Good early afternoon, and welcome to Taaleri's Interim Statement presentation. As you can see under the headline, it's gonna be myself, Peter Ramsay, presenting, and our new CFO, Ilkka Laurila, for the first time. Taaleri had a good and profitable quarter, so let's start with some key figures. The continuing earnings were EUR 10.3 million, and that is, to compared with 9.8 a year ago in the first quarter. Our total income was EUR 70 million, also to be compared to EUR 9.3 million a year ago. And our operating profit was 9.7 , EUR 9.6 million , and that's... The corresponding number was 1.6 a year ago, so a very marketable increase. Our AUM is EUR 2.6 billion. That is the same as it was at the end of last year.
If we look at the growth on the lower side of this slide, we can see that our continuing earnings have grown by 4.3% during the last 12 months. Worth noting is that our sustainable fund products are 85% of our AUM today, and that means that these are fund products in accordance with the EU SFDR regulation, and that is the Article 8 and 9 funds that we refer to then. Moving over to the highlights for the quarter, and as I said earlier, the group net income developed positively in first quarter.
The renewable energy continued the fundraising for SolarWind III, and of course, as always, the renewable energy is active in developing projects that they are pulling forward for the SolarWind III fund, but also operating both wind and solar wind farms in the previous funds that we have launched. In the bioindustry, I would say that it was very much business as usual, which means that they're advancing the investments in Bio Fund I, and also looking for new investments. But they are also now in discussion with potential anchor investors for the venture capital fund. Then we launched a new strategy for our real estate business. The focus is more on investment activities and creating new products as compared to earlier, more a asset management-leaning strategy.
Garantia had a good quarter with a low combined ratio and a healthy amount of investment income. Investment income amounted to EUR 4.8 million for the quarter. Finally, I'd say that the stabilization of interest rates and the generally good development of capital markets is a good sign for a stronger fundraising market going forward. If we move over to our private asset management business and start with the renewables, as I said, earlier, focus is very much on the fundraise for SolarWind III, and forwarding the projects that they have in the portfolio. They are also doing preparations to exit Taaleri Wind Fund II and III during this year.
If we look at the numbers for the quarter, perhaps they're a bit small to see, but, I can say that the continuing earnings rose by 16% to EUR 4.6 million in the first quarter, and, total income was EUR 5.3 million. There was, income of EUR 800,000 in the investment operations. So the EBIT or operating profit for the first quarter was EUR 1.4 million, compared to a loss last year of EUR 300,000. Full-time employees is 48 currently. That's an increase of two from last year, and the AUM increased from last year's corresponding quarter with EUR 200 million to EUR 1.6 billion.
If we move over to the other private equity business, as I said, we launched a new strategy for the real estate business, but we also managed to sell our a very small fund called Taaleri Housing Fund IV, so that was concluded during the quarter. Apart from what I mentioned earlier about the bioindustry, it's also important to note that they continued the construction of the torrefied biomass plant in Joensuu, and that should be completed by the end of the year. If we look at the numbers, we can see that the continuing earnings were EUR 1.3 million, which is a decline of 17.5% to a year ago. There are really two reasons driving this decline.
One was that we had a mandate within the real estate business that was discontinued last summer, and the other thing is that we invested in a company called WasteWise last summer, and it's an associated company, and their part of the profit is consolidated to the continuing earnings. The company is doing a rather sizable investment currently, so that burdens them until they are operational and the production starts. The operating profit was negative EUR 900,000, and that's compared to a loss of EUR 500,000 a year ago. Full-time employees is 38, and we've seen an increase, in particular, in the bio industry space, which is one of our focus points, and we're growing the personnel there. AUM is EUR 1 billion, compared to a year ago, EUR 1.2 billion.
Now, we go to our strategic investments, and that means Garantia in our case. So the insurance result increased to EUR 4 million from EUR 3.8 million a year ago. The good results were supported by decrease in insurance expenses, and the combined ratio improved and was 21.5%. That is a very good number for an insurance company. Net income from investments was, as I said, EUR 4.8 million, and this was really due to the fact that rates stabilized, credit spreads tightened, and also, there was an increase in the equity portfolio. Right now, the portfolio of Garantia consists of 78% fixed income investments, and basically the shift from 86 has more or less been done to increasing the equity allocation.
