Good morning. Welcome to this CapMan's Q3 2024 Interim Report presentation. My name is Tuija Ottoila, and I'm responsible for investor relations at CapMan. Presenting today, we have CEO of CapMan, Pia Kåll. There will be a Q&A session after the presentation, and you can send in your questions during the whole presentation using the chat box. Now I hand over to Pia. Please go ahead.
Thank you, Tuija. Welcome also from my side to this Interim Report for the first nine months. This year is a year of growth and profit improvement. Our assets under management continue to grow. We are now at EUR 6 billion. It's a 20% growth from the beginning of the year or a growth of EUR 1 billion. Clearly stronger than the market and showing our resilience in the more challenging market environment. Our turnover grew 15%, being close to EUR 44 million for the first nine months, and our comparable EBIT is two and a half times higher than last year, now at EUR 13 million. The numbers you see here and throughout the report are for our continuing operations. We have classified our service business CaPS as a discontinued operation, as we in October announced that we have divested it.
As said in October, we announced that CapMan has divested CaPS for EUR 75 million. Our strategy is to grow our core business of private asset fund management. In line with this strategy, we also did this divestment of CaPS. CaPS was founded some 15 years ago as a service to our portfolio companies, but over the years it has grown into a standalone business and already for the past couple of years had very limited synergies with the rest of CapMan's operations. Through these divestments, we release capital and also resources that we can focus on developing our core business. The proceeds that we receive from this transaction will be used to accelerate growth in our fund management business. We will also use it to decrease interest-bearing debt and also enable strong dividend distribution over the coming years.
In connection with the divestment, we also announced that CapMan's board of directors expects to propose a total dividend of EUR 0.14 per share to the AGM in 2025. In our fund management business, we are through our investments today building the society we want to see in the future, in line with our vision to be the most responsible private asset company in the Nordics. Our reach in the Nordic society is significant. Within real estate, we develop human-centric sustainable real estate where we are the owner in 222 properties with more than 10,000 tenants. Within private equity and infrastructure funds, we are the owner in 47 portfolio companies with nearly 14,000 employees where we drive growth, job creation, and sustainability transitions. Through natural capital, we manage a portfolio of 240,000 hectares of land in sustainable forest management.
From a shareholder's point of view, we create value to our two business segments. In our management company business, where we manage private asset funds across investment strategies, we generate fee income that turns to fee profit and also carried interest when we do successful exits from our funds. Our investment business, which is the business where we invest CapMan's own balance sheet primarily into our own funds, we create investment returns, and it's also a way to accelerate growth of our management company business. When we look at our key financials through these business lines for the first nine months, and here again the numbers for the continuing operations, we see that we have a strong development across the board. Fee profit at EUR 6.5 million is a 68% growth compared to last year.
It's both driven by fee income growing, revenue growing, but also a clear improvement in fee profit margin. Carried interest is more volatile. We record it when the exits happen from the funds that generate carry. This year, EUR 3.8 million, primarily coming from our Nest Credit fund exits in the beginning of the year. Here, an almost 30% growth compared to the same period last year. In our investment business, which is a more long-term business, the fair value of our investments at the end of September stands at EUR 166 million, and the fair value changed since the beginning of the year, EUR 2.7 million or a 1.6% increase. Taking a closer look at our fee income and fee profit development, we can see that fee income from our management company business has grown 14% compared to last year. In the same period, fee profit is up 68%.
So here, both driven by more turnover, but also a clear improvement in fee profit margin, a five percentage points improvement when we look compared to last year's numbers. On the balance sheet side, our balance sheet investments are well diversified across asset classes, but also vintage years, and especially this diversification across vintage years means that we expect a positive cash flow from these investments over the coming years. The primary use for our balance sheet is to support our own funds and invest in our own funds, and therefore, even if we have external fund investments currently, we are not planning to do more of those. And when we look at the investment returns and the fair value changes, this is a long-term business and should be looked at over several years.
If we look at the last three years, we have just below 10% annual returns or fair value increases. If we look at the first nine months this year, EUR 2.7 million positive development. Here, our own funds continue to develop well, a EUR 5 million increase, but we have had a negative impact from our external, especially venture capital funds that have had a negative development this year, taking down the total to EUR 2.7 million. Still a clear improvement compared to last year where the total was a negative development, although our own funds also then performed positively. Taking together all the earnings components, we see that all of them contribute positively and result in a comparable EBIT growth, which is almost two and a half times higher than last year.
Fee profit at EUR 6.5 million, a 68% growth, carried interest EUR 3.8 million, an almost 30% growth takes us to an EBIT excluding fair value changes of EUR 10 million and a 50% growth compared to last year. Adding there the fair value changes, we are at EUR 13 million comparable EBIT for the first nine months compared to last year's five. Our balance sheet is solid and we have a good liquidity. And in these numbers, you don't yet see the impact from the divestment of CaPS, which will, of course, have a significant positive impact both on our cash position, our net gearing, and equity ratio. Moving then to the more longer-term strategy implementation, we continue to implement our growth strategy towards EUR 10 billion assets under management.
