Good morning all, a warm welcome to ABG Sundal Collier's Q1 Result Presentation. I'm very happy you have joined us this morning, appreciate the interest in us. Before we kick off the presentation, I would like to mention that we will, as usual, have a Q&A session after the presentation. Should you wish to raise any questions, please use the Q&A function in Teams, and we will answer the questions in turn. Don't you worry, I've got highly qualified members on my team backing me should there be any tricky questions. Okay, let's start the presentation. Kicking off with a few general reflections before we dig deeper into the numbers.
After what was a promising start to the quarter, with stock markets performing well and some recovery in capital markets activity, we were in March yet again reminded of the negative side effects by basically having a decade of no cost of capital. This time around, it was the collapse of Silicon Valley Bank that spurred financial turmoil, and turbulence in equity as well as in credit market obviously. While contributing to high activity in our secondary brokerage operations, it resulted in some planned primary capital market transactions being postponed or put on hold in March. That said, we were able to complete several capital market transactions as I will come back to later on in the presentation.
While ending up, the quarter 12% short of last year in terms of revenues, I still think this is a fair performance, not least given the market sentiment and compared to our historical track record. In fact, all our business areas improved or were more or less in line with last year, with one exception, and that was M&A. Furthermore, we have been able to grow our staff over some time while keeping a solid revenue per head, not least thanks to us continuing to deliver high quality advice to our client base. On that note, it is very pleasing to see that we were appointed by the Swedish Business Monthly Affärsvärlden, the IPO Advisor of the Year in Sweden in 2022, further building on our leading position in this field.
Furthermore, we are staying committed to the strategy of strengthening our position and offering to clients while keeping our long-term proven track record of profitability. That also means we are intensifying our already strong focus on running an efficient organization and keeping costs under control. We are in better shape than ever, and we are continuously working with developing our business and organization with a clear ambition to reach higher highs and higher lows over the cycles. With that, let's turn to the next slide, please. Looking more specifically into the numbers. As already mentioned, revenues of NOK 426 million in the quarter, down by 12%, as a consequence of M&A being a bit weaker compared to what was a very strong Q1 from an M&A perspective last year.
Operational leverage works both ways, thus, a slight negative impact on our margin, that ended up at 21%. Usually Q1 and Q3 tends to be from a seasonal point of view, our weaker quarters and Q2 and Q4 specifically tends to be stronger ones. Should history repeat itself, this isn't such a bad start after all. Clearly, our revenue and profitability-driven compensation models mitigate some of the negative leverage I talked about, from lower revenues on our operating margin. We'll come back to that in more detail later on in the presentation. As a consequence of revenues, operating margins, and mixed effects from more or less revenues from different geographical operations always has an impact on tax. EPS ended up at NOK 0.12 versus NOK 0.17 the same period last year.
Okay, next slide, please. Talking a bit more about the environment in which we operated in the first quarter. I've touched upon it to some extent. Q1 was supportive for our business with further indications that we have the peak in inflation behind us and the peak in interest rate heights just around the corner. That contributed to rather healthy environment in January and February. Then we had the collapse of Silicon Valley Bank, causing a very non-supportive spike in volatility for our primary business. Fortunately, the markets have settled again, and volatility expressed as VIX is back around the 20 level.
As we usually talk about below 20 is in terms of VIX, a good level to be on over time if we want a very active capital market. We also observed the swiftness in actions taking from authorities and the market participants in terms of, let's say, damage control post the Silicon Valley Bank and avoidance of a financial disaster that would have been the result letting Credit Suisse fail. Ordinary setbacks within a trading range is name of the game and likely to expected and not necessarily a big negative for our business. What we need now is more time for markets to continue to settle in terms of low volatility without any further major new negative surprises, such as banks going belly up. Next slide, please.
Yeah, I've talked about capital markets, primary capital markets being more muted in Q1. This slide might be slightly confusing, with volumes up by 61%, looking at the ECM volumes in the Nordics up by 61% in the quarter versus the same period last year. Note that the increase can almost entirely be explained by an increase in rights issues. Typically, that is a product that is underrepresented in our portfolio as an independent investment bank, and more likely to be overrepresented in the sort of the product portfolio of the lending banks. I will refrain from elaborating why that is the case. It's just an observation.
The capital market did okay in the quarter, with volumes up by more than 50%, led by especially high activity within energy shipping oil-related, oil service and related sectors in not least in Norway or to stating the obvious. M&A markets, on the other hand, has been very weak. As you know, I always talk about the stability in relative stability in M&A. With number of transactions down by 43%, it's anything done stable this quarter. Over time, it's more stable, but it's lumpy, especially Q1, and this was an example of the lumpiness playing out the wrong way.
