Interim Report January – September 2021

Reporting period January – September

• Net sales increased 24.9 per cent to SEK 12,528 (10,031) million. Organically, net sales grew by 13.7 per cent.
• EBITA* increased 40.4 per cent to SEK 2,696 (1,920) million.
• The EBITA margin* improved 2.4 percentage points to 21.5 (19.1) per cent.
• Profit before tax grew 43.3 per cent to SEK 2,226 (1,553) million.
• Net profit for the period grew 43.0 per cent to SEK 1,669 (1,167) million.
• Earnings per share increased 42.5 per cent till SEK 3.62 (2.54).
• Cash flow from operating activities amounted to SEK 1,915 (1,995) million.
• The pandemic did not negatively affect the market situation during the period.
• 14 new businesses were consolidated during the period with total annual net sales of about SEK 1,700 million.

Reporting period July – September

• Net sales increased 25.6 per cent to SEK 4,158 (3,311) million. Organically, net sales grew by 7.5 per cent.
• EBITA* increased 23.3 per cent to SEK 862 (699) million.
• The EBITA margin* was 20.7 (21.1) per cent.
• Profit before tax grew 20.1 per cent to SEK 692 (576) million.
• Net profit for the period grew 19.1 per cent to SEK 518 (435) million.
• Cash flow from operating activities amounted to SEK 736 (736) million.

Summary of financial performance  

COMMENTS FROM THE CEO

Lifco’s primary target is to increase its earnings every year through organic growth as well as acquisitions. Net sales increased by 24.9 per cent to SEK 12,528 (10,031) million in the first nine months of the year, driven by organic growth and acquisitions. Exchange rate effects negatively impacted sales. The generally favourable market environment in all three business areas was a strong contributing factor to organic growth of 13.7 per cent.

During the first nine months of the year, EBITA* increased by 40.4 per cent to SEK 2,696 (1,920) million and the EBITA margin* improved by 2.4 percentage points to 21.5 (19.1) per cent. Improvements in profitability are a result of organic growth, Lifco’s continual focus on profit margins, acquisitions as well as low sales and marketing activities during the first half of the year as a result of the pandemic. Sales and marketing activities have begun to return to more normal levels during the third quarter of 2021.

Earnings per share during the period increased 42.5 per cent till SEK 3.62 (2.54). Cash flow from operating activities amounted to SEK 1,915 (1,995) million during the nine-month period.

During the first nine months of the year, Lifco consolidated 14 acquisitions, of which four in the Dental business area, two in Demolition & Tools and eight in Systems Solutions. The acquisitions comprise four German companies, four Italian, three British, one Swedish, one Czech and one in the US. Many of the companies are market leaders in their respective market niches. The acquisitions will together have a positive impact on Lifco’s results and financial position during the year.

On 20 July, Lifco established a new MTN program with a loan framework of SEK 5 billion, making it possible to issue bonds in the Swedish market. On 26 August, Lifco issued an unsecured bond totalling SEK 750 million, and thereby has bonds outstanding totalling SEK 3,550 million. Lifco’s financial position remains solid and interest-bearing net debt amounted to 1.2 times EBITDA* at 30 September 2021, which is well in line with our target of interest-bearing net debt of a maximum of three times EBITDA* and means that Lifco possesses the financial scope to make additional acquisitions.

Per Waldemarson

President and CEO

GROUP PERFORMANCE IN JANUARY – SEPTEMBER

Sales increased 24.9 per cent to SEK 12,528 (10,031) million. Organic growth was 13.7 per cent, acquisitions attributed 12.4 per cent and exchange rate effects had a negative impact on sales of 1.2 per cent. The companies consolidated in the first nine months of the year were the Swedish Elvärmeprodukter i Skellefteå, the British companies Cleveland Cascades and T. Freemantle as well as the German Bode Components and the Czech Medema. Also during the period, the majority of the German companies Kaniedenta and Kentzler-Kaschner, the Italian companies Cangini Benne, DVG De Vecchi, MultiOne and Next Hydraulics as well as the British company Spinaclean, were consolidated. The assets and liabilities of Rissmann Dental and German ErgoPack’s distributor in the US were also consolidated.

