United Bankers Plc Financial statements bulletin 2017: favourable operating environment and successful mergers and acquisitions support growth

20.03.2018
United Bankers

United Bankers Plc
COMPANY ANNOUNCEMENT February 27, 2018 at 9:00

United Bankers Plc publishes its official Company announcement and press releases in Finnish. This is an unofficially translated summary of the Company announcement published on 27.2.2018 in Finnish. If there are contradictions between the language versions, the official Finnish text applies.

United Bankers Plc Financial statements bulletin 2017: favourable operating environment and successful mergers and acquisitions support growth

January–December 2017 in brief

The figures in this announcement are based on audited consolidated financial statements.
• United Bankers Group’s revenue (income from investment service operations) amounted to EUR 25.0 million (EUR 20.1 million for 1–12/2016).
• The Group’s EBITDA for the financial year amounted to EUR 5.2 million (EUR 2.8 million for 1–12/2016).
• The Group’s operating profit for the financial year totalled EUR 3.6 million (EUR 1.5 million for 1–12/2016).
• Profit for the financial year amounted to EUR 2.3 million (EUR 0.3 million for 1–12/2016).
• Earnings per share were EUR 1.52 (EUR 0.17 for 1–12/2016).

The Board of Directors proposes a dividend of EUR 2.00 per share.
The revenue and profitability of United Bankers Plc (hereafter ‘United Bankers’, ‘the Company’) took a clear upward turn in 2017. The Company carried out several strategically significant mergers and acquisitions during the year. Group structure was streamlined by increasing the parent company’s ownership of UB Nordic Forest Management Ltd and UB Real Asset Management Ltd to 100%. At the end of 2017, the Company also agreed on the largest transaction in its history, the acquisition of the entire share capital of Suomen Pankkiiriliike Oy. The acquisition will increase the assets managed by United Bankers by approximately EUR 600 million. Suomen Pankkiiriliike has not been consolidated in the United Bankers Group’s financial statements for 2017, as the transaction was only completed on January 31, 2018, after all conditions related to the transaction had been resolved. The Extraordinary General Meeting approved the share issue authorisation on January 8, 2018, and the Financial Supervisory Authority approved the deal on 31 January 2018. Another transaction that was important for the expansion of the Company’s sales network was the cooperation agreement concluded with POP Pankkiliitto on distribution of funds.

United Bankers’ customer numbers increased to around 7,700 (approx. 6,500 on December 31, 2016) and assets under management to EUR 2,285 million (EUR 2,000 million on December 31, 2016). Both numbers were once again a record high.
The Group’s solvency remained at a good level.

Key figures

United Bankers Group in 2017

Operational activities back on a growth path

The improved prospects of the global economy supported the positive development of the investment market in 2017. The revenue and EBITDA of United Bankers recovered to a significantly higher level after the weakening in 2016. The Company’s revenue saw a 24.5% increase to EUR 25.0 million. EBITDA, i.e. the Company’s operating result before depreciation, almost doubled to EUR 5.2 million. Operating profit more than doubled and was EUR 3.6 million, despite depreciation connected with mergers and acquisitions increasing further compared to 2016. Earnings per share increased to EUR 1.52 (EUR 0.17 in 2016). The number of people employed by the Group grew to 107 (102 on December 31, 2016).
Total sales of asset management products and services increased by approximately 10% from the previous year, totalling EUR 424 million. The amount of managed assets saw a 14.3% increase to almost EUR 2.3 billion in 2017. United Bankers’ customer numbers increased clearly, totalling around 7,700 at the end of the year.
Asset management service and product sales continued to focus on options that generate stable cash flow. A profitable strategy raised the capital of funds managed by UB Fund Management Company Ltd above one billion euros, after net subscriptions totalled more than EUR 120 million. The most popular funds were UB Fixed Income Plus, UB Forest, UB Nordic Property and UB Smart.

