Interim Report January-March 2023

Reporting period January – March

• Net sales increased 18.7 per cent to SEK 5,959 (5,022) million. Organically, net sales grew by 7.6 per cent.
• EBITA increased 30.9 per cent to SEK 1,330 (1,016) million.
• The EBITA margin increased to 22.3 (20.2) per cent.
• Profit before tax grew 26.1 per cent to SEK 1,057 (838) million.
• Net profit for the period grew 26.3 per cent to SEK 793 (628) million.
• Earnings per share increased 26.5 per cent till SEK 1.72 (1.36).
• Cash flow from operating activities amounted to SEK 731 (322) million.
• Six new businesses were consolidated during the period with total annual net sales of
  about SEK 525 million.
• New distribution of divisions in the Systems Solutions business area.

Summary of financial performance

COMMENTS FROM THE CEO

Net sales increased 18.7 per cent in the quarter to SEK 5,959 (5,022) million as the result of acquisitions, organic growth and foreign exchange gains. The generally favourable market environment in all business areas was a strong contributing factor to organic growth of 7.6 per cent. Net sales were also positively affected by price increases to compensate for higher costs.    

EBITA increased by 30.9 per cent in the first quarter, to SEK 1,330 (1,016) million, and the EBITA margin expanded by 2.1 percentage points to 22.3 (20.2) per cent. Organic growth, acquisitions and exchange rate effects contributed to the increase in EBITA.

Earnings per share increased 26.5% till SEK 1.72 (1.36) in the first quarter. Cash flow from operating activities amounted to SEK 731 (322) million during the quarter. The low cash flow in the preceding year was due primarily to increased inventory build-up as the result of high demand and disruptions to the global supply chain that led to requirements for greater safety stock.

Lifco consolidated six acquisitions during the quarter. In Dental, operations were expanded with the German medical technology company Kohler Medizintechnik, the German dental lab Welte Dentallabor and the Swedish product company Doxa Dental. In Demolition & Tools, the British company Broughton Plant Hire and Sales was acquired, which is a niche provider of plant hire solutions for the construction industry. In Systems Solutions, the British companies Alwayse Engineering and Didsbury Engineering were acquired in the Transportation Products division. Alwayse Engineering is a global supplier of ball transfer units and Didsbury Engineering is a global supplier of equipment for ground service and maintenance of aircraft. Taken together, the acquisitions will have a positive impact on Lifco’s results and financial position in the current year.

As a consequence of the divestment of a major company in the Forest division in 2022, and to increase transparency in Systems Solutions, a partly new distribution of divisions is reported from the first quarter of 2023. The change means that the Service and Distribution division is divided into the Transportation Products and Special Products divisions. The remaining operations in the Forest division are reported in the Special Products division. The Construction Materials division has changed name to Infrastructure Products to more clearly clarify the companies’ direction.

Lifco’s financial position remains good and interest-bearing net debt amounted to 1.2 times EBITDA at 31 March 2023, 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 – MARCH

Net sales increased 18.7 per cent to SEK 5,959 (5,022) million. Acquisitions contributed 9.5 per cent, organic growth accounted for 7.6 per cent, while foreign exchange gains had a positive impact of 4.5 per cent. The divestment in May 2022 of the Estonian company Hekotek, which mainly sells sawmill equipment to Russia, had a negative impact on net sales of 2.9 per cent. The British companies Alwayse Engineering, Broughton Plant Hire and Sales and Didsbury Engineering, the Swedish company Doxa Dental and the German company Kohler Medizintechnik were consolidated during the quarter. Assets of the German company Welte Dentallabor were also consolidated.

EBITA increased by 30.9 per cent to SEK 1,330 (1,016) million and the EBITA margin expanded by 2.1 percentage points to 22.3 (20.2) per cent. Organic growth, acquisitions and positive exchange rate effects contributed to the increase in EBITA. Foreign exchange gains had a positive impact on EBITA of 4.1 per cent. During the period, 44 (42) per cent of EBITA was generated in EUR, 23 (25) per cent in SEK, 10 (11) per cent in NOK, 8 (9) per cent in GBP, 6 (6) per cent in DKK, 4 (4) per cent in USD and 5 (3) per cent in other currencies.

Net financial items were SEK -65 (-17) million, negatively impacted primarily by higher interest expenses.

Profit before tax grew by 26.1 per cent to SEK 1,057 (838) million and net profit for the period increased by 26.3 per cent to SEK 793 (628) million.

Average capital employed excluding goodwill increased by SEK 279 million during the quarter, to SEK 3,723 million at 31 March 2023, compared with SEK 3,444 million at 31 December 2022. EBITA in relation to average capital employed excluding goodwill declined during the quarter to 134 per cent from 135 per cent at year-end.

