Interim report January – June 2020

NET ASSET VALUE AND THE LATOUR SHARE

• The net asset value fell to SEK 127 per share, compared with SEK 136 per share at the start of the year. This is a decrease of 5.5 per cent. By comparison, the Stockholm Stock Exchange's Total Return Index (SIXRX) decreased by 4.1 per cent. The net asset value was SEK 140 per share at 19 August. (1)
• The total return on the Latour share was 11.5 per cent during the period measured against the SIXRX, which fell 4.1 per cent.

INDUSTRIAL OPERATIONS

The second quarter

• The industrial operations' order intake fell 1 per cent to SEK 3,527 m (3,569 m), which represents a 15 per cent decrease for comparable entities adjusted for foreign exchange effects.
• The industrial operations' net sales rose 1 per cent to SEK 3,542 m (3,511 m), which represents a 13 per cent decrease for comparable entities adjusted for foreign exchange effects.
• The operating profit decreased by 8 per cent to SEK 474 m (512 m), which equates to an operating margin of 13.4 (14.6) per cent for continuing operations.

January - June

• The industrial operations' order intake rose 9 per cent to SEK 7,523 m (6,894 m), which represents a 6 per cent decrease for comparable entities adjusted for foreign exchange effects.
• The industrial operations' net sales rose 8 per cent to SEK 7,172 m (6,649 m), which represents an 8 per cent decrease for comparable entities adjusted for foreign exchange effects.
• The operating profit decreased by 0.5 per cent to SEK 922 m (928 m), which equates to an operating margin of 12.9 (13.9) per cent for continuing operations.

THE GROUP

• Consolidated net sales totalled SEK 7,283 m (6,752 m), and profit after financial items was SEK 2,925 m (3,575 m). A revaluation of Alimak has had a SEK -617 m negative impact on this year's income statement, and capital gains from divestment of shares in Tomra have had a positive impact of SEK 1,976 m. Capital gains and other items that affect the comparability of results had a favourable SEK 1,082 m impact on last year's income statement.
• Consolidated profit after tax was SEK 2,746 m (3,372 m), which is equivalent to SEK 4.29 (5.27) per share.
• The Group reported net debt of SEK 6,843 m (5,279 m). Net debt, excluding lease liabilities in accordance with IFRS 16, was SEK 6,267 m (4,613 m) and is equivalent to 7 (5) per cent of the market value of total assets.
• The Board's revised proposal for a dividend of SEK 1.25 per share for the 2019 financial year was approved by the Annual General Meeting.

INVESTMENT PORTFOLIO

• During the first six months, the value of the investment portfolio decreased by 4.7 per cent adjusted for changes in the portfolio and dividends. The benchmark index (SIXRX) decreased by 4.1 per cent.
• In May, 7.8 million shares in Tomra were sold for a consideration of SEK 2.5 billion. After the sale, Latour holds 21.1 per cent of outstanding shares in the company and remains its principal owner.
• The shareholding in Fagerhult increased to 47.2 per cent following acquisition of 1,590,000 shares in the six-month period. The shareholding in Alimak increased to 29.6 per cent following acquisition of 210,000 shares.

EVENTS AFTER THE REPORTING PERIOD

• There were no material events subsequent to the end of the reporting period.

 (1) The calculation of the net asset value on 19 August was based on the value of the investment portfolio at 1 p.m. on 19 August and the same values as at 30 June were used for the unlisted portfolio.

Comments from the CEO
“The second quarter was marked by concern and turbulence caused by the Covid-19 pandemic. We and our companies were quick to adapt our operations to the new conditions. Employee safety has been a top priority and considerable work has gone into understanding how much of an impact the pandemic would have. While the effects of the pandemic are far from over, we are pleased to report that we have come out of this difficult and highly uncertain quarter largely unscathed. We own well-managed companies that can be described as quality assets – this is proved, in particular by the development in the second quarter. The key question now for us and many others is how the market in general will develop as we go forward, in both the short and long term.

Adjusted for acquisitions and foreign exchange effects, the order intake fell by 15 per cent and net sales fell by 13 per cent during the second quarter. The quarter's operating profit was down 8 per cent, as against the very strong year-ago quarter, to SEK 474 m (512 m), with an operating margin of 13.4 (14.6) per cent, which we are very satisfied with considering the current circumstances.

Our operations have had a strong focus on cost awareness across their activities and taken significant measures to mitigate the effects of Covid-19. The business areas have benefited from state support programs where applicable, but only to a relatively small extent. Some operations have implemented short-time working. The restrictions imposed in various parts of the world have obviously impacted our operations to varying degrees, depending on the market and segments. Our portfolio is diversified and comprises holdings that are exposed to a range of geographic markets, customers and product segments, and this has reduced the negative impacts caused by the pandemic. It can be generally stated that the northern European countries have been impacted to a lesser extent, while the UK, France, Belgium, Spain and Italy have been affected far more severely. We have seen signs of recovery in the most affected regions towards the end of the quarter.

We have been cautious about new acquisitions during the quarter but have continued to apply our forward-thinking approach and invest in product development, sales and marketing for future business growth. We are also investing in our factories and currently have a high rate of investment. We are maintaining a strong focus on sustainability which is key to underpinning future growth.

In May, 7.8 million Tomra shares were sold from the investment portfolio, which meant we realised a small portion of the increase in value from our original investment amount in Tomra in 2011. The sale result in a wider scope for new investments while Latour still remains the largest shareholder in Tomra.

Since the start of the year, our investment portfolio has declined by 4.7 per cent, adjusted for changes in the portfolio and dividends, while the benchmark index SIXRX fell by 4.1 per cent. In light of the ongoing pandemic, second-quarter growth has also been good in our listed holdings. Several companies have experienced a considerable decline in the organic growth in sales, but are showing great resilience and are reporting strong operating profit. The net asset value in Latour decreased by 5.5 per cent to SEK 127 per share in the same period.

It is gratifying that we in the last quarter have been able to give two internal candidates the opportunity for a career development within Latour in competition with external candidates. Andreas Örje Wellstam, who has worked in Latour and Swegon since 2010, has been appointed new CEO of Swegon. In addition, Ole Kristian Jødahl, former CEO of Hultafors Group, was during the spring recruited to the position of CEO in our investment portfolio company Alimak Group.

Latour's Board revised the dividend proposal from SEK 2.75 to SEK 1.25 per share. This was approved by the Annual General Meeting on 11 May 2020.”

Johan Hjertonsson
President and CEO

For further information please contact:
Johan Hjertonsson, President and CEO, Tel. +46 702-29 77 93 or
Anders Mörck, CFO, Tel. +46 706-46 52 110

Conference call
President and CEO Johan Hjertonsson and CFO Anders Mörck present the report and answers to questions by telephone today at 10.00 AM (CET). The conference call will be held in English.

To follow the meeting, please call +46 (0)8 505 583 58.
To follow the webcast please visit our webpage, www.latour.se, or use the link:

https://onlinexperiences.com/Launch/QReg/ShowUUID=5F0B3FD3-8873-451B-875D-FD02D4A6E504