Finnish Industry Investment in 2015: Active year for investments, good growth in portfolio companies and healthy result

6.4.2016

We produced favourable results in 2015, both operationally and financially. We made new investments totalling €93m and our portfolio companies, in which we invest directly, grew despite the difficulties faced by Finland’s economy. Thanks to good market conditions, active portfolio management, value increases in both funds and portfolio companies, and a favourable climate for exits, net gains from investments for the year amounted to €109m, profit for the financial year totalled €86m, and there was a positive net cash flow of €63m.

President & CEO Martin Backman:

“Significant events in the financial year included new venture capital investments in the international MVM IV fund and in the Finnish Lifeline Ventures Fund II, and also direct investments in: LeadDesk (Venture Capital), Unisport-Saltex (Growth Investments), and also Kotkamills and Rauma Marine Constructions (Industrial Investments).

Our fund portfolio and our portfolio of direct investments both performed well. In fund investments, portfolio companies increased in value. Direct investments also created value and portfolio companies grew strongly. Net sales of our venture capital portfolio companies, for example, rose in 2015 by some 35% (median) compared to the previous year, while in the industrial investments sector Valmet Automotive landed a new contract for manufacturing the Mercedes-Benz GLC model.

There were more exits than in previous years. Sentica Partners’ social and healthcare provider Pihlajalinna, for instance, listed on the Helsinki exchange while discount retailer Puuilo was sold to Adelis. Northzone sold technology company Avito to South African media corporation Naspers. There were numerous exits from direct investments, also, including sales of shares in Holiday Club, Suominen, Glaston Corporation and Meyer Turku.”

Business environment

Finland’s economic climate remained challenging in 2015, with declining volumes of both investment and industrial production. Financial markets were fairly stable and Finland’s banking sector was economically sound, but stricter legislation has restricted loan financing.

The Finnish private equity and venture capital market continued to develop favourably, and Finland has become one of Europe’s leaders in terms of the ratio of venture capital volumes to GDP. There were a number of successful IPOs as well as exits by venture capital and private equity investors in Finland. International private equity and venture capital investments in Finland were more selective than in previous years.

Investment activities

Finnish Industry Investment made new investments and investment commitments amounting to €93m in 2015, an increase of 14% compared to the previous year. In addition to its own investment operations, Finnish Industry Investment manages the FoF Growth I and FoF Growth II funds. The FoF Growth II fund made three new investment commitments amounting to €38m during the review period.

Fund investments

In fund investments, investment commitments amounting to €67m (€42m) were given to seven new funds. Capital calls of altogether €68m (€63m) were paid out to private equity and venture capital funds in Finnish Industry Investment’s portfolio. Correspondingly, the funds returned a total of €99m (€61m) to the company.

The IPOs of funds’ portfolio companies and particularly some large-scale financing rounds at good valuation levels in venture capital funds were reflected in the funds’ result. The balance sheet value of private equity and venture capital funds at the end of 2015 was €326m, and it rose by €41m compared to the previous year. Capital calls totalled €68m, returns from funds €-99m, and realised and unrealised changes in fair value recognised as income totalled €72m.

Direct investments

Direct investments amounting to €25m (€39m) were made in altogether 12 portfolio companies. A €25m investment programme was launched during the review period, which will catalyse international capital into Finnish companies needing later-stage venture capital.

The good business performance of some portfolio companies (including Coronaria and Valmet Automotive) and also a number of financing rounds at good valuation levels were reflected in the valuations of direct investments. Exits also had a positive impact. The balance sheet value of direct investments at the end of the year was €134m, and it rose by €5m compared to the previous year. Investments paid amounted to some €25m, exits €-57m, and realised and unrealised changes in fair value recognised as income totalled €37.

Result

The profit for the financial year was €86m (€26m loss in 2014). The marked improvement compared to the previous year was largely due to strong growth in net gains from both fund investments and direct investments. Net gains from investments amounted to €109m (€-40m), comprising net gains from funds €72m (€-0.1m) and net gains from direct investments €37m (€-40m).

Balance sheet and cash flow

The balance sheet total at the end of 2015 was €895m (€695m) and the company’s equity amounted to €868m. The cumulative amount with which the Finnish government has capitalised Finnish Industry Investment from the very start of its operations totals €655m (as at the end of 2015).

Altogether €156m was returned from the company’s investments during the year and positive net cash flow was €63m. Some €99m was returned to the company from fund investments, of which €7m via the FoF Growth fund. Altogether €57m was returned to the company from direct investments.

Assets under management

The total amount of assets under management at the end of 2015 was €1,037m. Assets under management include the FoF Growth funds’ capital, as Finnish Industry Investment manages these funds.

Recent events and future prospects 

We have seen brisk activity in our investment operations in early 2016 also. Finnish Industry Investment has invested in the Nordic Creandum IV fund, the international cleantech company BMH Technology and the rapidly-growing software providers Vaadin and M-Files, among others. The company has also signed an agreement with international and Finnish investors regarding investing in pre-school and day-care centre operator Touhula Varhaiskasvatus.

With fund investments, the company is focusing on continuing to finance Finnish venture capital and private equity funds with the aim of increasing their fund sizes and encouraging international funds to be more active in Finland’s investment market. Direct investments are focused on internationalising companies needing later-stage venture capital financing and on medium-sized Finnish enterprises seeking international growth.

The objective of investment operations is international networking, improved channelling of capital on market terms, and the strengthening of expertise and active ownership in portfolio companies to enhance their growth, profitability and value creation.

Finnish Industry Investment’s financial statement and Annual Report

Operations and results 2015

 

For more information, please contact:

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