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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, welcome to Investment AB Latour's Q1 report for 2021. [Operator Instructions] Today, I am pleased to present Johan Hjertonsson, President and CEO; and Anders Mörck, CFO. Please begin your meeting.
Thank you, Madam. Johan Hjertonsson here, and I'm together with Anders Mörck, as has said, and very welcome to the presentation of our Q1 report. I will also, at the end, mention a little bit on the full year, since we don't have a full normal Annual General Meeting presentation this year, but I'll come back to that at the end of the presentation. But it's main -- the main focus is to present the Q1 report. So as you can see on the first slide, our group structure is unchanged, so no changes there. When it comes to the quarter as a summary, it was a very strong quarter. The pandemic is, as you all know, still ongoing. But our holdings and operations are very well positioned and handled the challenges very well. We're very proud of the achievements and very thankful to all of our team members throughout all our companies and holdings, so as an introductory note. Then we can change the slide. So there is no changes in the listed portfolios during the quarter, and here, we talk about the highlights in the investment portfolio. Value development so far at the end of the quarter 8.6% during the year compared to the SIXRX of 14.3%. And the underlying development, I would like to point out, is very satisfying. And the majority has reported so far and reported good order sales and profit of our 9 listed holdings. Until yesterday, the portfolio value increased to SEK 78.6 billion with a total return of 15.8% so far this year compared to the SIXRX of 19.4%. I would also like to mention that the Nomination Committee were to nominate our Boards. That work is concluded for this year. And overall, we're very satisfied with the results. And we're very happy to report that we have very diverse Boards with a good gender equality and that we have managed to recruit many competent Board members to the Boards in our 9 listed holdings. We have also done larger work than normal when it comes to remuneration for Board work. That is something we think is very important in Latour, and we have, in many cases, increased the Board to more than normal. And that is important because we need to attract talent. All our holdings are very international and the demands are also increasing going forward. So that's the theme that we've been driving for this year's Nomination Committee work, I would like to point out. So with same slide then, and I'd like to comment on our wholly-owned operations. And the year started with a very good momentum and increased even further at the end of the quarter. March was a very, very strong month for us. The pandemic still affects our operations and will do so for some time to come. There is a mixed picture although depending on geography and segments. There are some negative effects. We have some logistic challenges, higher transportation costs and difficulties with services to customers, to active customer [ site sales, ] and some project deliveries are sometimes a challenge. But I would like to point out those are minor issues in the overall view. We have very well-positioned operations on growing market segments. So therefore, an overall positive development. We reported very strong quarter total growth of net sales of 8% in the quarter with an operating profit that grew 27% to SEK 569 million and with a stellar EBIT margin of 14.5%, which is very strong considering the first quarter, if you look into the business seasonal effect. Normally, our quarter 1 is the lead strong quarter. And we continue to invest in our holdings. We invest a lot in product development, sales and marketing, and we have increased our drive for sustainable growth and the environmental questions in which we're continuing to strengthen our position going forward. And also digitalization is a very important aspect as we push that development further. I'm happy to report that Latour has signed United Nations Global Compact and that's a way for us to emphasize and even more underline our commitment on sustainability going forward. However, we see some examples of quite increased bureaucracy going forward when it comes to control and drive the sustainability approach from politicians. So one example is the taxonomy that is coming up, and the definitions are extremely narrow, and that contributes to unfair exclusion. And I also think that it will hinder innovation going forward. So that's the things that we've done here in the quarter. And if we continue then into the next slide, we can talk about acquisitions, M&A. And we have hired -- I'm happy to report that in the quarter, we have added SEK 1.5 billion of net sales through acquisitions in run rate during the quarter, and we have a high acquisition activity. We have a very good momentum and good speed and RPM in our M&A engine. Our M&A engine is running very well. And what I would like to point out that we -- Densiq, within Latour Industries acquired VM Kompensator in January with an annual net sales of DKK 23 million. And they're a designer and manufacturer of compensators and expansion joints used in the industrial applications. Latour Industries also completed the acquisition of VEGA with an annual net sales of SEK 200 million. VEGA is an Italian designer and manufacture of passenger lift interface systems and electronic system for elevator and platform lifts. And Bemsiq, we completed the acquisition of Elsys with an annual net sales of SEK 50 million. And they are manufacturer and seller of the LoRaWAN sensors for applications in smart buildings and cities, which is a very interesting and growing segment going forward. And the Hultafors Group completed the acquisitions of Fristads, Kansas and Leijona with an annual net sales of SEK 1.2 billion. They're all -- all 3 brands are leading brands in the professional workwear industry for a variety of end user segments. Having said that, it was a little bit of detail and overview of our portfolio companies and our wholly-owned operations and so on. And by saying that, I, would with a warm hands, like to hand over to our esteemed CFO, Mr. Anders Mörck. Over to you, Anders.