EBITA* increased 40.4 per cent to SEK 2,696 (1,920) million and the EBITA margin* improved 2.4 percentage points to 21.5 (19.1) as a result of organic growth, Lifco’s ongoing focus on profit margins, acquisitions as well as low sales and marketing activities during the first half of the year as a result of the pandemic. Exchange rate effects had a negative impact on EBITA* of 1.9 per cent. During the period, 41 (34) per cent of EBITA* was generated in EUR, 24 (29) per cent in SEK, 12 (14) per cent in NOK, 7 (8) per cent in GBP, 5 (6) per cent in DKK, 5 (3) per cent in USD and 6 (6) per cent in other currencies.

Net financial items were SEK -52 (-44) million.

Profit before tax grew 43.3 per cent to SEK 2,226 (1,553) million and net profit for the period increased 43.0 per cent to SEK 1,669 (1,167) million.

Average capital employed excluding goodwill increased by SEK 227 million during the period, to SEK 2,165 million at 30 September 2021, compared with SEK 1,938 million at 31 December 2020.
EBITA* in relation to average capital employed excluding goodwill increased during the period to 161 per cent from 139 per cent at year-end.

The Group’s net debt increased by SEK 2,137 million from 31 December 2020 to SEK 6,913 million at 30 September 2021, of which liabilities related to put/call options and additional considerations for acquisitions amounted to SEK 1,518 (986) million. Interest-bearing net debt increased by SEK 1,436 million since year-end and amounted to SEK 4,678 (3,862) million at 30 September 2021.

On 20 July 2021, Lifco established a new MTN program with a loan framework of SEK 5 billion, making it possible to issue bonds in the Swedish market. On 26 August 2021, Lifco issued an unsecured bond totalling SEK 750 million, and thereby has bonds outstanding totalling SEK 3,550 million. In addition to bonds outstanding, Lifco has standard short-term credit facilities.

The net debt/equity ratio at 30 September 2021 was 0.7 (0.6) and net debt/EBITDA* was 1.8 (1.6) times. Interest-bearing net debt/EBITDA* was 1.2 (1.1) times. At period-end, 50 (41) per cent of the Group’s interest-bearing liabilities were denominated in EUR.

Cash flow from operating activities amounted to SEK 1,915 (1,995) million during the first nine months of the year. Cash flow has been impacted by increased inventory and increased accounts receivables. Cash flow from investing activities was SEK -2,392 (-1,099) million, which was mainly attributable to acquisitions.

GROUP PERFORMANCE IN THE THIRD QUARTER

Sales increased 25.6 per cent to SEK 4,158 (3,311) million in the third quarter. Acquisitions contributed 15.9 per cent and organic growth 7.5 per cent while exchange rate effects had a positive impact of 2.2 per cent.

EBITA* increased 23.3 per cent to SEK 862 (699) million as the result of acquisitions and exchange rate effects. Foreign exchange gains added 1.9 per cent to EBITA*. The EBITA margin* was 20.7 (21.1) per cent. The quarterly comparison is affected by sales and marketing activities being at unusually low levels from the second quarter of 2020 as a result of the pandemic. Sales and marketing activities in the third quarter of 2021 have begun to return to more normal levels. During the third quarter, 46 (35) per cent of EBITA* was generated in EUR, 22 (30) per cent in SEK, 11 (13) per cent in NOK, 7 (9) per cent in GBP, 4 (4) per cent in USD, 4 (4) per cent in DKK and 6 (5) per cent in other currencies.

Net financial items were SEK -18 (-16) million.

Profit before tax grew by 20.1 per cent to SEK 692 (576) million. Net profit for the period grew 19.1 per cent to SEK 518 (435) million.

Average capital employed excluding goodwill increased by SEK 86 million to SEK 2,165 million at 30 September 2021, compared with SEK 2,079 million at 30 June 2021. EBITA relative to average capital employed excluding goodwill increased from 159 per cent at 30 June 2021 to 161 per cent at 30 September 2021.

