ABG Sundal Collier Holding ASA (ABG) Earnings Call Transcript & Summary

Good morning, all, and a warm welcome to ABG Sundal Collier's Q3 Results Presentation. Before we kick off, I would like to, as usual, introduce my co-presenter, Peter Straume, our CEO and Managing Partner for our Norwegian operations. And as always, we are also joined by our CFO, Geir Olsen. Sorry for that, Geir. I'd also like to mention that you may ask questions during or after the presentation using the Team's chat function. So it is a great pleasure indeed to present the strongest ever third quarter in our history. Our top line increased by 55% to NOK 561 million versus what actually was a rather strong finish to the third quarter last year. And bear in mind that Q3 is our seasonally weakest quarter with basically 1 month and change to close transactions. Year-to-date, our revenues exceeded NOK 2.1 billion, which is up by more than 100%. And for the first time, we exceeded NOK 3 billion in revenues over the last 4 quarters. Our business model is working as designed with great operational leverage, as illustrated by our earning per shares on a fully diluted basis being up by more than 200% to NOK 1.02 year-to-date. But maybe, which I think is more important, it is what is behind the headlined numbers that I find most pleasing. We have strong contribution from all markets, all geographies, all products, all sectors. This is a testimony of the strength of our business model and that our strategy being in a leadership position in all products always enabling us to provide and execute on the best advice for our clients, not what suits us as advisers should we have been strong in only 1 or 2 products, is paying off. We have coupled the leadership positions in our product areas with strengthened positions geographically as well as having more clients from more sectors than ever. We strongly believe we have been able to build a more sound and resilient business model than ever. To meet our strategic ambitions to continue to grow and to further build on our capabilities to serve a longer and still growing list of clients, we are continuing to recruit. Competition for talent is fierce out there, no doubt. But I'm very pleased to announce we have been successful in recruiting and we have now reached an all-time high headcount of 320 professionals, and our top priority is to further acquire and develop top talent in our Nordic offices. With that, I would like to dig further into the numbers, and let's flip slide, please. Yes. We have already touched upon revenues with NOK 561 million and NOK 3 billion in the quarter LTM, respectively. Since we are running this business as it is our own, which it partly is, in fact, we are not losing our heads in good times and we still take great pride in our cost discipline. This is further contributing to a very healthy operating margin, which is up from 24% to 36% in the first 9 months of the year. And on an LTM basis, we are at 38% operating margins and a healthy level of earnings per share on a fully diluted basis of NOK 1.48 the last 12 months. So let's flip the slide, please. Okay. We have delivered this set of results with the help from strong capital markets, even though there has been some hesitation and softness introduced in markets as of late. Long-term interest rates started to increase in September, which combined with some tensions in the economic system, including Chinese real estate developers in trouble, spurred some volatility at the end of the quarter. In spite of this, we still noticed strong investor appetite for IPOs and primary placements, even though more selectively and more price sensitive than at the beginning -- compared to the beginning of the year. So with that, I would like to leave the word over to Peter Straume, who will talk more about our markets and performance in investment banking. Please, Peter.

Thank you, Jonas. First, a quick view on sort of the Nordic combined figures. There was a slowdown in the [ equity capital ] market activity as well as listings into the last quarter, with few transactions and several delays. However, the debt capital market is still strong and taking some of the weight away from the equity capital markets. M&A continued to improve with several mega deals. You also see on a daily basis that some delayed equity raising turns into being M&A deals. But all in all, markets are still strong, some slowdown in the equity capital markets part. If you go to the next page to discuss a little bit the performance of ABG. Within corporate financing in the last 12 months, that's been fantastic. We're close to NOK 1.9 billion in revenues. So far, we're up by 176% to close to NOK 1.3 billion [ that we had crossed ]. Q3, as Jonas has mentioned, is normally a less active quarter due to summer obviously but still several important transactions. The secondary placement of -- in Visma, where several leading Norwegian and international investors took part, is one. In Sweden, we have the Cary Group to be listed. On the green side, we funded the Eways with equity and Öyfjellet with a EUR 315 million bond, which is a large number. And of course, the NOK 1.8 billion bond for Crayon to finance their soon completed public to private transaction all the way down in Australia, which is a great example on how we can use the bond market to support M&A. If we go to the next page, please. Our M&A advisory is also growing and ended 80% ahead of last year with NOK 369 million in revenues. Several transactions completed, such as the exciting merger between Cegal and SYSCO, as well as the acquisition of Solera Group by Unibrew. We experienced that M&A is picking up to some extent as an alternative to financing from the market and expect to see increased activity within M&A going forward. By that, Jonas, I leave the word back to you.