Thank you so much, Johan. Yes, we go to the first business area then, which is Caljan and the e-commerce market developed very strongly during the quarter and an increased demand for Caljan. So order intake actually grew by more than 100% during the quarter, and the order book now is on a record level. But on the net sales, as you can see, that was in line with last year. But as you can understand, and if we see the order intake, this is how it is in a project-related business. Some quarters, the deliveries are a little bit lower. Capacity utilization has been on a high level during the quarter as well. So we know that it will come later on this year. The operating profit amounts to EUR 1.9 million, which is a little bit lower than last year. But also here, this is not a surprise. We'll be substantially better from second quarter and going forward based on the extraordinary order situation that we have had. And as you know, also, we have had a lot of investments in Caljan since we acquired it. Last year, we finished the factory in Latvia. And right now, we are working with the establishment of a factory in the U.S. And we turn to the next business area, which is Hultafors. And Hultafors had a continued excellent development in the first quarter for more or less all markets and all product areas. We made the acquisition of Fristads, Kansas and Leijona that was completed on the 1st of March. So very much welcome to Latour all of you. In total, net sales grew by 32% in the quarter, of which 22% is organic. And I don't know what more to say, but it is really, really impressive. Just a few years ago, SEK 1.1 million in net sales was a good figure for a full year for Hultafors. Now we have that figure for 1 quarter. Good cost control combined with this high net sale contributed to a very, very strong operating results and an operating margin of 16.5%. There is, of course, a lot of focus on sustainability and digitization in the organization going forward. And as a final comment then on Hultafors, now you really have to compete with Swegon being the largest business area. So we really look forward to this competition going forward. Andreas and Martin. Thank you. Next page, please. So we go to Latour Industries. And you can say for the Latour Industries, there is a recovery for most of the business units, and there is organic growth in both order intake and sales. There are some concerns regarding price increases from raw material and difficulties within the service side of customers. But that's not much different from our competitors. So we still think the business is out there. Good cost control, in combination with the recovery on top line, contributes to a very good operating result and a margin of 12.6%. And we have said it before, there is a potential for substantially higher margins of profit in this business area. And part of that has now been realized, many thanks to all of those involved in contributing to this. And as you know, Latour Industries is the business area where we build new business areas within Latour, and this journey just continues. This quarter, we acquired VEGA and Elsys and VM Kompensator, as Johan said before. So welcome also to you. Go to next page. Nord-Lock. Nord-Lock have, from the low level last year, a strong start to the year. Market recovery, we can see, and there is a high activity across all regions. Sales increased organically by 7% and order intake grew by 9%. There are a lot of strategic initiatives to support further growth and profitability. And the expansion continued. Last year, we worked on both production sites in Åtvidaberg and [indiscernible] and Åtvidaberg was now open during the first quarter. The operating profit for Nord-Lock amounts to SEK 99 million with a margin of 27.8%, and that's quite impressive since the volumes are rather low. Still it's good that we can keep the margins on these levels and also at the same time invest for the future. And it should also be noted that Nord-Lock is the most international area that we have, and that means that they are the most [ crossed ] by the currency development, that with a strengthened Swedish krona and weaker dollars and [indiscernible] latest time. Let's go to Swegon, which then I shall begin with is still our biggest business area. Swegon had a strong start of the year but -- especially if you compare with the end of 2020. But as the international company that Swegon is, they are still affected by COVID-19, but the picture between the markets and geographies are, of course, different. Swegon and the residential business area, Swegon as a market and the residential as the business area are developing very positively. COVID-19 issues mainly relates to Southern Europe and the U.K. The net sales decreased organically by 1% compared to last year, but that is a comparison with a very, very strong first quarter last year. Swegon works with several internal efficiency projects and the low general spending in overall, that contributes to the strong operating profit with an operating margin of 11.5%. So actually, there was better operating margin on lower volumes this year, which is a good sign. We go to the next page, and we speak about the net asset value of Latour, and the net asset value increased by 8% during the quarter to SEK 166 per share. As you once heard before, SIXRX developed by 14.3%. And our share price at the end of March was SEK 226 and that will mean that we have a premium to our net asset value as we describe it of 36%. And yesterday, April 28, the net asset value increased further to SEK 173. But at the same time, the share price increased even more to SEK 267, and that should imply a premium of 49%. But as a remark, our valuation is just an indication of a prudent view of our value. We would -- and this, we also write in the report for the first time. If we would power our wholly-owned industrial operation and treat it as one group and use industry multiples for similar companies, we will have multiples around 29. And that would be one way of viewing on Latour's net asset value, and that would put substance to the premium that we have today to some extent, to our large sector. It's a difficult world today around valuation with the stock market going up and quality companies, in general, are valued at a very high level. And that said, about that, let's go to the net debt of Latour, which increased from SEK 4.6 billion to SEK 5.9 billion. And this increase, of course, is explained by the acquisitions we made during the quarter. The net debt still corresponds to only about 5% of the market value of our investments, and that gives a good headroom to make plenty of new investments. So long speech from me. Johan, back to you.
