Investor AB (publ)

Hello and welcome to Investor Year-End Report for 2020. For the first part of this call, all participants will be in a listen-only mode, and afterwards, there will be a question and answer session. Today, I am pleased to present Johan Forssell, CEO, Helena Saxon, CFO, and Vivica Hildman-Ryrberg, Head of Corporate Communications. Please go ahead with your meeting.

Thank you and welcome everyone to Investors Year-End Report and our conference call this afternoon. We will start out with our CEO, Johan Forssell, followed by our CFO, Helena Saxon, and then we will open up for questions. Please, Johan.

Thank you, Vivica. 2020 was for sure a special year, heavily impacted by COVID-19. And we all know that it led to severe suffering for people, but also contraction of the economies around the world. However, we also know that different industries have been hit in different ways. And that we can also see in our reports today. Looking forward, of course, the rollout of the vaccine provides a big opportunity. And we also see that supply chains are working reasonably well. And manufacturing is in most places up and running. So there are clearly positive areas or positive factors entering 2021. But there are also risks. COVID-19 is still not controlled. There are questions, of course, what if the vaccines will not bite as we hope? Could there be more mutations, et cetera? That is, of course, a risk. And as we all know, there are also financial risks with central banks that have basically poured a lot of money out in the system. And I think none of us know to what extent that will spur future inflation and higher interest rates. So there are always those kind of opportunities and risks, but as always, predicting the future is difficult. And that is why flexibility remains key. Being prepared, being flexible, and try to seize the opportunities but handle the risk. That remains our key focus. So with that introduction, moving down into 2020, that was a strong year for investors. I think I can say that the companies have really managed 2020 in a good way. And our subsidiaries have actually increased the profits somewhat during the year. and finished the year strongly. With the enlisted company, we invested more than $3 billion during the spring at attractive levels. And Patricia Industries, of course, highlighted the acquisition of advanced instruments. And as you have seen, the performance was really strong in the fourth quarter, growing at 16% organically with a very high profitability. Also, IKT performed great last year, up 55%. for all our investments in IKT. And despite the investments we made, both within Patricia and within listed companies, we end the year with very strong financials and the leverage that is below our target range. And finally then, I think another highlight, of course, is that 2020 was the year when we launched our focus areas and targets when it comes to sustainability, and that is a high priority in our daily work. Now, so moving to the next page, here are the figures. Our adjusted net asset value was up 14%, and our total charity return was up 19%, and that can be compared to the stock market being up 15% in Sweden. As you know, our goal is to pay a steadily rising dividend And the board has today proposed a dividend of 14 kronor per share. And just as a reminder, last year, due to the very special circumstances, we took the decision to be more cautious and gave a dividend of 9 kronor, about two-thirds of the original expectation. I think that to put that in context, almost half of the companies on the large cap in Sweden didn't pay dividends at all. But we're very pleased to now be more on track on the journey again. And the reason why we feel good about this dividend is that the companies have handled the pandemic well. The company stands strong. And as I mentioned before, investors' financial position is strong. So I think we feel comfortable with our recommendation. We have also proposed to split four to one. And the reason for that is that we have had over the last few years a strong increase in the share of the base, and today we have about 330,000 shareholders. And investor trades are at a high share price compared to most large cap companies on the Stockholm Stock Exchange. So a split could increase liquidity by providing access to a larger share of the base, and that is the main reason for the decision proposed. Moving then over to listed companies that now represent about 65% of the value of investor. Key highlights 2020, the spin out of Electrolux Professional during the spring. As I mentioned before, we invested in ABD Ericsson and Electrolux Professional in total 3.4 billion during the spring. A number of our companies have also made strategic acquisition. A few examples are Ericsson's expansion into the enterprise segment with the acquisition of Cradlepoint. And then Atlas Copco doing two acquisitions to build Machine Vision Division. And recently AstraZeneca announced the acquisition of Alexion, expanding into rare disease and immunology. High focus in some companies have also been on the corporate