Taaleri Q4 morning result: Earnings missed, dividend proposal above expectations

Translation: Original comment published in Finnish on 2/14/2024 at 9:09 am EET.

Taaleri's results announced this morning were well below our expectations, but this is fully explained by the weaker than expected returns on the Garantia's investment portfolio. Operationally, the figures were largely in line with our expectations and no substantial new information was provided on the progress of the strategy. Contrary to our expectations, Taaleri is proposing a significant additional dividend and a slightly higher basic dividend, which was by far the biggest surprise in the report. Taaleri’s earnings call can be viewed on InderesTV starting at 11.00 am EET.

Underperformance fully explained by Garantia's investment portfolio

Taaleri’s EBIT was 6.9 MEUR, clearly below our forecast of 11 MEUR. The difference is almost entirely explained by the significantly worse-than-expected performance of Garantia’s investment portfolio (1.4 vs. 5.6 MEUR), and adjusted for this, the result was well in line with our forecast. Of course, EPS was also well below our expectations, due to the severe underperformance of EBIT. The dividend was the biggest surprise in the report, and Taaleri will distribute a total dividend of EUR 1.0 per share (basic dividend of EUR 0.5 and additional dividend of EUR 0.5). Following the November strategy info, we were under the impression that Taaleri would no longer distribute additional capital off its balance sheet, with the focus of capital allocation being on the balance sheet bioindustry investments. In our view, the dividend decision is clearly positive, as Taaleri's balance sheet is still well over-capitalized and a more efficient use of the balance sheet is key to materializing the hidden value in the sum of the parts. As usual, Taaleri did not provide any guidance

No major surprises in Private Asset Management

In Renewable Energy, the growth in continuing earnings was well below our expectations, despite the second closing of the SolarWind III fund at the end of the year. The segment's continuing earnings remained at the Q3 level, and we could not find an explanation for this in the report, at least not at first glance. Investment income in Renewable Energy was significantly higher than we expected (6.7 vs. 4.1 MEUR), but this is largely explained by accounting factors, the contra entry for which is found in the segment's expenses.

Revenue from Other private asset management was low as expected (Q4’23: 1.5 MEUR) and EBIT clearly in the red. The level of continuing earnings is very low and the segment is in desperate need of new recurring revenue. In the report, the company stated that it has promoted growth take-offs in Bioindustry (balance sheet investments + a future VC fund), but no concrete results were yet provided. As expected, strategy work is underway in Real Estate as the new business director took over in January.

Garantia’s operational performance in line with expectations

As expected, Garantia's insurance revenue remained at the previous quarter's level due to sluggish demand, especially for mortgage guarantees. The guaranty insurance portfolio declined more than we expected, which can be considered a small disappointment. The claims cashflow was in line with our expectations and the insurance service result was well within our expectations. Investment performance fell sharply short of our expectations, which is surprising given the very favorable investment environment seen in Q4. Overall, Garantia's result was well below our expectations, but the earnings disappointment is of very little importance when it is due to investments.