The government-owned investment company Finnish Industry Investment Ltd (FII) posted the best record in its operating history. The consolidated net profit for 2006 amounted to MEUR 51.5. FII's venture capital investments continued to be strong, in both early-stage and growth-stage companies. The parent company made new investment commitments totalling some MEUR 61, while the subsidiary Start Fund I Ky made investment decisions amounting to MEUR 18.7. At year's end the company was an investor, both directly and through 72 funds, in altogether 440 companies. At year's end the Group's investments and investment commitments totalled MEUR 355.1.
FII's investments in seed financing grew appreciably in 2006, and the company also expanded its risk financing offerings through venture capital funds. The financing programme for the mining industry started well, with foreign companies keenly interested in investing in Finnish targets.
The breakdown of FII's portfolio at the end of 2006 was: 36.9% in venture capital funds focusing on early-stage companies, 18.9% in regional funds, 17.8% in buyout funds for corporate restructuring, 12.6% direct investments in growth companies, and 13.8% seed investments in early-stage companies.
Industry Investment Group's shareholders' equity was MEUR 366.2. The Finnish government's investments in Industry Investment amount to MEUR 269.8. The government last invested in the company in 2003.
"The company's role has contributed to the success of Finnish growth-stage companies. Implementing investment plans over the next few years depends on the proceeds accrued from the privatisation of state-owned companies continuing to be invested in Finnish Industry Investment Ltd," says Managing Director Juha Marjosola. He adds that the primary growth areas for investment are services, energy and the environment.
Strong growth in seed investments
FII considerably increased its investments in early-stage companies in 2006. Investments in target companies grew strongly compared to 2005, both in number and in euro terms. The company made altogether 71 decisions for first-round and follow-on investments in early stage companies. The aggregate value of these investment decisions was MEUR 18.7, over 70% more than in 2005.
The deal flow into FII's Seed Financing Programme was extremely brisk during the review period. Of the 185 candidate new projects investigated, about one-fifth resulted in an investment decision. The recipient companies in FII's Seed Financing Programme need capital particularly for further developing products, marketing and internationalisation.
FII's share of a first-round investment ranged between EUR 50,000 and EUR 800,000, averaging EUR 250,000. Follow-on investments were on average EUR 235,000. FII co-invests with private venture capital investors venture capital funds and business angels so the capital received by the investee company is larger and the company also receives useful business expertise.
Regionally, the Seed Financing Programme covers the whole of Finland. Roughly one-third of the investments were made in the Helsinki metropolitan area, and the remainder was spread relatively widely across the country. The investments are also spread among many sectors, although prominent sectors for first-round investments during 2006 were energy and the environment, ICT, services and healthcare technology.
The combined turnover of investee companies in 2006 amounted to roughly MEUR 100, and these companies together employed almost 700 people. Most investee companies were exporters, with exports generating up to 99% of their turnover in some cases. The investee companies in FII's Seed Financing Programme have also won many business awards, including the Venture Cup, the Productive Idea competition and the European Venture Contest.
By the end of 2006 a total of MEUR 27.1 had been invested in 82 early-stage companies under the Seed Financing Programme launched in 2004. At the end of the review period investments had been made in altogether 76 recipient companies under the Seed Financing Programme.
The MEUR 50 Start Fund I Ky fund established in 2005 to provide seed financing is expected to be fully invested during 2007, at which time investments will have been made in some 100 target companies. The capital requirements of early-stage companies continues to be strong and FII is preparing further capitalisation of the Seed Financing Programme.
Direct investments focused on the mining industry
During 2006 Industry Investment made direct investments in altogether 11 growth companies, totalling MEUR 17.3. Of this, MEUR 15 went on first-round investments and MEUR 2.3 went on follow-on investments in companies already in FII's portfolio.
The focus of direct investments was on the financing programme for exploration and mining companies, for which FII allocated MEUR 20 for the period 2006 2007. During the first year altogether MEUR 8.9 of this was invested in four exploration and mining companies: Belvedere Resources Limited, which is listed on the Toronto stock exchange; the Swedish company Endomines AB; Talvivaara Mining Company Ltd; and Vulcan Resources Limited, which is listed on the Australian stock exchange.
Other targets for direct follow-on investments in growth-stage companies in 2006 were Elematic Oy Ab, a supplier of machinery, production lines and complete precast concrete plants, and Stromsdal Corporation, a manufacturer of carton board for packaging and graphical end uses.
At the end of 2006 FII had direct investments and investment commitments in 18 growth-stage companies, amounting to MEUR 45.3. FII's direct investments account for 12.6% of the combined total of MEUR 355.1 in current investments and investment commitments.
