Lifco AB (publ)

Thank you and good morning everyone and welcome to our Q3 presentation. And we can start directly by going into page number two in our investor presentation. And on a very high level, we can conclude that this was another strong quarter for LIFCO with strong underlying market demand in demolition tools and system solutions specifically. And just briefly on Denzel, we had marginally weaker market situation compared to the comeback quarter in Q3 2020. I'll come back a little bit more to that later. On the overall level, we have a sales growth of 26%, of which 8% is organic growth. Acquisitions contributed with 16%. And in this quarter, we actually had a positive effect from exchange rates of 2%. On the EBITDA level, we are growing 23% in the quarter. And on the margin level, we have slightly lower margin compared to the Q3 2020, which was a quarter with very high margins due to solid sales volumes combined with, at that time, very low cost levels due to the early phase of the pandemic where all companies were in a sort of low level mood following the the extreme situation in q2 2020. uh if we talk about cash flow uh it's on a solid level same level as last year partly thanks to the increased profits which is then a little bit offset by increasing receivables due to the market conditions that are very strong and also inventory uh build up that is is taking place in many areas now due to the strong market conditions and companies getting ready for fulfilling the map Our return on capital employed is on a very high level, at 23%, and actually at 161% when we exclude Goodwill, which is a very good level. And this is, of course, an explanation for the strong cash development that we can have despite the growth period that most companies are in right now. And then we can go into the more specifics on page number three and talk firstly about dental area, which... Had a very strong quarter actually in last year in Q3 2020. And, you know, especially the cost levels in this area was at a very low level, which we indicated already a year ago, which was leading to extraordinary high margins last year. And this quarter, Q3 2020, is more a normal quarter. I would say more in line with quarter three in 2019. And, of course, complemented that with some acquisitions added to our sales growth. and we are now seeing activity levels in sales and marketing coming back to more normal levels as the markets are coming back also to a more forward-looking mindset in terms of future looking. Last year was a bit different in that respect. In WSL tools we see very you know continued strong market conditions And we are growing sales with 55% thanks to both very strong organic development and complemented by acquisitions in this year. And the higher margins in this year is mainly thanks to the operational leverage in this area. But also, of course, in this area, we're also getting more forward-looking and mindset in terms of sales and marketing and other costs that will come back to more normal levels. But I think the sales growth itself is is taking that effect away and so the operation leverage is more important in dimension tools and when it comes to sister solutions um we are growing sales both thanks to strong demand and market situation and complemented with acquisitions and the margins in q3 2020 are slightly lower than the previous year uh also here due to to the cost levels were extraordinary low last year and they are starting to come back to more to normal levels And also in this area, we have a few entities which are pointing out their report. And those entities are having longer order books, which means that they have not fully compensated the raw material price increases yet into the market. This is an ongoing process of trying to compensate. It varies between companies how quickly that can come in due to the order books mainly. And with that, we can go to page number four and just have a little bit of a short reminder on... for everyone how LIFCO over many years have been growing the business both organically and through acquisitions without any capital infusion or increasing debt ratios. In addition to that we also pay the small dividend every year. And obviously the data for 2021 is not yet ready as we only present full year numbers here and it will be presented in next quarter but after nine months we have can conclude that we have continued this journey with both strong organic development and acquisitions, and we are keeping our net debt to EBITDA ratio fairly constant, which we can see then in the next page, if we go to page number five. We are on a very solid level when it comes to net debt to EBITDA, and thanks to our strong cash flow characteristics of the business and the profit improvement, we still have a net debt to EBITDA of 1.8 times, if you include everything. and the interest bearing acceptivity is 1.2 which is actually lower than one year ago and this is despite the fact that we have been very active in acquiring companies in this year and once again this is a proof of the strong cash flow generation of our portfolio also in times of organic growth and with that we can go into page number six and on this page i'd like to just talk on the on the margin side as you can see we have a very strong development in terms of profit over the years But specifically looking at the margins, I'd like to remind you here that we have a long-term trend where LIFCO has increased our margins dramatically since our IPO in 2014. And this is, of course, a combination of operational improvements and our strategy to make our niche companies even more niche and more differentiated over time. And also acquisition has helped. And I think my final remark here is that the pandemic led to a faster than normal growth in margins. As you can see now, we are a little bit coming down in this quarter compared to last month in last quarter. But it was an extraordinary time here in the pandemic where basically cost levels were at a very low level. But still, the long-term trend is looking very good. And then we can go to page number seven. And here you can see also the capital employed ratios, return on capital employed on very good levels. And this is, of course, part of our focus. to always acquire and develop companies with very high return capital which once again is very fundamental part of our culture the fact that this we can combine strong organic growth with acquisitions uh without stretching our value sheets and we can do that over many years and then we can move all the way down to page number 12. uh and once again just a small reminder uh we have you know a very strong LIFCO philosophy of running our portfolio companies. It's based on the decentralized fundamentals where we let strong management in each individual company take the responsibility and get the mandate to deliver in each individual business. And we do that thanks to a philosophy of only acquiring and having companies that can be very successful on a standalone basis. And then we work with making these companies more profitable over time by having a clear strategy of focusing on the more profitable part of the business and sometimes then actively sort of sacrificing lower margin business for the long-term benefit of our group. And we do this in a very lean and simplified way where we try to keep every company very entrepreneurial and having the focus on the value-adding functions. And then we try to outsource things that are not absolutely crucial, which leads to a strong focus for the management of each company on the most value-creating parts. Which would then of course combine with a strong cash flow focus and a very long-term perspective. We have all our companies, we have the ambition to keep them forever, and therefore we are making sure that we also make the investment for the long-term growth of our business. And this was my last remark, and then I will open up for questions.

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Good morning, it's Carl here from Nordia. A couple of questions on my side. Firstly, on the ramp-up of costs in the quarter, which you talked a bit about, is it fair to assume a further sequential uptick in Q4 in the market selling and marketing activities? And also, do you plan to return to pre-pandemic cost levels, or how should we look at it?