Good morning, and welcome to Taaleri's presentation for the first half of 2024. My name is Linda Tierala, and I'm heading Investor Relations at Taaleri. Presenting today, we have our CEO, Peter Ramsay, as well as our CFO, Ilkka Laurila. The presentation will be followed by a Q&A, and you may submit questions through the chat function on the website link or the webcast link. You may submit questions at any time during the presentation. With those formalities on the way, you're welcome, Peter.
Thank you very much, Linda, and welcome to our sort of second quarter numbers that we will present today. This was a rather uneventful quarter for the outside world, but in Taaleri we have a lot of activity always going on, and these activities bring us step-by-step forward on our journey to hit our strategic targets, the ones that we communicated our Capital Markets Day last November. As a general notice, I would want to remind you all in the audience of the lumpiness of the recognition of some of our income lines. Last year, we recognized a sizable amount of investment income in Q2. The sale of our wind and solar development portfolio to SolarWind III was one of these events. We also recognized some performance fees from our Metsä III fund.
But Ilkka Laurila, our CFO, will later take you through some more smooth numbers to give perspective on our long-tailed nature of our business. But let's look at the numbers for the second quarter. Our continuing earnings grew to EUR 10.1 million. That's in the up left-hand corner, and in the lower left-hand corner, you can see our continuing earnings for the last 12 months. That's EUR 40.6 million. That's an increase of 2.3% from the previous 12 months rolling continuing earnings. Our income was EUR 11.9 million. That's compared to 20.. slightly over 26 a year ago, and big difference was that we didn't recognize any sizable investment income or performance fees.
Our operating profit for the second quarter was EUR 4.4 million, and our AUM stands at EUR 2.6 billion at the end of the second quarter. Looking at the highlights for the quarter, so our continuing earnings grew 3%, and profitability remained at a good level. The Renewable Energy continued the fundraising for Solar Wind III, and we're forwarding several due diligence processes there. Bioindustry advanced its international projects. They also did one more fund investment, but we did establish a project development company in Canada to explore the opportunity to start the production of torrefied biomass there, and the bioindustry is also looking to launch their venture capital fund this fall. The Real Estate business is looking to launch a new closed-end fund and doing preparations for that.
Garantia, they had a very good combined ratio at 26.5%. The results were in line with the corresponding results last year, at EUR 3.5 million, and the income from the investments was EUR 1.4 million. It's good to remember that over the PNL, all equity-related income is booked and just a portion of the fixed income portfolio. So the bulk, i.e., of the size of the portfolio, is booked straight towards equity. We also saw some green shoots, and maybe there's signs of improvement in the environment. That's at least how we see it. It's been persistently a challenging operating environment, especially in the fundraising area, but here I'm mainly referring to the stabilized and lower rates, and also there's a slight uptick in the M&A activity.
We think those are good green shoots and might stem for a better fall. Just as a reminder, I want to mention what we announced earlier this month, that we had changed the composition of our reportable segments by transferring our shareholding in Aktia Bank from what we call strategic investments to the other group, and thus the reporting period beginning from first of April this year, the former strategic segment will now be called Garantia, and that's from the first of April this year. The fact that we had to do this was we sold 150,000 of our holding shares of our Aktia holding, and that sort of triggered this. But I think it's more clear and transparent this way as well. So moving over to the business units, and we start with renewable energy.
As I said earlier, they continued the fundraising of the SolarWind III fund, and the. What it's all about is really forwarding the due diligence processes that we have there, and that they then are successfully completed and converted into subscriptions. So far, the construction decision has been made for three projects within the SolarWind III fund, so they're already forwarding construction projects there as we speak. Then we continue the preparations for the exit of Taaleri Wind Fund II and III, and these are, of course, at the end of their life cycle, so it's natural that we dispose the fund. All in all, the continuing earnings for the renewable energy grew by 22% year- over- year to EUR 4.8 million.
