ceo speech east capital explorer annual general meeting 2016 · 12% frontier markets fund 27...
TRANSCRIPT
CEO Speech East Capital Explorer Annual General Meeting 2016
9 June 2016
2
East Capital Explorer
- A company in transformation
3
Strategy, efficiency and capitalallocation for increasedshareholder value
1. Refining strategy3. Distribution of
capital to shareholders2. Efficient Operations
Increased Shareholder value
4
1. Stronger yield with a morestreamlined portfolio
1. Refining strategy 3. Distribution ofcapital to shareholders
2. Efficient Operations
Increased Shareholder value
5
Divestments and investments in line with the refinement
22,5
3,3
21,5
9,1
7,4
INVESTMENTS DIVESTMENTS
PORTFOLIO ACTIVITY 2015, EURM
3 Burės East Capital Baltic Property Fund III East Capital Russia Domestic Fund East Capital Frontier Markets Fund East Capital Deep Value Fund
IN TOTAL 25.8
IN TOTAL 38.0
Private equity36%
Real estate24%
Public equity40%
6
From public equity to private equity and real estate
2012
Private equity23%
Real estate6%
Public equity
71%
2014
Private equity36%
Real estate24%
Public equity40%
7
From public equity to private equity and real estate
2012
Private equity49%
Real estate28%
Public equity23%
2015
Private equity23%
Real estate6%
Public equity
71%
2014
8
Good conditions in the Baltics
• Combining growth of Eastern Europe with stability of Western Europe
• Growth driven both by domestic and foreign demand
• Low political and economic risk
• No currency risk
Other countries
18%
Other countries
14%
Balkans14% Balkans
13%
Russia27%
Russia16%
Baltics41%
Baltics57%
0%
20%
40%
60%
80%
100%
Q4 2014 Q4 2015
9
2. Increased profitability with efficient operations
3. Distribution ofcapital to shareholders
2. Effektiv verksamhet
Increased Shareholder value
2. Efficient Operations1. Refining strategy
10
Significantly lower costs with internal investment organization
• Termination of Investment Agreement with East Capital at the Extraordinary General Meeting on 9 May 2016
– In-house investment organization
– Increased cost efficiency
– Increased transparency
11
3. Attractive returns as shareholders receive part ofvalue
3. Utskiftning av kapital till aktieägarna
2. Efficient Operations
Increased Shareholder value
1. Refining strategy
3. Distribution ofcapital to
shareholders
12
Dividend policy which reflects our underlying cash flow
New dividend policy 2015:
"Dividends equivalent to at least 50% of received dividends from the Company's holdings and, in addition, redemption and repurchase may be used"
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
2009 2010 2011 2012 2013 2014 2015 2016
% of market value
Buyback Dividend Redemption Proposed dividend
EUR 76m distributed to shareholders since 2009
Dividend proposal 2016: 0,80 SEK per share…
… in combination with repurchaseprogram linked to the NAV discount
*Ongoing
*
*
Portfolio development 2015
28%
11%
2%
11%
Baltic Property Fund II
11%
Baltic Property Fund III
1%
Deep Value Fund16%
3%
12% Frontier Markets Fund
5% Other short-term, incl cash
15
Portfolio December 2015
Private Equity
Real Estate
Public Equity
Short-term Investments
Private equity
Real estate
Public equity
Short-term investments
28%
11%
2%
16
Private equity
Private equity -0,1% during 2015• Average IRR 7,1%
17
Starman
Starman +15,8 % during 2015• From Estonian operator to pan-
Baltic market leader• Acquisition of Cgates financed by
ECEX• Strong organic growth and the
highest profitability in the market
18
Starman
Starman +15,8 % during 2015• From Estonian operator to pan-
Baltic market leader• Acquisition of Cgates financed by
ECEX• Strong organic growth and the best
profitability in the market
Exit 2016 • Realized profit at least EUR 35m • IRR 24-27% net
11%
19
Melon Fashion Group
Melon Fashion Group -24,3% during 2015• Valuation in RUB -17%• Successful focus shift from growth
to profitability• 12% growth and 6% margin despite
a weakened market
2%
20
Trev-2 Group
Trev-2 -16,9 % during 2015• Continued streamlining and
disposal of non-core businesses• Strong dividend equivalent to 11%
yield • Stronger order book for 2016
11%
Baltic Property Fund II
11%
Baltic Property Fund III
1%
21
Real estate
Real estate +11,1% during 2015• Average IRR 10,6%
11%
22
3 Burės
3 Burės +14,1 % during 2015• Low to zero vacancy• Strong cash flow used for
amortization of loan • Building permit for a third building
Baltic Property Fund II
11%
Baltic Property Fund III
1%
23
Baltic Property Fund II & III
Baltic Property Fund II +9,8 % during 2015 (III newly launched)• 6 commercial properties with
strong and stable cash flows• Dividend 4% in May 2016, semi-
annual dividends going forward
Deep Value Fund16%
3%
12% Frontier Markets Fund
24
Public equity
Public +1.2% during 2015• Average IRR -0,5%
Deep Value Fund16%
25
Deep Value Fund
Deep Value Fund +1,6 % during 2015• Gives exposure to small and medium sized
companies in Eastern Europe with high potential for revaluation
• Strongly affected by the Russian market and the general sentiment
3%
26
Komercijalna Banka Skopje
KBS +16,7 % during 2015• Continously improved
profitability due to high netinterest margins
• Return on equity 5%
12% Frontier Markets Fund
27
Frontier Markets Fund
Frontier Markets Fund -1,9% during 2015• Global exposure to young and
growing markets• Large valuation discount
compared to both emerging and developed markets
• Volatile year due to global and regional events
28
NAV & Share development
Full year 2015
- NAV/share: -1,2%
- ECEX: +22,1%
- Index: -10,7%
Past 3 years
- NAV/share: +6,4%
- ECEX: +42,9%
- Index: -24,8% 20
30
40
50
60
70
80
90
100
ECEX NAV and share price vs. MSCI Emerging Markets Europe 3 years (SEK)
ECEX NAV/share ECEX share MSCI EM Europe
The future
30
Much has been done…
1. Refining strategy3. Distribution of
capital to shareholders2. Efficient Operations
Increased Shareholder value
31
.. but the journey continues
1. Continued value creation in current investments
2. Further refinement of the portfolio
– The Baltics still in focus
– Exit from public equity funds
3. Building of an internal investment organization and review of corporate structure
4. Distribution of capital to shareholders
– Buyback program continues
1. 4.3.2.