CapMan Oyj (CAPMAN) Earnings Call Transcript

Good morning, and welcome to this presentation of CapMan's Half Year Report 2026. Presenting today, we have Pia Kall, CEO of CapMan. And after the presentation, we will have a Q&A session, and you are welcome to send in questions in the chat. Pia, I hand over to you.

Thank you, Charlotte, and welcome, everyone, also from my side. It's a pleasure to present CapMan's half year report. We have continued strong growth in the second quarter. We had record all-time high capital intake and also held first closes in 2 of our important real estate and infra funds. Overall, for the first half, we have reached key milestones on our strategy execution. During the first quarter, we announced the expansion into European infrastructure debt, specifically investing in infrastructure for resilient climate transition in Europe. It's a growing market segment where private debt will play a key role. This is in line with the growth strategy we set out for Real Asset Debt together with CAERUS last summer at the time of the acquisition of CAERUS. At the same time, with this expansion, we also strengthened our presence in Europe by opening an office in Paris. In June, we held the first close in 2 important funds as well. Nordic Real Estate IV fund had a first close supported by both existing and new international investors, institutional investors. This is a fund that continues our successful value-add fund series. And with this first close, good momentum on track to reach our target size of EUR 750 million during 2027 when we expect to reach the final close. In June, we also held the first close for Nordic Infrastructure III fund. It's a fund with very strong investor demand, strong momentum, first close supported by more than 20 institutional investors and it set out to be the largest fund for CapMan Infra with a target size doubling from the second fund. Also here, our plan and expectation to reach a final close, a target size during 2027. When we look at our financials, assets under management, EUR 7.7 billion, all-time high, a continued growth from the first quarter and really supported by record high capital intake in the second quarter. Revenue for the first half year, EUR 31.4 million, a 16% growth, primarily from fee income growth where carried played a more modest role. And comparable EBIT at EUR 10 million, more or less flat from last year, strong fee profit growth, but slightly lower fair value uplift than we had a year ago. When we look at our AUM at EUR 7.7 billion, during Q2, we took in EUR 440 million of new capital. That's an all-time high quarterly intake. And overall, during the first half, some EUR 500 million raised. Capital was raised to real estate, Nordic Real Estate IV, where we had the first close, Infrastructure III, also to open-ended real estate funds and natural capital, our forest fund, Forest IV fund also to gain capital in Q2. In addition, our wealth segment has continued strong capital intake. And our investor base continues to be dominated by really international institutional investors from outside of the Nordics. This capital that we're raising is responsibly invested across the Nordic societies being part of building the society of the future. When we look at our total portfolio, it's really our real asset-focused investment strategies that continue to grow fastest, more than EUR 6 billion of our assets under management now in this segment. Real Estate at EUR 3.9 billion had several successful exits during the first half, also now adding AUM to the first close in Nordic Real Estate IV. In infra, strong development in the portfolio. We announced exit from Valokuitunen in Q1, which held its closing in July and now also with the third fund having its first close growing, so at EUR 0.8 billion AUM at the end of the period. Natural capital continuing to take in capital in the fourth fund and also completed exits in the Baltics, 2 portfolios, returning excellent returns to our investors. And real asset debt still primarily focused on real estate debt through CAERUS, but now also expanding into European infrastructure debt. With this business model, the value drivers really for us in the asset management business, the fee income and related fee profit from our funds and carried interest when successful exits are realized in the funds. From our balance sheet investments, investment returns that are supporting value creation for shareholders and also supports the growth of our asset management business. Looking at the key financials and the key drivers for the first half, fee profit at EUR 3.6 million, growing 28% compared to last year, significantly faster growth than fee income, demonstrating the scalability of our business. Net carried interest from this period, EUR 0.3 million, modest. But when we look into the second half of the year, we already have visibility and expect carried interest materials from the exits that are in progress. When it comes to our balance sheet, investment returns, a fair value uplift of EUR 6.2 million, 3.4% for the first half year. Our own funds contributing stronger, EUR 6.6 million, and the total portfolio now standing at EUR 173 million of fair value. When we look at the fee income and fee profitability development for the period, fee income, 16% growth above our long-term financial targets. And if we look at the underlying development comparing Q2 to Q1, we had successful exits generating significant cash flow for us, but then also reducing the fee-paying assets under management. And on the other hand, very successful fundraising in the second quarter, but with the closings held late in June. So that capital is not yet contributing to fee income in Q2, but will be contributing from Q3 onwards. Still overall strong growth. And fee profit continuing to grow even faster than fee income at a 28% growth, reflecting the scalability of the business as we grow. Fee profit margin also continued to improve despite that we, in Q2, had some