Income was down to EUR 5.5 million, compared to EUR 12.9 million, and that's really due to the fact that we sold a development portfolio last year to the SolarWind III fund. Operating profit was EUR 1.6 million compared to EUR 8.1 million, and the AUM was EUR 1.6 billion at the end of Q2, compared to EUR 1.5 billion a year ago. If we move over to our other private equity business, here we advanced new products. The investment operations of the current funds are, of course, key when we have already investments that we are dealing with, and then I talked about the internationalization of the business. So as I said, the real estate is looking to launch a new closed-end fund.
They're doing preparations for that, and a very busy quarter within the bio industry. Just to summarize it, again, they did their fourth investment in their BioOne fund, and, then they also continued the construction of the Joensuu biomass plant. They're looking to launch a new VC fund, this fall, so to start the fundraising, and, then finally, I mentioned the Canadian development projects. So we started that to explore the opportunity to start biomass production in Canada. Within the group, the continuing earnings were down to EUR 1.2 million from EUR 1.7 million. This is mainly due to negative impact from some of our associated, or some of our investments that are booked as associated, companies, so their profitability affects the earnings in this segment.
EBIT was minus EUR 1.3 million, and that's also slightly affected by the fact that as we're doing these investments, we're also increasing our personnel. AUM was EUR 1 billion, compared to EUR 1.1 a year ago. Just a couple of words on the fundraising market. Here you see a long-term chart over the fundraising market globally for private equity, and you had a really, really good run-up until 2023, basically. Record years, four record years preceding that, and since then, it's been a tougher market as interest rates rose. This year, globally, there's 6% less capital that has been raised in the first half compared to the first half last year.
We, however, believe that the stabilization and even some rate cuts that we've seen in the short end, and then the lower long-term rates will support fundraising in the medium term, especially in asset-heavy and yield-driven investments. Short term, the lack of capital paybacks, i.e., capital returns, will still weigh on the fundraising market, so we need to see that dynamic also pick up in action. All right, moving on to Garantia. So as I said, the combined ratio was very good at 26.5%, and Garantia's insurance results remained at the same level as last year at three point five million euros. The insurance revenue decreased slightly, and insurance service expenses remained at the same level as last year during the comparison period. The investment operations made a profit of one point four million.
I already talked about that, and in the investment operations, however, the allocation from sort of very fixed-income focused has been more balanced now, so now the composition is 20% equity, whereas it was 10% at year-end, and public equity is 20%, and then the fixed income portion has come down to seventy... slightly under 75%. It was in the high 80s% earlier. The insurance exposure is the same, at EUR 1.7 billion, as it was at year-end, and if we take a quick look, as I mentioned, the portfolio. This is Garantia's insurance businesses portfolio. So if we look at the size of the portfolio at the year-end, it was EUR 160 million. It's now EUR 155 million.
The portfolio has increased, but we have paid EUR 50 million in dividends to the parent company in between, but here you can also see that the composition of the portfolio, it's more normalized now. We have 20% in public equities there and 74% in fixed income. All right, then we go to the final part of my presentation here, which is the other or the non-strategics, and here, of course, the big thing is that we moved the Aktia shareholding into this portfolio. Despite this, we've managed to sell down our holdings. Right now, the total investments in the non-strategics are EUR 26.1 million . You can see it in the right-hand corner in the light blue box.
They were EUR 35 million at year-end, but in this number, we've included the Aktia shares, so it's not really quite comparable when I say... But we have decreased the size here, though. It's split, so it's EUR 50 million in real estate and then EUR 11 million in other. The whole segment here had an income of EUR 0.7 million. That's mainly due to our associated company Turun Toriparkki, which generated the bulk of the income, and as we had no disposals, and we have costs there, the loss was EUR 0.6 million for the quarter. And now I'm going to hand over to Ilkka. Please, Ilkka, take the stage.