From 30 June 2021, the Group’s net debt increased by SEK 391 million to SEK 6,913 million.

Cash flow from operating activities amounted to SEK 736 (736) million. Cash flow from investing activities was SEK -721 (-228) million, which was attributable to acquisitions.

FINANCIAL PERFORMANCE – BUSINESS AREAS

Dental

The companies in Lifco’s Dental business area are leading suppliers of consumables, equipment and technical service to dentists across Europe, and the business area also has operations in the US. Lifco sells dental technology to dentists in the Nordic countries and Germany, and develops and sells medical record systems in Denmark, Sweden and Germany. The business area also includes manufacturers which produce fitting products for dentures, disinfectants, saliva ejectors, bite registration and dental impression materials, bonding agents and other consumables that are sold to dentists through distributors around the world. In recent years, Dental has through acquisitions and organic growth increased its earnings in manufacturing, dental technology and software faster than in distribution, which has had a positive impact on margin growth in the business area.

Net sales in Dental increased by 24.2 per cent to SEK 3,822 (3,077) million during the first nine months of the year, positively impacted by organic growth and acquisitions. The year-on-year comparison is affected by the negative effects of the pandemic in 2020 that primarily occurred during the second quarter of 2020.

EBITA* increased by 32.8 per cent to SEK 839 (632) million during the nine-month period and the EBITA margin improved by 1.5 percentage points to 22.0 (20.5) per cent. Profitability was impacted positively from organic growth, Lifco’s continual focus on profit margins and acquisitions. The quarterly comparison is affected by sales and marketing activities being at unusually low levels from the second quarter of 2020 as a result of the pandemic. Sales and marketing activities have begun to return to more normal levels during the third quarter of 2021.

The dental market remains generally stable. The results of individual companies in Lifco’s Dental business may in any individual quarter be influenced by significant fluctuations in exchange rates, calendar effects (such as Easter), gained or lost contracts in procurements of consumables by public-sector or major private-sector customers and fluctuations in the delivery of equipment. In the third quarter of the year, there were no individual events that had a substantial impact on the earnings of the Dental group as a whole.

As of January 2021, the German operations Kaniedenta and Rissmann Dental were consolidated. Kaniedenta produces and sells dental consumables primarily for the German market. The company had a turnover of about EUR 29 million in 2019 and has 35 employees. The acquisition comprised the majority of the shares. Rissmann Dental is a dental laboratory and had sales of approximately EUR 4.1 million in 2019. The company has about 50 employees. The acquisition was an assets and liabilities acquisition. As of February 2021, the majority of the German company Kentzler-Kaschner was consolidated, which sells consumables to the dental market, mainly in Germany. The company had a turnover of about EUR 3.6 million in 2020 and has 20 employees. As of March 2021, the Czech company Medema was consolidated, which sells consumables and smaller sized equipment to dental clinics and dental laboratories in the Czech Republic. The company had a turnover in 2020 of about CZK 26 million, corresponding to about EUR 1 million. The company has four employees and the acquisition comprised all of the shares.

Demolition & Tools

The Demolition & Tools business area develops, manufactures and sells equipment for the construction and demolition industries. The Group is the world’s leading supplier of demolition robots and crane attachments. The Group is also one of the leading global suppliers of excavator attachments. The business area’s EBITA margin may fluctuate between quarters due to single, major special orders and changes to the product mix.

Net sales increased by 41.8 per cent to SEK 3,372 (2,378) million in the first nine months of the year, driven by organic growth and acquisitions. The market environment was generally good. EBITA* increased by 69.8 per cent to SEK 900 (530) million during the same period and the EBITA margin* improved by 4.4 percentage points to 26.7 (22.3) per cent. The EBITA margin* was positively impacted by organic growth, profitable special orders and Lifco’s continual focus on profit margins and acquisitions. The quarterly comparison is affected by sales and marketing activities being at unusually low levels from the second quarter of 2020 as a result of the pandemic. Sales and marketing activities have begun to return to more normal levels during the third quarter of 2021.

