Investment AB Latour (publ)

Good morning and welcome to the presentation of Investment Abilator's year-end report for 2024. As always, the first part of this presentation will be in listen mode only and we then open up for questions. If you want to ask a question, dial star 5 on your telephone keypad or use the chat window. So I will now hand over to our speakers, CEO Johan Gjertonsson and CFO Anders Mörk.

Okay, thank you, Katarina. Welcome everybody to the year-end report 2024 and Q4 2024 presentation. If we start with the first slide, you can see that our overall group structure is unchanged. We had a good end of the year despite the weak business climate and actually quite a lot of global turbulence, as you all know. Order intake and net sales are growing organically and profitability is on a healthy level. The underlying demand is, despite the business climate, relatively good in many markets that we operate in, but it varies between regions and industries. The construction and real estate markets are still slow, but with a counteracting positive trend for the energy efficiency sector. The logistics sector is gradually finally recovering, So we do see positive signs in that sector. But of course, we are well prepared to adapt if needed for any changes going forward. And also on the group level here, we should say in January, we announced that Mikael Jonsson-Albrechtsson is appointed new CFO for Latour. He's been with Latour for eight years and the last six years as CEO for BEMSIC, one of our business areas. And he starts 1st of May. And as you know, Anders Mörk has earlier announced that he will retire on the last of April. So this is actually not the last report with Anders. You will also hear him in the Q1 presentation. Our portfolio of 10 listed companies, if we go to that slide, clearly very positive underlying growth and profit development the last 10 years. Our holdings development in 2024 has in general been good despite the challenging markets. The profit levels are high for most of the companies. The acquisition activities continue also in our listed companies, as several has been announced during the fourth quarter. And if we continue to the total return for the listed portfolio in 2024, there are no changes within the listed portfolio during the quarter. In the beginning of last year, we increased our holdings in CETEC from 33 to 33.5 percent. We also participated in HMN Network's new share issue with our Prorata share, which was part of the financing of the acquisition of Redline Controls in the US. And the value development was 14.3% during the year, where 6RX was 8.6%. And until yesterday, February 10th, the portfolio value was 93.7 billion SEK. with a total return this year of 5.6% compared to the six hours this year of 7.6. And then if we continue to the wholly owned industrial operations, our wholly owned industrial operations ended the year with a strong quarter. Both ordering tech and net sales increased by 9%. So very strong quarter on the both top line figures. Despite the underweight business climate, the overall demand has been quite good on the markets we operate in. As I said, we are most likely gaining market shares is our main conclusion. The energy efficiency sector is growing and reduces early signs of the leased sector to recover. The development for our businesses with the largest exposure to the construction and real estate market is, however, mixed. For the full year, Bemsek and Svegan are growing organically, while Stultafors is slightly below last year or the previous year. Kaljan is benefiting from a recovery within the logistics sector and the water intake is growing, albeit from low levels. Our other business areas have a stable development, and Anders will soon take you through all the details by business area. All in all, the wholly owned operations quarterly EBIT increased to 986 million SEK, up from 856 the previous Q4 in 2023. We have good cost control and the gross margin is strong, resulting in an operating margin of 14.1%. And for the full year, our businesses have protected the profit in an effective manner in a very challenging environment. Very strong execution on behalf of everybody in our wholly owned operations. Total growth of water intake 5% and net sales of plus 1%. This is the full year. And organically water intake increased by 1% and net sales declined by 2%. Operating profit for the full year amounted to 3.7 billion SEK, slightly down from 3.8 billion SEK the year before, and an EBIT margin of a healthy 14.3% in 2024 compared to 14.9% in 2023. And lastly, also very strong cash flow generation, which amounted to almost 3.7 billion SEK. almost a hundred percent compared to EBIT I think that's quite strong so it's a strong result and especially if you consider it being a recession year which we do so we are very happy and proud of these results on behalf of and I am behalf of all the team members in our wholly owned operations so if we go to the next slide which is acquisitions We have had a high pace within the M&A area throughout last year. We've made three acquisitions during the fourth quarter, of which one was finalized within the quarter and the other two early in January of last year. BEMSIC acquired Armstrong, a Canadian company that provides an extensive range of gas detection solutions. The addition of Armstrong further strengthens BEM6's product portfolio with a comprehensive gas detection offering. The company has 60 employees and a net size in 2024 that amounted to 9 million Canadian dollars. Svegon signed an agreement to acquire Hovaterm, a manufacturer of modular air handling units, primarily on the German market, which was finalized in January. of last year, HOVA term had 178 BGs and net sales in 2023 that amounted to 32 million euros. With this acquisition, Swego strengthened its position in the German HVAC market, the largest market for air handling units in Europe. And LSAB within Latour Industries signed an agreement to inquire HTS Group, a manufacturer of saw blades and sawmill knives, for the sawmill industry, which also was finalized in January of this year. Hodes Group have 64 employees and NetSays in 2023 amounted to 10 million euros. Through the acquisition, LSAB reinforces its position in Germany, which is the largest market for sawn wood in Europe. Earlier in 2024, we finalized five acquisitions, and in the ovalist acquisition, Arkel during the third quarter was finalized in January of this year after approval of the Turkish authorities. If we include the free acquisition that was finalized in January of this year, we have added nine businesses to the group and close to 3 billion SEC in net sales on an annual basis. And I should also mention that is to have profitability well in line with that of the whole industrial group. So we're very happy that we've had a high pace in the M&A area of last year. And last but not the least, also the two future solutions have made three investments in 2024, now holding a portfolio of 10 sustainably focused Swedish companies. Very exciting. to say the least. By having said that I hand over with your hands to Anders to take us through the business areas. So over to you Anders.

