Active year for investments, good growth in portfolio companies and healthy result
Finland’s economic climate remained challenging in 2015, with declining volumes of both investment and industrial production. Financial markets were fairly stable during the year. Finland’s banking sector is economically sound, but stricter legislation has lessened the availability of loans for companies.
The Finnish private equity and venture capital market continued to develop favourably. This was particularly true for early-stage venture capital investments, in which Finland now ranks among the top European countries when they are proportioned to GDP. Local venture capital funds and later-stage private equity and venture capital funds also exited successfully from numerous investments during 2015.
There is, of course, room for improvement. Compared to their international and Nordic peers, private equity and venture capital investment funds operating from Finland are too small in both the later-stage venture capital segment and in the segments for later-stage investment. In terms of channelling international capital into Finland, we also lag behind our main peer countries. In the case of rapidly growing technology enterprises and SMEs, the number of internationalising companies in these segments that are seeking and capable of growth is limited, which in turn impacts the effectiveness and development of the ecosystem. The aim of Finnish Industry Investment’s fund operations and direct investments is to promote the creation of new success stories by channelling capital on market terms, by placing expertise in portfolio companies and by international networking.
We made new investments in 2015 amounting to €93m. New investment commitments, totalling €67m, were made to seven venture capital and private equity funds and €25m was paid out in new direct investments. Significant events in the financial year included venture capital investments in the international MVM IV fund and in the Finnish Lifeline Ventures Fund II, and also direct investments in: LeadDesk (Venture Capital), Unisport-Saltex (Growth Investments), Kotkamills and Rauma Marine Constructions (Industrial Investments).
Our fund portfolio and our portfolio of direct investments both performed well. In fund investments, portfolio companies increased in value. Direct investments also gained value and portfolio companies grew strongly. Net sales of venture capital portfolio companies, for example, rose in 2015 by some 35% (median) compared to the previous year, while in the industrial investments sector Valmet Automotive landed a new contract for manufacturing the Mercedes-Benz GLC model.
There were more exits than in previous years. Sentica Partners’ social and healthcare provider Pihlajalinna, for instance, listed on the Helsinki exchange while discount retailer Puuilo was sold to Adelis. Northzone sold technology company Avito to South African media corporation Naspers. There were numerous exits from direct investments, also, including sales of shares in Holiday Club, Suominen, Glaston Corporation and Meyer Turku.
Thanks to good market conditions, active portfolio management, value gains in both funds and portfolio companies, and a favourable climate for exits, net gains from investments for the year amounted to €109m, profit for the financial year totalled €86m, and there was a positive net cash flow of €63m.
There has been brisk activity in our investment operations in early 2016 also. We have invested in the Nordic Creandum IV fund, the international cleantech company BMH Technology and the rapidly-growing software providers Vaadin and M-Files, among others. We also signed an agreement with international and Finnish investors regarding investing in pre-school and day-care centre operator Touhula Varhaiskasvatus.
With fund investments we are focusing on continuing to finance Finnish venture capital and private equity funds with the aim of increasing their fund sizes and encouraging international funds to be more active in Finland’s investment market. Our direct investments are focused on internationalising companies needing later-stage venture capital financing and on medium-sized Finnish enterprises seeking international growth. The objective of our investment operations is international networking, improved channelling of capital on market terms, and the strengthening of expertise and active ownership in portfolio companies to enhance their growth, profitability and value creation.
Our profitable year would not have been possible without the hard work of our personnel, stakeholders, investment partners, the management teams and organisations of portfolio funds and companies, and all our other cooperation partners. I extend heartfelt thanks to them all.
President & CEO