Lifco AB (publ)

Thank you very much and a warm welcome to everyone. Good morning. And we would like to present the LIFCO Q4 2021 numbers. And we can start already by going into page number two in our investor presentation, where we have the summary of the key figures for the quarter and for the full year. And as you can see from this page, we can conclude that 2021 was another very strong year for LIFCO. And we also saw the same trend in the last quarter with very strong development driven by strong underlying markets in demolition tools and system solutions area. Overall, in the quarter, we had a sales growth of 32%, of which 20% was organic growth and acquisitions contributed with about 15%. And for the full year figures, LIFCO grew the sales with 27%. And there we had organic growth contributing with 15%. And acquisitions, 13%. And if you go down to the EBITDA level, we had also very nice growth. In the quarter, we had 30% growth. But, however, a slightly lower margin compared to the same quarter in 2020. And I'd like to remind everyone that in 2020, Second part of 2020, we had extraordinary good margin development due to lower cost levels following the early phase of the pandemic. And for the full year, the EBITDA grew by 37% due to a combination of strong organic development and acquisitions helping our EBITDA development. And further down in the graph, you can see that the cash flow has been solid and growing compared to previous years. Thanks to increased profits, but partly offset by slightly increasing inventory and receivable levels due to the very strong market conditions that have led to this development. But all in all, if we go all the way down to return on capital employed, we have ended the year at the quarter on a very high level, 23% return on capital employed. And if you take the return on capital employed, excluding Goodwill, we are now at 162%, which is a very strong level for NIFCO. And then we can go into page number three and go a little bit more into the different business areas. And if we start with dental on the top. We had, and here I'd like to remind everyone, we had a very strong end of 2020. Last quarter and also the third quarter in 2020 was a little bit of a comeback situation from the early phase of the pandemic where we suffered severely in Q2 2020. and in the second half of 2020 we had the lower cost levels due to the sort of freeze coming out of the early phase of the pandemic which led to extraordinary high module developments in 2020 and then if you look in q4 2021 we are back into more normal levels more in line with how things were in end of 2019 and we are now seeing in the dental that you know activity levels uh have now been back in sales and marketing activities etc more back to normal levels since uh basically mid 2021 uh and the companies are more in a forward-looking mindset uh if we go further down down to demolition tools uh we have had now for quite some time very strong market conditions and that has continued in the fourth quarter uh we are growing sales uh with 55 percent uh thanks to very strong organic development and also quite substantial acquisition help. We have done some larger acquisitions during the year in this field. And the higher margin that we have now generated in the last quarter in demolition tools is mainly explained by strong operational leverage due to this strong sales growth in this business area. If we go down to seasonal solutions, we are growing sales strongly, both thanks to the underlying market demand and from acquisitions. uh the margins in the last quarter of 2001 are slightly lower than previous years or previous year i should say and that's also the same reason that we had also extraordinary low cost levels in the later part of 2020 and now we're back into more normal levels and here i also like to mention that in this area we have few entities that have longer order books which have had more difficulties getting the quick compensation of the increasing raw material pricing or the material prices overall in the value chains. And this has been a challenge for many companies, but we have overall managed very well, I have to mention here. So on the whole ISCO level, we've been doing a very good job in quickly adapting our price levels. And the ones that are suffering more, of course, are the ones with longer order books, where it takes longer time to transfer this over. And with that, I'd like to move over to page number four. And that's a little bit more of a Historical review, a long-term perspective on LIFCO. And this is, once again, another reminder of how LIFCO have been growing our business for now the last seven years since we came into the stock exchange. And I know there's a lot of data on this page, but if we go to the third row, we can see the growth from acquisitions that have been last year in 2021 was a record year. In modern time, we grow LIFCO's EBITDA from acquisitions with 18%. But as you can also see, it's been a strong growth driver for us for many years historically as well, ranging from 9% to 14%, and then last year jumping up to 18%. If we go further down in the table, you can see that organic EBITDA growth has been more volatile, but it's a very important area for us. We have a strong focus on buying high-quality companies and then developing the profits in these companies organically. And last year, 2021, was a record year here as well. We had 21% organic growth in the profits, thanks to very strong market conditions. But also, historically, we've been doing a decent job on this category. It's a very critical area for us. And these two things together, basically buying very good companies, and then, of course, having a strong focus on making sure the companies develop in the right direction. In combination with the discipline in valuation, basically buying smaller-sized companies has led to a situation on the very bottom of this graph, where you can see that we can do all this through self-financing and still keeping our net debt-GDTA ratio fairly constant, while paying a small dividend or a dividend every year to our shareholders. And with that, we can move over to page number five, and just a little bit more details around the net depth development obviously we are growing our nested in in absolute terms as we are growing but in relation to our profit development it's been a very stable level ranging just below the the two times net depth edta if you include all all depth positions and we ended the year uh with a net debt tbta of 1.7 times compared to 1.6 times one year ago and we have done quite a number of acquisitions in 2021 i have to mention here as well the interest bearing depth is the interest rate net step gbta is at 1.1 times which is the same level as one year ago so we are basically ending the year with a very strong financial position and giving us room for financial room for more acquisitions going forward And with that, we can move over to page number seven in our presentation. And, yeah, we already mentioned the numbers here. We have strong developments in return on capital employed, both if you include the goodwill. And also on the right-hand side, we have been looking at the company portfolio. Without the goodwill, we have a very strong position now at 162%. And this has been, and it's a very fundamental part of LIVCO, because it basically means with this type of key ratios, we can grow organically, like we've done in 2021, and still generate a very strong cash flow, which means that we have the possibility to continue acquisitions through self-finding in our own balance sheet. And we have a lot of emphasis on this when acquiring new companies, and of course a lot of emphasis in the existing portfolio to make sure we are developing in the right direction when it comes to these type of measurement and then i'd like to go all the way down to page number 13 which is a slide that i normally don't present but we update this data every second year so now we have a new data set it's it's a it's a slide that we actually presented the first time we went public in 2014 trying to summarize how Lifco had grown some of the portfolio organically. And we have now measured the original dental portfolio on the left-hand side. This is now pure organic development of the original dental companies that we followed all the way back to 1997. And as you can see, we had very strong development through the first 15 years up until 2013. basically doing a lot of operational improvements in this subset of the portfolio. But since then, we have been more on a plateau, but still developing overall nicely. And in the last two years here, between 19 and 21, we have 6% CAGR in organic EBITDA development in this subset. So I'd just like to remind, these are examples. We try to follow these examples from a very, very long time perspective. Obviously, we have also strong organic development in companies that we've added in the later part of LIFCO's development. But I think these are very interesting because they follow the very long time perspective. And on the right-hand side of this page 13, we have then followed our original demolition robots company in Brock, which LIFCO then has had in the portfolio since 2000. You can also see that this is one example of very long-term focus on gradually developing business from organic improvements, both improving margins and sales and leading to a situation where we now have reached another 10% CAGR between 2019 and 2021 and then a record high EBIT margin. I'd like to mention here on the block data that this is now measuring only the Swedish entity Because that's the entity we had from the start, but it's giving a relevant picture of the organic development of this type of company. And then we can move all the way down to page 28, which is the list of acquisitions in 2021. And as you can see, we have been very active in all our three business areas. uh we are slowly you know developing and gradually developing our acquisition capacity which has led to this effect that we are now able to to do a little bit more acquisitions than we were maybe able to do uh four or five years ago and this is a continuous development of organically developing our own resources in in being active in finding companies but also being being able to take care of new acquisition that is equally important that we can make sure we set the foundation to continue organic development of the acquired entities and and we take a big emphasis on having the right people involved in in steering that development from this perspective and this is a journey that hopefully will continue it's always difficult to buy you know great companies uh in small niches but we we do very uh hard work here and uh hopefully we can continue to to find new exciting companies in the future in this area And I think this was all for me right now. And then I'd like to see if there are any questions.