Thank you, Anders. Very well. Thanks a lot. Next page is some comments around our financial targets, where we say we should have an annual growth of about 10%, operating margin above 10% and return on capital somewhere 15% to 20%. And so how have we done in the last 12 months running? Well, growth last 12 months was 7.6%, and the EBIT margin was 14.8%, and the return on capital was 15.3%. So EBIT margin well above the target and return on capital within the range, and growth below the target. But I would like to point out that growing with 7.6% during a period with full pandemic effect, we're actually now more than 12 months into the COVID-19 pandemic and to show strong growth during that period, I think it's really good. And especially, we are proud of -- that we protected and even increased the margins in these full 12 months with pandemic at 14.8%. So -- and then on next slide, we talk about our continued international growth. And as you can see in about 5, 6 years ago, in '15, we had about half of our sales outside the Nordic area. And today, we have 2/3 of our sales outside the Nordic area. So we actually -- we're continuing with good pace our internationalization going forward. And we have a -- we are financially very strong and this enables us to continue investing in our existing holdings, add-on acquisitions and also new holdings. And we have, during the pandemic, I would like down the line, always continued to invest in our companies as before with a long, long-term forward-looking view that has paid out very well. And then we go to the next slide. And as I said in the beginning of the presentation, we will not host a normal Annual General Meeting this year, and this call would also serve as a very short summary presentation for the full year. I would like to share a couple of slides on the full year. And this -- change slide again. And now I'm talking about the full year last year, so not the quarter. And the year was clearly marked of the pandemic, as you all know, mixed picture depending on geography and segment. As I said before, we've always put employee safety first with different measures to mitigate the effect of COVID-19. And I think the combination of dedicated management teams with committed employees plus overall cost awareness have protected our profit very well during 2020. So we're very happy and proud of the outcome. The total order growth were 9% last year and net sales were the same 9%. And the operating profit grew last year by 16% to 2 -- a little bit north of SEK 2.1 billion EBIT with a margin of 14.3% as a summary on the finances last year. And if we go to the next slide, on the M&A side, we acquired and ended and closed acquisitions which added SEK 0.7 billion or SEK 700 million on our top line. And the Hultafors Group acquired EMMA Footwear last year. Latour Industries: S+S and Batec. are going to acquire and Swegon is going to acquire Waterloo and SLT. And in addition, we signed agreements for 3 more acquisitions, which was closed in January, February, as we have just discussed on the [indiscernible]. During the Q1, we closed those as well. And all of the acquisitions have had a strong international focus going forward. And then the next slide, we summarize what we did in our public portfolio, in our listed portfolio. And there were some changes in the portfolio last year. We -- in Q2 of last year, we divested some shares in Tomra and our shareholding is now 21.1% of the outstanding number of shares in Tomra, We're still the main owner, and we still take the main owner responsibility in Tomra. We still have a very positive and long-term view of Tomra. We also increased our investment in Fagerhult, and we today hold 47.8% of the outstanding shares in Fagerhult, and we slightly increased our holding in Alimak at 29.6%. And the value development in the listed portfolio was 9.1% during last year compared with the SIXRX of 14.8%. And we think that's satisfying given the very harsh circumstances of last year. And once again, the underlying development is good. Some are struggling with net sales and have an organic decline. But in general, the profits are well protected in our 9 listed holdings. And then, I think we are at the last slide, if we change slide again. This was a very short summary of the full year 2020. Much more could be said. So therefore, I can highly recommend that you read our annual report for 2020 to get more insights about our group structure and how we develop the group, our operations, our sustainability work, the net asset value and the Latour share and much, much more. The annual report, you can find on our website, that's a PDF file. But you can also order a printed version from our website and you go to latour.se to do all of that. And that concludes the presentation. Thank you very much for listening in. That's the presentation part from me and Anders. And having said that, we open up for questions and hopefully some answers.
[Operator Instructions] The first question comes from the line of Joachim Gunell from DNB Markets.
So two questions for me, and hopefully, you'll be able to answer them.
