Finnish Industry Investment Ltd (FII), a government-owned investment company, posted a healthy profit for the third consecutive year: MEUR 48.1 for financial year 2007. Investment operations were brisk. The parent company made new investment commitments totalling MEUR 167.6 and exited fully from four companies and partially from four others. In addition, FIIs subsidiary Start Fund I Ky invested altogether MEUR 12.7 and exited from seven companies.
At the end of the review period, Industry Investment was an investor, either directly or through funds, in a total of 438 companies. At years end the parent companys investments amounted to MEUR 469.4.
At the end of 2007 some 49% of FIIs investments (MEUR 230,4) were in venture capital funds that invest in growth companies, 17% (MEUR 80,7) in buyout funds that invest in later-stage companies, 13% (MEUR 60,6) in regional funds that invest in various growth stages, 11% (MEUR 49,2) were direct investments in growth companies, and 10% (MEUR 48,5) were investments in the portfolio companies of Start Fund I Ky, which focuses on early-stage companies.
The focus during the review period was primarily on the energy & environment, medical, mining, internet technologies, and service sectors.
Given the favourable economic climate, Industry Investment made a record number of new investments, while successful exits contributed to the company posting a healthy profit for the third consecutive year, says President & CEO Juha Marjosola.
We now have a score of cleantech companies in our portfolio, which develop technologies that save energy and conserve the environment. Projects related to mitigating climate change and the requirements of sustainable development will continue to offer a growing number of challenging investment opportunities.
The Groups shareholders equity amounted to MEUR 414.3 and the parent companys to MEUR 423.4. The Finnish government has invested in total MEUR 269.8 in Finnish Industry Investment. The last time the government invested in the company was in 2003.
Fund investments in 2007
The establishment of new funds was brisk in 2007, and the volume of investment commitments FII made to them altogether MEUR 144.5 in 14 funds was higher than in any previous year.
Of these commitments, MEUR 137.5 were to new funds and MEUR 7 were follow-on commitments to existing funds. New fund investments focused mainly on funds investing in growth-stage companies, with the emphasis on the technology, energy and medical sectors.
At the end of 2007 Industry Investment had investment commitments to altogether 80 funds, through which the company was an investor in 339 companies. Fund investments amounted to MEUR 371.7 and accounted for 79.2% of all FIIs outstanding investment commitments (MEUR 469.4).
New venture capital funds:
- CapMan Technology Fund 2007 LP
- Creandum II LP
- Inveni Life Sciences Fund I Ky
- Nexit Infocom II LP
- Power Fund II Ky
- Profita Fund III Ky
- Sentica Terveysteknologia I Ky
- Suomi Välirahoitusrahasto I Ky
- Suomi Yritysjärjestelyrahasto I Ky
New investments in regional funds:
- Teknoventure Rahasto III Ky
- Midinvest Fund II Ky
New buyout funds:
- Intera Fund I Ky
- MB Equity Fund IV Ky
- Sponsor Fund III Ky
Direct investments in 2007
In 2007 Industry Investment made direct investments totalling MEUR 23.1 in seven growth companies. Initial investments in three companies amounted to MEUR 16.1 and follow-on investments in three companies already in FIIs portfolio amounted to MEUR 7. FII exited fully from four growth companies and partially from another four during the review period.
Direct investments were primarily focused on the service, hi-tech and mining sectors. At years end, investments had been made, under the auspices of FIIs financing programme for the mining industry, in five mining projects operating in Finland that will have a profound impact on local employment and regional economies.
The deal flow of growth-stage companies was strong throughout the review period. Portfolio companies in the growth stage need capital especially for expanding into international markets. Industry Investments share of an initial investment ranges between MEUR 1 and MEUR 10. The average size of follow-on investments is between EUR 400,000 and MEUR 5.
At the end of 2007 FII had direct investments and investment commitments totalling MEUR 49.2 in 17 growth-stage companies. Direct investments account for 10.5% of FIIs total outstanding investment commitments of MEUR 469.4.
- Nexstim Ltd is a company specialised in medical technology that commercialises and markets the brain scanning equipment it develops.
- Realia Group Ltd is the Nordic countries largest real estate brokerage and property management company.
- Scandinavian Minerals Ltd is an ore exploration and mining company listed in Toronto, Canada. The companys main focus is the development of the Kevitsa nickel-copper-PGE (Platinum Group Elements) project in Sodankylä, northern Finland.
- Incap Furniture Oy is the worlds largest manufacturer of pinewood furniture.
- Intune Circuits Ltd develops and manufactures RFID antennas needed for remote identification.
- Talvivaara Mining Company Ltd is a large nickel-mining project in Sotkamo, Finland.
During the review period Industry Investment exited from Belvedere Resources Ltd, an ore exploration company, Elematic Ltd, a company specialised in production technologies for precast concrete elements, Forchem Ltd, a tall oil distillery, and Keycast Ltd, a steel foundry. In addition, Industry Investment partially exited from BioTie Therapies Corp, Konepaja Ceiko Ltd, Okmetic Plc and Talvivaara Mining Company Ltd.
Start Fund I Kys investments in 2007
Finnish Industry Investments Start Fund I Ky fund, which invests in early-stage companies, invested a total of MEUR 12.7 in altogether 60 companies, and exited from seven portfolio companies in 2007. In developing its portfolio companies, the funds third year of operating focused more than previously on follow-on investments, in which it invested MEUR 5.8 during the review period.