So operating profit for the first quarter in Garantia was EUR 8.5 million. That's compared to EUR 4.4 million a year ago, and the guarantee insurance exposure was unchanged to a year ago at EUR 1.7 billion. And then we move over to the other group income, and let's start with looking at the size of the portfolio that we have in what we call the non-strategic investments. That's the box on the right-hand side, and we can see that the balance sheet was EUR 26.4 million at the end of last year. It has now decreased substantially to EUR 18.9 million, and that's really as a result of disposals. So the EUR 8.6 million came from a payment of a receivable that we had from a real estate project in Canada.
This actually didn't have a P&L effect as such. On the other hand, Turun Toriparkki, we made a positive change in the fair value, and that was EUR 0.7 million. That is, of course, shown up in the balance sheet here, as well as in the income of investments. So the income total EUR 1.1 million here, with a 0 result on an EBIT level, and that's compared to a loss last year of EUR 1.4 million in the other group's income. And now I'll hand over to Ilkka Laurila, our CFO. He'll take you through the numbers. And I think you have your own-
I have my own.
Yeah.
So, good afternoon on my behalf as well, and before we go a bit deeper on the numbers, maybe I should shortly introduce myself, because as Peter mentioned, it's my first time as a CFO of Taaleri. I have a bit more than 20 years of relevant working experience. Started my career in forest industry, then spent, say, seven, eight years in M&A advisory, financial advisory, and restructuring advisory services. Then joined Terveystalo 2012. First Head of Treasury, then Procurement, and CFO since the end of 2014, and left Terveystalo 2022, after 10 years, period there. Last year, two years, I've been working as a different interim and shorter CFO periods.
Well, that's about me, and then we can go to the more interesting piece, and Taaleri's financial development during the first quarter 2024. Peter already mentioned that the revenue or the income achieved EUR 17 million during the first quarter, and with the nice operating profit level of EUR 56.2, but maybe highlighting on this slide that even though the number of the FTEs has increased, the personnel expenses or the personnel cost has decreased versus year ago. And the reasoning for that is that we have accrued less on different variable pieces of the personnel expenses, and that's why we have a lower level of personnel cost during the first quarter.
On the other hand, the direct costs have increased somewhat from EUR 1.8 million to EUR 2.2 million, roughly, and the key drivers, there's actually two drivers. The first one is that we have had more traveling-related expenses, mainly deriving from those fundraising activities. And secondly, we have had more advisory and consulting service-related expenses, again, mainly relating to developing new services and new products to the market. Then, if we take a look at these four sources of revenue, which we have communicated earlier, the biggest proportion of the income during this quarter actually came from the investment operations, EUR 6.8 million, followed next by continuing earnings from the private asset management, EUR 5.9 million, and then Garantia's insurance operations generated EUR 3.9 million.
As already mentioned, we did not recognize any performance fee during the first quarter of this year. As you can see, on a quarterly basis, these income sources actually fluctuate quite a bit. But then if you take a look at the longer period of time, this is now 24 months, so two years period, and as you can see, the picture is actually much more stable when it comes to these four different revenue sources. The biggest piece has been these continuing earnings from the private asset management business, followed by the investment operations with EUR 37.2 million, and then nice stable income also from Garantia's insurance operations, as well as the performance fees.
So as you can see, on a quarterly basis, it fluctuates quite a bit, but in a longer term, you can see much more stable development of these different income sources. That also applies on a quarterly level, especially for the profitability. As you can see on this slide, when we take a look at the group level Continuing Earnings, you can see on the left-hand side that it has had a quite stable, nice development from EUR 9.8 up to EUR 10.3 during the last quarter. On the other hand, these other revenue sources or income sources have fluctuated quite a bit during the quarters and was now at EUR 6.8. And that directly is reflected to operating profit development, and as you can see, we are phasing through the second quarter.
This year we are facing quite tough comparison period, as there were some bigger revenue recognitions during the second quarter 2023. Biggest one was related actually to energy business, and in which we kind of the development portfolio was sold and the revenue recognized during the second quarter. Then if you take a look at the private asset management business, the picture is pretty much the same. The underlying continuing earnings is developing quite nicely from EUR 5.5-EUR 5.9, even though there is a slight downward trend from EUR 6.7-EUR 5.9 during the last two quarters.