structure. Of course, ABB after digesting power grids, now the focus is to work in the decentralized structure to really supply better customer offerings and also increase efficiency in the corporation. Wärtsilä also reorganized and launched a number of initiatives to improve the internal efficiency, not least when it comes to project handling. We had a number of new CEOs last year. During the spring, we had new CEOs announced and started, with Björn entering in ABB, Helena in Epiroc, and Henrik in Husqvarna. And now we have coming up on February 1, we have Håkan Agnevall, who will join or start as CEO of Värtsilä. And sustainability has been a focus for us in many years when it comes to the listed companies, but over the last 6 to 12 months now, we have further integrated the work into our value creation plans and being more specific and better KPIs for follow-up. With that, moving over to Patricia Industries, which now is about a quarter of the value of Investor. A couple of highlights. I mentioned before the acquisition of Advanced Instruments, which is a company that we really like. And as I mentioned before, started really well in the first quarter in our ownership, now with the fourth quarter results. But we have also had other companies like Sarnova and Laboree doing significant acquisitions during the year, and we have supported also related to those. 3 Scandinavia took a very important decision when it comes to the divestment of the passive network infrastructure. That is an important deal for investors because, first of all, it's a highly value-created deal, and secondly, it will also give a strong liquidity In total, we will get about 5 billion, of which we have received a little bit more than 1 billion in the fourth quarter. And then, on the people side, Zlatko joined as CEO of Memlic in November, and is now up and running. And also, of course, within our subsidiaries, there's a high focus on the sustainability area. On the next page, you can see the broad picture of the Patricia business, focusing on the subsidiaries and also our part of the profit, our 40% part of the profit in three. You can see that the subsidiaries total sales is about 40 billion. And you can see that if you add our part of the profit in three, the EBITDA amounts to more than 10 billion. So this is a sizable part of the company. On the next page, You can see the operational performance. You see the big hit during the spring when the pandemic started. But you can also see the recovery in the third quarter and, of course, the strong quarter that we have released. Then on page 13, you can see that the organic growth was 14% for the subsidiaries in the quarter, and the adjusted profit growth was almost 30%. but you can also see that it's widespread between the different companies, so let me comment on that. On page 14, you can see that Mendic grew 41% in the quarter. If we exclude the PPE business, the underlying organic growth for the group was 9%, and that consists of a growth of 5% from wound care and an underlying growth in surgical of 14%. The growth in surgical this quarter, within that segment, we had a very high growth in the gloves business. You can see that the profitability also improved quite a lot. Sarnova continued to perform well, and the adjusted profit margin increased. Advanced instrument dimension before excellent start under our ownership. And then PIAB, here we did see a return to growth. since the company grew 12% in the fourth quarter, and also here with better profitability. So for these four companies, very strong performance. On the other hand, Ronability, Laboree, and Permavis, as you can see, are still affected by COVID-19. And that is mainly related to the fact that they have high-risk groups in the customer base. It's difficult to reach the customers. And in some cases related to Laboree, it also is due to postponement of elective procedures. However, you can see despite the sharp falls in sales that the profitability has remained at good levels. Saying then a few more words about the different companies on Mänlycke. I think I mentioned the underlying growth of 9% and the split between Wound Care and Surgical. When it comes to the PPE business and looking forward, we expect to add or we expect to have additional sales of PPE also into 2021. But we expect it to be significantly less than we had in 2020. And that is also the reason why we have done an adjustment when we have valued Manlik, basically lowered the multiple a bit to account for this fact. Profitability very strong, driven by good cost efficiency and, of course, leverage on sales. Another highlight was that the cash flow was extremely strong in the quarter, and the company distributed almost €350 million in the quarter. Moving then over to Permobil. As mentioned before, the organic growth was 10%. Europe and America was down roughly in line with that figure while APAC grew somewhat in the quarter. And the EBITDA margin increased. Moving to Sarnova, organic sales amounted to 19%. And here I can say that both emergency preparedness and acute grew at strong levels in the