growth initiatives and also cost for establishing infra debt. We continue a strong focus on cost control and also continue to deploy our internal effectiveness measures through implementing AI and automation in our processes. These initiatives aim for a platform where we can handle significantly higher assets under management with basically the same cost base in the platform. And this is also why we expect a continuing fee profit margin improvement, but the real uplift in that margin will really be seen when we reach final closes in our large funds and that large AUM growth is coming through. Looking at our balance sheet and our investments, a well-diversified private asset portfolio. At the end of the period, EUR 51 million of cash and the investment portfolio at EUR 173 million in fair value. End of the period, EUR 69 million in remaining commitments into our funds, somewhat up from Q1, and we also expect the number to continue to somewhat go up as we make our house commitments into the funds when they give their first closes. During the first half, we had a positive EUR 10 million cash flow from our investment operations. And also when we look into Q2, we expect this positive development to continue, not least because Infra I's exit from Valokuitunen was closed in July, and there's also other exits being pursued that will generate positive cash flow. This is overall a trend that we expect to continue with also over the coming years, on average, fund investments, distributions from exits being done, clearly exceeding the new capital drawn to meet fund commitments. And as a whole, that we're generating a positive cash flow for the group. Looking at the fair value changes for the first half year, EUR 6.2 million uplift. Our own funds across the board contributed positively, EUR 6.6 million, 4.5% fair value uplift. So on an annual basis, a 9% uplift. External funds, more or less flat, slightly negative, a minus 1.1% fair value development, taking down the total. And combining this, looking at the comparable EBIT development, EUR 10 million at the -- for the first half year, strong contributors, fee profit growth and fair values, still fair value changes somewhat below those of last year, meaning that we end at EUR 10 million EBIT instead of last year's EUR 10.6 million, but really fee profit continuing to drive good growth. Our balance sheet and our liquidity continues strong. Equity ratio at 58.5% and cash and other short-term financial assets at EUR 50 million with an additional undrawn credit limits on top of EUR 20 million means that we have a strong liquidity to support growth and growth initiatives and financial stability to continue to pursue our strategy. Looking then more ahead, if we start by looking at the external market environment. What we saw during the first half of this year is continued positive signs in the market of both the fundraising market turning, driven by that the transaction market continued to show positive signs and revival. Overall, long-term forecasts are expecting assets under management in European real asset funds to continue to grow above 10% per year. And in an environment that we have at the moment with geopolitical uncertainty, economic uncertainty, real asset investments are strongly positioned, investments like infrastructure, real estate, timberland, offering to investors investments that are diversifying and more stable, more controllable outcomes than many other asset classes. In addition, at the moment, when we're seeing a disruption from artificial intelligence in the market, disrupting both business models, but also valuations, here, again, when we look at real assets specifically, we expect to see positive effects for more efficient asset management opportunities, but at the same time, on average, less negative impact as AI is not able to replace real assets like real estate properties or infrastructure. So net-net, expecting more of a positive impact there. Also looking at the market from a geographical position, the Nordics and Europe in general is well positioned. The Nordics with stable political environment and stable economies are attracting capital basically from all continents at the moment when investors are looking for places to invest long-term capital. We continue to deliver on our growth strategy towards our strategic objective to reach EUR 10 billion of assets under management by the end of 2027 and implementing our strategic initiatives through the CapMan WINS programs. Reaching our EUR 10 billion assets under management target by end of '27 requires on average a 16% growth in AUM during '26 and '27, whereas over the past 3 years, with quite heavy market headwinds, we have been able to grow 20% per year. And now at EUR 7.7 billion, we are on a good track to reach our objective. And if we look at the contribution from different investment areas in more detail and the ongoing fundraisings, which will take us to our objective when we reach the target sizes there, when we look at real estate, significant contribution. Here, we have the Nordic Real Estate IV fund with now the first close held and the target size of EUR 750 million. In addition, we have our open-ended funds directed at institutional investors that continue to attract capital. And on average, we have been raising some EUR 300 million per year into these funds. In infrastructure, important milestone now with the third fund, first close in place and a target size of EUR 750 million for that fund. In natural capital, we held the first close in the next flagship fund, European Forest IV fund, in December and continued fundraising to gain capital now in Q2, and also see good momentum and investor appetite for that fund going forward. Within real asset debt, CAERUS VIII fundraising continues. Target size at final close some EUR 500 million. And now we are also going into infrastructure debt, where fundraising and investor discussions will be started towards the end of this year. Within private equity