But that is actually deriving from certain fund-related accruals which came in related to SolarWind II and bio fund, which were kind of recognized during the last quarter last year, and also some of those in the third quarter. That was the reason why the level during those two quarters was actually higher. But the same reflection you can see for the operating profit. It fluctuates quite a bit based on how these other revenue and income sources are developing during the financial year.
But then if you take a look at again a bit more longer horizon and take a look at versus the LTM versus the LTM year ago, you can see that on a group level the Continuing Earnings has increased by 4.3%, and operating profit has increased nice 33.4% level versus LTM year ago. On the other hand, if you take a look at the private asset management business, you can see that the Continuing Earnings has increased 15.7% versus LTM year ago. Then on the other hand, operating profit has slightly declined 9.2%, and the key rationale for that is that we the SolarWind...
Sorry, the Wind two and three revenue of those exits were some of, a part of those were recognized already back in 2022, and that can be seen in the LTM period from Q1 2023. That has an impact, positive impact for those, that period, but not anymore for the LTM period Q1 2024. Then finally, we will continue for the rest of the 2024 year with a bit strong balance sheet. Maybe highlighting first that on the left-hand side, as you can see, and as Taaleri has communicated earlier, the non-strategic investments are in a exit phase, and you can see that it has declined quite a bit already from 26 to almost at EUR 19 million.
Then, on the other hand, we are investing more in strategic and direct investments, which has increased from EUR 32 million- EUR 34 million. Another piece may be worth noting is that Garantia's investment portfolio is at EUR 152 million, down from EUR 160 million, and the reasoning for that was that the EUR 15 million dividend for the PLC was paid before the quarter ended. The cash and cash equivalent was still on a strong level at the end of the first quarter, but maybe worth noting is that after that, we have paid that EUR 28 million dividend for our shareholders.
And we are continuing with strong equity ratio, EUR 215.8 out of EUR 312.2 is 69.1%, so our equity ratio continues to be strong, and that is good basis for further development and the further investments that we are aiming to do. And then I think it's time to invite back Peter for the summary of first quarter.
Thank you, Ilkka. Let's take the summary. So here's a repetition of the highlights for the quarter, which showed a good profit as a whole, and I'm not gonna repeat myself too much, and I think instead we try to look ahead. And what we can say is that there are some positive trends in our operating environment, and as I said, it's a stabilizing interest rate environment, and then that the capital markets have been quite strong and encouraging. And so finally, one could say that also the global economy has been stronger than we perhaps foresaw late last year. This brings us to the last slide and the outlook for 2024 in our various business lines.
What we say is that the continuing earnings from the renewable energy business is expected to develop positively during the rest of the year. The operating profit for 2024 will depend on what the final performance fee would be for Wind II and III funds. So this is, of course, something that just as a repetition, we have recognized EUR 14 million in performance fees in earlier years, and then once the fund comes to the end, and it's sold, then, of course, we know what the final performance fee was. And according to our updated strategy, we're looking to have a strong international growth in Taaleri Bioindustry, as well as in the real estate business.
Just as a repetition, I'll say that we aim to have 50% of our limited partners, i.e., investors in our new funds, coming from abroad. We are increasing costs in the other private asset management business. We're doing it upfront in order to be able to launch new products, and that means that the operating profit for the other private asset management business will be negative this year. For Garantia's point of view, we could say that the continuing earnings are expected to fall slightly from the level from last year. And this is due to the development of the Finnish housing market and in particular, the mortgage uptake. But in the current economic operating environment, Garantia's net income from investment operations is actually expected to develop positively compared to the corresponding period last year.
Finally, within the other group, as previously said, this is really a function of if we are able to dispose assets and at what profit, once we dispose them, that will then determine the profitability in the other group. So that leaves us to the Q&A session. Thanks for listening, and maybe I'll hand over to the floor if there are any questions. We have a microphone circulating for any potential questions. Here we go.
Yeah, thanks. Joni Sandvall from Nordea. Maybe starting still with the Wind II and III carry potential, I think you have a pretty good visibility in the valuation in the field currently. So, how would you say how the carry potential has evolved now during past year?