The majority of shares of the Italian company MultiOne were consolidated as of February 2021, a leading manufacturer of mini loaders and attachments. The company had a turnover of around EUR 27 million in 2020 and has 46 employees. The majority of the shares of the Italian company Cangini Benne were consolidated as of April 2021, a leading manufacturer of attachments for excavators and front loaders. Cangini Benne had a turnover of about EUR 35 million in 2020 and has 115 employees.

Systems Solutions

Through its operating units, the Systems Solutions business area operates in industries offering systems solutions. Systems Solutions is divided into five divisions: Construction Materials, Contract Manufacturing, Environmental Technology, Service and Distribution, and Forest.

Net sales in Systems Solutions increased by 16.6 per cent to SEK 5,334 (4,576) million during the first nine months of the year, mainly on the back of organic growth in all divisions except Forest as well as acquisitions. The market for Systems Solutions was healthy overall during the period.

During the first nine months of the year, EBITA* increased by 24.8 per cent to SEK 1,048 (840) million and the EBITA margin* improved by 1.2 percentage points to 19.6 (18.4) per cent. Improvements in profitability are a result of Lifco’s continual focus on profit margins, organic growth and acquisitions. The quarterly comparison is affected by sales and marketing activities being at unusually low levels from the second quarter of 2020 as a result of the pandemic. Sales and marketing activities have begun to return to more normal levels during the third quarter of 2021. Certain operations have not received full cross-compensation of elevated raw-material prices due to them delivering on existing order backlogs.

Construction Materials reported a stable performance in sales and profitability in the nine-month period.

Contract Manufacturing reported a stable increase in sales during the nine-month period with a somewhat weaker profitability trend.

Environmental Technology reported favourable development in sales and profitability during the period due to acquisitions and generally healthy demand in the aftermarket segment and for consumer durables. In the third quarter of 2020, those companies that sell indirect products that are not part of a value chain took a hit from the pandemic.

Service and Distribution reported a favourable sales trend during the first nine months of the year as a result of organic growth and acquisitions, with a something weaker profitability trend due to the product mix and that cross-compensation for elevated raw-material prices has yet to be fully implemented in certain operations. In the third quarter of 2020, sales and profitability were partly boosted by operations that were positively impacted by the pandemic.

Forest had lower sales, but improved earnings and profitability during the first nine months of the year, which was due to the project-related component of the business, in which sales and earnings can fluctuate substantially between the quarters. These variations do not usually correlate with the underlying market situation but instead depend largely on the outcome of specific projects.

In the Construction Materials division, Elvärmeprodukter i Skellefteå was consolidated as of July 2021, which sells heating products for floor, roof, ground and frost protection, mainly in Sweden. The company had a turnover of around SEK 38 million in 2020 and has eleven employees. The acquisition comprised all of the shares. The German company Bode Components was consolidated as of August 2021, a leading manufacturer of safety products for elevators. Bode Components generated sales of about EUR 5 million in 2020 and has nine employees. The acquisition comprised all of the shares.

In the Environmental Technology division, the British company Cleveland Cascades was consolidated as of February 2021, a global leader in the design and manufacture of bespoke dry bulk loading chutes. The company had a turnover of around GBP 5.1 million in 2020 and has some 30 employees. The acquisition comprised all of the shares. The British company Spinaclean was consolidated as of April 2021, which develops and sells vacuum cleaners and pressure washers for indoor and outdoor high-level cleaning. The company had a turnover of about GBP 5.8 million in 2020 and has some 20 employees. The acquisition comprised the majority of the shares. ErgoPack’s distributor in the US was consolidated as of May 2021. The company had a turnover of about USD 4.2 million in 2020, all of which was generated by the German company ErgoPack GmbH, which Lifco acquired in 2019. The acquisition of the distributor in the US was an assets and liabilities acquisition.