Thank you. If you do wish to ask a question, please press 01 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing 02 to cancel. There will be a brief pause while questions are being registered. Our first question comes from Carl Ragnarstam with Nordea. Please go ahead.

Hi, it's Carl here from Nordea. Firstly, a question regarding cost ramp up. You said that sales and marketing expenses came back from the beginning of Q3. So I guess, could you give some flavor on If you're back to the 2019 level currently or in Q4 at least, or if it's sort of more to come if we're entering a more, or a period with less restrictions in 2020?

Yes, I think first of all, to make it a bit clear, it's mainly sales and marketing related, but I think there was a general freeze. You know, LIFCO is consisting of many small companies. entrepreneurial-driven companies. And when the pandemic came in the early phase, there was a general freeze in many areas, including sales and marketing, obviously, but also in product development, there were not as many new initiatives taken during the early phase of the pandemic, etc. And that, I think, started to come back already one year ago, and we saw the effects in our numbers, maybe more coming from Q3 2021. And I think the mindset is very much back to a normal level right now. Of course, we cannot in every area carry out every sales and marketing activity exactly like we've done in the past. But our companies are finding new ways to be close to our customers and to make sure we keep our positions in place. So I think we are now back to a more normal level. Then, of course, on top of that, we have in some areas very strong organic development now, which leads to, you know, maybe needs to ramp up costs, but that's more a normal growth-related area. But if you take the more normal situation, I think we are fairly back to normal levels right now in our attitude and our way of working in the companies.

Perfect. In demolition tools, you have obviously quite good margins in the quarter. Would you say that you had a tailwind from special orders from ROC in the quarter? Or is it sort of strong widespread underlying growth? Because when I look at it, it looks like machinery and tools had a bit higher growth in the quarter compared to construction materials. I don't know if it's a leading indicator.

No, I think the reason for the development is mainly the very strong underlying market conditions, which leads to improving sales and operation leverage. if you go into the very much details here of course we have some areas here that that you know on the margin have a little bit difficulties on on raw material pricing etc etc but there's no one project order that that makes an impact this is a general very strong underlying market condition and operational leverage that creates this development across the board i would say

Okay so no special orders in the quarter then?

No special order that makes this stand out in this quarter. I think the key theme for this quarter is the strong market development and strong underlying demand.