Well, there are, of course, several moving variables here when you look at the valuation of a wind farm. One is, of course, the price of electricity. So what has happened there is that it has sort of stabilized at a higher level than before the war. The other thing is interest rates, so interest rates have gone higher. But of course, we don't need to look at construction costs when it's an operation. These funds are operational. So I'd say that, you know, from when we look at the valuation, these two forces have sort of mitigated each other, and when we do the assessment of the performance fees, we've always said that we have to be conservative there from pure simple reason that these variables can move over time.
Now, it will, of course, in the end, it will be shown how conservative were we, if at all, but I, I would emphasize that we have been conservative when we book these estimated performance fees.
Maybe adding on that one note, if you haven't recognized that we actually made a small change in our accounting principles during the first quarter, so earlier, so during the last year, we kind of accrued those revenues biannually, and now we are doing on a quarterly basis. But still, we didn't recognize any performance fee during the first quarter, but now we take a look at it on a quarterly basis, not anymore biannual, as it was 2023.
On possible exit, then you are still aiming for taking mandates on these wind farms?
Well, that's of course up to the buyer, so that's something that we cannot steer, but naturally, if the buyer is such a party that needs an operator, then we're very happy to offer our services. That's for sure.
Yeah, thanks. Then, maybe question about real estate strategy renewal, and, as you said, you are aiming for new products. So any timeline for these products currently?
Yeah, well, let's stick to what I said at the capital markets. I think we have a window, sort of right where we are now, 12 months, maybe a little bit more. So I think this is an opportune time to sort of get new products to the market, but you have to talk to the investors first. You sort of have to be sure that you have the demand, and that the positioning of your product is right. So I think that's sort of an interaction that takes place, and those interactions have, of course, started, but on the timing, I still would say that that is sort of the cycle you have here. And we've already seen, I mean, some money coming to the market.
It's been assets that have had sort of trouble for one reason or another that they have actually transacted, and then you get some price points of where the market is, and I think that's kind of encouraging also for new investors looking to enter the market.
Yeah. Then maybe follow up on the fundraising. You said that there might be, let's say, improved outlook now when the interest rates have stabilized. So have you seen yet any real changes on the investor appetite in the market?
I think they're very, very early green shoots, but I would say that takes time, so the important thing is that the market sort of stabilizes, and then you've had this denominator effect as well, that, you know, when the public markets went down, people felt that they were perhaps a bit overexposed to private markets. So that denominator effect has partly also been sort of mitigated. But the important thing for private equity investments is that you can recycle the money, and so you also need for this sort of to come back full scale, you need to see capital returns, and that hasn't yet started.
... Okay, and I suppose there is no real changes on appetite, on strategies, you know, allocation on different strategies, what we were going through, for example, during the CMD?
On our behalf, no. I mean, the market is always, of course, out there, and you can look at whatever Preqin publishes. They come a little bit late, but I think that, in this situation, you know, I'd say that the infrastructure side is quite stable, so there wasn't... You know, it also came down, but I think we actually outperformed the market if you look at just pure numbers on our recent fund compared to the older one. But I think the recycling of the money is really the key, and then the rebalancing of the sort of, what you call the denominator effect. But so I don't think our strategies are such that there hasn't been sort of a change in attitude towards them. We don't see that.
Okay, then maybe one question to Ilkka about employer benefits for the full year. Now, it was down a bit from last year, so if you are performing in line with your expectations, should we expect similar process during the latter part of the year?
Not really. As the headcount increases, it should kind of follow the pattern of the headcount changes in the coming quarters.
Okay, thanks. And last question, Garantia's insurance revenues. I know that you are speaking about Continuing Earnings, but the insurance revenues were up 1% now in Q1, so are you expecting a softer market for... market conditions for Garantia during the rest of the year?
So I think if we just look at the biggest sort of product group, which is mortgages, you know, they have come down, and the mortgage formation hasn't really sort of picked up, so we're at a very low level. In the medium term, we do think that this is sort of going to normalize, but for the full year, one has to remember that the revenue recognition of Garantia is also... There's a tail to it, so therefore, you know, if there's not a significant pickup, we can just see what that tail sort of tells us, and therefore, you know, that, that's the effect, but it's not as dramatic as the market seems to be.