Good morning on my behalf as well, and then, like, usually, we will go through some of the numbers more detailed, as well as some P&L line item trends, how those have developed in the longer term. Starting from the P&L structure, Peter already explained how the top line has developed during the last quarter, but as you can see, actually, the overall cost line items, be it fees, personnel costs, or direct expenses, are on a lower level compared to last year, similar period. Personnel expenses worth noting is that the main reason being on a lower level is actually that there was less variable costs related to incentive and bonus related structures this quarter compared to last year. And that's the main reason, the main driver for the lower level.
Same actually applies pretty much when you take a look at the first half numbers, both the fees and commissions, as well as the personnel costs are on a lower level compared to last year. That actually results in a situation that if we compare first half operating profit 48.3% to last year full year numbers 48.1%, it's almost on the same level. Even though that we have had a quite significantly less performance fees, as well as the investment income, the profitability has remained relative basis on a quite stable level versus the full year last year. The same second quarter numbers in a waterfall.
As you can see, there was no performance fees accrued during this quarter, and the biggest proportion, obviously, of the income is deriving from the continuing earnings of our private asset management business. But again, if you take a look at the longer term, actually, the picture is somewhat different, related again to this lumpiness or big fluctuations in other than the continuing earning line items. And as you can see, it's much more balanced if you take a longer view, twenty-four months history on different line items. Obviously, the continuing earnings still contribute the majority of the income, but then followed by the investment operations as well as the Garantia.
But then also, on the other hand, there's quite sizable amount of the performance fees recognized during the last twenty-four months. Then, a similar kind of set, if you take a look at the quarterly development, as you can see, the kind of the continuing earnings is on a group basis, is developing quite steadily. And there was this big, other than continuing earnings line item recognized in a year ago, but during the last four quarters, it has been much more stable, and that's why relative to comparison period, the second quarter last year, our operating profit also looks somewhat different versus year ago.
But again, if you take a look at our private asset management side, you can actually see that the continuing earnings in the private asset management is developing quite nicely. So from EUR 5.6 million in the year ago versus EUR 6.1 million this year, and the same lumpiness in other than continuing earning line items can be seen, obviously, also in the private asset management business, which is reflected again in our operating profit development. Again, if we take a bit longer horizon, this is comparing now always our last 12 months numbers, you can see that the continuing earnings on a group level is growing steadily versus year ago. And the other than continuing earnings is much more stable in the...
If you take a look at this kind of picture. But even more important is that if we take a look at how the continuing earnings in the private asset management side is developing, you can see that the growth actually is quite nice. It's 13.3%, versus LTM period year ago. So from EUR 22.2 million up to EUR 25.1 million this quarter or and this last twelve-month period, so quite steady and nice growth there, even though other than these continuing earnings items are not increased during the last quarters.
And then finally, on the balance sheet side, as Peter already explained, non-strategic strategic investments have declined quite significantly versus year versus year-end last year, from EUR 35.5 million down to EUR 26.1 million . And worth noting, obviously, is that the Aktia is adjusted to last year numbers in these figures as well. On the other hand, the direct investments have increased by EUR 5 million , up to EUR 37.6 million , and the clear majority of that is related to our participation of our share issue in one of our investments, namely Fintoil.
Strong liquidity position still holds, so cash and equivalents, even though that we paid EUR 28 million on dividends, it still holds EUR 23.2 million in cash balance, versus EUR 38 million at the year-end last year. As said, the EUR 28 million dividend were paid during the second quarter this year. I think it's time to summary and the outlook, and then we'll. I will invite Peter back to the stage.
... Thank you, Ilkka. So the summary, first we have the same summary as we had earlier, so I'm not gonna take you through these again. But if we look at the outlook, so what do we say about the rest of the year 2024? And we expect the continuing earnings from the renewable business to develop positively. And, of course, the operating profit for 2024 will depend, among other things, on the net income from the investment operations, and then the revision of any estimated performance fees from the exit phase funds Wind II and III, and the timing of those, of that exit. And in the other private equity businesses, as I said, we're driving our growth there, both international and domestic, and this means...