To some extent, it's also obviously a reflection of underlying fundamentals with funding costs still being on the high side and the spread between buyers and sellers in the private market being still a bit too high to get deals done. However, we start to see signs of this gap closing and expect volumes to improve again in M&A, even though it's difficult to say if it will happen this quarter. Next slide, please. Looking at our performance specifically, starting off with the corporate finance, as mentioned, we were able to close several deals, not least before the mid-March turbulence in markets. In general, activity was very high during short periods of execution windows.
A lot of this happened in mid-February, not all, but a lot overrepresented mid-February. I'm very glad that we were able to execute so many deals under such a short period of time. You can also see that activity for us was higher in Norway compared to Sweden, which to a large degree also is a reflection of the activity on these markets in general during the quarter. Three IPOs completed, two in energy and shipping in Norway, and one in Denmark within healthcare, resulting in ABG having an extremely strong market share in IPOs in Denmark over the last couple of years. A number of high-yield deals closed with a majority of our deals in other sectors than energy, and also including one convertible bond, as you can see there.
All in all, okay activity, I'd say. Next slide, please. Yeah, looking at M&A, which in a historical context, I'd describe as decent. Compared to Q1 last year, of course, a negative development with volumes down by 45%, which is pretty much bang in line with what we've seen in the markets in general during the first quarter. One public M&A worthwhile highlighting in the quarter, Bonnier acquiring 75% of Readly, as well as a number of private deals within different sectors, TMT, energy, and seafood. As mentioned previously, we see signs of the gap closing between buyers and sellers. It's anybody's guess to see if this will materialize in higher volumes within the next couple of months or so.
I would expect, as mentioned previously, volumes within M&A to pick up during the year. Next slide, please. Yeah. One example of our one of our business areas not only being in line, but actually improving year-on-year, brokerage and research that has continued to deliver a very solid result, with revenues up 12% year-on-year versus anything that was easy comps last year. This performance is, to some extent, of course, supported by the turmoil in the financial sector and the volatility this caused. It's not only volatility that that is the name of the game here. I think it's very clear that we have stepped up one level in terms of having a strengthened position within all products within brokerage and research.
Ensuring this historically strong performance not only in the quarter but also providing us with a higher base. Of course, there will be swings in the future, but it will be from a higher base compared to where we were just a few years ago. Continued strong performance, hanging on to market share gains and continuing to take market shares according to our own best knowledge. Next slide, please. When it comes to costs and headcount, this is something we, to some extent, can control and to some extent difficult to control short-term, not least given the inflationary pressures all of us have been hit by as of late. We're doing what we can.
One thing is keeping on to our flexible and, let's say, revenue and profitability driven compensation model. We have also intensified our already strong focus on efficiency and underlying cost reductions. All in all, costs down by 5%. However, the weaker NOK has worked not in our favor, but on the contrary, it has contributed to reported costs being up by NOK 9 million in the quarter. That is obviously something that is difficult for us to do anything about. We're doing what we can with underlying costs. In terms of headcount, we have leveled out around 340 FTEs. We took our foot from the gas pedal last year in terms of recruiting.
We are now working more intensively with performance management and expect this level not to increase. The slight increase in terms of number of staff during the quarter is mainly due to additions from new business initiatives, as I mentioned during the last quarter presentation, i.e., private banking and alternative investments. These businesses are progressing according to plan, by the way, and will contribute to revenues in 2024. With that, next slide, please. If I could summarize what I think are the main key takeaways today and from the first quarter. Number one, with the exception of one product, M&A, all our business areas have stayed pretty much in line or have improved this quarter compared to a rather strong quarter last year.
Capital markets environment was obviously negatively impacted at the end of the quarter. Supporting brokerage, but having a negative impact on primary deals in March. As just mentioned, we are relentlessly working with diversifying our operation and further developing the talent pool to maximize the potential and output of our teams. We have maintained, and we have even increased our focus on efficiency and the streamlining of our operations to ensure we keep and over time improve our strong track record of profitability. With that, I'll open up the floor for any questions.
We have received a couple of questions. The first being, what are your thoughts on the state of the IPO market? Will the window open up soon?
With the obvious disclaimer, I don't have this crystal ball. I'd say that the most important indicator to look at is not stock indices going up by quite a lot from here. What we need now is more time of stability, more time of low volatility. We have encouraging signs from volatility being back around the 20 mark again. We also note that fears of outflows from mutual funds, et cetera, have not proven right, making us optimistic when it comes to the IPO window opening up once this time of stability has passed.
I guess, the boring answer is, give us some time and be patient and, we see a good potential that IPOs will be back on track again. Maybe not to the same extent we saw a couple of years ago, but, at least, on a selective basis.
