.

The Annual General Meeting held on 17 April 2014 decided to increase the company’s share capital by €105m, of which €30m is allocated to the FoF Growth II fund, €50m to the Industrial Renewal investment programme and €25m to the new co-investment programme.

Finnish Industry Investment also decided at the start of this year to adopt IFRS accounting practice for financial year 2015. Switching to IFRS accounting practices is expected to improve the value of accounting data in investment activities.

Finnish Industry Investment’s Annual General Meeting of 17 April 2014 elected a Board of Directors comprising Esa Lager, Board Chairman, and ordinary members: Urpo Hautala, (Financial Counsellor, Ministry of Finance); Kimmo Jyllilä, (CEO, Almatro Advisors Oy); Johanna Lindroos, (Partner, Dasos Capital Oy); Mika Niemelä, (Director of Finance, Ministry of Employment and the Economy); Annamarja Paloheimo, (Head of Branch Region, Nordea Bank Finland Plc); and Riitta Tiuraniemi.

Finnish Industry Investment’s financial statements, impact report and corporate responsibility report are published on annualreport2014.industryinvestment.com

 

Further information:

Martin Backman, President & CEO, Finnish Industry Investment Ltd Tel: +358 9 6803 6875, email: martin.backman@teollisuussijoitus.fi