Yeah. Okay, thanks. That's all.
Any further questions? Yes.
Henri Elo, SalkunRakentaja. Mm. I have maybe two questions. One is that, part of your strategy is, investments in bioindustrial investments, both companies and funds. How can you describe that development?
So, the funds that we invest in, they are our own, so that's sort of we support our own funds, so we don't invest in third-party funds. The direct investments there, we increased now by EUR 2 million, our investments in what we call the strategic sort of investment or, or those that are are within our business lines. What we do there is, we have a normal process. We have a separate strategy that we've sort of, implemented for that, and our own team who look at that, and we are sort of... It's quite broad. The bioindustry definition for us is non-fossil or recycled materials, and this means that, of course, we look at a lot of different, situations, a lot of different companies, but we will be very selective in the investments we do there.
We'd rather do fewer and larger investments than the opposite. So therefore, it means that there is a lot of activity going on, but it also means that, there's not gonna be anything as such to be announced on a quarterly basis.
Was it so that there are some companies already in production, or are you building up them more, like Joensuu and Hamina, and what were they?
Fintoil is in operations already. The bio coal, or the torrefied biomass plant in Joensuu, that is being built. Hopefully, will be ready by the end of the year. WasteWise is another company. I mean, there are numerous companies, but that all has one line operating, but they're now investing for the second line, and that is recycling chemically plastics. So there are those that are in sort of construction phase, and those that are already operational, and those that are sort of scaling.
And those were direct investments, were they?
These are direct investments, yes.
Okay. And then another question, one part of your strategy is also internationalization, so how can you describe that, when you are going to abroad or be more international?
So, twofold. One is, of course, when we look at our funds, our ambition is really to have 50% of investors in the new funds, that they are non-Finnish investors, and of course, that work is done. We have to get our name out there. People outside of Finland don't know Taaleri, so it means a lot of footwork. We take part in seminars. We go to these capital introduction events. There are numerous events. I mean, there's every month, one or two events where a Taaleri salesperson goes and they speak or present the fund. Then, we use capital introduction companies, so we have third-party distributors, and they work as a sort of prolonged arm of our sales force, and it's basically the same there. We arrange together with them events. It can be in Asia.
In some cases, we've arranged events at the local embassy, so the local embassy has hosted us, and then our capital introduction partner has invited investors there, and then we take it from there on. So there's a lot of footwork, and there's really no shortcut here. Competition is hard. There are a lot of funds out there. I think it's really important that you get to tell Taaleri's story, and then to present these funds for the right audience, and it's really all about getting in front of the right audience, and that takes time.
... Was it so that you have also people from abroad, or can you say, but your knowledge or that kind of skills and researches?
Yes, we have, I mean, we have offices abroad within the renewable energy. We have offices in Madrid, we have one in Hungary. Of course, they are not there as salespersons primarily, but they are taking care of the product development and the construction and the operation of these assets. But then the other side of your question is on sort of this is on the fund business, the internationalization. Then we've also said that we want to partner up with industrial players in our bioindustry efforts, and most often these are international players. The point of partnering up is that we get credibility, and then we also are able to integrate into the whole value chain.
This means that eventually we will then establish sort of offices abroad for any new venture, because you cannot be sort of... I think that you have to be local, you have to have local presence if you have local operations. So that's another dimension to our internationalization. Any more questions? No. I had some questions here that have come. What... It says, "What is the geographical distribution of stocks in Garantia's investment portfolio?" And, although it's not a large allocation, it's increased a little bit, but I'd say that, there's an overweight to the US. I won't go into more detail there. "Do we know more precisely when the exit from Wind II fund and Wind III fund will take place?" And we do not know.
So we will know the process will start sort of in a very short, hopefully, short timeframe, and it's a process that takes time, because you send out an investment memorandum, then you get responses, and then you select people for the next round. So I would say this is something that most likely will take another 6-8 months or so. So it, it's a process. "TT Canada loan was sold, paid. What was the cash flow? No profit or loss." So yes, there was an interest rate that we received during the years that we borrowed the money to the project. But when they repaid the principal, there was no profit sort of recognized from that event as such. There were no other questions here that had come online.
If there are no further questions, I thank you for all the questions and for your attention. Thank you.
Thank you!