Okay thank you so much Johan. We start with the first business area which is BEMSIG and BEMSIG ended this year strongly with an order intake that grew organically by 16% in the fourth quarter. The building automation division continues to show a stable development while the metering business still is a bit more volatile when it comes to order intake. The total growth in net sale was 36% of which 10% were organic growth. This is a very strong performance considering then the challenging market within real estate and construction industries. And the operating profit amounted to 85 million compared to 55 last year with a strong margin of 18.2%. And this is then despite several ongoing initiatives within product development and recruitments within the group. For the full year, the profit margin was 22%. And in total this year, BAMSIC have finalized three acquisitions, all of them performing according to plan and together adds 20% acquired growth to the top line. And on this business area, I would like you to highlight and look on the right side of the picture, which is the five year development of the company. And I think it speaks for itself. So very well done, Mikael and your team. We go to the next business area then, which is Kalyan. And for Kalyan, you all know now that customers have been conservative for a quite long time when it comes to capital expenditures. However, then the logistics sector is slowly recovering and Kalyan's pipeline is increasing. Order intake during the fourth quarter is exceeding last year by 21%, which is a good sign. And the trend is now definitely going up again. However, as an effect of the lower order intake before, the net sale is still below corresponding period last year. The quarterly EBIT amounts to 36 million. Also this an effect of the lower volumes and the operating margin amounts to 10%. uh during the quarter we have also decided to close the business within automated system in uk due to low volumes and lack of profitability so this is probably a good decision for the future A total cost of about 6 million has affected the operating result in the quarter as a consequence of that. And Kalyan has proactively conducted cost saving programs during the year to decrease the fixed cost base while maintaining the level of service to the customers. This has resulted in a substantially lower cost base for Kalyan and now Kalyan is prepared to take off going forward with profitable growth. Thank you so much to Henrik and your team for this and we go to the next business area. Well, you know that Hultafors Group has been hit by tough market conditions. Despite this, Hultafors Group reports organic growth of 3% during the quarter and ends the year strongly. The gross margin is strong and operating profit increased to 333 million compared to 307 last year with a profit margin of 17.6%. And this is really good under the circumstances. We are continuously investing in product development, sustainability and digitalization to strengthen the company in the long term. And I would like to highlight that I'm impressed by the sustainable and circular product offerings that are materializing within the group now. So this is very well managed by you, Martin, and your team within Hultafors Group. And we go to the next business area, which is InnovaLift. InnovaLift ends the year strongly, despite an overall weak construction market, especially when it comes to new installation in China and Europe for platform lifts. Order intake grew by 17%, of which 14% was organic growth. The division's lift manufacturing and installation and services are in line with last year, whilst the division components and modernization reports good growth. The net sales growth was 3% and the gross margin is improving step by step. So the quarterly result increased as you can see it to 83 million compared to 59 last year with a margin of 11.9%. And even though this improvement have taken place, there is still room for further improvement. And I said before, Innovalift finalized the acquisition of Arkel in Turkey. And just to highlight, as a reminder, this will add substantial growth and profitability from February 2025. All in all, very well done, Andrea and team. We go to the next business area, which is Latour Industries, and we see a mixed picture for the business units within Latour Industries. The underlying demand has been good for REAC, especially on the US market, and for Max AGV and also for Densic. However, the forest wood and mining industry is weak in the Nordics, affecting all the other business units negatively. During the quarter, net sales was 3% below last year. But summarizing the year, net sales grew by 4%, driven by REAC and Max AGV. And the quarterly operating profit increased to 47 million kronors, driven by the strong net sales in REAC and Max AGV. And as you can see in the five year chart, things are moving slowly in the right direction. Latour industry is focusing to continue to build and develop the existing holdings and also to find new platform investments for Latour. So very well done, Tina and your team. We go to the next page, which would be Nordlok. The business climate is still quite tough, even though it's gradually stabilizing. But Nordlock still managed to end the year with a record quarter, which is very impressive. Order intake grew by 7% and net sales grew by 9%. And the net sales amounted to 514 million SEK, which is a record high number for Nordlock. Project sales in Europe was the main driver during the quarter. Also the quarterly EBIT is all-time high that amounted to 136 million kronas with an operating margin of 26.5%. Well, it's okay to continue that direction, you can say. We should also note that Nordlok has decided to gather all central functions in Göteborg, where the majority of Latour's other business areas headquarters are situated. And this has affected the result with some minor one times cost during the quarter. So all in all, a strong year for Nordlok Group. Very well done to Daniel and your team. Let's go for the last business area, which is Svegon. And considering the business climate for the construction industry and the real estate sectors, Svegon's performance is very well, even though we saw somewhat slower order intake in the end of the year. Order intake grew by 10% in total, but adjusted for acquisitions, it was 4% down during the quarter. But for the full year, it was growth by 1% organically. The net sales during the quarter grew by 20% and also was 5% organic growth. There is still a mixed picture between the segment and geographies. North America is standing out on the positive side. Thanks to strong gross margin and good cost management, EBIT came in at 10.2%. Even though we had a short December month, that should also be noted, which affected the figures. And as I said before, Sveagon acquired Hovertam in Germany and this will impact the growth for Sveagon going forward since it was closed in January 2025. And also for Svegon, I would like to highlight that I'm impressed by the product offerings within a circular economy that has started to materialize within the group. You continue to be in the forefront compared to the competition. So very well done, Andreas and your team. And we should also put some comments down on the net asset value for Latour. We increased the net asset value last year by 11%, adjusted for dividends, and it amounted to 215 kronas per share at the end of the year. And the share price at that point was 276, which means that we have a premium compared to our net asset value of 28%. Yesterday, the net asset value was 223 kronas, the share price 289 kronas, and the premium then 30%. our consolidated net debt decreased during the quarter as a result from the strong cash flow and also that we received some dividends from those companies that have split up the dividends in two parts so we ended the year with 12.3 percent in net debt, and that is then 8% of the market value of our investments, leaving a nice headroom then for us to continue to do further acquisitions. So that was all from me and I hand back to you, Johan. Thank you.