and wealth, our wealth segment and especially the IP programs and other wealth products have on average taken in some EUR 200 million of new assets under management per year. And now during the first half, also continuing that space with a capital intake of roughly EUR 100 million. In addition, Nest IV, Special Situations II in fundraising and Growth IV planning for fundraising when we come into next year. Taking a deeper look then at the 2 important real estate and infra first closes that we held in June. So Nordic Real Estate IV is the fourth vehicle in our value-add fund series, and we held a first close there on the 17th of June, supported by both existing and new international institutional investors. The fund is well positioned and the timing is very good for this fund to take advantage of the attractive Nordic real estate market with the repricing that we have seen and attractive pockets of investment opportunities. And the fund has already secured the option for its first deal, a compelling residential project in Copenhagen, and we also have several other attractive opportunities in the pipeline. So expect to deploy capital very fast in this fund. Target size, as said, EUR 750 million, which we expect to reach during 2027. In Nordic Infrastructure III, it's the third vehicle, continuing our successful infrastructure investment focused mid-market Nordic investments. And here, we held a first close on the 24th of June, strong momentum, strong appetite for the fund and the first close was supported by more than 20 institutional investors with both Nordic and international ones and especially on the international side, several investors who have already reserved capital to further commitments during the year when the fundraising continues. Also here, a strong attractive investment pipeline in the market and the fund in a position to make first investments still during this year. Building on the strong momentum here, we expect to reach the target size of EUR 750 million also here during 2027. Looking at the portfolio then, value creation has continued strong across our investment areas and funds, and also transaction activity has remained high. 10 new investments during the first half of the year, spanning across real estate, growth, infrastructure and natural capital. When it comes to the exits, several very successful exits. In first quarter, we announced Valokuitunen exit from the Infra I fund, which closed now in July. And during the second quarter, Nordic Real Estate III fund doing excellent exits, both in Finland and in the Sweden. And the second growth fund exiting Silmaasema in June. And a couple of more words around Silmaasema, which is a stellar example of the value creation we do in our growth investment area, supporting entrepreneurs in driving growth in their businesses. So in June this year, the fund signed an agreement of the sale of Silmaasema to Terveystalo. During our ownership period, the company developed into a market leader in its sector in vision and eye healthcare in Finland, and also showed very strong financial development, growing clearly above the market rate, average revenue growth, 16% per year, which means that revenue doubled during our ownership period. And at the same time, profit quadrupled, so very strong -- even stronger profit development than revenue development. And a schoolbook example of the type of companies our growth strategy is supporting. In addition to the value creation in our funds, we are also continuing to develop our own operations, building scalable operation and systematically now deploying AI automation and technology across our platform operations. We have, over the past year, had several development initiatives that are now being implemented to, on one hand, enable scalable revenue growth, being able to manage more assets under management with the same platform resources and that way also driving effectiveness, efficiency and cost savings by streamlining our operations and automating a lot of manual work steps. Here, the target is to really be able to keep platform cost as such or on a more or less flat basis even if we, under this strategy period, double our assets under management and that way with growing AUM growing fee profit margin significantly. Sustainability also continues to be an integral part in all of our operations, both in our own and in our funds, preparing our assets for resilience in the current market and that way also creating financial returns. This work also recognized in international benchmarks, where we continue to improve our scores and in '25, already reached stellar scores across our funds with 4 or 5-star ratings in the international risk ratings and also being recognized by the ISS STOXX benchmark on ESG, where we are among some 180 global asset manager ranked in the first decile. Continuing on this path of implementing and executing on our growth strategy, we are well positioned for continued profitable growth. Looking at our strategic objectives of EUR 10 billion by 2027 in assets under management, we are now at EUR 7.7 billion. Fee income will follow assets under management development. And here, we also now, if we look at the last 12-month basis, at EUR 63 million and continue growing from last year. Fee profit growing even faster as our scalability initiatives are coming through in the numbers and continued fee profit margin improvement expected also going forward. A recap of our long-term financial objectives here at the end. So revenue growth target to grow above 15% per year for the first half, now at 16%, exceeding that. Return on equity above 20%. We were at 7% at the end of June. Equity ratio exceeding our target at 59%. And for this year, the AGM has made a decision on a EUR 0.12 per share dividend, of which half has already been paid. When it comes to the outlook for the year, it remains unchanged. We estimate assets under management to grow and also fee profit to continue to grow compared to last year. Thank you.

