Year-end report 2016

Report

Presentations

Press release

Year-end report 2016

NET ASSET VALUE AND THE LATOUR SHARE

  • The net asset value rose to SEK 348 per share, compared with SEK 317 per share at the beginning of the year. This is an increase of 12.1 per cent, adjusted for dividends. By comparison, the Stockholm Stock Exchange's Total Return Index (SIXRX) increased by 9.7 per cent. The net asset value was SEK 360 per share at 15 February (1).

  • The total return on the Latour share was 12.2 per cent in the period compared with 9.7 per cent for the SIXRX.

  • The Board of Directors proposes an increased dividend to SEK 8.00 (6.75) per share and a 4:1 stock split.

INDUSTRIAL OPERATIONS
The fourth quarter

  • The industrial operations' order intake rose 24 per cent to SEK 2,276 m (1,840), which represents an 11 per cent increase for comparable entities adjusted for foreign exchange effects.

  • The industrial operations' net sales rose 17 per cent to SEK 2,278 m (1,942), which represents a 5 per cent increase for comparable entities adjusted for foreign exchange effects.

  • The operating profit increased by 5 per cent to SEK 272 m (260), which equates to an operating margin of 11.9 (13.4) per cent for continuing operations.

Full year

  • The industrial operations' order intake rose 15 per cent to SEK 8,384 m (7,264), which represents a 9 per cent increase for comparable entities adjusted for foreign exchange effects.

  • The industrial operations' net sales rose 14 per cent to SEK 8,199 m (7,186), which represents a 7 per cent increase for comparable entities adjusted for foreign exchange effects.

  • The operating profit increased by 17 per cent to SEK 1,052 m (900), which equates to an operating margin of 12.8 (12.5) per cent for continuing operations.

  • Five acquisitions were completed in the industrial operations during the year. These contribute annualised net sales of just under SEK 800 m.

GROUP

  • Consolidated net sales totalled SEK 8,344 m (7,186) and profit after financial items was SEK 3,754 m (4,299), of which SEK 890 m (1,753) are capital gains.

  • Consolidated profit after tax was SEK 3,670 m (4,117), which is equivalent to SEK 23.01 (25.81) per share, of which SEK 5.58 (11.0) per share are capital gains.

  • Net debt at the end of December was SEK 1,446 m (2,205) and is equivalent to 2.5 per cent of the market value of total assets.

INVESTMENT PORTFOLIO

  • In 2016, the value of the investment portfolio increased by 10.2 per cent adjusted for dividends and changes in the portfolio. The benchmark index (SIXRX) rose 9.7 per cent.

  • In the fourth quarter, ownership in Tomra increased to 25.9 per cent of the capital after the acquisition of 181,000 shares.

EVENTS AFTER THE REPORTING PERIOD

  • Acquisition of Safegard Systems Ltd. within business area Swegon. The company employs 24 staff with headquarters in Dublin, Ireland, and had a turnover of EUR 8 m in 2016.

  • Acquisition of an additional 340,000 shares in Tomra, giving an ownership stake of 26.1 per cent in the company’s capital. Increased ownership stake in Diamorph, from 26.4 per cent to 28.2 per cent.

(1) The calculation of the net asset value at 15 February 2017 was based on the value of the investment portfolio at 1 p.m. on 15 February and the same values at 31 December were used for the unlisted portfolio.

Comments from the CEO
“Our wholly-owned industrial operations continued to expand in the fourth quarter. Order intake saw organic growth of 11 per cent with corresponding growth in invoiced sales of 5 per cent. Including acquisitions, order intake grew by 24 per cent and invoiced sales by 17 per cent. For the full year, order intake achieved organic growth of 8 per cent and invoiced sales delivered organic growth of 7 per cent. Including acquisitions, total net sales rose 14 per cent. The fourth quarter performance therefore provided a strong finale to 2016, which was the best year ever for the industrial operations. For the first time, our operating profit exceeded one billion, SEK 1,052 m (900), to give an operating margin of 12.8 (12.5) per cent.

The industrial operations as a whole are now solidly delivering above our 10 per cent annual growth target and well above our 10 per cent operating margin target. This fine performance gives us scope to make further investments to enable future growth. Most of the invest-ments that we are making in product development and increased sales and marketing in existing operations are recognised as an expense in the income statement. Product development is an ongoing process in our business areas, all of which had exciting product launches during the year that are attracting considerable customer interest.

My expectation is that activity and growth in the building and construction industry will remain strong across much of Europe. There are currently no signs to suggest a slowdown in the construction industry in this part of the world. This benefits the late-cycle areas of our business, for example Swegon and Fagerhult. We are however seeing a fragmented picture across the markets of Europe. The region with the strongest growth is still the Nordic countries, driven primarily by Sweden. The Netherlands, Belgium and Poland are also enjoying positive growth. Several other European markets are stable but are not seeing any significant growth. In addition, it is interesting to note some recovery among our customers in the general manufacturing industry compared with previous relatively low levels. I believe this picture is also corroborated by the order intake reported by other industrial companies for the fourth quarter of 2016.

Just as before, it is difficult to assess how markets in the rest of the world will develop. No one has really yet said whether the outcome of the US election will boost the American market or lead to a global trade stagnation. We feel that the general market situation in South-East Asia, including China, is still unsettled, and the shipbuilding crisis in Korea has generated great uncertainty there. However, one should note that the situation has been uncertain for some considerable time and that we have performed well in this climate. The industrial operations make just 13 per cent of their sales outside of Europe, but a full 72 per cent outside of Sweden.

Thanks to our growth, fine earnings performance and stable financial situation, we are well positioned to think and act ahead, as we have in the past, no matter how the markets change. Despite relatively weak market growth, we are confident that our firm footing will allow us to continue to report strong earnings.

We made no acquisitions for the industrial operations in the fourth quarter. Earlier in the year, a number of interesting acquisitions were made for Latour Industries, Nord-Lock and Swegon. These acquisitions represent additional annual sales of almost SEK 800 million. We're expecting acquisition activity to remain relatively high throughout 2017. Our healthy financial position allows for investments of more than SEK 5 billion.

A number of our listed holdings have submitted their reports for the fourth quarter and, in line with previous reports, these companies have generally reported a strong performance. This ensures that further investment can be made in future growth for the listed holdings too.

The value of the investment portfolio increased by 10.2 per cent during the year, adjusted for dividends, while the benchmark index (SIXRX) increased by 9.7 per cent. The net asset value in Latour increased in the same period by 12.1 per cent to SEK 348 per share, adjusted for dividends.

Let me sum up by saying that growth was very positive in 2016 and it is on this basis that the Board is recommending that the dividend be raised to SEK 8.00 (6.75) per share.”

Jan Svensson
President and Chief Executive Officer

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

Conferense call
President and CEO Jan Svensson and CFO Anders Mörck present the report and answers to questions by telephone today at 11.00 AM (CET).
The conference call will be held in English.

To follow the meeting, please call +46 (0)8 566 426 91. The conference will be webcasted.
To follow the webcast please visit our webpage or use the link:
http://event.onlineseminarsolutions.com/r.htm?e=1348097&s=1&k=A7AC9F27A9E4FAEE218CD85CB9CC9B08