In the past 18 months Ernst Russ AG (DE:HXCKk) (formerly HCI) has been transformed into an investment and asset manager focused on the maritime sector. The 2016 acquisitions of König & Cie, Ernst Russ Reederei and WestFonds have completed the group’s full service ship management offering and built scale in asset management and trustee services. The group’s ability to win new investment and asset management mandates across a range of asset classes should be significantly enhanced, offsetting the drag of legacy closed end (KG) fund run-off. A recovery in shipping markets would have a strong positive effect on the group’s consolidated earnings.
Acquisitions significantly boost 2016
Acquisitions had a significant impact on the group’s assets, earnings, and cash position in 2016. The revenue contribution of c €22m helped reported revenues increase by 93% to c €40m with net attributable profit reaching €6.2m (2015: €1.0m). Balance sheet items showed strong increases with equity growing to €39m and cash to €28m. Consolidation effects and one-off items obscure the underlying trends, but for the current year management expects revenues to be moderately higher than in 2016, with net profits at least at the 2016 level, implying a strong operational performance without one-off items as seen in 2016.
Attractive partner for growth
ERAG’s positioning in investment and asset management is significantly strengthened in shipping and across a range of assets, while its income streams are diversified to include ship management, both for internal funds and external third-party ship owners/operators, where a market recovery would be highly beneficial. ERAG’s ability to grow AUM is enhanced and the larger, more competitive trust services offering has the ability to win third-party mandates, while both mitigate the impact of a continuing run-off of existing closed (KG) funds.
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