CEO COMMENT - THIRD QUARTER 2020
”The third quarter of 2020 has been busy with activities across the board. On the transaction side, EQT’s thematic investment strategy continues to identify and execute attractive opportunities, with Danish based Natural Colors being a good example of a company supported by the sustainable consumer health and environmental megatrends. In total, we signed investments of EUR 6 billion and the pipeline continues to look stable. The portfolio value creation agenda is on track, but market uncertainties related to the pandemic remain. Even though only a few of the portfolio companies operate in the hardest hit sectors, a second wave and a prolonged pandemic may have a negative impact across the portfolio. Looking ahead, a number of strong EQT fund portfolio companies are being prepared for exits, should market conditions remain supportive.
There is a good demand for EQT funds, with the EQT IX and EQT Infrastructure V fundraisings running according to plan. In early October, EQT Real Estate II was closed at EUR 1 billion. I am also excited about the launch of EQT Growth, another core area for EQT’s future expansion. With numerous growth opportunities in existing strategies and the launch of new strategies, we see the need to accelerate investments in people and our platform into 2021. Looking forward, we will continue our purpose-driven approach, both in EQT AB and the portfolio. We see continued structural growth and interesting long-term opportunities for EQT while remaining vigilant for risks.”
Christian Sinding, CEO
HIGHLIGHTS DURING THE THIRD QUARTER 2020
- Total investments by the EQT funds in the quarter amounted to EUR 6.0bn
- Investments announced during the quarter include IFS in Sweden (EQT IX and EQT VIII), idealista in Spain (EQT IX), Chr. Hansen Natural Colors in Denmark (EQT IX), Colisée in France (EQT Infrastructure V), EdgeConneX in the US (EQT Infrastructure IV) and the launch of a joint-venture to build rental homes in the UK (EQT Real Estate II)
- Total gross fund exits in the quarter amounted to EUR 1.9bn
- Expected value creation (Gross MOIC) remains ”On plan” in key funds in Private Capital and Real Assets, while EQT Infrastructure III, as of September 30, 2020, continued to develop ”Above plan”
- EQT IX was activated and started generating management fees, as announced on July 14, with EUR 13.3bn of commitments as per September 30, 2020
- EQT VIII had a step-down in AUM-base of EUR 3.4bn
- The hard cap for EQT Infrastructure V was announced at EUR 15.0bn. EQT AB currently expects to recognize management fees from EQT Infrastructure V from November 1, 2020
- The hard cap of EUR 1.0bn for EQT Real Estate II was reached
- Investment level in key funds as of September 30, 2020, excluding events after the reporting period: 15-20% in EQT IX (0%), 80-85% in EQT Infrastructure IV (50-55%) and 5-10% in EQT Infrastructure V (0%)
- EQT VII Gross MOIC increased from 1.7x in the second quarter to 2.0x in the third quarter
- The divestment of Credit is expected to close during the fourth quarter
- Following high activity level throughout the organization and in preparation for the next step of EQT’s growth journey, investments in personnel will be accelerated in the coming quarters to future-proof e.g. Client relations and capital raising, EQT technology and Fund management
- From September 24, 2020, Partners continue to be subject to lock up agreements towards EQT AB, with the right to pledge shares to a bank, as described in the IPO prospectus. Further, EQT AB has granted waivers from lock ups on EQT AB shares for a limited number of individuals, primarily related to discontinued and divested business lines. Under the waivers, shares representing less than 1.5% of EQT’s share capital are expected to be divested. Any sale process would be coordinated by EQT AB
HIGHLIGHTS DURING THE LAST TWELVE MONTHS (COMPARED TO LTM ENDING SEPTEMBER 2019)
- Total fund investments of EUR 9.6bn (EUR 10.5bn)
- Total gross fund exits of EUR 4.2bn (EUR 5.3bn)
- Fee-generating AUM of EUR 46.5bn as of September 30, 2020 (EUR 36.8bn). This change is primarily driven by the activation of EQT IX during Q3 2020
- Number of full-time equivalent employees and on-site consultants (FTE plus) amounted to 709 (636) at the end of the period, of which FTEs amounted to 657 (579)
EVENTS AFTER THE REPORTING PERIOD
- The EQT Growth strategy was announced on October 19 with Microsoft Corporate Vice President Marc Brown joining as Partner and Head. With EQT Growth, EQT will be among the very few private markets firms in the world with investment strategies that address the needs of companies throughout their lifecycle
- On October 16, EQT Infrastructure V announced the acquisition of a stake in Deutsche Glasfaser. With the investment, EQT Infrastructure V is expected to be 10-15% invested based on its target fund size of 12.5bn
- Thomas von Koch, Partner and previous Managing Partner, being one of EQT’s most senior investment professionals, has decided to revert to focus on EQT funds’ investment activities. As a consequence, he is leaving the Executive Committee as of October 2020
Presentation of EQT AB’s Q3 2020 announcement
Financial analysts and media are invited to participate in a conference, including a presentation at 08:30 CEST.
The presentation and a video link to follow the conference live can be found atwww.eqtgroup.com/shareholders/financial-reportingand a recording will be available afterwards.
To participate by phone, please use the following dial-in details below, at least 10 minutes in advance.
Sweden:+46 856 642 651
Confirmation Code: 65003104
Information on EQT AB’s financial reporting
The EQT AB Group has a long-term business model founded on a promise to its fund investors to invest capital, drive value creation and create consistent attractive returns over a 5 to 10-year horizon. The Group’s financial model is primarily affected by the size of its fee-generating assets under management, the performance of the EQT funds and its ability to recruit and retain top talent.
The Group operates in a market driven by long-term trends and thus believes quarterly financial statements are less relevant for investors. However, in order to provide the market with relevant and suitable information about the Group's development, EQT publishes quarterly announcements with key operating numbers that are relevant for the business performance (taking Nasdaq's guidance note for preparing interim management statements into consideration). In addition, a half-year report and a year-end report including financial statements and further information relevant for investors is published. Finally, EQT also publishes an annual report including sustainability reporting.
Kim Henriksson, CFO, +46 70 665 41 23
Olof Svensson, Shareholder Relations Director, +46 72 989 09 15
Nina Nornholm, Head of Communications, +46 70 855 03 56
EQT Press Office, [email protected]
This is information that EQT AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 07:30 CEST on 21 October 2020.
EQT is a purpose-driven global investment organization with a 25-year track-record of consistent investment performance across multiple geographies, sectors, and strategies.
EQT has raised more than EUR 75 billion since inception and currently has around EUR 50 billion in assets under management across 20 active funds within three business segments – Private Capital, Real Assets and Credit. With its roots in the Wallenberg family's entrepreneurial mindset and philosophy of long-term ownership, EQT is guided by a set of strong values and a distinct corporate culture. EQT manages and advises funds and vehicles that invest across the world with the mission to future-proof companies, generate attractive returns and make a positive impact with everything EQT does.
The EQT AB Group comprises EQT AB (publ) and its direct and indirect subsidiaries, which include general partners and fund managers of EQT funds as well as entities advising EQT funds. EQT has offices in 17 countries across Europe, Asia Pacific and North America with more than 700 employees.
More info: www.eqtgroup.com
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