Thank you very much, Pia. We also welcome Atte Rissanen to the stage, CFO of CapMan. So let's start with questions with the audience here, please.

Jaakko Tyrvainen from SEB. At least to me, the fee margin was perhaps somewhat surprisingly down during the quarter compared to the previous quarters. Was this just because of the timing, as you explained, the timing of the exits and then the fact that the new AUM came in, in the very end of the quarter? Or is there something else in this quarter-on-quarter volatility?

Yes, I can take that then. Pia, feel free to expand after my answer. But yes, basically, I would say that you are hitting the nail on the head. So H1 fee income grew by 16%. Fee profit grew by 28%. But then if you look at Q2, we had very good exit activity. We had exits from infra. We had the PDS exits materializing, basically exits eroding the fee base, but on the other hand, providing the very good cash flow from investments that we saw during Q1, the fund investments generating EUR 10 million positive cash flow for us during Q2 or during H1. And of course, that coupled with the fact that the very good AUM intake was at the end of the quarter, that means that it doesn't generate fee income yet during Q2, but will generate some EUR 5 million on an annual basis going forward. So that is basically what you're seeing here. And also when you look at the cost side, well, you could see personnel expenses basically flat compared to Q1. On the other operating expenses, of course, there's some AUM-linked placement agent fees, for example. And we did have some costs that we've taken now in relation to the establishment of the new infra debt investment area. But overall, I'd say the main point is that we have good visibility now going forward with the AUM that we've raised and as well. So that means good visibility on the fee income, good visibility on the cash flow generation and also hopefully carry during H2.

Very good. Explains a lot then, and you answered already to my couple of next ones. But you noted that the real asset is the place to be under the AI disruption. Is this widely kind of a recognized thing also among the investors? And on the other hand, you have also the growth fund. Have you seen the AI revolution causing pressure on the fair values over there?

Thank you. So let's take it into 2 parts, the question as it is. I would say, among investors, what we see is some of them clearly kind of diversifying by going into real assets because it is less volatile, and it is easier to predict the outcomes when you have real assets that are backing the investments. At the same time, I think we should be humble and say we are in the beginning of a disruption. So exactly how it will play out, I don't think anyone has the crystal ball. But overall, the fact is that you cannot replace physical properties or infrastructure or forest with AI. So in that sense, it is a more stable asset class and investors are clearly also seeing that when they look at their overall portfolios. And it goes both for the equity and the debt side where our debt side is also focused on real assets. When it comes to growth in our private equity portfolio, there what we've seen so far is when it comes to the peer valuation and the peer group valuations, there you clearly see an impact from AI, especially on the software side. At the same time, when we look at the portfolio development, it is fair to say that not all software companies are reacting the same way and some will be very much needed also in an AI era. And there, we have seen continued very strong operational performance in our portfolio. So the impact so far has been solely from the external peer valuation benchmarks.

Very good. Then the final one on the new funds that are seeking clearly higher fund size overall in the final closing, have you seen the average ticket size increasing in the first closing compared to those predecessors?

We clearly see ticket sizes increasing, and we see that we have investors who have been following us now for several vintages, who now see that the target sizes that we have are such that they can deploy the type of tickets that they want to deploy per fund. And we have previously been too small, but they have liked the investment strategies we've had. And now they are clearly interested in this fund and joining this fund. So that's why we also attract new investors into these funds because they are international investors for whom you need to be above EUR 700 million for them to even consider investing. So we have both new coming in with large tickets that way. And we have existing investors who have maybe cut somewhat their ticket sizes in previous funds to match the sizes that we've had and who are now increasing ticket sizes. So from both of those angles, we see average ticket sizes going up and also new investors really looking at the fund.

Sauli Vilen from Inderes. About the headcount, the headcount came a tad down during Q2. Is this just like a quarterly volatility? Or do you actually see that the headcount should flat out now? I guess it's one of the key drivers behind the flat cost base you're aiming.

Between these quarters, it's just normal fluctuation. And here, thinking forward, where the effectiveness and the automation really takes hold, now the first wave of implementation that is in the platform. And there, we expect to be able to kind of keep the cost. Of course, when it comes to investment operations, that is still somewhat people-dependent. You need a certain amount of individuals, investment professionals per target assets. So there it will not stay flat, but clearly there's scalability also there. But now quarter-on-quarter, no dramatic changes. It's just fluctuation.

Then you referred to the flat cost base in '27 or flattish cost base, I guess, on '27 or once in your CEO review. Just to clarify on that, does that also include bonuses and possible like the distributor fees on the fundraising? Or are those like excluded on that?

Yes. Just to clarify, I think Pia was referring to the platform cost staying flat, so basically the support organizations. Of course, within the investment teams, when the operations grow, there are variable items that grow in line with -- so for example, variable compensation, those will not stay flat when top line goes forward. But the fee margin will improve notably. We're not saying that the '27 cost base will be that of the entire group cost base, will not be at the '25 level.

Okay. That's clear. Then about your own commitments and on the for the real estate and infra on both, you made roughly EUR 10 million commitment on those funds. Do you see that that's the amount? Or do you see you need to top that up going forward?