Interim Report January - September 2015

Press release

Interim Report January - September 2015

NET ASSET VALUE AND THE LATOUR SHARE

• The net asset value rose to SEK 275 per share, compared to SEK 250 per share at the beginning of the year. This is an increase of 12.7 per cent, adjusted for dividends. By comparison, the Stockholm Stock Exchange’s Total Return Index (SIXRX) increased by 3.8 per cent. The net asset value was SEK 304 per share at 5 November (1).
• The total return on the Latour share was 34.3 per cent for the period, which is significant better than the SIXRX index.
  

INDUSTRIAL OPERATIONS
Third quarter

• The industrial operations’ order intake rose 14 per cent to SEK 2,092 m (1,836), which represents a 5 per cent increase for comparable entities adjusted for foreign exchange effects.
• The industrial operations’ net sales rose 11 per cent to SEK 2,079 m (1,877), which represents a 2 per cent increase for comparable entities adjusted for foreign exchange effects.
• The operating profit increased by 6 per cent to SEK 250 m (237), which is equivalent to an operating margin of 12.0 (12.6) per cent for continuing operations. 
• During the quarter, Nord-Lock acquired Boltight Limited in the UK. The company has 18 employees and annual sales of approximately GBP 4 m.
• During the quarter, Latour announced its intention to sell the Specma Group business area.
  

January to September

• The industrial operations’ order intake rose 14 per cent to SEK 6,447 m (5,649), which represents a 2 per cent increase for comparable entities adjusted for foreign exchange effects.
• The industrial operations’ net sales rose 13 per cent to SEK 6,271 m (5,542), which represents a 1 per cent increase for comparable entities adjusted for foreign exchange effects.
• The operating profit increased by 33 per cent to SEK 702 m (526), which is equivalent to an operating margin of 11.2 (9.5) per cent for continuing operations.
  

GROUP

• The Group’s profit after financial items was SEK 2,505 m (1,464).
• The Group’s profit after tax was SEK 2,372 m (1,322), which is equivalent to SEK 14.87 (8.29) per share. The profit includes capital gains of SEK 670 m, which is equivalent to SEK 4.2 per share.
• Net debt at the end of September was SEK 3,581 m (3,302) and is equivalent to 7.6 per cent of the market value of total assets.
• New financial targets have been set. The required rate of return on operating capital has been changed to 15 - 20 per cent (previously 20 per cent) to enable further growth through acquisition.
  
  

INVESTMENT PORTFOLIO

• During the period, the value of the investment portfolio increased by 14.1 per cent adjusted for dividends. The benchmark index (SIXRX) rose 3.8 per cent.
• In the first quarter, 30.1 per cent of the shares in Troax Group AB were acquired. The company reports annual sales of approximately SEK 900 m. In the second quarter, the ownership in Nobia dropped to 10.1 per cent following the disposal of 5,400,000 shares.

(1) The calculation of the net asset value on 5 November 2015 was based on the value of the investment portfolio at 1 p.m. on 5 November and the same values as on 30 September were used for the unlisted portfolio.

Comments from the CEO
"Both our listed holdings as our wholly-owned industrial operations delivered a positive performance in the third quarter. Organic order intake improved in the industrial operations by 5 per cent and net sales by 2 per cent. Volume growth is particularly strong in Hultafors and Latour Industries, and Swegon is now also on an upward trajectory. Nord-Lock, however, is experiencing a slight decline. Including acquisitions and foreign exchange effects, order intake in the industrial operations grew by 14 per cent and invoiced sales by 11 per cent. The order backlog continued to grow and at the end of September order intake was exceeding invoiced sales by SEK 177 m.

The operating profit increased by 6 per cent to SEK 250 m (237), which is equivalent to an operating margin of 12.0 (12.6) per cent. In absolute terms, this is our best ever quarter.

However, we are seeing signs around us that operations that have an early business cycle are starting to lose demand. Even operations with exposure to the oil, gas and mining industries are, for known reasons, experiencing a slightly tougher time than before. Operations closely linked to the construction sector usually have a late business cycle and thus have more opportunity to keep growing for a while. Geographically, we can see that there is a certain amount of growth in Europe, although it is not strong. However, the investment climate is poor. We expect growth to be slow in China, which is not a significant market for our industrial operations. In North America, there is concern that the downturn in the oil, gas and mining industries will spread to other sectors.

In spite of this, we can still see good potential for reporting strong earnings even if market growth is relatively weak, but at the same time we are viewing general economic developments with deference. We continue to conduct our operations based on the premise that we cannot count on the economic situation offering us any significant help, but we are not holding back on investments in product development, sales and marketing.

We made one acquisition in the industrial operations in the third quarter. Nord-Lock acquired the British company Boltight, which is a leading hydraulic bolt tensioning manufacturer. Boltight has its head office in Walsall, UK, and has been developing bolt tensioning solutions for critical applications for the power generation, oil and gas, and manufacturing industries for 16 years. The company has 18 employees and annual sales of approximately GBP 4 m.

We completed another three acquisitions earlier this year in the wholly-owned industrial operations. In the second quarter, parts of the Ergolet Group in Poland were acquired by REAC in Latour Industries. The business generates sales of SEK 30 m and is based in Jasien in Poland. The deal ensures that REAC has a supply chain for key components. Latour Industries acquired Produal, a leading Finnish manufacturer of devices for building automation measurement and room control. Produal has 95 employees and generates sales of EUR 18 m with a very high level of profitability and operates in an area that is related to our previous holdings in the field of energy efficiency, Kabona, Bastec and Elvaco. We believe strongly in the future of this area. Specma Group also made a smaller acquisition in the second quarter with its purchase of Hydraulikhuset.

In August, we also announced our intention to dispose of the Specma Group business area and work is currently on-going with the aim of divesting the business area by the end of this year.

We have also now decided to announce new financial targets. We are adjusting the target for the required rate of return on operating capital to 15-20 per cent from a previous absolute limit of 20 per cent. The reason for this change is that the new target seems more suited to a business that is oriented towards acquisitions, where we otherwise run the risk of not being able to compete for interesting acquisition targets. The fact that we have adjusted the required rate of return should not be interpreted to mean that we are lowering our level of ambition, but should be seen to indicate that we do not want to restrict our acquisition opportunities.

Most of our listed holdings have submitted their reports for the third quarter. On the whole, the companies have reported very positive performances with regard to both growth and profitability. It is particularly interesting that Sweco’s public offer to buy up the Dutch company Grontmij was successfully implemented during the quarter. The acquisition makes Sweco the leading technology consultancy company in Europe.

The investment portfolio value rose 14.1 per cent in the nine-month period, thus outperforming the SIXRX benchmark index, which rose 3.8 per cent. The net asset value in Latour increased by 12.7 per cent in the nine-month period to SEK 275 per share, adjusted for dividends.”

INVESTMENT AB LATOUR
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