In the Service and Distribution division, the British company T. Freemantle was consolidated as of January 2021, a niche manufacturer of cartoning and sleeving machinery. The company had a turnover of around GBP 5.0 million in 2019 and has some 40 employees. The acquisition comprised all of the shares. The Italian company DVG De Vecchi was consolidated as of July 2021, a leading manufacturer and distributor of coffee machines. DVG De Vecchi had a turnover of about EUR 16 million in 2020 and has 39 employees. The acquisition comprised the majority of the shares. The Italian company Next Hydraulics was also consolidated as of July 2021, a leading manufacturer of telescopic cranes mainly used on light vehicles. The company also produces stabilisers for vehicles. Next Hydraulics had a turnover of about EUR 21 million in 2020 and has 43 employees. The acquisition comprised the majority of the shares.

 ACQUISITIONS

Lifco made the following consolidations in the nine-month period:

Further information on the acquisitions is provided on page 18. The figures for net sales and number of employees refer to estimated annual net sales and the number of employees at the acquisition date. As of the third quarter of 2021, Lifco does not announce acquisitions with annual net sales of less than SEK 10 million in press releases.

Taken together, the acquisitions will have a positive impact on Lifco’s results and financial position in the current year.

OTHER FINANCIAL INFORMATION

Employees

The average number of employees was 5,912 (5,461) during the nine-month period. At the end of the period, the number of employees was 6,171 (5,423). Acquisitions added about 460 employees.

Events after the end of the reporting period

On 1 October 2021, Lifco reported the assets and liabilities acquisition of Zenith Dental Aps. The company is a niche distributor of dental products in Denmark that reported sales of about DKK 21 million in 2020. The business will be consolidated in the Dental business area and the consolidation is expected to take place in January 2022.

The Swedish IT services company Anidem Computers was consolidated in October 2021, and reported sales of about SEK 4 million in 2020 and has four employees. The company’s customers are dentist clinics and the acquisition comprised the majority of the shares.

The acquisitions will not have a significant impact on Lifco’s results and financial position in the current year.

Related party transactions

No significant transactions with related parties took place during the period.

Risks and uncertainties

The risk factors which have the biggest impact for Lifco are the competitive situation, structural changes in the market and general level of economic activity. Lifco is also exposed to financial risks, including currency risks, interest rate risks, credit and counterparty risks.

The pandemic did not negatively affect the market situation during the first nine months of the year. Lifco continues to monitor the effects of the pandemic.

The Parent Company is affected by the above risks and uncertainties in its capacity as owner of the subsidiary companies. For further information on Lifco’s risks and risk management, see the 2020 Annual Report.

Accounting policies

The Group’s interim report has been prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. In respect of the Parent Company, the report has been prepared in accordance with the Annual Accounts Act and Recommendation RFR 2 Financial Reporting for Legal Entities of the Swedish Financial Reporting Board. The accounting policies have been applied in accordance with those which are presented in the 2020 Annual Report and should be read in conjunction with these.

In the first quarter of 2021, the Group changed its accounting policies concerning call/put options issued in non-controlling interests. Changes in value of these options were previously recognised in profit or loss. The changed accounting policy means that these changes in value are instead recognised in equity as shareholder transactions. The Group is of the opinion that this reporting is justified since it better reflects the significance of the transaction and thus provides a more true and fair view. Comparative figures have been recalculated for 2020 without this leading to any material impact on the reporting.

DECLARATION OF THE BOARD OF DIRECTORS

The Board of Directors and Chief Executive Officer warrant and declare that this nine-month report gives a true and fair view of the Parent Company’s and Group’s operations, financial positions and results, and that it describes significant risks and uncertainties faced by the Parent Company and the companies included in the Group.

Enköping, 22 October 2021

AUDITOR’S REPORT

Lifco AB (publ) Corp. Reg. No. 556465-3185

Introduction

We have reviewed the condensed interim financial information (interim report) of Lifco AB as of 30 September 2021 and the nine-month period then ended. The Board of Directors and the CEO are responsible for the preparation and presentation of the interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of Review

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed on the basis of a review does not provide the same level of assurance as a conclusion expressed on the basis of an audit.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Enköping, 22 October 2021

PricewaterhouseCoopers AB

Eric Salander                                                                    Tomas Hilmarsson
Authorised Public Accountant                                           Authorised Public Accountant

Auditor in Charge

FINANCIAL CALENDAR

The 2021 year-end report and the report for the fourth quarter will be published on 2 February 2022.