Thank you, Anders, for an excellent review and walkthrough of the business areas and our net asset value development. So we are on the slide of financial targets. As you can see, our long-term targets over a business cycle is to grow more than 10%, have an operating margin of at least 15%, and the return on operating capital of at least 15%. So in summary, during the last 12 months or last year, we had growth of 1.3%, we had an EBIT margin of 14.3%, and we had a return on operating capital of 15.1%. This is an outcome that we're very pleased with. As I said, the targets are to be seen over a business cycle. And 2024 cannot be described in another way than it was a recession year. So growth is lower than before, but considering the economic climate, it is expected. And also in 2023, we had a lower M&A activity level. And therefore, we haven't added much acquired growth to last year. But going forward, this will obviously increase as we have presented. We have done a lot of acquisitions in 2024. And we have actually calculated that if we include all the acquisitions in 2024 and up until today, we will add everything else the same we will add another nine percent of acquired growth to 2025 top line figures and the ebit margin is still strong and the return of on operating capital is satisfying so if we go to the dividend slide and for all of you that are shareholders in Latour i hope you're happy with With this slide, so given the good profit development and the strong financial position that Anders accounted for, the board of director proposes an increased dividend to 4,60 kronor per share, which is an increase of 12.2%. And the proposal is well in line with our dividend policy. and as you can see we have a very strong historic trend of increased dividends so we're very proud to be able to deliver that also another year and if we continue then to the next slide just as an end and to summarize so overall yet another strong year for Latour and the Latour companies We are a long-term sustainable investment company and a responsible owner. We are financially strong and we continue to invest in our holdings, both existing and new ones, to enable future growth and create value for our shareholders. We have an ambition to grow both organically and through acquisitions, and I look forward to be part of the development going forward. So thank you so much for listening in to the year end report of 2024 with a focus on the Q4 numbers. So having said that, we open up for questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Linus Sigurdsson from DNB Markets. Please go ahead.