We build on our cornerstones delivering top investment returns through active value creation in our assets, integrating sustainability into the value creation, and developing CapMan as a home for top performers. Growth comes through being the preferred Nordic partner for institutional investors, scaling existing products and launching new, and selectively exploring strategic acquisitions, resulting in not only growing assets under management, but growing fee profit, carried interest, and returns on balance sheet investments. Looking at what's been happening in the funds, we have continued an active transaction activity both on new investments and exits, despite that the market still is quite slow. 10 new investments year to date out of these 3 during the last quarter, 2 into our Growth Equity III Fund, so Gubbe and Innofactor, and then also our Nest Credit Fund making 1 platform investments. Also 6 exits year to date from the portfolios.
On the sustainability side, a highlight from the annual Global Real Estate Sustainability Benchmark GRESB ratings. Here, all of our funds that participated increased their ratings and their scores. Five of our funds now receive the full five-star rating, both on the real estate side, CapMan Hotels and the Nordic Property Income Fund, and our infrastructure funds. Here I see this as a testament to that we can drive financial value creation in line with sustainability value creation, and when we look at growth, assets under management now at EUR 6 billion, that's a 20% growth during this year, and we have raised some EUR 430 million of new capital year to date. Growth is coming through three levers: scaling existing funds, launching new products, and selectively doing strategic acquisitions.
On existing funds, what we have executed so far this year is really the final closes in Nordic Infrastructure II and Growth Equity III, where Infrastructure Fund doubled the size compared to the first fund, and Growth III hit their hard cap of EUR 130 million. We in addition have several ongoing fundraisings and also fundraisings being planned. Of the closed-ended funds, notably the Nordic Real Estate IV fund is fundraising, targeting a size of 750 million. Here we see good interest in the fund, but first close will move into 2025. We have also started the planning on our next Sustainable Forest and Wood Fund and likewise on our next Credit Fund. Our open-ended funds continue fundraising across residential hotels, Nordic Property Income Fund, our Sustainable Forest and Wood III Fund, and also our CapMan Wealth Investment Partner programs.
Looking at new products during this year, we in the beginning of the year launched CapMan Social Real Estate Fund targeting EUR 500 million in equity, and also during the third quarter, we received a new real estate mandate with some EUR 100 million assets under management. On the acquisition side, largely contributing to our growth this year, our acquisition of Dasos Capital and the establishment of CapMan Natural Capital in March this year. Across the board, we at the moment have several large growth initiatives ongoing, and if they materialize, they will accelerate our growth further. If we look at our investor base, it continues to grow and also internationalize.
Out of our 440 limited partners in our funds, they are institutional investors, half of them from outside of the Nordics, but if we look at where we raise capital, the EUR 430 million year-to-date, this year 75% of that is coming from outside of the Nordics. Increasingly international investor base. CapMan's long-term financial objectives targeting growth in our management company and service business about 15% year-to-date to 14%, strong balance sheet return on equity about 20% and equity ratio about 50% here, year-to-date 8% and 49%. Our distribution policy to pay sustainable distributions that grow over time. In connection with the announcement of CaPS's divestment, we also announced that CapMan's board of directors expects to propose a dividend of EUR 0.14 per share to the AGM in 2025.
Our outlook estimate for the year remains unchanged, so we are estimating assets under management to grow during this year. We are now up 20% compared to last year, and we also estimate fee profit from continuing operations to grow here year to date, a 68% growth. Thank you, and let's move over to the Q&A.
Thank you, Pia. I now also welcome CFO of CapMan, Atte Rissanen, to join us for the Q&A session. Please remember to send in your questions via the chat box. Let's start with some questions from the audience.
Hi, this is Kasper from Inderes. Thanks for the presentation. Let's start with sales. Inflows were about EUR 230 million in Q3, at least according to my calculations. In which funds did these go?
So in the new capital flowing into assets under management.
So that was primarily into real estate funds, both into our hotels fund and then into our mandates. And then smaller inflow in the other open-ended funds. So no significant inflows in forest funds. Continued there quarter on quarter. There, actually, for the third fund that is open-ended, we have extended the distribution now into other Nordic countries as well. So expect that to pick up there, but small inflow this quarter as well.
Okay. And the average fee per assets under management decreased in Q3 compared to, for example, last year or average from previous quarters. What was behind this?
Sorry, what was the question?
Your average management fee per assets under management in Q3 decreased.
Well, I don't think that there are any major changes in the underlying management fee base.
Of course, quarter to quarter there might be some changes, for example, due to retroactive fees in connection with final closings. We had those in Q2, but as for Q3, we didn't have any sort of one-off events that would be impacting. Of course, some of the inflows, as Pia mentioned, in the mandates as well as the open-ended real estate funds, those tend to be on average smaller management fees than for the closed-end funds. So that could be one impact behind.
But this should be kind of the going forward, normal going forward rate.
