Privanet as an investment

Privanet Group is a Finnish investment service group specialised in the trading of unlisted shares and managing companies’ financing needs, serving both private citizens and companies, the market of unlisted securities as its main business area.

In addition to the parent company Privanet Group Plc, Privanet Group consists of its subsidiaries Privanet Capital Markets Ltd and Privanet Securities Ltd, both owned 100% by the parent company. The main business operations of Privanet Capital Markets Ltd consist of organising public offerings, trading financial instruments on the Company’s own account, and intermediating unlisted securities. Privanet Securities Ltd focuses on maintaining the unlisted securities aftermarket, on financing arrangements especially by crowdfunding and on the Certified Adviser’s role in the First North marketplace.

Privanet Group operates through twelve local offices, serving approximately 17,000 customers across Finland.

Financial period 2017

Business environment

The business environment remained good throughout the accounting period. The sentiment in the stock market was strong and remained on a rising trajectory, even though warnings on a potential correction were increasing. A positive sentiment in the stock market also markedly benefits the business related to unlisted shares and other securities. As the overall profit level of the interest market is still close to zero, investors are actively looking for other, more profitable investments, including bonds of unlisted companies. Their profit has still remained at the level of 6 to 8 per cent per annum.

Crowdfunding continues to be popular, and, for example, the annual Slush event makes investing in start-ups even better known among the public. Increasing popularity of crowdfunding has significantly positive effects on the Company’s business along with the growth and increased frequency of the financing rounds of the AROUND crowdfunding service. The acquisition of a qualified minority of FundedByMe Finland, which focuses on smaller-scale financial arrangements, has also had a positive impact on our business. The Company is expecting substantial growth in both the AROUND and FundedByMe business, and the operating environment is expected to remain favourable also during the ongoing accounting period.

Business operations

The group structure of Privanet Group was clarified by acquiring the entire stock of its subsidiary Privanet Securities Ltd in the possession of the Group. Privanet Securities Ltd acquired a qualified minority of 33.4% of FundedByMe Finland Ltd. This arrangement makes it possible for us to provide access for more and more Finnish companies to the crowdfunding market. The basis for the cooperation started by these companies has been to utilise the investor base, networks and expertise of these two companies.

In addition, Privanet Securities Ltd expanded its business area by launching Realinvest, a new loan-based crowdfunding platform specialised in the crowdfunding of property development and infrastructure projects.

In the autumn of 2017, the company decided to put the fund project on hold for the time being and to concentrate on the promotion of internationalisation projects instead. The company signed an agreement on strategic cooperation with Nordic Growth Market NGM Ab, a company fully owned by Börse Stuttgart GmbH. The company directed a share issue to Nordic Growth Market NGM Ab, a company fully owned by Börse Stuttgart GmbH, which made it a significant shareholder of Privanet Group Plc. Through cooperation, Privanet will strengthen its position as an international player in the financing business.

The Group’s results of operations are mainly constituted by the sales proceeds from the trading of securities on the Company’s own account and, compared to the years of comparison, to an increasing extent by various kinds of fee income. The fee income of the Company comes through AROUND and Realinvest crowdfunding offered to domestic companies, fee income from the Privanet aftermarket and other commissions. The demand for crowdfunding has remained strong, and there are plenty of high-quality start-up and growth companies to be financed by the Company. The AROUND service has gathered increasing interest among investors, and it is developed constantly.

Increased focus on sales resources and sales processes and favourable development of most target companies lie in the background of the positive trend with the Group turnover, i.e. income derived from investment services. The turnover of the Group increased by 10.8 per cent to 13.97 million euros (compared to 12.61 million euros in the corresponding period in 2016). Most business expenses are administration costs, primarily consisting of personnel expenses. Personnel expenses have increased through the costs generated by increasing the headcount of the administrative organisation and sales and were 4.25 million euros (3.37 million euros) in the accounting period of 2017. Other administration costs were 2.36 million euros (2.86 million), including costs mainly related to marketing, legal and consulting services and IT management software and maintenance costs. Other administration costs, approximately 0.50 million, have remained at the level of the year of comparison, excluding the direct costs related to the listing project in 2016. The Company made a profit of 4.8 million euros (4.62 million euros) in the financial period.