The annual report for 2021 will be published in the week starting 14 March 2021.

The report for the first quarter 2022 will be published on 29 April.

The report for the second quarter 2022 will be published on 15 July.

The report for the third quarter 2022 will be published on 21 October.

ANNUAL GENERAL MEETING 2022

The Annual General Meeting of Lifco AB will be held on Friday, 29 April 2022, at 11 a.m., at Bonnierhuset, Torsgatan 21, Stockholm. Shareholders wishing to raise an issue for discussion at the AGM may do so by submitting their proposal to the Chairman of Lifco by e-mail: ir@lifco.se or by post to: Lifco AB, Attn: Bolagsstämmoärenden, Verkmästaregatan 1, SE-745 85 Enköping, Sweden. To ensure their inclusion in the notice and thus on the agenda for the AGM, proposals must be received by the Company no later than 11 March 2022.

THE NOMINATION COMMITTEE

Prior to the Annual General Meeting 2022, the Nomination Committee consists of Carl Bennet, Carl Bennet AB, Per Colleen, the Fourth Swedish National Pension Fund (AP4), Hans Hedström, Carnegie Fonder, Javiera Ragnartz, SEB Fonder & Liv and Frank Larsson, SHB Fonder & Liv. Carl Bennet is Chairman of the Nomination Committee.

Shareholders wishing to submit proposals to the Nomination Committee for the 2022 AGM may do so by sending an e-mail to ir@lifco.se or writing to: Lifco, Attn: Valberedningen, Verkmästaregatan 1, SE-745 85 Enköping, Sweden.

FURTHER INFORMATION

Media and investor relations: Åse Lindskog, ir@lifco.se, telephone: +46 730 24 48 72.

TELECONFERENCE

Media and analysts are welcome to call in to a teleconference, where CEO Per Waldemarson and CFO Therése Hoffman will present the interim report. After the presentation, there will be an opportunity to ask questions.

Time: Friday, 22 October at 9:00 a.m. CEST

Link to the presentation: https://tv.streamfabriken.com/lifco-q3-2021

Telephone numbers:

Sweden +46 8 505 583 69

UK +44 3333 00 90 31

US +1 631 913 14 22, PIN US: 19684002#

LIFCO IN BRIEF

Lifco offers a safe haven for small and medium-sized businesses. Lifco’s business concept is to acquire and develop market-leading niche businesses with the potential to deliver sustainable earnings growth and robust cash flows. Lifco is guided by a clear philosophy centred on long-term growth, a focus on profitability and a strongly decentralised organisation. The Group has three business areas: Dental, Demolition & Tools and Systems Solutions. At year-end, the Lifco Group consisted of 175 operating companies in 31 countries. In 2020, Lifco reported EBITA of SEK 2,702 million on net sales of SEK 13.8 billion. The EBITA margin was 19.6 per cent. Read more at www.lifco.se.

CONDENSED CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

SEGMENT OVERVIEW

Lifco’s operations are monitored and evaluated by the CEO and resources are allocated based on information from the three operating segments Dental, Demolition & Tools and Systems Solutions. The defined quantitative limits have been exceeded only by Dental and Demolition & Tools. One further operating segment, Systems Solutions, is presented. This operating segment consists of a merger of those divisions which have similar economic characteristics and which do not individually meet the defined quantitative limits. These divisions are Construction Materials, Contract Manufacturing, Environmental Technology, Service and Distribution and Forest.

NET SALES TO EXTERNAL CUSTOMERS

No sales are made between the segments.

Net sales by type of income:

EBITA

A breakdown of results by segment is made up to and including EBITA. EBITA is reconciled to profit before tax in accordance with the following table:

CONDENSED CONSOLIDATED BALANCE SHEET