CFO’s insight into H1: Keeping up the good work

The holiday season is over, nevertheless, I feel inspired when looking back over the past six months: 17 new investment decisions and 12 new investment agreements, a new statement on climate and energy, and a new global commitment to raise a further USD15 billion for gender-smart investments. And so forth.

Despite the challenges caused by the COVID-19 crisis, the Finnfund team is working with a high level of enthusiasm and delivering excellent results.

As the half-year mark has passed, it is time to sum up the key figures – and try to foresee what the rest of the year may bring:

• The first half of the year 2021 was very active. In H1, Finnfund made 17 new investment decisions, worth 155 million euros. Our portfolio grew by 14 million euros compared to the situation at the end of the year 2020, 2.3%, reaching 622 million euros. In Q2 we received a few unexpected prepayments from our customers, and therefore the growth of the portfolio slowed down compared to Q1/2021.
• The interest income decreased by 6% compared to H1/2020 (EUR 10.5 million vs. EUR 11.2 million). However, the net interest income increased almost 10% from the previous year, reaching 8.4 million euros (EUR 7.7 million), due to lower interest expenses. The interest expenses decreased 40% compared to H1/2020. The main reason for the decreased interest income and expenses is the lower level of the USD reference rates.
• The net financial income remained at the same level compared to H1/2020 (EUR 7.2 million vs. EUR 7.5 million).
• Operational expenses increased by 20% compared to H1/2020 due to the change of the accounting policy regarding bonus provisions. However, operational expenses remained under control and stayed below the budget by 7%.
• The profit before reduction in value of investments and sales gains and losses was 0.5 million euros (EUR 2.1 million).
• The profit for H1 was -3.8 million euros (EUR -17.9 million). The main reason for the negative result is nonlinear revenues from the funds as well the sale gains from equity investments. We still expect to receive these revenues later this year.
• Write-downs were at a moderate level, 8.0 million euros (EUR 21.9 million) in total. The amount represents 1.3% of the portfolio’s book value.

The outlook for the financial year 2021 remains to be difficult. Although the beginning of the year was good, the origination of new investments will be increasingly challenging because of the global pandemic. The current outbreak of the delta variant makes travelling extremely difficult, and we do not expect to be able to travel to our target countries during this year. As we strive to maintain our high standards in all our operations, that obviously creates pressure both to our origination as well to the portfolio management and monitoring.

Finally, as we value our stakeholder’s feedback high, we will conduct a stakeholder survey during Q3. Should you be among the respondents, please feel free to share your thoughts with us! In addition, please remember that you can always reach out to us both directly or via our website.

Olli Sinnemaa
CFO, Finnfund

P.S. This is the second quarterly blog post aiming to provide a better insight into our investment operations for our financiers, investors and other stakeholders – the first one for Q1/2021 can be found here.

We have also started to publish a quarterly newsletter – you can read the Q2 edition & join our subscribers here.