That's the bioindustry in particular, and this is reflected in the profitability. This means that we will have an increased number of employees there, and we believe the operating profit will be loss-making for this segment the rest of the year. In Garantia, we expect the continuing earnings to fall slightly from the level of the corresponding period last year. This is really due to the development of the housing market, although there are some sort of improvement signs, we do believe this is the fact. If the interest rate environment stays sort of on the course that we believe, then we will expect the development of the portfolio to be positive at the end of the year.
And then the other group, which is sort of our investments there, it's all up to, you know, do we do any disposals? Do we realize any gains? So that is something where it's kind of hard to give any prediction. But, thank you on our behalf. I guess, Linda, it's time for the Q&A.
Yes, thank you for the presentation. So, now we open up the floor for questions. And, again, if you have any, any questions, in the online audience, you may submit them at any time, also during this session, through the chat function, in the webcast link. Yep, we have a question here in the audience.
Hi, this is Kasper Mellas from Inderes. When do you expect to do the next closing for our Solar Wind III fund?
So probably, looking at year-end, to do a closing, and then the fund raise is such that then the final close would be in June 2025.
Does every closing result in higher variable personal costs, similar to the second quarter of last year?
Basically, yes, if they are successful. Yep.
And what could you give us a rough estimate on what kind of growth do you expect in number of personnel for both renewable energy and other private assets?
I think in renewable we don't really expect that we'd be doing sort of-
The improvements are done, but in the bio industry, we've increased the personnel, what is it, five during this year. Maybe Ilkka has the exact number.
I don't have the exact number, but something like that.
Yeah.
Yeah, yeah.
Five or six-
... and I think for the time being, sort of don't expect very many new recruits, but we will have to do some recruits when we start the business in Canada.
Okay, that's it from me. Thanks.
Thank you.
Thank you for the presentation. It's Jukka-Pekka Pesola from Nordea. You continued to support the Fintoil company during the quarter. Could you describe in ballpark figures how large was the support, and how has the business developed?
So, our sort of, as Ilkka said, roughly EUR 5 million, and, the business. I would say that, when we look at the sort of, the, development of the business, I think it, the market was distorted when it started, its operations due to the war, in Ukraine, but now it's more normalized. So now we expect, more normalized sort of, the prices have normalized, and we also expect that the utilization would sort of start to normalize in the business.
Perfect. On the new real estate products, what kind has the investor feedback been at this point, as the real estate market has overall been subdued?
Yeah, I think, we said it at our Capital Markets Day, that there's a twelve to eighteen-month window, and that was in about a year ago. So we still think there's a window, but, we think that window is sort of closing, and therefore makes sense now to raise a new closed-end fund.
Yes, and a final one on Garantia. We've heard some positive news on mortgage application volumes from some major banks in Finland, so have you seen this also reflect in new applications for Garantia or the insurance portfolio?
As I said, there are some kind of small green shoots there, but I think it comes a little bit with a lag. It actually, the same thing happened when the market cooled off. There was sort of a lag. I think in the... and what we said then was that obviously people want that product, so that was sort of, it was in demand then, but I think now we believe there's a little bit of the same lag for another reason, to the other direction, but yeah, we see that it's stabilized.
Okay, that's all from me now.
Thanks. Joni Sandvall from Nordea. Maybe one follow-up on the personnel costs. I think, Ilkka, you mentioned that there was less variable costs on renewable energy, so should we expect this to be roughly the run rate of the personal expenses now, and then obviously there will be fluctuations with the when the closings are done, but just thinking about the basic, you know, run rate for the-
the personnel costs?
Yeah, yeah, I think, yeah, you're right on that. So the run rate is pretty much as it is now, but you should take into account that there will be some variable kind of line items, depending on the fundraising and depending on other kind of performance-related criteria as well. But kind of the underlying is on a quite okay level at the moment.
Okay, thanks. That's all from me.
It seems that we don't have any further questions from the audience. If that's the case, then we will conclude this webcast presentation. Thank you for following Taaleri, and we wish you a pleasant day.
Thank you.
Thanks.