Yeah, of course, depending on the product mix and new sales development, but yes.
But with this mix?
Yes.
Okay, thanks. You booked some negative returns from your own funds. In which funds did these negative returns come from?
During the third quarter, it was in most cases quite an uneventful quarter.
We had negative impact in the funds that have a USD connection. So the exchange rate euro USD hit negatively in Q3. That impacts our external fund of funds, but it also impacts our own wealth investment program that is a fund of funds for US-based buyouts. So for example, real estate developed? Real estate, the valuations are done once a year and only adjusted kind of quarterly, so they are very flat development in Q3.
But the USD went down almost 5% when you look at the 30th of June and the end of September.
Yeah, that makes sense.
Yeah.
And how would you rate the possibility that you will book any significant carry from Q4?
There are exit processes ongoing, but given that we're already in November, I would say that we need to look at carry on a longer horizon.
Why was the tax rate so high in Q3?
There shouldn't be any sort of, I mean, the tax rate is what it is. It depends on sort of the earnings mix, of course, where we repatriate that. So if it's primarily domiciled in Finland, we of course need to adhere to the Finnish tax regulations, and there shouldn't be any sort of items that would stick out of normal there.
Yeah, but the taxes in Q4 were about EUR 800,000, which is quite high compared to the result from the operations.
You of course need to take into account that the fair value changes. If there are negative fair value changes in some funds, those might not have a tax shield, because those are Luxembourg domiciled investments or domiciled investments. So that could be the explaining factor.
Okay, thanks. My last question.
What kind of one-time expenses do you expect to book in Q4 related to the sale of CaPS?
Well, those expenses will be treated in connection with the discontinued operations, so there shouldn't be any sort of major adjustments related to that because they're all presented in one P&L row.
Yeah, but obviously some effect on the cash flows.
Yes, but those cash flows have been already described, so we expect some EUR 64 million in total taking into account all expenses and whatnot.
Okay, thanks. That explains it. That was it for me. Thank you very much.
Thank you for the presentation. It's Joni Pääkkö from Nordea. One question on the Nordic Real Estate fund closing that was postponed to 2025. So could you give us a bit more color on the reasoning behind that? Was there some anchor investor that fell out, or was it overall the sentiment?
So there's a couple of things there that the Nordic Real Estate III fund, the investment period there is still ongoing, and they see good investment opportunities in the market. And you can't start the fourth fund without closing the investment period in the third fund, so that is one in it. And then what's impacting is the general kind of slow fundraising market at the moment. So good dialogue with our anchor investors, but timings are shifting.
Yeah, and one question, you mentioned the real estate revaluations. Of course, you don't guide those, but from this point of view, do you see that their revaluation in Q4 should be more stable, positive or negative?
It's done by external valuators, so we are not the ones to comment the valuations before we receive them.
Okay, thank you. That's for me.
Okay, if no further questions from the audience, let's move on to the online questions. So here's a question to the CFO. Despite growth in AUM and EBIT, earnings per share are in constant decline. Why is this?
The main factor behind the difference in the earnings per share is, of course, well, we first of all have the fair value changes which are impacting. We, of course, have between the EBIT as well as the EPS also financial expenses. We have the taxes as well as the minority interest. So you can look at the delta between last year and this year, and there you see sort of what has been driving the development now in the EPS.
I'd say that more important than that is the underlying fee profitability and the sort of operating leverage that we've been able to demonstrate as the relative profitability of operations has been still improving quite notably.
Thank you. As a reminder, please send your questions using the chat box. Operating expenses remain high and growing despite your declaration of cost control. This is driving your share price down. Do you need to cut staff numbers?
Our relative profitability continues to go up, and as we showed the fee profit margin now, first nine months this year at 16% versus 11% last year really shows that our business model is scaling. Of course, operational expenses, we did acquisition of Dasos Capital, and they are adding AUM, and they are adding top line, but they also, of course, add their costs, and that's the main contributor in the expense side increase.
But relative profitability continues to improve.
Yeah, for example, looking at the salaries and personnel expenses, if you take the first nine months, those are up 5% year on year, and of that figure, some 50%, so half of the growth is explained by the fact that we acquired a new business, which of course has their own people working for it. So basically CapMan level, if you take just this CapMan, base CapMan without Dasos, those are up only 2.5% during the first nine months of this year.
What is your strategy related to external VC investments? To my understanding, it is not part of your core strategy anymore, and it seems to weigh you down.
So like we stated also in the presentation, the main target for our fund investments or from our balance sheet investments into funds is to our own funds.
So, those venture capital and fund of fund investments that we have into external funds, we are not planning to do new of those. Those have been actually; they are weighing us down now, but also to be fair, over the years they have been, so if you look at the total returns from them, they have been good investments, and they had their own rationale back when they were done, but right now there are no plans to increase those.
Thank you. Do we have any further questions from the audience? If not, that concludes the webcast, and we thank you for participation and wish you a nice day.
Thank you.