FII offers later-stage growth companies venture capital for financing growth, spin-off projects, major industrial investments and corporate restructuring. The investments are not restricted to any specific sector or sectors. FII co-invests in direct investments together with other investors and financiers. The company's share of these venture capital investments in later-stage growth companies has been between MEUR 1 and 5.
In 2006 FII exited from A-Inspection Ltd and agreed on an exit from Forchem Oy Ab that was implemented in January 2007.
Investment decisions in eight new funds
In 2006 FII was instrumental in creating three new funds that focus on early-stage technology companies and made decisions to invest in them amounting to MEUR 23. These funds are Conor Technology Fund I Ky, Eqviteq Technology Fund III K/S and Creandum II LP.
During 2006 Industry Investment also made decisions to invest in four new growth funds, amounting to MEUR 31: Midinvest Fund II Ky, Sentica Kasvurahasto II Ky, CapMan Life Science IV LP and CapMan Technology Fund 2007 LP.
FII also gave a MEUR 7 investment commitment to the buyout fund EQT Fund V.
There were a high number of fund exits from investee companies in the favourable economic climate, and funds called in appreciably more capital and profit than in 2005. Altogether MEUR 50 was returned to the company from funds in 2006.
Events after the financial year
An amendment to the special Act of Parliament regulating the company was passed by Parliament and entered into force on 1 March 2007. The legislative amendment will give FII better opportunities for promoting the internationalisation of companies and for making investments more flexible by using a wider range of financial instruments. The latest government resolution on the general guidelines for Finnish Industry Investment Ltd's investment activities entered into force on 5 March 2007.
Finnish Industry Investment Ltd's Annual General Meeting decided on 3 April 2007 that no dividend would be paid for 2006.
FII's Annual General Meeting elected the Board of Directors for 2007. Heikki Aurasmaa, Director, Central Finland Regional Labour and Business Centre, was elected Chairman of the Board. The AGM elected the following as Members of the Board: Johanna Ikäheimo, Chairman of Lapsett Group Oy's Board; Matti Luukkonen, Managing Director, IS-Capital Oy; Raili Mäkitalo, Counsellor, Ministry of Finance; Professor Antti Paasio of Turku School of Economics and Business Administration; Sirkka-Liisa Roine, Managing Director, Finnish Foundation for Share Promotion, and Heikki Vesa, Industrial Counsellor, Ministry of Trade and Industry.
COMPANY IN BRIEF
Finnish Industry Investment Ltd is a government-owned investment company. The company invests the proceeds accrued from the privatisation of state-owned companies in promoting the growth and internationalisation of Finnish businesses.
Finnish Industry Investment invests in capital funds and also directly in companies. The targets are in all sectors and in particular are early-stage and growth-stage businesses that, without Industry Investment Ltd, would not receive sufficient private capital. Capital investments are needed for seeding and financing the growth of investee companies, for corporate spin-offs, major industrial investments, and sector and corporate restructurings. Industry Investment acts as a co-investor with private investors, investing at most one-half of the capital and limiting its ownership to one-half.
The Group comprises the parent company, Finnish Industry Investment Ltd, and its wholly-owned subsidiaries a venture capital fund, Start Fund I Ky, established in 2005 to provide seed financing, and its management company, Start Fund Management Oy.
Industry Investment Ltd's investments and investment commitments amounted to some MEUR 360 at the time the 2006 Annual Report went to press.
KEY FIGURES
Consolidated net profit MEUR 51.5
Shareholders' equity, Group MEUR 366.2
Parent company's net profit MEUR 54.2
Shareholders' equity, parent company MEUR 370.9
The company was founded in 1995
Personnel at end of 2006: 17
Government investments in Finnish Industry Investment since 1995 total MEUR 269.8
Further information:
Juha Marjosola, Managing Director, Finnish Industry Investment Ltd
mobile +358-50-62 636, juha.marjosola@industryinvestment.com
Henri Grundstén, Director (investments in early-stage companies)
Finnish Industry Investment Ltd, mobile +358-50-431 0840,
henri.grundsten@industryinvestment.com
Kimmo Viertola, Director (investments in growth-stage companies)
Finnish Industry Investment Ltd, mobile +358-50-309 2734,
kimmo.viertola@industryinvestment.com
Finnish Industry Investment Ltd's 2006 Annual Report:
www.teollisuussijoitus.fi
(now in Finnish, English version available in the end of April)
LOGO (photos available from: asta.sjoblom@industryinvestment.com)