Of the potential new projects reviewed in 2007, about one-third resulted in a decision to invest. Early-stage companies need capital particularly for further development of their products as well as for marketing and international expansion. The prominent sectors were energy, internet technology, pharmaceuticals development and ICT. FIIs share of initial investments ranged between EUR 50,000 and EUR 800,000, the average being EUR 250,000. The average size of follow-on investments was EUR 235,000.
At years end Start Fund I had 82 companies in its portfolio and had exited, fully, partially or through share-swaps, from 15 companies. This represents 10.3% (MEUR 48.5) of FIIs total investment commitments of MEUR 469.4.
FII launched the Seed Financing Programme in 2004. On conclusion of this programme, investments had been made in almost 100 early-stage companies and altogether 86% of Start Fund I Kys MEUR 50 capital had been invested. Recipient companies operate in a broad spectrum of sectors all over Finland. Exports of products and services generated a substantial proportion of most portfolio companies net sales. Many also received business awards for example, by winning Helsingin Sanomats InnoSuomi competition, the Nordic Venture Summit, Incubator Business of the Year, and the Productive Idea Competition.
On the whole, the Seed Financing Programme has proven successful in encouraging the growth of early-stage companies. Portfolio companies have developed favourably and made significant inroads, especially in foreign markets. Industry Investment has actively supported this and provided follow-on financing for it.
In June 2007, the distribution of work between public finance providers was agreed upon. According to this agreement, Finnish Industry Investment manages the companies in its Start Fund I fund and makes follow-on investments in them, and in future FII makes direct initial investments in companies that have progressed beyond the seeding phase.
Events after the review period
Finnish Industry Investment Ltds Annual General Meeting decided at the meeting held on 27 March 2008 that no dividend would be distributed for financial year 2007.
The Annual General Meeting elected Finnish Industry Investment Ltds Board of Directors as follows: Heikki Vesa, Industrial Counsellor, Ministry of Employment and the Economy (Chairman); Johanna Ikäheimo, Board Chairman, Lappset Group Ltd (Member); Matti Luukkonen, Managing Director, IS-Capital Ltd (Member); Raili Mäkitalo, Counsellor, Ministry of Finance (Member); Kaija Pöysti, Partner, Blue White Ventures (Member); Tuomo Rönkkö, Board Chairman, Raskone Ltd (Member); and Taisto Turunen, Director General, Ministry of Employment and the Economy (Member).
COMPANY IN BRIEF
Investing in Growth
Finnish Industry Investment Ltd (FII) is a government-owned investment company. The company invests the proceeds accrued from the privatisation of state-owned companies in the growth and internationalisation of Finnish businesses.
FII invests in funds and also directly in growth-stage companies, especially in corporate ventures that necessitate taking risks over the long-term. Additional capital is needed for financing the growth of portfolio companies and for new business projects, major industrial investments, and sector and corporate restructurings. FII invests in all sectors.
A legislative amendment enacted during the review period enables the company to invest in foreign companies and funds. Foreign investments are associated with financing the international growth of portfolio companies and building up networks of cooperation between international investors.
FII co-invests, on equal terms with private investors, to a maximum of one-half of the capital and ownership. As owners, FII and its co-investors contribute their accumulated experience in developing growth-stage companies and provide useful networks of contacts both in Finland and abroad. Investors are involved in a portfolio company for an average 35 years.
Initiatives for new investment projects are proposed by the entrepreneurs themselves, by co-investors and by other finance providers and consultants. When evaluating potential new investments, FII takes account of the companys business plan, growth opportunities, the innovative nature of the product or service, the sectors market prospects and the companys management.
Established in 1995, Finnish Industry Investment is subordinate to the Finnish Ministry of Employment and the Economy. The Group comprises the parent company, Finnish Industry Investment Ltd, and its wholly-owned subsidiaries the Start Fund I Ky fund, established in 2005 to provide seed financing, and its management company, Start Fund Management Oy.
FIIs investments and investment commitments amount to approximately MEUR 470.
Consolidated profit MEUR 48.1
Consolidated shareholders equity MEUR 414.3
Parent companys profit MEUR 52,6
Parent companys shareholders equity MEUR 423,4
Company established 1995
Government investments in Finnish Industry Investment Ltd since 1995 amount to MEUR 269.8
- Juha Marjosola, President & CEO,
tel. +358-9-6803 6811, juha.marjosola (at) industryinvestment.com
- Marko Häikiö, CFO,
mobile +358-40-766 6794, marko.haikio (at) industryinvestment.com
- Henri Grundstén, Director (Direct Investments, Venture Capital, Start Fund I Ky),
mobile +358-50-431 0840, henri.grundsten (at) industryinvestment.com
- Kimmo Viertola, Director (Direct Investments, Buyouts, M&A),
mobile +358-50-309 2734, kimmo.viertola (at) industryinvestment.com
- Asta Sjöblom, Communications Manager,
mobile +358-50-552 7273, asta.sjoblom (at) industryinvestment.com
ANNUAL REPORT 2007 in English will be available in May: www.teollisuussijoitus.fi/in_english/publications/annual_reports/