quarter. Acute was a little bit higher, but boosts were 15% or higher. And also here, the underlying profit margin increased. And importantly, the expansion into the revenue cycle management business that will now be called Digitech closed in the quarter. Moving then over to Laboree, the organic sales growth was 14% in the quarter, and we continue to see a sharp decline in elective urology and gas drugs. and that is related to postponement of some procedures that are elective. While the maternal and child health business, which is clinical innovation acquisition, actually grew during the quarter. The underlying profitability, the reported profitability increased somewhat, while the underlying profitability decreased somewhat compared to last year. Moving down to PIAB. Organic growth, as I mentioned, was double-digit in the quarter. Actually, all geographical regions contributed positively, but Europe was showing the strongest growth. And also when it comes to different divisions, all divisions grew in the quarter, but ergonomic handling had the highest growth. The profit margin expanded quite a bit compared to last year, but we should remember that last year was negatively affected by costs for the acquisition of Tavi. So, adjusting for that, the property margin last year was 24%, so up a bit, but not as much as you can see in the P&L. And the company also launched a number of new products, mainly related to the automotive, but also to the electronics and e-commerce businesses. Advanced instruments, I've already mentioned the key figures, and you can see the good performance. we will continue now under our ownership and invest both in the commercial organization to drive long-term growth and also within R&D. Those are top priorities to grow this profitable company. Moving to Grownability, this is a company that continues to be negatively affected by COVID-19. And you can see the organic growth was down 22% in the quarter. If you start on the consumer business, it's important to remember that the customer for vulnerability, they are different from the ones buying cars. So the recovery of vulnerability consumer business is lagging the recovery we see in the normal car business. And the reason, of course, is that they are more high-risk groups. When it comes to the commercial part of vulnerability, that has been negatively affected by the fact that there is less public transportation within buses and taxis. But despite the tough times related to COVID, you can see that profitability is holding up very good due to good cost management. Free Scandinavia, subscription-based grew, service revenue up 1%. adjusted to some one-time items in the quarter, profit grew 1%, and as I mentioned before, the key highlight is the divestment of the passive network infrastructure. And after the end of the quarter, 3 secured 100 MHz spectrum in the 3.5 GHz band in Swedish 5G options, and that would make it possible for 3 to build out 5G to give their customer a really good offering in that area. Shortly on EQT, you can see that EQT has become a sizable part of investors now representing 10% of our total assets. I mentioned that the total return for the total investment was 65% last year. You can see that the company EQT AD being on the stock market was up almost 100%. while the development of the funds was up 12%. In constant currency, the funds were up 17%. And once again, you should remember that we are reporting this with one quarter lag, so this is up until the third quarter. Our priorities then going forward, of course, make sure we sharpen our role as an engaged donor and always make sure we have an attractive portfolio. And moving to slide... This is the one that is updated that we showed on our Capital Markets Day. I just want to reiterate that we truly believe we have a strong base, strong portfolio for the future with a lot of medtech healthcare companies that can benefit from the demographic trends. And also for many of these companies, we see great opportunities to expand geographically around the world. Within advanced engineering, we have a number of companies that are in the forefront where we see good opportunities, not the least within automation. Within technology, we have companies like Ericsson and Nasdaq with very strong offerings that can ride on the more digital world that we see. And within the financial, to give one example, that ECT, of course, has a great exposure to alternative investment, which is a future growth area. So we have a portfolio with... companies that have strong market position and where we see a lot of opportunities to grow going forward. So then to summarize from my side, we will continue to work with the strategy we have that we have worked with for a long time. And of course, we are constantly tweaking it. We are constantly trying to move a little bit faster, do it a little bit more efficient, but the basic is still the same based on our ownership model. based on a portfolio with strong companies, and of course we have a good financial strength to support our companies in the years ahead. So with that, I will hand over to Helena.