Summary of Ferd’s financial results for 2018
Ferd’s value-adjusted equity at the close of 2018 has been temporarily calculated to be NOK 31.4 billion (NOK 32.3 billion at 31 December 2017). There was significant variation in the results achieved by Ferd’s business areas in 2018, with the returns generated ranging from 12% to -11%. The return on value-adjusted equity for Ferd as a whole has been temporarily calculated to be -2.2% for 2018. The Nordic stock market fell 6.1% in 2018 in NOK terms (MSCI Nordic Countries), with all the world’s major stock markets also generating negative returns.
The return on Ferd Capital’s combined portfolio has been temporarily calculated to be -2.9% in 2018. Most of the business area’s private companies reported stronger earnings in 2018 than in 2017. Ferd achieved a return of 12.2% on its real estate portfolio, with the majority of Ferd Real Estate’s projects progressing well. Ferd External Managers reported an aggregate return of 2.4% (in USD terms) on its four investment mandates. Ferd Invest reported a return of -10.8% in 2018.
Ferd invested NOK 2.7 billion in 2018. The two largest investments it made in the year were in Mnemonic, a cyber security company, and in Benchmark Holdings, a British listed company. Ferd received significant dividend payments from its private portfolio companies and reduced its holdings in Petroleum Geo-Services (PGS). Ferd’s fund investments paid out NOK 900 million and fund units totalling NOK 500 million were sold at the beginning of the year. Ferd realised over NOK 800 million from real estate sales in 2018. In total, Ferd’s realisations in 2018 exceeded new investment by NOK 1.8 billion.
Ferd had NOK 12.1 billion of available liquidity at the close of 2018. In addition, Ferd has un-drawn credit facilities totalling NOK 7 billion. At 31 December 2018 Ferd’s bank deposits and money market fund investments totalled NOK 2.4 billion, which represents 7.6% of Ferd’s value-adjusted equity. The value of Ferd’s listed shares, equity fund investments and liquid hedge fund investments was NOK 9.7 billion.
Composition of Ferd’s value-adjusted equity at 31 December 2018:
Ferd Capital is a long-term investor that has an active ownership role in its portfolio companies during Ferd’s ownership period in order to ensure the best possible value creation. The business area has three investment mandates: Private companies, Listed companies and Special Investments. The Ferd Special Investments mandate permits investments in financial instruments relating to most aspects of corporate capital structure, and these investments are not subject to any requirements in respect of ownership interest or influence. Ferd Capital’s largest investments at 31 December 2018 were Elopak, Aibel, Interwell, Mestergruppen, Brav, Fjord Line, Fürst, Mnemonic and Servi, as well as its investments in the listed companies PGS, Scatec Solar, Benchmark Holdings, Boozt, NKT and Nilfisk.
The combined value of Ferd Capital’s three portfolios at 31 December 2018 was NOK 16.9 billion. The majority of the private companies reported stronger earnings in 2018 than in 2017, although some of them reported a decrease in earnings. The multiples for many companies that are comparable to the private companies in Ferd Capital’s portfolio decreased in 2018, causing the valuations of Ferd’s private companies to be lower at 31 December 2018 than at the end of the previous year. The highest returns from Ferd Capital’s portfolio of listed investments were from Scatec Solar and PGS, while NKT delivered the weakest return. The return from Ferd Capital’s investment in PGS was very strong due to that Ferd reduced its holdings by NOK 800 million in July 2018.
The allocation of Ferd Capital’s investments between the three mandates at 31 December 2018:
Ferd Invest is a financial investor that invests in listed Nordic companies. Its target is to generate a return that is higher than the return on its Nordic benchmark index. Ferd Invest’s mandate does not stipulate limits with regard to the allocation of investments between countries or sectors. The portfolio is concentrated, which means that significant variation in relative return must be anticipated from time to time.
The value of Ferd Invest’s portfolio at 31 December 2018 was NOK 3.6 billion (NOK 4.0 billion at 31 December 2017). Ferd Invest generated a return of -10.8% in 2018. This represented underperformance relative to the portfolio’s benchmark index of 4.9 percentage points. The business area’s investments in Thin Film, Otello and Cxense were the main reason for this underperformance, with these three companies together reducing the portfolio’s return by 5.8 percentage points.
The largest investments in the portfolio at the close of 2018 were Novo Nordisk, Norwegian Air Shuttle, Nokian Renkaat, ISS and Essity.
Allocation of Ferd Invest’s portfolio between the Nordic stock exchanges at 31 December 2018:
Ferd External Managers
Ferd External Managers comprises the four investment mandates Relative Value, Macro, Global Equity and Global Fund Opportunities. The investment objective for these portfolios is to generate attractive risk-adjusted returns over time, both in absolute terms and relative to their respective markets and indices.
The market value of the Ferd External Managers portfolios at 31 December 2018 was NOK 4.3 billion. The portfolios, which are managed and measured in US dollars, produced a total return of 2.4%. The portfolios produced a good return relative to their respective markets. In absolute terms the best performing portfolio in 2018 was the Macro portfolio with a return of 9.9%.
Allocation of the Ferd External Managers portfolio between investment mandates at 31 December 2018:
Ferd Real Estate
Ferd Real Estate is an active real estate investor. The business area develops residential property, office buildings and warehousing/office combination buildings. Ferd Real Estate carries out projects both independently and in collaboration with selected partners. The business area also carries out purely financial real estate investments. It is also responsible for managing the office premises and warehouse/office combination premises owned by Ferd.
Value-adjusted equity was NOK 2.6 billion at 31 December 2018. The real estate portfolio generated a return of 12.2%. Residential real estate prices rose by 6% in Oslo in 2018, and some of the other real estate segments in which the business area has invested saw a reduction in market yields. Ferd Real Estate made good progress at a number of its individual projects and several milestones were achieved. The majority of Ferd Real Estate’s investments performed well in 2018.
Allocation of Ferd Real Estate’s portfolio by market segment at 31 December 2018:
Ferd Social Entrepreneurs
Ferd Social Entrepreneurs (FSE) invests in social entrepreneurs that deliver measurable social results, and it contributes to the consolidation of their market. FSE provides these companies with networking, expertise and capital in an active partnership with defined milestones and set social targets. The companies must be focused on achieving a double bottom line, which is to say that they must have a social driving force and must also be, or have the potential to be, financially self-sustaining. There were 11 companies and one fund investment in the portfolio at the end of 2018. FSE made two equity investments over the course of the year, namely in Auticon and Motitech. In autumn 2018, FSE invested in Den Sociale Kapitalfond Invest 1, a Danish fund that primarily invests in Danish companies that have clear double-bottom-line ambitions.
Other Activities principally comprises investments in fund units purchased in the secondary market and investments in externally managed private equity funds. Ferd received in excess of NOK 900 million from these two portfolios in 2018. The Other Activities area also includes central group costs and the financial results of the financial instruments held to manage Ferd’s currency exposure.