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Interim report January – June 2018

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NET ASSET VALUE AND THE LATOUR SHARE

  • The net asset value rose to SEK 105 per share, compared with SEK 95 per share at the start of the year. This is an increase of 13.1 per cent, adjusted for dividends. By comparison, the Stockholm Stock Exchange's Total Return Index (SIXRX) increased by 4.1 per cent. The net asset value was SEK 106 per share at 20 August. (1)

  • In the period, the total return on the Latour share fell by 1.6 per cent measured against the SIXRX, which rose by 4.1 per cent.

INDUSTRIAL OPERATIONS

The second quarter

  • The industrial operations' order intake rose 24 per cent to SEK 3,192 m (2,578 m), which represents a 14 per cent increase for comparable entities adjusted for foreign exchange effects.

  • The industrial operations' net sales rose 20 per cent to SEK 2,983 m (2,478 m), which represents an 11 per cent increase for comparable entities adjusted for foreign exchange effects.

  • The operating profit increased by 34 per cent to SEK 397 m (297 m), which equates to an operating margin of 13.3 per cent (12.0) for continuing operations.

  • On 30 April, Hultafors Group acquired Johnson Level & Tool, based in Wisconsin, USA. Nord-Lock has concluded an agreement for the acquisition of its Spanish distributor IDQ.

January - June

  • The industrial operations' order intake rose 19 per cent to SEK 5,944 m (5,004 m), which represents a 10 per cent increase for comparable entities adjusted for foreign exchange effects.

  • The industrial operations' net sales rose 18 per cent to SEK 5,536 m (4,697 m), which represents a 9 per cent increase for comparable entities adjusted for foreign exchange effects.

  • The operating profit increased by 24 per cent to SEK 677 m (549 m), which equates to an operating margin of 12.2 per cent (11.7) for continuing operations.

THE GROUP

  • Consolidated net sales totalled SEK 5,614 m (4,807 m) and profit after financial items was SEK 1,119 m (1,476 m). Assa Abloy’s goodwill write-down in the second quarter negatively impacted the income statement by SEK 570 m. Excluding this item, profit increased by 13 per cent to SEK 1,689 m (1,476 m).

  • Consolidated profit after tax was SEK 954 m (1,351 m), which is equivalent to SEK 1.50 (2.12) per share.

  • Net debt at the end of June was SEK 5,229 m (2,608 m) and is equivalent to 7 per cent of the market value of total assets.

INVESTMENT PORTFOLIO

  • During the first six months, the value of the investment portfolio increased by 12.6 per cent adjusted for dividends and net investments. The benchmark index (SIXRX) rose 4.1 per cent.

  • There were no changes in holdings in the investment portfolio during the quarter. Earlier in the year, however, the ownership stake in Alimak Group increased to 28.2 per cent of the capital following the purchase of 800,000 shares.

EVENTS AFTER THE REPORTING PERIOD

  • In July, Hultafors Group acquired the Swedish company Hellberg Safety AB.

(1) The calculation of the net asset value on 20 August 2018 was based on the value of the investment portfolio at 1.00 p.m. on 20 August, and the same values as at 30 June were used for the unlisted portfolio.

Comments from the CEO
“All the business areas are making positive contributions to the continued acquisitive and organic growth of the wholly-owned industrial operations. In the second quarter, the order intake grew by an impressive 24 per cent and invoiced sales by 20 per cent. Excluding acquisitions and foreign exchange effects, order intake grew by 14 per cent and invoiced sales by 11 per cent. We are extremely pleased with these growth figures, which we take as evidence that our commitment to product development, sales and marketing in the companies is really paying dividends. The order backlog at the close of the period is SEK 1,571 m (1,310 m), up 20 per cent on the previous year's value. This strong growth means that in absolute terms we are yet again able to report the best quarter ever, with an operating profit that rose to SEK 398 m (297 m) to give an operating margin of 13.3 per cent (12.0). We have exceeded all our financial targets in the last 12-month period.

Despite the sense of unease and uncertainty in the world arising from trade barriers and heated exchanges between various political figures, most markets still seem to be enjoying strong economic growth. We are seeing some negative signals from operations or products that are supplied to the automotive industry, and also considerable hesitancy in decision making on major investments, particularly in North America and China. Although the auto industry is not a major segment for us, these signals should not be ignored as there could be knock-on effects in other industrial segments. There is still uncertainty surrounding investment trends in North America, but otherwise the outlook currently seems stable. Outside of Europe, we are viewing developments in Asia, including China and India, with continued optimism. In the industrial operations, it is primarily Nord-Lock that is represented in Asia, where it continues to perform well, with 28 per cent growth (organic) so far this year.

Our stable earnings performance and strong growth continue to give us confidence to act proactively regardless of the market climate. The search for suitable companies to add to the Group continues with unabated vigour, and the industrial operations were complemented by two acquisitions during the second quarter. These were of the American company Johnson Level & Tool for Hultafors Group and the Spanish company IDQ for Nord-Lock Group. Read more about our acquisitions and disposals on page 4 in the report.

There have been mixed reactions to the reports that the majority of our listed holdings have now presented. Assa Abloy's write-down of goodwill in the Chinese operations has affected our income statement, but it is important to keep in mind that Assa has built up a significant position in that market during a period of growth. We are confident that this will continue to be an important market for Assa and for most companies with global ambitions. The reports have otherwise been in line with our expectations.

The growth in value on the stock exchange has recovered slightly during the second quarter after a weak first quarter, and the value of our investment portfolio increased in the first six months by 12.6 per cent, adjusted for dividends and net investments. By comparison, the SIXRX increased by 4.1 per cent. In the same period, the net asset value in Latour increased by 13.1 per cent to SEK 105 per share, adjusted for dividends.”

Jan Svensson
President and CEO

For further information please contact:
Jan Svensson, President and CEO, Tel. +46 705-77 16 40 or
Anders Mörck, CFO, Tel. +46 706-46 52 110

Conference call
President and CEO Jan Svensson and CFO Anders Mörck present the report and answers to questions by telephone today at 10.00 AM (CEST).
The conference call will be held in English.
To participate in the meeting and be able to ask questions, please call +46 (0)8 566 426 93.
To follow the webcast please visit our webpage or use the link: http://event.on24.com/wcc/r/1781058-1/68D4464ECF0283E07563769CD956FEDB

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