The Group’s net debt increased by SEK 893 million from 31 December 2022 to SEK 9,469 million at 31 March 2023, of which liabilities related to put/call options for acquisitions amounted to SEK 2,013 (1,903) million. Interest-bearing net debt increased by SEK 757 million since year-end and amounted to SEK 6,347 (4,938) million at 31 March 2023.

The net debt/equity ratio at 31 March 2023 was 0.7 (0.7) and net debt/EBITDA was 1.7 (1.8) times. Interest-bearing net debt/EBITDA was 1.2 (1.1) times. At period-end, 38 (58) per cent of the Group’s interest-bearing liabilities were denominated in EUR.

Cash flow from operating activities amounted to SEK 731 (322) million. The low cash flow in the preceding year was due primarily to increased inventory build-up as the result of high demand and disruptions to the global supply chain that led to requirements for greater safety stock. Cash flow from investing activities was SEK -1,379 (-574) million, which was mainly 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 a number of manufacturers which produce, inter alia, 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 16.8 per cent to SEK 1,525 (1,306) million during the first quarter, primarily as the result of organic growth and acquisitions.

EBITA increased by 28.6 per cent to SEK 328 (255) million during the period and the EBITA margin improved by 2.0 percentage points to 21.5 (19.5) per cent. In the preceding year, profitability was negatively impacted by disruptions in production of dental prosthetics in China due to the pandemic.

From January 2023, Doxa Dental of Sweden, which develops, manufactures and commercialises bioceramic dental products, was consolidated. The company had sales of approximately SEK 12 million in 2021. Assets of the German company Welte Dentallabor were consolidated from January 2023. In 2021, the company had a turnover of about EUR 1.3 million and has 12 employees. The German company Kohler Medizintechnik, which manufactures dental instruments, was consolidated from March 2023. The company had a turnover of around EUR 7 million in 2022 and has 36 employees.

Demolition & Tools

The Demolition & Tools business area develops, manufactures and sells equipment for the infrastructure, demolition and construction 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 35.3 per cent during the quarter to SEK 1,810 (1,338) million, primarily as the result of acquisitions and organic growth. The market situation during the quarter was generally strong. Net sales were also positively affected by price increases to compensate for higher costs in the business.  

EBITA increased by 39.8 per cent to SEK 446 (319) million, positively impacted primarily by organic growth and acquisitions. The EBITA margin improved 0.8 of a percentage point to 24.6 (23.8) per cent.

The British company Broughton Plant Hire and Sales was consolidated from March 2023, which is a niche provider of plant hire solutions for the construction industry. The company had a turnover of around GBP 22 million in 2022 and has 100 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: Contract Manufacturing, Environmental Technology, Infrastructure Products, Special Products and Transportation Products. The distribution of the division changed as of the first quarter of 2023. More information about the divisions can be found of pages 11–12.

Net sales in Systems Solutions increased by 10.3 per cent to SEK 2,624 (2,378) million during the quarter, mainly on the back of acquisitions and organic growth in the Contract Manufacturing and Environmental Technology divisions. Net sales were also positively affected by price increases to compensate for higher costs.

EBITA increased during the period by 23.8 per cent to SEK 594 (480) million and the EBITA margin increased by 2.4 percentage points to 22.6 (20.2) per cent, primarily as the result of organic growth and acquisitions.

Contract Manufacturing reported a healthy sales trend in the quarter with improved profitability.

Environmental Technology reported a healthy sales and profitability trend in the quarter.

Infrastructure Products reported a healthy sales trend in the quarter as the result of acquisitions, but profitability declined.

Special Products reported a decline in sales in the quarter due to the divestment of the Estonian company Hekotek in May 2022, while profitability improved substantially.

Transportation Products grew to a certain extent in the quarter with a favourable profitability trend.

In the Transportation Products division, the British company Alwayse Engineering was consolidated from March 2023, which is a global supplier of ball transfer units. The company had a turnover of around GBP 5.6 million in 2022 and has 41 employees. In the Transportation Products division, the British company Didsbury Engineering was also consolidated from March 2023, which is a global supplier of equipment for ground service and maintenance of aircraft. The company had a turnover of around GBP 6.5 million in 2022 and has 33 employees.

ACQUISITIONS

Lifco consolidated the following acquisitions in the period:

Further information on the acquisitions is provided on page 15. The figures for net sales and number of employees refer to estimated annual net sales and the number of employees at the acquisition date.

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

OTHER INFORMATION

Employees

The average number of employees was 6,583 (6,258) in the first quarter. At the end of the period, the number of employees was 6,694 (6,311). Acquisitions added 222 employees.

Events after the end of the reporting period

Consolidation of the British company The Real Spirit of Coffee is expected to take place in the second quarter of 2023 in the Systems Solutions business area, division Special Products. The Real Spirit of Coffee is a supplier of high-end coffee machines and consumables, mainly for the British market. The company had a turnover of around GBP 24 million in 2022 and has 66 employees. The acquisition, which encompasses all shares, was announced on 13 February 2023.

