Lifco AB (publ)

Thank you and good morning everyone and welcome to the LIFCO Q1 presentation. We can start by going into slide number two in our investor presentation. And on a high level, we can conclude that this was another strong quarter for LIFCO, driven by continued very positive development in our demolition tools and system solution segments. and partly offset by a slightly weaker development in the dental field, which I will come back to in the next slide. On the overall group level, we see a sales growth of 30% in the quarter, of which 14% is organic growth. Acquisition contributed with 12%, and we also had a positive effect from exchange rates in this quarter. On the EBITDA level, we see a growth of 25% in the quarter, but it actually means that we have slightly lower margins than Q1 in 2021, which was, looking back to last year, still a quarter where we had slightly lower cost levels following the pandemic, where most companies were going into more cost-saving attitude during the pandemic. We still had that effect in early 2021. We also have an effect on the margin, a slight effect that, you know, raw material pricing is a continuous challenge for many companies and also for us. I would say for the most part, our companies are adjusting very well and they are able to push through price increases quickly enough to compensate for the higher input costs in their products. But, of course, as I mentioned in previous quarters, we have some contrast with the longer order books where we have some difficulties getting this full effect translated quickly enough. So that's a small effect in this quarter as well. If we go further down and look at the cash flow, first of all, I'd like to mention when it comes to cash flow that Q1 is a seasonal effect where we normally have a lower cash flow. mainly due to the receivables that we get paid by end of year and then building up in Q1. We also had that effect this year. And in addition to that, we also have, as many companies around us, an inventory build-up effect because in these strong market conditions and this challenging supply chain situation, most of our companies are building up some safety stock to make sure that we can hopefully deliver going forward. So that has some effect. It's not a huge impact, and therefore we can actually meet the same cash flow as last year, despite these effects. Our return on capital employed is still on a very good level, 23%. It includes the whole value sheet and 160% when excluding the goodwill, which is, once again, an explanation why we can have solid cash development despite very high growth in most of our companies right now. And with that, we can go in more to the segments on page three, where I'd like to start to comment a little bit about the dental. And here, as I already mentioned, we had a decline in sales and also a drop in profits in this quarter. And the perspective here should be also, first of all, looking back to last year. We had a very strong first quarter in 2021. So it's partly a comparison effect here due to the low cost levels that we had in manual dental companies following the pandemic. And also led to extraordinary good margins in last year's numbers, which we have conquered previously. And just to repeat, so everybody is on the same page. We saw roughly around the summer of 2021, we saw activity levels and cost levels being back more to normal levels. as the market had been back for quite some time and the companies were in a more forward-looking mindset. And this is not only an effect for us, it's also an industry effect that when competition is also out more actively doing activities, we have to follow as market leaders to keep our positions. And then for Q1 2022, I would like to specifically highlight one effect that is a little bit out of the ordinary for us, We had an additional negative sales and profit impact from COVID restrictions in China, which led to problems for our prosthetics business, where we had one major production unit in China producing prosthetics sold mainly to the German market. And this led to a situation where we basically lost orders because the German dentists, our customers, had uncertainty in delivery times due to the COVID restrictions in China. And we also have to find other production alternatives to make sure we could deliver, which led to increased costs. And here I would like to highlight that the situation improved during the last weeks of the quarter for us. But as you all know, the uncertainty around the COVID situation in China is still ongoing. So it's just something we have to continue to be aware of. If we go further down to demolition tools, it's very strong market conditions still remaining, which we have now for quite some time. We're growing sales with 46%, thanks to very strong organic development and complemented also with some acquisitions. And margins in this segment, as those of you who have followed us for some time can see, they are quite volatile, more volatile than the other areas. And this has to do with different mortgage levels and different product segments. Mixed effects can come into play. And the margins are still a little bit lower than last year. And we also have in this area sound effects from cost levels being more normalized now, which were not the case one year ago. In terms of solutions, we also have very strong growth in both sales and profits, coming both from organic development and acquisitions. And I would say here, most of the companies in this segment have had a very solid quarter. And as you can see, the growth has translated into strong margins, despite also here ongoing difficulties with raw material pricing and component pricing that has to be pushed forward into the value chain. But in this segment, for this quarter, we've been able to manage that very well. Going forward, we can go to page number five. I'll just talk a little bit about our net debt position. And we are, thanks to our strong cash flow characteristics and the profit improvements, we are in the quarter with a net debt EBITDA of 1.8 times, which is the same level as one year ago. And the interest-bearing net debt EBITDA is at 1.1 times, which is also the same level as one year ago. And this is despite the fact that Lyft has been very active in acquiring companies during the last 12-month period. And I think this development is a proof of the strong cash flow generation of our portfolio, also in times of organic growth. And with this position, we remain very strong capacity for continuing acquiring great companies when we find the right opportunities at reasonable valuation levels. And with this, we can go forward to page number six. And this is a little bit more lifting the more on the horizon and look at Cisco for many years historically. We are here tracking our long-term profit development and our targets, just to remind everyone, is to increase profits every year. And for the most part, we have been very successful in doing that through a combination of strong organic to growth complemented with acquisitions. And I would like to once again highlight that we have been doing this development while still paying a small dividend every year and not asking shareholders for money via capital infusion. And after the first quarter in 2022, we also have a very good start this year. And of course, we don't make any statements about future. Instead, we focus on adapting to the market situation that we're operating. And then we can go all the way down to page 28. And basically just conclude on the acquisition level that we had, as you all know, that we had a very strong 2021 and a slightly softer start to 2022. And this is just another example that that doesn't mean that LIFCO activity level has changed compared to last year. But when it comes to acquisition, it's always difficult to predict and the outcome will be different between quarters. And we are in many different discussions and we are very active and Sometimes these materialize into transactions and sometimes, you know, for various reasons, it doesn't translate into transactions. We continue the high activity level and ambitions are still very high for future acquisitions. And then also, I'd just like to make one more remark on the acquisitions. That's actually to mention that we this week announced something that is not very normal for LIFCO. We actually announced a divestment. or one of our portfolio companies. And as all of you know, this is not part of the normal LIFCO strategy to sell companies, and it will not be for the future either. But this company is called HecoTech. It's an Estonian company that sells sawmill equipment project business into Russian markets, or mainly the Russian market. The turnover here was about 40 million euros in 2021, and HecoTech has been in LIFCO for about 15 years. And I also like to thank the management of the company for all the successful cooperation over all these years. But given the situation right now, we think it's the right decision for LIFCO to sell the shares in this market conditions. And this is all I wanted to share with you for now. So I'd also like to open up for any potential questions.

Thank you, Per. If you do wish to ask a question, please press 01 on your telephone keypad. Our first question comes from Carl Rangnerstam. Your line is now open. Go ahead, Carl.

Hi, good morning. It's Carl here from Nordea. A few questions from my side. Firstly, I think you mentioned in the report that you had some raw material headwinds in the quarter. Is it possible, firstly, maybe to quantify in which segments you see the most impacts from it? Also, is it possible to quantify the gross margin impact from it, because it's down a bit year over year? And thirdly, on that note, is also, of course, if you have, I mean, given that we have seen a lot of raw materials rally post Q1, and if it's fair to assume that the headwinds could increase in Q2.