Good morning, Yvonne. Good morning, Anders. Thank you for taking my questions. Starting on an aggregate level for your industrial operations in 2025, given that organic growth is at least positive, and since the businesses that you acquired last year are as you say, well in line with profitability. Is it fair to assume in 2025 you could be back at margin levels, at least in line with 2023? Or am I missing any headwinds there? Thank you.

Thank you, Linus, for your question. If I start and let's see if Anders wants to add. It's obviously a very forward-looking type question to that, but let's say like this. I think we deliver a strong EBIT margin in a low economic activity. And as we have highlighted, we have very strong gross margins and we have good cost control. So if the market would turn, obviously we expect a nice drop through to drop through on the bottom line in EBIT. So if those things happen, I will be disappointed if we would not. come back to margins of 2023 or above but you can hear there are some ifs and the ifs are related to the market development so far so far you know you know let's hope for the best but plan for the worst is kind of our our attitude going forward so we're prepared for everything but But let's see. I'm not a macro economist, but that's how we view it. Do you want to add to that, Anders?

No, I think it was a good answer. And you know that we see on our financial targets on a very long term. So over a business cycle, we shall be there and some years above and like now a little bit below.

I think you could say, and I think that's the message we're sending if we make, you know, 14.3% in a recession year, Linus. Obviously, we expect to make more in a stronger macroeconomic year.

Okay, thanks. I appreciate that the market is an unknown in this equation. And then just secondly on your commentary around further M&A sounds quite forward leading to me. Now after a busy 24, you've raised the dividend and looking in relation to your targets, can you just help us think about how much scope do you have left for M&A?

Thank you. You want to take a stab at that Anders?

Yeah, it's, I would say around 5 billion, if you look in a forward 12 month period going forward, because we grow the ability together with the cash flow and with hopefully increased profits. And so around 5 billion would be the possibility and then you can also with new acquisitions since we have an internal policy that is well known we grow also dynamically by the profitability and the acquisition that we make so yeah and i guess that's a good answer and from a financial point of view and and then linus of course you need you need cash but you also need management and an organization

to do successful acquisitions and integrate them well. And we have over the last couple of years also strengthened the Latour organization with a lot of new competences and so on. So I think we are ready to go for another strong year in acquisitions, provided that we find the right targets that we really like and fit into our long-term strategy and also fits our values and culture, to not say the least.

Okay, much appreciated. That was all for me.

Thank you, Linus. Great questions.

Meanwhile, we're waiting, Johan. We have one question in the feed.

Yeah.

So I read it. It's from, well, I think it's anonymous. It's from ASD. So someone, we don't know who it is, but the question is, was it Latour that bought the shares in New Wave from Torsten Jansson?

No, it was not Latour that bought those shares.

And we have answered that question as well.

Yeah.

And we have a message that there are no more questions on the phone line. And I don't see any more questions in the feed. So.

Okay. Great, Anders. And thank you very much, Anders. And thank you very much, Katarina. And thank you, everybody, for listening in. And we look forward to talk to you again on April the 29th, where we will present the Q1 results. Thank you very much.