Investor AB (publ)

Hello and welcome to the Investor AB Q2 Report 2021. Throughout the call, all participants will be in listen-only mode and afterwards there'll be a question and answer session. I'll now hand the call to Viveka Hardman-Reiberg, Head of Corporate Communications. Please go ahead with your meeting.

Hello and welcome everyone to Investor's Q2 conference call. We are hosting this conference call this late in the afternoon, as we've had a board meeting today, and then we released our report as the board meeting was finalized. As usual, we will start out with our CEO, Johan Puschel, who will present the results, followed by our CFO, Helena Saxon, and then we will open up for a Q&A session. So please, Johan.

Thank you very much, Vivica, and once again, welcome to this conference call. If we start on page number two, we are clearly seeing an improved economic environment, and that, in combination with the low rates, has continued to fuel asset prices. But there are uncertainties that remain. We know about supply chain issues, geopolitics, and, of course, the spread of the Delta variant. And it is worrying that the Delta variant is now spreading, not least in Asia, in countries such as Indonesia, Thailand, and Malaysia, where there is a low vaccination level among the people. And this is clearly a risk, and we are already seeing an impact in a few places. One example being Melnyke that have a plant in Malaysia where they produce gloves that is currently being affected that they need to handle. So it is something that needs to be watched. how this is spreading around the world. But overall, as I started with, we are seeing an improvement in the economy. And, of course, the first quarter from August was overall very strong. The net asset value was up 5% in the quarter, and our total share of the return was up 15%, and that can be compared with the stock market in Sweden being up 7%. Moving on to page number three. The listed company had a total return of 5% in the quarter. Patricia Indices' value was up 3%. That was driven by higher earnings, but mitigated by multiple contraction. There was a strong operational performance in the companies, and the two companies made strategic add-on acquisitions. And then Grand Group and Grand Hotel Property were divested in the quarter. The strong development within EQT continuables when it comes to value, and also we had a very strong cash flow in the quarter. And actually, the cash flow for the total group was very strong in the quarter, driven by EQT, distribution from Melvike, $2 billion, and then also distribution from 3 related to the divestiture of the passive infrastructure, and finally the divestiture of grant group and the related properties. So we have a very strong financial position that we will utilize where we see opportunities, and I will come back to that. If I then move to listed companies, the top priorities in the quarter has been to handle supply chain issues and, of course, the rapidly changing demand. At the same time, of course, many strategic investments in R&D technology and auto lead sustainability is, of course, continuing at high speed. Moving then over to Patricia Industries, the reported sales growth in the quarter was 16%. The organic growth sales was 25%. And the difference between it is mainly that we have a double-digit negative currency effect in the quarter. The profit growth was very strong at more than 30%. and the divestment of grants generated 1.5 billion of net proceeds. Ronability and Permobil made important strategic add-on acquisitions in the quarter. Permobil acquired Probio, which is a leading Italian manufacturer of manual wheelchairs with annual sales of about 100 million Swedish crowns. Ronability acquired a majority in Q-Straint, which is actually the global leader in wheelchair securement solution, so basically constraints, with a revenue of about $60 million, and this company has a profitability above the level of what we see in Ronability. It is great to see that when we look through our subsidiaries and look at the pipeline of potential add-on acquisitions, we have a very strong pipeline, and we plan to invest significant capital going forward to grow our subsidiaries through not only organic, but also accelerating when it comes to M&A activity. Moving down to slide number six. For sure, the second quarter last year was a weak quarter, as you can see from this graph. Compared to that weak second quarter last year, The organic growth was 25% and the profit was up 32%. But as mentioned before, we should remember that we also had a currency headwind in the quarter. Most companies, and this is important, I think that most companies delivered strong sales and profit on an absolute level. So basically disregarding the base levels. And now we come back to that on the next slide. So here you have the different companies, and I will run through a little bit each company and not only comment about the performance versus the second quarter last year, but also to give you an indication when it comes to the organic performance, where we skip out currency and add on acquisitions, the organic development versus the second quarter 19, so you can have a little bit of a feeling where are we now compared to pre-COVID levels. As you can see from the chart, if we exclude Cernova, which I will come back to, all companies generated very strong growth compared to last year, between 18% and 81% organic growth. If I start down with Braunability, the organic growth was 81% in the quarter, and you can also see that we have a good margin expansion. If we then compare Bronability compared to the second quarter level, 2019, we can see that for Bronability, we are still clearly below pre-COVID-19 levels, actually double digits below. So this is one company, while we saw a short recovery in the quarter, we are still below where we were before COVID-19. Laboree had an excellent performance in the quarter, up 67% organically and very strong profitability. And here, if we compare with pre-COVID levels organically, we are now up mid to high-thinning digits compared to the second quarter 2019. So due to the strong development this quarter, we are now above previous levels. Advanced Instruments, our latest subsidiary, has continued to perform extremely well, and we are very pleased to have bought this company. It grew 47% organically in the quarter, and the profit margin was 50%. And here it's clearly record levels, whatever you do the comparison with. Also, TIAB had a very strong quarter, organically up 33% compared to last year. with margin expansion. And if we compare PM's performance compared to the organic situation before COVID-19, they are up mid to high single digits. So also here above previous levels. Mönlycke grew 18% organically, some margin expansion. And if we do the same comparison here with second quarter 19 and exclude the PPE contracts, it's up just about missing a digit compared to the second quarter 19, with wound care being the main driver, while surgical is up just a little bit. Permobil grew 18% in the quarter, and also here margins improved somewhat. And here we can see that if we compare with pre-COVID levels, the situation is relatively stable. now almost back to pre-COVID level, but actually a few percentage points below. Finally, Densanova. This was the company where we actually saw negative organic growth by 3% in the quarter, and there are two main reasons for that. First, there was a strong COVID-19-related sake last year, and secondly, we had an unusually mild flu season this year. The underlying performance is good, and if we look on the pre-COVID level, this is up a few percent compared to that level. So that is a run-through of the companies. And then let me say a few more words about Manlycke on the following page. As mentioned, organic sales was up 18% in the quarter. The contribution from the customer contract sales related to PPE was limited this quarter and actually slightly lower than during the second quarter last year. COVID-19-related customer agreements within PPE are not expected to add material to sales during the second half of this year. And please remember that the second half last year was significantly boosted by PPE contracts, so that needs to be taken in consideration. However, the underlying business is strong. Wound care grew organically by 20% in constant currency, and we saw very good development in the U.S. and in France. Surgical grew 17%, and we saw good development in gloves and trays. The profit margin was up 1% points, driven by both the strong sales but also a good mix. But it was negatively impacted by increased raw materials and also increased logistics costs. And the strong cash flow continues in this company, so they were able to distribute 200 billion euros. With that, moving then over to ETT, the total return for the total franchise was 9%. The listed ETT AB company was up 9% in the quarter, and the increase in the sums were up 10%. But please remember that we do the reporting in the sums with one quarter lag. So this is up until March 31. The cash flow, as mentioned before, was very strong, $3.8 billion to investors during the quarter. One of the reasons why it was so exceptionally strong was that the mid-market U.S. fund made some significant exits, and our share in the mid-market U.S. fund is very high, but overall a good cash flow. And you can see it has a very high activity rate. doing both significant investments and the number of exits. So then, to summarize, we have a proven governance model, and we stick to it. And I think we have a portfolio with high exposure to attractive long-term trends. And our focus is to continue to work relentlessly as an engaged donor with these companies, capture opportunities, both geographical expansion, but of course also through M&A and other initiatives. And then secondly, we also need to continue to make sure that we have an attractive portfolio. So with that, I stop and hand over to Helena.