The strong positive development of the forest fund operations of United Bankers continued in 2017. At the end of the year, the capitals of the three forest funds, UB Forest, UB Nordic Forest Fund I Ky and UB Nordic Forest Fund I II Ky, totalled EUR 233 million. United Bankers is a leading Nordic forest fund house and one of the largest forest owners in Finland. The combined forest assets of the funds were close to 80,000 hectares. The targets for investors’ returns from forest funds were also met.

Launched in 2016, the Nordic Property Funds and UB Yritysrahoitusrahasto were able to boost their capital raising during 2017. The capital of UB Nordic Property Fund amounted to EUR 65.9 million at year-end. Investment commitments made to UB Yritysrahoitusrahasto increased to EUR 54 million. The fund has granted loans to Finnish SMEs in the total value of around EUR 30 million.

Equity funds, including the fund capital of United Bankers, totalled EUR 1.1 billion at year-end 2017. The UB LCR Income Fund was discontinued in November due to regulatory changes, which reduced the amount of managed assets by approximately EUR 52 million. One new fund was established in 2017: the UB Real Asset Fund, which invests in forests, properties and infrastructure. UB Pension Fund was merged with the UB Global REIT fund in May.
Structured investment loan sales remained at a good level despite a challenging investment rate environment. UB Asset Management Ltd launched 18 new structured investment loans on the market during the year. Structured loan sales declined by approximately 6% and were EUR 85 million. Various credit-linked bonds continued to be the most popular products.

The number of assignments of investment banking subsidiary UB Capital Ltd grew slightly year-on-year. During the review period, UB Capital acted, for example, as an advisor to investment company Triton when it acquired the Swedish company Anläggning & Kabelentreprenad i Malmö AB (Akea) from Priveq Investment Fund IV L.P. It also acted as an advisor to owners when KEWAB was sold to Triton and when the Swedish Saldab IT AB was sold to Stockholm-listed Dustin Group. Moreover, it acted as an advisor to owners in the sale of Thor Shipping and Transport Ab to Accent Equity Partners AB. Furthermore, UB Capital acted as advisor in a number of non-public transactions.
The profitability challenges of securities brokerage continued, even though the volumes traded went up thanks to positive market development. In 2017, UB Securities continued to focus on improving operational efficiency and building a new trading team. UB Securities Ltd acted as the lead manager of the targeted share issue of Herantis Plc, and participated in the targeted share issue of Kuuhubb Inc. Moreover, UB Securities was the Certified Advisor of Herantis Plc, Nexstim Plc and Suomen Hoivatilat Oyj. The agreement with Suomen Hoivatilat ended when the company moved from the First North market place to the main market of Nasdaq Helsinki on March 1, 2017.

Outlook

The regulation adopted at the beginning of 2018 is estimated to translate into increased costs for the Company and slow down sales in the first half of the year. Aiming to improve investor protection market transparency, the MiFID II Directive requires investments in system development, for example, due to increased documentation and reporting obligations. The system development projects launched to meet the new regulation are still ongoing and involve increased automation by means of digital services. The PRIIPs Regulation on the provision of packaged retail- and insurance-based investment products, on the other hand, may slow down the sales of structured investment products.
The mergers and acquisitions carried out in 2017 are expected to have a positive effect on the revenue and EBITDA of United Bankers in 2018. The merger of United Bankers and Suomen Pankkiiriliike is expected to create synergy benefits already in 2018. The merger of these two companies can be anticipated to improve efficiency and create cost savings related to, for example, administration, information system and web service environments, and marketing. These are likely to take full effect from the beginning of 2019 onwards.
United Bankers has recently concluded significant cooperation agreements that will offer new distribution channels for UB funds. The distribution agreements signed with POP Pankkiliitto and Nordea boost the Company’s selling power both regionally and in digital channels.
Increased distribution power and the increase in assets under management support the future prospects of United Bankers. The Company expects year-on-year growth in both revenue and EBITDA.