Thank you, Peter. And let's continue on the next slide with brokerage and research, where we can conclude that we have continued the strong performance into Q3, with strong gains yet again in revenue growth despite facing rather tough comps year-on-year. Albeit slightly difficult to measure, we strongly believe we have continued to gain ground on market shares. We have proven ourselves yet again through having brokered several block transactions during the quarter, such as the NOK 4.5 billion sale of Entra shares from Folketrygdfondet to Castellum. These type of transactions would not have been possible obviously without our dedication to deliver first-class advice and execution services to our clients. And it's clear that once again, our entire hard-working brokerage team and highly rated research team across all geographies are contributing to our improved standing amongst clients, as highlighted by our year-to-date revenues being up by 25% to just north of NOK 450 million and on an LTM basis, just south of NOK 600 million. We are also continuing to on-board new clients in a pace never seen before. And we have also witnessed some, let's say, pent-up demand of physical meetings, even though we do not expect a return to pre-COVID activity when it comes to physical meetings. Next slide, please. Costs. Well, I've already mentioned, we take great pride in controlling what we can control, and we are still running a tight ship. The increase in operating costs is mainly driven by design and our own actions, by design through the increase in revenue and profitability, driving compensation and bonuses to employees; and by our own actions by front office expansion, especially within investment banking, which is perfectly in line with our strategic ambition to grow and expand our business. Looking at our noncompensation costs, those are rather stable, an increase of NOK 1 million, which is a change, I think, and is an impressive achievement by all that can control the fixed costs, always thinking ahead and thinking another time before on-boarding new costs that we probably don't need. And I think that we should expect the fixed cost base to be relatively stable near term. When it comes to the total cost base, we are obviously not in control of currencies, general inflation. And what we are in control of is new hires that I expect to continue to go up. But once again, fixed cost base, we expect that to be relatively stable. Okay. Next slide, please. Closing remarks. Well, once again, we have delivered the best set of Q3 results ever, with the LTM revenues hitting the NOK 3 billion mark for the first time ever. We have a significantly broader contribution from more sectors, all geographies and all products, contributing to a very balanced revenue mix. And I would say that our franchise has never been in better shape than now. I don't have a crystal ball. But based on our solid and well-diversified pipeline across products, sectors, geographies, we are optimistic about our ability to continue to deliver strong results to our shareholders and partners. We are, of course, humble about the importance of stable and open capital markets to our business short term. But once again, I'm convinced we have built a stronger and better business model than ever. We will focus on raising the bar with higher lows and higher highs. Last but not least, our top priority is to acquire and develop top talent. We have a strong track record of doing just that. And once again, based on our strengthened brands, strong profitability and excellent position in the market, I expect us to continue being successful in increasing and developing our talent pool. So with that, I would like to leave the floor open for any questions.

First question, received. From the outside, it seems like there was several big transactions, especially in Sweden, such as Aktie and Storskogen without ABG involved. Did ABG lose market share in Q3?

There were a few transactions that caught a lot of media attention. Usually, that is the public ones, as mentioned in the question. But if we start to measure market shares on a weekly or monthly quarterly basis, I think we will have high volatility in all competitors, including our own market shares. So no, I wouldn't say we have done that, as highlighted by our results delivering healthy revenues from our equity capital markets. We tend to measure this on a 12-, 18-, 24-month basis, and we still see a healthy increase in market shares on that note.

Next question. We have seen more turbulence on the equity market lately. How will that affect your business?

Well, as stated previously, we are, of course, humble about the importance of stable and open capital markets to our business short term. But once again, since we have many products in our portfolio and the ability to shift track given the leadership position in all projects, I'm convinced we will do well. Having said that, we still see the IPO window being open, albeit with investors being more selective, which we think is sound and actually paves the way for a more sustainable cycle.

Next question raised. You say that talent acquisition is a key priority. In what areas will you grow? And how many do you foresee that you will be in a year?

I think -- sure, I think we will continue to focusing on growing talent pool in our investment banking division, but also selectively within markets and especially research. We now cover 412 companies in our Nordic coverage, which is by far most of any other competitors, and we still see that list expanding. But mainly focused on investment banking. And I think that our headcount will cross the 350 mark within 12 to 18 months.

There is no further question at this point.

Okay. Thank you all for having attended our presentation. And should there be any further follow-up questions, please do not hesitate to contact either Peter Straume or yours truly directly. Thank you so much.

Thank you. Bye-bye.