Joachim. We hear you and you're a little bit faint on the line. So if you could speak up a bit.
Absolutely. Can you hear me better now?
Yes, that's better.
Perfect. Thank you. So perhaps you can comment a bit on -- I mean, with the very strong growth in organic orders, especially in Caljan, obviously. But can you comment a bit on given that March was so strong business momentum sequentially in what you have seen so far in April across the various segments?
Yes. We can do that on a very high level, if I start and add please, Anders, if you want. I mean, actually, the Q1 started quite well. It just ended even stronger. And we have no reason to -- in the short term, if you look some months ahead, to believe that there will be a major shift or change in that view. However, as I pointed out, there are some challenges as well. I mean, steel prices are rising strongly globally. They are exploding in the U.S. There are some component shortages. There are some logistic bottlenecks and so on. So I mean, the overall macro picture of the global economy is quite strong, actually, I would I have to say, and interest rates are quite very -- or very low. I think that's what I would stretch me to comment on that question. Do you want to add, Anders? Do you want to define...
No, I think you put it in a nice way. Maybe you can say Caljan is, of course, as Joachim yourself mentioned something extraordinary. And there, the visibility is longer than in the other companies, of course, because orders are project-related, and we know we have really high order intake, and that puts a good faith in both Q2 and Q3, so to say. In the other companies, a little bit shorter. And in a company like Hultafors actually, the visibility is 1 day. Those orders are -- is more or less the same as net sales.
That's clear. And since you provided for the first time, this, call it, the hypothetical reasoning regarding the market's implicit valuation of your unlisted assets, perhaps you can also, coming from, call it, hypothetical point of view, elaborate a bit on, basically, if you would be willing to take further steps to provide an updated framework from the current very prudent view that you provide yourself in some times or is that out of the picture?
No. At the time, we have no such plans. But Anders and I felt that the premium value compared to the way we value our business is [ 100 point. ] It's approaching 50%, and we thought we needed to add -- shed some more light around that and provide possible explanations to that premium value. That's why we did that comment on. Anders?
No, about when we started 12 years ago to do this valuation or guiding valuation of our wholly-owned businesses, I would say, the difference was not even close. It was rather a discount on the share price of Latour, and that helped to guide the stock market. But as I pointed out before, the stock market climate is very difficult now to interpret. So you need to give more comments around why we do the valuation and also that you could have different views because you can see companies today valued at 40, 45, 50x EBIT, at least if you look on last year's EBIT. And that we -- that was not the case in 2008 or 2015. And it's difficult when you have a peer growth of one company in the previous gives the value of 13, and another company gives the value of 45 as an implied EBIT multiple. And this is only that we felt it was in place to comment, and it's a difficult stock market out there, and we are actually glad that it is the stock market that puts the value on Latour and not ourselves. We work with the profits and the growth of the company.
That's -- I think that's very comprehensive. And just a follow-up on that. I mean, would it make sense in any way because we have seen some of the, call it, sector colleagues, I mean, issuing shares that's premium in order to, I mean, really accelerate their investment pipeline? And I mean, obviously, you have a large financial muscle already in Latour. But perhaps just a comment on what you're seeing, I mean, what's happening with investment companies, more generally speaking, issuing shares at the premium and perhaps also your view on whether this, I mean, emerging structure in SPACs, if that is something that would fit, I mean, Latour as a principal shareholder somewhere down the line?
Yes. Joachim, thanks for your question. I think it's a little bit important before answering your question to go back to, I mean, what are we? Yes, we are an investment company, but we're also an industrial company. And I think issuing shares or putting up a SPAC or other things to do capital is -- to your point, Joachim, we have a very strong balance sheet. We focus more on developing good businesses and finding good businesses, and then we work with the financing. We prefer to do it that way. We have a more industrial look. We develop companies. We find good companies. We acquire good companies and then finance it. So we prefer not to put the wagon before the horse and start working with the financing and then search the companies. And we have no real need for that. So we -- as Latour, we stay the course, and we focus on building good industrial companies. And the financing is not a major issue in those areas. I think, you agree on this or do you want to add some around...?
No. I think you put it in a nice way. And it's also difficult to do this as you imply new share issues because what we discussed before is actually no one knows what the correct net asset value is. Then you don't know what the correct premium is either.
[Operator Instructions]There are no further questions. So I will pass back for any closing comments.
Okay. I think that's it. So on behalf of Anders and myself, I would like to thank you all dearly for taking the time to listen to us and for you showing interest in Latour. And in this format, we will meet again when we publish the Q2 report in about a quarter's time. So see you and talk to you later. Thanks a lot.
Thank you for attending. You may now disconnect your lines.