Consolidation of the German company Datamed Is expected to take place in the second quarter of 2023 in the Dental business area. Datamed develops, sells and supports a software program used by German dental clinics. The company had a turnover of around EUR 2 million in 2022 and has ten employees. The acquisition, which encompasses all shares, was announced on 23 March 2023.

Consolidation of the Norwegian company Aura Electric will take place in April 2023 in the Systems Solutions business area, division Infrastructure Products. Aura Electric manufactures low volt electrical supplies. The company reported net sales of about NOK 38 million in 2022 and has ten employees. The acquisition, which encompasses a majority of the shares, was announced on 24 March 2023.

On 6 April 2023, Lifco announced the acquisition of the majority of the shares in the Italian company Geax, a niche manufacturer of compact piling rigs. Geax had a turnover of around EUR 15 million in 2022 and has 26 employees. Consolidation is expected to take place in the second quarter of 2023 in the Demolition & Tools business area.

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 global macroeconomic factors, 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.

Lifco is working actively to monitor and continually evaluate sustainability-related risks and their impact on the Group’s operations and earnings. The Group has established a governance structure that involves Group management and the Board and works to continually improve the company’s sustainability-related activities and minimise related risks. As part of this governance, Group management evaluates the compliance of, for example, the Code of Conduct, occupational injuries, IT security and legal disputes, for every subsidiary on a quarterly basis.

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 2022 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 2022 Annual Report and should be read in conjunction with these.

This report has not been examined by the company’s auditors.

DECLARATION OF THE BOARD OF DIRECTORS

The Board of Directors and Chief Executive Officer warrant and declare that this three-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, 28 April 2023

FINANCIAL CALENDAR

The report for the second quarter will be published on 14 July.

The report for the third quarter will be published on 20 October.

The year-end report and the report for the fourth quarter will be published on 2 February 2024.

The Annual Report and Sustainability Report 2023 will be published in March 2024.

FURTHER INFORMATION

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

ONLINE PRESENTATION

An online presentation with Per Waldemarson, CEO, and Therése Hoffman, CFO, will take place on Friday, 28 April at 9.00 a.m. CEST. The presentation can be listened to online or by calling in to the telephone conference. Questions can be asked at the telephone conference.

Link to the presentation: https://ir.financialhearings.com/lifco-q1-2023

If you wish to participate at the telephone conference, you can register using the link below. Following registration, you will receive a telephone number and a conference ID to log in to the conference.

Link to register for the telephone conference:

https://conference.financialhearings.com/teleconference/?id=5005427

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 211 operating companies in 30 countries. In 2022, Lifco reported EBITA of SEK 4.7 billion on net sales of SEK 21.6 billion. The EBITA margin was 21.6 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. Until 31 December 2022, these divisions were Construction Materials, Contract Manufacturing, Environmental Technology, Service and Distribution and Forest. The Forest division became significantly smaller than other divisions following the divestment in May 2022 of the Estonian company Hekotek, which mainly sells sawmill equipment to Russia. As a consequence of the decrease in the size of the Forest division, and to increase transparency concerning Systems Solutions, a partly new distribution of divisions is reported from the first quarter of 2023. The change means that the Service and Distribution division is divided into the Transportation Products and Special Products divisions. Operations in the Forest division have been relocated to the Special Products division. The Construction Materials division has changed name to Infrastructure Products to clearly clarify the companies’ direction.

NET SALES TO EXTERNAL CUSTOMERS

No sales are made between the segments.

Net sales by type of income:

Net sales for the Systems Solutions business area by type of income quarters 2–4 2022 and total 2022:

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

ACQUISITIONS IN 2023

Six businesses were consolidated in the first three months of the year. The consolidated business are the British companies Alwayse Engineering, Broughton Plant Hire and Sales and Didsbury Engineering, the Swedish company Doxa Dental and the German company Kohler Medizintechnik. Assets of the German company Welte Dentallabor were also consolidated.

The purchase price allocation includes all acquisitions consolidated during the first three months of the year.

Acquisition-related expenses of SEK 17 million are included in administrative expenses in the consolidated income statement for the first three months of the year. Since the respective consolidation dates, the acquired companies have added SEK 45 million to consolidated net sales and SEK 14 million to EBITA. If the businesses had been consolidated as of 1 January 2023, consolidated net sales for the year would have increased by a further SEK 97 million and EBITA would have increased by a further SEK 34 million.

FINANCIAL INSTRUMENTS

¹ Other liabilities classified as financial instruments refer to mandatory put/call options related to non-controlling interests.

The carrying amount is the same as the fair value. Financial instruments at fair value are classified into different levels depending on how fair value is determined. All financial instruments at fair value in the Lifco Group have been classified as level 3, i.e. non-observable inputs. The fair value of short-term borrowings is equal to the carrying amount, as the discount effect is insignificant.

KEY PERFORMANCE INDICATORS