Finnish Industry Investment half-year report 2016 shows a record-high investment volume – €100 million to finance company growth.
“Our investment volume in the first half of 2016 was record-high: we made new investments and commitments amounting to over €100 million. Significant events include commitments to international venture capital funds such as EQT Ventures and Northzone as well as Finnish Intera’s new growth fund. In direct investments we invested for example in Verto Analytics and BMH Technology,” said President & CEO Martin Backman. “Our portfolio performed well during the period. Direct portfolio companies’ sales grew on average by 20% (median) compared to last year. We saw favourable development in portfolio companies in for example software, healthcare, services business, marine cluster and construction sectors. Portfolio companies made significant investments into production, e.g. Kotkamills and Valmet Automotive’s new GLC production line.“
Despite the challenging economic climate, venture capital investments into Finnish companies remained active during the first six months of the year; Finnish companies raised €142 million of venture capital from Finnish and international investors. This is fuelled by the entrepreneurial spirit in Finnish growth companies. There were 11 larger, over €5 million financing rounds in Finland, while in 2012-2015 there were only 5-10 on a yearly basis. FII has been directly or via funds an investor in five of these eleven cases. Correspondingly, the exit market in buyouts remained brisk in Finland and internationally.
FII made new investments and commitments amounting to €103m during the review period. In fund investments, FII gave commitments of €62m to six new funds; two of these were Finnish growth funds and four were international venture capital funds. An active exit market in especially later stage funds was reflected in the financial result for fund investments. The balance sheet value of fund investments was €307,4 million. Capital calls totaled €24,9 million, returns from funds €52 million and realised and unrealised changes in fair value recognised as income totaled €5,7 million.
In direct investments, FII made investments amounting to €41m in 18 companies. The business performance of portfolio companies continued strong, which was reflected in unrealised positive changes in fair value. The balance sheet value of direct investments was €172,9 million. Investments paid amounted to €44 million, exits €12,6 million, and realised and unrealised changes in fair value recognised as income totalled €7,8 million.
FII’s international co-investors invested €118 million in nine portfolio companies, including M-Files, Verto Analytics and Touhula Varhaiskasvatus. Furthermore, FII’s international portfolio funds invested in three Finnish companies. In addition to capital, international investors bring valuable expertise and networks to portfolio companies.
The profit for the review period was €11 million (after taxes). Net gains from investments amounted to €13,6 million, comprising net gains from funds €5,7 million and direct investments €7,8 million. FII’s cumulative profits amounted to €224 million.
The balance sheet total was €906 million and the company’s equity amounted to €879 million. Altogether €61,2 million was returned from the company’s investments and net cash flow was €-4,4 million. Some €48,6 million was returned to the company from fund investments, of which €4 million via FoF Growth. Altogether €12,6m was returned to the company from direct investments.
The total amount of assets under management at the end of the period was €1044 million. Assets under management include the capital in FoF Growth I & II, as FII manages these funds.
After the review period FII has given a commitment to Verdane IX, and invested directly in Vexve. Portfolio company Eniram was sold to Wärtsilä. Portfolio funds Northzone and Conor Venture Partners invested in Finnish company Zervant. Portfolio company Componenta faced financial difficulties and applied for debt restructuring in September 2016.
Investment operations and portfolio management will continue strong for the remainder of the year. Following an internationally active six months in fund investments, FII will focus on Finnish deal flow, estimating that it will make several commitments to new funds. In direct investments, FII will focus on increasing the value of portfolio companies and making follow-on investments.
The investment volume during the second half of 2016 will likely be lower than the record active first six months of the year. Financial performance will be affected by the general development in the operating environment, performance of portfolio companies, and financial rounds carried out in the last six months of the year.
International investors have increased activity in the Finnish venture capital and private equity market. This trend is likely to continue in the future and increase the supply of growth financing and growth possibilities for Finnish companies.
Source: Finnish Industries Investment