Considering the drop in ABG's pre-tax profit to NOK 87 million in the first quarter of 2023 from NOK 121 million in the corresponding period of the previous year, accompanied by the reduction in operating profit and revenues, could you provide a detailed analysis of the effects the Silicon Valley Bank collapse and the ensuing market turbulence have had on your primary capital market transactions?
Oh, that was a slightly more detailed question than I have the capacity to answer, to be honest. It's difficult to provide you with some, at least some credibility, a very clear answer on that. What I can say is that it had a negative effect, especially on our Swedish primary capital markets activity planned for post-winter break in March, coinciding with the Silicon Valley Bank collapse, making a few transactions being postponed or put on hold. Given that we have the costs we had during a very short period of time, that obviously had a negative effect in terms of our profitability.
I would say not having those revenues obviously had an impact all the way down to operating profit and earnings per share. I'm not in a position to clearly say if we, relative to peers in March, post that very short period of time, we're talking about a couple of weeks or three weeks, lost or gained market shares. I'm not in that position, I'm afraid.
Could you discuss the current status and future prospects of your diversification strategy with a particular focus on the development and anticipated revenue generating from the new business areas being explored, which are set up to contribute to the income stream starting in 2024?
Yeah, of course. I mean, we are not known. For those of you who have followed us for quite some time, we're not known for being a kind of a new venture business, adding new businesses on a quarterly basis. Now it coincided with two businesses that we have considered for a long period of time, i.e., private banking and alternative investments. For us, the most important trigger has been both technology making it possible for us in a low risk manner, i.e., low cost manner to launch a private bank. In terms of both private banking and alternative investment, having the right team available, and maybe that is the most important part of the equation.
Very happy to see that we have been able to attract these very highly qualified teams and expect them to be able to not only deliver revenues, but also to deliver synergies to our existing operations that fits very well into our strategy of further strengthening our position within our core, as well as adding new revenue streams that are less cyclical. I'm not in the position to give you any numbers, not yet at least. Our internal enthusiasm has not decreased, on the contrary, since the team have actually joined us.
Given that the historical data on average headcount and revenues per head as well as operating costs per head from the initial quarter of 2021 to 2023, can you provide insights into the factors that have contributed to the fluctuations in revenues and operating costs per head?
Starting off with non-compensation cost per head, that has been very stable, and that is a very important KPI for us. For those of you who have followed us for quite some time, you might recall that a million NOK tends to be the number per year in terms of non-compensation costs per head. That is, in spite of inflation increasing quite a lot, stable. You might say it should decrease with a number, a higher staff count. Should the staff count have been stable, it would definitely have increased given the inflationary pressures over the last couple of years. We're not recruiting to keep the non-compensation cost per head stable at NOK 1 million .
Of course, we're recruiting to increase our revenue base, and we're recruiting people that can add to revenues and that can make us more relevant for our clients. In a growth phase, it is with stable markets, often very difficult to recruit and keep the same level of revenue per head stable. We were fortunate to have a strong cycle at the same time as we started to execute on our strategy to improve our position further by recruiting top talent, let's be honest.
Now in more normal or even actually rather weakish markets, I'm very glad to see that we are keeping or having actually a revenue perhaps slightly above historical levels, pre what was in insight a very strong cycle 2021, 2020 and 2021. Any further questions?
Yes, we have one more. Could you discuss any strategic measures or initiatives the company plans to undertake in order to enhance the revenues per head and control the operating costs per head moving forward?
Controlling operating costs per head is something we do on a daily basis. We are obsessed by keeping this track record of profitability, not for the sake of it, because it's very important for us to be humble for the fact we have a lot of shareholders expecting us to do just that. Also it provides us with the stability to make the right decisions over time, that you can do having a strong profitability even in weaker cycles, and not be forced to making the wrong decisions. That is something we work on on a daily basis. In times like this, we are intensifying, making sure, double-checking, triple-checking, cross-checking that we do not have any unnecessary costs and that we work in the most efficient manner. That is on cost.
Revenue per head. Keeping the key to that is obviously having high quality advice provided by top talent. It's easy to say, hard to execute on. Enabling executing on that ties very much into us being profitable and having the capacity to pay accordingly to top talent. Keeping top talent, improving the talent pool, making sure we always provide top advice that making us having more recurring clients and keeping costs under control. Maybe not rocket science, but a lot of hard work.
Great. No further questions as it seems.
Okay. Should there be any further questions, post this webcast, do not hesitate to contact Anna, who will forward accordingly either to yours truly or our CFO, Geir Olsen. Thank you for tuning in.