Okay perfect and in terms of acquired growth I mean looking back in 2019 you had what 1.3 billion worth of credit sale roughly you had 770 in 2020 and now we ended up in 2 billion in 2021 which is obviously quite impressive would you say that 2021 is parked in inflated number due to catch-up effect from 2020 which we obviously could see by the 2020 number meaning that 2022 might be or it might be in 2020 be difficult to reach the 21 level in absolute number or Or is it an effect of a different way of working? Or Jack, could you help me with that?

When it comes to acquisitions, we are very picky in what companies we think can qualify to be part of our organic development journey going forward. So we are always looking at many different companies and sometimes we get more closings and sometimes we get a little bit less. The only thing I can mention, which I have mentioned here in the past, is that we are in a position now compared to at least two three years back we have we have a better organizational structure to take care of new acquisitions and and we can then ramp up the activity to get even more leads into lift go and work on even more projects well that would lead to to an outcome in 2022 or 2023 that is in the same you know level as 21 it's impossible to say because it's not only related to our work It's also related to the quality of the companies we get access to and where we strike basically the sweet spot in terms of negotiating the deal with the entrepreneurs. So I can only mention that we are working harder than ever in 2021. It has yielded better results than ever in the acquisition work. But we are not giving any guidance on where we will end up. And I think it will be very dangerous to do that also because quality is always more important. This is not a sprint. It's a marathon to develop a company like Lyftrope. And our ambitions are very high. We strive for always trying to do a bit better than last year, both in acquisitions and organic work. But we are also very patient and quality oriented. So for us, it's more important that we get the right companies in and continue to develop LIFCO for the many years to come, rather than stressing acquisitions and LIFCO. But I hope that answers your question. Hopefully we can continue this, because we have no guidance. Yeah, of course, of course. Okay, all for me. Thank you.

A reminder, if you do wish to ask a question, please press 01 on your telephone keypad. Our next question comes from Carl Bokvist with ABG Sundal Collier. Please go ahead.

Yes, thank you and good morning. I was just a bit interested in the comments you made about the end market demand, particularly in system solutions. The improvements that you see now in forestry, for example, is this the start of a new stable level or is it a catch up from a weaker comparison period or an easy comparison period?

Well, I think the forest area is a bit special for LIFCO because it mainly consists of the project related thermal equipment business. where obviously the markets are important, but maybe more important is basically the projects that we take in and how we perform on these projects. So I would not really translate the market conditions comment into that specific area. I think there are other factors that are maybe even more important than the market conditions, of course. That's the situation in driving a product business. You need the market to be there, but even more importantly you need to deliver on the right projects and get the right pricing out there and so forth. So I think the comment there is more general comments throughout all the areas.

Understood. And then just the comment you made on systems solutions also when it comes to just the kind of natural impact from companies having longer lead times and the impact that it has on pricing mechanics. The first question overall, do you have any kind of insight into your belief on how the lead times have progressed for LIFCO overall compared to, let's say, a quarter ago, given supply chain challenges? And the second question is more on system solutions, how you look at the business overall when it comes to pricing adjustments and continued cost inflation.

So I guess the question is both about you know getting components in and then how we deal with raw material pricing. Is that the question?

Yeah or first you know for the group as a whole I understand you know you have different lead times across all kinds of businesses but just would be interesting to hear how you your view on the entire supply chain situation and how that has developed compared to three months ago for example.

I think it's been now for quite some time a very difficult situation when it comes to sourcing components for many of our companies. It's a constant battle out here. I think we have an advantage being very decentralized and very entrepreneurial and rather small, so we can scramble around. Most of our companies have been very successful in having very short predictability on what's going to be able to deliver in the next couple of months, but doing a very good work. So it's still in the same situation. It's still an unknown factor. It has been for quite some while, but we've been able to scramble very well in this area for the most part. Of course, there are examples of some companies that cannot deliver everything they wanted every month. They're waiting for some critical components. But on the overall fiscal level, it has not been a material impact. But you can also argue that with easier supply chains, We could, of course, maybe have grown a little bit more quicker, so to say, because the demand has been very strong. But I think that's a fact of the situation, that when you have this type of strong market conditions combined with the situation coming out of the pandemic, we have this situation. When it comes to the pricing, I think we are, in general, very good in adapting pricing quickly. It's a core fundamental part of our culture in any given year, and especially also in this year. Where we had some smaller issues has been in areas where we have long order books. And there's been some difficulties in quickly getting component pricing and raw material pricing into our own prices. But for the most part, we have very little problem with this. And we have been doing a good job of being quick in adapting to this. And this is more a fact of life when you're sitting in very long order books. But even with the long order books, we also try to find ways how to address this. And this is a new learning. For us, and many of us have been now in LIFCO for 15, 20 years, it's the first time we experienced this type of situation. So we are learning also how to look at the order book and what type of pricing can you give away for how long, et cetera. It's a new learning for all of our companies in these situations. We are also addressing that for the future to be even more flexible for the rise again and continue.

Understood. Thank you. Thank you.

There are no further questions. I hand back over to our speakers.

Okay, thank you very much for listening and I wish everyone continued nice Wednesday. Thank you very much.